MANILA, Philippines - Millions of consumers would have no means of communication if the franchise of Philippine Long Distance Telephone Co. (PLDT) were revoked, the chairman of the phone firm said on Wednesday. "If you revoke the franchise of PLDT [you also revoke those of] Smart and Digitel. That [move] will mean disfranchising 70 million cellular [-phone] subscribers and more than 2 million fixed-line subscribers. Our ability to communicate to the outside world will get seriously impaired," PLDT Chairman Manuel V. Pangilinan said at the sidelines of a stockholders’ meeting of Philex Mining.
PLDT, which is partly owned by Hong Kong's First Pacific Co. Ltd. and Japan's NTT Communications and NTT DoCoMo, is being investigated for possible breach of the foreign-ownership rule, which stipulates that Filipino investors should own 60 percent and foreign investors only 40 percent. The probe came after the Supreme Court (SC), in a recent ruling, directed the Securities and Exchange Commission (SEC) to study if PLDT committed such violation.
During Tuesday's continuation of oral arguments on motions for reconsideration filed by Pangilinan and other parties against the SC ruling, a PLDT lawyer argued that the phone giant stood to lose its public-utility franchise as values of shares of its Filipino and foreign investors are expected to hit the bottom if the High Tribunal maintained its ruling. "I can't imagine the consequences of disfranchising PLDT. It means that we have to stop operations," Pangilinan said.
Even subscribers to non-PLDT networks such as Globe Telecom Inc. and Bayan Telecommunications Inc. would also be affected if the SC decision turned out to be unfavorable to PLDT because these phone firms also hold interconnection deals with the phone giant. Without interconnection, a PLDT subscriber, for instance, could not call or send text messages to another subscriber registered with a different network. "Absolutely everything will be affected, the interconnection deals included. We have also peering contracts [or those where parties are on equal footing] with international companies, so [those], too, will be affected," Pangilinan said.
In its June 28 decision, the High Tribunal held that the term 'capital' in Section 11, Article XII, of the 1987 Constitution, refers only to "common" shares whose owners can vote in the election of directors. It does not refer to capital stock, which is composed of 'common' or voting shares and 'preferred' or nonvoting shares. It directed SEC "to apply this definition of the term 'capital' in determining the extent of allowable foreign ownership in respondent PLDT and, if there is violation of Section 11, Article XII, of the Constitution, to impose appropriate sanctions under the law."
The government chief counsel defended the Supreme Court's interpretation of the term 'capital' in the constitutional provision that limits foreign ownership of domestic public utilities to 40 percent. Solicitor General Francis Jardeleza said the Court’s ruling was consistent with the constitutional mandate for the Filipinization of public utilities. "The Office of the Solicitor General respectfully submits that the term capital in the context of Section 11, Article 12 of the Constitution means the shares of stock with the right to vote in the election of officers," Jardeleza said. "The word capital...can only mean voting shares because the Constitution textually conditioned the operation of a public utility to corporations where Filipino citizens own voting shares that can elect a majority of the board."
Jardeleza added that interpreting the term capital to include nonvoting shares would defeat the constitutional provision for a self-reliant and independent economy effectively controlled by Filipinos. He said such interpretation would also lead "to absurd results" as foreigners holding common shares equivalent to only .001 percent of the capital would end up controlling the board and thereby operate the public utility even if Filipinos hold the remaining 99.99 percent of the capital but nonvoting shares. He added a review of the 1986 debates by the framers of the Constitution would conclusively prove that the delegates intended control in a public utility to be in the hands of the majority of the board elected by the Filipino majority of the voting stockholders.
The ruling stemmed from a complaint filed by then-human-rights lawyer Wilson Gamboa seeking to annul the sale to the Hong Kong-based First Pacific Co. Ltd. for P25.2 billion of 111,415 shares of Philippine Telecommunications Investment Corp. (PTIC) in PLDT. On March 22 PLDT sought shareholders’ approval to issue new preferred shares with voting rights to comply with the SC ruling on the holdings of foreigners in listed public utilities.
More than two-thirds of the company's shareholders approved the proposal for PLDT to issue 150 million new preferred shares with voting rights. "The objective is to reclassify the existing preferred-share structure of the company such as that a new class of voting preferred would be created” to bring PLDT's total foreign equity to 35 percent from the current 59 percent and thereby complying with the 40-percent foreign-ownership limit for public utilities operating in the country."
The voting preferred shares will be issued to the Beneficial Trust Fund of PLDT and other Philippine parties. When issued, the ratio will be 65:35 in favor of Filipino investors from the existing 41:59.
Source: ABS-CBN News
