By Ashley Erika O. Jose, Reporter
THE POTENTIAL acquisition of a majority stake in DITO CME Holdings, Inc. by a foreign group will likely bolster the company’s financial health and operational capabilities, according to some analysts.
“Additional equity is very important because DITO’s telecommunications business is capital intensive and its operating cash flow remains negative,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message on Sunday.
In a regulatory filing, DITO CME said there have been no definitive agreements yet regarding the majority takeover of DITO CME.
“The company will make the necessary disclosures and seek the appropriate regulatory approvals if such a transaction is executed, as required by the rules of the Securities and Exchange Commission and the Philippine Stock Exchange,” the company said in a regulatory filing last week.
DITO CME is the operator of DITO Telecommunity Corp.
In 2023, DITO CME said it had entered into a subscription agreement with Summit Telco Holdings Corp. for P3.3 billion, allowing the issuance of 3.3 billion common shares to the company priced at P1 each.
Summit Telco Holdings is a wholly owned unit of Singapore-based Summit Telco Corp. Pte. Ltd., which is an existing shareholder of DITO CME.
Summit Telco Holdings is a newly formed holding company, incorporated in October 2023.
According to DITO CME’s regulatory filing in December, Summit Telco Holding’s subscription to DITO CME’s shares is its first business venture since its incorporation.
Last year, another unrelated third-party company, Xterra Ventures Pte. Ltd., subscribed to DITO CME shares.
Xterra Ventures makes up 3.76%, or 610 million, of the firm’s 16.235 billion issued and outstanding common shares, which were placed via private placement out of the company’s unissued authorized capital stock.
Summit Telco Corp. now accounts for around 8.14% of DITO CME’s outstanding shares, while its unit, Summit Telco Holdings, holds 16.89%, with Udenna Corp. remaining the biggest shareholder with a 54.77% stake but lower than its previous 65.9% stake before the entry of the new investors.
“DITO needs deep-pocketed major shareholders that can provide significant financial support to the company. If it is able to find new investors who can commit the necessary equity funding, then that should be positive for the company in the immediate term,” Mr. Colet said.
Seedbox Securities, Inc. equity trader Jayniel Carl S. Manuel said a change in majority shareholders might boost confidence, citing the financial struggles of its current majority shareholders.
“While DITO CME has stated that no definitive agreements have been made, the substantial interest shown by Summit Telco suggests potential significant developments,” he said in an e-mail on Monday.
He said additional capital from foreign investors would help ensure sustained financial support for DITO CME, allowing it to achieve long-term growth and competitive advantages in the market.
“Additional equity from a major shareholder like Summit Telco [Holdings] is crucial for DITO CME. The telecommunications sector requires substantial capital investments for network expansion, technology upgrades, and service enhancements,” Mr. Manuel said.
For his part, BDO Capital & Investment Corp. President Eduardo V. Francisco does not anticipate a major buyout of DITO’s stake.
“[I] don’t think it (the majority takeover) will happen. They bought less than three billion shares, and I think the total is almost 20 billion,” Mr. Francisco said in a Viber message.
Earlier this year, the company said it was setting aside up to P30 billion for capital expenditures this year, mainly for the network rollout of its unit, DITO Telecommunity.
For the first quarter, DITO CME saw its attributable net loss widen to P4.11 billion from P336.67 million in the comparable period a year ago, despite posting higher gross revenues for the period.
According to the company’s financial statement, the company recorded a gross revenue of P3.78 billion, 61.5% higher than P2.34 billion previously.
This comes after its gross expenses ballooned to P7.04 billion, up 31.1% from P5.37 billion in the same period last year.
On Monday, shares in the company closed one centavo or 0.49% lower to end at P2.04 apiece.
