There are likely to be a number of significant mergers and acquisitions in the Far East telecommunications industry this year, but the two most important in terms of regional development have almost certainly been made.
Singapore Telecom’s purchase of a sizeable stake in Southeast Asia’s largest mobile operator, Advanced Info Services (AIS) of Thailand, and Hong Kong-based First Pacific Group’s seizing control of Southeast Asia’s oldest, and for many years most respected, full service operator, Philippine Long Distance Telephone (PLDT), have set the stage for the creation of two regional powers.
Both acquisitions were made in the face of stiff competition from major multi-national operators wishing to get substantial footholds in the region. And both will result in regional operators able to provide an affordable alternative to world- spanning satellite telecoms networks for people who only travel to neighboring countries.
The two companies could not be more different. State-owned Singapore Telecom, whose chairman and CEO is Brigadier General Lee Hsien Yang, son of long-time Prime Minister and now senior statesman Lee Kuan Yew, is a traditional telecoms company which has branched out into cellular, data and internet operations in the past few years.
First Pacific is a relatively new conglomerate which was established in Hong Kong in the 1970s to act as an offshore investment vehicle for the Salim family of Indonesia, immensely wealthy ethnic Chinese old friends of the recently deposed President Surharto.
Heading up First Pacific is Filipino businessman Manuel (Manny) Pangilinan, CEO since the group was established. First Pacific has dabbled in a number of businesses while trying to establish a few core areas for itself, and has recently been rapidly divesting itself of operations ranging from security firm Guardforce, to Dutch trading company, Hagemeyer.
It seems to have settled on telecoms, banking, integrated property services and marketing and distribution as its core areas. Although, as Pangilinan says: First Pacific is a story still being written, and there have been strong rumors it is trying to sell its main banking asset, First Pacific Bank, in Hong Kong.
But where the two agree is in the importance of having strong regional operations and being able to provide regional services to customers. And they have both built up war chests to allow them to go on the acquisition trail – more than $4bn in the case of SingTel, and considerably less for First Pacific, although its recent divestments have raised more than $2.5bn – $750m of which went towards buying the stake in PLDT.
Although its has acquired substantial stakes in Belgian national operator Belgacom and Norwegian GSM operator Netcom ASA, and has businesses in both the US and Australia, SingTel’s focus has mainly been on Asia and particularly SouthEast Asia in the past few years as it has set about assembling a regional network piece by piece.
Central to its plan has been GSM and it now has control of, or a strong stake in, GSM operators in China, Vietnam and the Philippines as well as Singapore and now Thailand. In Southeast Asia, its coverage extends over an area with a population of 142 million. If it is able to buy into networks in Indonesia and Malaysia it would be triple that.
But it is the acquisition of 20% of AIS, with its nearly a million mobile subscribers, which has made it feasible for SingTel to really get into providing a regional service. It has now given us sufficient critical mass to roll out unique regional services, including multiple local telephone numbers as well as local access to voicemail and customer service to customers that travel in the region, says CEO Lee.
SingTel is working on putting multiple numbers in the same SIM (subscriber identification module) card so that when for example, a Singapore GSM customer of SingTel Mobile visits Thailand, people will be able to call him/her on a local Thai AIS number and he/she will be able to make calls via the AIS network.
First Pacific also has built up a network of cellular operations in several countries including China, India, Indonesia and the Philippines, during the past three years. It sold its first telecoms business, Hong Kong mobile operator Pacific Link because the local market was simply too crowded and competitive, and a smaller Taiwan operation was also sold for the same reason. But it is the acquisition of PLDT, one of Asia’s top telecoms operators, which for the first time makes it a serious player – only eight years after it first ventured into the sector.
In the Philippines, First Pacific’s Smart Communications Inc uses outdated TACS technology but it is quickly establishing a GSM network. Smart has nearly 800,000 subscribers and is the country’s largest network, and the acquisition of PLDT also gives First Pacific management control of Piltel, PLDT’s mobile subsidiary which has another 230,000 subscribers. Although Piltel is in serious financial trouble at present, it is likely to eventually be combined with Smart to form a new company which would challenge AIS for the title of Southeast Asia’s biggest mobile operator.
First Pacific is also forging strong links with Japan’s top operator NTT, which has recently extended its shareholding in Smart and is to invest in PLDT. Asian analysts predict more cooperation around the region between the two – possibly to offer a regional service competitive with the one being rapidly put in place by SingTel.
This article is part of ComputerWire’s M&A Impact information service. Some articles from the service are being provided to Computergram subscribers for a trial period only.
