Bayan Muna says PLDT-Digitel merger unconstitutional; PLDT says let NTC respond

CAGAYAN DE ORO CITY (MindaNews/29 October) — Bayan Muna Rep. Teodoro Casiño has filed a House Resolution calling for an investigation into the merger of  Philippine Long Distance Telephone Co. (PLDT)-Digital Telecommunications Philippines, Inc. (Digitel), claiming it would “essentially” monopolize the telecommunications industry.

House Resolution 1320, co-authored by Byaan Muna Rep. Neri Colmenares, directs the Committee on Information and Communications Technology to conduct an investigation, in aid of legislation, into the “intensifying monopoly of the telecommunications industry and the probable increase in prices and monopoly practices resulting from the apparently illegal and unconstitutional ‘Share and Swap Deal’ between PLDT and Digitel,”

The resolution cited Section 19, Article 12 of the 1987 Philippine Constitution  which provides that the State “shall regulate or prohibit monopolies when the public interest so requires” and :no combinations in restraint of trade or unfair competition shall be allowed.”

The PLDT-Digitel share and swap deal violates this provision, the resolution said.

In a telephone interview, Casiño said the National Telecommunication Commission (NTC) undermined Congress when it approved the merger last Wednesday.

He argued NTC should be sanctioned for approving the merger, since the approval was
“done in bad faith”  because Congress is on recess.

He also proposed that the Securities and Exchange Commission should be cautioned against rushing the approval of the PLDT-Digitel buyout.

“The NTC and SEC should be reminded to follow what the law provides – that this should pass through a transparent process, with a public hearing, and it should pass through Congress so we can scrutinize if, indeed, the consumers and public interest are served,” Casiño said.

“The share and swap deal, merger, or whatever you may want to call it between PLDT and Digitel, creates or tends to create, a monopoly and therefore is unconstitutional,” he said.

PLDT group spokesperson Ramon Isberto, in an e-mailed statement, Saturday said, “the NTC is in a better position to respond.”

“With respect to the argument raised by Rep. Casiño that the NTC had acted in bad faith by approving the Digitel transaction while Congress was in recess, I believe the NTC is in a better position to respond. Let me comment though that this transaction was thoroughly and repeatedly examined and debated upon over the past seven months. The Commission can hardly be accused of having rushed to judgment on this matter,” he said.

On Wednesday, NTC approved the sale of 51.55 per cent of Digitel’s share to PLDT, making the latter acquire control of about 70 percent of the country’s telecommunication industry.

Two days after the approval of the PLDT-Digitel merger, Fitch Ratings–in their statement on their website:–raised PLDT’s debt score for long-term, peso-denominated loans from BBB+ to A-.

The BBB rating means “currently low default risk” while an AA rating shows “expectations of a very low default risk.”

In their statement, Fitch Ratings said “the rating upgrade reflects Fitch’s expectation that the PLDT-Digitel combined entity will have a significantly improved market position.” Fitch Ratings, in the same statement, posited that “PLDT-Digitel will become a dominant operator, having about 70 percent and 66 percent of subscriber and revenue market shares, respectively.”

Fitch Ratings is an international rating agency tasked to provide value beyond the rating through objective and balanced credit opinions, research and data. It rates credit scores of private corporations,

The deal will virtually make competing firm Globe Telecommunications, Inc control only 30 percent of the remaining market share.

Isberto said the “NTC noted first of all that the Supreme Court has held that monopolies are not per se prohibited by the Constitution, but may actually be permitted to exist to aid in the performance of various services and functions in the public interest.”

“It added that various laws such as the Public Service Act and the Public Telecommunications Policy Act of 1995 (Republic Act 7925) provide the government, particularly the NTC, adequate powers to regulate mergers or consolidations and prevent or stop abuse of market power and/or unfair competition,” Isberto’s statement said.

The Public Service Act and the Public Telecommunications Policy Act of 1995 ensures equality of treatment for franchise holders. Other telecommunication franchises have done away with this requirement just like the franchises of RC Yulo in 1997, Radio Communication of the Philippines, Inc (RCPI) and Sear Telecommunications in 1998.

“I don’t think the framers of RA 7925 or other franchises that waived congressional approval ever imagined a situation where PLDT or any entity would once again control 71% of the market. I don’t think they contemplated allowing, without their consent, a deal that would reverse the policy of de-monopolization in the telecommunications industry. This is why congressional approval is explicitly required in the franchises of the big players – Digitel, Digitel Mobile, PLDT, Smart Communications, Globe Telecom and Bayantel. This is our only safeguard against the re-emergence of a monopoly in the industry,” Casiño said.

Isberto saidt PLDT has “a valid and existing telecoms franchise (and) is thus covered by this exemption from congressional review.”

He said the issue on the Digitel franchise had been discussed exhaustively in the course of the Digitel hearings, where the NTC ruled that this provision of the Digitel franchise granted in 1994 had been modified by the RA 7925 a year later, providing for “equality in treatment in the telecommunications industry.”

“Under that provision, any advantage, exemption or privilege granted under existing or future franchises shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of these franchises,” Isberto said.

He added that several telecommunications companies “had been granted franchises that do not requires congressional approval of the merger or acquisition of a telecoms company, provided the acquiring party has a valid and existing legislative telecoms franchise.” (Cong Corrales/MindaNews)