Philippine Long Distance Telephone (PLDT) and Globe Telecom’s recent acquisition of San Miguel’s telecom firms and their franchises for P69 billion (P52 billion in cash and the assumption of P17 billion of debts) marks the total domination by three foreign companies of our telecom industry. This is in sharp contrast to the telecom industry in all Asian countries, which are controlled by their nationals.
Especially as the food and beverage conglomerate gave up its subsidiaries’ franchise over the 700-megahertz radio spectrum, crucial to the expansion of PLDT/Globe’s cellphone coverage, San Miguel obviously abandoned its dream of challenging the two foreign-owned firms in the telecom industry after its plans to take in the Australian Telstra as its technical partner fell through.
With their dominance of such lucrative public utility firms that exploit a natural and national limited resource (bands of the radio spectrum, which mobile telephony uses) and which have a captive market, foreign owners of these two firms have siphoned off huge profits from the country.
That PLDT and Globe are Filipino firms is, in effect, the biggest corporate deception ever foisted on the nation.
The two firms have been claiming over the past 16 years that they are Filipino-controlled and dominated. PLDT, in its reports to the Philippine Securities and Exchange Commission (SEC), claims it is majority Filipino-owned, with its latest “General Information Sheet” report to the SEC declaring foreign ownership of only 18 percent. Globe reports 27 percent foreign ownership.
These are lies, fabrications made possible, believe it or not, by President Aquino’s reversal – through an SEC ruling – of a Supreme Court decision in 2011 (reaffirmed in 2012) that had exposed PLDT’s violation of the 40 percent constitutional ban. (More of that in Friday’s column.)
The facts are incontrovertible, which are reported in the official reports of the two telecom companies and their foreign owners.
The Hong Kong-based, Bermuda-incorporated First Pacific Co., Ltd. – owned 45 percent by the Indonesian magnate Anthoni Salim – has 25.6 percent of PLDT’s common shares, according to the firm’s annual reports published in Hong Kong, and on its official website (www.firstpacific.com). First Pacific is the single biggest shareholder of PLDT and its undisputed controlling stockholder.
This is also disclosed in PLDT’s reports to the US Securities and Exchange Commission, which the firm is required to submit because 20 percent of the firm’s equity is traded on the New York Stock Exchange in the form of American Depositary Shares (ADS).
According to PLDT’s reports to the US and Philippine SECs, two subsidiaries of NTT Telegraph and Telephone Corp., the world’s third largest telecom firm – NTT Communications Corp. and NTT Docomo – hold 20 percent PLDT’s stock. A separate 18 percent of PLDT common shares are held by foreigners via the stock market and 12 percent are in the form of ADS.
This means that foreign ownership of PLDT totals 76 percent, way above the 40 percent limit the Constitution allows foreigners to hold.
Globe portrays itself as one of the corporate jewels of the crème de la crème elite, the Ayala clan, with Jaime Augusto de Zobel himself reportedly boasting that taking the property firm into the high-tech industry has been his distinct contribution to the conglomerate.
The truth, though, is that Ayala Corp. is a minority stockholder, owning 30 percent of its common shares.
Its biggest stockholder, with a 47 percent stake, is Singapore Telecommunications (SingTel), a subsidiary of Singapore’s state investment fund Temasek Holdings. By virtue of its state ownership, Temasek belongs to the 5.4 million Singaporeans who are represented by their prime minister, Lee Hsien Loong. Such an irony: A firm owned by 5.4 million Singaporeans is one of the two companies dominating the telecom industry of another country with a much bigger population of 100 million Filipinos.
Combined with a further 15 percent stake held by foreign stock market investors, foreign holdings in Globe total 62 percent. Singtel itself, in its 2015 annual report, declares the “percentage of effective equity interest” it holds in Globe as 47.2 percent, with its investment in the firm amounting to US$800 million as of end-March 2015.
It is really amazing how PLDT and Globe have been able to propagate their big lie that they are Filipino-owned, and to trample on our Constitution largely unnoticed. I am not even the first to have claimed that they are not Filipino-owned – the two firms did.
In an episode that is utterly hilarious, if not for what it says about our regulatory agencies and the press – that they are utterly inutile—Globe and PLDT themselves accused each other of being foreign-dominated, presenting basically the same fact as I have pointed out.
Globe’s NTC plea
Globe in August 2011 asked the National Telecommunications Commission (NTC) to stop PLDT from acquiring tycoon John Gokongwei’s Digitel not only because the huge merger would stifle competition in the industry, but that in violation of the Constitution the foreigners owned more than 40 percent of its shares. Globe even asked the NTC to cancel all telecom franchises given to PLDT as such violates the Constitution.
PLDT’s chief counsel, Ray Espinosa, swiftly reacted, claiming that Globe openly discloses that Singtel owns 47 percent of the firm’s common shares, and therefore, is a foreign company.
Obviously told by their superiors that their accusations were tearing asunder the lies they have been propagating for a decade, the press releases suddenly ceased. None of the NTC or the SEC or the press, investigated the very serious accusations.
Foreign dominance of our telecom firms now is, indeed, so ironic. The deregulation of the sector in 1993 had been President Fidel Ramos’ biggest and most successful reform program. It, however, only led to the loss by an old elite, the Antonio Cojuangco clan, of its telecom monopoly, which was replaced by three foreign companies.
“So what if foreigners own our telcos?,” some might say. This is just one of the many “what ifs:”
Based on the dividends PLDT and Globe have paid out to their shareholders from 2000 to 2015, and their foreign ownership shares, foreign owners have taken $8 billion of profits out of the country from 2000 to 2015.
That’s equivalent to six years of foreign investment inflows into the country, or about P400 billion. If state firms had owned our telcos – as they do in China, Singapore and Vietnam—that P400 billion would have been a huge source of funds for the government, which could finance an entire railway system for Luzon or five light railway systems in the metropolis. (That P400 billion over 15 years means P27 billion annually, a mammoth amount compared with the P3 billion turned over annually to the state coffers by the government’s biggest profit-maker, Pagcor.)
This is one reason, other than the industry’s being too important for the economy to let foreigners control it, why nearly all Asian countries – Japan, South Korea, Singapore, China, Indonesia and Vietnam – despite opening up their other industries to foreigners, have allowed only their nationals, public or private firms, to dominate their telecom sector. The most common structure in Asia, in fact, is to have state firms or corporations with a significant state ownership dominate their local telcos, even as these entities get foreign minority partners, as they do in several countries.
The ‘Cha-cha’ agenda
The proposed lifting of the Constitution’s restrictions on foreign ownership of public utilities—which Salim and Singtel have evaded—will only mean the legalization of their violation of the 1987 Constitution, with the two foreign-owned companies dominating this crucial public utility forever.
This is due to the fact that because of the industry’s nature and dynamics, only two dominant players ultimately emerge, with much smaller players able to get only a small, 10 to 20 percent, of the market – until they are absorbed by the bigger players. The telecom sector in each country in the world, without exception, is dominated by only two huge firms, in some cases, with a minority share of the market – 10 to 20 percent – held by other small players.
This, in fact, has been the case here: PLDT and Globe gradually absorbed other players such as Isla Communications and Digitel. Try valiantly as it did, San Miguel with its vast resources couldn’t even make a beachhead in the country’s most lucrative industry.
The Charter-change move to lift the restrictions is entirely a project to entrench the dominance by the Indonesian Salim, the Japanese firms, and Singtel of our telecom sector.
Perhaps the incoming Rodrigo Duterte presidency, with its declared anti-oligarch stance, will find the wisdom and audacity to uphold the Constitution and end the foreigners’ exploitative dominance of our local telecom industry.
On Friday: How PLDT and Globe conceal their majority foreign ownership, and how President Aquino has criminally allowed it.