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Is Telstra coming to the Philippines?

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Telstra Corp., the leading telecom company in Australia, has disclosed ongoing talks with San Miguel Corp. to form a joint venture company that will compete with mobile phone service providers Globe Telecom and Smart Communications in the Philippines.

There were no concrete plans yet, but Telstra chief Andy Penn was quoted as as saying the telco giant would spend up to $1 billion, once it pursues its investment in the Philippines with San Miguel. 

He said the joint venture would offer an alternative to "lousy" services provided by current operators in the Philippines.

“We’re doing a lot of work there and supporting San Miguel to date in terms of the design and the network rollout if that were to go ahead,” he said.

Penn said the Philippine mobile market is “interesting” because there are only two incumbent players and “the EBITDA [earnings before interest, taxes depreciation and amortization] margins in the Philippines, have been relatively strong.”

Telstra chose San Miguel as its potential partner because the latter holds radio frequency spectrum that can be used by the joint venture to offer high-speed broadband services.

“The partner is a very strong partner both from the perspective of its business interest in the market and also its spectrum holdings as well,” Penn said, referring to San Miguel.  

The planned joint venture would see San Miguel holding a majority stake, in compliance with the 1987 Constitution, which limits the foreign ownership of utilities to a maximum of 40 percent.
“We would be restricted to a 40 percent shareholdings for regulatory reasons,” Penn said. 

San Miguel holds some of the “very powerful” mobile frequency band, particularly the 700-megahertz spectrum.

The 700 MHz band, located above the TV broadcast channels, penetrates buildings and walls and covers larger areas.  Mobile wireless service providers in other countries have been using the  spectrum to offer mobile broadband services.

The Philippine government allocated 80 megahertz of spectrum in the 700 MHz band to wi-Tribe Telecommunications Inc., 10 MHz to Hi-Frequency Telecommunications Inc. and 10 Mhz to New Century Telecommunications. 

San Miguel owns  wi-Tribe and Hi-Frequecy, which plans to form a mobile phone joint venture with Telstra.

The 700-MHz band is a “very powerful” frequency because the coverage is wider and the capital spending requirement is lesser.

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