Network defends operations; SEC says ownership rules evolving

MANILA, Philippines — Officials of broadcasting giant ABS-CBN said their operations were compliant with laws and rules and the network deserved to have its franchise renewed.

The Securities and Exchange Commission (SEC) also said yesterday that the Philippine Depository Receipts (PDRs) held by the network’s holding firm were compliant with existing laws.

SEC Commissioner Ephyro Luis Amatong told the Senate committee on public services, which is conducting an inquiry into the franchise renewal application of the network, that when ABS-CBN Holdings Corp. offered PDRs in 1999, it was based on prevailing laws and jurisprudence, particularly the Foreign Investments Act.

“Even now, the interpretation of the SEC is that holders of PDRs are not owners of underlying corporations, there’s no transfer of ownership (to foreigners),” Amatong told the panel chaired by Sen. Grace Poe.

PDRs are investment instruments that allow foreign investors to put in capital in local corporations. The terms of the PDR offering differ from corporation to corporation.

Solicitor General Jose Calida had earlier filed a quo warranto petition before the Supreme Court (SC) seeking to nullify the franchise of ABS-CBN on grounds that it violated the constitutional prohibition of foreign ownership in media entities.

Amatong stressed that the PDRs were not held by the network but the holding company.

He, however, said the test of determining foreign ownership in a corporation that issued PDRs is “evolving” in the SC, based on the high tribunal’s rulings in previous cases.

The commissioner said the general determination of who controls a firm is whoever the majority owner of the total capital stock is.

He added that the SC, in hearing cases on PDRs, has begun modifying the test to include “beneficial ownership” or to include who controls the voting of members of the board.

This prompted the SEC in 2013 to issue a memorandum circular to guide corporations on the thrust of the SC. Amatong said the high tribunal is still deciding on a similar pending case.

The SEC official admitted that the agency has yet to look into the case of ABS-CBN, prompting senators to prod him to act faster, given the urgency where Congress must decide on the network’s franchise.

“If the (network) was not in violation, they should be covered, they should be allowed to rectify if there’s a new interpretation (from the SC),” Poe said, adding that with the Philippines having a relatively small capital pool, PDRs are resorted to as a way to gain investments.

ABS-CBN president and chief executive officer Carlo Katigbak maintained that the network was compliant with the law.

“If the rules and regulations have changed, we should be given the opportunity to rectify along those laws,” Katigbak told the panel.

Sen. Sherwin Gatchalian said that based on his reading of the holding company’s documents, the PDRs had safeguards.

“The provisions are quite explicit… they have to comply with constitutional requirements,” Gatchalian said.

Sen. Sonny Angara pointed out that many companies, listed or not, rely on PDRs. Angara asked Amatong what would happen if the SC would rule against ABS-CBN.

“It is not only ABS that made use of the PDR vehicle. There are other media outlets, depending on the grounds, how the court will rule, other companies that have foreign investors in nationalized (industries) may also be affected,” Amatong said.

Commissioner Johannes Bernabe of the Philippine Competition Commission said the shutdown of ABS-CBN would not augur well in efforts to level the playing field in the broadcast industry.

Bernabe said that if the audience share of the network moves to its rival GMA-7 significantly, that could raise a red flag in other jurisdictions.

The National Telecommunications Commission (NTC) can issue a provisional permit for ABS-CBN to continue operating after its franchise expires on May 4 if Congress fails to act on the network’s application for the renewal of the same by that time, Justice Secretary Menardo Guevarra told the committee.

Guevarra, however, told the committee that it would be better if both the Senate and the House of Representatives pass a resolution asking the NTC to issue the permit to give the agency a stronger legal basis to do so.

“There is a gap in the law that could have declared the status of operations of a radio and television franchisee when the Congress has not finally acted on a bill for the renewal of its franchise,” he said.

“When there is a gap in the law, equity comes in to fill the gap. Equity is the principle by which substantial justice may be attained in cases where the prescribed or customary forms of ordinary law are inadequate,” he added.

Congress, according to the justice secretary, may pass a resolution authorizing the NTC to issue a provisional authority to allow ABS-CBN to operate until lawmakers finally act on its application to renew its 25-year franchise.

Guevarra testified at the hearing after the NTC – deviating from its usual practice of allowing franchisees to operate until Congress renews their franchises – asked the Department of Justice (DOJ) for a legal opinion.

He, however, said the DOJ would not formally issue a legal opinion as ABS-CBN is a private entity, thus its comment would not be legally binding.

Senate President Pro Tempore Ralph Recto and Senate Minority Leader Franklin Drilon asked NTC Commissioner Gamaliel Cordoba whether the agency could withdraw the authority anytime.

“Considering there is no more franchise, since it has already lapsed, then we can withdraw the provisional authority at any time, subject to the conditions,” Cordona said.

Drilon warned that such a “sword of Damocles” would have serious implications on the future editorial content of the network and press freedom in general.

The senators said the NTC should not pass the buck to Congress and wait for the resolution as it has allowed other franchisees to continue operating without any difficulty.

“And I would like to say that if the NTC decides to give the provisional license for ABS-CBN to operate, this is not a special treatment; it’s been done before,” Poe said.

“In fact, based on the precedence, if it is not given with no concrete reason, it is going to be more of the exception than the rule,” she added.

Bureau of Internal Revenue-National Investigation Division’s Roberto Baquiran told the committee that the network has been faithfully paying taxes, totaling P14.398 billion from 2016 to 2019, excluding income tax for last year as the filing is still in April.

‘Torture’

A teary-eyed ABS-CBN’s Rank-and-File Employees’ Union president Jon Villanueva said the uncertainty over the network’s franchise has been a “torture” for them.

“It’s torture,” Villanueva said when asked by Angara on the effects of the revocation of the franchise. “All of us employees are worried as the days go by. It’s really torture.”

“Our lives became better because of ABS-CBN. That’s why we are worried what would happen to us if ABS-CBN fails to secure a new franchise,” he said in Filipino.