"The parties remain committed to this deal since it stands to bring substantial benefits not only to the shareholders but also to the consumers and the general public who will all benefit from the combined resources and expertise of the PLDT Group and Digitel," Manuel Pangilinan, PLDT chairman, said.
"In the end, this means higher-quality services being made available to a wider market at affordable prices," he said.
(PLDT slides for a second day. Page A-2)
James L. Go, JG Summit chairman, said: "We are confident that soon the consumers of Sun will reap the benefits of a stronger and more robust telecommunications company resulting from the PLDT-Digitel deal."
The original schedule for closing the deal was June 30, but the NTC has yet to make a decision after a series of hearings last month.
NTC, moreover, has scheduled further hearings on July 5, 7, 12 and 14 to listen to the opposition of Globe Telecom Inc., the No.2 in the cellular phone industry, to the ownership tie-up between sector leader Smart which is owned by PLDT, and No.3 player Digitel.
Pangilinan expressed optimism that the Digitel transaction will be not affected by the Supreme Court ruling which found that foreign ownership of PLDT has breached the constitutional limit of 40 percent.
The Supreme Court ruled that the 60:40 ownership in favor of Filipinos for utilities must be based on common stock with voting rights.
It rejected PLDT’s stand that the computation must be based on all outstanding shares, including preferred. PLDT signed an agreement with JG Summit last March 29 to buy all the latter’s interest in Digitel, made up of 3.277 billion common shares representing 51.55 percent of equity; zero coupon convertible bonds issued by Digitel; and, intercompany advances of P34.1 billion . The three assets are valued at P69.2 billion.
In exchange, the PLDT will issue a new PLDT share for every P2,500 consideration of the deal, for a total share issue equivalent to a 13.7 percent stake in PLDT.
PLDT has also offered to buy the remaining 48.45 percent stake in Digitel held by the public at P1.60 per share in the next three months. The buyout will bring the total acquisition cost to P74.1 billion.
Once the consolidation is completed, PLDT will have more than 60 million mobile phone subscribers and nearly 3 million broadband subscribers.
The full effects of the Supreme Court ruling against Philippine Long Distance Telephone Co. may take some time for business to digest and absorb. The ruling was announced by Supreme Court spokesman Midas Marquez Tuesday night after an en banc meeting of the tribunal, but it has yet to be promulgated. It is also to be expected that PLDT will seek a reconsideration of the decision.
This early, however, the ruling is already causing apprehensions among foreign investors who are already doing business here as well as those entertaining plans of doing so under the same legal framework under which the Hong Kong-based but Indonesian-controlled First Pacific Group first came in.
The issue is the constitutional provision which reserves utilities and the exploitation of natural resources to companies which are at least 60 percent Filipino-owned.
According Manuel V. Pangilinan, chairman of PLDT and of other local companies controlled by First Pacific, the 60:40 percent ownership in favor of Filipino has always been interpreted as based on the total outstanding shares (both common and preferred of the company). This was so when First Pacific bought into PLDT in 1998. This was also the assumption when First Pacific expanded into power distribution (Manila Electric Co.), tollways (North Luzon expressway and Subic-Clark expressway) and lately mining (Philex Mining).
The reported ruling has abandoned the old rule and the SEC has directed the Securities and Exchange Commission to compute the 60:40 ratio based only on the outstanding common or common stocks.
By Pangilinan’s own calculation, if preferred shares are included in the computation, then PLDT’s capital ratio is 87:13 in favor of Filipinos. If preferred shares are excluded, the balance shifts to 64:36 in favor of foreigners.
"(The ruling) is extremely disappointing personally for me as a Filipino… It would have a negative and adverse impact on the financial markets here and abroad," Pangilinan said. "We are aware that certain other business companies are in a similar structure with PLDT. In due time when that is discovered by the market, it will have an adverse impact as well."
It’s anybody’s guess how the Supreme Court would finally decide the case. It could yield to pragmatism (the country needs foreign investments and there must be continuity in policies) or it could narrowly stick to the letter of the charter (the law is hard but it is the law). If it would go the latter route, the Philippines would likely miss out on the new wave of global money, spooked by the recent financial crisis in the developed country, moving to emerging markets.
A pity, for that would be the fifth time the Philippines would miss the boat in the wave of foreign investments that wash into this region in apparent 10-year cycles.
