BAGUIO, Philippines – Despite foreigners owning majority of Philippine Long Distance Telephone Co.’s (PLDT) common shares, the company said Filipinos still manage the company.
This is what matters, said lawyer Victor Lazatin during Tuesday’s oral arguments on a Supreme Court decision that only common shares should be counted in calculating foreign ownership of a public utility.
“The decision ignored the reality on the ground i.e, a self-reliant and independent PLDT effectively controlled by Filipinos,” he said.
In a June 2011 ruling, the SC ordered the Securities and Exchange Commission (SEC) to determine if PLDT violated the 60-40 rule (60% of capital owned by Filipinos, 40% by foreigners) on foreign ownership. The 60-40 rule is stated in Sec.11, Article XII of the 1987 Constitution.
The High Court said SEC should define “capital” as ‘”shares of stock entitled to vote in the election of directors” or common shares, and not as total outstanding capital stock, which covers both common and non-voting preferred shares.
But Lazatin said this ignores the “real” level of control and management in the corporation, adding that out of 13 directors in the firm, only 2 are foreigners, while all of the executives and managers are Filipinos.
The SC ruling stemmed from a petition filed by the late PLDT stockholder Wilson Gamboa, who sought to nullify the sale of the government’s stake in the telco to Hong Kong-based First Pacific group.
In 2007, First Pacific, through affiliate Metro Pacific Assets Holdings Inc., acquired 111,415 shares owned by government in Philippine Telecommunications Investment Corp. (PTIC), which in turn owned PLDT. The acquisition was equivalent to a 6.4% indirect stake in PLDT.
Gamboa alleged that consequently, the acquisition increased First Pacific’s stake in PLDT to 37% from 30.7%, hence also raising the stake of foreigners in the company to 81.47%. Gamboa said this put the selection of PLDT’s board of directors in the hands of foreigners.
Businessman Manuel Pangilinan, who represents the First Pacific group in the Philippines and chairs PLDT, as well as the Philippine Stock Exchange (PSE) filed separate motions for reconsideration of the SC ruling on Gamboa’s petition.
Pangilinan said the ruling, if affirmed, would be “economic suicide” because it would scare investors away.
For its part, the PSE warned that the new definition of capital could lead to a loss of over P600 billion worth of allowable foreign investments in PSE-listed companies.
‘Do our economy good’
Lazatin said that PLDT does not also only subscribe to the conditions stipulated in the Constitution, but also to good governance standards, including fairness in opinion, risk evaluation and compliance to audit requirements, among others.
He implored the SC to “do another La Bugal and do our economy good!”
In La Bugal v. Ramos, the SC overturned its ruling in 2004 which struck down provisions of the1995 Mining Act as unconstitutional because they allowed foreign mining firms to operate in the country. The SC, however, reversed itself in December of the same year.
Lazatin presented graphs showing a spike in foreign direct investments after the SC made an about face in its decision on the Mining Act. Justice Lourdes Sereno said, however, that the data does not show the big picture, as there was “no data on royalties and taxes paid” by the mining firms.
Sereno also challenged Lazatin’s assertion that the High Court does not have jurisdiction over the case. Lazatin said the definition of capital could only be set by legislation.
Nonetheless, PLDT has prepared a back-up plan in case the SC rules against it with finality.
PLDT secured in March its shareholders’ approval to issue new voting shares to lower foreign equity in the company.
PLDT said it will issue 150 million preferred shares with voting rights to PLDT’s beneficial trust fund to lower the company’s total foreign equity to 35% from the current 64%.
The SC will continue its oral arguments on June 26, with constitutional experts Bernardo Villegas and Fr. Joaquin Bernas invited to appear as “amici curae” or friends of the court. – Rappler.com