Philippine Long Distance Telephone Company (PLDT) and Globe Telecom—the top two providers of mobile voice and Internet services in the Philippines—joined forces Monday in a US$1.5 billion deal to acquire the wireless unit of San Miguel Corp. which had aspirations of emerging as a third national wireless competitor in the island nation. 

Together, PLDT and Globe dominate the Filipino wireless sector with respective market shares of 57% and 43%.  Monday’s deal would give both carriers access to coveted 700 MHz spectrum assets that could provide a much-needed boost to wireless Internet services throughout the Philippines.  (A recent study compiled by data analytics firm Ookla has ranked the Philippines in 21st place out of 22 Asian countries in terms of Internet reliability and speed.)  National law also limits foreign investors to a 40% stake in Filipino telecommunications carriers, and incoming Philippines President-Elect Rodrigo Duterte has promised to take steps to open the market to foreign competitors if service speeds and standards are not improved.  As for San Miguel—a power, petrochemical and food conglomerate best known for its beer—the pact ends the company’s two-year quest to enter the national wireless market.  San Miguel is expected to use the proceeds of the transaction to support infrastructure and power station projects.

Under the terms of the deal, PLDT and Globe will receive stakes of 50% each in San Miguel telecom unit Vega Telecom.  In exchange for their new 700 MHz assets, PLDT and Globe have pledged to return certain spectrum assets to the government to facilitate the market entry of a new carrier.  The pact remains subject to the approval of shareholders and the newly-established Philippine Competition Commission, which has promised to “assess and take action as appropriate.”  As San Miguel President Ramon Ang described the sale as “a sacrifice we had to make” to enable incumbents PLDT and Globe to improve service speed and reliability, PLDT CEO Manuel Pangilinan predicted that, upon completion of the deal, “customers will progressively experience faster Internet and higher call and data quality.”