In this photo taken Feb. 14, 2020, ABS-CBN employees, supporters and various rights group gather in front of the ABS-CBN main office in Quezon City to join in the Black Friday protest calling for the renewal of the network’s franchise.
The STAR/Miguel De Guzman
Point by point: ABS-CBN answers Solgen Calida's quo warranto petition
Kristine Joy Patag (Philstar.com) - February 24, 2020 - 7:04pm

MANILA, Philippines — The Philippines' chief government lawyer ran to the Supreme Court this month in a bid to revoke the franchise of media giant ABS-CBN, a network that has been at the bitter end of tongue-lashings from President Rodrigo Duterte.

Solicitor General Jose Calida said in a statement upon filing the quo warrano petition: “We want to put an end to what we discovered to be highly abusive practices of ABS-CBN benefitting a greedy few at the expense of millions of its loyal subscribers. These practices have gone unnoticed or were disregarded for years.”

Replying to Calida's petition, ABS-CBN released a statement on the day of filing and rebutted: "We reiterate that everything we do is in accordance with the law. We did not violate the law. This case appears to be an attempt to deprive Filipinos of the services of ABS-CBN."

On Monday, ABS-CBN answered Calida's allegations in a 58-page Comment Ad Cautelam (Latin for "for security").

Here is a look at the allegations Calida made in his quo warranto petition and ABS-CBN’s reply in its comment filed Monday:

Quo warranto as the proper remedy for ABS-CBN franchise woes

What Calida said:

The franchises of ABS-CBN Corporation and ABS-CBN Convergence have to be revoked for the gross violations they have committed. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by he State because a franchise is granted by law and its unlawful exercise is primarily a concern of the Government. Quo warranto is specifically available as a remedy if it is thought that a corporation has offended against its corporate charted or misused its franchise.

What ABS-CBN said:

Rule 66 of the 1997 Rules of Civil Procedure is now limited to quo warranto actions for usurpation of public office, position or franchise. Accordingly, nothing in Rule 66 of the 1997 Rules of Civil Procedure pertains to misuse of abuse of such public office, position or franchise.

Congress has the power to grant, amend, alter and repeal a franchise, as provided by Section 11, Article XII of the Constitution.

The case is of ‘transcendental importance’

What Calida said:

The present petition involves a matter of transcendental importance, and is a case of first impression, which are some of the exceptions to the doctrine of hierarchy of courts cited above.

This case is of transcendental importance because ABS-CBN’s franchise mandates it to serve the public by its broadcast operations. ABS-CBN Corporation in fact earned the distinction of being the largest media conglomerate in the country, reaching millions of viewers in all corners of the country.

What ABS-CBN said:

[T]hese are not ‘special and important’ reasons which would justify a direct resort to this Honorable Court. The issues involved, not the nature of the parties’ businesses and their size, determine whether a case is of transcendental importance.

The Honorable Court is not a trier of fact.

EXPLAINER: Calida cites 'transcendental importance' in case vs ABS-CBN: What is it?

Operation of pay-per-view channel through free-to-air signals

What Calida said:

It bears stressing that NTC found [Broadcast Service Division’s] report that “No Encryption nor Conditional Access of programming content shall be allowed” to be in order. Accordingly, the NTC imposed a condition on ABS-CBN Corporation that “[t]he use of Conditional Access System (CAS) on DTTB service shall be subject to Conditional Access Guidelines that the Commission or any other relevant government agency may hereafter issue.” At present, there are no Conditional Access Guidelines yet issued by NTC or any other government agency. In the absence of any permit from NTC and guidelines on conditional access, ABS-CBN Corporation has no authority to offer the KBO Channel.

ABS-CBN Corporation cannot deny that it has no permit or authority from the government, specifically [National Telecommunications Commission], before it launched its [Kapamilya Box Office] Channel. Despite being aware of the absence of such a permit or authority, ABS-CBN remains undeterred and continuously operates the KBO Channel in violation of its franchise, the NTC directive and Order, and the [Department of Information and Communications Technology] Framework.

What ABS-CBN said:

Convergence was registered with the NTC to provide value-added services... KBO was therefore a Convergence service. In fact, before the launch of all its KBO offerings, Convergence sought and obtained NTC approvals.

That the Broadcast Service Division recommended that “[n]o Encryption of Conditional Access of programming content shall be allowed” is beside the point. The NTC did not adopt such recommendation in its Order and did not state that “no CAS shall be allowed.” Rather, it imposed among the conditions that ABS-CBN should comply with future guidelines which government may impose.

EXPLAINER: Calida says ABS-CBN's KBO service illegal, but network says it has permits

On the transfer of Multi-Media Telephony's franchise to Convergence

What Calida said:

ABS-CBN Convergence violated Section 15 of R.A. 7907, as amended by R.A. 8332, when the controlling interest in Multi-Media Telephony, the grantee, was transferred to ABS-CBN. As explained above, the majority of the shares of ABS-CBN Convergence was acquired by ABS-CBN Corporation or Sapientis through [Columbus Technology Inc.], and this transfer of the legislative franchise or the rights and privileges thereunder was made without Congressional approval. The web of corporate layering employed by Respondents is plainly intended to go around the congressional approval requirement in the subject legislative franchise.

What ABS-CBN said:

First, there was never any transfer of shares in the grantee, MTI. The controlling interest in MTI has always been, and still remains with Columbus, even after Sapientis subscribed to 70% of Columbus’ increased capital stock in 2011.

The Main and SME Board Listing Rules adopted by the Philippine Stock Exchange and approved by the Securities and Exchange Commission...require that the applicant must have a ‘cumulative consolidated earnings before interest, taxes, depreciation and amortization..” ... Convergence has incurred losses in every fiscal year from 1997 to present... Since Convergence cannot comply with the requirements under PSE’s Main and SME Board Listing Rules, it cannot list and offer its shares to the public.

On foreign ownership of the company

What Calida said:

The figures above show that the number of ABS-CBN Corporation shares were transferred to ABS Holdings and subsequently, ABS Holdings issued financial securities in the form of [Philippine Depositary Receipts], which are then issued to both Filipino and non-Filipino nationals.

ABS-CBN Corporation’s issuance of PDRs to non-Filipino citizens is therefore a contravention of Section11, Section XVI of the Constitution which provides that ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens.

ABS Holding’s issuance of PDRs to non-Filipino citizens is a scheme employed making it appear that the shares remain with the Filipino corporation while granting influence over the mass media enterprise to foreign investors. A foreign investor in this case may validly profit from a mass media corporation with a foreign equity restriction.

What ABS-CBN said:

ABS-CBN PDRs were issued subsequently and these PDRs were also registered with, and approved by the SEC in 2014.

The PDR holders’ rights are not equivalent to the full beneficial ownership rights of the shareholders of ABS-CBN... The PDRs do not grant any of the foregoing rights to PDR Holders as against ABS-CBN.

Since the voting power of the ABS-CBN shares remains with Philippine stockholders, dividends accruing to investors, of whatever nationality, is [sic] irrelevant. Hence even assuming that the PDRs are shares (they are not), and that what PDR holders receive are dividends from ABS-CBN this right to receive dividends is not per se determinative of that stocks’ full ‘beneficial ownership.’

EXPLAINER: ABS-CBN's Philippine Depositary Receipt holders not owners, lawyer says

ABS-CBN ABS-CBN FRANCHISE JOSE CALIDA
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