Antitrust body, the Philippine Competition Commission (PCC), has pulled the plug – at least for the time being – on the US$69.1 billion buy-out of San Miguel Corporation’s telecom assets by the country’s telco duopoly, Philippine Long Distance Telephone (PLDT) and Globe Telecom (GT). Now lawyers for the two companies have filed new documents with the Commission as they scramble to save the deal. Closed channel: San Mig steps away and telco giants step in
The PCC has rejected notices filed by the two buyers, saying that they are “deficient and defective in form and substance”. The acquisition – the largest since JG Summit Holdings’ US$1.6 billion purchase of San Miguel’s shares in Manila Electric in October 2013 – concluded at the end of May, was for Vega Telecom Inc., San Mig’s telco subsidiary.
Deeming the transaction “not approved,” the PCC will now conduct a comprehensive review to determine the relevant market and whether the deal presents substantial changes to the market structure which will “result in sustained gains for the public by not restricting competition”.
Citing Section 17 of the Philippine Competition Act, the PCC noted “an agreement consummated in violation of this requirement to notify the Commission shall be considered void and subject the parties to an administrative fine of one percent (1%) to five percent (5%) of the value of the transaction.” That translates to a fine of between US$691 million and US$3.455 billion.
Both telcos seem to be at a loss over the Commission’s requests for further clarification of the deal, each claiming that they complied with the regulatory requirements and kept within PCC rules and guidelines.
Globe went one stage further in its statement: “The company did not enter into any prohibited act as defined under the PCC rules and guidelines. In addition, recognizing the importance of open market competition, the transaction did not result in any market share gain or loss for any of the three parties involved because the companies purchased were non-operating”.
When the deal was announced, PLDT shares climbed as much as 11%, while Globe and San Miguel each jumped more than 6% at one point. Liberty Telecoms, the listed subsidiary of Vega Telecom, leapt 16.39%. On 16 June, with trading resumed, share prices of PLDT gained PHP22 or 1.10% to close at PHP2,022; Globe rose by PHP20 or 0.88% to PHP2,290.
Globe (with Bayan Telecommications and Kickstarter among its listed subsidiaries) and PLDT (with Smart Communications and Sun Cellular in its telco stable) – they share 57% and 43% of the Philippine wireless market, respectively – have requested a meeting with the Commission. In a letter to the PCC, they said: “Consistent with our earlier declaration, we express our willingness to cooperate with the Honorable Commission to settle the issues surrounding the transaction, having in mind the tremendous benefit that the public will gain from the immediate unlocking of the advantages of the underutilized frequencies underpinning the transaction”.
This will be the first major case to be assessed by the newly created, Philippine Competition Commission. Anti-competitive practices, fair game for PCC