Just recently, the Securities and Exchange Commission (SEC) ordered Vega Telecom Inc. to suspend its tender offer to minority investors in Liberty Telecoms Holdings Inc. originally set last Sept. 21, until having clarified the reassignment of coveted frequencies thought to have eroded the listed company’s share value.
SEC ordered Vega Telecom to submit an amended tender offer report, one that discusses the reassignment of certain frequencies, among others, five business days before it can recommence the offer not later than Oct. 17. The new offer period should provide reasonable time to the tendering shareholders to evaluate or assess the amended and/or additional information, the SEC said.
A report by BusinessWorld said SEC’s markets and securities regulation department also asked Vega Telecom to discuss the circumstances surrounding the reassignment of the 723-738/778-793 and 2555-2595 bands from Liberty Telecoms’ subsidiary Tori Spectrum Telecom Inc. to affiliate Bell Telecommunications Inc., as well as the consideration received from the reassignment and how the frequencies were reflected on its financial statements as well as financial operations and results before and after the transaction.
Vega Telecom was also ordered to discuss in detail the unified rollout plan of Tori Spectrum and affiliates BellTel, Express Telecoms Co. and Hi Frequency Telecommunications, Inc. in the amended tender report. This was after Vega’s parent San Miguel Corp. (SMC) had explained that the reassignment of the frequencies from Tori to BellTel formed part of plans to roll out a unified telecommunications network.
The reassignment was not disclosed until Vega Telecom initiated a voluntary tender offer to minority shareholders of Liberty Telecom pursuant to its takeover by PLDT and Globe from SMC.
According to the BusinessWorld report, analysts had expected Vega Telecom to price its tender offer around P5 per share, considering that Liberty Telecoms owned the coveted frequencies. The assets, it turned out, were transferred to BellTel as early as March 2015. Vega offered P2.20 per share.
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SMC said in a letter to the SEC dated Sept. 8, 2016 that it considered the assignment of frequencies ‘soft information’ that did not have to be disclosed since its Unified Rollout Plan was never finalized or approved. It added that Liberty only allowed sister firms to co-use the asset approved by telecommunications regulators, and never transferred its ownership; and that the frequencies’ true monetary value was actualized only once Globe and PLDT bought it.
However, SEC is looking into reports that on February 10, 2015, BellTel specifically asked the National Telecommunications Commission (NTC) for the cancellation of the Frequency Assignment Sheets issued to Extelcom, Hi-Frequency and Wi-Tribe, and the consequent issuance to BellTel of new Frequency Assignment Sheets, which is contrary to the claim that the frequencies were co-used and ownership was never transferred to BellTel.
With regard to the value of the frequency, observers argue that frequencies can be assigned values. In fact, unused frequencies or spectrum are being auctioned off. Analysts such as Australia-based Creator Tech in fact valued SMC’s 700 MHz frequencies at close to P70 billion when talks between Telstra and SMC were ongoing last year.
In the BWorld report, it was noted that aside from annual and quarterly reports, the SEC requires the submission of “current reports on significant developments” deemed necessary to keep information on the operation of the business and the financial condition of security issuers updated. The Philippine Stock Exchange (PSE) adopts the same reportorial requirements, particularly asking issuers to “promptly make available all information, through the submission of structured and unstructured disclosures, that would enable a reasonable investor to determine whether to buy, sell or hold securities, or in connection with the exercise of related voting rights.”
Both PSE chief operating officer Roel Refran, and the SEC’s officer in charge of the Office of the Commission Secretary Amando A. Pan Jr. confirmed that a review is ongoing. The SEC’s Markets and Securities Regulation Department (MSRD) in particular, is probing the supposed failure of Liberty Telecoms to disclose the information to the investing public.
It is only right that the PSE and SEC look into Liberty Telecoms’ alleged non-disclosure of the reassignment of its radio frequencies to BellTel and if indeed, it is considered material information that could significantly affected shareholder value.
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