(First of two parts)
WHERE would Philippine Long Distance Telephone Co. (PLDT) be today without the First Pacific group of Hong Kong and NTT Group of Japan?
Nobody knows for sure.
Would PLDT have Smart Communications Inc. as a wholly owned subsidiary when it already owned Pilipino Telephone Corp.?
Again, nobody would know.
Even the performance of PLDT common shares listed on the Philippine Stock Exchange would have been uncertain. The stock’s price could have gone either way: Down the drain or up as PLDT continues surging, climbing to a 30-day high of P3,290.
Or again, you could only presume that even without First Pacific and NTT, PLDT would have made good in the market. But improving its services would be in doubt.
Everything though was and still is unpredictable.
Many, many years ago, even after Manuel Pangilinan took over, PLDT was a good buy if the stock fell below P1,000, a price which would never come back.
Thanks to foreigners.
But then, the Philippines has been blessed by patriotic framers of the Constitution who chose to give Filipino control of partially nationalized industries.
From the 1935 Constitution to the one drafted after the Marcos era, nationalism prevailed: Filipinos should own the majority of the businesses that are so covered by the constitutional restriction.
The Supreme Court ruling in 2011 and 2012 did not change said ratio of ownership. As the final arbiter on the question of law, it found foreign equity in PLDT to have breached the 40-percent limit, and ordered the Securities and Exchange Commission (SEC) to make its own investigation and computation.
Recently, the SEC issued a guideline that adopted the Supreme Court computation but minus the court requirement that in determining at least 60-percent Filipino control, a company should compute each class of shares separately.
“In short,” the High Court said, “the 60-40 ownership requirement in favor of Filipino citizens must apply separately to each class of shares, whether common, preferred nonvoting, preferred voting or any other class of shares.”
Complying with the guidelines on foreign ownership issued by the SEC on May 20, 2013 may not be easy. The SEC even shortened the timetable for compliance to only one year, which it had earlier set at five years, which it found too long.
Has the SEC adopted the individual computation of each class of shares as the High Court had ordered, attracting foreign investments would not be an easy task.
Signed by Chairperson Teresita J. Herbosa, SEC Memorandum Circular No. 8 laid down the formula in computing the 60-40 ratio of ownership between Filipinos, who, the law says, should be in control, and foreigners limited to 40 percent.
If you are a foreigner and would want to know how much money he needs to invest in, say Company A, in which you could only own 40 percent, you may want to know how the SEC, as securities regulator, would explain to you such ownership limit.
Well, the SEC would point to you Section 2 of its circular which provides that the constitutional requirement should be applied to both “the total number of outstanding shares of stock entitled to vote in the election of directors and the total number of shares of stock whether or not entitled to vote in the election of directors.”
At this point, the SEC seems to be testing the mathematical genius in corporate lawyers.
But the computation provision in SEC’s circular would be better explained by citing the ownerships structure of a listed company, which is not PLDT, but Globe Telecom Inc.
The outstanding capital stock of Globe Telecom consists of 132.413 million common shares of which Singapore Telecom International Pte. Limited owns 62.646 million, or 47.31 percent, and 158.515 million voting preferred shares, which are all owned by Asiacom Philippines Inc., in which Ayala Corp. owns 60 percent and SingTel 40 percent.
In addition, foreigners indirectly own 21.871 million shares, or 16.52 percent, lodged with PCD Nominee Corp. Together, SingTel and unnamed foreigners who are PCD clients, combine for 84.517 million common shares, or 63.828 percent of common shares.
Do these numbers and the result of the computation make Globe Telecom a law violator?
The answer is yes and no.
It would be yes, if the basis would be the Supreme Court ruling that the computation of 60-40 ratio of ownership in favor of Filipinos should be applied to each class of shares.
And it would be no, if the High Court’s ruling that Filipinos’ 60-percent control and 40-percent foreign ownership limit should be based on all voting shares.
Luckily for Globe Telecom, the High Court and the SEC allow the dilution of foreign ownership of common shares exceeding 40 percent by the issuance of voting preferred shares. Including 158.515 million voting preferred shares held by Asiacom, Globe Telecom would have 290.928 million voting shares.
Recomputing by dividing 84.517 million, Globe Telecom common shares held by SingTel and PCD by 290.928 million voting shares equals 29.050 percent, a percentage way below the 40-percent foreign ownership threshold.
Globe Telecom needs to sell 31.851 million voting shares to reach 116.371 million shares, which represent 40 percent of the company’s 290.928 million voting shares. (to be continued on Friday)