FREE Market Commentary: 3rd Telco Known by November

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Market Issue or Event

3rd Telco Player Known by November

The DICT placed the bid submission deadline by Nov. 7 this year. Interested groups can buy the bid documents for PHP 1.0 Million starting Oct. 8. Bidders presented in last week’s briefing are Converge ICT, Udenna Corp., ECP, NOW, PTT and TBGI.

In terms of qualifications, the company should not be a related party to any dominant telco, have no outstanding liabilities to the NTC, and paid-in capital of at least PHP 10.0 Billion.

The third telco will be picked based on 3 criteria: 1) population coverage; 2) internet speed; and 3)
investment over 5-yr commitment period.

 

Our Partner Broker’s View and Commentary

As the market remains frail, talks of a third telco may again boost speculation on companies that are looking to bid. We note though that PTT is being asked by NTC to pay about PHP 444 Million for supervision and regulation fees. Combined with a negative equity, it will be a tall order for PTT to compete.

On the other hand, as of their latest financial statements, ECP, NOW, and TBGI do not meet the requirement of at least PHP 10.0 Billion in paid-in capital. The large CAPEX required for the 5-yr period (>PHP 200 Billion) also puts into question ability of these companies to meet the requirements, unless of course they are able to get foreign partners to fund the CAPEX.

In any case, we think the barriers to entry are high and the duopoly continue to show signs of turnaround with steady growth in service revs and recovery of EBITDA margins. Our consensus Target Price for GLO is PHP 2,130 and PHP 1,600 for TEL.

 

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AP Securities (formerly Angping & Associates Securities)

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