Court of Appeals to PCC: Keep off P70-B telco deal

Globe Telecom and PLDT scored a victory in the Court of Appeals, which directed the country’s competition watchdog and antitrust body to keep its hands off the acquisition by the two companies of P70 billion in telecommunication assets of San Miguel Corp. (SMC).

The Philippine Competition Commission (PCC) has expressed concern that the buyout would adversely affect government efforts to attract new investors in the country’s telco sector and would fortify the duopoly in the industry.

In its Oct. 18 ruling, released to the public on Monday, the appeals court’s 12th Division said the PCC flouted the constitutional rights of PLDT and Globe when it blocked their purchase on May 30, 2016, of Vega Telecom.

Vega Telecom is the holding company of SMC’s valuable radio frequency assets, including those in the coveted 700 megahertz (MHz) band.

The 700 MHz is a low-band frequency prized for its ability to efficiently cover wide distances and penetrate buildings.

Third player

The sale of Vega Telecom’s assets ended SMC’s efforts to become the third player in the telco industry, which has been criticized for the country’s slow internet speed.

Talks between PLDT, Globe and SMC started soon after SMC’s own negotiations for a joint venture with Telstra Corp. Ltd. of Australia failed in March last year.

The antitrust body will pursue the appropriate legal option once it has formally received a copy of the decision, PCC Chair Arsenio Balisacan said in a text message.

Internet services poor

“We note that a year after the sale, the public continues to complain of slow, expensive and poor quality internet and mobile services,” the PCC said in a statement.

The appeals court said Globe and PLDT had completed “substantial compliance” with Memorandum Circulars 16-001 and 16-002 issued by Balisacan in February 2016.

The circulars spelled out the rules on the mergers of private companies in compliance with Republic Act No. 10667, or the Philippine Competition Act.

The separate PCC orders covered buyouts and integrations of private firms valued at more than P1 billion.

“This court has carefully considered the actions of PCC … and has come to the conclusion that PCC gravely abused its discretion thereby ousting it of its jurisdiction,” the court said.

It pointed out that there was grave abuse of discretion whenever constitutional rights were disregarded or violated.

“Here, PCC violated [the] petitioners’ constitutional right to equal protection of the laws as PCC refused to accord the deemed approved status of acquisition despite substantial compliance with (the PCC orders),” the court said.

The resolution was penned by Associate Justice Ramon Bato Jr. with Associate Justices Manuel Barrios and Maria Elisa Sempio Diy concurring in.

Petition in Supreme Court

They issued the ruling despite the PCC petition in the Supreme Court seeking judicial intervention in scrutinizing the agreement.

In granting the separate petitions filed by Globe and PLDT, the appeals court said the PCC disregarded the right to due process of the two telcos “by forcing a full review” of the multibillion-peso buyout deal when its authority only allowed “limited review.”

It assailed the antitrust body for asserting that the notice submitted by the telco firms to the PCC regarding the transaction should have been covered by RA 10667’s implementing rules and regulations despite the fact that these were not yet applicable at the time.

In addition, the court ordered the PCC to acknowledge the agreement involving San Miguel, PLDT and Globe “as deemed approved by operation of law.”

“A writ of prohibition is hereby issued precluding the PCC, its employees, agents, or persons acting for and its behalf from conducting a full review and/or investigation of the subject acquisition,” it said.

“On a final note, this court, however, has to point out that the approval of the subject acquisition does not remove the power of the PCC to conduct a postacquisition review to ensure that no anticompetitive conduct is committed by the parties.”

The court said the antitrust agency “may very well exercise its powers to prevent and punish anticompetitive behavior” if the companies involved in the deal were found to have violated the law.

Competition welcome

PLDT and Globe have said they welcome competition and were making every effort to boost services.

“We will proceed to expand and with the build-out of our 3G and 4G,” PLDT chair Manuel Pangilinan told reporters on Monday.

PLDT’s broadband speed and coverage have increased since the telco deal, he added.

Globe has not received a copy of the decision and could not comment on the matter, the telco told the stock exchange. SMC was not immediately available for comment. —With a report from the wires