The STAR earlier reported that Smart will be making an offer soon to acquire a majority stake in GMA 7 and hopes to have a deal finalized before May this year.
A highly placed source disclosed yesterday that PLDT and Smart want the acquisition to be a done deal before May or before the election of a new set of directors for the two companies.
Company officials told The STAR that contrary to what others are saying, Smart is a 100 percent Filipino owned company and is therefore allowed under the Constitution to engage in mass media.
They also emphasized that the company is ready to defend its plan against anybody and that it is confident that the law is in its favor.
Earlier, National Telecommunications Commission (NTC) chief Armi Jane Borje was quoted as saying that Smart cannot legally acquire GMA 7 since the former is owned by the Philippine Long Distance Telephone Co. (PLDT) which is not a Filipino company.
"PLDT is a Filipino company. PLDT wholly owns Smart and therefore, Smart is a 100 percent Filipino company," Smart officials said.
They also explained that the rule that governs the determination of whether or not a company is Filipino or foreign is the ‘control test‚’ recognized under the Foreign Investments Act and no longer the ‘grandfather rule‚’ on equity ownership which the Securities and Exchange Commission (SEC) has already discarded.
Under the control test, so long as a company is at least 60 percent Filipino owned, then it is Filipino. Applying this rule, PLDT is thus a Filipino company. Smart is 100 percent owned by a Filipino company.
GMA 7, reacting to a STAR report last Monday, said that neither PLDT nor Smart is qualified to buy any broadcasting company, since both companies are not 100 percent Filipino owned.
It said that this was the reason why Mediaquest Holdings, which is owned by PLDT employees, became the vehicle for the proposed acquisition of GMA in 2001. The country’s second largest broadcasting network also said that contrary to The STAR report, the owners of the network have not received any such offer from PLDT and/or Smart to acquire a majority stake in GMA 7 (although the report never mentioned that an offer has already been made. The report said that an offer was being prepared).
The network said it expects to register a net income of more than P1 billion for 2003 and may again surpass its nearest competitor’s profits for the second year in a row.
Smart officials said that both the contention of Borje and GMA that PLDT and Smart are not wholly owned Filipino companies were based on the old grandfather rule on equity and therefore no longer have legal basis.
PLDT and GMA in Feb. 2001 entered into a memorandum of understanding for the latter to acquire 66.67 percent of the network for P8.5 billion. PLDT, however,0 pulled out of the whole thing after its creditors expressed concerns over its ability to meet obligations that are maturing in 2002-2004.