PCC: Telcos’ SMC asset purchase has performance conditions

By Patrizia Paola C. Marcelo,
Reporter

THE Philippine Competition Commission (PCC) said the National Telecommunications Commission (NTC) has the authority to take back the wireless frequency from PLDT, Inc. and Globe Telecom, Inc. which they acquired from San Miguel Corp. (SMC) if the telcos do not improve their services.

PCC Commissioner Johannes Benjamin R. Bernabe said that the NTC can “claw back” the permission it gave to the telcos to use the 700 megahertz (MHz) frequency the incumbents acquired in 2016 from SMC, once the NTC reviews the conditions of the approval and finds that the telcos have not met the terms.

His remarks signal a possible scenario for allocating spectrum to a new entrant, the so-called “third player.”

The approval of the use of the 700 MHz came with the condition of improved connectivity, reliability and speed of Internet service, and the one-year period condition has already elapsed. The telcos justified that the acquisition of the much-coveted frequency is for delivering better service to customers.

“It imposed a condition that within one year from the date of approval of co-use, Smart and Globe have to ensure that there is increased capacity, both in terms of broadband and internet access speed. And this one year period has already lapsed and therefore NTC should be able to make a determination whether the right of co-use should be retained or whether or not certain frequencies should in fact be clawed back and allocated in favor of a prospective third telco player…” Mr. Bernabe told BusinessWorld Editor-in-Chief Roby Alampay in a Bloomberg Philippines television interview.

“They can in fact also say, ‘well, maybe you don’t need all the frequencies that we allowed to co-use. And instead of letting you continue using them under the co-use agreement we are now going to allocate it in favor of the third player.’ That is a possibility that, we in the PCC see as being possible.”

Mr. Bernabe said however that the most the PCC can do is “encourage” the NTC to pursue the review.

“They are a co-equal agency in government, the most that we can do perhaps is to encourage them to pursue their review which is their mandate, under these terms of the co-use agreement that they approved and maybe exercise some discretion of terms of what could benefit the consumers the most,” he said.

The competition watchdog is counting on a positive ruling from the Supreme Court (SC) after it questioned the purchase of SMC assets by the incumbents.

The PCC filed an appeal with the Supreme Court over a Court of Appeals (CA) ruling rejecting its bid to review PLDT and Globe’s acquisition of SMC’s telco assets.

In the appeal, the PCC said the CA erred in deciding that the $1.5-billion telecommunications deal was deemed approved.

In October, the CA’s former 12^th division ordered the PCC to cease its review of the acquisition of SMC’s assets by the two telco incumbents.

“Hopefully, within the next year or two, the Supreme Court would be able to issue its decision on our appeal,” Mr. Bernabe said.

The PCC expects a favorable ruling to pave the way for farming out frequencies in time for the entry of a third player. The regulator estimates that only 12.8% of the spectrum will be left for a third player.

The third player also could end up paying around P3 billion for the 3G (third generation) frequency surrendered by PLDT, required by the government when it approved a merger with Digitel Telecommunications Philippines, Inc.

Department of Information and Communications Technology (DICT) Officer-in-Charge Eliseo M. Rio, Jr. said compensation is still needed, and the third player, if interested in acquiring the 3G frequency, will have to assume the responsibility of compensation.

Mr. Rio said that the remaining frequencies are “enough” for the third player to compete with PLDT and Globe. The DICT however, is looking at a “more equitable” allocation of frequencies in the long term, and this would possibly include reallocation or re-farming of frequencies.

However, Mr. Rio admitted this would take a long process and cannot immediately be carried out.

PLDT and Globe have said they are wary of the government’s reallocation plans, adding that they are using the 700-MHz frequency band.

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