Philippines’ Telecom Stocks Wobble After Duterte Warns of Closure
(Bloomberg) -- Philippine telecommunications stocks, a bright spot in the nation’s equities amid the coronavirus pandemic, are facing headwinds after President Rodrigo Duterte warned of closure and expropriation.
PLDT Inc. sank as much as 3.6% before closing slightly higher Tuesday, while Globe Telecom Inc. dropped as much as 3.4% before paring its loss. The domestic telcos run the risk of getting shut and their frequencies seized by the state unless they improve their services and boost internet access, Duterte said Monday during his state of the nation speech.
This the latest threat in a string of crackdowns on some of the nation’s biggest businesses as Duterte pushes a populist agenda. This month a panel of lawmakers denied renewal of the franchise for broadcaster ABS-CBN Corp., a subject of Duterte’s verbal tirades since he assumed office in 2016. And contracts of Manila Water Co. and Maynilad Water Services Inc. are also being revised after Duterte said last year these agreements are onerous to the public.
“The issue may drag both Globe and PLDT,” said Rachelle Cruz, an analyst at AP Securities Inc. “But with both telcos ramping up infrastructure, any big drop should be an opportunity to accumulate as both benefit from the strong demand for both mobile and home broadband connection.”
Demand for mobile and data services as well as rising online transactions amid the pandemic have benefited PLDT and Globe. PLDT shares have rallied 34% this year, the best performer on the Philippine Stock Exchange Index, while Globe has declined 1%, better than the index’s 24% slump.
While the franchises of PLDT and Globe are protected by law, the possibility of an executive action can’t be discounted, according to a report by analysts at Citigroup Inc.
©2020 Bloomberg L.P.