Australia’s biggest telco, Telstra and San Miguel Corporation have failed to reach a commercial agreement for a new mobile network in the Philippines.

The two company ended negotiations for the $1 billion joint venture to bring a third player in the Philippines’ market.

According to Telstra’s CEO, Andrew Penn, the breakdown could be positive for Telstra’s share price because there have been concerns about the highly competitive market that telco’s cash will be invested.

“Despite an enormous amount of effort and goodwill on all sides, we were simply unable to come to commercial arrangements that would have enabled us all to proceed,” says Penn.

“While this opportunity is strategically attractive, and we have great respect for San Miguel Corporation and its president, Mr Ramon Ang, it was obviously crucial that the commercial arrangements achieved the right risk-reward balance for all involved.”

He says Telstra will continue to pursue growth opportunities in Asia.

Telstra CEO Andy Penn speaking at the Telstra 2015 Australian Digital Summit in Sydney today. (Photo credit: The Australian
Telstra CEO Andy Penn speaking at the Telstra 2015 Australian Digital Summit in Sydney today. (Photo credit: The Australian)

Meanwhile, Mr. Ang of San Miguel Corp. said that: “Both SMC (San Miguel) and Telstra worked hard to come up with an acceptable resolution to some issues. However, we agreed we can no longer continue with the talks. I believe this is best for all parties.”

Telstra and San Miguel Corp. originally began negotiations for the deal in August last year, where Telstra had planned to take on the local telco giants PLDT and Globe Telecom for a billion dollar mobile venture.

But both of Telstra’s would-be rivals, PLDT and Globe Telecom are demanding the local regulator force, San Miguel, to share its spectrum –which would greatly decrease the potential advantages and profitability of the new ventures.

Spectrum is the electronic airspace that all broadcast technologies rely on and the 700MHz frequency band is the best at penetrating buildings and travelling long distances.

This was Telstra’s biggest advantage is San Miguel’s 90 per cent holding of 700MHz spectrum across the country.

In an exclusive interview with Fairfax Media last year, PLDT head of Regulatory Affairs Ray Espinosa, said, that their company would begin lobbying Philippines President Benigno Aquino III and their legal team is preparing to launch legal actions against the regulators, San Miguel and any of its partners unless the spectrum was shared.

“The 700MHz as it is assigned today has been issued with the assumption that it will be used for broadcast purposes only [and] the companies that hold it cannot legally use it for mobile communications purposes,” he said.

“We are prepared to take vigorous action judicially if that’s necessary for us to get our fair share of the frequency … and that could mean bringing the case before our judicial courts. That would be against the regulators and the holders of the frequency.

“We will also bring it to the attention of the office of the President to emphasise how important this is … before the end of the year if not the early part of January,” he added.

PLDT and Globe Telecom dominate the Philippines’ mobile market, Telstra’s entry in a mobile venture in the Philippines would result in lower prices and profits, according to an analyst.