Enrile: Globe lost to PLDT in Digitel deal

Globe Telecom's defensive stance against the share-swap deal between Philippine Long Distance Telephone Co. (PLDT) and Digital Telecommunications Philippines Inc. (Digitel) is nothing but a case of sour graping, a lawmaker remarked on Tuesday. During the inquiry of the Senate Committee on Public Services on the P69.2-billion deal between PLDT and Digitel, Senate President Juan Ponce Enrile said Globe is up in arms because it lost the Digitel acquisition deal to PLDT, which the former had also earlier sought. "This is a situation when a loser is complaining against the winner," Enrile said. "If there was a purchase by Globe, would there have been an anti-trust issue?" he asked. During the proceedings, JG Summit Holdings president and COO Lance Gokongwei revealed that prior to striking the deal with PLDT, Globe had earlier approached him in several "informal talks" for possibilities of acquiring Digitel. "There were several discussions with various principals of Globe," Gokongwei said. "Initially we had preliminary discussions with James Go, chairman of Digitel, myself, and Fernando Zobel de Ayala." Gokongwei said they were approached by Globe with the objective of acquiring the company, "perhaps in the same way as an exchange of shares." He said Globe made a verbal offer to acquire Digitel, but said he could not remember how much the offer was. "[But] it's substantially different from the current offer," he stressed. Gokongwei said at least four months of discussions had passed but nothing materialized out of the talks, causing the two parties to break off from the negotiations due to a non-agreement on the price of the deal. Restraint of trade For its part, Globe said it is raising issues of anti-trust in accordance with the provision on Article 12, Section 19 of the constitution, which tackles State regulation and prohibition of monopolies. "The constitution is very general when it says 'restraint of trade,' whether it is actual or threatened restrained of trade," explained Rodolfo Salalima, counsel for Globe, referring to instances when government can step in to regulate or prohibit monopolies. But Enrile pointed out that monopolies are prohibited only because of the possibility of inordinate pricing. "[But] we have a regulatory body [the National Telecommunications Commission] which decides on the pricing [telcos] can charge," he stressed. Salalima, however, said that monopolistic practices do not only arise from pricing, but also from "acts that would stifle competition." He cited the matter of interconnection, which he said is being delayed by PLDT despite several requests for it to be implemented. "Now, we have 31 pending requests of interconnection with PLDT, and only one [Davao] is approved. The dominant carrier has every incentive to delay. And what happens if you delay? It's the public who is made to suffer for this in terms of [having to pay for] long distance calls," Salalima pointed out. PLDT head of regulatory affairs and policy Ray Espinosa, however, said that interconnection issues are complicated. "They are not simple issues. They involve technical [issues], and we are in the process of resolving them. Issues such as compatibility of systems and tariff [are present]," he pointed out. But Salalima said the delays in interconnection caused by PLDT are a prime example of "monopolistic business being flaunted again." "We feel that [with the Digitel deal], they will acquire more market power. In the frequencies alone, we are at the losing end," he said. Battle over frequencies In earlier interviews, Globe said one of the reasons it is opposing the deal is because it would put PLDT at an unfair advantage given the number of frequencies it will hold following its acquisition of Digitel. As it stands, NTC commissioner Gamaliel Cordoba said Smart commands about 52 percent of the market. Globe has 30 percent market share, while Sun Cellular, the cellular mobile division of Digitel, has 16.7 percent. Salalima said Globe is calling on the NTC to rationalize the assignment of frequencies, especially those which PLDT currently holds. "It is the rule of the NTC, in the case of 3G frequencies, that a group is entitled only to one set of frequencies. But right now, [with the deal], PLDT will have four blocks of [frequencies]," he said. "How can we compete if we do not have the tools to compete?" he added. In a statement distributed to reporters after the hearing, Salalima alleged that PLDT and its group "is in the business of buying and selling radio frequencies" because of its earlier statement that Globe only wants to get frequencies from the NTC free of charge. "It is not right for PLDT to insinuate that Globe wants to get these frequencies for free because in fact they are freely assigned by the State," he pointed out. "Conversely, by said statement, PLDT and its group imply that they bought from somebody their present 3G frequencies," he added. Currently, only one 3G frequency is available to be awarded to prospective operators, but will still have to be bidded out by the NTC. NTC's Cordoba said the awarding of the fifth and final 3G frequency is on hold because it is still under litigation following a case filed by Bayan Telecommunications before the Court of Appeals. Cordoba, however, stressed that the NTC can indeed recall frequencies "but only on the basis of non-use and non-payment of spectrum users' fees." PLDT's Espinosa, for his part, stressed that PLDT is using its frequencies efficiently, so they can not be taken away by the NTC. "The law is very clear that frequencies are awarded on the basis of proper, efficient and effective use. Smart's efficient use of its frequencies is being used to serve millions of customers," he said, adding that their acquisition of Digitel, and the subsequent consolidation of the two companies' facilities, will produce benefits to the public. — VS, GMA News