Monopolistic rampage

THE ACQUISITION by PLDT (Philippine Long Distance Telephone Co.) of Digitel’s Sun Cellular has sparked in Philippine business circles widespread fears of a new era of monopoly control in the telecommunications industry.

More than this,  the heightening public debate over the implications of the merger to fair and free competition in Philippine-style laissez faire capitalism has also focused attention on the phenomenal predatory takeover of more than a dozen of important Philippine business corporations by mega overseas conglomerates—in particular, the Hong Kong-based First Pacific Investments Corporation (MPIC).  The MPIC is chaired by Manuel V. Pangilinan, who holds court in Manila and, sometimes, in Hong Kong, as chairman of the PLDT, one of the leading companies in the Philippines, in which First Pacific has considerable investments. Incidentally, PLDT, is one of the oldest public utilities in the country. Its long reign of undisputed dominance has appeared to have fostered in the company, now presided over by Pangilinan, a sense of belief that it has the permanent right to rule this sector.

So alarmed is the Philippine political class over the economic penetration of the slew of First Pacific companies and its effect on the autonomy of the Philippine Republic that demands are mounting in Congress to put teeth to the country’s weak anti-trust regulations. Such move, its proponents say, should put a stop to the predatory corporate acquisitions by regional mega companies, the present-day reincarnation of the reviled Wall Street-based multinational companies, whose boards of directors were beyond the reach of the sovereignty of developing countries in which the MNCs had investments.

Against this broader background of concern over the economic penetration of corporations controlled by a mega parent/holding company, such as Metro Pacific, the issue of whether the merger of PLDT and Piltel is beneficial to telecom product consumers has taken secondary importance to the issue of whether the Philippine state is strong enough to curb the predatory activities of monopoly-motivated companies. This issue, basically about the power of the Philippine state to impose its authority, underlies the recent calls in Congress to strengthen the anti-trust regulations to stop pernicious practices “in restraint” of trade. It also prompted President Aquino to order the Department of Science and Technology and the National Telecommunications Commission to investigate whether the PLDT-Digitel merger has given undue advantages to it. The President wants to know from these regulatory agencies whether the merger would curtail competition.  Telecom industry sources have come up with the conclusion that the merger has not only consolidated PLDT’s monopoly in the industry, it also has reduced the industry to a two-way competition between the dominant PLDT-Smart combine (with its acquisition of Digitel’s Sun Cellular assets and facilities) and the second industry competitor, the Ayala-led Globe.

The dynamics and the mechanics of the transformation of the telecom market into duopoly after the merger have been amply explained by industry experts and contending parties (including the PLDT and Globe spokespersons), and my immediate concern is to call attention to the fact that the Aquino administration is now beginning to be aware that its capacity and political will to intervene in the merger are being put to a test. In his order signaling that the government has now decided to intervene to level the playing field in the telecom sector, the president, in particular, has called the attention of the  DOST and  NTC to complaints from other players in the telecom sector that they are being excluded from the field.

The President said, “The portion that I remember has to deal with the allocated frequencies being adjacent to each other providing an undue advantage. It seems that costs will be severely cut by this purported merger that nobody else would be able to compete.”

The President issued the order after government regulatory agencies (such as the NTC) appeared inert and reluctant to assert their regulatory powers under the law, as if waiting for a cue from the President on whether to preempt initiatives taken by PLDT to push the merger, with the least intervention by the government.

The most important development in this intervention is that the President has given an indication to the government regulatory agencies and to the Metro Pacific and PLDT conglomerate that he is not staying on the sidelines while mayhem is taking place in the disturbed balance in the telecom sector. From his own commanding heights in the Metro Pacific and PLDT executive suites, Pangilinan, the imperious overall chief of the conglomerate,  has pushed the monopolistic merger, brushing aside norms of fair competition, and apparently believing that the Philippine state is non-existent. Unfortunately for him, the President of  the Republic has the last word. At last, the normally phlegmatic head to state, remembered a pledge he made in his first State of the Nation Address. He said,  “Bawal ang monopolya, bawal ang mga cartel na sasakal sa kumpetisyon.  Kailangan po natin ng isang Anti-Trust Law na magbibigay buhay sa prinsipyong ito.”

Pangilinan, take heed. Metro Pacific does not own or run this country.