Powerful news
DEN SOMERA
This week particularly started with powerful news that spurred the market into an advancing mode. The most pivotal of these was the release on Tuesday of the latest draft of the much-awaited terms of reference (TOR) for the selection of the country’s third major telecommunications player by the Department of Information and Communications Technology (DICT).
The talk for a third telco has been a consuming issue, taken up by the present administration out of the public’s general outcry, arising from the very poor and low quality of service provided by PLDT, Inc. (TEL) and Globe Telecom, Inc. (GLO), the two existing telephone companies of the country especially with the cost and speed of their internet services.
In one of the studies conducted on the country’s internet service, it was reported that while “average internet connection speed had increased 20% year-on-year,” it still remained comparatively the slowest and most expensive among the other countries surveyed in the Asia Pacific region.
The DICT adopted an ambitious selection standard, which was simply stated as based on a bidder’s “highest committed level of service.”
As further explained, the new major player will be chosen on the basis of “its promises to provide the best service to the widest number of subscribers and customers in the shortest time possible.”
On this basis, the third telco applicant must meet three specific criteria. First is by the applicant’s ability to serve as much of the country’s overall population as possible. Second is by its minimum average broadband speed.
Third is by its yearly capital and operational expenditures appropriations over a five-year period.
In addition, the third telco applicant is required to make the following: a 40 percent national coverage of the population; provide at least 5 Mbps speed; and a yearly P40-billion war chest in the next five years.
The selection committee will use a point system to rate the plan submitted based on the above general requirements.
Above all, the third telco applicant should also have a net worth of at least P10 billion with a Congressional franchise to operate telecom services. In case of a consortium, Filipinos should control at least 60 percent and at least one of the members should be a holder of a Congressional franchise.
Lastly, the third telco bidder should not be a related party to any existing telecom group and had no outstanding liabilities.
The NTC will assign frequency band 700 megahertz, 850 MHz, 2100 MHz, 2010 MHz, 2.5 gigahertz, 3.3 GHz, 3.5 GHz and 10.5 GHz to the new player.
The draft TOR was released in preparation with the scheduled public consultation on Friday next week by the DICT and as part of its market study.
The next third telco player was originally intended to be named by President Duterte in his State of the Nation (SONA) in July.
That plan, however, is now unlikely to happen with the delays in the crafting of the TOR, which is still scheduled for public consultations on Friday next week. DICT officials now feel that this may then happen only before the end of 2018.
Among the companies that earlier expressed interest in the bidding were Now Corporation, PT&T and Converge ICT Solutions Inc., along with their foreign partners.
Only prospective participants that purchased the selection documents will be allowed to attend the pre-selection information session which shall be set by the selection committee.
The selection documents could be purchased by prospective participants from the National Telecommunications Commission for P1 million.
Introduction of short selling
The Philippine Stock Exchange, Inc. (PSE) has finally secured the approval of the Securities and Exchange Commission (SEC) in the introduction of short selling in the stock market.
Short selling is defined as the “sale of a security (stock) that is not owned by the seller or that the seller has borrowed.”
Short selling is motivated by the notion that a security’s price will decline, and in the process can be bought back at a lower price for a profit. This is the opposite of the traditional trading process in which you have to buy first, then sell later.
While short selling is practiced in other exchanges – and utilized by investors as a hedging mechanism – it was devised to help increase the level of trading activity and improve the market’s liquidity.
The eligible stocks for short selling were limited only to the 30 component stocks of the PSE index (PSEi) and to the exchange traded funds. Only 10 percent of the eligible securities’ outstanding shares can be shorted.
This limit is intended to act as a safeguard for the orderly conduct of short selling activities at the same time to give “ample room for price discovery.”
In the execution of short selling orders, trading participants are to ensure that the client has entered into the necessary securities borrowing arrangements prior to entering a short selling order. Such borrowing arrangements must adhere to existing SEC, BIR, and PSE regulations governing securities borrowing and lending.
The PSE is lining up a schedule of workshops for various stakeholders in the coming weeks on the subject.The approved guidelines on short selling can be downloaded from the PSE website,ww.pse.com.ph.
FOO
Among the important news in the corporate front is the follow-on offering (FOO) of the third largest nickel producer of the country, Global Ferronickel Holdings Inc. (FNI). The FNI’s offer period has been set from July 9 to July 13, 2018 while the offer price has been fixed at P2.07 per share.
The sale will involve a total offering of 250 million common shares that will raise a total of P517.5 million, to underwrite its ongoing P200 million capital expenditures (CAPEX) for mine development and purchase of equipment, as well as to pay some outstanding loans. The listing date is tentatively set on July 20.
Unfortunately, while FNI’s operations continue to be profitable, management is projecting that earnings will be flat this year. Current production cost is about $11 per ton of ore against the market price of about $20 a ton.
In the game
Making our view on the results of the recent audit on the trading activities of the players in the game, the balance of Pixiu’s remaining shareholdings in Shang Properties, Inc. (SHNG) has been inadvertently not recorded since Week 15. This was properly corrected and table 1 below is her final investment summary and performance standing as of Week 16 or the week ending June 22, 2018.
Den Somera is a licensed stockbroker. The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. E-mail address of the writer is den.somera@manilatimes.net
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