Telstra eyes $US1bn Philippines spend

Source: theaustralian.com.au

Telstra chief Andy Penn has revealed that the telco giant will spend up to $US1 billion if it goes ahead with its plans to launch a new mobile phone venture with beer and food giant San Miguel in the Philippines.

Speaking at the telco’s annual investor day in Sydney today, Telstra boss Andrew Penn said the telco would not spend more than $US1bn to establish the joint venture with additional financing for the new operation coming from San Miguel and banks.

“We are not expecting it to be more than $1 billion. That would be essentially Telstra’s equity investment. We could own 40 per cent of the venture which would also have external financing as well,” Mr Penn said.

“That would be our share of the equity financing and the local partner would put in their share of the equity financing and then banks would also make a contribution and that would make up the total funding for the venture.”

Telstra has been in talks with San Miguel since August. No deal has yet been reached but talks are ongoing Mr Penn said.

A Telstra play in The Philippines could see the telco invest hundreds of million of dollars in new mobile infrastructure to ­disrupt the telecoms duopoly in the archipelago nation that is dominated by local players Globe and PLDT.

“The Philippines market from a mobile perspective is interesting because there are only two incumbent operators. The EBITDA margins in the Philippines are relatively strong and were we to complete a deal, the partner is a very strong one,” Mr Penn said.

“Frankly let’s face it, go to the Philippines and experience the lousy service you get from the incumbent operators and you will see that the opportunity for a new operator to provide a much better quality service … I think there’s a significant opportunity. Of course any new venture comes with its level of risk which is why we are being considered and measured.”

The Philippines, with close to 100 million inhabitants, is a ­potentially lucrative market for Telstra, which is desperate to ­increase its mobile reach into fast-growing Asian markets.

While The Philippines has a mobile phone penetration rate of more than 100 per cent, its services are dominated by slower 2G services. If Telstra decides to join forces with San Miguel, it could see the two companies roll out much faster 4G services, which would be highly popular with the nation’s smartphone users.

Any investment in the Philippines would be in line with Mr Penn’s strategy to increase the telco’s presence in Asia and become more of an international telecoms brand.

Telstra’s prospective foray into The Philippines is the latest in its bid to build a presence in a lucrative market.

Last year, it bought data centre and undersea cable operator Pacnet for $697 million, doubling its infrastructure assets in the Asia-Pacific where the telco hopes to push out its network applications and services.