PCC should flex muscle on 700-MHz deal–PCCI

By Catherine Pillas | June 1, 2016

Business groups—long tired of the poor Internet service in the country as most Filipinos are—received the news on Globe Telecom Inc. and PLDT’s acquisition of the prized 700-megahertz (MHz) band with little hope that the deal would lead to better services soon.

This is why they want the Philippine Competition Commission (PCC) and the National Telecommunications Commission (NTC) to closely monitor the duopoly in the telco industry, and make sure the reverse would not happen—worse service or higher fees because a potential market competitor has been erased in the picture.

“The key for better services is more competition. [But since there is this deal already], the PCC, even if they don’t know the details yet, should advise the NTC that the consumers and subscribers will see an improvement and not translate to higher fees,” Philippine Chamber of Commerce and Industry (PCCI) President George T. Barcelon told the BusinessMirror.

Barcelon said the competition authority should flex its muscle and give guidance to the NTC in the P69.1-billion deal among PLDT, Globe and diversified conglomerate San Miguel Corp. on the 700-MHz band announced on Monday.

The PCCI head expressed reservations that despite the return of a portion of the coveted 700 MHz to the government—and the pledge of the two telcos—there is no assurance of better service to the paying public.

The country’s two major telecommunication firms earlier this week acquired the telco assets of San Miguel.

But this deal may still have to undergo review by the newly formed competition authority.

Management Association of the Philippines (MAP) President Perry Pe said how the PCC would act on this deal is keenly awaited by the business community.

“The MAP expects any decision to be rendered swiftly because of public interest,” Pe said.

PCC Chairman Arsenio M. Balisacan told reporters on the sidelines of MAP’s general meeting on Tuesday that the commission is guided by a previously issued memorandum circular in handling the matter.

Memorandum Circular (MC) 16-001 indicates transitory rules governing mergers and acquisitions, while the implementing rules and regulations (IRR) of the Philippine Competition Act is still being crafted.

According to the MC, a merger or acquisition agreement, wherein the transaction value exceeds P1 billion, and which will be executed before the effectivity of the IRR, should notify the commission of details, such as:

The parties to the merger or acquisition; the type of transaction (whether a merger or an acquisition); the consideration; the key terms of the transaction; and the timing for the execution or implementation of the transaction.

Balisacan declined to comment on the issue further, but said the PCC awaiting submission of details from the parties involved in the most significant deal in the telecommunications industry since PLDT’s acquisition of the previously Gokongwei-led Digitel Telecoms Inc. in 2011.

While the finality of the telco “mega-deal” is still up in the air, if the two players seek exemption from prohibited mergers and acquisition, they must prove that the deal will lead to market efficiency.

“Their exemption is for us to determine; the commission has the power to examine transactions, especially those that have an impact on public interest,” Balisacan said.

Section 21 of the Philippine Competition Act outlines exemptions from prohibited mergers and acquisition. Among the exemptions are if the parties can establish that the deal has brought about or is likely to bring about gains in efficiencies that outweigh the limitation on competition.

This burden to prove efficiency is pressing, as the deal gave Globe and PLDT access to the sought-after 700-MHz spectrum that regulators have given to SMC’s Liberty Telecoms Holdings Inc. unit. This practically dashed hopes for a third player coming in soon.

Operating mobile-Internet services under the 700-MHz spectrum is cheaper and more efficient than operating under higher-frequency bands. Under the deal, the 90-percent shareholding of San Miguel in the 700-MHz band will be distributed to the two telcos and the government.

Both firms assert that they will use the assets to improve their services, with PLDT’s Smart Communications, Sun and TNT, as well as Globe and its Touch Mobile brand, pledging faster mobile Internet-browsing speeds in four to six months.

“Bigness [of a firm] doesn’t imply inefficiency; there has to be a determination of anticompetitive elements,” the PCC chairman remarked.

Source: www.businessmirror.com.ph