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Antitrust body gets gag order, TRO on review of P70-B SMC telco sale stays

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Antitrust body gets gag order, TRO on review of P70-B SMC telco sale stays

/ 06:18 PM February 18, 2017

The Philippine Competition Commission (PCC) ended last week on rough note.

Its appeal to lift a temporary restraining order blocking (TRO) its planned review of PLDT Inc. and Globe Telecom’s joint acquisition of San Miguel Corp.’s telco unit – a deal criticized for being anti-competitive – was denied by the 12th Division of the Court of Appeals in a Feb. 17, 2017 resolution.

Moreover, the PCC can no longer talk about it, the court having issued a rare gag order against it at the request of PLDT.

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The telco giant was worried that PCC’s statements to the media could lure public sympathy and “may lead to unintended prejudice whilst the case is ongoing.”

In line with the gag order, the antitrust body was told to remove from its website a bruising preliminary report that indicated how the SMC telco deal last May 30, 2016 likely violated the Philippine Competition Act and was a prelude to more “cartel-like behavior.”

These were among the findings resolving a PCC appeal to a TRO issued against its review in Aug. 26 last year and PLDT’s request that a gag order be placed on the PCC last Sept. 30.

Battle over telco frequencies

The legal battle emerged after the PCC wanted to review the almost P70-billion acquisition of SMC’s Vega Telecom, which had access to valuable telco frequencies, including those in the powerful 700-MHz band. The resulting deal gave PLDT and Globe control over about 80 percent of all available telco frequencies.

In its resolution, the Appellate Court said PLDT “was able to establish the existence of a clear positive right that needs judicial protection during the pendency of the main case.”

“We agree with PLDT that there is an urgent and paramount necessity of enjoin PCC from proceeding with the pre-acquisition review and/or investigation to prevent serious and irreparable damage to PLDT, whose credit standing is at risk and its ability to borrow funds to fully rollout the previously unused/ idle 700MHz spectrum my be jeopardized,” a portion of the resolution read.

It noted that failure to roll out the spectrum would violate conditions imposed by the National Telecommunications Commission (NTC) in allowing PLDT and Globe to co-use frequencies assigned to Vega.

SMC itself planned to use those frequencies to launch a rival telco service of its own, but the bid weakened after its talks with Australia’s Telstra Corp. Ltd. failed in early 2016.

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Does the acquisition need PCC approval?

The main case between the telcos and the antitrust body was whether the acquisition required PCC approval.

PLDT and Globe earlier argued the deal should be “deemed approved,” citing the PCC’s own memorandum circulars that were in effect when the deal was launched.

The PCC countered that the required documents submitted by the telcos, namely the transaction notice, were deficient and lacked crucial material information.

The circulars were issued by the PCC to guide merger deals before the implementing rules and regulations (IRR) of the Competition Law were in effect. PLDT and Globe sealed the Vega acquisition just days before the PCC released the law’s IRR on June 3, 2016.

The Court of Appeals noted in its decision that the TRO was preliminary in nature and “does to dispose of the main case.”

Still sub judice

In resolving PLDT’s request for a gag order, the court also ordered all parties to cease and desist from issuing public comments “that would violate the sub judice rule and subject them to indirect contempt of court.”

As noted, the PCC was told to remove “immediately” from its website its initial findings on Vega’s acquisition, which it dubbed “preliminary statement of concerns”. The document was dated Aug. 25, 2016, or a day before the TRO was issued.

The document, prepared by the PCC’s mergers and acquisitions office, outlined scenarios where PLDT and Globe likely violated provisions outlined under the law. It would then serve as the basis of a more detailed investigation.

These scenarios included effects on the loss of potential competition in retail mobile services as well as the effect on current and potential competition on fixed broadband and fixed voice services. PCC also cited less options for wholesale customers of mobile services and fixed broadband services, and the possible “collusion” between PLDT and Globe.

Vega a ‘credible’ threat

PCC said SMC, via Vega, was a “credible” threat to PLDT and Globe, partly due to its large spectrum holdings, and was potentially a “disruptive competitive force and may be regarded as a maverick firm.”

The PCC also worried about the telco frequencies now controlled by PLDT and Globe.

“This setup increases the risk associated with cartel-like behavior,” the PCC said.

As part of the SMC deal, PLDT and Globe returned some of the acquired frequencies to government but PCC noted it may not be enough.

“The amount of available spectrum post- transaction may not be sufficient for a new player to exert competitive pressure on PLDT and Globe,” it said in its preliminary report.

PLDT and Globe earlier countered that the move was aimed at freeing up unused or underutlized telco frequencies to improve the quality of mobile internet in the Philippines. /atm

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TAGS: Court of Appeals, gag order on Vega Telecom, Globe, PCC, Philippine Competition Commission, PLDT, SMC telco, TRO on acquisition of Vega Telecom, Vega Telecom
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