Foreign group to overtake Dennis Uy as top DITO CME shareholder. Change in control next?

Singapore’s Summit Group will soon become the single-largest shareholder of listed DITO CME Holdings, owner of DITO Telecommunity, after the government’s antitrust body approved a key share sale that will further cut Davao tycoon Dennis Uy’s stake in the telco he helped launch in 2020.

The deal involves the issuance of up to 9 billion new shares to Summit Telco, which was cleared by the Philippine Competition Commission.

If the shares are issued in full, this will reduce Uy-led Udenna Corp.’s overall stake from 49.79 percent to about 35 percent, while Summit Telco Holdings, together with Summit Telco Corp. Pte. Ltd., will increase its stake from 22.8 percent to 45.6 percent.

The latter figure means Summit Telco’s ownership will remain just below the change in control threshold that would trigger a mandatory buyout offer to minority stockholders of DITO CME.

​Dennis A. Uy 

DITO CME chair 

DITO CME is subject to a foreign ownership cap, but there’s a workaround

It might also raise scrutiny on the ownership of the Summit Group, which has yet to be fully detailed, since DITO Telecommunity holds a legislative franchise and government-issued radio frequencies to offer telecommunications services.

Because it also owns property assets, the firm is subject to the 40 percent foreign ownership cap. The workaround is it can divest of the property, similar to recent moves by Jollibee Foods Corp. of tycoon Tony Tan Caktiong. 

Deal benefits

Meanwhile, industry insiders say Summit Group’s entry will help address concerns about DITO’s ability to fund ongoing investments

For one, the operating telco, DITO Telecommunity, is a venture between Uy and China Telecom. But despite China Telecom’s presence, its participation is capped due to limitations set by the revised Public Service Act that covers state-owned entities.

Uy’s group also faces significant financial challenges. This prompted it to sell off key assets, including 2GO Group, Conti’s, and Wendy’s Philippines, to reduce debts.

What’s next?

Without major ownership changes at DITO CME, the group will likely continue business as usual, with no significant shifts in operations.

Management of DITO Telecommunity, led by seasoned telco veteran Ernesto “Eric” Alberto, will also continue given its growth strategy and goal of achieving profitability by 2028.

Could DITO CME issue more shares to Summit in the future, possibly leading to a change in control? That remains to be seen, but it’s a decision for another day.