PLDT asks NTC to dismiss Globe Telecom's last-minute motion to stop Digitel deal

MANILA, Philippines - Philippine Long Distance Telephone Co. (PLDT) has asked the National Telecommunications Commission (NTC) to dismiss outright and to “expunge from the records” a last-minute motion of Globe Telecom to stop PLDT’s acquisition of Digital Telecommunications Philippines Inc. (Digitel).

PLDT argued that the twisted logic of Globe’s manifestation provides grounds for nullifying its own acquisition of Isla Communications in 2001.

In its motion filed Aug. 9, PLDT said Globe’s motion – which also called for the revocation of the licenses of PLDT and its subsidiaries Smart Communications Inc. and Connectivity Unlimited Resource Enterprise Inc. (CURE) – presented arguments that are “clearly distorted, concocted and a blatant misrepresentation of applicable laws and established facts.”

Globe had alleged that PLDT was prohibited from acquiring Digitel on the ground that PLDT was considered a foreign corporation under the Supreme Court decision on the Gamboa case and the Foreign Investments Act (FIA) of 1991.

In response, PLDT pointed out that the Gamboa decision, which held that the term “capital” when used to determine the degree of foreign ownership refers only to voting shares, was not final and executory.

It added that Globe’s reference to the FIA does not support its claims because that law “does not distinguish what constitutes ‘capital stock’ entitled to vote.”

Given that the Gamboa decision is still subject to reconsideration, PLDT said the interpretation of the term “capital stock” should be as it is commonly understood, and as upheld several times by the Securities and Exchange Commission (SEC), to be consisting of both common and preferred stocks which, under Sec. 6 of the Corporation Code, are accorded the right to vote.

“Considering that PLDT has always ensured that at least 60 percent of its total capital stock (common and preferred shares), all of which are entitled to vote under the Corporation Code, are held by citizens of the Philippines, it cannot be held to be in violation of Section 3(a) of the FIA,” it added.

In this light, Globe’s claim that PLDT’s earlier acquisitions of Smart and CURE are null and void ab initio (or “from the beginning”) is “bereft of merit”, according to PLDT’s motion.

“Globe’s self-serving and hypocritical claim is also belied by the fact that, when it acquired Islacom in 2001, 53 percent of its common shares were collectively owned by Singapore Telecom and Deutsche Telekom. Following Globe’s self-serving interpretation of the application of Section 20(i) of the Public Service Act and Articles 5 and 1409 of the Civil Code, then its purchase of Islacom should likewise be declared null and void considering that it would then also be in violation of Section 3(a) of the FIA,” PLDT said.

“Moreover, based on Globe’s own logic, then, any change in ownership structure following its acquisition of Islacom cannot serve to remedy its violation of the FIA, considering that such acquisition would have been null and void ab initio,” it added.

PLDT said further that in 2008, Singapore Telecom was able to purchase 62.65 million shares, amounting to 47.3 percent of the common shares of Globe. “Following Globe’s tenuous logic, Globe itself was in violation of the 40 percent constitutional limit on foreign ownership of a public utility in allowing Singtel’s investment,” it said.

Finally, PLDT said Globe’s “frivolous and baseless submission” was yet another attempt to further delay the NTC’s decision on the joint application of PLDT and Digitel for the approval of the Digitel transaction.