PLDT regulatory affair and policy head lawyer Ray Espinosa is correct to point out that Globe talks of monopoly and yet its controlling shareholder— the Ayala group—has institutionalized combinations in restraints of trade.
He said that in Ayala property development projects—residential and commercial—Globe and Innove have exclusive telecommunications services rights.
“Neither PLDT nor any other telco can provide telephony and DSL services to these exclusive enclaves,” Espinosa said as he raised the issue that such arrangement could be “illegal.”
Globe has taken the narrow view that the entry of Digitel into the PLDT telecoms family will create a monopoly. But experts like James Sullivan, head of Asia Telecom Research of JP Morgan Singapore does not see it that way. He said Globe even stands to benefit from less competition.
Sullivan said: “Globe is put in an interesting position. On one hand, the industry structure has become far more stable which is positive for industry participants. One can argue this is positive for Globe because they get the benefits of an improved industry without having to pay the price.”
So why is Globe raising a howl?
Espinosa has an interesting theory. Her says it seems that Globe is resorting to what he calls as “regulatory blackmail” and wants to get concession from the National Telecommunications Commission “on a silver platter”.
He said that the monopoly issue being raised by Globe is a ruse and is meant to weaken the resolve of the commission to approve a deal that will bring enormous benefits to the public in terms of better service and accelerated high-speed broadband internet service throughout the country.
Espinosa pointed out: “This just negotiating tactic. If it’s not regulatory blackmail, it’s regulatory free ride that they want.”
“It is clear from Globe’s letter (to the NTC) that they want concessions. Concessions to make up for their own inefficiencies. And this at the public’s expense” Espinosa added.
PLDT chairman Manuel V. Pangilinan scoffed at the talks that the PLDT deal with Digitel would hinder competition in the local telecommunications industry. “We will keep Digitel as a separate company. This is not a merger. We will maintain the unlimited and bucket-priced services of Sun Cellular.”
Pangilinan has taken the broad view that PLDT’s competition is not just confined to local shores. He said the deal with Digitel was crucial to better equip PLDT against the changing landscape and the onslaught of Internet companies such as Facebook and Skype.
This is the same view of Napoleon Nazareno, president and CEO of PLDT who said that they “expect competition to remain robust given other operators are formidable and well-founded” and added that they what they are doing is prepare for “growing competition from so-called over-the-top service providers, those that offer social networking, instant messaging and VoIP (voice over internet protocol) services.”
The PLDT group is aggressively in laying the groundwork for these non-traditional competition. It seem that Globe is now wants to do it too by trying to force NTC to give it concessions and for the government in general to give it protection.
***
Foreign investors are welcome in the Philippines. However, even as we welcome them they should be reminded that they cannot bend and break our laws to do what they please.
Apparently needing such a reminder are the representatives of Japanese investors in Ingasco Inc., the country’s leading service provider in the gas manufacturing industry.
Ingasco is a joint venture company between the Filipino firm Caloocan Gas Corp., (CGC) a leading manufacturer and distributor of industrial gases in the Philippines and Taiyo Nippon Sanso Corporation (TNSC), a top Japanese distributor of industrial gases and manufacturer of air separation plants.
It supplies such gases as oxygen, hydrogen and liquid nitrogen and its clients are the top corporations in semiconductor, pharmaceuticals, petrochemical, automotive, medical, steel and shipbuilding industries, Ingasco was incorporated as a domestic corporation in 1951 by the Gutierrez family but in 2002 it was transformed into Joint Venture Company with shareholders comprising of the Gutierrez family group (34.2 percent), CGC (30.2 percent), and Nippon Sanso Corp of Japan (35.6 percent).
To ensure that the rights of the minority are always protected, the joint venture company adopted the so-called super majority vote rule in its Amended Articles of Incorporation.
The super majority vote rule requires a 90-percent vote of shareholders to amend the articles of incorporation as well approval of major company decisions and policies.
In 2004 Nippon Sanso Corp. merges with another Japanese firm, Taiyo Toyo Sanso to form the Taiyo Nippon Sanso Corporation (TNSC).
In 2006, TNSC purchased all the shares of the Gutierrez and the Japanese firm ends up with 69.81 percent of the shares of the joint venture and the Filipino company CGC maintaining its 30.2 percent share.
With 69.81 percent of the shares, the Japanese investors became unhappy with the super-majority vote rule and wanted to junk it. The four Japanese members of the board of directors lead by Masahiko Kitabatake, who is also Ingasco president, tried to railroad the amendment to the articles of incorporation that would remove the super-majority vote rule in a special board meeting held in December last year.
Of course the two representatives of CGC to the Ingasco board – Raymund Chu and Mon Fui Chu – objected and TNSC failed to get the required 90 percent vote.
Despite the failure to get a 90% supermajority, the Japanese group called for a shareholders meeting and again with Mon Fui Chu objecting to the proposed amendment.
The Japanese corporate bullies however were not giving up. Kibatake and the other Japanese directors of Ingasco went to the Securities and Exchange Commission (SEC) to file the amendment to the articles of incorporation of Ingasco that would remove the 90-percent super-majority vote rule.
Kitabatake et al told the SEC that it had obtained the necessary 2/3 vote of shareholders deliberately withholding the fact that the requirement should be the vote of 90 percent of the total outstanding shares which the Japanese group of course never obtained.
CGC, of course, anticipated this ploy by the Japanese group and through its lawyer CGC wrote Director Benito Cataran of the SEC’s Company Monitoring and Registration Department asking him to reject any malicious and unlawful attempt of Ingasco’s other shareholders to amend the articles of incorporation without the required affirmative vote of the shareholders holding in the aggregate at least 90% of the total outstanding Ingasco shares.
The proposed amendment was rejected by the SEC through Cataran and his decision was later affirmed by the SEC en banc, a decision that reinforced CGC’s position that the proposed amendment to Ingasco’s amended articles of incorporation and by-laws were “invalid and illegal”
To ensure that the Japanese group would be dissuaded from doing similar underhanded corporate ploy, CGC , through Raymund Chu, has filed perjury raps against Kitabatake and the other Japanese members of the Ingasco Board of Directors namely Akihiro Marutani, Kunishi Hazama and Masahiro Shindo.
The case is now pending before the Office of the City Prosecutor of Mandaluyong.
Perhaps the SEC can also take action and send a clear and unmistakable message to the Japanese investors in Ingasco as well as other foreign investors that the SEC will not allow a deliberate and malicious breaking of the law.
