It’s about copper and what economists call “entry” plus a bubble-play on Meralco stock price

cheap-broadbandThe corporate struggle for control of Meralco is all about wires, electricity grid copper wires. Meralco owns them, and they can be used for broadband to compete with the other providers, mainly the three major telecoms and the cable tv companies.

If PLDT acquires control of those wires, it can decide to keep them unused. Why? PLDT is already in the broadband business, using its telephone copper wires. Surely this is a move that does not benefit the consumer. It prevents entry into the broadband industry, and keeps the uneasy oligopoly “as is.” In the game of “entry,” it is a purely defensive move.  And if it turns out that broadband over power lines is cheaper than that using telephone wires, PLDT can keep its telephone wires to itself, unused by other broadband providers.

San Miguel, with its own nascent telecom, can also use the Meralco wires, to compete with PLDT. This should benefit the consumer. The new telecom can even subsidize or lower the power rates now paid by electricity consumers. It is an aggressive move that would pay off if the economic profits of PLDT  in the existing set-up are large.

Of course, playing its cards well, San Miguel can “sell out” a part of its stake at an even higher price than the Meralco price today. As a cynic might say, “Velly good!”

But technology can make all this corporate struggling pointless.  Eventually, the web will be mostly wireless, and the value of copper wires as web highways will go down.  If you can “wi-fi” the neighborhood, you can wi-fi the country.  Thus, it is possible to guess that the corporate struggle can be used in other ways.  One way is to hype the value of the wires to the stock buying public, which could result in a bubble in Meralco stock.  Of course, the bubble is not likely to last though it is hard to predict when it will end.

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