When the National Telecommunications Commission (NTC) announced a few months ago its approval of the P70-billion joint buyout of San Miguel Corp.’s (SMC) telecom assets, including the coveted 700-megahertz (MHz) band, by PLDT’s Smart Communications and Globe Telecom, Internet users and mobile-phone owners were overjoyed by the prospect of much faster Internet or broadband services coming their way soon.
But the good news was short-lived, as the newly created Philippine Competition Commission (PCC) declared that it was reviewing the P70-billion buyout deal. Now, it’s the PCC’s turn to come to grief as the Court of Appeals (CA) recently ruled that the PCC should stop its review of the buyout agreement.
In a seven-page resolution, the CA’s 12th Division granted the temporary restraining order (TRO) sought by the two telcos, and issued a writ of preliminary injunction against the unwarranted PCC probe. The order, signed by Associate Justice Ramon Bato Jr., forbids the antitrust body “from conducting further proceedings for the pre-acquisition review and/or investigation of the subject acquisition.”
The CA agreed with PLDT’s position that “due to the ‘deemed approved’ status extended to the subject acquisition…PLDT has a clear right to be protected from the pre-acquisition review and/or investigation conducted by respondent PCC.”
The appellate court said the injunction was necessary to protect PLDT’s right to be accorded “safe harbor” or protection from challenge under Republic Act 10667, or the Philippine Competition Act.
Another issue raised by the court was the negative impact of the PCC review on PLDT’s financial status. It said PCC’s unnecessary muscle-flexing would adversely affect PLDT’s ability to raise funds to bankroll the “necessary infrastructure badly needed to improve the Internet speed and connection nationwide.”
Apart from this, the CA argued, delaying the implementation of the buyout deal might lead the NTC to penalize PLDT, considering that the commission had already approved the agreement with several conditions attached to it.
The two telcos have welcomed the CA’s order as this would allow them to continue with the implementation of the buyout agreement, including the use of the long-idle frequencies in the 700 MHz.
PLDT Head of Regulatory Affairs Ray Espinosa believes that the buyout agreement serves the public interest.
“On the one hand, it makes 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. On the other, it leaves the door open for new entrants in the industry,” he emphasized.
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.
The real value of the 700-MHz band acquired by Globe and PLDT/Smart under the NTC-approved buyout deal is its longer range, better indoor penetration and capacity to provide wireless Internet connectivity, especially in the hinterlands.
For its part, Globe has also cited inconsistencies in the IRR of the PCC related to the buyout agreement.
According to Globe general counsel Froilan Castelo, PCC treated the buyout agreement differently from other deals when the P70-billion transaction was clearly within the “safe harbor period” of the PCC.
“Stating that this transaction should still be subject to review despite its own rules, the PCC has changed the rules suddenly in the middle of the game and acted on it whimsically,” Castelo said.
The PCC chose to disregard its own rules and is now saying that it is not bound by them, with its insistence that the buyout agreement should still be reviewed even when it was already deemed approved before the effectivity of its final IRR, Castelo argued.
In the PCC memorandum circular, it said a deal is deemed approved if and when “consummated after the effectivity of the memorandum circular but before the effectivity of the implementing rules and regulations.”
What the two telcos have stressed is that they have complied with the law because under PCC Memo Circular 16-001, any deal forged before the issuance of its IRR is deemed already approved.
The acquisition by PLDT/Smart and Globe of SMC’s idle 700-MHz band was consummated after the effectivity of PCC’s own MC 16-001 and prior to the effectivity of its law’s IRR.
Likewise, PCC was duly notified of the transaction with the required information as provided for in Section 2 of M.C. No. 16-001.
Hence, it follows that after the NTC thumbs-up, the deal was deemed approved and the parties may proceed to execute or implement the agreement. In the absence of any proof of any false material information in the notice, the agreement may no longer be challenged by the PCC.
It should be pointed out that the PCC has no retroactive review power because the buyout contract was forged before the release of its IRR, legal experts say.
Moreover, the PCC review will delay and deprive the public of the use of faster and cheaper Internet services as promised by President Duterte.
Besides, stopping the implementation of the deal would cause irreparable damage to Globe and PLDT/Smart, which have both started rolling out their respective 700-MHz networks following the NTC-approved P70-billion deal. It should also be noted that SMC decided to sell its 700-MHz frequencies because, by itself, it could not raise the huge financial resources needed to build a digital network that could compete with PLDT/Smart and Globe.
Internet users in the country are expected to reach 44.4 million this year. Thus, Internet services should be vastly improved to meet fast-growing demand.
E-mail: ernhil@yahoo.com.