Nextel bares local conduits in acquisitions

Trunk radio operator Nextel International, Inc. (NII) has admitted to the United States Securities and Exchange Commission (US SEC) that it used several Philippine-registered companies to acquire some 59-percent majority stake in its local managed operating company Nextel Philippines.

Nextel is currently facing a major investigation by the National Telecommunications Commission (NTC) on charges that it violated the cap set by the Philippine Constitution on foreign company of utilities.

Nextel admitted to the US SEC that it raised its stake from 40 percent to 59 percent in the local company in its so-called 10-K report. Nextel explained that is acquisition of the majority stake in Nextel Philippines "has not only increased our economic interest but also our ability to participate in the business and strategic development of this (Nextel Philippines) company." The 10-K report is mandatory annual disclosure filed by publicly-held companies in the US.

In its other disclosure to the powerful regulatory agency, NII showed the US SEC that the companies involved in the acquisition of stakes in the local Nextel are wholly-owned NII subsidiaries.

These are Emerald Investments, Inc. and Foodcamp Industries and Marketing. Orient Holdings Ltd., Top Mega Enterprises and Joyce Link Holdings Ltd., on the other hand, are Hong Kong-registered firms.

The NTC is currently probing allegations that NII used its subsidiaries Top Mega and Orient to acquire capital stocks in Emerald and Gamboa, another Filipino firm. Gamboa and Emerald, in turn, acquired the shares in the local Nextel, which belonged to three companies: Gotesco, Jetcom and Foodcamp.

Emerald and Gamboa are majority owned by ACCRA Investments Corp. and ACCRAIN Holdings Corp., respectively.

Since Top Mega and Orient are foreign companies, the NTC is investigating whether their 40-percent ownership of Gamboa and Emerald have significantly diluted local stake in Nextel Philippines to only 40.92 percent.

The NTC is also investigating allegations that funds used by Gamboa and ACCRAIN for its acquisition of Nextel Philippines shares came from NII and was released through a local bank in the form of loans.

NII admitted to the US SEC that the scheme it used to acquire majority stake in the local Nextel could face legal sanctions in the Philippines.

"There can be no assurance that the transactions will not be subject to legal challenge," NII admitted to the US SEC.

NII also admitted that it is currently facing legal action in several Latin American countries, such as Chile, Brazil and Argentina.