‘No franchise violations in ABS-CBN-TV5 transaction’

A veteran lawmaker on Wednesday said no franchise law was violated in the “investment agreement” between TV5 Network Inc. and ABS-CBN Corp. and that the transaction is exempted from compulsory notification to the Philippine Competition Commission (PCC).

Albay Rep. Edcel Lagman said he wrote a letter to House Speaker Martin Romualdez last Monday following the privilege speech of Sagip Rep. Rodante Marcoleta questioning the “merger” of TV5 Network Inc. and ABS-CBN.

“First, the deal is not a merger where one entity absorbs another or two entities fuse to form a new one as defined by the Philippine Competition Act or  Republic Act [RA] No. 10667. TV5 and ABS-CBN remain separate and independent juridical entities,” Lagman said.

According to Lagman, the transaction of P4.45 billion is less than the transaction value threshold of P50 billion under the Bayanihan to Recover as One Act (Bayanihan 2) or RA 1144.

He also said “acquisition” does not apply to the transaction as defined in Section 4 of the “Philippine Competition Act” because ABS-CBN does not acquire control of TV5.

“Consequently, the said transaction is exempt from the compulsory notification and approval by the Philippine Competition Commission.”

The speech of Marcoleta was the agenda of the House Committee on Legislative Franchises and House Committee on Trade and Industry during its Wednesday briefing.

During the briefing, PCC Officer-in-Charge Johannes Bernabe told lawmakers that ABS-CBN and TV5 have yet to inform them of their transaction.

However, he admitted that the transaction between the ABS-CBN and TV is not notifiable, and does not meet the value under Bayanihan 2.

“Even if it’s not notifiable because it does not meet the threshold under the law, it does not preclude the parties from voluntarily notifying the PCC,” said Bernade, saying the PCC has the power to conduct a review on its own initiative to assess the impact of the transaction on the industry.

Marcoleta, who opposed the renewal of the franchise of ABS-CBN claimed that TV5 has violated its franchise by entering into a deal with ABS-CBN.

According to Marcoleta, the ABS-CBN should settle all their obligations before “riding” on another station’s franchise.

“I write on behalf of my constituents and concerned citizens about the looming House investigation which may result in the derogation of press freedom and free speech, the bedrock of democratic governments,” Lagman told the speaker.

Lagman said the transaction between TV5 and ABS-CBN has generated “baseless innuendoes which must be clarified and corrected.”

Terms of deals

PLDT Inc. and ABS-CBN have entered into two separate multibillion-peso deals that will allow the two groups to build a bigger media, broadband, and cable empire.

One of the deals involves the acquisition by ABS-CBN of 34.99 percent of total voting and outstanding capital stock in TV5 Network Inc., a PLDT unit, for P2.16 billion.

Meanwhile, the other deal involves the P2.86-billion investment by Cignal Cable Corp., a PLDT unit, into Sky Cable Corp. This transaction represents 38.88 percent of the total issued and outstanding capital stock in Sky Cable

“The contract is an investment agreement wherein ABS-CBN invests in TV5 by putting in P2.61 billion in exchange for 34.99 percent of TV5’s voting stock; and an additional P1.84 billion in Convertible Notes which can be exchanged for additional voting shares only after 8 years, and will increase ABS-CBN’s stake in TV5 to only 49.92 percent or less than a controlling absolute majority. This is still inchoate and subject to requisite approvals,” said Lagman.

“There is no franchise issue. Section 10 of TV5’s renewed franchise under RA 11320 is not violated by the transaction because there is no sale, lease, transfer, or grant of the usufruct or assignment of TV5’s franchise to ABS CBN.”

Moreover, he said there is no merger or transfer of controlling interest in TV5.

Also, Lagman noted that the Memorandum Order No. 003-06-2022 of the National Telecommunications Commission (NTC) is “constitutionally infirm, arbitrary, and vague.” “It [memorandum] violates the constitutional right of TV5 and ABS-CBN to enter into a contract which is not contrary to law, morals, good customs, public order, or public policy. There is no rhyme nor reason to disqualify an entity from contracting simply because it has ‘outstanding obligations’ to the government.”

In the same briefing, NTC Commissioner Gamaliel Cordoba said NTC issued a memorandum order to require a franchise holder to secure the commission’s approval for commercial agreements it enters into with other companies in areas where NTC has jurisdiction.

The lawmaker said the NTC memorandum is an usurpation of legislative power as it imposes a restriction on a franchisee like TV5 which is not in its legislative  franchise.

“The NTC memorandum is arbitrary because it discriminates against entities which have ‘outstanding obligations to the national and local governments.’ It is also akin to class legislation which infringes on the Constitution.”

Also, the solon said the NTC Memorandum is vague because it lacks the requisite  standards for determining what is the nature, extent, and status of the so-called “outstanding obligations.”

“The TV5/ABS-CBN transaction enhances fair competition in the television and broadcast industry,” Lagman said.

“Without a franchise, ABS-CBN ceased to be a major player in the industry TV5 has not achieved major player status. One television network presently dominates the industry. With the recent infusion of ABS-CBN investment in TV5, the playing field approximates leveling.”


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