PSE Circular for Brokers No. 2654-98

November 25, 1998 PSE CIRCULAR FOR BROKERS NO. 2654-98 November 24, 1998 MANNY PANGILINAN SUCCEEDS ANTONIO COJUANGCO AS PLDT'S PRESIDENT & CEO, AS FIRST PACIFIC TAKES STAKE IN COMPANY Manuel V. Pangilinan was today named President and Chief Executive Officer and a director of Philippine Long Distance Telephone Company (PLDT), with immediate effect. He succeeds Antonio O. Cojuangco, who has been appointed as Chairman, replacing Roberto Romulo, who is retiring from the Board. The senior management succession was approved at today's meeting of PLDT's Board at which six new individuals were named to fill sears on the 11-member body. LexLib The appointments follow the acquisition of PLDT shares representing a 17.2 per cent economic stake, equivalent to a 27.4 per cent voting interest, by First Pacific Company Limited, of which Mr. Pangilinan is Managing Director. Speaking following his appointment, Mr. Pangilinan said: "I am deeply honored to be named to this position at PLDT, one of the finest companies in the Philippines. Its growth and success over the past 70 years is a tribute to the effort and commitment of its management and staff, particularly Mr. Ramon Cojuangco and his family, I will do everything I can to ensure that PLDT continues to flourish. "Our acquisition of P29.7 billion (US$749 million) in PLDT shares is the largest single long-term investment into the Philippines since our Group's investment in Fort Bonifacio in 1995. This represents a major vote of confidence in the country's potential, an endorsement of the economic of the Estrada Administration and a clear sign of our belief that PLDT can become one of Asia's leading telecommunications companies and indeed, the first Philippine company of global stature." Mr. Conjuangco said; "This takes PLDT from a strong local company to a truly regional one. This is a good way to celebrate the company's 70th anniversary." aisadc As a result of today's succession, the following seven individuals are retiring from PLDT's Board Roberto Romulo, Alfonso Yuchengo, Enrique Cheng, Felix de Guzman, Antonio Meer, and Emmanuel Pelaez. They have been replaced by the following individuals, the new PCGG Chairman Manuel Pangilinan, Napoleon Nazareno, Albert del Rosario, Ray Espinosa, Fr. Bienvenido Nebres, and Orlando Vea. For further information contact the following : Antonio R. Samson Executive Vice President, PLDT (632)816-8731 (632)810-9955 November 24, 1998 Highlights US$749 million acquisition of a 17.2 per cent economic interest, representing a 27.4 percent voting interest in PLDT Manuel Pangilinan appointed PLDT's President and CEO Six new directors appointed to PLDT Board Plans to transfer interest in Smart to PLDT in exchange for new PLDT shares FIRST PACIFIC ACQUIRES PLDT STATE FOR US$749 MILLION ; MANUEL PANGILINAN NAMED PRESIDENT, CEO ; NEW DIRECTORS NAMED In a major step in its ongoing restructuring program, First Pacific announced today that it has acquired a 17.2 per cent stake in Philippine Long Distance Telephone Company (PLDT) representing a 27.4 per cent voting interest in the Company for US$749 million (HK$5.8 billion). At a special meeting this morning of the Board of Directors of PLDT - the largest telecoms company in the Philippines - First Pacific's Managing Director, Manuel V. Pangilinan, was appointed President CEO. He was also named to the Company's 11-member Board, joining live other new appointees nominated by First Pacific's Philippines affiliate. The purchase of the PLDT investment has been funded largely from the proceeds of First Pacific's asset disposal program which commenced in December 1997, as well as from bank credit lines. In addition, First Pacific announced that a preliminary agreement has been reached with Japan's Nippon Telegraph & Telephone Corporation (NTT) to raise its stake in Smart Communications, Inc. from approximately 15 per cent to up to 40 per cent. No terms or pricing for the transaction have yet been set. Following this move, First Pacific - which, together with its Metro Pacific Corporation affiliate in the Philippines, holds approximately 65 per cent economic interest in Smart-intends to transfer its remaining interest in Smart to PLDT in exchange for new PLDT shares, thus increasing further its holding in the Company. This Plan, which will be subject to regulatory and other approvals, is expected to be submitted to PLDT's Board as soon as practicable in 1999 Mr. Pangilinan, said: "The acquisition of a significant stake in PLDT is a milestone in First Pacific's evolution from a diversified international conglomerate into the owner of a select number of high-quality, larger businesses within Asia. While we do not see the region's harsh conditions lifting any time soon, we believe the timing is right for those with a long-term perspective to begin the process of re-investing. "Our strategy to acquire businesses in the region that are leaders in their home markets and have strong brand names. We believe that we can add substantial value to such companies and help them prosper by applying First Pacific's hallmark qualities of strong financial discipline and transparency, as well as by implementing international standards of industry practice. prLL "In the case of PLDT, First Pacific will be adding significant value to one of the largest companies in the Philippines. We will do this by improving efficiency, working to extend interconnect across the country, improving network planning and enhancing related functions. "Using our expertise developed at Smart we will implement effective marketing strategies as competition increases and the telecoms industry in the Philippines consolidates. By working to join Smart together with PLDT we can provide increasingly sophisticated consumers with integrated fixed and mobile products and services. "The result will be a stronger, more efficient PLDT - one that brings direct benefits to shareholders, to customers and to employees," Mr. Pangilinan said Terms of the acquisition First Pacific has agreed to pay P29.7 billion, equivalent to US$749 million for a 17.2 per cent economic interest in PLDT, equivalent to a 27.4 per cent voting interest. This equates to a price of P1.420 per share, in terms of economic interest, or a 31 per cent premium to the previous day's closing market price of P1,085. First Pacific's interest has been acquired in two steps: A direct interest of approximately 5.9 per cent was acquired through recent market purchases at a cost of US$197 million. An indirect interest of 11.3 per cent was acquired through the purchase of 52.7 per cent of Philippine Telecommunications Investment Corporation (PTIC) which owns a 21.5 per cent bloc of PLDT shares - as well as rights in PTIC, from Antonio Cojuangco and his family, Nori Ongsiako and her family, Antonio Meer and Alfonso Yuchengco for US$552 million. LLjur Rationale First Pacific considers the following to be the principal investment attractions of PLDT; Significant room exists to increase PLDT's customer base . Given the Philippines' low teledensity level, which stands as 3.3 lines per 100 people, and the company's established leadership position, PLDT is well placed to benefit as growth accelerates in the Philippines telecoms sector. A further 10 million lines are expected to be built in the country over the next decade, compared with the 2.4 million currently installed. The Company will commit itself to a policy of bringing more phones to more people more quickly. PLDT is among the Philippines' best-known brands . Over the course of its 70 years of operations. PLDT has developed a strong brand identity across the Philippines. By building on this strength, PLDT will be well positioned to maintain its market leadership in an increasingly competitive and consolidating industry. Smart has had significant success in developing marketing strategies for the Philippines market which can be brought to bear at PLDT. Significant room continues to exist to create cost efficiencies . While PLDT has made good progress in recent years in increasing operating efficiencies, there is considerable scope for further improvement, particularly in the areas of capital investment where installation costs are significantly higher than benchmarks set by other Asian operators. Better planning, procurement and financial controls would result in lower costs to build out the Company's network. PLDT can benefit by improving interconnect for all telecoms operators . By working immediately to improve the qualify of the interconnect between PLDT's network and those operated by other domestic carriers, reliability will increase and significant enhancement can be made to the company's revenues. A combination of Smart and PLDT will deliver an integrated solution to customers telecoms requirements . By combining these two complementary business, the enlarged group will position itself as the telecom service provider of choice in an increasingly competitive market. It will be capable of delivering to consumers a wide range of integrated technologies and pricing structures well suited to individual needs. LexLib In addition to leasing to improved financial returns, these changes will create improved service for all telecoms users and support economic growth in the Philippines. PLDT's new Board At a special meeting of the Board of Directors of PLDT, First Pacific's Managing Director, Manuel V. Pangilinan, was appointed President and CEO, as well as a Director, of the Company. He succeeds Antonio Cojuangco who has been named Non-executive Chairman. Mr. Pangilinan will retain his position as Managing Director of First Pacific in Hong Kong. As well as Mr. Pangilinan, five other new appointments were made to PLDT's Board. They include Napoleon Nazareno, Albert del Rosario, Ray Espinosa, Fr. Bienvenido Nebre Orlando Vea. xxx xxx xxx ING Barings is acting as financial adviser to First Pacific and no one else in connection with this transaction-and will not be responsible to anyone other that First Pacific for providing the protections afforded to customers of ING Barings or for giving advice in relation to the transaction .