Globe may benefit from Digitel buyout

Globe Telecom Inc. may yet benefit from Philippine Long Distance Telephone Co.’s (PLDT) acquisition of Sun Cellular, according to analysts, who see the deal putting an end to the intense price war in the industry.

“We are getting to see better margins for the industry [because of this development]. We are expecting an end [to] the intensified price war,” Prince Anthony Yeung of AB Capital Securities Inc. said.

Before Sun Cellular entered the picture, PLDT and Globe were not engaged in a price war, said Yeung.

“We will go back to the old model wherein PLDT and Globe [are the] only [ones] competing,” he said, adding that PLDT will be the overwhelming number one and Globe a distant second placer. The analyst said competition will no longer be about simply lowering the price, but more about innovative services.

The mobile unit of Gokongwei-owned Digital Telecommunications Philippines Inc. (Digitel), Sun Cellular entered the market in 2003 with an unlimited call and text service, triggering a price war in the maturing telecom industry.

As a third player, Sun Cellular has been eating up the market share of PLDT and Globe, said Astro del Castillio, managing director of First Grade Holdings.

“That’s why Digitel [has] become attractive to PLDT. One way of expanding is to buy out [the] competition and control the competition,” the analyst said.

Jun Calaycay of Accord Capital Equities said the PLDT-Digitel deal should force Globe to go back “to the drawing board to see what they can do to protect market share.”

“They might also consider looking to other small players not necessarily [for] a merger, [but] maybe just alliances,” Calaycay said, adding that Globe nevertheless has to improve its efficiency and offer innovative services.

“At a certain point the regulators have to look into [thePLDT and Digitel deal], the analyst said, citing a possible “monopoly” emerging.

With the Digitel acquisition, PLDT’s market share would rise to as much as 65 percent. Through mobile unit Smart Communications Inc., PLDT has 45.6 million mobile phone subscribers, while Sun Cellular has 14 million.