PDRs: To ABS-CBN with love

"Here’s an expert on the matter."



(First of three parts)

Today being Valentine's Day, I will refrain from commenting on the Very Urgent Omnibus Motion filed by Solicitor-General Jose Calida against the giant media network ABS-CBN. Based on Rule 66 of the Rules of Court, the quo warranto petition seeks to nullify the franchise of the network for a number of violations resulting in the "unlawfully exercise" of the said privilege.

Coming as it does just over a month before the expiration of the network's legislative franchise, and as the House of Representatives where legislative franchises originate has drawn all kinds of comments, there are concerns and speculations from all kinds of people and groups to the point that the grounds raised in the petition have been unduly drowned out.

Calida accused ABS-CBN of committing "highly abusive practices benefiting a greedy few at the expense of its loyal subscribers" alleging in the process that while its franchise was for broadcasting "free TV/radio," it has been doing otherwise by operating a pay-per-view channel in ABS-CBN TV-Plus, KBO Channel without getting the necessary permits.

Likewise, the petition alleged that the company has "resorted to ingenious corporate layering to transfer its franchise to ABS-CBN Convergence Inc. without the necessary  congressional approval."

Finally, the petition alleged that the network has clearly violated Section 11, Article XVI of the 1987 Constitution which states "The ownership and management of mass media shall be limited to citizens of the Philippines or to corporations, cooperatives or associations wholly owned and managed by such citizens" with its issuance of PDRs­—Philippine Depository Receipts—to foreigners which, based on its latest financial report, constituted 22 percent of its shares. 

While the petition raised legally compelling issues indicating the network's violations of the terms and conditions attached to its franchise, it is the matter of PDRs which is of particular interest to keen observers of the scene. This is not only because of the novelty attached to such a financial instrument; instead it is the sneaky, ingenious way it was used to get around the constitutional prohibition.

In this regard, I have taken the liberty of devoting this space to a well written, scholarly treatise on the subject written by Lorenzo E. Delgado, editor-in-chief of The Bedan Review.

It is my hope that with this enlightening piece the public will have a clearer and better appreciation of the constitutional issue raised in this quo warranto case which, for all intents and purposes, is at the heart of this controversy. Here goes:

Philippine Depositary Receipts: Mass Media’s Existing or Emerging Loophole To Constitutionally Mandated Full Filipino Ownership? 

Quando aliquid prohibitur ex directo, prohibitur et per obliquum. What cannot be legally done directly cannot be done indirectly. If acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.

Need not be told that the State has and will always recognize the great importance of mass media in the stability and development of the nation. Mass media acts as “gatekeepers,” the determining factor that decides whether or not a message can successfully flow from the transmitter to the receiver. The State therefore has the duty to protect said industry, ensuring that the same is within the control of its citizenry and far from the fetching influence foreign control carries. 

With the current trend of customization and diversification of financial instruments to heed the need of investments and thus entailing ways and machinations to suit the wants and demands of potential and existing investors, Philippine corporations engaged in mass media sought the use of Philippine Depositary Receipts to obtain foreign investment without being under the sanction of violating the Constitution. 

Hence, will the issuance of PDRs to foreigners, regardless of its underlying shares and whether the same will be exercised or not, curtail the Constitutional mandate of total Filipino ownership in mass media? 

It is believed to be so. 

Regardless of different scenarios pertaining to the issuance of PDRs of mass media corporations to foreigners such as whether the underlying shares are entitled to vote or not and whether the said PDRs are exercised or not, the primordial consequence of which is that the said PDRs will enable foreigners to control mass media corporations, a situation which was sought to be prevented by the Constitution. 

Mass media corporations namely ABS-CBN, GMA and Rappler, even at the expense of recognizing the constitutional prohibition of foreign ownership in the industry of mass media, have acknowledged the ability of PDRs to obtain foreign investment, to wit: 

“The PDRs unlocked the share value of ABS-CBN, allowing foreigners to participate in a media enterprise whose ownership is constitutionally limited to Filipinos. With foreigners allowed to buy PDRs, ABS-CBN shares which have long been undervalued, can now play catch-up with regional media counterparts.”

“Holders of the PDRs will enjoy only the economic benefits of the shares underlying the receipts without voting and other ownership rights. PDRs will allow foreigners to invest in a media enterprise whose ownership is constitutionally limited to Filipinos.”

Continued on Monday

Topics: Jonathan Dela Cruz , ABS-CBN , Solicitor-General Jose Calida , House of Representatives , ABS-CBN TV-Plus , KBO Channel
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