July 28, 2020 / 2:14 AM / 13 days ago

Philippines' new China-led telecom firm surges after Duterte's 'chilling' threat

MANILA (Reuters) - Shares in a new Philippine cellphone firm owned jointly by state-run China Telecom (0728.HK) and a tycoon close to President Rodrigo Duterte soared on Tuesday, a day after the firebrand leader threatened to shut down its two rivals.

FILE PHOTO: FILE PHOTO: A logo of Philippine Long Distance Telephone Company (PLDT) is seen in front of their building in Makati city, metro Manila, Philippines May 30, 2016. REUTERS/Romeo Ranoco/File Photo

DITO CME DITO.PS, a holding company for new operator, DITO Telecommunity, jumped nearly 11% compared to falls of over 3% for PLDT (TEL.PS) and Globe Telecom (GLO.PS) - whose billionaire owners Duterte has repeatedly attacked for being “oligarchs”, threatening state intervention in their business empires.

Duterte on Monday called their services “lousy” and threatened their closure during an annual state of the nation address that could unnerve investors concerned about political risks.

Six months ago he targeted water companies owned by the same tycoons - the Ayala family and Manual Pangilinan - leading to the cancellation of 15-year extensions to their concessions.

Monday’s outburst also targeted owners of ABS-CBN (ABS.PS), a top broadcaster that angered Duterte by not showing his campaign commercials, which led to the president’s Congressional allies rejecting its bid last month to renew its 25-year broadcast license.

“Given what recently happened to ABS-CBN, this is a clear and present danger to the businesses mentioned,” Francis Lim, head of the Management of the Association of the Philippines, said of Duterte’s threat to shut down Globe and PLDT.

“He can make it happen and that sends a chilling effect to business and potential investors.”

BIG WINNER

A big winner from Duterte’s political rise has been Dennis Uy, a 40-something ethnic Chinese tycoon from the president’s hometown and the biggest contributor to his 2016 election campaign.

Uy’s DITO won a telecoms license in 2018 that followed months of Duterte saying he had offered China the “privilege” of a license. China Telecom teamed up with Uy and was the only qualified bid.

Uy’s business empire has enjoyed explosive growth during the Duterte presidency, with the number of firms held by its flagship, Udenna Corp, quadrupling to over 100.

Several ventures include Chinese firms, private and government, with the China National Offshore Oil Corp (CNOOC) among those that have benefited from Duterte’s pro-Beijing stance.

The reclusive Uy last year joined Forbes Magazine’s “richest list” in a month when he acquired half of the country’s natural gas reserves, a high-speed ferry company and exclusive rights to sell Ferrari sports cars.

Experts and bankers have told Reuters that Uy has benefited not from Duterte’s intervention, but a perception their close ties would lead to preferential treatment, which also makes him attractive to Chinese firms seeking a Philippines foothold.

FILE PHOTO: FILE PHOTO: A logo of Globe Telecom is seen at a Globe service center in Edsa, Quezon City, metro Manila, Philippines, May 7, 2018. Picture taken May 7, 2018. REUTERS/Dondi Tawatao/File Photo

A spokesman for Uy in December told Reuters his spending spree showed his confidence in Duterte creating “an even playing field” and Uy had not used their friendship to gain an advantage.

Meanwhile, DITO said it would not comment on Duterte’s remarks but was committed to a March 2021 launch.

PLDT declined to comment and Globe said it had improved services.

Editing by Martin Petty

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