PSE Circular for Brokers No. 1398-99

June 15, 1999 PSE CIRCULAR FOR BROKERS NO. 1398-99 June 15, 1999 PHILIPPINE STOCK EXCHANGE, INC . Philippine Stock Exchange Center Exchange Road Ortigas Center, Pasig City Attention: Ms . Eileen M . Lacorte Analyst, Disclosure Department Gentlemen : This refers to your letter requesting clarification of the news article entitled " Digitel shares for sale for P 3 each ?" published in the June 15, 1999 issue of Business World. Globe Telecom hereby denies the allegations of the aforestated article. While merger talks are quite common in the telecommunications industry and are to be expected given the number of competitors in the market, Globe has had no discussions or negotiations, much less any agreement with DIGITEL, for any merger as of this time. LibLex We also wish to clarify that the article adverted to was not a press release of Globe Telecom nor did the company cause the publication of this in any other way. cdt We hope this clarifies matters. Very truly yours, (SGD.) GIL B. GENIO CFO-Chief Information Officer Digitel shares for sale for P3 each ? Following Philippine Long Distance Co.'s (PLDT) recent partnership with Japan-based telephone giant, Nippon Telegraph and Telephone Corp. (NTT), other industry players are now in a rush to consolidated resources to survive in the present competitive environment. Market talks have it that Gokongwei-controlled telephone firm, Digital Telecommunications Phils. Inc. (Digitel) is said being pursued by Globe Telecom GMCR, Inc. and Bayan Telecommunications, Inc. (Bayan Tel). An industry source, who requested anonymity, told Business World that between the two companies vying for Digitel, Globe has a better chance of acquiring the Gokongwei-owned telephone company. "Globe is financially sound to do acquisitions," the source added. Globe, backed up by the oldest conglomerate in the country Ayala Corp. as well as Singapore Telecom International, made a turnaround from its five-year consecutive net losses, earning P221 million in the first quarter of 1999. On the other hand, Bayan Tel expects net losses until the year 2000, with its net loss last year reaching P1.3 billion. LLjur The source also said that Digitel president John Gokongwei is asking for a P3 per share for the 47.45% stake in the company. Estimates show that with Digitel's around 210,000 subscribed lines as of December 1998, it would be valued at $830 per line. "Although this would appear cheap compared with PLDT's simulated equity cost per line of $2,900, Digitel might still have some room to command a premium especially once its cellular license has already been approved," the source added. The market went abuzz with speculations that Mr. Gokongwei is planning to divest its interest in the telecom industry after he was quoted as saying, "Everything is for sale, except URC (Universal Robina Corp.), for the right price," said the source. For his part, Bayan Tel executive vice president for finance and corporate affairs Primitivo T. Pearanda, Jr., neither confirmed nor denied its talks with the Gokongwei owned telephone firm, saying "Digitel and Bayan Tel may be good for competition." aisadc Globe and Digitel officials were unavailable for comment. The same source further revealed that the Lopez camp were "surprised" over the P3 per share valuation given by Digitel. "They probably found (Digitel) too expensive," the source said. Bayan Tel is said to be reviewing its due diligence of Digitel. Industry analysts said consolidation moves in the telecom industry is expected especially with PLDT having NTT as its strategic foreign partner. The telecom giant has likewise consolidated its subsidiaries, placing cellular leader Smart Communications, Inc. under its management, operating side by side with its existing cellular subsidiary, Pilipino Telephone Corp. (Piltel). "PLDT-Smart-Piltel combination is a tough group to compete with. The industry has no other choice but to sell or tie up," said Orion-Squire Capital Inc. research manager Cilette Liboro in a telephone interview. She likewise made a forecast that the present telecom environment will eventually be sealed down to two major players. "Among the two companies (vying for Digitel), Globe obviously has the edge but we cannot discount the fact that Bayan Tel is backed up with the Lopezes," said Ms. Liboro. The sentiment was echoed by ATR-Kim Eng Securities, Inc. telecom analyst Richard Tan who said Mr. Gokongwei would not probably give Digitel to the Lopezes, after his Philippine Commercial International Bank experience. cdlex "With Globe and Bayan Tel (talks for planned merger at a rocky stage, it has probably increased the allure of Digitel," said Mr. Tan "Digitel is the only one left with a niche market, a healthy Luzon-wide franchise. As an independent, Digitel cannot compete effectively alone . . . it definitely has to merge otherwise it would be left out," said Mr. Tan. Digitel shares closed yesterday at P2.18 from a high of P2.22