SEC looks into Liberty disclosure compliance

The corporate regulator is looking into possible nondisclosure rule violations committed by Liberty Telecoms Holdings Inc. relating to a critical transfer of assets before its sale to Globe Telecom and PLDT Inc.

That event, formally disclosed to the public by Liberty more than a year after it transpired, was tagged by minority shareholders as the main reason behind the “lowball”  price in an ongoing buyout offer for their shares.

Arman Pan, spokesperson for the Securities and Exchange Commission (SEC), said in an interview Friday that the Markets and Securities Regulation Department was looking into the matter.

“It should be presented to the commission next week,” Pan, who confirmed the preliminary report on Liberty’s potential failure to disclose material information, told the Inquirer.

The issue centered on the current tender offer price for shares held by Liberty’s minority shareholders, who own about 13 percent of the company.

The tender offer was launched on Aug. 24 by Liberty’s owner, Vega Telecom, the telco unit of San Miguel Corp. that was jointly acquired last May 30 by rivals PLDT and Globe Telecom as part of a massive P70-billion transaction. That deal has separately lured the scrutiny of the Philippine antitrust body.

The tender offer period ends on Sept. 21 this year, after which Liberty is expected to be delisted from the Philippine Stock Exchange.

The controversy stemmed from the P2.20-per-share tender offer price that Liberty’s minority owners deemed too low. Liberty shares are down about 25 percent since the tender offer price was announced early this week.

The price was based on a valuation report prepared by Punongbayan & Araullo in July 2016.

But the valuation report did not consider Liberty’s valuable radio frequency assets because these were assigned to another subsidiary of Vega, Bell Telecommunications, on March 17, 2015. This was separately confirmed by the National Telecommunications Commission.

The reassignment of frequencies in the 2500 Megahertz and the 700 MHz bands, coveted telco assets likely worth billions of pesos, was disclosed by Liberty only on Aug. 15, 2016, as part of its second-quarter financial filing.

The Inquirer also looked into a separate June 2015 valuation report made by Punongbayan, ahead of another tender offer last year in connection with SMC’s buyout of its Qatar-based partner, Ooredoo (formerly Qatar Telecom).

There were inconsistencies between the 2015 and 2016 Punongbayan valuations, likely arising from different sets of information disclosed by Liberty on both occasions.

Based on its report, Punongbayan was aware as early as June 2015 that Liberty no longer controlled the 700Mhz frequency since its value was not considered in the report.

However, it noted then that Liberty’s main asset was 40MHz of the 2500 band “which by itself should be of value to other players in the industry.”

Punongbayan valued Liberty’s 2500 spectrum holdings in 2015 between P817.1 million and P968.5 million, citing data made available to it as of end-March 2015, or after all frequencies were already assigned to Belltel, as revealed a year later.

These inconsistencies can arise given the limitations on the scope of such valuation reports. Punongbayan detailed these, saying information was based on representations made by its clients.

A Punongbayan official could not comment specifically on the report, citing confidentiality provisions.

Liberty, as a publicly traded company, was required to make timely disclosures to the PSE about material events, according to the PSE’s rules on disclosures.

A material event is defined as one “which would reasonably be expected to affect investors’ decisions,” the PSE said.

The bourse specifically noted that information should be disclosed “within 10 minutes from the receipt of such information or the happening or occurrence of said act, development or event.”

PSE and SMC officials did not immediately respond to requests for comment Friday.