SolGen Calida’s 63-page Quo Warranto Petition vs. ABS-CBN, in a nutshell » Manila Bulletin News

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  SolGen Calida’s 63-page Quo Warranto Petition vs. ABS-CBN, in a nutshell

Updated

THINKING PINOY

By RJ NIETO

NIETO

RJ Nieto

I have yet to find a single mainstream media article that attempts to summarize the 63-page Quo Warranto petition Solicitor General Jose Calida recently filed against media conglomerate ABS-CBN and its subsidiary ABS-CBN Convergence, so let me take a jab at it.

The Office of the Solicitor General (OSG) raised four major issues against ABS-CBN, and these are:

FIRST, that ABS-CBN violated its broadcasting franchise under RA 7966 when it used a free-to-air frequency to run its digital pay-per-view (PPV) TV channel Kapamilya Box Office (KBO).

ABS-CBN in March 2015 launched PPV channel KBO, then in early April 2015 asked NTC for permission to offer the Pacquiao-Mayweather match on PPV. Later that month, NTC told ABS-CBN to refrain from offering PPV TV until relevant guidelines have been created.

Despite this, OSG said ABS-CBN continued to offer PPV up to this day, such as the recently launched KBO99 promo, where viewers pay 99 pesos to watch movies. There are still no existing guidelines for Digital TV-based PPV up to this day, so ABS-CBN is still forbidden from offering PPV today.

OSG said this violates Section 3 of RA 7966, which requires ABS-CBN to secure prior approval from NTC, i.e., NTC permits and licenses.

SECOND, that ABS-CBN Convergence violated its telecoms franchise under RA 7908 (as amended by RA 8332) when the ownership of RA 7908’s original grantee was transferred to ABS-CBN Convergence without congressional approval.

Multi-media Telephony Inc (not a Lopez company) is RA 7908’s original grantee. Through a series of acquisitions, ABS-CBN eventually became the owner of Multi-Media Telephony and, by extension, its franchise. ABS-CBN uses this telecoms franchise to operate ABS-CBN TV Plus.

OSG said these transfers of ownership had no congressional approval, and OSG went on to argue that this violates Section 15 of RA 7908 (as amended by RA 8332), which requires prior approval from Congress before transferring ownership of the franchise.

THIRD, that ABS-CBN Convergence (again) violated its franchise under RA 7908 (as amended by RA 8332) when it failed to publicly offer stocks in a local bourse, as required by the franchise.

OSG said ABS-CBN Convergence has yet to offer any outstanding capital stock in any local stock exchange in the Philippines, contrary to the requirement in Section 16 of RA 7908 (as amended by RA 8332), which requires ABS-CBN Convergence to offer at least 30% of its capital stocks to the public.

FOURTH, ABS-CBN’s issuance Philippine Deposit Receipts (PDRs) violates the constitutional ban on foreign ownership of Mass Media.

The constitution limits ownership and management of mass media to Filipinos, and ABS-CBN is a mass media company. To get more funding, ABS-CBN issued PDRs, a type of security that entitles the bearer to the dividends of its corresponding stocks but not the ownership of those stocks. ABS-CBN went on to sell billions of pesos’ worth of these PDRs to foreigners like Prudential Singapore Holdings and the US-based Capital International Private Equity.

The OSG, however, argued that non-Filipino PDR holders have a right to ABS-CBN’s cash flow, which it can use to exercise some degree of control over ABS-CBN’s operations. The OSG basically said that the PDR is a legal fiction that was created to skirt ownership restrictions.

Now that I’ve provided a rundown of the four main issues, here’s what the OSG specifically requested four things from the SC (prayers):

First is the immediate issuance of a temporary restraining order on KBO’s operations, being that KBO has no NTC permit in the first place.

Second is the forfeiture of the ABS-CBN’s RA 7966 broadcast franchise. This affects ABS-CBN’s TV and Radio operations, which include Channel 2 and DZMM.

Third is the forfeiture of ABS-CBN Convergence’s RAs 7908 and 8332 telecoms franchise. This affects ABS-CBN TV Plus.

Fourth is to make the TRO on KBO permanent, i.e., OSG wants SC to shut down KBO for good.

Curiously, the OSG didn’t ask the SC to rule on whether PDRs are a form of ownership and/or control. While the SC may still comment on PDRs, the absence of a PDR-related prayer may give the SC an excuse to avoid saying too much about the touchy topic of PDRs.

Many Filipino companies issue PDRs, most of which are in industries with foreign equity restrictions.

 

With that said, is the absence of a PDR-relayed prayer an attempt at avoiding collateral damage? Or better yet, is it the Administration’s way of telling the Lopezes that while they can’t fight City Hall, City Hall is still giving them one last chance at negotiating an amicable endgame?

Only time will tell.

 

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