TTT TTT eee eg ee eee ee ee “rosy Sau ‘ “poe Get mare NeReptie ep. by Solichor General Calta ABS-CHN Cora. sock ANIS-CRIN Convergence Ine Petition for Quo Warrant GCN. * 3. In this quo warranto petition, the State will show that Respondent ABS-CBN Corporation has been broadcesting contents for a fee 2eyand the scope of its legislative franchise. Likewise, the State will establish that respondent ABS-CBN Corporation, hiding behind an elaborately crafted corporate veil, has been allewing foreign investments to partake in the ownership of the mass media giant in violation of the Constitution. 4, Appropriately, the State seeks to revoke the respondents’ respective franchises because they have been abusing and misusing their special privileges. The hour of reckoning may have been delayed, but it has now come. NATURE AND TIMELINESS OF THE PETITION 5. This is a petition for quo warranto under Section 5(1), Article VIII of the Constitution in relation to Rule 66 of the Rules of Court, seeking to revoke tne legislative franchises of ABS-CBN Corporation and ABS-CBN Convergence, Inc. for operating in gross violation of their legislative franchises under R. A. No. 7966 and R. A. No. 8332, respectively. 6. As will be explained below, this is a case of first impression and is unprecedented, involving as it does one of the biggest and most influential media and broadcasting ‘companies in the country. The suit is being filed with the Court as an exception to the application of the doctrine of hierarchy ‘of courts because the issues raised are of transcendental importance.! Ineluctably, it is only the Court that can properly and expeditiously resolve the transcendental issues raised in the instant petition. 7. Equally important is the certitude that the present petition is based on facts established no less by documents issued by Respondents and submitted to government offices. The facts are supported and ‘corroborated by official government acts, historical events, matters of public knowledge, and the admissions of Respondents and their "The Diocow of Bacolod m, Commiasion on Elections, GR. 25724, Jomany 21, 2015,Roepubite rep. by SobcHtot General Calida va. ABBS-CEN Corp. wand ABS-CIIN Comerpence Inc. representatives and officers. Simply put, the petition does not raise factual issues. 8. This petition ts timely filed in as much as the Republic has an imprescriptible right to institute such action. 9. The Republic is exempt from the payment of filing fees pursuant lo Section 22, Rule 141 of the Rules of Court. THE PARTIES 10. Petitioner Republic of the Philippines is s sovereign entity with capacily lu sue and be sued. It has the authonty to commence a quo warranto proceeding under Article VITT, Section 5(1) of the Constitution and Scction 1, Rule 66 of the Rules of Court. The Reoublic is represented in unis Petition by the Solicitor Genera, who has the mandate to ‘represent the Government of the Philippines, its agencies and instrumentalities, and its officials and agents in any litigation, Proceedings, investigation, or matter requiring the services of @ lawyer.” The Solicitor General's authority to institute a quo warranto petition on behaif of the Republic is provided under Section 2, Rule GG of the Rules uf Court. 11. The Solicitor General may receive the writs, orders, resolutions and processes of the Honorable Court at 134 Amorsolo Strect, Legaspi Village, Makali City. 12. Respondent ABS-CBN Corporation, formerly ABS-CBN Broadcasting Corporation is a domestic corporation primarily engaged in the business of television and radio network broadcasting within or without the Philippines with Prancipal oftice address at ABS-CBN Broadcasting Center, Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City.” Pursuant to Section ii, Rule 14 of the Rules of curt, Respondent may be served with this Honorable Court’s writs, orders, and processes through its P-esident or Corporate Secretary. * Ammen A." Amictes of Lacorperstion ADS-CEM CinprsatiintRepeblic oop. by Solkciiot Genial Calsda ve. ABS-CON Comp. aot ABS-CHM Convergence ine, Testi fox Quo Warman GR Me 13. Respondent ABS-CBN Convergence, Inc., formerty the Multimedia Telephony, Inc., is a domestic ‘corporation that acts as the telecommunications subsidiary of Respondent ARS-CRN Corporation, with principal office address at ADS-CON Broadcasting Center, Sgt. Esguerra Avenue comer Mother ignacia St., Quezon City. Pursuant to Section 11, Rule 14 of the Rules af Court, it may be served with this Honorable Court's writs, orders, and processes, through Its President or Corporate Secretary. THE SUBSTANTIVE FACTS: ‘Origin of the franchises of ABS- CBN Corporation and ABS-CBN Convergence, Inc. 14. Bolinao Electronics Corporation (BEC) was established in 1946 a5 an asacmbler of radio transmitting equipment. On June 14, 1950, Congress passed R.A. No. 511 granting Bolinao Electronics Corporation a temporary permit to construct, maintain, and operate stations for international telecommunication and stetions fer television iy he Philippines.> 15. In 1952, Rolinan Flectronics Corporation adopted the business name Alta Broadcasting System (ADS). ADS eventually launched the country’s first television broadcast in 1953. 16. On June 16, 1955, Congress passed R. A. No. 1343 granting Manila Chronicle @ permit to construct, maintain, and operate radio broadcasting stations and stations for television in the Philippines.* 17. In 1957, Chronicle Broadcasting Network (CBN), owned by Don Eugenio Lopez Sr., acquired ABS. In 1967, te * Abo knows mi “An aci granting the Boliman Blecrencs Corporution » inmporry permit io sonsowet, mains ea! oct satiow ‘oe fteronal teccommenicaten ent stom for television in the * ims RB as “AS Act prnamng th Maan Cieosicts & Perea NO CORMETRCL, MAN Had OPETNNE ach Lrcombuating Sith uel atm Roy subevisions as oa: Pippa.”‘Reais ep. by Solicitor Geserad Calida va. ABS-CBN Comp. and ABS.CBN Convergence Ine. operations of ABS and CBN were integrated, and the corporate name was changed to ABS-CBN Broadcasting Corporation. In 2010, the corporate name was changed again, this time to ABS-~CBN Corporation. 18. On June 21, 1969, Congress approved R.A. No. 5730 granting ABS-CBN Broadcasting Corporation a franchise to construct, maintain, and operate stations for international telecommunications and stations for television in the Philippines for a period of fifty years.* 19. On June 21, 1969, Congress enacted R. A. No. 5731 granting ABS-CBN Broadcasting Network a franchise to construct, maintain and operate radio broadcasting stations and stations for television in the Philippines for a period of fifty years.® 20. In 1995, Congress passed R. A. No. 7966 granting ABS-CBN its legislative franchise with a term of twenty-five years, the nature and scope of which state: Sectlon 1. Nature and Scope of Franchise. — Subject to the provisions of the Const'tution and applicable laws, rules and regulations, the ABS-CBN Broadcasting Corporation, hereunder referred to as the grantee, its successors or assigns, is hereby graated a franchise to construct, operace and maintain, for commercial, purposes and in the public interest, television an radio broadcasting stations in and throughout the pines, through microwave, satellite or whatever means including the use of any new technologies in television and radio systems, with the corresponding technological auxiliaries or facilities, special broadcast and other broadcast distribution services and relay stations. 7 2 Ale hoon a8 “An Act Amendirg the Tele asd Genin Sections of Republic Act Numbered Five Exndred ‘Elnven, Entitled “An Act Gemirag the Bolmac Hisctoaies Comporation a Teanpceury Permit ts Construct, Maisusia; ued Operate Sutices for Intemational Telecommanication aed Stations for Televicos in te Paslinpines™ Also known as “An Act Amending the Tide aad Certain Sections of Republic Act Numbered Thiress land Operate Radio Becadcastig tattoos and Stations far Television i the * Ammex “BR,” copy of RA. No, 7966, abso known as "An ect pruning the ABS-CBN Brosdcazimg ‘Corporation « Fanchise to eoctract iitall, opence nnd maizinin tslevsioe end radio troncasting sacs te Ge Pheippanes, and for ether purposes”Sep ep by Seto Gon Cah mi: ARS-CEN Corp. sbi eat era Acquisition of Multi-Media Telephony, Inc. and Amcara Broadcasting Network, Incorporated by Respondents ABS-CBN Convergence, Inc. and ABS-CBN Corporation. 21. Multi-Media Telephony, Inc. was incorporated on September 20, 1993. It sought a franchise to construct, establish, operate and maintain wireless communication paging system throughout the Philippines considering the public's need for wireless communication paging systems for business and personal use and the necessity to improve the technology and capabilities of the aging industry. Multi- Media Telephony, Inc. was the fourth player in the grcwing paging Industry after Easycall, Pocketbell, and Beeper 150." 22. On February 23, 1995, Corgress enacted R.A. No. 7908 which granted Multi-Media Telephony, Inc. the franchise to construct, establish, operate, and maintain radio paging system in the Philippines.® 23. Subsequently, on June 30, 1997, Congress passed R.A. No. 8332, which expanded the scope of Multi-Media Telephony's franchise to include the operation of mobile, cellular, wired or wireless telecommunications services throughout the Philippines and between the Philippines and other countries and territories. ** 24. After securing its legislative franchise, Multi-Media Telephony, Inc. obtained the following Certificate of Public Convenience and Necessity (CPCN) and Provisional Authorities from the National Telecommunication Commission (NTC) to operate their telecommunication systems, to wit: * See Explanatary Nott of Hoe fils. 10795 GLA.Na 7908). " Amecx "C." copy of RA. Nc. THA, also Known ac “An act panting the Mut Media Tetesiccty ‘nerpesin ech ocorsirct mba pera at ami ao ang Ese i Be FL, sad tr hemes "PRCA Ne E53; ss oss“ Ae Ateing Rep er: 708 eld “Aa Ach Grmang Ge Mate Media Telestony. Inorporui, 1 Franch © Consirect, Extabiih, Opes and ‘Manca Racin Paging Symes ins Philippines nd for Ocber PeposesRepublic rep. by Solicitor General Calta vu. ABS-CEN Corp, ‘and ABS-CBN oe ‘Reusen for Quo Wanrasto GE No, a. CPCN to procure, install and maintain Internet Protocol (IP) Access Node in NTC Case No. 98-212" issued on April 23, 2002; b. Provisional Authority to procure, install, operate and maintain a nationwide internet network In NTC Case No, 9§-146' issued on February 8, 1999; ¢. Provisional Authority to construct, install, operate and maintain Local Exchange Service (LEC) in NTC Case No. 99-206" issued on April 23, 2002: and d. Provisional Authority :5 install, operate and maintain a nationwide broadband network in NTC Case No. 98-103" issued on February 1, 2001. 25. On October 15, 2010, ABS-CBN Corporation acquired from PCCI Equities, Inc. its subscription rights over the 250,000 shares in Sapientis Holding Corporation. Sapientis thus became a wholly-owred subsidiary of ABS- CBN. 26. On December 29, 2011, Sapientis acquired Columbus Technology, Inc. (CTI), which owned 95% of Multi- Media Telephony, Inc. CTI sought the approval of the SEC for the increase in its authorized capital stock to accommodate the subscription of Sapientis. Thus, Sapientis was able to acquire 70% interest in CTI through the conversion of the deposits into common stock. This acquisition indirectly included the acquisition of Multi-Med a Telephony which as stated was a 95%-owned subsidiary of CTI. 27. On March 5, 2015, ABS-CBN Corporation entered into a merger with its wholly-owned subsidiaries, whichRepublic rep. by Solicinoe General Calida wa. ABS-CHN Comp, sed ABS-CBN Converponce fae Penton for Quo Wart GRNo included Sapientis. As a result of the merger, ABS-CBN Corporation became the surviving corporation of Sapientis.*5 28. In the meantime, ABS-CBN Convergence, Inc. signed a five-year network sharing agreement with Globe Telecom in 2013, in which ABS-CBN Convergence created a new mobile telephone brand, the ABS-CBN Mobile.!* The ABS- CBN Mobile had its own prepaid and postpaid voice, SMS, and mobile broadband services. The network sharing deal was approved by the NTC on June 7, 2013.27 29. On March 2, 2015, the Securities and Exchange Commission issued a Certificate of Filing of Amended Art’cles of Incorporation in favor of ABS-CBN Convergence." ABS- CBN Convergence uses Multi-Media Teiephony’s franchise without congressional approval. To this date, ABS-CBN Convergence has not publicly offerec any of its outstanding capital stock to any securities exchange within the Philippines.'? 30. Similarly, ABS-CBN Corporation acquired and used Amcare's legislative franchise under 2.4, No. 8135. Amcara was incorporated on April 11, 1994 and was granted a legislative franchise which lapsed into law on July 16, 1995.2 The franchise will expire on July 16, 2920. Amcara started its broadcasts using Channel 23. Channel 23 was, however, renamed Studio 23 in 2010 and was rebranded as ABS-CBN Sports and Action in 2014. 31. In its Amended Annual Report for 2012 submitted to the SEC,?* ABS-CBN Corporation disclosed that it had © Ammen," ABS-CBN Cesporation’s Quaciely Repor, SEC Fonx 17-0 for tseal year ended on Septcaiber 30,2016, 1 Repestbusiness inguin ae] 2611 7abe-cn forays inio-eleo-tasiness (ast accessed on Jamamy IC, 2020). rexpstrwrnw plstar comnfbesinesy 201.(0508-95 13Sinnc-ckaye globe sis che network shacing- agreement (lust accessed on January 10, 2020), hepssthewe sanailatines 2/71/06 Moesirstc- cabering 773 (las scented on Faemcy 19, 2220} SM Ammex "." Amended Anicies of im faror cf ABS-CEN Convergence. Inc: Lbnpeiieige see. com pbtoompunyDicecsoryforr do (ast acoeened Summary 15, 2020} ee ™ Soe Explannory None in Huse Bill No. 1297 * Ammex"K.” ABS-CBN Corpcratin's 201? amended Aseus! Repost porvast to Scction 17 ofthe SRC and Section 141 of Cemporation Code ofthe Phtippincs. SEC Foe 17-ARepublic cep. ty Solititor General Calida vs. ABS-CBN Comp. tod AlS-CBN Coreen. Psion for Quo Warrant. GR Ne. x invested or advanced 49% of equity interest or ownership in Amcara, which ABS-CBN Corporation considers as one of its subsidiaries. It also revealed that the remaining carrying value of investments in Amcara amounted to P4i millicn as of December 31, 2012 and 2011.77 Operation of Kapamilya Box Office is without the necessary permit from NTC. 32. After the expiration of the agreement between ABS-CBN Convergence and Giobe Telecom, the former severed network sharing ties with tr latter since ABS-CBN Convergence deemed its mobile business model financially unviable.?3 33. In 2015, ABS-CBN Corporation officially introduced and launched a digital broadcasting tusiness called the ABS- CBN TV Plus, which distributes digital set-top boxes with premium and free-to-air digital channels (such as the ABS- CBN Kapamilya Network, and pay-per-view services} to selected areas in the Philippines.** Thereafter, in March 2016, ABS-CBN Corporation launched a pay-per-view channel in ABS-CBN TVplus, the Kapamilya Bcx Office (KBO).2° The Kapamilya Box Office is a Pay-Per-View service in which Filipinos may choose to access premium content from their television sets that can be currently activated through SMS for a fee of 30.00 to P99.00.76 34, ABS-CBN Corporation is using the free-te-air frequency granted to it by the State for its operations of a Conditional Access System (CAS), particularly its KBO Channel. CAS is defined as a technology used in digital TV * fap. 60. 2 hdips:tbusinessmizror.com pl/P018/07/16fabe-che-conversenr=-siobe-cnd-S-yearsof-nerwodicsbaringy (Qast accessed on Fansazy 10, 2020). % Ansex “1.” ANS-CBN Corporation information Stutement dat=# March 14, 2019, SEC Feem 2015. 5. 3%; Ammex “M," ABS-CBN Corporation's “Quancly Report for Jane 30, 2015) pews phitir.com/caletsinmend!20] 5/021 S/L423784/abs cho launches digital tv (last accossed om January 10, 2020) {Risin a ch. comps] #16br chop incr tpeniebfce _ghuncet-with-one-moath-ffee-serecning-of-sat-cineuna-blocKbaste (ast scoested on 17 January 2030). hape:(tvple abe cin comv/¥be (las! acceseeé on Jamanry 15, 20298Republic rep. by Solicinor General Calla we ARS. CEN Corp, ftad ABS-CHN Convergence Ine SS , systems that involves satisfying qualified criteria prior to granting access to content.” 35. On April 1, 2015, ABS-CBN Corporation wrote a letter to NTC informing the latter of ‘ts plan to offer free-to- air viewers and those who will purchase the ABS-CBN TV Plus the option to watch the Pacquiao-Mayweather Match live through pay-per-view on Digital Terrestrial TV (DTT) for P2,500.00.* Under Section 3 of R.A. No. 7966, Respondent is required to secure prior authority from NTC before it uses any frequency in the television or radio spectrum. 36. Ina letter dated April 29, 2015, NTC directed ABS- ‘CBN Corporation “to refrain from offering any pay television ‘service in [its] DTT trials until such time that the Commission has come up with appropriate guidelires for the same.”2* NTC iterated the directive in Its Order dated May 14, 2019.37 37. Without NTC issuing any guidelines and ABS-CBN Corporation securing any permit, on April 18, 2016, ABS-CBN offered live viewing of “The Time Has Come: Donaire v. Bedak” for P199.00.°! On September 21, 2016 and July 4, 2017, ABS-CBN offered pay-per-view boxing of “Pinoy ride 38: Philippines vs Mexico” and “Pinoy Pride 41: Magsayo vs Diaz” through KBO for P99.00.*7 On April 13, 2017, ABS-CBN advertised its KBO Holy Week Special for P99.00.%? On September 14, 2019, the red carpet coverage of “The 2019 ABS-CBN Ball” was aired live on KBO for P30.00.% On November 30, 2019, “Listen: The Big Shot Concert” of the TNT Boys was aired live on the same channel P30.00.°> Last February 24, 2020, the homecoming concert of Miss Universe B Amnex "8." p.5. Framework ofthe Digital Teresita Television Rimadcesting (DTTB) Migration Pian 5 Ammer “O", Loner dined Ageil 1, 2015. ™ amnex “F*, Lene dated April 2, 2015. ™ Aumes “Q." NTC Grier dated May 14, 2019, " HMS097$ 14470eeckeal inockout-bakbakae-syabech ‘ppl! (ast acces on Tamuary 15, 2029). = A7GUI6 76890 pac pede 38 philippines vs-mexizo sa plume, Retpavpts sbe-che comfacen/detahlpid-1495 | STSMMY2 pinoy psd 41 wapsaye-re Ha sarsapeckhoy (it accrued om Jarary 14, 2020). - ab-che.comnine n/t pid LSSTOSEEOSONAkbe- ely week-epecial’ (ast necessed 8 Jameary 15, 2020). Meape -eekeaseu201/9/1ahe-che bal-2019-4it-Bve-cmr reer al che comm mewareomares betas let aceeaod on Pama 17, 2020). ‘kes five ooTlang=en last accessed on Famunry 17, 20203. EAT HR gy erties boy enajor concert‘Republic rep. by Selictor General Calida va AIS-CBN Corp, tnd ABS-CHN Convergence Inc, ‘Quo Warts 2018 Catriona Grey was also aired live on KBO.% Recently, ABS-CBN launched KBO99 Promo where a payee may enjoy ‘eight movies for four weeks for P90.09.57 38, As of February 2019, despite the absence of any permit from NTC and guidelines on conditional access, the KBO Channel inveigled 1.2 million unique TV Plus consumers to register in the service.>* Use of Philippine Deposit Receipts by ABS-CBN Holdings Corporation 39. On March 30, 1999, Worldtech Holdings Corporation was incorporated for the primary purpose of investing, purchasing, and holding real and personal property including but not limited to shares of stock, bonds, debentures, notes, evidence of indebtedness or other securities for obligations. On September 16, 1999, the SEC approved the change in the Company's corporate name to ABS-CBN Holdings Corporation.*” 40, On September 29, 1999, ABS-CBN Holdings issued Philippine Deposit Receipts (PDRs). The PDRs were then listed in the Philippine Stock Exchange on October 7, 1999, which PDRs may be exercised at any time from said date. Any cash dividend or other cash distributions distributed in respect of ABS-CBN Corporation shares received by the ABS-CBN Holdings (or the Security Agent on its behalf) shall be applied towards the operating expenses due from the company (including but not limited to applicable taxes, fees and maintenance costs charged by the Philippine Stock Exchange shown as “Operating Expenses” in the statements of income) for the current and preceding years. Any further amount equal to the Operating Expenses in the preceding year (the “Operating Fund”) shall be set aside to meet operatine or other expenses for the succeeding years. Any amount in * hapriwarw sansa com placer 753798 Gast acoewed on Seay 17,2020) * bape toptus abs con com (last ceessod on Jmauary 15, 2020) 2 baipethwwe atcha com/arweroonw bewrolens¥ 019/220 'sa-che tps setn-Tm ata Iewnct-n7iangen (ast sce on Jaary 10,2020) annex “Be ABS-CBN HoMtnys Comporation Noss Yo Finance! Sinemont, 2019 )* Quaely Beptet ‘rms to Section 17 ofthe Secures Repaation Code aod SRC Rule 1705},‘Repubiic nop. by Solicitor Geneval Cals va. ABS-CBN Cogp. ad ABS.CEN ie [Pesoon for Quo Warr GR Ne, excess of the aggregate of the Operating Expenses paid and the Operating Fund for such period (referred to as “Interest”) ‘shall be distributed to Holders pro-raza on the day after such cash dividends are received by the ABS-CBN Holdings.” 41. Upon exercise of the PDRs, an exercise price of 0.10 per share is paid by the PDR holders. This exercise price is shown as “Exercise fees” account in the statements of comprehensive income.*! 42. Immediately prior to the clesing of the PDR offering described above, Lopez, Inc., to which ABS-CBN Holdings is affiliated, transferred 132,000,000 ABS-CBN Corporation shares to the latter company for PDRs that were issued.** The number one PDR holder holding 186,635,072 or 60.42%, >CD Nominee Corp, is a non-Filipino.*> 43. In addition, on October 16, 2019, Prudential Singapore Holdings Pte. Limited, a Singaporean corporation with business address in Singapore, was deemed a substantial holder of 15,656,570 PDRs issued by ABS-CBN Holdings. The PORs were held in various funds managed by its subsidiary Eastspring Investment Singapore Limi-ed, also a Singaporean corporation.* 44. The obligation of ABS-CBN Holdings to deliver the ABS-CBN Corporation shaves on the exercise of the right contained in the PDRs is secured by the Pledge of Shares in favor of the Security Agent acting on behalf of each holder of a PDR over these shares. At any time after the initial offering, @ shareholder may, at his option and from time to time, deliver shares to the ABS Holdings in exchange for an equal number of PORs. The exchange is based on prevailing traded values of ABS-CBN Corporation shares at the time of transaction with the corresponding PD option price.*> ou =e ‘8 Ama "5," ABS Holdings" 2018 loloreeiion Sintered, SEC Form 204, with ais ofthe Top 20 FDR. bedders of ABS Holdings as of Decenber 23, 2018. “amen "5-1" ABS Hoktings’ Ponefcial Ownersip Dischatere dated October 28,2019, SEC Foor 18- a “Republicrep. by Solicinw General Cali vx. ABS-CRN Corp. ‘add ABS-CBN Camvergeace fn. 45. For as long as the PDRs are outstanding, ABS Holdings will not engage in activities other than In connection with the Issuance of the PDRs, the performance of obligations under the PDRs, and the acquisition and holding of sheves of ABS CBN Corporation in respect cf which the PDRs are issued.“ 46. The PDRs unlocked the share value of ABS-CBN Corporation, allowing foreigners to participate in a media prise whose ownership is constitutionally limited to inos. With foreigners allowed to buy PDRs, ABS-CBN Corporation shares, which have long been undervalued, can now play catch-up with regional media counterparts.*” 47, Parenthetically, as of 2018, aside from ABS Holdings, ABS-CBN Corporation alsc owns and controls at least seven other holding companies, including the ABS-CBN Global Ltd. incorporated in the Cayman Islands, a wholly- owned and controlled subsidiary of ABS-CBN Corporaticn, to wit: ‘Company Incorporation Principal Activity Currency ABS-CBN Global Ltd Cayman “slands Holding Company USO ABS-CBN Global Hungary Sudapest Hungary Holding Company USO Rasetta Holdings Corp Philippines Molding Company PHP Sapientis Holdings Corp Philippines Holding Company PHP ‘Columbus Technologies tn Philippines Molding Company PHP ‘SkyVision Corp Philippines Hoiding Company PHP Sun Cable Holdings Philippines Hoiding Company PHP 48. The flowchart? below illustrates the map of relationships of ABS-CBN Corporation's subsidiaries: saa ew “9 Soe Anmex *L.* particalarly 2018 dada Financial Stovement. 7-9, 1a, p. 265.Republic ne. by Solicitor Genera! Cab we. ABS:-CBN Comp. and ABS-CBN Convergence lac. GROUNDS RELIED UPON IN SUPPORT OF THE PETITION I. Procedural Arguments A. Quo Warranto is the proper remedy to forfeit the franchises of Respondents ABS-CBN Corporation and ABS-CBN Convergence, Inc. for gross violation of their franchises. 8. Direct resort to the Honorable Court is justified as this case is of transcendental importance and of first impression. IL. Substantive Arguments A. Respondent ABS-CBN Corporation violated its legislative franchise when it operated a pay-per-view channel through free-to-air signals. Respondent ABS-CBN Convergence, I) violsted its franchise under R.A. No. 7908, as as amended by R.A. No. 8332.arp by Slicer Cue Cat, ABS-CRN Cor snd ABS-CON Petition for Guo Warraate GR No. a. @. Respondent ABS-CBN Convergence, Inc. violated R.A. No. 7908, as amended by R.A. No. 8332, when the transfer of the subject legislative franchise was made without pricr approval from the Congress. b. Respondent ABS-CBN Convergence, Inc. violated Section 16 of R.A. No, 7908, as amendec by R.A. No. 8332, in relation to Section 21 of R.A. No. 7925, when it failed to publicly offer any of outstanding capital stock to any securities exchange in the Philippines. Tir. Respondent ABS-CBN Corporation’s issuance of Philippine Deposit Receipts through ABS- CBN Holdings Corporation violates the foreign ownership restriction of mass media under Section 11, Article XVI of the Constitution. DISCUSSION Procedural Quo Warranto is the proper remedy to forfeit the franchises of respondents ABS-CBN Corporation and ABS-CBN Convergence, Inc. for gross violation of their franchises. franchise." The special ci 49. Under Section 1 of Rule 66 of the Rules of Court, "an action for the usurpation of a public office, position or franchise may be brought in the name of the Republic of the Philippines against a person who usurps, intrudes into, or unlawfully holds or exercises public office, position or il action of quo warranto is a Prerogative writ by which the Government can call upon any "Roles of Coun, See. 1.Republic rep. by Sabiitor General Calida ws. ABS-CHN Cop, aod ABS.CBN ne * person to show by what warrant he holds a public office or exercises @ public franchise.* 50. Even as the action is maintained in the name of the Republic, the Solicitor Generai is obliged to commence such action upon complaint, and upon good reason to believe that any case specified under Section 1 of Rule 66 can be established by proof.*? The Solicitor General is duty bound to advocate a uniform and consistent compliance with the Constitution, the laws, and regulations of the State.5? 51. The franchises of ABS-CBN Corporation and ABS- CBN Convergence have to be revoked for the gross violations they have committed. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of the Government.* Quo warranto is specifically available as a remedy if it is ‘thought that a corporation has offended against its corpo-ate charter or misused its franchise.°> 52. Respondents are guilty of unlawful exercise of their franchises under Section 1(a), Rule 66 of the Rules of Court, wiz: Section 1. Action by Government against individuals. — An action for the usurpation of 3 puSitc office, position or franchise may be commences by a verified petition breught in the name of the Republic of the Philippines against: (2) A person who usurps, intrudes into, or unlawfully holds or exercises a public office, positicn or 53. In Divinagracia vs CBS Inc.,* the Court recogrized that “[t]here is in fact a more approoriate, more narrowly- % ‘Drvmagracia wi. Consolidated Brosdcasting Syatem, Inc GR, No. 162272, April 7. 2005 Mere, I Remedial Law (1999 ed), at 205; cing Newman v, U.S, 238 US. $37, 45, 56 LES S13, and Morar, Commmcen on the Rules of Cour, Vol. 3, [970 ad. © Dvmagracis ws. Consolidated Broadcasting System, Inc. GR Ne. 162772, Apel 7, 2005 citing Fakes of Comm See 3 Republic va. Sereno, GIR. No. 210428, May 11, 2018 % FLDT we RTC, GR. No. 52404, If Otaber-990, 190CRA 717, 730-731. ‘See Divinagracia va Conseliduned Broadeasing System Ine etal pra aOR te inna age[Republic ep. by Solicitor General Calida vs. ABS-CBN Comp, land ABS-CBN Convergence Ine tailored and least restrictive remedy ... " to call upon any person to show by what warrant he exercises a public franchise - the resort to a quo warranto proceedings under Rule 66 of the Rules of Court. 54. Divinagracia cited PLDT v. NTC and Celicom Inc.,5” in which the Court had declared that quo warranto is the Proper procedure to question a franchise, thus: The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, Is more property the subject of ‘the prerogative writ of Guo warranto, the fight to assert which, as a rule, belongs to the State “upon complaint or otherwise” (Sections 1, 2 and 3, Rule 66, Rules of Courts, the reason being that the abuse of a franchise is a public wrong and not 8 private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the Purpose brought by the State because a franchise is Sranted by law and its unlawful exercise is primarily a concern of Government, 55. It Is beyond cavil that a “franchise” is a “special Privilege." As a grant of the government, not only is a franchise a “special” privilege; it is also a privilege of “public concern."*° As a public concern, a frarchise has likewise been held to be “reserved for public cont-ol and administration” either by the government directly, or through state agents, subject to rules and regulations attached with the exercise of the powers of the franchise.®* 56. Thus, the Government, represented by the Solicitor Generat,* may file this petition for quo warranto to obtain a judicial! declaration that Respondents committed an unlawful exercise of their franchises, and should therefore forfeit them. © GR, No, B3404, October 18, 1990 * Faaphasis sappied ‘Mar vs PAGOOR, etal. GR No, 13420K, Noveniber 29, 2000. “14 id * Rake 66 ofthe Rates of Court, $20.Rep rp. by Slice General Calida vs, ABS-CEN Corp. aad ABS.CBN Convergence Inc Petton oc Quo Warr. GR Ne b. Direct resort to the Honorable Court is justified as this case is of transcendental importance and of first impression. 57. The invocation of the Court’s jurisdiction over a petition for quo warranto is warrantec under Section 5, Article VII of the 1987 Constitution: Section 5. The Supreme Court shall have the following Powers: () Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. 58. Accordingly, Section 7, Rule 66 of the Rules of Court provides that a petition for quo warranto may be filed before the Court, thus: Section 7. Venue. — An action under the preceding six sections can be brought only in the Supreme Caurt, the Court of Appeals, or in the Regional Trial Court exercising Jurisdiction over the territorial area where the respondent or any of the respondents resides, but when the Solicitor General commences the action, it may be brought in & Regional Trial Court in the City of Manila, in the Court of Appeals, or in the Supreme Court. 59. To be sure, the doctrine of hierarchy of courts precludes direct resort to the Court as it is a court of last resort. The rule, however, admits of exceptions. 60. The Court in Ang Nars Party-List vs. Executive Secretary discussed the doctrine of hierarchy of courts, in this wise: The doctrine on the hierarchy of courts states tha: petitions for certiorari and prohibition, which shail fall under © Dy vs. Bitat Palamos, GIR. No. 196200, Sepeember 11.2013. GIR No. 315746, October &, 201‘Republic rep. by Solicitor General Calida Ws, ABS-CEN Comp. and ABS-CAN Convergence ne. Peition for Qoe Warranio GRNs the concurrent jurisdiction of the regional trial courts, the higher courts, and this Court, must first be brought to the lowest court with jurisdiction.** In Rayos v. City of Manila, the Court held: Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to Issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and ‘njunction. However, such concurrence in jurisdiction does not give petitioners unbridied freedom of choice of court forum.In Hers of —Bertuldo ~—Hinog =v. Melicor, citing People v. Cuaresma, the Court held: This Court's original jurisdiction to issue writs of certiorari is not exclusive, It is shared by this Court with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is rot, however, ta be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of ‘courts, That hierarchy is determinative of the venue of appeals, and also se-ves as a general determinant of che appropriate forum for Petitions for the extraorcinary writs, A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs agzinst first level (inferior) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Azpeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its excicsive jurisdiction, and to prevent further over-crowding of the Court's docket. © Association of Medkcal Clinics for Overseas Workers inc. (AMCDW) vx. GCC Approved Medical Centers Association Ine, GR. No, 207132. Desember 6 20165. GR No, 190083, December 14,2011 6eu rp, by Solin General Calida vx ADS-CBN Corp. and ABS CBN Convergeect Ia. This rule, however, is subject to exceptions. In the Diocese of Bacolod v. » Commission on Elections,*7 the Court said: ‘Thus, the doctrine of hiererchy of courts is Mot an iron-ciad rule. This court has “full discretionary power to take cognizance and assume furisdiction [over] special civil actions for certiorari A second exception is when the issues Involved are of transcendental importance. In these cases, the imminence and clarity of the threat to fundamental constitutional rights Under the principle of hierarchy of courts, direct recourse to this Court is improper because the Supreme Court is a court of last sacred um revs tn be 60 lb onder (Ort to satisfactorily perform constitutional functions, thereby alowing ita devobe bs tine and attention to matters within its exclusive jurisdiction and preventing the avercrowding of ts docket.® Nonetheless, the invocation of this Court's original jurisdiction *o issue writs of certiorerihas been allowed in certain and the advancement of public policy; (2) when demanded by the broader interest of justice; (3) when the challenged orders were patent nullities; or (4) when analogous exceptional and GR No. 2057, Jaouary 21,2015,‘Rapabiic rep, by ScSictiog Grnerw: Calida va, ABS-CBN Corp, and ABS-CBN Convergesce Ine. Pettion for Que Warrasto GR Na compeliing circumstances called for and justified the immediate and direct handing of the case. 61. The present petition involves a matter of transcendental importance and is a case of first impression, which are some of the exceptions to the doctrine of hiererchy of courts cited above. 62. This case is of transcendencal importance because ABS-CBN's franchise mandates it to serve the public by its broadcast operations. ABS-CBN Corporation in fact earned the distinction of being the largest media conglomerate in the country, reaching millions of viewers in all corners of the country. As the biggest broadcasting entity, it is able to shape the public's opinion on a variety 2f issues, apart from providing entertainment. However, its size and function Joes not exempt it from complying with, and upholding the laws of the land, including the terms of its very existence—its franchise. 63. As discussed, the determination of the right to the exercise of a franchise, or whether the enjoyment of such privilege has been forfeited by non-use, is more properly the subject of the prerogative writ of quo warranto, to which the right to assert, as a rule, belongs to the State upon complaint or otherwise, the reason being that the abuse of a franchise is a public wrong_and not a private injury. The issue of abuse of franchise is a matter of public concern that calls for an action by the State that granted the franchise. 64. Aside from these considerations, this is case is of first impression. There is no jurisorudence yet on the revocation of a franchise of a television or radio compeny. This case presents issues that the Court can resolve to serve @S precedent. It is an opportunity that the Court must seize to draw the line in future cases. 65, The presence of these compelling circumstaices warrants the application of the exception to the doctrine of -v4 Fates Bibat-Palamos, © R. No, 196000, September th 2018 * Divimagraia va. Consolidated Brosdcating Sytem eGR. Na, 162273, Api 7, 2007.Repubiic rap. hy Salicinor Geseeni Calan ve. ARS.CHN Corp. sed ABS-CEN Comvergroce lac Prenton for Qeo Warum hierarchy of courts. Therefore, a direct and immediate resort to the Court is justified. Il. Substantive it operated a pay-per-view channel through free-to-air signals. 66. In February 2015, ABS-CBN Corporation launched the country’s first digital terrestrial set-top box with free and Premium digital TV channels calied ABS-CBN TV plus.” Thereafter, in March 2016, ABS-CEN launched a pay-per-view channel in ABS-CBN TV plus, the Kapamilya Box O*fice (KBO).?* 67. Under R.A. No. 7966, ABS-CBN is requirec to secure prior authority from NTC before it uses any frequency in the television or radio spectrum. Section 3 of the law states in irrefutable terms: Sec. 3. Prior Approval of the Nationa! Telecommunications Commission, — The grantee shal Sécure from the National Telecommunications Cammissior the appropriate permits and licenses for its station and shal ot ' 9 unreasonably delay the grant of any such authority.” 68. Thus, on April 1, 2015, ABS-CBN wrote a letter to NTC informing the latter of its plan to offer free-to-air viewers and those who will purchase the ABS-CBN TV plus the cption to watch the Pacquiao-Mayweather Match live through pay- Der-view on Digital Terrestrial TV (DTT) for P2,500.09.73 7 Sex Ammen “L.= p89. a “ips Sieaterainmer abe ch. comirwepdane/1231916-abs lus, ABS-CBN Corporation is engaged in broadcasting. In doing so, ABS-CBN is using the free-t2-air frequency grented ay the State. 81. In ABS-CBWN Broadcasting Corporation v. Philippine Multi-Media System, Inc., et al.,5* the Court discussed the nature of broadcasting: Aptty, it is imperative to discern the nature of When 2 broadcaster trarsmits, the signals are required to subscribe or to pay any “ee, One only has to have a receiver, and in case of televisicn signals, a television set, and to tune-in to the right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all the more supports this discussion. Appa-ently, the undiscriminating dispersal of ‘signals in the alr is possible only thrcugh wireless means. ‘The use of wire in tronsmitting sicnals, such as cable television, limits the recipients to thos= who are connected. Unlike wireless transmissions, in wire-based transmissions, It fs not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers. 82. In the same case, the Court added: In contrast. cable and DTH television eam revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content like Star Movies, Star World, Jack TV, and AXN, emong GR No. 175749-70, lary 19, 2009. 7 Undertamng toppiiedrep. by Selicioe Gemerl Calida wx, ABS-CBN Corp others, thus allowing its customers to. go beyond the limits of 'Free TV and Cable TV." It does not advertise itself as a focal channel carrer because these local channels can be viewed with or without DTH television. * 83. In the DICT Framework, free-to-air is defined as TV and radio broadcast services in clear and unencrypted form requiring no subscription, other than on-going cost or reception free. 84. The preceding facts show that the general public should not be made to pay to receive the free-to-air signals transmitted by broadcasting organizations. Broadcasting organizations are only allowed to yield income from their contracts with commercial advertisers and producers and direct sales. Otherwise stated, ABS-CBN Corporation is Prohibited from using the free-to-air signals to profit from the public, except to comply with its contractual obligations under contracts with commercial advertisers and producers. Therefore, ABS-CBN Corporation has no lawful authority to utilize the free-to-air signals to collect fees from the viewing public for its operations of the KBO channel. 85. Verily, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them. 86. Indeed, television is a business; however, the welfare of the people must not be sac-ificed in the pursuit of ‘profit. Although ABS-CBN Corporation was granted by the ‘State the special privilege of using a portion of its national patrimony -the free-to-air digital frequency - for free, ABS- CBN Corporation abuses the privilege to unlawfully derive profit fram the people. This warrants =he revocation of ABS- (CBN Corporation’s legisiative franchise. Unertiniag supplied: Citations ecm ed, ‘Telecom. & Brondcast Attys. ofthe Phile, Inc va, COMFLEC, 352 Phat 153 (1908), “ ABS-CBN Corporation vs. Philippioe Meii-Media Sypera. Inc..G.R. No. 175 760-70, Jammary 19, 2009, citing Teloesen. & Broadeast Atys of the Phils Ine vs, COMELEC. 352 Phil.Repbiic wep, by Seicinne Grmmal Calida ws. ABS-CEN Coep sed AUS-CBN Convergence | B. Respondent ABS-CBN Convergence, Inc. violated its franchise under R.A. No. 7908, as amended by R.A. No. 8332. 2. Respondent ABS-CBN ‘Convergence, Inc. violated R.A. No. 7908, as amended by R.A. No. 8332, when the transfer of the subject legislative franchise was) made without prior approval from the Congress. 87. ABS-CBN Convergence violated Section 15 of R.A. No. 7908, as amended by R.A. No. 8232, which states: Sec. 15. Sale, Lease, Transfer, Usufruct, etc.— The grantee shall not lease, transfer, grant the usufruct of, Sell nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any corporation or entity, nor shall the controlling interest in the grantee be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm, company, corporation or entity Philippines. Any person or entity to which this franchise & ‘sold, transferred or assigned, shall be subject to the same conditions, terms, restrictions, and litritations of this Act.” 88. The preceding provision states that a congress'onal approval is required by the subject legislative franchise before it can be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously to another corporation. 89. The requirement to seek congressional approval for the operation of legislative franchises and the transfer thereof by the grantee to another corporation emanate from the Provisions of the fundamental law of the land. Section 11, Article XII of the Constitution gave Congress not only the * emphasis sapped.Republic rep, by Solicitor Gtacral Calida vs. ABS-CBN Comp ‘and ABS-CIBN Convergence Ine Paitin for Quo Warrato GRNo 20wer to review and approve the franchises of public utilities, including those engaged in telecommunication services, but also the power to amend, alter, or repeal the franchises when she common good so requires: ‘Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted excep: to citizens of the Philippines or to corporations or associations organized under the laws of the: Philiopines, at least sixty per centum of whose capital Is owned by such citizens; nor shail such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years, Neither shall any such franchise or right be granted except under the condition that it shall be subject to. amendment, alteration, or repeal by the Congress when the common good so requires. The State shal. encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and ail the executive and managing officers. of such corporation or association must be citizers of the Philippines.%* 90. The significance of the congressional approval requirement cannot be overemphasized considering that monopolies in public utilities ought to be prevented. The record of the Constitutional Commission’s deliberations on National Economy and Patrimony shews that the framers of the Constitution intended to inclcde the congressional approval requirement in the grant of franchises of public utilities to prevent monopolies: MR, DAVIDE. The point is that we should leave it to ‘Congress to determine what would be the extent and ‘scope of a particular franchise. But as worded now, we do not embody into a particular franchise, certificate or authority the inherent nonexclusive character af the same.3* MR. NATIVIDAD. And my last question is with regard to franchises appearing in Section 15. What does the Committee envision? Which agency of the government shail issue the franchise to operate electricity from town to town? ‘Are we going to continue this under this Article? Einpbasi ppd. Record, Consticuicaal Commision Deliberations dusted Angus 3, 1985, p. 262; pls seppicd uRepbiic rep. by Soliciir General Calida. ARS-CBN Coxp. aod ABS-CEN Convergence inc. Peation for Quo Warrasio GRMN MR, VILLEGAS. It is still going to be given by the legislative body.‘ MR. MONSOD. Last Saturday, a phrase was introduced by Davide in Section 15 which states: “NOR SHALL SUCH FRANCHISE, CERTIFICATE OR AUTHORIZATION BE EXCLUSIVE IN CHARACTER FOR A PERIOD OF NOT LONGER THAN TAENTY-FIVE YEARS, RENEWABLE FOR NOT MORE THAN TWENTY-FIVE YEARS.” I believe his purpose was t2 align this with a section on the Article on Natural Resources. The committee would like to ask for a review of this phrase because by the nature of a “public utility,” it has to be exclusive most of the time. When we have a telephone company, @ power company and such, we do not set up three sets of wirings for three telephone companies to be in the area. Precisely, the nature of a “public utility” is that it is a natural monopoly; otherwise, i: would be too expensive for the country and for the consumers. MR DAVIDE. That particular amendment was introduced by meé, and the idea was nat basically to align it with the provision regarding the exploitation and utilization of natural resources. This particular provision which I Introduced, already existed as early as 1935. Under the 1935 tution, and which was reite-cted in the 1973 Constitution, we had this particular provision on public utilities. I fs now Seciion 5 of Artie XIV of the lors Constitution. It reads: No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to ctizens of the Philippines. or to corporations or associations organized under the laws of the Philippines at least sixty percentum of the capital of which Is ‘owned by such citizens, nor shail such franchise, certificate or authorization be exclusive In character 0° for @ longer period than fifty years. L only split the 50-year maximum period provided for in the 1973 Constitution as well as in the 1935 Constitution by °° 1d stp. 268, emphasis suppliedRepublic rep, by Solictor Gamera: Calida vs, ABS-CBM Corp and ARS-CBN Conwergonre in. ‘Feition for Quo Weracto GR Ne, Seta making it 25 years renewable for not more then 25 years, or, therefore, a tozal of SO years. ‘There must be a limit to these certificates or franchises. It cannot be perpetual, otherwise we will constitutionalize a monopoly in favor only of existing public utilities like the Manila Electric Company (MERALCO) and the Philippine Long Distance Telephone Company (PLDT). There must be a time limit because monopoly is prescribed not only by the provision of the presen: Constitution but also by the previous Constitution, 12! 91. It must be stressed also that the scarcity of radio frequencies made it necessary for the government to step in and allocate frequencies to competing operators of telecommunication services. The Court already held in Divinagracia v. CBS, Inc. that Congress unquestionably has the power to grant and deny franchises of telecommunication and broadcasting operators considering that they have no right to monopolize a radio frequency. Ergo, the government, through Congress, may impose conditions to see to it that telecommunication and broadcasting operators promote the public good, and may withdraw the franchise from those who fall short of the standards it set forth. Congress can even deny a franchise if the public interest so requires. As explained by the Court: ‘The franchise requirement traces its genesis to Act No. 3846, otherwise known as the Radio Control Act, enacted In 1931, Sectior 1 thereof provided that “[n]o Person, firm, company, association or corporation shal construct, install, establish, or operate .. a radio broadcasting stztlon, wichout having first obtained a franchise therefor from the National Assembly ...." Section 2 of the law prohibited the construction or installation of any station without a permit granted by the Secretary of Public Works and Communication, and the operation of such station without 3 license issued by the same Department Secretary. The jaw likewise empowered the Secretary of Public Works and Communication “to regulate the ‘establishment, use, and operation of all radio stations and ‘of all forms of radio communications and transmissions within the Philippine Islands and to issue such rules and regulations as may be necessary.” '™ Record, Comstietions] Commission Deliberations Gated Aupsst?5, 1986, p. 692: emphasis ppl. "GR Na, 162272, Ape 7, 2009, ”Rapubite rep. by Solicitor inant Cali vs. ABS-CBN Comp. we ne ABS-CDN Convergence: Pesiion for Quo Warman GRIN Noticeably, our Radio Control Act was enacted a few years after the United States Congress had passed the Radio Act of 1927. American broadcasters themselves had asked their Congress to step in and regulate the radio industry, which was then in its infancy. The absence of government regulation in that marcet had led to the emergence of hundreds of radio broadcasting stations, each using frequencies of their choice and changing frequencies at will, leading to literal chaos on the airwaves. Tt was the Radio Act of 1927 which introduced a licensing requirement for American broadcast stations, to be overseen eventually by the Federal Communications Commission (FCC). airwaves. Morcover, the airwaves themselves the very medium utilized by broadcast—are by their very nature not ‘susceptible to appropriation, much less be the object of any claim of private or exclusive ‘ownership. No private individual or enterprise has the physical means, acting alone to actualize exclusive ownership and use of a particular frequency. That end, desirable as it is among broadcasters, an only be accomplished if the industry Itself is subjected toa regime of government regulation whereby broadcasters receive entitiement to exclusive use of their respective or particular frequencies, with the State correspondingly able by force of law to confine all broadcasters to the use of the frequencies assigned to them." 92. There is no question therefore that any person or enterprise that wishes to operate a telecommunication or broadcasting system in the Philippines must secure a legislative franchise in the form of a law passed by Congress. AS the legislative franchise is being regulated by the government to prevent a monopoly of a scarce resource, that person or entity cannot transfer it to any another person or entity without the imprimatur of Congress. 93. Not only are the circumstances surrounding the ‘transfers of controlling interest of Multi-Media Telephony * Eeaphasis spplindRepublic rep by Solicit General Califa va. ABS-CBN Corp. and ABS-CBN Convergence Ine ‘suspicious, the transfers were. made without the approval and authorization of Congress. 94, Multi-Media Telephony is the grantee of a legislative franchise under R.A. No. 7908, as amended by R.A. No. 8332, to provide telecommunication services in the country for twenty-five years reckoned from the date of the effectivity of the law in 1995. 95. Multi-Media Telephony was incorporated on September 20, 1993. It sought for a franchise to construct, establish, operate and maintain wireless communication paging system throughout the Philippines considering the Public's need for wireless communication paging systems for business and personal use and the necessity to improve the technology and capabilities of the paging industry. Multi- Media Telephony, Inc. was the fourth player in the growing Paging industry after Easycall, Pocketbell, and Beeper 150.1% 96, After securing its legislative franchise, Multi-Media Telephony obtained CPCN and Provisional Authorities from NTC to operate its telecommunication systems. Howeve-, on July 23, 2015, when Multi-Media Telephony applied for the (a) issuance of CPCN; (b) extension of its Provisional Authority; and (c) grant of additional frequences before the NTC, it already used the corporate name of ABS-CBN Convergence. !°° 97. As Multi-Media Telephony represented itself as ABS-CBN Convergence, the latter was able to use the former's legislative franchise under R.A, No, 79C8, as amended by 2.A. No, 8332, and secure a Provisional Authority for three years from April 12, 2014 until April 12, 2018 before the NTC in ATC Case No. 97-245 to operate.'° 98. The use by ABS-CBN Convergence of the name of Multi-Media Telephony is contrary to public policy, as it will only "result in confusion and open the door to frauds and ' Sco Explanatory Note of House Bal Ne. 13759, R.A. No. 7908 "= Ammex “U,? Oxider dace! Sely 29, 2015.evasions and difficulties of administra-ion and supervision.”*7 A corporation cannot use another corporation’s name to transact business: except in the manner provided by the statute. By that name alone is it authorized to transact business, The law gives a corporation no express or implied authority to assume another name that is unappropriated; still less that of another corporation, which Is expressly set apart for it and protected by the law. If any corporation could assume ‘at pleasure as an unregistered trade name the name of another corporation, this practice would result In confusion nd open the door to freuds and evasions and difficulties of administration and supervision. The policy of the law as expressed our corporation statute and the Code of Commerce is dearly against such a practice.!0= 99. On March 2, 2015, a Certificate of Filing of Amended Articles of Incorporation wes issued by the SEC in favor of ABS-CBN Convergence.!°? The latter now uses the name of “ABS-CBN Convergence, Inc. (formerly Multi-Media ‘Telephony, Inc.)" in this re-incorporation. 100. The use of “ABS-CBN Convergence, Inc. (formerly Multi-Media Telephony, Inc.),” while apparently innocent, is in fact illegal and a mere subte-fuge to subvert the requirement of R.A, No. 7908, as amended by R.A. No. 8232. 101. A careful reading of the Quarterly Report pursuant to Section 17 of the Securities Requiation Code (SRC) and SRC Rule 17 (2)(b) thereunder dated September 30, 201219 of ABS-CBN would reveal that an intricate web of corporate layering was employed by Respondents to circumvent or Philippe Fast Insurance Incorporated ve. Harigas ta, G.R. Ne. L-26370 (ely 31, KPI) cine od ‘se Transpertstioe Ce. va. Rural Transit Co Lid. GIR. Ne" 415% (Septonber 6. 1934), ‘Sod Line Transporation Co. vx. Rema Test Co.,Lid_ il: Enephanis epplied, aad eiatioes eonined. See Amex “I” Ammer "¥,and ABS-CBN} Festion for Qua Warrant GR Ne, pubic wap. by Selicinar General Calida va. ABS.CBN Corp. ‘Comergesce Ine violate the conditions of the subject legislative franchise on sale and transfer. 102. By way of elaboration, on October 15, 2010, ABS- CBN Corporation acquired from PCCI Equities, Inc. all its Subscription rights over the 250,000 shares in Sap'entis Holding Corporation, with a par value of P1 per share, for 20.1 million. The fair values of the identifiable assets and liabilities ‘of Sapientis at acquisition date end the corresponding ‘carrying amounts immediately before the acquisition based ‘on the final purchase price allocation were: Fair Value Recognized on wisition Car Value {Amounts in Millions) pag ‘Cosh and cash equivaients Bo Trade and other receivab es a 3 Inventories 2 2 Prepaid expenses and other current 144 144 assets Property and equipment 116 116 Other noncurrent assets 32 2 Trade and other current llabiaties (650) (650) Loan payable (27) (27) Long-term debt (362) (382) Asset retirement obligation @ Q) Deferred tax fiability G2 £32) Net assets (735) P7368) Acquired ownership interest 70% Net assets acquired 315 Goodwill arising on acquisition 1,038. 523 a ‘Consideration 103. Sapientis thus became a wholly-owned subsidiary of ABS-CBN Corporation. 104. Subsequently, or on December 29, 2011, Sapientis acquired Columbus Technology, Inc. (CTI), which owned 95%. of Multi-Media Telephony. Notably, CTI sought the approval of the SEC for the increase in its authorized capital stock in order to accommodate the subscription of Sapientis. Thus, Sapientis was able to acquire 70% interest in CTI through the conversion of the deposits into common stock. This acquisition indirectly included the acquisition of Multi-Media a‘Republic mp. by Salicinr Gener! Calide vx. ABS-CBN Camp, ed ABS-CON Convergence Ine. Pestice for Que Warrasco GE Ne Telephony, which was, to reiterate, @ 95%-owned subsi Of CTI. The fair values of the identifiable assets and Tabilities at acquisition date and the cornespording carrying ameunts immediately before the acquisition are: Fair Value Recognized on wisition Carrying Value (Amounts in Thousands) P845 cash peas Deposits for future stock subscriptions 130,657 130,657 Trade and other payables (8,640) (8,640) ‘Short-term loans £132,000) 132,000) Net assets (9,138) (P9,138) Goodwill on 9,201 ‘Gonsiderstion paid by cash P63 (Net cash acquired with the subsidiary Peas, Cash paid (53) Net cash outflow P782, 105. Interestingly, on March 5, 2015, ABS-CBN Corporation entered into @ merger with its wholly-owned subsidiaries, which include Sapientis, the alleged purpose of which is to clean up ABS-CBN’s corsorate structure. AS a result of the merger, ABS-CBN Corporation became the surviving corporation of Sapientis.4#* 106. The effects of merger are provided under Section 80 of the Corporation Code, thus: Sec. 80. Effects or merger ar consolidation. - The merger or consolidation shall have the following effects: 1, The constituent corporations shall become a ‘single corporation which, in case of merger, ‘shalll be the surviving corporation designated in the plan of merger; _. 2. The separete existence of the constituent corporations shail cease, except that o” the surviving or the consolidated corporation; See Aupex “I.” ABS-CBN Corporation's Quarterly Report, SEC Fora 17-0 for Sscal year sede oa Scpeember 30, 2018Republic sep. by Solicitor General Calida vs. ABS-CRN Coep. ‘and ABS-CBN te, 3. The surviving or the consolicated corporation shal possess all the rights, privileges, immunities and and shall be subject to all the duties and liabilities of a corporation organized under this Code; 4. The surviving or zhe consolidated corporation shall thereupon and thereafter possess ail the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, end all receivables due on whatever account, induding subscriptions tc shares and other choses in action, and ail and every other interest cf, or belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed; and 5. The surviving of consolidated corporation shall be responsible and jiabie for ail the liabilities and obligations of ‘each of the constituent co-porations ir the same manner as if such surviving of consolidated corporation had itself Incurred such liabilities or obligatiors; and any pending aim, action or proceeding brought by or against any of Such constituent corporacions may be prosecuted by o- against the surviving or consolidated corporation. The rights of creditors or liens upcn the property of any of such constituent corporations shall not be impaired by such merger or consclidation. 107. The following flow chart illustrates the transfer of legisiative franchise effected by Respcndents: GRANTEE: ~~ mULTEMEorA R.A. No. 7908, as TELEPHONY, INC. amended by R.., nlp 8332Repebiic tp. by Solicits Geaural Cade vi. ABS-CBM Corp, aad ABS-CBN. toc. Peacion for Quo Ware ORM October 15, 2010 Sapientis became a wholly | ABS-CBN Corporation had owned subsidiary of acquirec from PCCI Equities, respondent ABS-CBN Inc, all its subscription rights Corporation over the 250,000 shares in Sapientis Holding Corporation (Sapientis), with a par value of Pi per share, for 0.1 mifion Sapientis acquired Columbus Technology, Inc. (CTI) * Sapientis acquired 70% interest through convers'on of the deposits into common stock. * CTI sought the approval of the SEC for the increase in its authorized capital stock in order to accommodate the subscription of Sapientis. + Multi-Media Telephony, Inc., is a 95% - owned subsidiary of CTI. March 5, 2015 + ABS-CBN Corporation entered into a merger with Sapientis, a wholly owned subsidiary. * ABS-CBN Corporation became the surviving Corporation.Republic ep: by Solicitor General Calida vx. ABS-CHN Corp. 108. ABS-CBN Convergence violated Section 15 of R.A. No. 7908, as amended by R.A. No. 8332, when the controlling interest in Multi-Media Telephony, the grantee, was transferred to ABS-CBN. As explained above, the majority of the shares of ABS-CBN Convergence was acquired by 4BS- CBN Corporation or Sapientis through CTI, and this trarsfer ‘of the legislative franchise or the rights and privieges thereunder was made without any congressional approval. The web of corporate layering employed by Respondents is plainly intended to go around the congressional approval requirement in the subject legislative franchise. 109. The temerity of ABS-CBN Corporation to monopolize the frequencies or airwaves of the State can be readily seen from its investment ir Amcara Broadcasting Network, Incorporated (Amcara), another broadcasting company holding @ legislative franchise under R.A. No. 8135.*% 110. Amcara was incorporated or April 11, 1994 and was granted a legislative franchise which lapsed into law on July 16, 1995, and will expire on July 16. 2020. Amcara started its broadcasts using Channel 23. Channel 23 was, however, renamed Studio 23 in 2010 and was rebranded as ABS-CBN Sports and Action in 2014. 111. In an Amended Annual Report for 2012 submitted to the SEC,' ABS-CBN disclosed that it had invested or advanced 49% of equity interest or ownership in Amcara, which ABS-CBN considers as one of ‘ts subsidiaries. It also revealed that the remaining carrying value of investments in INCORPORATED. [FELEVISION BROADCASTING STATIONS IN THE PHILIPPINES” Sect 1 of the law princely rer secriGh | Bien oes Eee of Presta Shira 0 te vlan ot Gal Conntetonl aad voptheable Laws, rales and regulacions. here is hereby “Ameara Brosdeasing S75: Anaes "A ABS-CBN Corpor’: 217 Amended Anza Reet paral Secox 17 fhe SSRC and Section [4 of Corporation Code ofthe Philppanes, SEC Form 17-A. aRepublic nop. by Solicinor General Calida wx. ABS-CBN Corp. Ameara amounted to P41 million as of December 31, 2012 and 2011.415 112. Hiding under the cloak of a different entity, ABS- CBN Corporation has been utilizing several frequencies or airwaves, which is a scarce resource of the State. As heid by the Court, the scarcity of radio frequencies made it necessary for the government to step in and allocate frequencies to competing broadcasters. In undertaking that function, the government is compelled to decide which of the competing applicants are worthy of frequency allocation. It is through ‘that role that it becomes legally viable for the government to impose its own values and goals through a regulatory recime that extends beyond the assignation of frequercies, notwithstanding the free expression guarantees enjoyed by broadcasters." With the ploy being employed by ABS-CBN Corporation in acquiring several interests in corporations ~hat hold legislative franchises in broadcasting as well as telecommunication services, the Government is being hoodwinked as it Is made to believe that the finite and limited ‘spectrum had been allocated to those that are worthy tc be accorded the privilege, when in truth it is only being utilized by one corporation, ABS-CBN. b. ABS-CBN Convergence, _ Inc. violated Section 16 of R.A. No. 7908, as amended by R.A. No. 8332, in relation to Section 21 of R.A. No. 7925, when it utterly failed to publicly offer any of its outstanding capital stock to any securities exchange within the Philippines. 113. As an indispensable requirement for the operation of ABS-CBN Convergence’s telecommunication services, Section 16 of R.A. No. 7998, as amended, mandates that ABS-CBN Convergence as a legislative ‘tanchise grantee shall offer at least 30% of its outstanding capital stock to any securities exchange in the Philippines within five years from the start of its operations: as * pr a‘Republic ep. by Solicitor exer Calida ws. ARE-CBN Comp, ‘and ADS.CEN Convergeoce In, ‘Yetiton for Quo Wamaae RNG. Sec. 16. Dispersal of Ownership.— In accordance with the constitutional provisions tc encourage _ public participation in the public utilities, the grantee shall offer at least thirty per centum (30%) of its outstanding + Capital stock or a higher percentage that may hereafter be provided by law in any securities exchange in the Philippines within five (5) years from the commencement of its operations. Noncompliance therewith shall render the franchise ipso facto revoked. 114. Regrettebly, ABS-CBN Convergence’s Articies of Incorporation*#® and the Philippine Stock Exchange's directory of publicly listed companies*?® undeniably show that, to this date, ABS-CBN Convergence has not publicly offered any of its outstanding capital stock to any securities exchange within the Philippines. 115. The inescapable conclusion is that ABS-CBN Convergence blatantly violated the conditions of its legislative franchise. Consequently, its legislat've franchise must be revoked. To permit ABS-CBN Convergence to continue its operations, despite its non-compliance with the express directives of R.A. No. 7908 would be an affront to the law. III. ABS-CBN Corporation's issuance of Philippine Deposit Receipts through ABS-CBN Holdings Corporation violates the foreign ownership restriction of mass media provided under Section 11, Article XVI of the Constitution. 116. As it is the Republic’s duty to protect the integrity and sovereignty of the country, it must always strive to ensure that its laws, especially the Constitution, be adhered to, Since mass media plays an integral role in a nation’s economic, political, and socio-cultural atmosphere, it is but ba spied Soc Amex "J." ABS-CBN Corwergence, Inc's Articles of lecnrpoexion htpsedge psc com phioonppreyDerctryfoe do (lat scons Saraary 15, 2020)Republic sop by Solicitr Genecal Calida we. ARS-CEN Corp. ned ABS-CBN Converpeace foe. ‘Peston for Quo Warranso, GR Ne, : See natural that the Constitution gives primacy in regulating it. To iterate, Section 1 of R.A. 7966, the ABS-CBN’s legislative franchise dictates: Section 1. Mature and Scope of Franchise. - Subject to the provisions of the Constitution and applicable laws, rules end regulations, the ABS-CBN Broadcasting Corporation, hereunder referred to as the grantee, its successors or assigns, Is hereby granted 2 franchise to construct, operate and maintain, for commercial purposes and in the public interest, television and radio broadcasting stations in and throughout the Philippines, through microwave, satellite or whatever mears including the use of any New techno.ogies in television and radio systems, with the corresponding technological auxiliaries or facilities, ‘special broadcast and other broadcast distribution services and relay stations. 2° 117. The 1987 Constitution, the most basic and Paramount law te which all persons must conform, limits the ownership and management of mass media to Filipinos. Section 11, Article XVI of the 1987 Constitution reads: SECTION 11. (1) The ownership and management of mass media shail be limited to citizens of the Philippines, or to corporations, cooperatives or Sesociatlons,, wholly-owned ‘snd ssaneged' by pack ‘The Congress shall regulate or p-chibit monopolies in commercial mass media when the public interest so requires. No combinations in restrain: of trade or unfair ‘competition therein shail be allowed. .:?! 118. The aforementioned Constitutional provision means that mass media companies operating ‘n the Philippines must be one hundred percent Filipino owned because allowing foreign entities to infiltrate our mass media outlets would bring about a looming threat of foreign influence and control in the country, which ultimately, would diminish our Constitutionally protected sovereignty. The said requirement was reiterated in R.A. 7042 otherwise known as Foreign ™ Amex “B.” Exphanis pple. » Bagh aedRepublic rep. by Solicitor General Calida ws. ARS-CBN Corp tnd ABS-CBN Convergence Inc Potion for Quo Waeranto GR No. Investment Act, as amended by R.A. 8179/22, Executive Order No, 184%, Presidential Decree No, 1018 and cther issuances, emphasizing that no fore'gn equity is allowed in mass media. 119. The current emerging financial market today and the advancement of technology carry the evolution of different types of financial instruments in order to capitalize differerit industries and to tailor the needs and wants of both Filipino and non-Filipino investors. One example is a Depositary Receipt, defined as a type of negotiable (transferable) financial security that is traded on a local stock exchange but represents a security, usually in the form of equity, that is issued by a foreign publicly listed company. The DR, which is a physical certificate allows investors to hold shares in equity of other countries.!7* 120. In the Philippines, a Philippine Depositary Receipt (PDR) is defined as a security which grants the holder the right to the delivery of the sale of an underlying share. The Philippines Stock Exchange further states that PDRs, per se, ‘are not evidence or statements or certificates of ownershia of a corporation.”* However, each PDR represents a share, and a PDR holder, whether Filipino or non-Filipino, has a right to all the dividends of the underlying shares of stocks acquired through the PDRs. PDRs, therefore, are issued as equivalents. in relation to the number of shares of a corporation thus, the value of PDRs is dependent upon the value of its corresponding share of a corporation. 121, ABS Holdings is the issuer of the financial security in a form of PDRs with cor-esponding ABS-CBN Corporetion shares. The PDRs are secured by the Pledge of Shares in favor of the Security Agent acting on behalf of each holder of a FDR over the ABS-CBN Corporation shares. Each PDR grants the PDR holders, upon payment of the exercise price of P0.10 and An Act te Promote Foreign tnvestments, Prasribe the Procedures foc Registcring Eatcprsen Doing Suatnessin the Philippines, nd for other prpores (1991). ° Promelgsting the Tent itoguar Foreign Lcvesiment Negntive List (2015). 2 Limiting the Ownership and Managewent of Mase Media 1a Cuizeot ofthe Philippinex sod for Oxbr Purposes (1978), 2 See mp srwww: invested com wees isrsucton- epOR-Hry oem! ™ The Philippine Stock Exchange Glosar, ips tiwww pet com phitncicMarkevucane hiw)s (last secessed on Hacuary 10, 202). 4s‘Repubie rep. by Solictar leneral Calida vt ABS-CBN Conp. and ABS-CEN ae, Convergence | Pestios for Qoo Warrant GR Ne —a subject to certain other conditions, the delivery of one ABS- (CBN Corporation share or the sale and delivery of the Proceeds of such sale of one ABS-CBN share.” The PORS here may also be perceived as an equity derivative, because the value of the POR is dependent on the underlying equity, which in this case are the ABS-CBN Corporation shares, 122. ABS Holdings has undertaken not to conduct any business other than in connection of PDRs, the performance of obligations under the PDRs and the acquisition and holding of shares of ABS-CBN in respect of which PORs are issued.17= 123. The details and movements of PDRs and the underlying shares as reported by ABS Holdings in 2016 and 2017 are as follows:*?* Number of Investment iin PRS. ‘Shares ABS-CBN _ Baance at 325,051,900 P15,102.724,489 15,070,219,299 December 31, 2016 ‘Conversion of (1,078,200) (40,548,772) (40,440,952) PDRS Exchanges of ‘ABS-CBN shares with POR __ 870,000 37,207,300 37,120,300 Balance at 324,343,700 15,099,383,017 15,066,898,647 (2,221,100) (62,972,126) (62,750,016) 124. The figures above show that the number of ABS- CBN Corporation shares were transferred to ABS Holdings and Subsequently, ABS Holdings issued financial securities in the form of PDRs, which are then issued tc both Filipino and non- Filipino nationals. Based on ABS Holdings Preliminary * Ammer “8,7 ABS Hoblings’ 2010 lersation Statement, SEC Form 20-55, p of Nots to Finunciat Sememext_ & Soe Aumet “5.” AUS Holdings’ 2018 lnfocmntion Sasemens, SEC Form N-IS. puruant wo Section 17.1 Regelatice. Code. hl of te Secures Sid. p 3 of Nowa Fimecial Statement,Republic rep, by Solicitor Gene-al Calida vs. ANS-CBN Czy, and ABS-CBN Convergeaes Ine Information Sheet submitted to the SEC with a list of the Top 20 PDR holders of ABS Holdings as of August 31, 2018, the number one PDR holder holding 198,667,338 or 61.78%, PCD Nominee Corp, is a foreign corporaticn, thus: 3° Name of POR Holoer No, of Shares Percentage PCD NOMINEE CORP ~ (FOREIGN) 198,667,338 61.78% 2 FD NOMINEE GORP = (FILIPINO) 114,374,019 35.57% 3. LOPEZ, INC, 1,578,430. 0.45% 1348725. 0.47% 5. MANUEL LOPEZ S/OR MA,THERESA LOPEZ 1,280,881, 0.43% IN SECURITIES CORPORATION 500 0.15% 500,000 0.15% 371,607 o.12% LLOPMENT CO., INC. 370,000 O.12% {0° tOREs HoLbiNGe Cobpoaat TON 369,900 0.22% 11. MANTES INSURANCE TRADERS INC, 310,260 0.10% -CONCIO 274,678 0.05% 256,340 6.08% 261,400 6.08% 120,000 c.08% 33,400 coz ‘30,000.00 coz 50,000.00 c.02% 44,464.00 02s 4,555 TOTAL, OUTSTANDING - TOP 20 POR HOLOERS: 321,936,342 125.As of October 16, 2019, as provided in the Beneficial Ownership Disclosure of ABS-CBN Holdings, Prudential Singapore Holdings Pte. Limited, a Singaporean corporation, is a deemed substantial holder of 15,656,570 PDRs issued by ABS-CBN Holdings. The PDRs were hed in various funds managed by its subsidiary Eastspring Investment Singapore Limited, also a Singaporean corporation. "3 126.In May 2013, Mercury Media Holdings Ltd., purchased PORs issued by ABS-C3N Corporation from Marathon Asset Management LLP., which cost approximately Php2.3 billion. Mercury Media Holdirgs Ltd. is an affiliate company of The Capital Group ef Companies, one of the world’s largest investment management organizations. The See Aumex "§,"p. 17 OF Annex "5-1," ABS Holdings’ Beneficial Ounerahip Disclosure dated October 28, 2019. SEC Fee. 18- a‘Republic rep. by Solicitor Genera: Calide ws: ABS-CRN Comp and AES-CBN Coavergeace Ine Petition for Quo Warasa. sale and purchase of the PDRs was effected as a specia block sale on the Philippine Stock Exchange. "? 127.In June 2013, a US-Based fund, Capital International Private Equity Fund YI, LP., acting through Mercury Media Holdings Finance I Ltd., completed the subscription of P2.5 billion worth of PDRs of ABS-CBN. I7 the reported disclosure, the issuance of the PDRs was made to infuse fresh funds to ABS-CBN.23 128. From its own disclosure, ABS. Holdings cash distributions are made to the PDR holders and declared as interest. Dividends declared as interest due to POR hoders amounted to P187.2 million in 2018, P334.2 million in 2017 and 239.9 million in 2016.*4 PDR holders earn dividends from their investment with ABS-CBN Corporation shares through the PDRs issued by ABS-CBN Holdings. 129. ABS Holdings key performance indicators are focused only on the dividends received by the registrant to meet the POR holders’ expectation and monitor the cash and ‘cash equivalents level to meet its obligations with respect to ABS Holdings current and preceding year's operations. 25 130. Nonetheless, Section 3.1.2 of the 2015 Implementing Rules and Regulations of the Securities Regulation Code, R.A. No. Act 8799, reads: Power to vote or direct the voting of such security) and/or investment returns or power (which includes the Power to dispose of, or direct the disposition of such security); (© 'SyCipLaw advises Mereary Mes Holings Latin is porcSasc of PDRs moe by ABS.CEN Holdings Soop. from Marathon Asset Manseemoet LLP SyCipLaw News. Sune 14,2013, secesed Jarmery 10, 2038, lenpe ewe nycighey, > 1% "AES-CBN completed FYB fed ising’. Snsiness Work Online uae , 2013, last cee! Senmary 19, 2020, pt nvorkdcaline com/content ip sect arportedtieabs-che-completer pte. STI, oa "ia 8Republic rep. by Solicitor General Calida vs. ABS-CBN Corp, smd ABS-CAN Convergence Inc. 131. Under the abovementioned definition, a person is directly or indirectly the beneficial owner of any equity security with respect to which he has: (1) voting power, which includes the power to vote, or to direct the voting of, such security or; (2) investment power which includes the power to dispose of, or to direct the disposition of, such security. 132. A non-Filipino PDR holder is indirectly investing in ABS-CBN, a broadcasting media entity and thus with a strict 0% foreign equity restriction, through ABS Holdings with investment returns in a form of dividend and with power to dispose of, or direct the disposal, of such PORs which necessarily fails under the definition of beneficial ownership. 133. Furthermore, a dividend is defined by the Philippine Stock Exchange as the share in the profits of a corporation which is paid to the stockholders out of the unrestricted retained earnings, in proportion to DRs is to obtain foreigr investment to increase their underva.ued shares, and to allow foreigner to participate in mass media.!*2 As can be gleaned from the disclosure, ABS-CBN Corporation has, for all intents and purposes, allowed foreigners to influence and participate in the mass media enterprise of the Philippines through the PORs. This is exactly what the 1$87 Constitution prohibits. 141. ABS Holdings’ issuance of PDRs to non-Filipino citizens is a scheme employed making it appear that the shares remain with the Filipino corporation while granting influence over the mass media enterprise to foreign Investors. A foreign investor in this case may va.idly profit from a mass media corporation with a foreign equity restriction. 142. This scheme is not only prohibited by the 1987 Constitution but criminal liability is also imposed on those who violate foreign equity —restrictions += and evade nationalization laws of the Philippines through various modes of proxy arrangement, making it appear as legal, but the entirety of the arrangement is to accomplish a transaction not allowed under Philippine laws. 143. Quando aliquid prohibitur ex directo, prohibitur et per obliquum. What cannot be legally done directly cannot be done indirectly. If acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.!#2 *9 Sec Aunex *8:* ABS 0 Seeepic op. by Seto Genre Cla mu. AIS-CH JARS CBN = as Proter lor Quo Warara GR Ne — Application for a Temporary Restraining Order or Writ of Preliminary Injunction 144.A temporary restraining order and writ of Preliminary injunction are preservetive remedies for the Protection of substantive rights and interests. A TRO issues only if the matter is of such extreme urgency that g-ave injustice and irreparable in:ury would arise unless it is issued immediately.'** Or the other hand, to be entitied to a writ of Preliminary injunction, the applicant must establish the following requisites: (1) the applicant must have a clear and unmistakable right, that is a right i esse; (2) there is a material and substantial invasion of such right; (3) there is an urgent need for the writ to prevent irreparable injury to the applicant; and (4) no othe- ordinary, speedy, and adequate remedy exists to prevent the infliction of irreparable injury. 145. Ergo, the primary requirement in issuing a writ of preliminary injunction is the existence of a clear and unmistakable right in favor of the applicant.““* An injunc-ion will not issue to pretect a right not in esse, or a right which is merely contingent and may never arise since. To be protected by injunction, the alleged right must be clearly founded cn or granted by law or is enforceable as a matter of law.” Ir. the absence of a clear legal right, the issuance of the injunctive relief constitutes grave abuse of discretion.:*® 146. As the grantor of a franchise, the State has a clear and unmistakable right to ensure that the grantee abides by the legislative franchise, This right necessarily includes the authority to forfeit the gran: should the grantee fail or refuse to comply with the provisions of the franchise. 147. Since ABS-CBN Corporation, without the requisite authority from NTC, has been continuously operating the KBO Channel, and illegally deriving profit f-om this unauthorized Aenmraan Profceeal Realy, tt. os. Manicisly of Pade Carin Bamagss Province, G. Ki. 19067, March 14,2002 SS Dewi ws. City Nose Copornin Serene 9, 2016, GX No, HE ‘i Oice of Cay Mayor of Parnbaqoe ve. Hie, GR Ne. 198303, December 19, 2007 {SrHets of Va. etal wx. Hooowble Cour of Appenl, etal OLR. Nz. MEDI, Soptember 42013 © Egucabic PCE Bank ma OF Mik Tinting. GF. No. 69950, Angas 11.2010,Republic ren. by Solicitor Gamera! Cai vx. ABS.CDN Corp: and ARS-CBN Coaverpenet Ins. Peston for Qoo Warmni2 GR Ne. enterprise, the State can ask the Court to enjoin such operation. 148. Furthermore, ABS-CBN Corporation has been issuing PDRs through ABS-CBN Holdings in violation of the foreign ownership restriction of mass media provided under Section 11, Article XVI of the Constitution, thus contravening their legislative franchise, which is “subject to the provisicns of the Constitution and applicable laws, rules and regulations.” 149. For its part, ABS-CBN Convergence transferrec its legislative franchise without prior approval from Congress. It also has not publicly offered any of its outstanding capital stock to any securities exchange within the Philippines, in violation of its legislative franchise. 150. There is an urgent need for the issuance of a TRO or writ of preliminary injunction to prevent irreparable injury to the State, considering that the injury arising from tre aforementioned violations are continuing and cannot 3e measured by any standard. Allowing Respondents’ serious Violations to fester would violate the right of the State to enforce its laws and rules. 151. Apropos, in Heirs of Yu, et al. vs. Court of Appeais,** the Court held: Damages are irreparable within the meaning of the rule relative to the issuance of Injunction where there Is no standard by which thelr amount can be measured with reasonable accuracy. “An I-reparable injury which a court of equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce urt, inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of measurement." An irreparable injury to outhorize an injunction consists of a se-ious charge of, or is destructive to, the property it affects, either physically or in the character in which it has been held and enjoined, or when the property has some peculiar quality or use, so thet Its “GR No, 182371, September 4.2013Regublic rap. by Solicicr General Calida ws. ABS.CHN Corp = ss ‘Peexio for Quo Warrant: GR Ne « Pecuniary value will not fairly recompense the owner of the loss thereof. 152. Respondents ABS-CBN Corporation and ABS-CBN Convergence have abused the franchises given to them by Congress. They should not be allowec to violate the laws and rules of the land while ostensibly serving the public. The State asks that the Court put a stop to their unlawful activities by issuing a temporary restraining order or writ of preliminary injunction. AFTERWORD. As aptly put by Virgil, “Nimium ne crede colori. Although Respondents portray themselves as law- abiding entities, the reverse is true. AS extensively demonstrated, Respondents are circumventing not only =hei legislative franchises but also the Constitution. The facts laid out in the petition unmistakably show their true side. This Court must the-efore seize this opportunity to revoke Respondents’ 'egislative franchises. These congressional grants cannct be abused, not even by media giants such as the respondents. PRAYER The petitioner consequently prays that this Honorable Court: 1. issue a temporary restraining order or writ of Preliminary injunction enjoning ABS-CBN Corporation from “urther operating the KBO Channel and offering it to the general public; 2. render judgment as follows: ‘Trust sot wo mach ins beaut} complexionRepublic rep. by Solicitor Genera! Cabide vs. ABS-CBN Corp, aan ABS-CBN Convergence Inz. Peution for Quo Warraate OR No. a. forfeiting the franchise of ABS-CBN Corporation under Republic Act No. 7966; b. forfeiting the frenchise of ABS-CBN Convergence, Inc. under Republic Act No. 7908, as amended by R. A. No. 8332; and d, making permanent the restraining order or writ of preliminary injunction to be issued by the Honorable Court. The petitioner also requests that the Honorable Court grant such further or other relief that it may deem just and equitable under the circumstances. Makati City for Manila, 10 Februa-y 2020.IBP Lifetime No. 015360, 08-18-16 MCLE Exemption No. VII-OSG090228 / 11-08-19 ae RENAN E. RAMOS Assistant Solicitor General Roll No. 33792 TBP Lifetime No. 015360, 08-18-16 MCLE Exemption No. VII-OSG000223, 11-05-19 MA. ANTON: d DIZON Assistant Solicitor General Roll No. 33774 IBP Lifetime No. 010284, 12-12-11 MCLE Exemption No. VII-OSG000219, 11-05-19 sts hake, M, SA B. DELA CRUZ-GALANDINES Assistant Solicitor General Roll No. 37023 TBP No. 066502, 01-10-19 MCLE Exemption No. VII-OSG000214, 11-05-19 BERNARD G. HERNANDEZ Assistant Solicitor General Roll No. 34618 IBP Lifetime No. 08866, 2-1-10 MCLE Exemption No. VII-OSG000218, 11-05-19 VIDA G."SAN VICENTE Assistant Solicitor General Roll No. 33995 IBP Lifetime No. 09503, 01-07-11 MCLE Exemption No. VI-000380, 04-02-18