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Lawmakers want probe on PLDT-Digitel merger

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Lawmakers on Wednesday called for a congressional inquiry into the controversial sale of Digitel Telecommunications Philippines Inc. (DTPI) shares to the Philippine Long Distance Telephone Company (PLDT), saying this is an outright violation of the franchise law.

San Jose del Monte City Rep. Arturo Robes, author of House Resolution 1161, asked the House Committees on Legislative Franchises and Information and Communication to look into the legality of the sale or disposition of shares by the DTPI to the PLDT.

Robes also urged both panels to summon the officials of both companies and those who were involved in facilitating the sale of shares.

PLDT recently acquired 51.55 percent of Digitel, which owns the Sun Cellular brand, from the Gokongwei Group and hoped to purchase the remainder from small shareholders during a mandatory tender offer.

On Feb. 17, 1994, Congress passed Republic Act 7678 granting Digitel the right to construct, install, operate and maintain telecommunications systems throughout the Philippines for 25 years. Its franchise will end in 2019.

Robes said a legislative franchise is a grant of the right or special privilege by the State to an entity through the legislature as a requisite for the operation of public utilities including telecommunication services.

"It’s a corporate act that comes close to a violation of its legislative franchise, particularly Section 15 of RA 7678," he said.

The San Jose del Monte solon said Section 15 of RA 7678 states that the grantee shall not lease, transfer, or sell its franchise to any person, firm, company or commercial or legal entity, nor its controlling interest be transferred, whether in whole or in part to any person, firm, company, corporation or entity without the prior approval of Congress as grantors of franchises.

Under the law, he said, DTPI is required to file a detailed annual report to Congress with respect to its programs, operations and/or compliance with the terms and conditions of the franchise.

At present, DTPI provides various telecommunications services primarily in the Philippines. The company also offers SUN cellular voice products and services comprising local calls, national and international toll services, among others.

Bayan Muna party-list Rep. Teodoro Casino, in a privilege speech on Tuesday, said the PLDT-Digitel merger is illegal "because such a buyout or swap and share deal requires congressional approval. This is explicit in Digitel’s and Digitel Mobile’s franchises."

Proponents of the merger, however, said that congressional approval of such mergers and acquisitions have already been waived by virtue of the 1995 Public Telecommunications Policy Act (RA 7925), which ensures equality of treatment for franchise holders.

The argument is that since the requirement for congressional approval of such mergers among telecom franchise holders have already been removed in two other franchises -- that of RCPI and Sear -- then under the principle of equal protection, the same should be waived for the merger involving PLDT-Smart and Digitel-Sun.

"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 percent of the market," the Bayan Muna party-list solon said.

"A deal that would reverse the policy of de-monopolization in the telecommunications industry was certainly not contemplated by previous Congresses and should not be tolerated by the 15th Congress," he said.

Casino stressed that congressional approval is explicitly required in the franchises of Digitel, Digitel Mobile, PLDT, Smart Communications and Globe Telecom.

He said the PLDT-Digitel merger is not only illegal, this will also "foster a monopoly in the sector and all the ills that come with overwhelming market power."

This might lead to non-competition and essentially higher prices for telecommunication services, he added.

"Digitel is not Mang Inasal that can be sold to any Tom, Dick or Harry. It is always subject to the limitations of its congressional franchise and the national interest. PLDT already owns Smart Communications Inc., Red Mobile, and Piltel. If it is allowed by the National Telecommunications Commission (NTC) to acquire Digitel, that would give PLDT 70 percent of the cellular mobile market, leaving Globe Telecom with a mere 30 percent. This is clearly a monopoly and this is not allowed under the 1987 Constitution as this will negatively impact on the public interest with regard to prices of cellular phone services. Government cannot allow any monopoly by any telecommunications company if it wants real competition to happen," he noted.

Casino cited Article 12, Section 19 of the Constitution which states that: "The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed."

"The SEC (Securities and Exchange Commission) and the NTC should deny the merger since this cannot be done without congressional approval," he said.
Bagong Henerasyon (BH) party-list Rep. Bernadette Herrera-Dy, on the other hand, filed House Resolution 1169 urging the appropriate House committee to conduct an inquiry into the legality of the merger between PLDT and Digitel.

Herrera-Dy quoted Section 11 of Article 12 of the Constitution, which mandates that "no franchise, certificate or any other form of authorization to operate a public utility shall be granted except to Filipino citizens or to corporations or associations organized under the law of the Philippines at least 60 per centum of whose capital is owned by such citizens."

"Neither shall such franchise or right be granted except under the condition that it shall be subject to amendment, alteration or repeal by Congress when the common good requires," she added.

Herrera-Dy said that Congress should initiate an investigation on the PLDT-Digitel merger "to ascertain that the transaction between the two companies would serve public interest and determine whether there were indeed violations committed."

Earlier, Ayala-led Globe Telecom has asked the NTC to intervene in the recent acquisition by PLDT of a majority stake in rival Digitel.

In a letter to the NTC, Globe warned that the PLDT-Digitel deal threatens free competition and ultimately gravely places at risk the public good, given the significant market power and influence now consolidated and vested in the PLDT Group. (Lilybeth G. Ison-PNA)




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