• SEC sanctions Liberty over asset transfer

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    The Securities and Exchange Commission (SEC) has sanctioned Liberty Telecoms Holdings Inc. with a P346,000 penalty for not disclosing the transfer of radio frequencies to another company.

    The commission noted such transfer could have been detrimental to pricing of Liberty’s mandatory tender offer of shares.

    It was only in August that the SEC learned of the transfer as Liberty applied for a delisting with the Philippine Stock Exchange (PSE), which entails a mandatory tender offer.

    The transfer was made from Liberty’s Tori Spectrum Telecom Inc. to Vega’s Bell Telecommunications Inc. (BellTel) in March 2015. Albeit undisclosed that time, the transfer could be material to Vega’s P2.20 per share tender offer at present.

    In a disclosure to the PSE on Friday, Liberty said the SEC is demanding a P346,000 fine—to be settled within five business days. It said the SEC did not buy the excuse that the board of directors had no knowledge of the transfer which happened longer before co-acquisition of Vega by PLDT Inc. and Globe Telecom Inc. in May.
    The co-acquisition by PLDT and Globe amounted to P69.1-billion.

    The excuse was “without merit,” according to Liberty, citing the commission.

    Vega—now split between Globe and PLDT—earlier said it could not respond to the SEC’s concerns regarding the frequency transfer as the transaction “occurred long before the acquisition of Vega by PLDT and Globe” from parent San Miguel Corp. (SMC).

    The SEC’s Market and Securities Regulation Department “find the company’s explanation without merit due to the fact that this is a corporate liability and on the basis that the company should be made liable for all its corporate acts, notwithstanding that there was a change in management in accordance with the principle of business continuity and succession,” the SEC said.

    Parent SMC also presented its side to the SEC, saying that the transfer of frequencies under a Unified Rollout Plan “was never finalized, approved, and signed,” thus it was tagged as “soft information” that can “create an undue market speculation” if prematurely disclosed at that time.

    “[SMC’s explanation] is also without merit considering that there was already an approval by the NTC [National Telecommunications Commission] on March 17, 2015 of the reassignment of frequencies, and the corresponding frequency sheets had already been issued by NTC to BellTel on March 23, 2015 indicates that the information or fact of the reassignment is already considered a material fact which would reasonably be expected to affect the investors’ decisions in relation to Liberty’s shares,” the SEC said.

    The SEC probe into Vega’s pricing of Liberty’s tender offer shares stemmed from the queries of concerned stakeholders. The 165.883 million Liberty shares on offer were equivalent to the remaining 12.82 percent stake held by the public.

    Asked by the SEC, brokerage firms earlier determined the Liberty’s shares should be tendered at P5 apiece considering the frequencies were still managed by Tori Spectrum.

    Through the tender offer, Vega was buying out Liberty’s minority stakeholders making Liberty a wholly owned subsidiary of Vega that would allow the company to delist from the PSE.

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    1. The next step for the minority shareholders in my opinion is to file a complaint with the SEC against San Miguel Corporation (previous owner of Liberty Telecoms) for violation of “Appraisal Right” under the Philippine Corporation Code (Batas Pambansa Bilang 68, Title 10, Sections 81 and 82). The 700MHZ frequency assets though technically have a zero value in its books happens to be the most valuable asset of the company as proven by the sale to the Globe-PLDT consortium. Liberty Telecoms was stripped of its most valuable asset without compensation and consultation with the minority shareholders and thus the violation of “appraisal right”. The complaint should include the invalidation of the low tender offer.