NEC of Japan hits Digitel for ‘inaccurate reporting’

The rift between NEC Corp. and Digital Telecommunications Philippines Inc. (Digitel) has taken a new twist as the Japanese-based company accused the Gokongwei-controlled firm of issuing inaccurate statements to its shareholders.

In a letter to the Philippine Stock Exchange, NEC hit the inconsistent statements made by Digitel in its disclosure dated May 26 and during its recent annual shareholders meeting.

NEC particularly questioned the accuracy of the statements that "the resolution of issues in litigation will not result to a material adverse impact on the financial statement in the current year and that "no provision for probable losses is necessary."

"No officer or member of Digitel’s board gave a statement as regards Digitel’s defenses or why these defenses were thought to be valid. The corporate secretary’s sole response was that the matter is currently pending with the ICC Arbitral Tribunal," NEC Manila office head Yoshifumi Matsubara said.

NEC also questioned Digitel’s explanation on the proposed transfer of the provisional authority (PA) to its subsidiary, Digitel Mobile Philippines Inc. (DMPI). The request is pending before the National Telecommunications Commission.

During its stockholders’ meeting, Digitel explained that DMPI was simply intended to be the marketing arm for the mobile business and later stated that the interest of the strategic investors in DMPI were simply "newspaper reports" and that no firm offers had been received from "potential investors."

"These statements are inconsistent with statements made in Digitel’s application for the transfer of the PA to DMPI, filed with the NTC on January 20, 2003, that there is a need for Digitel to spin off the operation and maintenance of its cellular mobile business to a fully owned subsidiary, taking into consideration the preference of potential strategic partners to invest only in the wireless sector," Matsubara said.

Digitel corporate secretary William S. Pamintuan, for his part, said the letter of NEC is "another blatant attempt by the latter to use the exchange as a forum in ventilating its issues against Digitel in connection with the pending arbitration proceedings it has filed against our company."

Pamintuan said neither NEC of Japan nor Matsubara were present during the said stockholders meeting. "As such, all the statements they made in the June 5, 2003 letter referring to the events that transpired during the said meeting are merely hearsay insofar as the company is concerned," he said.

The arbitration is based on a contract entered into between NEC and Digitel, for which NEC has already completed 99.95 percent of its contractual obligations and Digitel has defaulted in its payment obligations amounting to $236 million.

NEC claimed that Digitel had violated certain terms and conditions of the supply contract which include, among others, the delay in the delivery of contracted subscriber lines; the intermittent and unreliable performance of the wireless local loop system; the failure to post the performance bond; and the failure to turn over certain permits, clearances and other government requirements.