Everything’s not lost

(Or, another approach to challenging GLO and TEL’s stranglehold on the telco industry)

It has been two months since Globe Telecoms, Inc. (GLO) and PLDT, Inc. (TEL) surprised everyone with the announcement of their purchase of what amounted to all of San Miguel Corporation’s telecom business. This was totally unexpected since, just few weeks prior, SMC bared that it was also in talks with the Telenor Group based in Norway. Before then, SMC’s widely-anticipated foray into the telecoms industry had been closely followed not only by industry observers but also by the general public.

Word of the SMC telecoms buyout was met with disappointment almost everywhere, a testament to the public’s opinion of GLO’s and TEL’s service. Almost immediately, eyes turned toward the Philippine Competition Commission and how the office would react to the transaction. As you may already know, the PhCC is asserting its power to review the transaction while GLO and TEL insist that a review is unwarranted since the transaction is deemed approved under the PhCC’s transitory rules. Having taken diametrically-opposed positions, GLO and TEL have called upon the adjudicatory powers of the Court of Appeals for resolution: They filed separate Petitions for Certiorari and Prohibition with Application for Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the PhCC. In a nutshell, the telcos claim that the PhCC should be held to the provision of the transitory rules that mere notice of the transition is required and said transaction is deemed approved. Thus, the PhCC no longer has any authority to review the transaction. The telcos asked the CA to issue a TRO to compel the PhCC to stop its review. (Note: I will be taking a deep dive on this in another post.)

Again, news of this move by the telcos was not welcomed. In the eyes of those following the issue, the petitions were yet another ploy to stymie efforts to challenge the duopoly. The promise of better competition in the telecoms industry with the coming of third major player appeared to fade.

The disappointment is not without basis. The case will likely be tied up in litigation for a long time. Certainly, neither the telcos nor the PhCC (whoever loses at the CA) will rest until the Supreme Court has ruled on the matter. In the meantime, the telcos can race to implement the transaction and render the transfer an irreversible fait accompli.

Groups advocating for reform of the telecoms industry know this. They recognize the urgency of keeping the status quo pre-buyout. This is why there was such an outcry for the PhCC to act. Each day that passes may render untangling the transaction more difficult. And yet, this is not the time for gnashing of teeth for telecoms reform advocates.

Neither is it the time for celebration for the telcos.

Not yet.

I am not privy to the contents of the Notices of the buyout submitted by GLO and TEL. If we use the telcos’ respective disclosures with the Philippine Stock Exchange, however, it would appear that only the buyout of the SMC telco assets was submitted to the PhCC for approval.

How is this significant?

Well, the buyout consists in just a sale of shares. This made GLO and TEL stockholders of SMC’s telecom subsidiaries but it did not make GLO and TEL direct owners of the cell sites, towers, equipment, and, more importantly, the 700 mhz license. This is why GLO and TEL had to get the National Telecommunications Commission’s nod in their co-use arrangement over BellTel’s license to the 700mhz spectrum.

Since only the transfer of the shares will be covered by the the Notice (and, by extension, the cases pending) approval of the PhCC, the co-use arrangement is an independent transaction that may be vulnerable to separate challenge under the Philippine Competition Act. A complaint alleging abuse of dominant position or anti-competitive behaviour may be filed with the PhCC, or the PhCC may choose to act on this motu propio (in other words, on its own volition).

Such a complaint would need to allege and support the claim that the co-use arrangement is an agreement which has “the object or effect of substantially preventing, restricting or lessening competition.” Alternatively, a complaint may also allege and show that the co-use arrangement imposes “barriers to entry” or is an act that “prevent competitors from growing within the market in an anti-competitive manner.”

The next question then is who will file this complaint?

Will the PhCC step up to the plate? But that would mean fighting a battle on two front, on top of establishing the office, hiring staff, and conducting the National Competition Policy Review.

Will the complainant come from the roster of advocates or consumers? Remember that filing is just the first step. Being a complainant means you will probably be required to furnish evidence (although not the rest of it, since the PhCC itself has investigatory powers) and monitor the case from initiation to resolution.

Will someone take on this challenge?