Government to study implications of SC ruling

By Mia M. Gonzalez and Lenie Lectura, Business Mirror

Posted at Jul 20 2011 07:00 AM | Updated as of Jul 20 2011 03:00 PM

MANILA, Philippines - The country’s economic managers have asked the government, through the Office of the Solicitor General (OSG) to study the legal, financial and economic implications of the Supreme Court ruling on Philippine Long Distance Telephone Co. (PLDT) to see what the government can do to address it, if needed, Budget Secretary Florencio Abad said on Tuesday.

In an interview, Abad said the country’s economic managers have raised their concern about the ruling in terms of deterring potential investments in the country, which the government wants to avoid.

“Definitely, the economic managers raised a concern about that insofar as creating inhibitions on the part of investors to come in, but we’ve asked a group of lawyers to update us on the legal implications of that ruling,” he said.

Abad said the OSG will determine “what this ruling means and what are its implications.”

“Of course, implications are legal, but the implications are also financial and economic, so they’ll have to come back to us so that we can have a more rounded view. And then find out, look at what’s the upside and what’s the downside, and what can we do with respect to the downside,” he said.

Asked about the fears of the Philippine Stock Exchange (PSE) that the ruling, if not modified, could cause the loss of P630 billion in foreign investments, Abad said “the uncertainty, and a prolonged one, creates a disincentive for investors” which is why “we want to clarify that and settle that issue once and for all.”

“For businessmen, for as long as the rules of the playing field are level and clear, at least they know what they are up against. So it’s the uncertainty that we want to avoid,” he said.

Malacañang declined to comment on the concerns expressed by PLDT Chairman Manuel V. Pangilinan—that the ruling may lead to economic collapse—and the PSE, as the case is pending before the Court.

“We will leave that with the Supreme Court,” said Presidential Spokesman Edwin Lacierda.

Meanwhile, at the National Telecommunications Commission (NTC), PLDT and Globe Telecom Inc. on Tuesday traded barbs on frequency bandwidth allocation.

Globe insists that the deal between PLDT and Digital Telecommunications Philippines Inc. (Digitel) will result in “excessive” frequencies, which will consequently lead to a monopoly of the country’s frequency spectrum.

A witness presented by Globe during a public hearing conducted by the NTC said in terms of the 3G (third-generation) spectrum alone, the PLDT group, including Digitel, will have control over 45 MHz (megahertz), or about 56% of the total assignable spectra for 3G—more than enough for 35% of the Philippine population to use mobile Internet simultaneously via the 10,316 2G and 3G base stations of PLDT’s mobile arm, Smart Communications.

But PLDT said Globe failed to prove its allegations that PLDT has an “excessive” amount of radio frequencies and that Globe should be given an additional 20 MHz of frequencies, said Ray C. Espinosa, PLDT regulatory and policy affairs head.

“If anything, the testimony of engineeer Emmanuel Estrada, the head of network technologies strategy division of Globe, has bolstered PLDT’s position in the matter of radio frequencies,” Espinosa said.

Estrada testified that PLDT had more frequencies than it needed to serve its subscriber base. Under questioning, however, Estrada admitted that PLDT is more efficient in using its frequencies. His own computation revealed that PLDT has a subscriber to frequency ratio of 728,000:1 MHz versus Globe’s 650,000:1 MHz.

For Espinosa, this supports PLDT’s assertion that PLDT/Smart “is the most efficient cellular operator in terms of utilization of radio spectrum as measured by the number of subscribers being served per megahertz of frequency.”

Globe went on to claim that PLDT-Smart-Digitel’s thrust to gain substantial spectrum holdings creates a “stock-out” scenario in the telecommunications industry in terms of available spectrum.

“This then makes any existing competitor or a future one at that unable to compete cost-effectively,” Estrada explained. “Any new entrant will take some time before it can be a formidable competitor to a giant incumbent like PLDT-Smart-Digitel. With a new entrant still years away from becoming a viable competitor to PLDT-Smart-Digitel, government must assign at least an additional 10 MHz of 3G spectrum to Globe for it to become a more effective competitor. Effective competition translates to better and more affordable services to consumers.”

But according to PLDT, Estrada confirmed that Globe has a dominant 70% share in the 900 spectrum, owning a total of 17.5 Mhz, compared to Smart’s 7.5 MHz.

Digitel wasn’t even allocated by the NTC frequencies in the 900 band.

Because of their characteristics, sub-1000 frequencies like those in the 900 spectrum, are superior in terms of providing wider coverage than the frequencies in the higher bands. “Because of this, operators who do not have 900 bands, like Digitel or less of it like Smart, have to spend more on infrastructure to expand their reach,” said William Pamintuan, Digitel’s senior vice president for legal services.

“Digitel has no frequency allocation in the 900 band requiring it to build more cell sites in order to widen its coverage, but did we complain?” Pamintuan asked during the hearing.

Estrada, during the hearing, also admitted that the 900 band could be used for both 2G and 3G applications and furthered that Globe had 45MHz in the 2500 band, with 15Mhz under Globe subsidiary Innove and another 30Mhz through its acquisition of Altimax which he said took place in 2009.

“These statements from Estrada demolish Globe’s claims that it does not have enough 3G frequency to support future growth in the broadband business. They do have the frequencies but they do not wish to use it. Instead, they want to arrogantly take those assigned to PLDT. If Globe wants additional frequencies, then they should like everyone else apply with the NTC,” Espinosa said.