Nextel International writes off RP affiliate

US-based Nextel International, Inc. (NII) reported recently that it has discontinued funding to its local affiliate, Nextel Communications Philippines, Inc., following its review of the latter’s operating performance.

In a report to its shareholders and the US Securities and Exchange Commission, NII said it is writing off its Philippine operations also following its "review of economic conditions and other relevant factors relating to Nextel’s operating company (in the Philippines)."

The local Nextel is currently under investigation by the National Telecommunications Commission (NTC) following a request from the Department of Transportation and Communications (DOTC) that NTC look into allegations that NII may have violated constitutional provisions on foreign ownership of vital utilities.

The DOTC-endorsed complaint said NII may have used two local companies to cover its acquisition of close to 60 percent of the local Nextel, a move confirmed by NII in its report to the US SEC. The Philippine Constitution limits foreign ownership of vital utilities to only 40 percent.

Constitutional lawyers said the organic law does not distinguish between direct and indirect ownership when the framers established the foreign ownership cap, a distinction Nextel lawyers had reportedly hoped to put up as an argument.

Constitutionalist Alan Paguia alleged that Gamboa Holdings, Inc. and Emerald Investments, which hold 20 and 28 percent, respectively, of the local Nextel’s outstanding shares are mere conduits of the Virginia-based NII.

NII has reported owning 40 percent each of the Philippine Nextel company, Gamboa Holdings and Emerald Investment.

In a recent press release, Nextel president Emilio Festejo said the local company hopes to finance its capital expenditure requirements from loans and supplier credit. Industry observers said the NII write-off was "untimely" since the local Nextel had just launched a new data service.

Festejo said the company is eyeing 350 of the country’s top 1,000 corporations for the new service.