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The Philippines’ House of Representatives last night ratified changes to the Public Service Act, making it easier for foreign investment in the nation’s telecoms players
In the years since the emergence of the coronavirus pandemic back in 2020, the world’s reliance on telecoms networks has only increased. Data traffic continues to surge, and discussions are beginning to arise as to whether connectivity should be viewed as a utility, akin to water, electricity, and gas.
But while this definition merely a matter of semantics for many of us, officially designated as a utility company can have significant ramifications in many markets around the world.
This is true of the Philippines, where, as part of the country’s 1987 Constitution, only companies that are at least 60% owned by Filipinos are allowed to own and operate as public utilities, theoretically leaving the nation’s crucial infrastructure under the control of its own citizens.
These regulations, part of the Public Service Act, have for years used a murky definition of the term ‘public utility’, meaning that telecommunications, as well as other sectors like aviation, have been forced to abide by these majority Filipino ownership laws.
Now, however, this Act has been amended, with the definition of public utility companies and public service companies being elucidated.
Under these new definitions, public utilities are designated as companies managing or otherwise controlling electricity distribution, petroleum distribution systems, and water or wastewater systems, as well as those managing airports, seaports, public utility vehicles, and tollways or expressways.
Public services, meanwhile, will include telecommunications, air carriers, domestic shipping, railways and subways. For these companies, limitations on ownership by foreign investors will no longer apply, potentially opening the door for major investment in the coming years.
The impact of this reform cannot be underestimated. The Philippines has one of the most restrictive economies in Southeast Asia when it comes to foreign investment, which supporters of the bill’s reform suggest has stunted the economy over many years.
“It’s a massive reform because it opens us to foreign capital. We need a lot of foreign capital. We have plenty of domestic talent, but they leave for abroad because the capital required to hire them is invested abroad," explained Joey Salceda, House Ways and Means Chair Rep.
For the telecoms industry, this amendment represents a sudden opportunity for large scale foreign investment, something which could help ease the burden of their expensive network rollouts. Philippine telcos PLDT and Globe Telecom have long been under pressure from the government to improve communications services around the country more rapidly, with President Duterte even threatening to close them down if they did not meet targets.
Nonetheless, both of these telcos have downplayed the bill’s importance, saying they had no real need for foreign investment at this time.
Newcomer DITO Telecommunity, which launched just last year, has responded much more favourably about the changes to regulations, suggesting that they would be open to further foreign investment.
“We do see it as positive that you are opening up investments in the telco space because as you can see with our conversations, for telco, you need huge investments,” said DITO Telecommunity chief administrative officer Adel Tamano. “If the local market cannot provide that money, then foreign investors really are needed,”
DITO is currently 60% owned by millionaire Filipino businessman Dennis Uy’s Udenna Corporation, with the remaining 40% owned by China Telecom.
Asked by media if China Telecom could now increase their stake in the business, Tamano said he could not answer categorically, since investors controlled or acting on behalf of foreign governments could be prohibited from increasing their stake.
“We are still studying it,” he said. “I think what I do want to say categorically is the 40 percent of China Telecom is unimpaired.”
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