ABS-CBN, ABS-CBN Convergence seek dismissal of quo warranto petition

Mike Navallo, ABS-CBN News

Posted at Feb 24 2020 10:09 PM

MANILA – ABS-CBN Corp on Monday asked the Supreme Court to dismiss the quo warranto petition Solicitor General Jose Calida filed against its franchise and that of its subsidiary ABS-CBN Convergence. 

In a 56-page submission, ABS-CBN and its telecoms unit also asked the high court to junk the Solicitor General's plea for a temporary restraining order against KBO, its pay-per-view channel.

KBO OPERATION HAD PERMITS

KBO’s operations is one of the grounds cited by the OSG in its petition to revoke ABS-CBN’s franchise since it supposedly violated ABS-CBN’s obligation to air without fees on a free-to-air frequency.

But ABS-CBN said it obtained the necessary permits and authorization from the National Telecommunications Commission before it launched its operations, contrary to the claim of the OSG.
 
It showed letter-approvals from NTC as well as an opinion from the Department of Justice expressly authorizing it to offer pay-per-view.

It clarified that when KBO started, it was not part of the free channel offerings of TVPlus, its digital terrestrial service, as it was a value-added service for ABS-CBN Mobile under Convergence.

But when ABS-CBN Mobile folded, KBO continued to be offered on TV Plus on the strength of the 2018 DOJ opinion which said:

“We find it clear enough that broadcast companies can engage in Conditional Access (CA) or Conditional Access System (CAS) and, for the same reason can offer TV pay-per-view services…There is nothing in said provisions that would give any impression that ‘commercial purposes’ are limited only to income derived by TV broadcast companies from paid advertisements.”

Justice Secretary Menardo Guevarra affirmed this opinion during the Senate hearing on ABS-CBN’s franchise renewal at the Senate Monday afternoon.

In its quo warranto petition, the OSG had claimed that the NTC ordered ABS-CBN to refrain from offering PPV in April 29, 2015, which it supposedly reiterated in a May 14, 2019 order.

But ABS-CBN clarified that the May 14, 2019 NTC order cited by the OSG, on the contrary, allowed ABS-CBN to offer CAS subject to guidelines that the NTC may issue in the future.

It said that the prohibition cited by the OSG was only a recommendation by the NTC’s Broadcast Service Division which was not adopted in the resolution.

The resolution said: “The use of Conditional Access System (CAS) on DTTB service shall be subject to such Conditional Access guidelines that the Commission or any relevant govt agency may hereafter issue.”

NTC has not issued any guidelines up to now but ABS-CBN said that doesn’t mean it cannot offer PPV.

It noted, that if there were alleged violations, the penalty is only a fine of P200 and not the revocation of franchise.
 
CONVERGENCE DID NOT VIOLATE THE LAW

ABS-CBN refuted allegations it illegally purchased the franchise of Multi-Media Telephony, Inc. (MTI) (now known as ABS-CBN Convergence) through a subsidiary without congressional approval and through an intricate web of corporate layering.

It said the controlling interest of MTI remained with another entity, Columbus, even if ABS-CBN’s subsidiary Sapientis subscribed to 70% of Columbus’ increased capital stock.

The transfer of the shares, it said, also did not constitute a transfer of Convergence’s legislative franchise which would have required Congressional approval.

Convergence also defended itself against allegations it failed to offer 30% of its outstanding capital stock to the public, saying it was legally impossible for it to qualify to be listed in the Philippine Stock Exchange having suffered annual losses from 1997 to 2018. In 2018 alone, it recorded a total loss of P165 million and a capital deficiency of over P6 billion.

One of the requirements for PSE listing is cumulative consolidated earnings of at least P50 million for 3 years.

ABS-CBN HOLDINGS’ PDRS DID NOT GIVE BENEFICIAL OWNERSHIP TO FOREIGNERS

Addressing questions about alleged foreign ownership through issuance of Philippine depository receipts (PDRs), ABS-CBN insisted the PDRs are not proof of ownership of shares but are mere securities or equity derivatives.
 
The OSG claimed foreign PDR holders are granted indirect beneficial ownership to foreigners because they receive dividends and supposedly have the power to dispose or direct disposal of the security.
 
But ABS-CBN said PDR holders are not granted rights of shareholders such as the right to vote and be elected and they have no right to sell the share, select the buyer or decide on purchase price. They are only entitled to cash distribution and additional PDRs, it explained.

“Not being shareholders of ABS-CBN, they cannot demand ABS-CBN to declare dividends, or claim such dividends directly from ABS-CBN. Instead, PDR Holders are granted only the right to distribution from ABS-CBN Holdings of the amount remaining after the expenses and other obligations of ABS-CBN Holdings are paid,” it said.

ABS-CBN pointed out, the PDRs were approved by the Securities and Exchange Commission.

PRESS FREEDOM ISSUE

The media conglomerate said the grounds invoked by the OSG “do not justify the overkill penalty of revocation or forfeiture” of its franchise.”

Instead, what is at stake is its right to freedom of the press and of speech.
 
“Granting the Petition means shutting down what the Republic concedes to be the country’s ‘largest media conglomerate… reaching millions of viewers in all corners of the country’ and the ‘biggest broadcasting entity… able to shape the public’s opinion on a variety of issues, apart from providing entertainment.’ This case, therefore, cannot be resolved without ‘compromising’ the ‘fundamental guarantees of freedom of speech and of the press,” it claimed.

QUO WARRANTO STRAIGHT TO SC NOT PROPER REMEDY

ABS-CBN also argued that a quo warranto petition before the Supreme Court is not the proper remedy since the 1997 Rules of Court limits the filing of quo warranto petition only to actions involving usurpation and not misuse of its franchise.

The proper venue to raise violations of the franchise, it said, is in Congress which granted the franchise.

Supreme Court magistrates are expected to meet on Wednesday for their weekly en banc session where they could decide the next steps for the quo warranto petition as well as whether or not to issue a gag order, as prayed for by Solicitor General Jose Calida.