PLDT’s fibre-optic network expansion completed (Philippines)
www.WirelessFederation.com/news: The second phase of fibre- -optic network expansion programme has been completed by Philippine Long Distance Telephone along with the activation of an additional 320 Gbps across six network loops nationwide.
The operating capacity of PLDT’s DFON has been increased to more than 1,000 Gbps after this expansion project at a total cost of about PHP 600 million. PHP 2.6 billion DFON network fortification programme has also been started by PLDT through establishment of loops within the loops to enhance network resiliency.
1,220 km third fibre-optic cable of PLDT running between Lucena and Cebu is expected to be completed by the middle of this year.
Portugal Telecom May Repel Takeover, Credit-Default Swaps Show
Portugal Telecom SGPS SA is likely to be successful in repelling a hostile takeover, according to traders betting on the creditworthiness of companies in the credit-default swap market.
The perceived risk of owning Lisbon-based Portugal Telecom’s 3.3 billion euros ($4.1 billion) of bonds has declined to the lowest in three months, a sign derivatives traders don’t anticipate an acquisition. Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on a company’s ability to repay debt.
A proposed 10.7 billion-euro takeover by Sonaecom SGPS SA may fail because of concerns by regulators and efforts by Portugal Telecom to boost payments to shareholders. An unsuccessful takeover means Portugal Telecom may keep its investment grade rating, according to Standard & Poor’s.
“It’s dragging out, and the regulator may not be in favor of it,” said Mondher Bettaieb-Loriot, a fund manager at Swisscanto Asset Management in Zurich, who owns Portugal Telecom bonds. The bid “may fail, given the measures Portugal Telecom has taken to defend itself,” he said.
The cost of credit-default swaps based on Portugal Telecom bonds has fallen to 138,000 euros a year from a record 190,000 euros on Aug. 10, according to data compiled by Bloomberg. The cost was about 45,000 euros before Oporto, Portugal-based Sonaecom made its bid in February. A decline indicates improvement in the perception of credit quality; an increase suggests deterioration.
Bid Block
Portugal Telecom is trying to block Sonaecom’s takeover by spinning off the company’s cable television operator PT Multimedia, and offering shareholders 3.5 billion euros in increased dividends and share buybacks.
Portugal Telecom and Vodafone Group Plc, the country’s third mobile operator, say the deal will stifle competition. The acquisition will vault Sonaecom, the second-biggest Portuguese phone company, to first place from third in the wireless market.
The country’s Competition Authority gave preliminary approval of the takeover on Sept. 27 with conditions Sonaecom sell some units and limit price increases. The regulator is taking comments from companies and Portugal’s National Communications Authority until Oct. 27, before issuing a final decision.
Only after regulators approve the offer will shareholders get the chance to vote on it, which may not be until next year, Portugal Telecom chairman Henrique Granadeiro said Oct 23.
Expensive Trades
“It could be as late as February that shareholders vote,” said Philip Watkins, a credit analyst at Commerzbank AG in London. “One reason default swaps are declining might be the extended time frame for the conclusion of the bid. It’s expensive to own the default swaps when there’s no real new news.”
Investors who buy credit-default swaps, sold by financial firms such as New York-based JPMorgan Chase & Co. and HSBC Holdings Plc in London, are paid 10 million euros in exchange for the notes should the company fail to adhere to debt agreements during the next five years.
Portugal Telecom spokesman Francisco Lucena in Lisbon declined to comment. Sonaecom chief financial officer Chris Lawrie wasn’t available to comment.
S&P cut Portugal Telecom’s credit rating in August to BBB-, the lowest investment grade. It said the rating may be affirmed at that level if Sonaecom’s bid is unsuccessful. Sonaecom would need to fund the purchase with debt taken in the combined company’s name, leading to lower credit ratings, S&P said.
Yield Falls
Portugal Telecom shares have declined 6 percent from the high of 10.44 euros reached after the bid was announced. The stock traded at 9.75 euros today, valuing the company at 11 billion euros. Sonaecom is offering 9.5 euros a share.
Bond yields have fallen. The yield premium that investors demand to hold Portugal Telecom’s 500 million euros of 4.375 percent bonds due in 2017, compared with similar maturity government debt, has narrowed 32 basis points over the past month to 180 basis points. The yield premium was 96 basis points before Sonaecom’s bid.
The perception of European credit quality as measured by the iTraxx Crossover Index improved today. The index, which includes 45 companies with investment-grade and non-investment grade ratings, fell to 252,000 euros, or 2.3 percent, from 258,000 euros yesterday, according to JPMorgan Chase & Co. Companies in the Crossover Index have more than $80 billion of bonds outstanding. The average daily fluctuation of the index is 1.5 percent, according to Bloomberg calculations.
The iTraxx Europe Index, which includes 125 companies with investment-grade ratings, fell to 25,750 euros from 26,500 euros.
Credit-default swaps are the fastest-growing part of the $298 trillion market for derivatives, financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. The five-year contracts, conceived to protect bondholders against default, pay the buyer face value in exchange for the notes should the company fail to adhere to its debt agreements.
Source- http://www.bloomberg.com
