Manila: Business -What Went Before: SMC deal with PLDT, Globe Telecom

In May 2016, San Miguel Corp. (SMC) signed a deal to sell its telecommunication assets to PLDT and Globe Telecom for P70 billion, just two months after partnership talks between SMC and Australian telco giant Telstra Corp. collapsed.

PLDT and Globe, which made the acquisition via a 50-50 arrangement, wanted SMC’s coveted radio frequencies, particularly the 700 megahertz band.

The deal allowed PLDT and Globe to corner about 80 percent of all available telco frequencies, an environment that the newly created the antitrust body, Philippine Competition Commission (PCC), believed would hinder the entry of new competition in the Philippines’ two-player telco sector.

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The PCC, in its letters dated June 7 and June 17, 2016, ordered the preacquisition review and investigation of the acquisition made by PLDT and Globe of all the issued and outstanding shares and assets of Vega Telecom Inc., a subsidiary of SMC holding, the conglomerate’s telecommunication assets.

Pursuant to the sale and purchase agreement executed on May 30, 2016, for an agreed purchase price of P52.08 billion under a deferred payment scheme, P26.04 billion was paid upon the execution of the contract, P13.02 billion on Dec. 1, 2016, and P13.02 billion on May 30, 2017.

‘Deemed approved’

The main case between the telcos and the antitrust body was whether the acquisition required PCC approval. PLDT and Globe earlier argued the deal should be “deemed approved,” citing the PCC’s own memorandum circulars that were in effect when the deal was launched.

The PCC countered that the required documents submitted by the telcos, namely the transaction notice, were deficient and lacked crucial material information.

The circulars were issued by the PCC to guide merger deals before the implementing rules and regulations (IRR) of the Competition Law were in effect. PLDT and Globe sealed the Vega acquisition just days before the PCC released the law’s IRR on June 3, 2016.

In July 2016, PLDT and Globe sued the antitrust body for launching a review and sought a temporary restraining order (TRO) or writ of preliminary injunction to stop the PCC’s investigation.

The TRO was issued on Aug. 26, 2016.

Appeal denied

In February, the 12th Division of the Court of Appeals denied the appeal of the PCC to lift the TRO blocking its planned review of PLDT’s and Globe’s joint acquisition of SMC’s telco unit.

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The court also issued an unusual gag order against the antitrust body at PLDT’s request. The telco giant worried that PCC statements to the media could generate public sympathy and “may lead to unintended prejudice whilst the case is ongoing.”

Through the Office of the Solicitor General, the PCC filed a petition in the Supreme Court on April 18 in an effort to lift an appeals court order preventing the PCC from reviewing the sale.

Apart from allowing its review of the deal, the PCC also wanted a halt to the further consummation of the transaction, including the final payment of P13 billion to SMC by the end of May and the further rollout of telco frequencies, including those in the 700 megahertz band now being pursued by PLDT and Globe.

On May 30, PLDT and Globe Telecom completed their acquisition of SMC’s telco assets, making their final joint payment to SMC while defying the competition watchdog’s request to hold off until the courts make a final ruling.

Source: Inquirer Archives