SMC's Eastern Telecom joins opposition to PLDT-Digitel deal

MANILA, Philippines -  Eastern Telecommunications Philippines Inc. (ETPI) has called on the National Telecommunications Commission to audit the telecommunications and other government infrastructure concessions controlled by the Hong Kong-based First Pacific Group in the country that may be used to restrict competition in the telco industry.

In an opposition filed with the NTC against the planned acquisition by Philippine Long Distance Telephone Co. (PLDT) of Digital Telecommunications Philippines Inc., (Digitel), ETPI said the NTC will have to impose conditions to ensure the prevention of anti-competitive behavior.

ETPI, now 49 percent owned by Vega Telecom, a wholly-owned subsidiary of San Miguel Corp. (SMC), said the NTC’s competitive policy has said that market share is widely considered as the most transparent indicator of dominance or significant market power.

It cited that a market share of 40 percent gives rise to a presumption of significant market power while a market share of less than 25 percent is deemed insufficient for a player to behave as if it were unaffected by market forces.

ETPI pointed out that this is because the transaction will result in the PLDT group having dominance and significant market power by virtue of its control over Smart Communications, Smart Broadband Inc., Smart subsidiary Connectivity Unlimited Resource Enterprise Inc. (CURE), Digitel and Digitel Mobile Philippines Inc.

It noted that the group “will acquire a commanding 70 percent market share of the entire suite of telecommunications services currently being offered on the Philippine market.”

This ranges from cellular mobile communications, local exchange carrier (LEC) services, inter-exchange carrier (IXC) services, international gateway facilities (IGF), fixed and wireless broadband services, and value-added services.”

“Likewise of importance is the control of the PLDT combine, its related companies and affiliates of various other companies and facilities… and government infrastructure concessions,” ETPI said.

It cited Manila Electric Co. and its subsidiary, eMeralco Ventures Inc. (which own and lease out significant fiber optic cables in areas where Meralco operates as well as telecommunications-related assets such as poles) and the Subic-Clark-Tarlac Expressway and North Luzon Expressway.

“Related companies and affiliates of the PLDT combine will therefore be in a position to restrict access by competitors of the PLDT combine to such telecommunications -related facilities,” ETPI said.

The company also pointed out that the PLDT group will effectively control six out of the existing seven international cable systems that carry outbound voice and data traffic, and four out of the current five cable landing stations where such undersea cable systems terminate on Philippine land.

“As a result, the PLDT combine will be in a position to discriminatorily price the capacities of its international cable landing stations and… restrict access to the landing stations or charge discriminatory prices for such access,” ETPI said.

It added that the PLDT Group’s dominance will also extend to a commanding control of Internet exchanges and local Internet peering which is an arrangement of traffic exchanges between ISPs.

As a result of the transaction, ETPI said the PLDT Group will have the largest Internet exchange in the country in terms of membership and, with its command of very extensive telecommunications facilities, “will be in a position to restrict access to locally hosted content by deliberately disallowing traffic from competitors to pass through its network.”