PLDT, Globe payment to SMC can preempt court rulings, says gov't

MANILA, Philippines – It has been a year since the country's two dominant telecommunications firms, PLDT Incorporated and Globe Telecom Incorporated, bought the entire telecommunications assets of San Miguel Corporation, a conglomerate that was supposed to compete with them and provide consumers "high-quality mobile broadband."

On May 30, a year after the mega deal was signed, PLDT and Globe completed the last tranche of its P69.1-billion payment for San Miguel's assets. This was despite a pending case before the Supreme Court (SC) filed by no less than the Philippine Competition Commission (PCC).

Even as the Court of Appeals (CA) Special 12th Division blocked PCC from reviewing the deal, the transaction still awaits a final court ruling from the CA en banc.

"Completing the payment for the telco assets is a move that unduly preempts the forthcoming rulings of the SC and CA," the almost two-year-old independent, quasi-judicial body said in a statement on Wednesday, May 31.

For PCC, the big-ticket deal goes beyond the purchase itself because of its impact on public interest. (READ: Battle lines drawn over San Miguel's telco buyout deal)

"As with any transaction required to be notified to PCC, the P69.1-billion deal needs to be reviewed through a market competition lens to safeguard consumer welfare over the long term," said the commission, which is chaired by the former Socioeconomic Planning Secretary Arsenio Balisacan. (READ: New Internet speed minimum throwback to '90s?)

Why sell assets

For San Miguel, the mega deal averted a possible protracted legal battle over its valuable 700 megahertz (MHz) spectrum and fast-tracked delivery of high-speed Internet access to millions of mobile subscribers in the Philippines. The Ramon Ang-led conglomerate announced this months after the collapse of talks with Australian telecom company Telstra Corporation.

PLDT and Globe want the 700 MHz spectrum allocation. (READ: Telstra-San Miguel a bumpy, costly ride)

Existing operators and new entrants are drawn to the Philippines because of the undoubted growth potential in the relatively unsophisticated market. How does one unlock this potential? This is where the 700 MHz frequency band comes in.

Before the P69.1-billion deal existed, the GSM Association (GSMA) had said the Philippines and Thailand were the only countries in the Asia-Pacific that have yet to utilize the 700 MHz frequency, a key resource in providing faster Internet services.

The 700 MHz band is key to expanding mobile broadband into the outlying islands and rural provinces in the Philippines. This would enable mobile operators to reduce capital and network costs, thereby accelerating rollout and lowering prices for end users.

PCC said that if only PLDT and Globe submitted the required notificiation, "this telco deal review would have been completed earlier."

What's missing

A day after PLDT and Globe announced the buyout deal, the National Telecommunications Commission (NTC) gave the two telcos the permission to co-use certain radio frequencies in the 700 MHz previously held by San Miguel.

The co-use agreement raised concerns among several independent researchers, who see it as anti-competitive. (READ: San Miguel's sale of telco business: Will consumers benefit?)

PCC had asked PLDT and Globe for details on the co-use agreement, but the two telcos argued they had submitted a complete report and that the transaction is "deemed approved."

"For us what we want to know…the most important aspect of this transaction is the co-use agreement between the two telcos. We asked for more information on the co-use agreement with respect to 700 MHz," PCC Commissioner Stella Quimbo said during a media briefing in February.

While the commission guarantees fair evaluation for every notification, PCC said compliance with the law should nevertheless be complete and transparent. "Notifications should not be filed merely for the sake of submission."

"The PCC may be fairly new and companies are still adjusting to the regulatory framework of the Philippine Competition Act, but they must strictly adhere to the law. Globe and PLDT should not be exempted," it said.

How has it been

Amid the pending cases, PLDT and Globe have been activating cell sites using the frequency of San Miguel, deemed to be beneficial to its consumers.

Expense from its buyout of San Miguel Corporation's telecommunications business, meanwhile, had dented the net income of PLDT and Globe momentarily. (READ: Globe Telecom's Q3 net income drops by 50%)

San Miguel, on the other hand, saw its net income in 2016 surge, thanks to a one-time gain in 2016 from the sale of its telecommunication business.

The two-year-old PCC will not stop until it gets to review the San Miguel telco buyout case, as it continues to raise concerns about competition and consumer interest.

"[We] will not back down or be intimidated by companies who have grown accustomed to unregulated business practices that hamper competition and ultimately hurt consumers," Balisacan said.

The outcome of the controversial deal is now up to the hands of the CA and SC. –