PLDT creates new voting preferred shares to comply with foreign ownership limit

MANILA, Philippines - Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) has created new voting preferred shares to comply with foreign ownership limits once an order issued by the Supreme Court last week becomes final.

The Supreme Court had said that in calculating compliance with the Constitution’s 40-percent limit on foreign ownership of public utilities, only voting common shares should be counted. That excluded PLDT’s non-voting preferred shares, putting PLDT over the 40 percent limit.

In a statement, PLDT said the new class of stock can only be bought by Filipinos and Filipino-controlled entities. It said it could sell 150 million of the new stocks to reduce foreign ownership of voting shares from 64 percent to 36 percent.

PLDT explained that it would sell the voting preferred shares if the Supreme Court ruling becomes final “to protect the interests of PLDT and its stakeholders.’’

Company officials said that when the voting preferred shares are issued, the resulting capital structure of PLDT will be aligned with, and identical to, the current capital structure of many listed Philippine companies engaged in businesses such as the operation of public utilities, mining and land development.

While PLDT maintains that its current share structure fully complies with the Constitution, it said although the Supreme Court decision is not yet final and still subject to reconsideration, this could disrupt PLDT’s operations and transactions.

To safeguard the interests of its consumers, shareholders, holders of its securities and lenders, the PLDT board has approved amendments to the company’s articles of incorporation that will authorize the board to issue the voting preferred shares as and when the board determines such issuance to be necessary to protect the interests of PLDT and its stakeholders.

The issuance of the voting preferred shares will result in an expanded voting capital in PLDT consisting of common shares and voting preferred shares.

The amendments will be subject to approval by the stockholders of PLDT owning two-thirds of the total outstanding shares. After the approval of the amendments by the PLDT shareholders, up to 150 million voting preferred shares could be initially issued to the PLDT Beneficial Trust Fund and other Philippine nationals. When issued, the 150 million voting preferred shares will be about 45 percent of the expanded voting shares of PLDT and the total foreign equity in PLDT’s expanded voting shares will be reduced from the current 64 percent to about 36 percent.

PLDT chairman Manuel V. Pangilinan said: “PLDT believes that its current share structure is in full compliance with the Constitution, all applicable laws and regulations and various opinions of the Securities and Exchange Commission and it is prepared to exercise all its legal options in relation to the Supreme Court’s ruling. In the meantime, PLDT wants to assure all its stakeholders, particularly its customers, that it will be business as usual for PLDT”.

“We assure our shareholders and the general public that they will continue to reap the benefits from PLDT’s continued services,” he added.

Pangilinan said last week the court ruling prompted investors to call the company and ask why the court is “changing the rules.’’ The Philippine Stock Exchange expressed “strong reservations’’ about the ruling and said it would work closely with the Securities and Exchange Commission, which the court charged to “apply’’ the definition and impose sanctions if there has been a violation.