Introduced bv Senator Ralvh G. Recto 
EXPLANATORY 
NOTE 
Providing public telecommunications services requires huge capital and 
investments to serve the nation's telecommunications requirements. Trends in the 
industry have shown that certain telecommunications entities acquiring or combining 
with other telecommunications companies are able to better serve the public due to 
economies of scale. 
Since some public telecommunications entities are already listed while others are 
not, a situation may arise where a listed public telecommunications entity acquires 
another telecommunications entity whose shares are not yet listed. In this case, 
independent of the listing of the shares of the parent company, the subsidiary is still 
required to offer a portion of its shares to the public. This may be so even if there is 
practically an identity of interests between the two companies as when one company 
owns and controls all or substantially all of the outstanding voting stock of another 
company. 
Ownership and control of at least two-thirds (2/3) of the outstanding voting stock 
of another company constitutes ownership and control of "substantially all" of the 
outstanding shares thereof because the parent company is in a position to exercise 
significant influence, if not control, over its subsidiary, including its strategic direction, 
policies, and business affairs. It also has the ability to elect a controlling number of 
directors to the board of its subsidiary. 
Where a listed company owns and controls all or substantially all of the 
outstanding voting stock of a telecommunications entity and its franchise or RA 7925 
requires an offering of a portion of its shares to the public, the subsidiary should be 
deemed to have complied with the requirement of a public offering of shares. The 
purpose of the law to disperse equity ownership should already be deemed complied 
with. Furthermore, there is an identity of interests between said companies and to require 
the subsidiary to +ke a public offering and listing of its shares will result to chainlisting, 
if not double listing. 
It should also be recognized that the parent company owning at least a majority of 
the voting stock of another company (the subsidiary) is required, under generally 
accepted accounting principles, to consolidate the revenues and profits of the subsidiary 
(less the attributable share of minority interests) into the financial accounts of the parent 
company. The value of the parent company would then take into account the earnings 
and financial performance of the subsidiary. 
Likewise, dividends declared by the 
subsidiary and received by the parent company to the extent of the its percentage 
shareholding in the subsidiary are indirectly distributed to the shareholders of the parent 
company when dividends are eventually declared by the parent company. Viewed in this 
light, it should be clearly appreciated that where the parent company is already listed and 
traded in the stock exchange, the public shareholders of such listed company already 
partake of the value and earnings of the subsidiary. Accordingly, it can be said with 
cogent basis that the public shareholders of the listed parent company, albeit indirectly, 


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also owns the same ownership interest that the listed parent company holds in the 
subsidiary. 
Under this proposal, the public offering requirement under Section 21 of Republic 
Act 7925 is deemed complied with where a listed company owns at least two-thirds (2/3) 
of the outstanding,voting stock of a public telecommunications entity even if the latter is 
not listed and traded in the stock exchange. 
In light of the foregoing, the approval of this bill is earnestly requested. 
In light of the foregoing, the approval of this bill is earnestly requested. 
A 


13‘h CONGRESS OF THE REPUBLIC 
) 
’94 
10 /\<: 3 3  
S E N A T E  141~; 
OF.THE PHILIPPINES 
1 
First Regular Session 
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C 
FlKE4VED P.Y:- 
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S.BIELN0. j, 
Introduced bv Senator Raluh G. Recto 
AN ACT 
AMENDING SECTION 21 OF REPUBLIC ACT NO. 7925 OR THE 
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PUBLIC TELECOMMUNICATIONS POLICY ACT OF THE PHILIPPINES 
Be it enacted by Sennte and House of Representatives of the Philippines in Congress 
Assem bled: 
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Public Ownership. - In compliance with the constitutional 
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mandate to democratize ownership of public utilities, all telecommunications entities with 
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regdated types of services shall make a bona fide public offering through the stock 
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exchanges of at least thirty percent (30%) of its aggregate common stocks within a period of 
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five (5) years from effectivity of this Act or the entity’s first start of commercial operations, 
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whichever date is later: PROVIDED, THAT, A TELECOMMUNICATIONS ENTITY 
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SHALL BE DEEMED TO HAVE COMPLIED WITH THIS SECTION IF AT LEAST 
SECTION 1. Section 21 of the Public Telecommunications Policy Act of the 
Philippines is amended as follows: 
“SECTION 21. 
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TWO-THIRDS (2/3) OF ITS OUTSTANDING VOTING STOCK IS OWNED AND 
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Exchange Commission. 
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FRANCHISES.” 
CONTROLLED, DIRECTLY OR INDIRECTLY, BY A LISTED COMPANY. 
The public offering shall comply with the rules and regulations of the Securities and 
THIS PROVISION SHALL IPSO FACTO BECOME PART OF PREVIOUSLY 
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GRANTED TELE%OMMUNICATIONS FRANCHISES AND SHALL BE ACCORDED 
IMMEDIATELY /AND UNCONDITIONALLY TO THE GRANTEES OF SUCH 
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SECTION 
2. 
Implementing 
Rules 
and 
Regulations. 
The 
National 
Telecoinrnunications Commission and the Securities and Exchange Commission shall 
promulgate and establish the necessary rules and regulations for the effective 
enforcement of this Act. 
SECTION 3. Separability Clause. If any provision of this Act is held 
unconstitutional or invalid, all other provisions not affected thereby shall remain valid. 
SECTION 4. Repealing Clause. All laws, decrees, executive orders, rules and 
regulations or parts thereof, which are inconsistent with this Act, are hereby repealed, 
amended or modified accordingly. 
 SECTION.^ 5. Effectivity. This Act shall take effect fifteen (15) days following its 
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publication in the Official Gazette or in two (2) newspapers of general circulation. 
Approved,