Town Arjay L. Balinbin, Senior Reporter
PLDT, Inc. announced on Tuesday that it entered into agreements with two foreign tower companies for the sale and leaseback of its 5,907 telecom towers for P77 billion, which will be used to repay debt, fund major cash requirements, and pay special dividends of up to P9 billion.
The group’s subsidiaries, Smart Communications, Inc. and Digitel Mobile Philippines, Inc., signed the sale and purchase deals with the subsidiaries of international telecommunications infrastructure services companies edotco Group and EdgePoint, PLDT said in a disclosure to the stock exchange.
The 5,907 towers – almost half of PLDT’s total tower portfolio – are spread across the Philippines, with 2,973 being acquired by ISOC edotco Towers, Inc., a subsidiary of edotco Group, and 2,934 towers by Comworks Infratech Corp., a subsidiary of EdgePoint.
With the proceeds from the transaction, the PLDT group aims to prepay P27.5 billion in debt maturing this year, PLDT Chief Finance Officer Anabelle L. Chua said during a press briefing.
“We do not need to borrow P24.5 billion that will be used for capital expenditures and other investment requirements. Originally, based on our plans, we would have had to borrow; but this time, we can avoid doing that with the proceeds that we’ll generate from this transaction, ”she noted.
“So with the P52 billion that’s largely being used to share the company, we should enjoy savings on our financing costs. The estimate here of P2.6 billion is calculated at the assumption of a 5% interest rate per annum, ”she added.
The company also expects to see a payment of special dividends of up to P9 billion to its shareholders.
The transaction was signed on Tuesday. PLDT expects staggered closing because of the number of towers being transferred.
“First closing is expected in May 2022 with final closing by the fourth quarter,” Ms. Chua said.
PLDT Chairman Manuel V. Pangilinan in March said the bids the company had received for its towers were “north of the P50-billion mark.”
Asked how PLDT was able to fetch a higher valuation for the towers, he said during Tuesday’s briefing: “I think that’s partly on the back of the good condition of our towers; partly because of the good credit standing of PLDT, I would like to believe, and partly because we had good financial advisors. ”
“I think, on the whole, the timing was perfect, and also this is the first ever towers sale to be achieved here in this country, so in many respects, it had the benefit of a first mover advantage,” he added.
edotco Group, which has more than 54,000 towers across nine countries in Asia, and EdgePoint, which owns around 10,000 towers across Indonesia and Malaysia, will “bring to bear global best practices and technologies in operating the towers which should translate into better network quality, higher resilience and faster recovery from typhoons and other natural calamities, ”PLDT said.
PLDT said its wireless arm Smart has agreed to lease back the towers sold in the transaction for a period of 10 years.
“Smart has secured competitive terms as the anchor tenant on the towers and expects to benefit from operational and capital expenditure savings,” the company said.
“The sale and leaseback will be complemented by a new tower build commitment of 1,500 towers in total over the next few years,” it added.
Regina Capital Development Corp. Equity analyst Anna Corenne M. Agravio said in a phone message that the transaction is “one of the largest asset acquisitions by foreign players that the market has observed so far.”
“Given that this means PLDT will book significant gains, the deal would help the company lower its leverage – which has remained elevated since 2019 – even with its aggressive spending,” Ms. Agravio added.
According to PLDT, the arrangement is also expected to be “earnings accretive from the first full year post closing.”
“This implies that the deal would not just be a one-off gain,” Ms. Agravio said.
“PLDT’s share price has outperformed the index the past few days, so it looks like investors have turned more bullish on the telco,” she added.
In a separate phone message, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said: “This is a positive signal to the international investment community, attesting to increased confidence by foreign investors to bring in more capital into the country.”
“This in view of the country’s improved economic and credit fundamentals in recent years / decades as attested by relatively favorable credit ratings of about 1-3 notches above the minimum investment grade, maintained despite the pandemic since 2020, as well as the country’s attractive demographics , with a population of 110 million, or the 12th largest in the world, with relatively young population and majority of the population already at working age since 2015 (demographic sweet spot) that helps sustain relatively faster economic growth in recent decades, ”he added.
PLDT shares closed 0.37% higher at P1,899 apiece on Tuesday.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.