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Public good prevails

The recent acquisition by the Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom of the telecommunications assets of San Miguel Corp. is probably the biggest news to hit local business headlines in recent years, not only because of the sheer magnitude of the transaction but also due to its ability to change the whole telco landscape.

The transaction meant that SMC, which for years has promised to become a third viable player, has given up on its bid to rollout a competitive nationwide telco service, after its supposed partner – Telstra of Australia – decided not to invest in SMC’s telco service.

Rolling out a viable nationwide telco service required enormous capital and technical knowhow. And so SMC came to that very crucial decision to sell its telco assets to PLDT and Globe for a whopping P70 billion.

Meanwhile, the National Telecommunications Commission (NTC) approved the co-use arrangement among Smart, Globe, and BellTel in respect of certain frequencies to be retained.

On May 30, 2016, under the transitory rules of the newly created Philippine Competition Commission (PCC) which were in effect until the issuance of the implementing rules of RA 10667 or the Philippine Competition Act, PLDT and Globe notified the PCC in writing about the acquisition and after such notification, the transaction shall be deemed approved and the parties may proceed to execute or implement their agreement and such may not be challenged except when the notification required contains false material information.

The implementing rules of RA 10667 took effect only on June 18, 2016 which meant that the PLDT-Globe-SMC transaction was covered by the transitory rules.

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Despite all these, the PCC on June 7 told the parties that the notification was not compliant with the requirements under the transitory rules and therefore cannot be claimed to have been deemed approved. In another letter dated June 17, PCC said it will initiate a full review, if not investigation, of the transaction.

PLDT filed a petition with the Court of Appeals for the issuance of a TRO/writ of preliminary injunction (together with a petition for certiorari and prohibition) to prevent the PCC from conducting the review.

PLDT also said the subject acquisition was with the prior approval of the NTC and such review would illegally encroach upon the jurisdiction of the latter, that the review would cause serious and irreparable damage to the credit standing of PLDT and its ability to raise funds to roll out the 700 megahertz spectrum, and that it would cause PLDT to violate the NTC conditions under the co-use arrangements which among others require that the parties increase broadband and Internet access speed within one year, that the parties submit within 60 days a roll-out plan to cover at least 90 percent of cities and municipalities in three years.

In a much-welcome development, the CA’s 12th decision granted the prayer for a preliminary injunction by PLDT to preserve the rights of the parties while the main petition for certiorari and prohibition are being heard.

The CA said that due to the deemed approved status of the subject acquisition by virtue of the transitory rules, PLDT at the very least has the right to be protected from the pre-acquisition review and/or investigation by the PCC.

It pointed out that the review will violate the right of PLDT to be accorded safe harbor or protection from challenge, except for false material information; that the company will suffer grave and irreparable injury due to the effect on its stock prices and ability to raise funds; and that PLDT will be subject to possible sanctions by NTC for non-implementation of the co-use agreement.

In short, the court is stopping the PCC from preventing the roll out of the frequencies which would be most beneficial to current and new subscribers of PLDT and Globe.

But beyond all the legal mumbo-jumbo is the fact that at the heart of the issue is the public good, and not some academic and theoretical discourse about competition which in any case has not been stifled or curtailed by the transaction; that the so-called preliminary findings of the PCC are largely based on speculation, conjecture, and unsupported hypothesis, and do not appear to be backed up by hard evidence; and that the PCC cannot interpret its rules as it sees fit and that its actions of have been whimsical and abusive.

It should also be noted that the approval by the NTC of the co-use of certain frequencies meant that the use of such frequencies by Smart and Globe would be beneficial to the public, will improve the public service, and will not be anti-competitive. The good of the public service, which is the essence of competition, is further protected by the conditions imposed by the NTC on Smart and Globe for the co-use of the frequencies.

PLDT regulatory affairs chief Ray Espinosa earlier explained that the purchase agreement serves the public interest by making available powerful frequencies that can be immediately used to deliver a valuable public service to tens of millions of Filipinos and to support economic and social development while leaving the door open for new entrants in the industry with the return of certain frequencies to government by the parties.

Espinosa also noted that there is “a hidden cost to inaction” as studies show that frequency left unused in mobile broadband leads to lost opportunities for economic growth.

A study by GSMA and Boston Consulting Group showed that the use of the low-frequency 700 MHz band for mobile data would lead to “significant” socioeconomic benefits, including higher economic growth, more jobs, new businesses and more tax revenues for the government.

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