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China Telecom's Philippine partner Dito CME drops rights offering

Flopped fundraising comes as blow to tycoon Dennis Uy, a Duterte campaign donor

The parent of the Philippines' third telecommunications company, Dito Telecommunity, is a joint venture between tycoon Dennis Uy's group and state enterprise China Telecom. It has deferred a stock rights offering on "less than ideal market conditions" but secured longer-term financing. (Source photo by AFP/Jiji and DCME website)

MANILA -- An ongoing 8 billion peso ($156 million) stock rights offering meant to bankroll the expansion of the China-backed telecom challenger in the Philippines has been called off due to "less than ideal market conditions."

Dito CME Holdings, which owns a 54% stake in Dito Telecommunity, announced the decision on Sunday. The unusual move was made amid "perceived risks" surrounding Dito ahead of a looming leadership change in the Philippines and comes as another blow to tycoon Dennis Uy, a campaign donor to President Rodrigo Duterte.

Dito is a joint venture between Uy's group and state enterprise China Telecom. It launched service in March after winning a license auction conducted at the behest of Duterte, who had slammed the industry duopoly for poor service.

Dito CME initially set the offering from Dec. 27 to Jan. 18, and extended it by another week due to the omicron variant-driven surge in coronavirus cases.

"Due to less than ideal market conditions, we decided to postpone the SRO," Dito CME President Eric Alberto said in a statement. The company is considering other financing options, he added.

Ryan Tapia, president of underwriter China Bank Capital, said the offering got "good support" from existing investors, but the bank agreed to defer it "in light of current market conditions and other perceived risks."

It was not immediately clear how many eligible investors took up shares, but the company said they will be refunded. Udenna, Uy's holding company and Dito CME's parent, had said it would not participate in the rights offering.

The rights offering involves 1.64 billion shares at 4.88 pesos apiece, a 17.5% discount from the prevailing price late last year. Analysts had attributed the steep discount to the already tumbling stock price of Dito CME and concerns about Dito's future after Duterte steps down in June.

The bulk of the proceeds of the rights offering was intended to fund Dito's expansion as it enters its second year in business. Dito aims to grow its subscriber count to 12 million this year from 5 million last year by building more cell sites in new locations.

Despite the share sale's deferral, Dito CME Chief Financial Officer Joseph John Ong said the company had secured $4 billion in longer-term financing, more than enough to cover the remaining three years of Dito's five-year spending plan. Dito had committed to invest around $5 billion for five years when it won the license auction in 2018.

The flopped fundraising is the latest upset for Uy, who has also struggled to seal a deal to take over the Malampaya natural gas project, a key power source for the Philippines. In December, a Philippine state enterprise that owns a stake in Malampaya said it had withheld the green light for Uy's deal of up to $460 million to buy Shell's 45% stake in the energy asset. The revelation was made during a Senate hearing that questioned the Uy group's capability to run Malampaya.

In recent years, the entrepreneur from the city of Davao has led an aggressive expansion push that saw him take over numerous companies, from the local operations of Family Mart to Ferrari.

Still, Uy remains upbeat on the telecom venture's prospects. "The operations of Dito Telecommunity continue to expand and we are more bullish this year," the tycoon said.

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