The PLDT (TEL)-Digitel (DGTL) merger created buzz in the stock market and in the consumer world drawing in mixed emotions and reactions. Many felt threatened now that PLDT owns more than half of the unlimited call and text pioneer in the Philippines. But is it really so? Here's my insights about the merger.
The recent TEL-DGTL merger was likened to the BDO-Equitable PCI Bank merger in 2006. When BDO bought PCI Equitable Bank in 2006, they released a statement that Equitable PCI Bank would remain and operate as a separate entity but later on became Banco de Oro Unibank and Equitable PCI Banks were slowly turned into BDO branches.
Manny Pangilinan said that Sun Cellular would retain its existing features yet many people are pessimistic and think that the unlimited call and text will be gone soon.
I don't think that the unlimited call and text features of Sun Cellular will be phased out in the merger because such feature is the lifeline of Sun Cellular and the same feature will further boost PLDT's subscriber population. Though in a sense that a huge part of the competition has been killed, Globe still owns a significant part of the market which I believe is strong enough to compete with TEL and DGTL. PLDT has to keep its competitiveness up against Globe and the unlimited call and text feature is an edge.
What's in it for Globe? Globe (GLO) gained market sentiment after the merger. Two days after the merger, TEL's stocks decreased (probably because of profit taking) while DGTL's continued to sink while GLO's still went up.
What prompted the market sentiment for GLO? In my opinion, GLO is the only company that could neutralize the monopoly of PLDT as of the moment. Globe has approximately 25 million subscribers, quite significant in comparison to PLDT's 41 million and Digitel's 16 million. Though the merger made PLDT own the lion's share of the pie at 57 million, the market sentiment is leaning towards Globe for now and if they can capitalize on the panic that the merger has created, they could give PLDT a run for their money.
Fundamentally, I am staying away from telco stocks right now. First, I find TEL and GLO expensive. Expensive in a sense that for an amount of 2400 or 900 I can buy more shares from different stocks at a cheaper price and for an equal potential. As soon as the telco fever is over, I'm confident that other stocks will follow. Second, other than the merger, telco companies doesn't have much fundamentals. There hasn't been any technological advancements which makes me think that the telco sector is stagnating as of the moment.
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