It was a move earlier described to possess surgical precision and haste. On May 30, 2016, or a month before President Rodrigo Duterte assumed office, the PLDT Group and Globe Telecom jointly announced they would acquire the telecommunications assets of food giant San Miguel Corp. (SMC) in a megadeal perceived to strengthen the duopoly of the two telecoms behemoths.
The deal involved the sale of SMC assets amounting to P70 billion, the acquisition of Vega Telecom Inc., which owns controlling interests in five telecom firms, the return to the government and eventual resale of the 700 megahertz (MHz) of radio spectrum, and assumption of P17 billion in unpaid debts and liabilities of the acquired firms. It was described to have come at the most inauspicious time.
Their announcement came four days before the Philippine Competition Commission (PCC) would announce its implementing rules and regulations (IRRs) in pursuit of its mandate. In hindsight, which is always 20/20, the PLDT Group and Globe Telecom had virtually beaten the PCC to the draw.
It was on July 21, 2015, that then- President Benigno S. Aquino III signed into law Republic Act 10667, or the Philippine Competition Act, to pave the way for PCC’s creation.
The PCC has the following mandate: enhance market competition, liberalize key sectors, promote a spirit of entrepreneurship, encourage private investments, hasten technology development and transfer, and foster resource productivity.
It institutes a national competition policy, prevents economic concentration, penalizes anticompetitive pacts, and stops abuse of dominant position and anticompetitive mergers and acquisitions. The mandate is premised on consumer protection and enhancement of domestic and international trade.
It took a year for the PCC to work on its IRRs. Without the IRRs, the PCC is deemed toothless and powerless to deal with monopolies and other combinations in restraint of trade. Aquino, as the outgoing president, just signed the law creating the Department of Information and Communications. Its existence has become official after Duterte named Rodolfo A. Salalima as its first secretary.
Among his first official acts, Salalima sustained the deal and instructed the regulatory National Telecommunications Commission (NTC) to do what is best to improve telecom services to the country. The NTC did not take long to give the returned 700-MHZ spectrum to the PLDT Group and Globe Telecom.
The PLDT Group and Globe Telecom described the transaction as a “done deal”, as they immediately signed the formal accords. It was presented as a “fait accompli” deal, as PCC Chairman Arsenio M. Balisacan was among the last to be notified of the single biggest transaction in the local telecoms industry.
Balisacan, a development economist who worked on poverty issues, earlier resigned his post as socio-economic planning secretary and National Economic and Development Authority director general to become the first PCC chairman. Under Republic Act 10667, the PCC is a powerful agency which could issue cease and desist orders and deputize law-enforcement agencies to stop monopolies and other combinations in restraint of trade. He has a seven-year term of office.
Although the two parties described the deal as a “win-win” transaction, it did not stop the PCC from looking into its legality and propriety. This is where the problem starts. The PCC, as the competition watchdog, has sought to look into the P70-billion deal because of perceived violations of the national competition policy and “cartel-like behavior”.
The PCC argued it was not properly informed about the deal, an issue considered largely as procedural, not substantive, in nature. Moreover, it expressed fears the deal could violate the national competition policy, which promotes the healthy interplay of market forces in the country.
For their part, the two telecommunications giants said the transaction sought to meet the barest minimum requirement: the improvement of telecoms services to the more than 100 million Filipinos. The acquisition and use of the 700-MHZ spectrum, which is regarded as central to the deal, resolves the fundamental issue of “frequency hoarding” in the telecoms industry.
The 700-MHZ spectrum used to be owned by Liberty Telecoms, which controversial businessman Raymond Moreno controlled until he sold the firm to SMC. Both Globe and the PLDT Group had coveted this spectrum before because it means enhanced flexibility for their operations. Its acquisition has been so complex, raising various arguments to the point of absurdity.
For his part, Salalima could only take a swipe at Balisacan for questioning the decision of the NTC to allow the PLDT Group and Globe Telecom to use the spectrum they have acquired last year from the dormant SMC telecoms firms.
Salalima said the PCC should have looked at the NTC’s technical skills and administrative capacity to determine the assignment of frequencies for telecoms services. Moreover, the PCC should confer with the NTC before making public statements.
Taking a strong stand against frequency hoarding, Salalima argued that the acquisition and use of the 700-MHZ spectrum, regarded as the strongest radio frequencies, does not constitute anticompetitive behavior because it seeks its eventual use and stop the indecent hoarding of unused frequencies. There should be an end to frequency hoarding, he argued.
Said Salalima, whose expertise is on constitutional law: “The other side of the coin here is: ‘Is it anticompetitive if frequencies, which are being hoarded, are used for public service? Is it anticompetitive for particular frequency to be used since there are still available frequencies under the 700 MHZ and in other frequencies? Is it anticompetitive if NTC told me that there are still other frequencies other than the 700 MHZ, sufficient for a third-party player?’”
Consequently, Salalima said, Globe Telecom and the PLDT Group have only 66 percent of the total number of 700-MHZ spectrum frequencies available. “It would be better for the people to use the spectrum than allow a single firm to hoard the frequency,” he said.
E-mail: ernhil@yahoo.com.