SolGen backs telco deal review

THE GOVERNMENT’S top lawyer scored industry giants PLDT Inc. and Globe Telecom over the May 30 buyout of San Miguel Corp.’s telecommunications unit, revealing how the buyers hid key deal details to escape the antitrust body’s scrutiny and included provisions barring SMC from again competing in the telecommunications space.

The Solicitor General, which filed on behalf of the Philippine Competition Commission its comment to the 12th division of the Court of Appeals last Aug. 11, requested that PLDT’s petition blocking the PCC from reviewing the P70-billion deal “be denied for utter lack of merit.”

That was the main request in the 127-page comment obtained by the INQUIRER. Also detailed was the PCC’s intent to review the massive transaction for potential violations of the Philippine Competition Act, which last week marked its first anniversary.

The Solicitor General specifically slammed technicalities that PLDT and Globe raised in saying the deal, which effectively ended SMC’s bid to become a third telco player and maintained the current industry duopoly, deserved automatic approval.

It was that stand that led PLDT andGlobe to seek the appellate court’s intervention last July 12 to block the PCC’s probe. Globe had filed a separate but similar petition in court, but this was later consolidated with PLDT’s filing.

The government’s top lawyer said the two telcos intentionally hid from their May 30 PCC transaction notice details on an earlier-obtained “co-use” agreement for valuable but unused radio frequencies of SMC’s Vega Telecom, the holding company that was acquired days later.

It said the move was a “deliberate effort” on the part of the buyers “to shield said agree-

ments from respondent [PCC’s] review.” This was why the PCC said earlier that the transaction forms submitted by the telcos were deficient.

“Such conduct by petitioner can even be considered as tantamount to the submission of false material information in light of proof of its deliberate withholding material information,” the solicitor general said.

That included “intentionally misrepresenting” the deal as a mere acquisition of a holding company without detailing the co-use of frequencies, which were a limited and essential asset.

“The radio frequency spectrum, which is the underlying consideration of the subject acquisition, is a scarce and natural resource. Therefore, it is in the interest of the state to review the subject acquisition,” the Solicitor General wrote.

The validity of the transaction notice was a relatively standard document. It was filed for at least 60 other merger deals since the PCC’s Memorandum Circular (MC) came out, the antitrust body had said in a previous statement.

The document was now front and center of a legal battle that could determine the fate of the country’s biggest telco deal since the time PLDT bought out the Gokongwei family-led operator of Sun Cellular in 2011.

PLDT and Globe lawyers did not immediately respond to requests for comment, but they earlier argued the joint buyout of Vega was aimed at unlocking SMC’s unused frequencies to improve mobile internet service.

Despite criticism over spotty internet, mobile data was among the fastest-growing and most profitable business segments today as consumers shift away from traditional calls and text messaging. Data-intensive activities likes mobile games and videos are on the rise.

The filing of the transaction notice was covered under the transitory rules of the PCC, contained in MC No. 16-002. The MC covered deals before the the implementing rules and regulations were finally released on June 3 this year and took effect June 20.

Both PLDT and Globe repeatedly cited technical cover offered by the MC in arguing the deal should be “deemed approved” by the PCC.

That MC outlined how parties behind transactions valued at more than P1 billion should formally inform the antitrust body via a notice containing all the relevant transaction details to gain “deemed approved” status.

But the Solicitor General revealed that PLDT and Globe failed to provide the so-called key terms of the transaction in their notices. In its place, it was “merely stated that the parties shall execute a SPA (sale purchase agreement), which contains the terms and conditions of the transaction.”

“No amount of legal argumentation can enshroud this inescapable truth that the subject notice submitted by petitioner to respondent failed to comply with all the requirements specified under the MCNo. 16-002,” the Solicitor General wrote.

The Solicitor General added that the acquisition of Vega “provides for an undertaking on the part of SMC to refrain from directly or indirectly engaging in any business or enterprise that is competitive or antagonistic to the telecommunications business of petitioner [PLDT] and Globe.”

SMC president Ramon S. Ang did not immediately respond to a request for comment.

Ang, however, said in an interview in the days after the May 30 acquisition that selling Vega was a difficult decision and came amid legal threats from PLDT and Globe.

In its comment to the Court of Appeals, the Solicitor General said the PCC should be allowed to do its job.

“The alleged losses to be incurred by petitioner should not deter respondent from reviewing the subject acquisition as the enormity of public interest involved therein outweighs petitioner’s interest to conduct business as it deems,” it wrote. “After all, public interest represented by respondent reigns supreme over any private interest.”

Vega was sold to PLDT and Globe for approximately P69 billion, which included P17.02 billion in liabilities. In addition, the telco acquired Bow Arken Holding Co. and Brightshare Holdings, which were linked to SMC and held added frequency assets.