Finally it happened. The Philippine Stock Exchange index (PSEi) received a much-needed boost yesterday, thanks to the news of PLDT acquiring a majority stake in Digitel.
Since the start of the year, the PSEi has been averaging a downside of 10%. Yesterday, the index jumped 2.98%, up 116.51 points to close at 4,023.74.
The market rally was led by PLDT (stock code: TEL) which gained 15.72% in one day, closing at P2,356. TEL was also yesterday’s most actively traded and top gainer stock.
The PSEi surge is attributed to the announcement made by the Philippine Long Distance Telephone (PLDT) Company that it is acquiring a 51.5% stake in Digital Telecommunications Philippines Inc. (Digitel) in a multi-billion peso share swap with principal shareholder JG Summit Holdings. The transaction is said to be valued at P69.2 billion.
Analysts say the merger could result in a duopoly that would boost the margins of the country’s top two telecommunications companies, Smart (owned by PLDT) and Globe (owned by Ayala Corp.). In the past, Digitel’s cheap “unlimited” promos and packages — offered under the Sun Cellular brand — had sparked a price war in the industry that eventually eroded the margins of competing firms.
The acquisition of Digitel will solidify PLDT’s dominance in the Philippine telecoms markets. Digitel will add 14 million subscribers to Smart’s 46 million users, with Smart effectively grabbing a huge 67% of the total mobile phone market.