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Telstra-San Miguel: Why It Didn't Push Through And What This Means For Us

Don't feel too bad; all is not lost
by Neps Firmalan | Mar 14, 2016
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Australian telecommunications company Telstra and local conglomerate San Miguel Corporation (SMC) have canceled their plans of going on a joint venture to provide the country with better and faster Internet service.

SMC president and COO Ramon Ang said that this was due to both companies failing to agree on an equity investment, GMA News reported.

"Both SMC and Telstra worked hard to come up with an acceptable resolution to some issues. However, we agreed we can no longer continue with the talks. I believe this is best for all parties," he said.

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Ang's sentiment was echoed by Telstra CEO Andrew Penn. "Despite an enormous amount of effort and goodwill on all sides, we were simply unable to come to commercial arrangements that would have enabled us all to proceed," said the foreign company head in a press release.

Penn also added that the possible partnership was enticing, but made it clear that a feasible balance between investments and profits should be met. "While this opportunity is strategically attractive, and we have great respect for San Miguel Corporation and its President Mr. Ang, it was obviously crucial that the commercial arrangements achieved the right risk-reward balance for all involved."

In other words, the Telstra-SMC deal was appealing, but the two corporate giants weren't able to see eye to eye when it came to major financial decisions.

Still entering the game

This doesn't mean that SMC won't enter the local Internet race, though. In fact, the Ang-led conglomerate will still push through with their plan of setting up a telecommunications network even without Telstra this year.

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"We are not rushing. What’s important is that we give Filipinos a third and better choice that they have been deprived of for the longest time," Ang said.

"SMC’s entry in the telecom market will definitely be a game-changer. When we launch, consumers will benefit from better, cheaper service," he added.

Also, Telstra and SMC might still work together, to a certain extent, with the former offering "to continue technical network design and construction consultancy support to San Miguel Corporation, should those services be required."

Still a well-endowed new player

Last October, Telstra announced it was investing up to $1 billion in the Philippine telecommunications market to offer fast and reliable Internet service for Filipinos.

This was widely met with praise by the local public amidst complaints of lousy, snail-paced yet expensive online services, especially compared to neighboring Asian countries.

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With the celebrated deal being scrapped, SMC alone will take on both PLDT and Globe—the two companies currently dominating the local Internet industry. However, SMC has the financial capabilities to play with the big boys, being the country's most diversified conglomerate.

Also, since it holds many well-known brands, Ramon Ang and co. won't have much trouble in terms of advertising their Internet services. Their products, from beers such as San Miguel and Red Horse to processed meats under the Purefoods brand, are well known. This means that whatever new product SMC will introduce will have instant recall, as opposed to an unknown newcomer who'll have to heavily advertise just to develop brand awareness. SMC just has to attach a "A product of San Miguel Corp..." label in the ad materials and they're good to go.

Then there's the whole 700 Mhz issue. For the uninitiated, 700 Mhz is an unused frequency that could theoretically provide fast deployment of LTE and broadband services to local consumers. It's currently controlled by SMC, with both PLDT and Globe asking the National Telecommunications Commission to intervene and regulate the allocation of the bandwidth. This means that SMC also has the technical resources to make good on its aim to provide fast Internet service to local users.

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What this means for current local Internet users

While they may deny being even the least bit alarmed, a Telstra-SMC partnership is certainly a big threat to both Globe and PLDT.

With SMC now going solo, they might find it a bit more difficult, at least at first, to navigate the scene without Telstra's help (Telstra is Australia's largest telco, so their know-how is a big boost for any partner entering the Internet market). However, as we've said, they have the means which includes financial and technical resources. By itself, SMC still poses a major threat and if they play their cards right (including the proper utilization of the 700 Mhz bandwidth), they might just force the competition to improve and offer better, cheaper services.

So, what does this mean for us stuck with sucky Internet speeds for the longest time? More choices which, as we've discussed before, the lack thereof is one of the major reasons why our Internet is so damn slow. It may be without Telstra but, hey, it's a start.

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With reports from Drei Medina

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