The two most recent significant business development in the country are the formation of a third telco to challenge the duopoly and resumption of the exploration and development of the Reed/Recto Bank oil and gas prospects as the Malampaya gas is nearing depletion.
The government assembled a sizable spectrum and awarded the same to the winning bidder, to form the third telco. The winning bidder was the group of Dennis Uy (DU). The winning bidder would in no way be viable without a financial and technical backer. Dennis Uy turned to China Telecom, a state-owned Chinese telecom operator, for financial and technical support. The third telco was organized as Dito Telecommunity.
DITO CME Holdings, Inc. was formerly ISM Communications, Inc. Dennis Uy’s (DU) Dennison Holdings Corp acquired around 45% of ISM. At that time, it was thought that ISM will be the back-door listing vehicle for DUs holding company Udenna Corp. But that didn’t materialize. Recently DITO has been touted as also the back-door listing vehicle for Dito Telecommunity but that has yet to happen.
The private Udenna Corp. continues to be the main holding company of DU. Udenna Corp. owns 35% of Dito Telecommunity. Recently, Udenna acquired 45% of the Malampaya gas project from Chevron and set to acquire the other 45% from Shell.
Meanwhile, moratorium on the exploration of oil and gas at the South China Sea has just been lifted by President Duterte. The most significant exploration area is the Reed Bank/Recto Bank. Service contract for the area is operated by Forum Energy Ltd. which owns a 70% stake in the service contract. PXP Energy has a 67.19% controlling interest in Forum Energy Plc with 48.76% held directly and 18.43% held indirectly through FEC Resources, Inc., a 54.99%-owned subsidiary. Manny Pangilinan (MVP) led, and Hong Kong based First Pacific holds an effective economic interest of 42.4% in PXP Energy.
However, MVP failed to secure a partnership with China National Offshore Oil Corp. (CNOOC), a China state-owned gas and oil company, for the joint exploration of the area. Joint exploration with China has been seen as the solution to the adverse claim of China in the area. Since 2012, MVP has been negotiating with CNOOC but of no avail.
While CNOOC partnership has eluded MVP, DU was able to seal one. Eventually since Udenna is already in Malampaya it could end up acquiring a controlling stake in the service contract for Reed Bank in partnership with CNOOC.
Back at DITO, DITO’s primary asset is its advances to Udenna Corp. and Chelsea Logistics (C). At some point in time, Udenna Corp. may repay DITO’s advances with significant interest in third telco Dito Telecommunity, significant interest in Malampaya and Reed Bank gas and oil exploration assets, and Chelsea Logistics may convert DITO’s advances into Chelsea into a significant equity investment. In the end, DITO will end up owning significant interest in Dito Telecommunity, the third telco, in Malampaya and Reed Bank gas and oil assets, and in Chelsea Logistics.
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