With the affirmation by the Philippine Competition Commission of Enrique Razon’s acquisition of 25 percent common shares and 51 percent voting rights of Ayala’s Manila Water Co., Inc., the once-embattled water concessionaire in the east zone, is now duly protected from Duterte irreverence and threats.
In concurring with the merged entity, the PCC’s Mergers and Acquisitions Office said it found no substantial lessening of competition in the market of the supply of raw water to the East Zone, which covers Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, parts of Quezon City, Manila, and portions of Rizal.
Natural Monopoly
The PCC described it as a “natural monopoly” allowed by law through regulation.
The company has a concession agreement with Metropolitan Waterworks and Sewerage System (MWSS).
“However, the PCC found that customer or input foreclosure is unlikely given that the arrangement is meant to service the East Zone even beyond the lifetime of Manila Water’s concession.
“Such foreclosure is deemed unlikely by PCC since operations – including the procurement, development, allocation, rate rebasing, and other supply-and-demand dynamics in the water sector – are highly regulated by MWSS.”
Razon’s Trident Water is a subsidiary of Prime Metroline Holdings, whose range of business interests span hotel and gaming operations, mining, infrastructure, power generation and distribution, and port services.
Takeover Threat
Last December, Duterte threatened to take over the water concessions of Ayala and MVPangilinan’s Maynilad Water Services after being advised about the so-called onerous agreements to the concession agreements that former President Gloria Macapagal Arroyo extended for another 25 years.
A respected foreign magazine pointed out that the Feb. 3 decision of Ayala to sell 25 percent of the company to Razon is meant “to seek cover from the unrelenting hostility of President Duterte.”
Razon disclosed to the PSE that he acquired 820 million common shares in Manila Water for P10.7 billion, but Ayala remains a shareholder with 38.6 percent.
Asia Sentinel said “Razon is no enemy of the president, but he is not particularly an ally either and operates with a pretty wide degree of independence. He is rich enough to be one of the few power players that the president will be unlikely to cross.”
Razon is now one of the richest men in the country.
Telcos Next
Manila Water spent more than P166 billion (US$3.27 billion to install 5,500 km of pipes, built 2 new filter plants, 32 new reservoirs, 113 pumping and booster stations, 40 additional wastewater treatment facilities and quintupled the size of the sewer network, expanding water service to cover 93 percent of the area, serving more than 7 million people.
This includes an additional two million customers from the poor and marginalized sector, who used to buy vended water in buckets or pails delivered by vendors in pushcarts,” the company said.
With Manila Water now effectively shielded politically by Razon, the Ayalas should still contend with the president’s ire over alleged corruption in the lease of the land at the University of the Philippines Next step: telcos With Manila Water now protected by Razon, the Ayalas must look for other mergers and acquisition schemes for its Globe and the UP-land lease, which Duterte described as flawed.
The President in his 5th SONA last July gave Globe and Smart until December this year to improve their services for the benefit of customers or face foreclosure, nee confiscation, of their operations.
Asian Firms
Globe’s partner is Singapore Telecom, one of the most respected Asian companies in the industry and whose treatment will be widely noted in Singapore and beyond.
Ayala has long been recognized outside the Philippines as well as locally as the most stable, least politicized large group in the country, said the Asian Sentinel.
Smart’s parent PLDT is linked closely to Metro-Pacific and hence to the ASEAN-spanning Salim group of Indonesia, once a product of Suharto’s cronyism but today a professionally managed conglomerate.
Its head, Manny Pangilinan is one of the best known and respected businessmen in the country, and beyond.
A Step Closer
Congress’ approval Tuesday of a 25-year franchise to Dito Telecommunity, founded by Duterte’s campaign funder, Dennis Uy from Davao City, brings Uy a step closer to acquiring either Globe or Smart come December, if any or both of them fail to meet Duterte’s approval.
Uy’s partner in Dito is state-owned China Telecom. Dito Telecommunity—nee Mindanao Islamic Telephone Company—is late in most of its deadlines in the timetable set forth by the government, including the “technical audit” that was scheduled for July 8 to confirm that its physical network was in place and ready to operate, which is now pushed back to January 2021, since only a fourth of its planned towers had been built.
The company hopes to be ready by Duterte’s next birthday, March 28, as it races to fulfill its promise of a “world class” telecoms service.
China Connection
Once confined to oil terminals and marketing mainly in Mindanao, his alliance with Beijing’s China-ASEAN Investment Cooperation Fund enabled him to buy Negros Navigation, a long-established shipping company previously owned by the Aboitiz group and renamed 2GO Group.
Since Duterte’s election, Uy has also acquired rights for a casino in Cebu and development rights at the Clark Global Freeport Zone, adjacent to Clark airport.
He has massive plans for hotels, offices and a university and acquired a national telecom license.
Postscript
I wonder why is the government machinery in a frenzy to approve franchises, permits for mergers and acquisition and paperwork legitimizing the operations of the crony companies of the president?
I suspect, as most others do, the President is not well. (This was the same scenario when the late strongman Marcos was on his sick bed and the cronies were gobbling up businesses right and left).