Philippine Long Distance Telephone Co. (PLDT) has approved the issuance of new voting shares to allow the company to comply with the Supreme Court’s interpretation of foreign ownership limits in local utilities.
In a disclosure, PLDT said it would issue 150 million new voting preferred shares to BTF Holdings Inc., a subsidiary of the phone firm’s employee beneficial trust fund. The creation of the shares was approved in a special shareholders’ meeting last March.
Officials earlier said the shares would only be issued if the Supreme Court threw out petitions by PLDT’s top executives—chair Manuel V. Pangilinan and CEO Napoleon Nazareno—that sought a reversal of a previous decision that said the telco’s ownership structure was in violation of restrictions on foreigners. In a ruling last week, the Supreme Court upheld its previous ruling in a vote of 10-3.
PLDT said the new shares would bring down the voting rights of foreign shareholders in PLDT to 34.5 percent, down from the previous 58.4 percent.
The new voting preferred shares “shall have voting rights at any meeting of stockholders for the election of directors and all other matters to be voted upon by the stockholders in any such meetings.”
BTF Holdings, as the owner of the new shares, “shall be entitled to cumulative dividends at the rate of 6.5 percent annually,” the disclosure added. The new shares will not be convertible into common shares, which have a higher dividend yield.
PLDT said the creation of the new shares was prompted by the Supreme Court’s change in the definition of the term “capital” when dealing with local corporations. PLDT said previous opinions by the Securities and Exchange Commission defined capital to include shares that did not have voting rights.
Under the old definition, the company said it complied with constitutional restriction that prohibited foreigners from owning more than 40 percent of the shares of any public utility company. However, this changed in 2011 in the case of Wilson Gamboa vs. Finance Secretary Margarito Teves et al., when the tribunal said that the term “capital” should only cover shares that gave investors the right to vote.