Will Aquino allow PLDT to call shots?

APPARENTLY disturbed by the controversy over the merger of Philippine Long Distance Co. (PLDT), which has held a monopoly of the country’s telecommunications industry for more than half a century, and Digital Telecommunications Philippines Inc. (Digitel), a much smaller company, President Aquino has ordered an inquiry into whether the merged companies have gained undue advantage over other industry players.

The swallowing up of Digitel by the telco giant has stoked fears in local business circles that the PLDT takeover of the facilities of the highly lucrative Sun Cellular, a Digitel subsidiary which entered the market in 2003 and started offering 24/7 unlimited calls and text messaging, may undercut rates charged by two other companies and stifle competition.

Ayala-led Globe Telecom Inc. has said that the merger may wipe out the level playing field in the telecommunications industry, and signaled the return to the old PLDT monopoly.

The problem as far as monopolistic trends are concerned is that the PLDT chair is Manuel V. Pangilinan, who founded First Pacific 20 years ago and remains the top honcho of the Hong Kong-based holding company.

Pangilinan is also the chair of Maynilad Water Services Inc., Metro Pacific Tollways Corp., Medical Doctors Inc., Metro Pacific Communications Inc. and Metro Rail Transit. These are strategic utilities which First Pacific controls.

With this scope of enterprises, First Pacific controls a network of industry leaders in the Philippines and has a finger on every aspect of Filipino life. Its interests range from telecommunications, water, infrastructure, roads, hospitals, health services, power distribution (Meralco), mining (Philex Mining Corp.), public transport, and media industry (TV5).

It also plans to expand into railways and airport operations by bidding for several government projects under the Aquino administration, and likewise controls one of the biggest food firms in Indonesia.

Most powerful

No business complex in the Philippines has expanded in scale and extent than the conglomerate headed by Pangilinan, surpassing even those of the traditional Filipino economic oligarchies, including the Lopez and Ayala families.

Pangilinan has become the most powerful economic person in the country, who is unelected and holds no public office.

The rapid pace and expansion of Pangilinan’s business conglomerate in the Philippines has not remained unnoticed by the business community, which has been sensitively attuned to the oligarchic pattern of wealth concentration since the time of the wealthy blocs based on agriculture, particularly sugar as a cash and export crop, natural resources, mines, forestry and fisheries, which have formed the bases of political power in the country.

The merger has raised fears that it has not only consolidated PLDT’s monopoly grip in the economically and politically strategic sector but it has also led to the elimination of a level playing field in the telecommunications industry.

Globe’s opposition

Rival telcos, particularly Globe, have denounced the PLDT-Digitel merger as a throwback to the dark ages when one dominant player was free to dictate pricing without having to deliver better services to consumers. Globe has asked the government to intervene and stop the merger.

According to Globe, the deal would result in the PLDT-Digitel group cornering 70 percent of the market in terms of revenue and subscribers. Seven out of 10 mobile users in the Philippines are estimated to be on the PLDT-Digitel network.

Globe emphasized that the threat to free competition and, ultimately, to public service and the common good, more than justifies intervention by the National Telecommunications Commission (NTC) to check PLDT’s alleged predatory raids on the market perpetrated through so-called sweetheart deals.

Pangilinan’s promise

Pangilinan has promised that Sun Cellular’s low-priced services would be maintained and improved. According to PLDT, its takeover of Digitel would be good for the industry and would result in better services for subscribers at even better prices.

PLDT makes it appear that the P74.1-billion deal was a market transaction in which the telco giant agreed to acquire a 51.55-percent stake in Digitel and undertake a mandatory tender offer to minority investors. According to PLDT, the deal does not require intervention by the NTC, the government’s regulatory agency.

Pangilinan’s assurances to keep the charges down have not allayed the skepticism of consumers that PLDT’s aim is to choke Sun Cellular’s popular unlimited calls and text services and eventually jack up the telco giant’s charges.

Gov’t intervention

Pangilinan is viewed in some business sectors as an aggressive and acquisitive economic empire builder whose activities can only be stopped by state intervention.

The issue facing the Aquino administration is whether the state would step in to level the competitive playing field in the telecommunications sector.

Put differently, will Mr. Aquino allow a private conglomerate to call the shots and determine the rules of competition in the communications sector that had been liberalized and “demonopolized” by then President Fidel V. Ramos in Republic Act No. 7925, or the New Telecoms Policy Act of March 1955.

The act was legislated to substantiate Article XII, Section 19, of the Constitution which provides that state shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.

Near monopoly

When President Aquino ordered the NTC and Department of Science and Technology to look into “any undue advantage” that the PLDT-Digitel merger may have gained over other players in the industry, he said that “limited competition would result in a near monopoly in the telecom sector.”

He noted that “monopolies were inherently inefficient” and said that his administration “would look after the interests of the public, phone subscribers in particular, in this case.”

Mr. Aquino’s message to First Pacific, PLDT and Pangilinan is clear: The Philippine state lays down the rules of business, not private business. And the President does not want the state to be the captive of private business in a free-enterprise capitalist system.