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Telecommunication

Duterte rocks Philippine telcos with threat to seize assets

President takes fresh aim at big business in his annual national address

Philippine President Rodrigo Duterte delivers his State of the Nation Address at the House of Representative in Metro Manila on July 27. (Malacanang Presidential Photographers Division/Kyodo)

MANILA -- The Philippines' leading telecom companies have found themselves on the defensive once again after President Rodrigo Duterte threatened to close them and seize their assets if they do not improve their services.

Duterte zeroed in on the telecom duopoly of PLDT and Globe Telecom as he railed against the country's business elites -- which he often brands "oligarchs" -- during his annual congressional address on Monday.

Amid worries that the industry is becoming increasingly politicized, shares in Globe dropped by as much as 3.4% on Tuesday, before closing 0.5% lower, while PLDT fell by 3.6% at one point before settling 0.5% higher. Manila's benchmark index was up 1.1%.

PLDT's principal shareholders include Japan's NTT Group and Hong Kong-listed First Pacific, while Globe is a joint venture between Philippine conglomerate Ayala Corp. and Singapore Telecommunications. PLDT and Globe both belong to the groups that own water and power contacts that Duterte has criticized.

In his address, Duterte told the two telecom companies they had "better improve" or "I might just as well close all of you." The president said he will "expropriate" their assets.

"Kindly improve the services before December. I want to call Jesus Christ [in] Bethlehem. Better have that line cleared," Duterte said.

Globe, in a statement, said the company is heeding the call of the president to improve telecom services and is investing $1.2 billion this year. The company said red tape has hobbled its infrastructure buildup. PLDT has yet to issue a comment.

This is not the first time the firebrand president has taken aim at the telecom duopoly. Amid widespread complaints of slow internet speeds in 2016, Duterte told the two service providers to shape up or face competition from China.

Dito Telecommunity, a joint venture between China Telecom and Davao tycoon Dennis Uy, a Duterte campaign backer, has since won a license but has faced difficulties building its network ahead of its commercial launch next year. Shares of DITO CME Holdings, a prospective listing vehicle for Dito, rose 3.4% on Tuesday.

After apologizing to the owners of the water and telecom companies in May, Duterte recently renewed his attacks on a few family-owned business groups, most especially the Lopez family, the owners of ABS-CBN, the nation's largest broadcaster, which was shut down by telecoms regulator in May.

"Without declaring martial law, I dismantled the oligarchy that controls the economy of the Filipino people," he said in a speech with solders in mid-July in reference to the Lopez family.

The fresh pressure on the telecom companies comes amid concerns that the industry is becoming increasingly politicized and could turn off investors. Fitch Solutions early this month downgraded the Philippine telecom industry's risk score to 46.1 points out of 100 from 57.5.

"The regulator's apparent ability to be influenced by the government continues to be a key impediment to foreign investor sentiment, and has also made the telecoms landscape difficult for both new entrants and existing players," Fitch Solutions said in a commentary.

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