Battle lines drawn over San Miguel’s telco buyout deal

Chrisee Dela Paz

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Battle lines drawn over San Miguel’s telco buyout deal
The Philippine Competition Commission argues the deal between PLDT, Globe, and San Miguel falls within the scope of its review

MANILA, Philippines – Only Globe Telecom Incorporated and PLDT Incorporated refused to comply with the requirements of the newly-established  Philippine Competition Commission (PCC), based on the 61 transaction reports that the commission received before the publication of its implementing rules and regulations (IRR).

The PCC made this revelation after Globe released a statement on Wednesday night, July 19, claiming that the commission is treating differently the Globe-PLDT P69.1-billion deal to buy out the  telecommunications businesses of San Miguel Corporation (SMC).

PLDT, Globe, and the PCC are at an impassé over the San Miguel telco buyout.

The PCC has argued that the deal falls within the scope of its review. PLDT and Globe insisted that the anti-trust body’s transitory rules provide the deal a “deemed approved” status.

Globe and PLDT claim that, under the transitory rules of the PCC, the P69.1-billion deal “only needed a notice” to the commission and is “not subject for review.”

But the PCC said it is its call if a transaction is “deemed approved” after it determined the sufficiency of requirements.

“We adopted uniform procedure in determining sufficiency of requirements under the memorandum circular. We have received 61 notifications under the memorandum circular, and about a quarter of these were determined to be insufficient and not deemed approved,” the PCC said in a statement on Thursday, July 21.

“All other parties had complied with the PCC’s request for additional information. Only Globe and PLDT refused to comply,” the guardian of the Philippine Competition Act added.

Why did PCC enter the scene?

The Philippine government on August 8, 2015, implemented Republic Act 10667 or the Philippine Competition Act. The law promotes free and fair competition in trade industry and other commercial economic activities.

The long-overdue law prohibits anti-competitive agreements, abuse of dominant position, and anti-competitive mergers and acquisitions.

This republic act gave birth to the PCC, which is created to guard against companies’ predatory tactics – ranging from price fixing to the creation of cartels.

“PCC comes with initial budget of P300 million. It’s a quasi-judicial body. We can act like a court, impose sanctions,” PCC Chairman Arsenio Balisacan said in a media briefing in early 2016.

Organized on February 1 this year, the PCC serves as the primary authority on competitive agreements in the Philippines, as mandated by law.

Under the Philippine Competition Act, the PCC “has the the power to review proposed mergers and acquisitions, determine thresholds for notification, determine the requirements and procedures for notification.”

To fill the void while it was finalizing the IRR, the PCC on February 12 issued transitory rules to mergers and acquisitions of over P1 billion.

Under the transitory rules, parties to the merger or acquisition of over P1 billion “shall be deemed approved…and may proceed to implement their agreement” after complying with the requirements of the PCC.

These rules are the source of misunderstanding between the PCC and the telcos, prompting industry players to file for a temporary restraining order with an appellate court.

How it led to a court case

On May 30, PLDT and Globe bought all of San Miguel’s telecommunications assets for P69.1 billion. San Miguel was supposed to launch a 3rd major telco player this year.

This was before the PCC published its IRR on June 4. This means the P69.1-billion deal is covered by the commission’s transitory rules.

The commission then rejected the initial transaction notification of PLDT, Globe, and San Miguel, saying it lacks information and thus is “not deemed approved.”

PLDT and Globe firmed up their stance, saying the PCC has no power to undo their deal.

Globe said “there is no ground for PCC to prevent the transaction from being deemed approved.”

On July 12, the two telcos sought a temporary restraining order (TRO) against the PCC, stopping the commission’s comprehensive review of the deal.

The telcos argued that the PCC “cannot withhold and block the transaction out of a process not found in their own rules, and not disclosed to the public.”

But for the PCC, PLDT and Globe “erroneously interpreted the rules as vesting in them the sole prerogative to determine sufficiency of their submission and automatic approval of their own transaction.”

“The PCC requested for additional information on the key terms of the transaction, which they refused to provide, thereby preventing the PCC from granting it a deemed-approved status,” the commission said in a press statement.

In response, Ray Espinosa, PLDT head of Regulatory Affairs, said PLDT, Globe, and San Miguel “fully and diligently complied with the notice requirements of the Commission’s transitory circulars.” (READ: Jobless soon: 400 consultants of scrapped 3rd telco player)

“The commission has no power or authority to interpret its rules as it deems fit. The terms of the commission’s transitory circulars were clear and left no room for interpretation. It behooves the commission to follow its own rules,” Espinosa said in an e-mail.

Globe also issued an e-mail response, saying “it is puzzled until now why PCC claims the notice and filing are insufficient. Globe has bent backwards more than it can to accomodate PCC and comply its requests for more information.”

The Ayala-led telco then added: “PCC perhaps might be looking for a non-existent document.”

For several independent researchers, the deal is clearly anti-competitive. (READ: San Miguel’s sale of telco business: Will consumers benefit?)

“I see a greater capability of the two dominant players to exploit their duopolized markets,” the co-founder of Democracy.Net.PH, Pierre Tito Galla, had told Rappler.

For Grace Mirandilla Santos, a research fellow at regional information and communication technology (ICT) policy think tank LIRNEasia: “More market concentration has never led to a consumer win. It’s probably more efficient for the telcos, but whether the benefit would be reflected in better consumer service is a different case.”

PLDT and Globe, however, said better Internet services will be provided because of the deal. The two telcos have been consistently rolling out cell sites using the frequency bands they gained from the transaction.

Under the rules, the PCC has 90 days to review a transaction. Until then, the telcos cannot proceed with the terms of the deal. –

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