Third telco unfairly scrutinized

Third telco unfairly scrutinized Featured

THE country’s newest telco hasn’t even gotten off the ground yet but is already catching a lot of flak from opposition politicians and scaremongers. Don’t get me wrong. I’m all for giving everyone (the critics most especially) the democratic space to put in their two cents’ worth, however inane it may be. But when such opinion or point of view calls for applying the law or the rules selectively, then it should be unmasked for what it really is — a partisan political stunt.

Caught in the crosshairs of Duterte administration critics is the country’s third telco, Mislatel, and its consortium partners: Dennis Uy’s Udenna Corp. and Chelsea Logistics, and state-owned China Telecom.

Senate Minority Leader Franklin Drilon argued that Mislatel’s franchise was “ipso facto revoked” for failure to operate after it secured its license in the 1990s and for failure to seek congressional approval when majority interest were transferred to a certain Nicanor Escalante.

Drilon was obviously referring to the provision in Mislatel’s legislative franchise (Republic Act 8627) requiring the latter to “commence operations within one (1) year from the approval of its permit by the National Telecommunications Commission,” and to “commence operations within three (3) years from the effectivity of this Act.”

Another provision in the legislative franchise of Mislatel, referred to by Drilon, states that “the grantee (i.e. Mislatel) shall not lease, transfer, grant the usufruct of, sell nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other corporation or entity, nor shall the controlling interest of the grantee be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm, company, corporation or entity without the prior approval of the Congress of the Philippines…”

So, at first glance, Drilon appears to have raised a valid point. Except that these provisions in Mislatel’s legislative franchise are what we lawyers call “boilerplate clauses” or standardized language used in all telco legislative franchises. This means that all local telecoms companies have the same, if not similar, clauses in their respective legislative franchises.

Which begs several questions: Why is Mislatel being singled out? Why have the legislative franchises of other dormant (aka nonoperating) telcos not been revoked? And why have former buyout deals of telecoms duopoly Smart or Globe not been subjected to the same congressional scrutiny as Mislatel?

If we are to level the playing field and apply the law fairly and equally to all telco players, then all existing legislative franchises as well as buyout or joint venture deals, should be reviewed and re-examined, and must be subjected to the same eagled-eyed inquiry as Mislatel.

In the list of “Public Telecommunications Entities with National Coverage,” there are several telcos that do not even have a provisional authority (PA) or a Certificate Certificate of Public Convenience and Necessity (CPCN) that would allow them to operate, let alone operate continuously.

One of the oldest ones, even pre-dating Mislatel’s franchise, is a certain Major Telecoms Inc., which was granted a legislative franchise as far back as July 26, 1994 but does not at present have any PA or CPCN from the NTC. Another dormant telco is Unicorn Communications Corp., which obtained its legislative franchise on July 11, 1996, two years ahead of Mislatel.

There are several other dormant telcos in the NTC list like Message Systems Inc. (RA 8279, approved April 10, 1997), H. E. Baldo, Inc. (RA 9149, approved July 31, 2001), Schutzengel Telecom Inc. (RA 9857, approved Dec. 20, 2009) and several others granted legislative franchises from 2012 to 2016. Why haven’t their congressional franchises been declared “ipso facto” revoked for continued nonoperation?

I’m sure the public is also well-aware of the buyout deals in the telecoms industry. One of the more notable ones is the acquisition of the former third telco player — the Gokongwei-led Digitel (of the defunct Sun Cellular) — by Philippine Long Distance Telephone Co. (PLDT) in 2011 for P69.2 billion. That takeover removed the only viable competitor to telco giants Smart and Globe.

It was such a controversial transaction that not a few senators and congressmen raised a howl over the share-swap deal, demanding that the transfer of the controlling interest in Digitel to PLDT should be subject to congressional approval, citing a similar boilerplate clause in Digitel’s legislative franchise.

Of more recent vintage was the buyout by PLDT and Globe of telecoms unit of conglomerate San Miguel Corp. for P69.1 billion, so far the biggest telco deal in the country.

Under the deal, PLDT and Globe will acquire the entire share capital and assume the liabilities of firms with additional spectrum frequencies, such as Bow Arken Holdings Co. (parent company of New Century Telecoms Inc.) for P691 million, and Brightshare Holdings Inc. (parent of Eastern Telecommunications Philippines Inc. [Eastern]) for P206 million.

Meanwhile, the shares of Vega Telecom Inc. (holding company for publicly traded Liberty Telecoms Holdings Inc. which owns almost all the 700MHz frequency (694 MHz to 790 MHz), together with High Frequency Telecommunications Inc., Bell Telecommunication Philippines Inc. and Eastern, were sold to Smart and Globe for P52.85 billion.

To my knowledge, none of these buyout deals secured “prior” congressional approval, let alone been scrutinized or approved by Congress, as stipulated in their legislative franchises. Why didn’t Drilon and his Liberal Party allies invoke the same provisions and demand the same congressional authorization in the Digitel and SMC deals as it did with Mislatel? If the takeover transactions of PLDT and Globe sans congressional imprimatur wasn’t such a big deal then, why should it suddenly be an issue now in the case of Mislatel?

True, Congress may have ratified Mislatel’s franchise and ownership change. But why only Mislatel? Aber?000
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