Telstra pulls out of Philippines talks with San Miguel: report

San Miguel Corporation President Ramon Ang told local newspaper The Philippine Daily Inquirer that the negotiations had ...

San Miguel Corporation President Ramon Ang told local newspaper The Philippine Daily Inquirer that the negotiations had ended after months of deadlock. Photo: Bloomberg

Talks between Telstra and beer giant San Miguel to build a new mobile network in The Philippines have reportedly ended in failure after months of negotiations.

Telstra had planned to pump billions of dollars into a new joint venture that would've taken on local incumbents Globe Telecom and PLDT.

Many shareholders had expressed serious doubts about the high risks involved in the deal and Telstra's share price has tumbled since talks were first confirmed in August 2015.

Telstra chief executive Andy Penn had as recently as February said the telco was working hard to lock in a deal with San ...

Telstra chief executive Andy Penn had as recently as February said the telco was working hard to lock in a deal with San Miguel. Photo: Justin McManus

But San Miguel Corporation President Ramon Ang told local newspaper The Philippine Daily Inquirer that the negotiations had ended after months of deadlock.

"Both SMC and Telstra worked hard to come up with an acceptable resolution to some issues," he reportedly said. "However, we agreed we can no longer continue with the talks.

"I believe this is best for all parties."

He added that Telstra had offered to continue providing technical work design and construction consultancy services to the company. 

If confirmed, the failure to strike a deal could help lift Telstra's flagging share price because it was seen by some analysts as a risky play.

But it also highlights Telstra's grinding battle to find new sources of profits and revenues as its local operations face falling profit margins thanks to rising competition and the national broadband network's construction.

Telstra chief executive Andy Penn had as recently as February said the telco was working hard to lock in a deal with beer and food giant San Miguel.

He had pledged to spend up to $US1 billion to buy 40 per cent of the joint venture on top of extra money to be raised with a syndicate of local banks.

However. at the same event Mr Penn also said the talks had continued for longer than he had anticipated or liked.

Landing a deal in The Philippines was seen by Telstra as a good opportunity because the two telco incumbents are a duopoly that generate strong mobile profit margins.

The archipelago suffers from poor mobile broadband and limited 4G coverage, giving Telstra a potential technical edge. 

But The Philippines is also a notoriously tough place to do business and San Miguel's last partner, Qatar Telecom, pulled out of a joint venture in 2015 after its mobile products failed to make headway.

Telstra's would-be competitors told Fairfax Media in December that it was planning to tie the Australian company up with lawsuits and presidential appeals over the radio spectrum resources allocated to San Miguel.

It is understood Telstra had already been sending its staff and engineers to The Philippines in an effort to help build the network.

Sources told The Inquirer that mobile towers in Metro Manilla and provinces immediately to the North and South of the region had already been built and would be switched on soon. 

Mr Ang said he remained open to the idea of partnering with a different company but was in no hurry to do so. 

Telstra has been contacted for comment. 
 

Related posts