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NTC should reject PLDT-Digitel merger

/ 09:19 PM September 29, 2011

I don’t understand why it is taking the National Telecommunications Commission (NTC) such a long time to disapprove the acquisition by giant Philippine Long Distance Telephone Co. (PLDT)-Smart of the much smaller Digitel Telecom. It is a simple case.

PLDT bought out Digitel, including its franchise. But franchises can neither be sold nor transferred. Only Congress can give out franchises to our limited telco airspace. PLDT can buy the assets of Digitel but not its franchise. The franchise goes back to the government, which may then give it to another deserving franchise applicant.

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If we let this deal pass, what is to prevent the cash-awash PLDT (guess where the cash is coming from; the Anti-Money Laundering Council should look into it) from buying out all the companies with franchises? Then PLDT will have a monopoly of all public services and the public and even the government will be at its mercy.

The NTC is dilly-dallying too much, as if it is waiting for something. And Congress should put its foot down on the deal which is stealing the legislative body’s authority to award franchises.

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To begin with, the controversial deal will mean a return to a monopoly by PLDT of the telecommunications industry. Do you still remember the dark days when PLDT had a monopoly of the telephone industry? It took years to get a landline and applicants had to beg on bended knees before officials of PLDT. And after you finally got your landline, you had to wait hours to be able to call. And after you dialed the number, you had to wait more hours for the busy signal to end.

It was only with the advent of the mobile phone that the Filipinos were liberated from the clutches of PLDT. Now most Filipinos, including househelp and children, have cell phones, and communicating is easy. Do we want to chuck all that and return to the PLDT monopoly? If there is no competition, phone rates will surely rise, as we can see from the oil, cement and pharmaceutical industries where there are cartels and no competition.

PLDT claims that the global trend is toward consolidation of market players to improve the economies of scale, rationalize capital expenditures and meet the demands of new technologies.

But the Constitution prohibits monopolies. Article XII, Section 19, provides that “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

So what should we follow, the Constitution or global trends? Trends still cannot override the fundamental law of the land.

In other countries, they impose conditions on in-country telecom mergers. Most recently in the United States, in AT&T’s purchase of T-Mobile, AT&T was told to shed a significant chunk of T-Mobile’s spectrum. The Philippine government should impose similar conditions to the proposed PLDT-Digitel merger.

In a hearing of the Senate committee on public services, data given by NTC Commissioner Gamaliel Cordoba showed that the PLDT-Digitel merger has a majority of 51 percent of 3G and CMTS (cellular mobile telecommunications systems) frequencies, while Globe has a mere 23-percent share to service over 23 million subscribers.

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Other telcos, namely Extelcom and BellTel, have 9 percent and 6 percent, respectively. Cordoba admitted that the government has only 6 percent (10 Mhz) 3G frequency left for allocation, and this is currently under

litigation.

If PLDT-Digitel is saying it needs all the frequencies it has with only 60 million subscribers, other subscribers are also entitled to a fair share of the State’s frequencies which they should enjoy through better products using more advanced technology being offered by other telco providers.

The “consolidation” of PLDT and Digitel will result in an imbalance of spectrum allocation in their favor as Smart and Sun will serve 60 million subscribers with 371 Mhz, while Globe serves 27.3 million subscribers with only 99 Mhz.

PLDT should prove its claim that the monopoly will benefit or protect the consumers since the promise to continue Sun’s unlimited call and text plans is “simply a promise but the agenda regarding Sun’s Unli is still unclear.”

From a financial standpoint, continuing Sun’s unlimited plans is bad business—Smart is losing revenue because of such plans, while Sun has been a losing proposition all these years.

PLDT promises to maintain unlimited services, but five or 10 years from now, when all the stage actors are gone, who will remember that promise? Besides, the promise is not binding in law.

According to Globe senior vice president and legal counsel Rogelio Salalima, PLDT has a poor track record in fulfilling its obligations as it has refused to heed the interconnection decision of the Supreme Court in the case of PLDT v. NTC and Extelcom.

“Since 2006, Globe has been requesting for interconnection in 32 new areas where we have invested in landline infrastructure, and our landline services have gained good traction. To date, of those 32 areas, PLDT has acceded to only 1 point-of-interconnection (POI) in Davao City,” Salalima said.

He added that “at the expense of the consumers, PLDT still refuses to interconnect with Globe to protect its hold on the market. Without interconnections, the public suffers because they have to pay more in terms of long distance charges.”

If PLDT can do these things now, it surely can do whatever it would like to once the proposed merger is approved by government since it will have monopoly or effective control of the entire telecommunications market.

NTC should reject this proposed merger to make sure that the Filipino consumers will benefit in the end, not only one or two corporate entities.

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