Philippines may lift foreign ownership caps on telcos
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The Philippines government is considering lifting foreign ownership restrictions on local telecoms companies and other utilities to help stimulate the industry.
The government has proposed to raise the current cap limiting foreign direct ownership to 40% of a utility company up to 70%. While the economic planning ministry believes the change could be implemented with the passing of a new law, the 40% cap is enshrined in the constitution and some analysts believe lifting the cap would require a constitutional amendment, which would be very difficult to pass.
The Philippines’ duopoly of telecoms operators are both part owned by foreign investors. PLDT is around 25% owned by Hong Kong based First Pacific and Globe Telecom is 20% owned by Singtel and operated as a joint venture with Ayala Group.
Philippines president Rodrigo Duterte has been firmly calling or the telecoms industry to improve services for Filipinos, and has threatened to bring in new competition to improve competition and quality. He has also asserted that foreign investment is needed to improve the Philippines’ telecoms sector.
Duterte is scheduled to deliver his second State of the Nation Address today.
Questions & Answers
Q.What is the proposed new limit for foreign direct ownership in Philippine utility companies?
What is the proposed new limit for foreign direct ownership in Philippine utility companies?
The government has proposed increasing the current cap on foreign direct ownership to 70%. This is a significant rise from the existing limit of 40% for utility companies.
Q.Why do some analysts think lifting the foreign ownership cap will be difficult?
Why do some analysts think lifting the foreign ownership cap will be difficult?
Some analysts believe lifting the 40% cap would require a constitutional amendment. This process is generally considered very difficult to successfully pass, presenting a major hurdle.
Q.What is President Duterte's motivation for potentially changing foreign ownership rules?
What is President Duterte's motivation for potentially changing foreign ownership rules?
President Duterte wants to improve telecoms services for Filipinos and increase competition and quality. He believes foreign investment is necessary to achieve these improvements in the sector.
Q.Which foreign companies currently have ownership stakes in Philippine telecoms operators?
Which foreign companies currently have ownership stakes in Philippine telecoms operators?
Hong Kong-based First Pacific owns approximately 25% of PLDT. Singtel holds a 20% stake in Globe Telecom, which operates as a joint venture with Ayala Group.