PSE Circular for Brokers No. 2846-99

November 9, 1999 PSE CIRCULAR FOR BROKERS NO. 2846-99 November 8, 1999 Securities and Exchange Commission Director Linda A. Daoang Money Market Department SEC Building, EDSA Mandaluyong City Philippine Stock Exchange Disclosure Department Listing and Disclosure Group 4/F PSE Center, Exchange Road Ortigas Center, Pasig City Gentlemen: Please be advised that Globe Telecom, Inc.'s parent corporations Ayala Corporation and Singapore Telecom International (STI) a wholly owned subsidiary of Singapore and Deutsche Telekom signed an agreement over the weekend outlining the basic terms of a merger between Globe Telecom, Inc. (Globe) and Isla Communications Co., Inc. (Islacom). The agreement comes on the heels of Ayala becoming Deutsche Telekom's partner in Islacom last April 1999. Under the terms of the agreement, the three parties will work together to finalize a structure and the mechanics of a merger of the two companies. After completion of the due diligence process, a date will be set to execute a definitive merger agreement and will be subject to shareholder and regulatory approvals. In the interim, both Globe Telecom and Islacom will continue to operate separately but work will begin to maximize any operating synergies. The proposed merger will result in the Philippines' eighth largest company in terms of stock market capitalization with a combined market capitalization of approximately USD 1.8 billion and the sixth largest telecom company in South East Asia ranked by market capitalization. On a proforma basis, the merged entity will enjoy a leading position in the Philippines telecommunications market with 810,127 cellular subscribers and over 314,201 fixed line subscribers, and will strengthen Globe's dominance as the largest digital cellular operator. The merged entity will have the support of two world class telecommunications operators, Deutsche Telekom and Singapore Telecom, and Ayala Corporation, the Philippines' largest conglomerate. cdll Under the preliminary terms, Globe Telecom will issue new common shares to Deutsche Telekom, and will issue new preferred shares to a company that will be 60% owned by Ayala, 20% by STI and 20% by Deutsche Telekom. The exact number of new common and preferred shares to be issued by Globe Telecom will be determined upon finalization of the ownership structure and merger agreement. The three parties have also agreed that they will take significant stakes in the merged entity, while committing to abide by current Philippine regulations restricting foreign ownership of telecommunications companies. Because of an expanded capital base, Globe Telecom is expected to increase its board of directors to 15. cdll The merged company is expected to achieve higher revenue growth than either company could expect to achieve on its own. Also, the merged company plans to achieve significant operating and capital expenditure savings. The transaction is expected to close in the second quarter of year 2000, subject to approval by both companies' shareholders, certain regulatory approvals and other customary conditions. The parties also stressed that the integration process between Globe Telecom and Islacom will not affect the levels of customer service offered by each company. Globe is one of the largest telecommunications companies in Philippines, offering domestic and international services. Globe is currently the Philippines' fastest growing telecommunications company, the dominant digital cellular operator and the second largest cellular operator overall. As of September 30, 1999, Globe had 638,127 cellular subscribers, 139,201 fixed line subscribers, and PHP 35.3 billion-(USD 884 million) in total assets. Globe, a listed company, recently reported earnings of PHP 652 million in the first nine months of 1999. LexLib Islacom is one of the leading telecommunications companies in the Philippines, offering domestic and international services. It has a dominant position in the fixed line market in the Visayas and is the second largest nationwide digital cellular operator after Globe. As of September 30, 1999, Islacom had 172,000 cellular subscribers, 175,000 fixed line subscribers, and PHP 22.4 billion (USD 561 million) in total assets. Goldman Sachs advised Deutsche Telekom on the merger, and Morgan Stanley advised Globe. The three shareholders have also retained Arthur D. Little to advise the merged company on its future operations and management. Enclosed please find a copy of the press release issued by the parties. This information is being submitted in compliance with the disclosure rules of the SEC and PSE. cdll Very truly yours, (SGD.) GIL B. GENIO Senior Vice President/Chief Finance Officer Ayala, SingTel, Deutsche Telekom move one step closer to a Globe Telecom and Islacom merger Combination Has 810,127 Digital Cellular Subscribers, 314,201 Fixed Line Subscribers, USD 1.8 Billion Market Cap, Complementary Service Areas MANILA PHILIPPINES 08 November 1999 Ayala Corporation, Singapore Telecom International (STI) a wholly owned subsidiary of Singapore Telecom and Deutsche Telekom today announced their signing of an agreement over the weekend outlining the basic terms of a merger between Globe Telecom Inc. (Globe) and Isla Communications Co. Inc. (Islacom) Globe's major shareholders are Ayala and STI, while Islacom has Deutsche Telekom and Ayala as its shareholders The agreement comes on the heels of Ayala becoming Deutsche Telekom's partner in Islacom last April 1999. Under the terms of the agreement the three parties will work together to finalize a structure and the mechanics of a merger of the two companies. llcd After completion of the due diligence process, a date will be set to execute a definitive merger agreement and will be subject to shareholder and regulatory approvals. In the interim both Globe Telecom and Islacom will continue to operate separately but work will begin to maximize any operating synergies. The proposed merger will result in the Philippines eighth largest company in terms of stock market capitalization with a combined market capitalization of approximately USD 1 8 billion and the sixth largest telecom company in South East Asia ranked by market capitalization. On a proforma basis, the merged entity will enjoy a leading position in the Philippines telecommunications market with 810,127 cellular subscribers and over 314,201 fixed line subscribers and will strengthen Globe's dominance as the largest digital cellular operator. The merged entity will have the support of two world class telecommunications operators, Deutsche Telekom and Singapore Telecom, and Ayala Corporation, the Philippines' largest conglomerate. prcd Under the preliminary terms Globe Telecom will issue new common shares to Deutsche Telekom, and will issue new preferred shares to a company that will be 60% owned by Ayala 20% by STI and 20% by Deutsche Telekom. The exact number of new common and preferred shares to be issued by Globe Telecom will be determined upon finalization of the ownership structure and merger agreement. The three parties have also agreed that they will take significant stakes in the merged entity, while committing to abide by current Philippine regulations restricting foreign ownership of telecommunications companies. Because of an expanded capital base, Globe Telecom is expected to increase its board of directors to 15. The merged company is expected to achieve higher revenue growth than either company could expect to achieve on its own. Also, the merged company plans to achieve significant operating and capital expenditure savings. Mr. Jaime Augusto Zobel de Ayala President of Ayala Corporation commented; "The combined entity will be the Philippines' second largest telecommunications company and will be entrenched as the number one GSM service provider. Its customer base is large and fast-growing, and the merger brings together two companies which have each developed momentum in their core markets. The merger of these two companies will create significant synergies and will enhance our ability to be a formidable competitor and effectively meet our customer needs." cdlex Mr. Axel Hass, President of DT Asia (a subsidiary of Deutsche Telekom) said "The Globe and Islacom combination is an ideal strategic move that will create exceptional long term growth and value for shareholders, customers and employees. We will be able to quickly integrate the two complementary companies to achieve synergies to broaden the range of services and to better meet the needs of its customers for high-quality and innovative services." LibLex Mr. Sin Hang Boon, CEO of STI said, "This merger brings together two high performing organizations that share common goals, have compatible strategies and reflect demonstrated track records of commitment to the telecommunications industry. The merger will significantly enhance shareholder value by enabling us to realize potential synergies, serve our customers better offer a wider range of value-added products and services and compete effectively. It will also help us to produce a higher return to shareholders than either company could achieve on a stand-alone basis." The transaction is expected to close in the second quarter of year 2000, subject to approval by both companies' shareholders certain regulatory approvals and other customary conditions. The parties also stressed that the integration process between Globe Telecom and Islacom will not affect the levels of customer service offered by each company. Globe is one of the largest telecommunications companies in Philippines offering domestic and international services. Globe is currently the Philippines' fastest growing telecommunications company the dominant digital cellular operator and the second largest cellular operator overall. As of September 30, 1999 Globe had 638,127 cellular subscribers 139,201 fixed line subscribers and PHP 35.3 billion (USD 884 million) in total assets. Globe, a listed company, recently reported earnings of PHP 651 million in the first nine months of 1999. Islacom is one of the leading telecommunications companies in the Philippines offering domestic and international services. It has a dominant position in the fixed line market in the Visayas and is the second largest nationwide digital cellular operator after Globe. As of September 30, 1999 Islacom had 172,000 cellular subscribers, 175,000 fixed line subscribers, and PhP 22.4 billion (USD 561 million) in total assets. Goldman Sachs advised Deutsche Telecom on the merger, and Morgan Stanley advised Globe. The three shareholders have also retained Arthur D. Little to advise the merged company on its future operations and management. For further information, please contact: Globe Telecom, Inc. Gil Genio +632 730 2734 Isla Communications Co., Inc. Fred Dael, +63 32 412 0057 Ayala Corporation Jack Madrid, +632 841 5447 Singapore Telecom Ivan Tan, +65 838 2007 DT Asia Anne Tan, +65 438 9100