PCC sees P70-B telco deal its baptism of fire

OPERATING in a shared office space with a staff less than those of many small businesses, the newly created Philippine Competition Commission is taking on its biggest challenge yet: tackling a P70-billion telco acquisition whose architects say required no government approval.

The deal was straightforward enough. Industry giants PLDT and Globe Telecom on May 30, 2016 jointly bought San Miguel Corp.’s telecommunication unit Vega Telecom, ending the latter’s dramatic bid to become a third telco player.

Vega held valuable but unused radio frequencies, which the telco duopoly said were needed to help solve the country’s “slow” internet issues at a time when digital services were delivering most of the new growth and profits— replacing traditional calling and text messaging.

But the situation is different today than the mega transactions in the past, with the Philippine Competition Act fully in effect as of last year.

In an interview with the INQUIRER, PCC Chair Arsenio Balisacan talked about birthing pains at the PCC, the PLDT-Globe-SMC deal, and why it was important to strengthen the new- ly formed institution at this early stage.

The fact that the PCC’s first big test, the SMC telco acquisition, came so soon after the commission started its work did not at all dampen the spirits of the people at PCC, he added.

“We don’t mind challenges. We are looking at the commission as a longterm development process,” Balisacan said in an interview at the office that PCC shared with the Development Academy of the Philippines in the Ortigas Business District.

“Baptism of fire is fine as long as it makes you stronger,” he said.

Balisacan, who used to head the National Economic and Development Authority, also explained why the commission had to reject the telco duo’s argument that their joint buyout of Vega should be automatically approved.

PLDT and Globe cited technical cover provided by the PCC’s “transitory rules” under memorandum circulars it issued before the implementing rules and regulations came out on June 3.

“This issue, the anti-competition law, is more than mergers and acquisitions. We have anticompetitive agreements, abuse of dominant position,” Balisacan said.

“To pin us on the basis of just the MC, in isolation of the broader frame- work, is not the way we see our function, our mandate. The MC cannot dilute the law,” he said.

PLDT and Globe insisted the deal was deemed approved, saying they had submitted the necessary notices as required under the MC. A back and forth that played out for weeks culminated with the PCC announcing last Friday that the deal would be placed under a “comprehensive review.”

Some observers said this could set the stage for a legal battle between the PCC and the telco duopoly, which had already started to deploy SMC’s acquired frequency assets to bolster their networks.

Both telcos yesterday sought a “dialogue” with the PCC to clarify their position. They added that a full set of frequencies had been returned to the government, which they said was enough for a third telco player to enter.

Balisacan noted that the next big challenge was finding talented individ- uals for the PCC.

Right now, the agency had about about 10 people, a fraction of the 200 administrators, lawyers and investigators it needed, partly due to the hiring ban ahead of the May 9 polls. They were currently relying on people seconded from other agencies, like the Department of Justice, Balisacan said.

“The expertise is quite thin at the moment so I have to look at this from a longer perspective and make sure we can develop the competencies required,” Balisacan said, noting that the country did not have a “history and tradition” of competition law.

The main objective would also to tap “younger” individuals, and train them with “crash courses” on anti-trust. Balisacan said many institutions and experts from the United States, European Union and Australia were ready to lend their support.

He noted they could hit the required 200 PCC staff by 2017, and that appli- cations so far were competitive. He said this was also because the PCC was exempt from government salary standardization, meaning they could offer to pay better and close the gap with private sector compensation.

Even with limited manpower, he said the PCC had been looking into acquisition deals under its mandate.

From February to June 8 this year, the PCC oversaw about 47 transactions worth a combined $24 billion, several of which were in financial services and consumer staples, Balisacan said.

The PCC’s capabilities will increase as more people are hired and training courses are completed, he said. The Philippines was the last among the Asean’s original member countries to have an antitrust law.

“The beauty with starting late is you don’t have to start from scratch,” Balisacan said, citing the expertise and lessons learned from other countries. “That is our advantage as a latecomer.”