Smart may go to court over ETPI shares

Smart Communications Inc. is planning to sue CPR Philippines for not honoring a 2001 agreement to purchase the former’s 9.8- percent equity interest in Eastern Telecommunications Phils. Inc. (ETPI).

One of CPR’s affiliate is AGN Philippines (AGNP), the local subsidiary of an Australian group which controls 40 percent of ETPI.

AGNP has been opposing the entry of ISM Communications, whose president and chairman is former Trade Minister Roberto Ongpin, into ETPI as well as the alleged conspiracy within the board to deliver control to Ongpin’s group.

"CPR can be held liable for failure to complete their acquisition of Smart’s shares worth P214.4 million as provided in our conditional share purchase agreement (CSPA) with CPR," according to Smart legal and carrier business group head Rogelio Quevedo.

Smart waived its right of first refusal in connection with the sale to PRN Philippines of British firm Cable and Wireless Plc’s 40-percent stake in ETPI.

In return, PRN agreed to buy Smart’s entire equity stake in ETPI. PRN then assigned the obligation to purchase the equity of Smart in ETPI to CPR, an affiliate of PRN. On Feb. 22, 2001, Smart and CPR signed the CSPA which resulted in the sale of Smart’s ETPI shares to CPR.

Quevedo noted that Smart has complied with all the conditions precedent to closing as required under the CSPA.

CPR has, however, failed to comply with its obligation to deliver to Smart the final payment amounting to P214.4 million for the purchase of Smart’s ETPI shares, in violation of the CSPA.

Nevertheless, AGNP has already been exercising full beneficial control over the said shares, he said. "From all indications, CPR clearly failed to fulfill its contractual obligations. Unless they remedy this situation, we will be compelled to go to the courts, " Quevedo warned.

Australian Gigahertz Network International (AGNI) is the single biggest shareholder of ETPI through subsidiary AGNP.

The Australian group owns 40 percent of the telecom firm, with the remaining 60 percent divided among four entities, including Polygon Investors and Managers Inc., which is believed to be a company controlled by cronies of former President Marcos. Polygon’s 20-percent stake in ETPI has been under PCGG sequestration.

AGNP, which has investments in ETPI reaching $40 million, appointed Roger Buckeridge and Nenita Lim-Cruz as chairman and president, respectively, but the two were recently ousted in a management takeover bid by Pablo Lobregat supported by the two PCGG directors Basilio Cruz and Emiliano Jurado.

Buckeridge has just filed a case in court questioning the priority of the sale by Aerocom Investors and Managers inc. of its 17.7- percent stake in ETPI to ISM Communications, led by former trade minister Roberto Ongpin.

Buckeridge in his complaint alleged that the sale to ISM is in violation of a provision in the articles of incorporation of ETPI on the right of first refusal of existing shareholders to acquire the stake of a selling shareholder.

He also said that it was improper for the PCGG directors to support the acquisition by a group identified with former President Marcos.

Meanwhile, the Philippine-Australian Business Council expressed deep concern over the ongoing intra-corporate row at ETPI that started with the ouster of two representatives of an Australian firm which has a 40-percent stake in ETPI, from the board of the corporation.

This was revealed yesterday by lawyer Leo Dominguez, chairman of the Philippine-Australian Business Council.

"As it is our objective to promote growth in business relations and trade exchange between the Philippines and Australia, we are expressing our hope that this matter would be resolved as soon as possible in a just and fair manner," Dominguez said.

Buckeridge and Nenita Lim Cruz, who represent Australian Gigahertz Network, Pty. Ltd. (AGNI), which has a 40-percent stake in ETPI through its local subsidiary, Australian Gigahertz Network Philippines (AGNP), were ousted as chairman of the board and CEO and president, respectively, during an ETPI board meeting last May 10, 2005. The 40-percent stake of AGNI in ETPI was acquired through an inclusion of 40 million Australian dollars.

This is the second time the concern has been raised over the ongoing intra-corporate row at ETPI, the first being made by Australian Ambassador to the Philippines Tony Hely, in a letter to then Trade and Industry Secretary Juan Santos dated May 24, 2005.

"While this is primarily a commercial matter, AGNI’s claims if correct, raise concerns about the security of investors’ interest in the Philippines and the impartiality of Philippine government appointees to act in the interests of good governance. I would be grateful if you would examine these claims with a view to ensuring the impartial conduct of the appointees in question," Hely appealed to Santos in his letter.