PLDT, Globe sue competition watchdog, block review of SMC buyout

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PLDT and Globe insist their ₱70-billion purchase of San Miguel's assets was already "deemed approved" when they notified the competition body of the transaction.

Metro Manila (CNN Philippines) — The conflict between the Philippine Competition Commission (PCC) and telco giants has escalated even further.

PLDT, Inc. and Globe Telecom, Inc. filed separate cases at the Court of Appeals on Tuesday to stop the competition watchdog from investigating their buyout of San Miguel Corp.'s (SMC) telco business.

"We will be fully cooperative (with the government review), but there is something we cannot change, which is our position that the transaction is already approved under the terms and by force of the PCC's own memorandum circulars," Ray Espinosa, PLDT regulatory head, said in an interview.

Both PLDT and Globe insist their ₱70-billion purchase of San Miguel's assets was already "deemed approved" when they notified the PCC of the transaction.

They cite the Commission's memorandum circulars, which require all companies to flag the PCC when they engage in mergers or acquisitions worth ₱1 billion and up.

The circulars read that upon notification, "mergers and acquisitions... shall be deemed approved."

Globe said in a statement: "The PCC cannot by whim or caprice state that it wants a review without any legal basis. The PCC cannot withhold and block the transaction out of a process not found in their own rules, and not disclosed to the public."

Related: Gap in competition rules may allow telco mega-deal

But for the PCC, the Competition Act takes precedence over the circulars. The law empowers the Commission to review a deal and its implications. It states that a deal is only approved when the PCC says so. It also imposes penalties on companies that act on a deal without the PCC's go-signal.

If the Court of Appeals upholds the side of the PCC, PLDT and Globe can be fined as much as 1-5% the value of the transaction — in this case, anywhere between ₱700 million and ₱3.5 billion.

"I'm disappointed the issue came to this," PCC Chairman Arsenio Balisacan said in an interview on Tuesday.

The PCC said in a separate statement that it was pushing through with its investigation of the buyout.

It had hoped to complete the review as soon as possible, but the court case would surely delay the results. The Commission accused PLDT and Globe of attempting to block the "resolution of an issue which is of great importance to public interest and welfare."

Related: Globe, PLDT take over SMC's telco assets

PLDT and Globe bought out San Miguel's telco business in May, dividing up its assets equally between the both of them.

Prior to that, San Miguel had considered entering the industry through a partnership with Australian carrier Telstra Corporation, Ltd.

It promised better service since it owned the much-coveted 700-megahertz spectrum frequency, which promises better geographical coverage and indoor reach than the frequencies held by PLDT and Globe.

However, the deal fell through — and not without threats from PLDT and Globe.

The PCC went ahead with its review of the telco deal anyway, publishing an invitation for public comment on Monday. It encouraged concerned citizens and stakeholders to submit information on how the merger could affect the telco industry and its consumers.

The public comments will form part of the PCC's review, Balisacan said.

He added, "The Commission will also be performing its own analysis based on its own information, from all available data, including data from the parties themselves."

PLDT's Espinosa, however, was confident the comments would lean in their favor.

"Our use of the spectrum is in line with the encouragement of the government to improve telco services. It is for the betterment of public welfare. If the PCC cancels this deal, it would create incalculable loss to consumers," he said.

Globe added, "There is nothing anti-competitive with the transaction to warrant its disapproval."