This is a reply by PLDT to a letter published earlier this week by a US based investor. The original letter can be read by clicking the 'related article' at the bottom of this article.
Eyal Shram raises some good interesting points regarding the flawed decision of First Pacific to sell controlling shares of Philippine Long Distance and Telephone Company (PLDT) to a competitor. In particular, we agree with his fundamental point that the First Pacific-Gokongwei deal, "may not be a good deal for PLDT's minority shareholders, given my own impression of Mr. Gokongwei's past investment style." We also appreciate Mr. Shram's support of our President, Manuel V. Pangilinan's commitment to long-term shareholder value.
However, we would like to clarify a few misconceptions raised in Mr. Shram's letter.
First and most importantly, all decisions relative to the First Pacific - Gokongwei deal were made with the unanimous support of the PLDT board composed of independent-minded and objective individuals who take to heart their fiduciary duty to protect the best interests of PLDT and its shareholders. It is also worthwhile to note that the PLDT board contracted their own legal and financial advisors to insure that their decisions are based on independent and objective advice.
It is therefore unfair and inaccurate for Mr. Shram to state or insinuate that Mr. Pangilinan unilaterally made all the decisions "to block this deal" for his personal interests.
There are a few other misguided points that merit clarification:
+ Mr. Shram is worried that the First Pacific bid has distracted PLDT management from running the company. The first half performance of PLDT for the year 2002 should dispel any worries: PLDTÆs net income is up over 100 percent, cash expenses are down and the company has substantially completed its liability management program. PLDT remains to be the leader in the fixed line, wireless, Internet and satellite business and maintains its position as the countryÆs premiere communications company.
+ Mr. Shram says that PLDT has 'abused' the legal system. To the contrary, in a bid for greater shareholder transparency, PLDT simply asked a judge in New York to require First Pacific to disclose its Memorandum of Agreement with the Gokongwei Group. As a PLDT shareholder, Mr. Shram should realize he too benefits from the fair and full disclosure of information that PLDT requested from the courts.
+ Mr. Shram questions why Mr. Pangilinan is now using the anti-competitor clause to block the deal when he himself circumvented that clause when First Pacific bought PLDT while owning Smart Communications. It bears explanation that the Gokongwei situation is different from the First Pacific situation at that time. The First Pacific investment included a contractual commitment allowing PLDT to buy Smart thus enabling PLDT to own a successful wireless business. The by-law provision was introduced well after the completion of the Smart acquisition precisely to protect PLDT and its shareholders against any corporate raider or competitor. Mr. PangilinanÆs strategy to acquire Smart has started to bear fruit and is the main driver of revenue and growth for the PLDT Group today.
Finally, let us reiterate why we believe the best interests of PLDT's shareholders and its stakeholders reside with the present management of PLDT:
+ First PacificÆs flawed decision to sell control of PLDT to a competitor is NOT beneficial to all PLDT shareholders. It is only beneficial to First Pacific who in truth, directly owns less than 10 percent of PLDT. Every other shareholder, including Mr. Shram does not benefit from this deal. If the deal pushes through, Mr. Shram will get the Gokongwei Group as the new managers of PLDT, a scenario which he himself admits is not a reason for optimism.
+ We believe the present management has a proven track record in operating a telecommunications company and our financial and operational performance is testament to this.
PLDT is on track towards building one of Asia's finest telecommunication companies providing quality service to our subscribers and customers, while enhancing value for our shareholders. We are proud of this record and would like to assure Mr. Shram and all our shareholders that we will not waver on this commitment.
Finally, allow me to take this opportunity to thank FinanceAsia for awarding PLDT as the best company in investor relations, one of the top companies most committed to corporate governance and one of the best managed companies in the Philippines. We are honored that your prestigious publication and its readers believe in what the PLDT management has accomplished and will continue to accomplish in the years to come.
VP-Media and Strategic Communications
Philippine Long Distance and Telephone Company