• Reading time:11 mins read

Is the Senate afraid of exposing that foreigners now control 74% of Smart?

WHAT kind of Senate do we have now, which in the past several decades, had proven to be the Republic’s last bastion of nationalism—as when it rebuffed in 1991 the pressures of the then very popular President Cory Aquino to retain the US military bases here?

Now some senators are falling over each other in their rush to give a foreign-owned telecom company, Smart Communications, almost everything it wants in a franchise. This includes exemption from all local taxes and the repeal of the requirement for it to list 30 percent of its shares in the stock market.

Even if public listing was a specific requirement of the franchise it got it in 1992, Smart has refused to do so for the last 25 years. Talk of regulatory capture: the Securities and Exchange Commission did nothing to enforce that requirement.

When Smart Communications was given its first franchise in 1992, helped by President Ramos then in order to pose competition to the then monopoly Philippine Long Distance Telephone’s (PLDT) Piltel, it was 100-percent Filipino-owned.

Twenty-five years later and needing its franchise renewed for another quarter of a century by this month, Smart is now majority-owned by foreigners, because it had become a 100-percent subsidiary of PLDT. That this telecom mammoth has become 74 percent-owned by foreign companies, is due to a great extent to deposed President Joseph Estrada who facilitated the foreigners’ takeover of it in 1998.

WHO HE? Do the senators even know that Indonesian Anthoni Salim is the biggest single stockholder of PLDT and therefore of its subsidiary, Smart, to which they’re giving a 25-year franchise? Did they even ask him to appear in Congress to argue why Smart should be given that permit to operate for a quarter of a century?

PLDT’s—and therefore Smart’s—controlling, and biggest single shareholder is the Indonesian magnate Anthoni Salim, with 26 percent of PLDT through his Hong Kong-based, First Pacific Co. Ltd. The second biggest, with 20 percent, is Japan’s state-owned Nippon Telegraph and Telegraph (NTT), the world’s largest telecoms firm.* (PLDT Chairman Manuel Pangilinan only has .01% shares in the firm.)

First Pacific and NTT announce–boast—these figures to the world in their annual reports and websites. Yet PLDT reports to the Securities and Exchange Commission that its foreign ownership is just 17 percent.

Such dominant foreign ownership has allowed Smart, through PLDT, to siphon out of the country about $1 billion in profits so far, most of this to the Indonesian and Japanese owners.

Drastically changed

Isn’t the fact that Smart has drastically changed from being a Filipino company to a foreign one important in evaluating whether the Senate should give Smart a 25-year franchise, especially since this is really in violation of Constitution’s 40 percent limit on foreign capital in public utilities?

We are the only country in Asia whose telecom industry—a strategic sector that exploits our natural resources—is controlled by foreigners. Isn’t our Senate wondering why that is so, and how it has and will affect our economic development?

Isn’t it ironic that Congress probed Perfecto Yasay, Jr.’s citizenship to eventually reject his appointment by President Duterte as his foreign secretary, when it refuses to examine the “citizenship”—i.e. whether it is or is not a Filipino-controlled firm —of Smart, which controls half of the country’s mobile telephone system?

Never mind the House of Representatives, or such a congressman as Reynaldo Umali, a Liberal Party stalwart and a former Bureau of Customs commissioner who has been, for some reason, Smart’s champion in this Congress and the past. We understand the ways of the world. But the Senate, purportedly the Republic’s bastion of integrity, consisting, as they say, of 24 independent republics?

Yet our senators seem to be either so awed or afraid of Smart that they didn’t even summon its biggest stockholder, the Indonesian Salim (who has never even stepped on Philippine soil), to tell the Senate in person why it should give his firm a new franchise. Even his top executive Manuel V. Pangilinan didn’t bother to appear at the Senate. Instead, only minor executives, the highest being the chief financial officer, appeared before the Senate.

Aren’t the senators insulted by that? Did they even summon oppositors to giving Smart a 25-year franchises, or Supreme Court Senior Justice Antonio Carpio who has pointed out in court decisions that PLDT has made a mockery of our Constitution?

Are our senators so terrified of Smart to find out who really owns it?

Aren’t the senators even curious that PLDT, which owns Smart 100 percent, has such mysterious firms as shareholders such as Metro Pacific Investments Limited, Larouge B.V., Intalink B.V., and Semilion Enterprises – two of which are incorporated in offshore financial centers known for their very secretive corporate laws.

Not even curious?

Are the senators not even curious that at the top of the corporate layering ownership scheme that leads to PLDT is an obscure firm, Pilipinas Enterprise Management Corp. (PEMC) whose stockholders are Pangilinan, Meralco executive Alfred Panlilio, PLDT officers Rene Bañez and Lourdes Chan, and Maynilad president Victorico Vargas?

Aren’t the senators curious that the market value of these five Salim executives’ indirect shares in PLDT and in the other major Salim firm Metro Pacific Investment Corp., through their PEMC holdings amount to a P3 billion for Chan and Bañez, P7 billion for Panlilio and Vargas, and P9 billion for Pangilinan? Their dividends from PLDT and MPIC because of their shares in PEMC in the past ten years could amount to from P6 billion to P12 billion.** This would put them in any listing of the country’s billionaires, but strangely, they’re not, they are still working their butts off at Salim’s firms.

Senator Ralph Recto, a grandson of the great nationalist Claro M. Recto, appears to be even awed by the foreign-owned Smart, telling this writer and senators in Senate hearings that they have no choice but to give the company its franchise, since “it has 60 million subscribers.”

What? That is clearly a simplistic too-big-to-fail justification, one that borders on capitulation to economic blackmail. One doesn’t have to be too smart to see that what the Senate can do, is to allow the firm to operate, while government finally investigates why it, as well as PLDT, has been allowed, starting from Estrada’s time, to operate a public utility even if more than 40 percent of its common stocks are owned by foreigners, in violation of the Constitution. If it cannot comply with the constitutional provision, the State not only can, but also must order it to sell the necessary shares to Filipinos.

PLDT of course had resorted to an artifice, the issuance of cheap, ”voting preferred shares” to its pension fund worth just P150 million, in order for it to claim that Filipinos are its main stockholders. But this is microscopic amount when compared to foreigners’ holdings of common stocks worth P218 billion. The Senate is not bound to such artifice in granting a franchise, which is a privilege, and not a right of a foreign firm.

Recto even defended Smart’s lobbying that it be exempted from listing its shares by claiming that if the firm is required to do so, PLDT’s stock prices would possibly go down. This is absurd and Recto should just look at another firm in the telecoms industry, Globe Telecoms, a listed firm whose mother firm is Ayala Corp., another listed firm.

Why has Smart refused to list 30 percent of its shares? Obviously because this would dilute the 46 percent shares of the Indonesian and Japanese controlling owners of the company to just 32 percent, weakening its presently tight control of this member of the telecoms duopoly.

Recto as well as Senator Miguel Zubiri even try to appear to be champions of “the general public” which they claim own more than 50 percent of PLDT, through the stock market.

So misleading

This is so misleading, and perhaps even dishonest of them.While about 50 percent of PLDT’s stocks are technically registered for sale and purchase at the stock market, foreigners through mutual funds and investment firms have been holding 28 percent of the firm’s shares. Only 12 percent are held by Filipino investors in the stock market. Even the tycoon John Gokongwei’s shares—which he has kept as his permanent stake in PLDT—has his 8 percent classified as stock market investments. Only less than 1 percent really of PLDT’s stocks are actively traded daily in the stock market.

It was only Senator Risa Hontiveros who demonstrated nationalism—perhaps independence or intelligence—by requesting the committee on public utilities headed by ex-US citizen Senator Grace Poe to ask Smart to report on the ultimate ownership of several Salim-controlled firms that are the biggest controlling companies of Smart’s mother company PLDT.

Hontiveros though will be given the runaround by Smart, which will inform the Senate that those firms have nothing to do with Smart. This is accurate, but I don’t think Smart will volunteer to disclose that these firms control its mother firm PLDT through an intricate network of corporate layers intended to hide from the public the fact that it is foreign-owned.

The franchise the Senate will give Smart Communications will last for 25 years, until the year 2042! That’s for a generation for chrisakes, halfway through which all of the current senators will no longer be in the Senate.

The Senate will be scandalously derelict in its duty if does not look into Smart’s ownership, and blindly give away a 25-year franchise to a foreign-owned telecom firm that not only has near-monopoly power in our strategic telecom industry but exploits our natural resource, the country’s radio spectrum.

* Details of this are in my book Colossal Deception: How Foreigners Control Our Telecoms Sector, available in most bookstores and at Amazon.com.

* Details in my MT column “Closet billionaires… or corporate dummies?”, June 21, 2015.