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Globe draws solons’ ire at hearing

MANILA, Philippines—Globe Telecoms, the company most affected by the Philippine Long Distance Telephone Co.-Digitel merger, on Tuesday found itself on the defensive during the Senate investigation into the deal.

Senators asked if Globe, owned by the Ayala Group, would have questioned the merger if it had been successful in its own efforts to purchase Digitel Telecommunications Phil., a failed move that Globe executives reluctantly admitted at a hearing on Tuesday of the committee on public services.

Globe apparently attempted to buy Digitel before PLDT came into the picture.

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PLDT successfully concluded last month a P74-billion share-swap deal with the Gokongwei family, the owners of Digitel, that gave it a 51.55-percent controlling stake in the merger.

PLDT is the operator of mobile brands Smart, Talk N Text and Red Mobile, while Digitel operates the Sun Cellular mobile network.

Responding to a question from Senate President Juan Ponce Enrile, Froilan Castelo, Globe chief for regulatory affairs, said there were informal talks but they “did not prosper.”

“In other words, you were interested,” said Enrile.

Lance Gokongwei, Digitel director and president of Digitel’s parent company JG Summit, said Digitel was approached by Globe “with the objective of acquiring the company, perhaps in the same way, in exchange for shares.”

“There was a discussion that could possibly lead to a buyout or merger of the two companies in exchange for consideration,” he told the senators.

Sen. Joker Arroyo later told Globe executives: “Had the transaction been consummated, you would not be here. Globe would not be here complaining. But because it is PLDT and Digitel, Globe is complaining. So how is that?”

“You cannot expect Congress to equalize things when the solution is competition in the market,” he added.

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Rodolfo Salalima, Globe’s external legal counsel, stressed that his company was not questioning the legality of the contract between PLDT and Digitel, which he said Globe was leaving to the government bodies concerned to determine.

Endanger free competition

What Globe wanted to point out was that with the PLDT-Digitel merger, a monopoly that was already big to begin with was “getting bigger and may endanger free competition in the country,” Salalima said.

“We agree that sometimes one becomes relatively bigger than the other because of market forces. There are natural factors which may contribute to one becoming too big. But when such bigness becomes too much, there is a need precisely to put in some conditions or regulations,” he said.

Globe has claimed that the PLDT-Digitel deal would create a monopoly in the local telecom industry, leading to a slower pace of innovation and higher rates for consumers.

Digitel’s Sun Cellular brand is known for its affordable services that have driven down the profit margins of both PLDT and Globe.

Arroyo said the committee would look into the main issue of whether the merger would benefit consumers.

Unlimited calls to go on

PLDT director Rey Espinosa assured consumers the merger would not stop the unlimited calls and text messaging services currently available through Digitel.

He said Digitel’s Sun Cellular label would eventually become the brand for the merged companies’ “unli” services.

PLDT chair Manuel V. Pangilinan on Tuesday hit out at Globe, accusing the Ayala group of monopolistic business practices.

“PLDT is not allowed to install phone services inside malls and real estate developments (owned by the Ayala group), despite the clamor from their tenants,” Pangilinan said, noting that Globe was allowed to offer telecom services in these areas.

The Ayala group, through its Ayala Land unit, is one of the country’s largest property developers. It operates shopping malls in Metro Manila, Cebu and Pampanga.

Pangilinan said the Ayala group also made a bid to buy Maynilad Water Services, the water utility in Metro Manila’s west zone, which was eventually bought by the Pangilinan-led Metro Pacific Investments Corp. and DM Consunji.

“If (the Ayala group) won the contract for Maynilad, then they would be a true monopoly in water services for the Mega Manila area,” Pangilinan told reporters. The Ayala group owns Manila Water Co., the concessionaire for Metro Manila’s east zone.

Aquino orders probe

President Aquino last week said he had ordered the National Telecommunications Commission (NTC) to review the Digitel deal to ensure that the merger would not lead to an “undue advantage” for PLDT.

Pangilinan said that with the merger, PLDT would help in the long-term survival of Sun Cellular’s low-priced services which some industry watchers have tagged as “unsustainable.”

“We have publicly made a commitment not only to keep the Sun brand. In fact, we will enhance their services by connecting it to our wider infrastructure network,” he said.

He said that Sun’s current landline subscriber base of around 500,000 in the Central Luzon area would benefit from the takeover because they would be connected to the PLDT network. This would lead to lower rates extending to more people.

“What we are asking is that the government should protect the consumers, not our rival,” Pangilinan said.

In a separate statement, Gokongwei said being part of PLDT’s wider network would benefit Sun’s 15 million users.

“This is the greatest benefit of this transaction, and consumer satisfaction from a bigger network is really what our franchises are for,” Gokongwei said.

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TAGS: Digitel Telecommunications, Globe Telecoms, mergers, Sen. Juan Ponce-Enrile, Senate, Smart-PLDT
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