Bizlinks...Philippine Business, Issues and Links, as published in Philippine Star

If there is any one single reason that can be cited in favor of Philippine Long Distance Telephone Co.’s recent acquisition of a major share in Digital Telecommunications Philippines Inc. (Digitel), it is the fact that the dominant telecommunications company stands on firm legal ground.

Two months ago, PLDT signed a share-swap deal with the owners of Digitel, which allowed the former to gain a 51.55 percent controlling stake in the latter. Almost immediately, Globe Telecom Inc. lodged a protest based on fears that the PLDT-Digitel arrangement would lead to a monopoly in the local telecommunications industry.

With the consummation of the Digitel shares transfer, PLDT now controls about 70 percent of the mobile market after it had added the upstart Sun Cellular brand to its well-established network that includes Smart, Talk ‘N Text and Red Mobile.

Clarifying issues

As Globe aired its complaint before various government agencies, the ensuing investigations and public debates helped clarify issues that otherwise would have remained as corridor talk among the country’s mobile phone subscribers.

Perhaps what sealed Globe’s attempts to question the justness of the PLDT-Digitel marriage is the resolution announced by Congress that no predatory or monopolistic behavior had been broached since both PLDT and Digitel would continue to own their respective franchises.

Strong statement

It was no less than the Senate President Juan Ponce Enrile himself who reportedly stated after the Congressional hearings that the share-swap deal between PLDT and Digitel does not require congressional approval because only shares of stocks were transferred, and not the franchise.

When Enrile issued such dry comments against the complainant Globe for being a sore loser and resorting to “sourgraping,” any astute observer would know that the protest lodged by the Ayala-owned telecom firm for all intents and purposes was dead.

The fact that Globe had earlier tried to acquire Digitel but in the process of bidding lost to PLDT’s higher price offer only weakened its position. When Manong Johnny says that Congress cannot be used by a private company to question a legitimate business deal, it’s really time to raise the white flag.

After the Senate hearings on the merger, Enrile even stated that Congress’s approval of franchises carried a provision stating that the privileges given to a franchise holder forms part of the privileges of the next holder. Ergo, the sale of Digitel did not breach any law.

The Senate has sent Globe’s protestations to the National Telecommunications Commission, and pending the government agency’s decision, only the matter regarding consumer apprehension, mainly of Sun Cellular subscribers, remains.

Consumer apprehension

On this score, there is no better spokesperson to pacify the apprehension of the growing number of Sun mobile service users than PLDT chairman Manuel V. Pangilinan himself. It helps that the boss himself has spoken to reassure Digitel customers.

Pangilinan has spoken that the merger will rebound to more benefits for consumers. I guess this simply means that Sun subscribers will soon be seeing better network service that they had in the past griped on. After all, they should be piggy-backing on the broad and extensive PLDT and Smart backbones.

And for the price-conscious Sun Cellular service users, the big boss himself again assured that the pricing structure will be kept as long as customers want it and that on the whole the merger will be more advantageous in the future to them.

Following Pangilinan’s declarations, such offerings as unlimited texting and unlimited calls that Sun is now so famous for should pretty much remain in the portfolio. And even be made available to more people outside Metro Manila and key cities of the country.

Safeguards

Globe may be gritting its teeth over the lost opportunity of getting its hands on Digitel. But if it wants to bring this advocacy for greater transparency and anti-monopolies forward, and if it really believes in the validity of the issues it had raised against the PLDT-Digitel swap merger, it should take a long term position on bills favoring an antitrust law in Congress.

Globe has been batting for greater transparency in such types of swap-share deals, and the fact that the PLDT and Digitel have refused to give details of their agreement may lend credence to Globe’s apprehensions.

A number of lawmakers have introduced various versions supporting an antitrust law but there has been little progress in having the legislation approved, mainly because of the complexities involving various stakeholders. But there is scope to further tighten on antitrust measures.

Digitel, for example, is authorized to sell a controlling interest of their company without having to go to Congress since this is specifically stated in the terms of its franchise.

Having Lance Gokongwei and Manny Pangilinan, both credible and highly respected business leaders, closing the agreement even if details had not been released for public consumption softens any suspicion of underhanded dealings that may be detrimental to public interest.

But in future, there may be other swap deals that may not be arrived at in such an acceptable fashion. Although the current wordings of RA 9189 has its inherent checks and balances, now is a good time to review the law for any weaknesses.

Upholding public interest

As the economy grows and becomes more complex, opportunities for mergers and consolidations among companies and businesses may have to be resorted to as competition intensifies and the need for cost effective operations increases. We expect our legislators to be attuned to these developments and must always be ready to make sure that there are not opportunities for dubious companies to take advantage of laxities in the current law to the detriment of public good.

The PLDT-Digitel deal may not be one of them, but we’ve seen in the past too many examples of weak laws being used against public interest.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net