CME Holdings Corp.’s decision to postpone a major fundraising operation has the potential to stymie its young telecom unit’s rollout plans, a situation that might jeopardize its ability to reach state-imposed benchmarks.
DITO has unilaterally postponed its planned P8-billion stock rights offering (SRO) to obtain funds for its telecom venture, DITO Telecommunity Corp.’s capital-intensive network expansion. The business blamed the fiasco on “worse than optimal market conditions,” but analysts stated over the weekend that investors just “lacked faith” in DITO.
While the postponed offer may not have an immediate impact on the telco industry, Terry Ridon, convenor of the infrastructure think tank Infrawatch PH, feels the incident “may hinder (DITO’s) deployment and expansion to improve connection and user experience.”
That might pose a major problem for DITO, which is owned by Davao-based businessman Dennis Uy, who is also renowned for supporting President Rodrigo Duterte’s campaign as his 6-year tenure comes to an end. DITO would have to pass a third annual technical examination in July, which had set more tough criteria for the company: 70% population coverage and a minimum average speed of 55 Mbps.
DITO’s chairman, Uy, stated that the company is “confident” that it will pass the test.
For the time being, DITO President Ernesto Alberto stated that the business is “studying many alternative financing solutions recently made available to us that we believe will be more value-enhancing to our shareholders.” According to firm CFO Joseph John Ong, DITO acquired pledges on nearly $4 billion in long-term financing from overseas creditors that, once approved, are “more than enough to support the DITO Telecommunity roll-out plans for the last three years of our five-year capital expenditure plans.”
Ridon, on the other hand, is advocating for greater transparency. “To advise regulators and investors working with the company, DITO should reveal the degree of the impact on its future plans,” he said.
The Philippine Stock Exchange halted trading of DITO’s shares on Monday, putting the exchange’s reputation at risk as a result of the company’s action, which is expected to hurt small-time investors who sold their DITO stocks to fund their purchase of discounted SRO shares in the hopes of profiting from the offer.
According to Ridon, the PSE and SEC “should increase the degree of sanctions for comparable unsuccessful transactions to avoid such instances in the future.”
Already, the fallout from the SRO debacle looked to have spread to other Uy-led businesses. On Monday, Phoenix Petroleum Philippines, Uy’s oil firm, ended trading down 1.3 percent. In the meantime, PH Resort Group Holdings Inc. fell 7.5 percent, while Chelsea Logistics and Infrastructure Holdings Corp. fell 0.61 percent.
“The lack of confidence arises from the high execution risk.” According to the company’s guidance, DITO is still in its early stages of operation and is not expected to be profitable until 2026,” said April Lee-Tan, head of research at COL Financial.
“If DITO is able to build its subscriber base and earn profits faster than planned, it should help boost investor confidence,” Tan added.
Source: PhilStar