Philippines’ SEC puts temporary block on PLDT, Globe closing Liberty tender offer

20 Sep 2016

The Securities and Exchange Commission (SEC) in the Philippines has ordered PLDT and Globe Telecom – the local duopoly that now controls Liberty Telecommunications Holdings (Tori Spectrum, formerly Wi-Tribe), having jointly purchased the assets from San Miguel Corp (SMC) – to defer their tender offer for Liberty. In the meantime, the firms have been told to submit additional information to explain the ‘controversial’ reassignment of mobile frequencies that critics suggest drove down the tender offer price. The tender offer was priced at PHP2.20 (USD0.048) per share, and was supposed to expire on 21 September, involving some 165.88 million shares, equivalent to 12.82% of the former SMC unit’s issued and outstanding common stock.

The commission’s Markets and Securities Regulation Department (MRSD) has directed Vega Telecom – the holding company now jointly owned by PLDT and Globe Telecom, which controls Bell Telecommunications Philippines (BellTel), Eastern Telecommunications Philippines (formerly ETPI), Tori Spectrum, Express Telecommunication Company (Extelcom), Hi-Frequency Telecommunications and Telecom Technologies Philippines (TTPI) – to defer the tender offer closing, submit a new timeline relative to the tender offer, and submit more information on the circumstances surrounding the reassignment of frequencies. The SEC said a new offer period should also recommence not later than 17 October 2016 and it is keen to know from Vega Telecom how its prior reassignment of frequencies, particularly its valuable 700MHz spectrum, had resulted in ‘confusion’ on the valuation of Liberty shares.

PLDT and Globe paid SMC a total consideration of PHP69.1 billion primarily for that asset, although the likes of Papa Securities have complained that all frequency allocations of Tori Spectrum had been assigned to BellTel. They note that as Tori Spectrum had already ceased to be the assignee of these frequencies, the value of the frequencies was not considered in the valuation when the telecom assets were sold to PLDT and Globe. As such, the SEC has ordered Vega Telecom to supply information on:

• the circumstances surrounding the reassignment of frequencies

• a disclosure of the consideration received from the assignment and how it was reflected in Liberty’s financial statement and a discussion of the impact

• a breakdown of purchase price paid by PLDT and Globe to SMC, consisting of payment as actual purchase price, payment for outstanding advances and payment of assumed liabilities

• a detailed discussion of recent information on the unified rollout by Tori Spectrum.

Philippines, Globe Telecom (incl. Innove), PLDT Inc. (incl. Smart Communications and Sun Cellular), Vega Telecom