This article first appeared in The Edge Malaysia Weekly on April 4, 2022 - April 10, 2022
AXIATA Group Bhd’s 63%-owned subsidiary edotco Group Sdn Bhd is understood to be in talks with PLDT Inc of the Philippines to acquire a portion of the latter’s telecommunication tower business, sources familiar with the matter tell The Edge.
While the details are scarce, sources say the acquisition could be a substantial one with edotco eyeing about 3,000 of PLDT’s 6,000 telecom towers that are up for sale.
It is understood that edotco may be utilising its 51%-owned unit ISOC edotco Towers Inc — a joint venture with the Philippines-based ISOC Infrastructure Inc — for the acquisition of PLDT’s telecom towers. ISOC edotco Towers was set up in September 2019.
The Edge understands that a number of edotco’s top brass are in the Philippines at the time of writing, but how soon a deal may be inked remains to be seen.
A source familiar with the matter says the deal is “imminent”, adding that, “From what I gather, it (the acquisition) could be concluded soon.”
There has also been talk of PLDT leasing back its towers from ISOC edotco Towers after the sale, but this remains conjecture at press time.
According to news reports in the Philippines in mid-March, PLDT was disposing of 50% of its tower assets — or 6,000 out of a total of 12,000 towers — valued at some PHP50 billion (US$966 million or RM4.06 billion). PLDT president Alfredo Panlilio reportedly said that the Philippine company had narrowed down the 19 initial bids it had received to six, and that the bidders were tower players that were “strong well-funded entities” from across the globe.
PLDT was looking to choose two companies — each acquiring 3,000 towers — with the award being made in the second quarter of the year, said the news reports. UBS AG is understood to be advising PLDT on the sale. Final bids for the sale of the 6,000 telecom towers is said to have been received by PLDT on March 1 this year.
If edotco via its unit ISOC edotco Towers is one of the preferred bidders, Axiata may have to fork out around RM2 billion for the acquisition. Axiata is a 36.75%-owned unit of sovereign wealth fund Khazanah Nasional Bhd.
Apart from Axiata, edotco’s shareholders are INCJ Ltd (owned by Japan Investment Corp) with a 21.14% stake; Mount Bintang Ventures Sdn Bhd, which is a wholly-owned unit of Khazanah Nasional, with 10.57% equity interest; and Kumpulan Wang Persaraan (Diperbadankan) or KWAP with the remainder 5.29% stake, company searches show.
With such strong shareholders, edotco is unlikely to have any difficulty with funding.
Meanwhile, the Philippines-based ISOC Infrastructure is the vehicle of businessman Michael C Cosiquien, who is also the co-founder of Megawide Construction Corp, a US$200 million company publicly traded on the Philippine Stock Exchange. Cosiquien was listed by Forbes as one of the Philippines’ top 50 richest individuals in 2020 with a net worth of US$175 million.
For its financial year ended December 2020, edotco posted an after-tax profit of RM175.23 million on the back of RM1.88 billion in revenue. As at end-2020, the telecom tower company had total assets of RM6.51 billion, total liabilities of RM2.73 billion and retained earnings of RM482.11 million.
In early March, edotco acquired about 1,000 towers from Indonesia’s PT XL Axiata Tbk for RM219 million, giving it a presence across all major Indonesian islands of Java, Sumatra, Bali, Sulawesi and Kalimantan, and eastern Indonesia. PT XL Axiata is a 61.48%-owned subsidiary of Axiata, edotco’s parent company.
With the acquisition from PLDT, edotco will have under its belt a portfolio of 50,000 owned and managed towers and a presence in nine markets across Asia — in Malaysia, Myanmar, Bangladesh, Cambodia, Sri Lanka, Pakistan, the Philippines, Laos and Indonesia.
An IPO of edotco has been talked about since January 2018, but has yet to take off.
Axiata’s stock was suspended last Friday pending an announcement on its merger with DiGi.Com Bhd. Axiata is a large company with a market capitalisation of RM34.69 billion.
Makati-based PLDT, which is the Philippines’ largest telecom and digital services provider by market value, had a market capitalisation of US$7.6 billion at the time of writing.
According to Bloomberg, PLDT’s shareholders include NTT DoCoMo Inc of Japan with a 20.35% stake, Philippine Telecommunications Investment Corp (12.05%) and JG Summit Holdings Inc (11.27%), the latter of which is controlled by the family of the late John L Gokongwei Jr, a renowned businessman. Hong Kong’s First Pacific Co Ltd holds a 3.54% stake in PLDT.
News reports from the Philippines state that PLDT is divesting its tower business to trim its gross debt, which was pegged at US$5 billion at end-2021.
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