weeuoweeue a. oe: oe) oes ee’ t wuuw DPPC eee Pee ETS LT er TEE Pree SUPREME COURT © = FRORECERE | U-s& wsoxeeaer, Republic of the Philippines U20FEB 0 AN 946 Supreme Court Manila REPUBLIC OF THE PHILIPPINES, represented by SOLICITOR GENERAL JOSE Cc, CALIDA, Petitioner, ~ versus ~ G.R. No. 251358 For: Quo Warranto ABS-CBN CORPORATION (FORMERLY ABS-CBN BROADCASTING CORPORATION) and ABS-CBN WITH CD FILED CONVERGENCE, INC. (FORMERLY MULTI-MEDIA TELEPHONY, INC.) Respondents, eee wo nnnnnn nnn x PETITION Petitioner Republic of the Phili pines, represented by Solicitor General Jose C. Calida, resp. ectfully states: PRELIMINARY STATEMENT 1. In view of its nature asa legislative franchise is not a right that Can be exercised at will and pleasure, Rather, it is a Privilege subject to regulation under such conditions as the government ma) grant from the State, a regardless of the grantee’s identity and influence, 2. For decades now, Respondents ABS-CBN Corporation and ABS-CBN Convergence - grantees of legislative franchises - have been at the forefront of Philippine mainstream media Purportedly “in the service of the Filipino people.” Ironically, Respondents are charging the public for such service which, however, should be free.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. xe 3. In this quo warranto petition, the State will show that Respondent ABS-CBN Corporation has been broadcasting contents for a fee 5eyond the scope of its legislative franchise. Likewise, the State will establish that respondent ABS-CBN Corporation, hiding behind an elaborately crafted corpcrate veil, has been allcwing 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 Diocese of Bacolod vs. Commission on Elections, G.R. No. 205728, January 21, 2015.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc, Petition for Quo Warranto GR.No, x representatives and officers. Simply put, the petition does not raise factual issues. 8. This petition is 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 to Section 22, Rule 141 of the Rules of Court. THE PARTIES 10. Petitioner Republic of the Philippines is a sovereign entity with capacity to sue and be sued. It has the authority to commence a quo warranto proceeding under Article VIII, Section 5(1) of the Ccnstitution and Section 1, Rule 66 of the Rules of Court. The Resublic is represented in this Petition by the Solicitor Generai 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 a lawyer.” The Solicitor General’s authority to institute a quo warranto petition on behalf of the Republic is provided under Section 2, Rule 66 of the Rules of Court. 11. The Solicitor General may receive the writs, orders, resolutions and processes of the Honorable Court at 134 Amorsolo Street, Legaspi Village, Makati City. 12. Respondent ABS-CBN Corporation, forrrerly 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 principal office address at ABS-CBN Broadcasting Center, Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City.? Pursuant to Section 11, Rule 14 of the Rules of Ccurt, Respondent may be served with this Honorable Court's writs, orders, and processes through its President or Corporate Secretary. ? Annex “A,” Articles of Incorpcration ABS-CEN Corporation.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R.No. 13. Respondent ABS-CBN- Convergence, Inc., formerly the Multimedia Telephony, Inc., is a domestic corporation that acts as the telecommunications subsidiary of Respondent ABS-CBN Corporation, with principal office address at ABS-CBN Broadcasting Center, Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City. Pursuant to Section 11, Rule 14 of the Rules of 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 as an assembler 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 stations fer television ir the Philippines. 15, In 1952, Bolinao Electronics Corporation adopted the business name Alto Broadcasting System (ABS). ABS eventually launched the country’s first Also known as “An act granting the Bolinao Electronics Corporation a temporary permit to construct, ‘maintain and operate stations “or intemational telecommunication and stations for television in the Philippines.” Also known as “An Aot granting the Manila Chronicle a permit to construct, maintain and operate redio broadcasting stations and stations for television in the Philippines.”Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. 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 4 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: Section 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 granted a franchise to construct, operate and maintain, for commercial, purposes and in the public interest, television and radio broadcasting stations in and throughout the “hilippines, through microwave, satellite or whatever means including the use of any new tectihologies in television and radio systems, the corresponding technological auxiliaries or faci special broadcast and other broadcast distribution services and relay stations. 7 5 Also known as “An Act Amendirg the Title and Certain Sections of Republic Act Numbered Five Eundred Eleven, Entitled “An Act Grantiag the Bolinao Electronics Corporation a Temporary Permit to Construct, Maintain and Operate Stations for Intemational Telecommanication and Stations for Televison in the Philippines”. * Also known as “An Act Amencing the Title and Certain Secticas of Republic Act Numbered Thirteen Hundred and Forty-Three, entitled “An Act Granting the Manila Chronicle a Permit to Construct, Maintain and Operate Radio Broadcasting Stations and Stations for Television in the Philippines.” 7 Annex “B," copy of R.A. No. 7966, also known as “An act granting the ABS-CBN Broadcasting Corporation a franchise to corstract, install, operate and maintain television and radio broadcasting stations in the Philippines, and for other purposes.”Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto 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 2aging industry. Multi- Media Telephony, Inc. was the fourth player in the grcwing Paging industry after Easycall, Pocketbell, and Beeper 150.8 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 Explanatory Noté of House Bill No. 13755 (R.A. No. 7908). ° Annex "C," copy of R.A. Nc. 79¢8, also known as “An act granting the Multi-Media Teleshony Incorporated, a franchise to construct, establish, operate and maintair. radio paging system in the Phil:ppines, and for other purposes.” '° Annex "D," R.A. No. 8332, also known as “An Act Amending Republic Act No, 7908, Entitled, “An Act Granting the Multi-Media Teleshony, Incorporated, a Franchise to Construct, Establish, Operate and Maintain Radio Paging System in -he Philippines, and for Other Puzposes”,Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. a. CPCN to procure, install and maintain Internet Protocol (IP) Access Node in NTC Case No. 98-212" issued on April 23, 20€2; b. Provisional Authority to procure, install, operate and maintain a nationwide internet network in NTC Case No. 98-146%2 issued on February 8, 1999; c. 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 =o install, operate and maintain a nationwide broadband network in NTC Case No. 98-1034 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-owned 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 1 Attached as Annex “EK, " Atached as Annex “F.” Awached as Annex “G.” “* Attached as Annex SH.”Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x 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, 2013.17 29. On March 2, 2015, the Securities and Exchange Commission issued a Certificate of Filing of Amended Articles of Incorporation in favor of ABS-CBN Convergence.!® ABS- CBN Convergence uses Multi-Media Telephony'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. !9 30. Similarly, ABS-CBN Corporation acquired and used Amcara’s legislative franchise under 2.A. 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 8 Annex “1,” ABS-CBN Corporation's Quarterly Report, SEC Forre 17-0 for fiscal year ended on September 30, 2016. ‘6 https://business. inquirer.net/124117/abs-cbn-forays-into-telco-business (last accessed on January 1¢, 2020). “hutps:/www.philstar.com/business/2013/06/08/95 1358/ntc-okays-globe-abs-cbn-network-sharing- agreement (last accessed on January 10, 2020); htips://www.raanilatimes.net/2013/06/07/businass/nte- approves-abs-c-globe-network-sharing/773 / (last accessed on January 10, 2020). “Annex “J,” Amended Articles of Inccrporation in favor of ABS-CBN Convergence, Inc.: https://edge.pse.com.ph/companyDirectory/forr:.do (last accessed January 15, 2020). ach ® See Explanatory Note in Heuse Bill No. 3297 *' Annex “K,” ABS-CBN Corpcration’s 2012 Amended Annual Report pursuant to Section 17 of the SRC and Section 141 of Corporation Code of the Philippines, SEC Form 17-A.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. 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 cerrying value of investments in Amcara amounted to P41 millicn as of December 31, 2012 and 2011.72 Operation of Kapamilya Box Office is without the necessary permit from NTC. 32. After the expiration of the agreement between ABS-CBN Convergence and Globe Telecom, the former severed network sharing ties with tre 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 cusiness 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).?5 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 P30.00 to P99.00,76 34. ABS-CBN Corporation is using the free-to-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 2 Id, p. 60. 2 hps://ousinessmirror.com.ph/2018/07/ 6/abs-cbn-convergence-globe-end-5-years-of-network-sharing/ (last accessed on January 10, 2020). 2 Annex “L,” ABS-CBN Corporation Information Statement datzd March 14, 2019, SEC Form 20-1S, p. 37; Annex “M,” ABS-CBN Corporation’s Quarterly Report for June 30, 2015; hups://www philstar.com/entertainment/2015/02/15/1423784/abs-ctn-launches-digital-tv (last accessed on January 10, 2020). Shtips://entertainment.abs-cbn.com/tv/updates/1231916-abs-cbn-typlus-launches-kapamilya-box-office- channel-with-one-month-free-screening-of-star-cinema-blockbuste-s (last accessed on 17 January 2020). 26 https://tvplus.abs-cbn.comv/kbc (last accessed on January 15, 2029).Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GRNo, — systems that involves satisfying qualified criteria prior to granting access to content.2? 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 P2,500.00.78 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.”29 NTC iterated the directive in its Order dated May 14, 2019.39 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 #199.00.3 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 P99.00.3? On April 13, 2017, ABS-CBN advertised its KBO Holy Week Special for P99.00.2? 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 P30.00.35 Last February 24, 2020, the homecoming concert of Miss Universe 7 Annex “N,” p. 5, Framework of the Digital Terrestrial Television Broadcasting (DTTB) Migration Plan, 2 Annex “O”, Letter dated April 1, 2015, » Annex “P”, Letter dated April 29, 2015. % Annex “Q,” NTC Order dated May 14, 2019. 31 https://tvplus.abs-cbn.com/news/details/pi¢-1460975 143476/weekend-knockout-bakbakan-sa-abs-cbn- \wplus/ (last accessed on January 15, 2020). % _htips:/tvplus.abs-cbn.conv/news/details/pid-147444 1676940/pinoy-pride-38-philippines-vs-mexizo-sa- Wwplus-mo/; hitps://tvplus.abs-cbr.convnews/details/pid-1499137334492/pinoy-pride-41-magsayo-7s-diaz- sa-superkbo/ (last accessed on January 14, 2020), * hps://tvplus.abs-cbn.com/news/Cetails/pid-1492058839696/kbo-holy-week-special’ (last accessed on January 15, 2020), https://www.abs-cbn.com/newsroom/news-releases/2019/9/13/abs-cbn-ball-2019-airs-live-on- Kbo?lang=en (last accessed on January 17, 2020). ° _https://www.abs-cbn.com/newsroon/news-releases/2018/1 1/28’highly-awaited-int-boys-major-concert- airs-live-on?lang-en (last accessed on January 17, 2020),Republic rep. by Solicitor General Calida vs, ABS-CBN Comp. and ABS-CBN Convergence Inc. Petition for Quo Warrant GR. No, x 2018 Catriona Grey was also aired live on KBO.26 Recently, ABS-CBN launched KBO99 Promo where a payee may enjoy eight movies for four weeks for P90.C0.37 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.3® Use of Philippine Deposit Receipts by ABS-CBN Holdings Corporation 39. On March 306, 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.39 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 2 https://www sunstar.com.ph/article/i 793798 (last accessed on January 17, 2020). » hups://tvplus.abs-cbn.comy (last accessed on January 15, 2020). 3 _hups://werw.abs-cbn.com/newsroon/news-releases/20 19/2/2C/abs-cbn-tvplus-sells-7m-units-since-its- launch-in?lang=en (last accessed on January 10, 2020). * Annex “R,” ABS-CBN Holdings Corporation Notes to Financizi Statements, 2019 3° Quarterly Report pursuant to Section 17 of the Securities Regulation Code and SRC Rule 17(2)(B).Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x 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-ra=a 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.4? The number one PDR holder holding 186,635,072 or 60.42%, >CD Nominee Corp, is a non-Filipino.43 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 PDRs were held in various funds managed by its subsidiary Eastspring Investment Singapore Limized, also a Singaporean corporation.*+ 44. The obligation of ABS-CBN Holdings to deliver the ABS-CBN Corporation shares 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, a shareholder may, at his option and from time to time, deliver shares to the ABS Holdings in exchange for an equal number of PDRs. The exchange is based on prevailing traded values of ABS-CBN Corporation shares at the time of transaction with the corresponding PDR option price.*® 1d, “1a, 1a, ® Annex “S,” ABS Holdings’ 2018 Information Statement, SEC Form 20-IS, with a list of the Top 20 PDR holders of ABS Holdings as of December 20, 2019. “ Annex “S-1,” ABS Holdings’ Beneficial Ownership Disclosure dated October 28, 2019, SEC Forrs 18- A Sd,Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R. No. x 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 she7es 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 rredia enterprise whose ownership is constitutionally limited to Filipinos. 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 USD ABS-CBN Global Hungary Budapest Hungary Holding Company USD Rosetta Holdings Corp —_Philippines Holding Company PHP Sapientis Holdings Corp Philippines Holding Company PHP Columbus Technologies In Philippines Hoiding Company PHP SkyVision Corp Philippines Hiding Company PHP. Sun Cable Holdings Philippines Hoiding Company PHP 48. The flowchart*® below illustrates the map of relationships of ABS-CBN Corporation’s subsidiaries: 61a, Td. “8 See Annex “L," particularly 20/8 Audited Financial Statement, >p. 7-9. Td, p. 265.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x—— can convonanion ann sunning ‘Wert ne GROUP Desenber 32018 sTeANATIONAL SUBS OLARES 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. B. Direct resort to the Honorable Court is justified as this case is of transcendental importance and of first impression. II. Substantive Arguments A. Respondent ABS-CBN Corporation violated its legislative franchise when it operated a Pay-per-view channel through free-to-air signals. B. Respondent ABS-CBN Convergence, Inc. violated its franchise under R.A. No. 7908, as amended by R.A. No. 8332.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto 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 amended by R.A. No. 8332, in relation to Section 21 of R.A. No. 7925, when it failed to publicly offer any of its outstanding capital stock to any securities exchange in the Philippines. Ir. 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 I. Procedural 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. 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 franchise."°° The special civil action of quo warranto is a prerogative writ by which the Government can call upon any * Rules of Court, Sec. 1.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR No. Xe person to show by what warrant he holds a public office or exercises a public franchise.>* 50. Even as the action is maintained in the name of the Republic, the Solicitor General 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.5* 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.54 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.5> 52. Respondents are guilty of unlawful exercise of their franchises under Section 1(a), Rule 66 of the Rules of Court, viz: Section 1. Action by Government against individuals. — An action for the usurpation of a public office, position or franchise may be commenced by a verified petition breught in the name of the Republic of the Philippines against: (a) A person who usurps, intrudes into, or unlawfully holds or exercises a public office, positicn or franchise; .. 53. In Divinagracia vs CBS Inc.,>* the Court recogrized that “[t]here is in fact a more appropriate, more narrowly- “ Divinagracia vs. Consolidated Broadcasting System, Inc.,G.R. No. 162272, April 7, 2009 citing O. Herrera, Il Remedial Law (1999 ed.), at 295; citing Newman v. U.S., 238 U.S. 537, 545, 56 L.Ed. 513, and Moran, Comments on the Rules of Court, Vol. 3, 1970 ed, * Divinagracia vs. Consolidated Broadcasting System, Inc., G.R, No. 162272, April 7, 2009 citing Rules of Court, Sec, 1. 5 Republic vs. Sereno, G.R. No. 237428, May 11, 2018 PLDT vs, NTC, G.R. No. 88404, 18 October 7990, 190 SCRA 717, 730-731. 3 See Divinagracia vs. Consolidated Broadcasting System Inc., et al., supra. GR. No. 162272, 7 April 2009.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. x 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 Cellcom 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 properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court}, the reason being that the abuse of a franchise is a public wrong and not a 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 granted 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 control 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 General, 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. 57 G.R. No. 88404, October 18, 1990. 5 Emphasis supplied, # Del Mar vs. PAGCOR, et. al., G.R. No. 138268, November 29, 2000, Td. Old. ® Rule 66 of the Rules of Court, See. 2.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto 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 VIII of the 1987 Constitution: Section 5. The Supreme Court shall have the following powers: (1) 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 Court, the Court of Appeatis, 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 a 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 that petitions for certiorari and prohibition, which shall fall under © Dy vs. Bibat-Palamos, G.R. No. 196200, September 11, 2013. GR. No, 215746, October 8, 2019.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G No. 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 unbridled freedom of choice of court forum. In Heirs of Bertuldo Hinog ve Melicor, citing People v. Cuaresma, the Court held: This Court's original jurisdiction to issue writs of certiorari 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, to 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 against first level (“inferior”) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Aopeals. 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 exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. © Association of Medicat Clinics for Overseas Workers Inc. (AMCOW) vs. GCC Approved Medical Centers Association Inc., G.R. No. 207132, December 6. 2016. © GR. No. 196063, December 14, 2011.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence inc. Petition for Quo Warranto GR.N wee 0, 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 not an iron-clad rule. This court has "full discretionary power to take cognizance and assume jurisdiction [over] special civil actions for certiorari ... filed directly with it for exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised in the petiticn." XXX A second exception is when the issues involved are of trenscendental importance. In these cases, the imminence and clarity of the threat to fundamental constitutional rights outweigh the necessity for prudence. The doctrine relating to constitutional issues of transcendental importance prevents cour-s from the paralysis of procedural niceties when clearly faced with the need for substantial protection. XXX Under the principle of hierarchy of courts, direct recourse to this Court is improper because the Supreme Court is a court of last resort and must remain to be so in order for it to satisfactorily perform its constitutional functions, thereby allowing it tc devote its time and attention to matters within its exclusive jurisdiction and preventing the overcrowding of its docket.® Nonetheless, the invocation of this Court's original jurisdiction zo issue writs of certiorerihas been allowed in certain instances on the ground cf special and important reasons clearly statec in the petition, such as, (1) when dictated by the public welfare 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, 205728, January 21,2015, 20Republic rep. by Solicitor Genera: Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto GRIN x compelling circumstances called for and justified the immediate and direct handling of the case.6* 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 transcendental 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 of issues, apart from providing entertainment. However, its size and function does 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 considerazions, this is case is of first impression. There is no jurisprudence yet on the revocation of a franchise of a television or radio company. This case presents issues that the Court can resolve to serve as precedent. It is an opportunity that the Court must seize to draw the line in future cases. 65. The presence of these compelling circumstances warrants the application of the excertion to the doctrine of * Dy vs. Judge Bibat-Palamos, GR. No. 196200, September 11, 2C13. ® Divinagracia vs. Consolidated Broadcasting System, Inc., G.R. No. 162272, April 7, 2009. 21Republic rep. by Solicitor Generai Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto No. hierarchy of courts. Therefore, a direct and immediate resort to the Court is justified. II. Substantive A. Respondent ABS-CBN Corporation violated its legislative franchise when 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 called ABS-CBN TV plus.” Thereafter, in March 2016, ABS-CBN launched a Pay-per-view channel in ABS-CBN TV plus, the Kapamilya Box O*fice (KBO).7 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 secure from the National Telecommunications Commissior the appropriate permits and licenses for its station and shal Not_use any frequency in the television or radio spectrum without having 2¢en authorized by the Commission. The Commission, however, shall not unreasonably withhold or delay the grant of any such authority.72 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- per-view on Digital Terrestrial TV (DTT) for P2,500.09.73 “See Annex “L,” p. 89. “thitps:/fentertainment.abs-cbn.com/tv/updates/123 19 16-abs-cbn-tvplus-launches-kapamilye-box-cffice- channel-with-one-month-free-screening-of-star-cinema-blockbusters (last accessed on 17 January 2C29), ? Underlining supplied. ® See Annex “O,” Letter dated April 1, 2015.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto However, in a letter dated April 29, 2015, NTC directed ABS- CBN “to refrain from offering any pay television service in [its] DTT trials until such time that the Ccemmission has come up with appropriate guidelines for the same.”7* 69. In its Order dated May 14, 2019, NTC iterated the directive to ABS-CBN Corporation. In the NTC Order, the Broadcast Service Division (BSD) made a finding or recommendation that “No Encryption nor Conditional Access of programming content shall be allowed.” Furthermore, in granting Provisional Authcrity to ABS-CBN Corporation to convert DWWS television station from Analog TV service to DTT using Channel 2 in Metro Manila, NTC imposed the following conditions:’> 4, The use of Conditional Access System (CAS) on DTTB service shal be subject to such Conditional Access guidelines that the Commission or any other relevant government agency may hereafter issue; ... 10. It_shall_ secure, with this Commission permits and licenses for the equipment, facilities and operations and shall have at all times valid permits and licenses to cover its equipment, facilities and operation; ... 19, It shali abide with all laws, rules and regulations of the land. ... 23. Finally, this P.A. shall be valid unt!l the effectivity of its Congressional Franchise under R.A. 7966, from date hereof, and may be subject to amendment, alteration, suspension, revocation or cancellation when public welfare, morals or national security so requires or when grantee operates beyond its authcrization granted ...76 70. NTC did not authorize ABS-CBN Corporation to operate a Conditional Access System (CAS) when it granted a Provisional Authority to the latter. Under the Framework of the Digital Terrestrial Television Broadcasting (DTTB) Migration Plan prepared by the Department of Information and Communications Technology (DICT Framework), CAS is defined as a technology used in digital TV systems that ™ See Annex “P”, Letter dated April 29, 2015. * See Annex “Q,” NIC Order dated May 14, 2019. % Underlining supplied. 23Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. involves satisfying qualified criteria prior to granting access to content.”” In its operations of the KBO Channel, the criteria imposed by ABS-CBN Corporation is the purchase of ABS-CBN TV plus and the payment of the subscription fee. 71. It bears stressing that NTC found BSD’s report that “No Encryption nor Conditional Access of programming content shall be allowed” to be in order. Accordingly, the NTC imposed a condition on ABS-CBN Corporation that “[t]he use of Conditional Access System (CAS) cn DTTB service shall be subject to such Conditional Access Guidelines that the Commission or any other relevant government agency may hereafter issue.” At present, there are no Conditional Access Guidelines yet issued by NTC or any other government agency. In the absence of any permit from NTC and guidelines on conditional access, ABS-CBN Corporation has no authority to offer the KBO Channel. 72. Moreover, under the DICT Framework (which was crafted after DICT’s consultation with public and private broadcasters, equipment manufacturers, content producers and key TV industry stakeholders), the operation of CAS is subject to prior approval or authorization by the government: ubject to stakeholders’ consultation and issuance of the corresponding rules end regulations, the government may allow operati f Conditional Access System for DTTB. The NTC is in the process of consultation with the stakeholders. This supplementary service may be permissible subject to prevailing decrees, acts and laws, as well as rules and regulations set and promulgated by the NTC. As Pay TV will be a valuable resource stream for broadcasters and a mechanism to provide premium content to consumers, the stand of the government is to make more available free broadcast content to the people, However, the policy and rules and requlations for the introduction of Pay TV services for DTTB has yet to be formulated, developed and issued should the regulator allow such operation. If implemented, it is ideal to have a common CAS by all broadcasters so that a single STB may be able to access *7 See Annex “N,” Framework of the DITB Migration Plan, p. 5. 24Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. premium contents from all broadcasters assuming a common ground can be struck among stakeholders.78 73. Besides, the Framework also states: Subject_to_additional_rules_and regulations to_be issued, the government may allow realization of new services that_can_ be méde_availabie by DTTB such_as Conditional Access System (CAS), Mobile TV, among others. These may include Pay TV as a means of delivering premiurr content implemented through Video on Demand, as contrast to free mobile over-the-air broadcast I'ke One-Seg. In terms of copyright protection, the government shall issue appropriate guidelines, rules and regulations. As measure for example, watermarking can be used to prevent unauthorized copying and viewers are unable to receive or record Digital TV streams unless device permission has beer granted.79 74, The operations of CAS are thus subject to prior approval by the government. In the DICT Framework, broadcasting organizations are recuired to secure an authority from the NTC to operate a CAS: The Philippine market is a very cost sensitive market. Analog only TV’s are an important segment of the TV market in the Philippines. Many consumers will use their TV sets for non-Terrestrial TV related activities such as gaming, watching movies, as well as portals for Satellite and Cable Tv. However, if terrestrial broadcasters will be allowed to encrypt additional contents for Pay TV applications, ar authority from __the _National___Telecommunications Commission must be obtained pendinc the deliberation anc creation of an Implementing Rules and requlation with the stakeholders and Congress for the Pey TV franchise. This will make the digital tuners in many TVs redundant, as consumers will need to purchase broadcaster STBs to watch. encrypted content regardless if an integrated DTTB receiver has already been purchased by the viewer.8° 75. ABS-CBN Corporation cannot deny that it has no permit or authority from the government, specifically NTC, before it launched its KBO Channel. Despite being aware of the absence of such a permit or authority, ABS-CBN remains 71d. at 20. 791d, at 30; Underlining supplied. 87d, at 39; Underlining supplied. 25Republic rep. by Solicitor General Calida vs. AES-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto undeterred and continuously operates the KBO Channel in violation of its franchise, the NTC directive and Order, and the DICT Framework, 76. At the same time, ABS-CBN Corporation is not only operating a CAS without the required authority from NTC; it also illegally exacts money from the Filipino people. KBO is a pay-per-view channel where Filipinos may choose to access premium content from their television sets.®! To be able to watch the movies and other contents shown in the KBO, one must first register and pay P30.00 cr P99.00 through the country’s mobile networks (ABS-CBN Mobile, Globe, TM, Smart, TNT and Sun).8* As advertised by ABS-CBN Corporation:® PRICE ON WEEKEND KBO30 Weekend (Saturday 10AM to Sunday 10PM) 30.00 = 5 movies (3 local titles and 2 foreign titles) = MMK = Myx SUPER KBO99 Weekend (Saturday 19am to Sunday 10pm) P99.00 = 1 premium movie or marquee title (fresh from theatrical) = 5 movies (3 local titles and 2 foreign titles) = Myx 77. From time to time, ABS-CBN Corporation offers promotions to entice the viewing public to subscribe to the KBO channel. On April 18, 2016, ABS-CBN Corporation offered live viewing of “The Time Has Come: Donaire v. Bedak” for P199.00.® Similarly, on September 21, 2016 and July 4, 2017, ABS-CBN Corporation offered pay-per-view boxing of “Pinoy Pride 38: Philippines vs Mexico” and “Pinoy © Supra note 26. * hups://tvplus.abs-cbn.com/kbo (last accessed on January 15, 2020). ®hups:/tvplus.abs-cbn.com/news’éetails/pid-14€312882378 7/kaparnilya-box-office-frequently-asked- questions! (last accessed on January 15, 2020). 5 https://tvplus.abs-cbn.com/newsidetails/pid-1460975 143476/weekend-knockout-bakbakan-sa-abs-cbn- wplus/ (last accessed on January 15, 2020). 26Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto Pride 41: Magsayo vs Diaz” through KBO for P99.00.85 On April 13, 2017, ABS-CBN Corporation 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 ®30.00.8” Similarly, on November 30, 2019, “Listen: The Big Shot Concert” of the TNT Boys was aired live on the same channel ®30.00.% Last February 24, 2020, the homecoming concert of Miss Universe 2018 Catriona Grey was also aired live on KBO.® Recently, ABS-CBN Corporation launched KBO99 Promo in which a payee may enjoy eight movies for four weeks for P90.00.2° 78. Section 202.7 of the Intellectual Property Code defines broadcasting as ‘the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also ‘broadcasting' where the means for decrypting are provided to the public by the broadcasting organization or with its consent.’ Section 202.7 of the IP Code, thus, provides two instances in which there is broadcasting, to wit: (1) the transmission by wireless means for the public reception of sounds or of images or of representations thereof; and (2) the transmission by satellite for the public reception of sounds or of images or of representations thereof in which the means for decrypting are provided to the public by the broadcasting organization or with its consent. 79. Furthermore, NTC in its Rules and Regulations for Digital Terrestrial Television (DTT) Brcadcast Service, defines Data Broadcasting as “a method of delivering Rich Text and graphics on the screen including the details and instructions from Emergency Warning Broadcast of an ISDB-T service." 8 _httpsi//tvplus.abs-cbn.conv/news’details/pid-147444 1676940/pinoy-pride-38-philippines-vs-mexico-sa- tvplus-mo/; htps:/tvplus.abs-cba.com/news/details/pid-1499137334492/pinoy-pride-d |-magsayo-vs-diaz- sa-superkbo/ (last accessed on January 14, 2020). % https:/ityplus.abs-cbn.com/news/details/pid-1492058839696/kbc-holy-week-special/ (last accessed on January 15, 2020). Mhttps://www.abs-cbn,com/newsroom/news-releases/2019/9/13/abs-cbn-ball-2019-airs-live-on- Kbo?lang=en (last accessed on January 17, 2020). 3 _hitps://www.abs-cbn.com/newsroom/news-releases/2018/1 1/28-highly-awaited-tnt-boys-major-concert- airs-live-on?lang=en (lest accessed on January 17, 2020). ® https://www.sunstar.com,phiarticlé/1793798 (last accessed on January 17, 2020). >» https:/tvplus.abs-cbn.cony (last accessed on January 15, 2020). > Annex “T,” NTC Memorandum Cireular No, 97-12-2014. 21Republic rep. by Solicitor Genera: Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine: Petition for Quo Warranto GR.No, 80. When it offers the KBO Chennel in its ABS-CBN TV ?lus, ABS-CBN Corporation is engaged in broadcasting. In doing so, ABS-CBN is using the free-to-air frequency grented by the State. 81. In ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System, Inc., et al.,°? the Court discussed the nature of broadcasting: Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster trarsmits, the signals are scattered or dispersed _in the air. Anybody may pick-up these signals. There is no restriction as to its number, type or class of recipients. To receive the signals, one is not 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 air is possible only through wireless means. The use of wire in transmitting signals, such as cable television, limits the recipients to those who are connected. Unlike wireless transmissions, in wire-based transmissions, it is not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers.9> 82. In the same case, the Court added: Anyone in the country who owns a television set and antenna _ci ceive ABS-CBN's signals for free. Other broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-! IBC-13 can likewise be accessec for free. No payment is required to view the saic channels because these broadcasting networks do not generate revenue from subscription from their viewers but from_airtime revenue _from_contracts with _commercia. advertisers and Droducers, as well as from direct sales. In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN, among ® GR. No. 175769-70, January 19, 2009. ® Underlining supplied. 28Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc Petition for Quo Warranto GR.No. x 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 carr'er because these local channels can be viewed with or without DTH television.%4 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 saccificed in the pursuit of Drofit.%° 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 from the people. This warrants “he revocation of ABS- CBN Corporation’s legislative franchise. “4 Underlining supplied; Citations om:tted. * Telecom. & Broadcast Attys. of the Phils., Inc. vs. COMELEC, 352 Phil. 153 (1998). % ABS-CBN Corporation vs. Philippine Multi-Media System, Inc., G.R. No. 175769-70, January 19, 2009, citing Telecom. & Broadcast Attys. of the Phils., Inc vs. COMELEC, 352 Phil. 153, 173 (1998). 29Republic rep. by Solicitor General Calida vs, ABS-CBN Comp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x B. Respondent ABS-CBN Convergence, Inc. violated its franchise under R.A. No. 7908, as amended by R.A. No. 8332. 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 prior approval from the Congress. 87. ABS-CBN Convergence violated Section 15 of R.A. No. 7908, as amended by R.A. No. 8332, 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 with appr of the Congr of the Philippines. Any person or entity to which this franchise is sold, transferred or assigned, shall be subject to the same conditions, terms, restrictions, and limitations of this Act.9” 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 supplied. 30Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto Dower to review and approve the franchises of public utilities, ‘ncluding those engaged in telecommunication services, but also the power to amend, alter, or repeal the franchises when the 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 except 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 shall 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 fublic 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 all the executive and managing officers of such corporation or association must be citizers of the Philippines.°8 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 shcws that the framers of the Constitution intended to include 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. Bui as worded now, we do not embody into a particular franchise, certificate or authority the inherent nonexclusive cheracter of the same.92 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 shall issue the franchise to operate electricity from town to town? Are we going to continue this under this Article? * Emphasis supplied. ® Record, Constitutional Commission Deliberations dated August 13, 1986, p. 262; emphasis supplied. 31Republic and ABS. rep. by Solicitor General Calida vs, ABS-CBN Corp. “CBN Convergence Ine. Petition for Quo Warranto GR.No. 00 Td. at MR. VILLEGAS. It is still going to be given by the legislative body. ‘°° MR. MONSOD. Last Saturday, a phrase was introduced by Commissioner Davide in Section 15 which states: “NOR SHALL. SUCH FRANCHISE, CERTIFICATE OR AUTHORIZATION BE EXCLUSIVE IN CHARACTER FOR A PERIOD OF NOT LONGER THAN TWENTY-FIVE YEARS, RENEWABLE FOR NOT MORE THAN TWENTY-FIVE YEARS.” I believe his purpose was to 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, a 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 ts a natural monopoly; otherwise, iz would be too expensive for the country and for the consumers. MR DAVIDE. That particular amendment was introduced by me, and the idea was not 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 Constitution, and which was reiterated in the 1973 Constitution, we had this particular provision on public utilities. It is mow Section 5 of Article XIV of the 1973 Constitution. It reads: No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to ccrporations or associations organized under the laws of the Philippines at least sixty percentum of the capital of which is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character o> for a longer period than fifty years. J only split the 50-year maximum period provided for in the 1973 Constitution as well as in the 1935 Constitution by p. 269; emphasis supplied. 32Republic rep. by Solicitor Genera: Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto G.R.No. making it 25 years renewable for not more than 25 years, or, therefore, a tozal of 50 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: Constituticn but also by the previous Constitution.1° 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. Section 1 thereof provided that "[n]o Person, firm, company, association or corporation shal construct, install, establish, or operate ... a radio broadcasting stetion, without having first obtained a franchise therefor from the National Assembly ...." Section 2 of the law prohib:ted the construction aor installation of any station without a permit granted by the Secretary of Public Works and Communication, and the operation of such station without a license issued by the same Department Secretary. The law 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 Istands and to issue such rules and regulations as may be necessary." '°! Record, Constitutional Commission Deliberations dated August 25, 1986, p. 699; emphesis supplied, "2 G.R_No. 162272, April 7, 2009, 33Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto G.R.No. Noticeably, our Radio Control Act was enacted a few years after the United States Congress had passed the Radio Act of 1927. American broadcasters tremselves 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 marxet 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. It 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). This pre-regulation history of radio broadcast stations illustrates the continuing necessity of a government role in overseeing the broadcast media industry, as opposed to other industries such as print media and the Internet. Without regulation, the result would be a free-for-all market with rival broadcasters able with impunity to sabotage the use by others of the airwaves. Moreover, 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, can only be accomplished if the industry itself is subjected to a regime of government regulation whereby broadcasters receive entitlement 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.!03 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 ©} Emphasis supplied 34Republic rep. by Solicitor Generai Calida vs. A3S-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No, ene x 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 frequencies before the NTC, it already used the corporate mame of ABS-CBN Convergence.1°5 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 NTC Case No. 97-245 tc operate. 1% 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 'S See Explanatory Note of House Bill No. 13759, R.A. No. 7908. "85 annex “U,” Order dated July 23, 2015, 164, 35Republic rep. by Solicitor General Calida vs. A3S-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. evasions and difficulties of administration and supervision."!°7 A corporation cannot use another corporation’s name to transact business: The incorporators ‘constitute a body politic and corporate under the name stated in the certificate.’ A Corporation has the power ‘of succession by its corporate name.'The name of a corporation is therefore | to its existence. It cannot change its name 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 and open the door to frauds and evasions and difficulties of administration and supervision. The policy of the law as expressed our corporation statute and the Code of Commerce is clearly against such a practice,108 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 subterfuge 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 Regu‘ation Code (SRC) and SRC Rule 17 (2)(b) thereunder dated September 30, 2012119 of ABS-CBN would reveal that an intricate web of corporate layering was employed by Respondents to circumvent or © Philippine First Insurance Incorporated vs. Hartigan, et al., G.R, No. L-26370 (July 31, 1970), citing Red “ine Transportation Co, vs, Rural Transit Co., Lid., G.R. No. 41576 (September 6, 1934). * Red Line Transportation Co. vs. Rural Transit Co., Ltd.,id.; Emphasis supplied, and citations om:tted. See Annex “J.” * Annex “V,” see pp. 52-53. 36Republic rep. by Solicitor General Calida vs. A3S-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R. No. xe 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 acquisiticn date end the corresponding carrying amounts immediately before the acquisition based on the final purchase price allocation were: Fair Value Recognized on Acquisition Carrying Value (Amounts in Millions) Cash and cash equivalents p49 P49 Trade and other receivab es 13 13 Inventories 2 2 Prepaid expenses and other current 144 144 assets Property and equipment 116 116 Other noncurrent assets 12 12 Trade and other current liabilities (650) (850) Loan payable (27) (27) Long-term debt (362) (352) Asset retirement obligation (1) (1) Deferred tax liability (32) (32) Net assets (736) (P736) Acquired ownership interest 20% Net assets acquired 515 Goodwill arising on acquisition 1,038 Consideration P523 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 37Republic rep. by Solicitor Genera’ Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. Telephony, which was, to reiterate, a 95%-owned subsidiary of CTI. The fair values of the identifiable assets and liabilities at acquisition date and the correspording carrying amcunts immediately before the acquisition are: Fair Value Recognized on Acquisition Carrying Value (Amounts in Thousands} Cash P845 P3845 Deposits for future stock subscriptions 130,657 130,557 Trade and other payables (8,640) (8,640) Short-term loans £132,000) (132,000) Net assets (9,138) (P9,138) Goodwill arising on acquisition 9,201 Consideration paid by cash P63 Net cash acquired with the subsidiary P845 Cash paid (63) Net cash outflow P782 105. Interestingly, on March 5, 2015, ABS-CBN Corporation entered into a merger with its wholly-cwned subsidiaries, which include Sapientis, the alleged purpose of which is to clean up ABS-CBN’s corporate structure. As a result of the merger, ABS-CBN Corporation became the surviving corporation of Sapientis.1!1 106. The effects of merger are provided under Section 80 of the Corporation Code, thus: Sec. 80. Effects or merger or consolidation. - The merger or consolidation shall have the following effects: 1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; ... 2, The separate existence of the constituent corporations shall cease, except that o* the surviving or the consolidated corporation; UI See Annex “I,” ABS-CBN Cozporation's Quarterly Report, SEC Form 17-Q for fiscal year erded on September 30, 2016.Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No, x 3. The surviving or the consolicated corporation shal possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under this Code; 4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions tc shares and other choses in action, and all and every other ‘nterest 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 or consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent co-porations ir the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligatiors; and any pending claim, action or proceeding brought by or against any of such constituent corporazions may be prosecuted by or 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 legislative franchise effected by Respcndents: Congress GRANTEE: LEGISLATIVE FRANCHISE ~=> MULTI-MEDIA R.A. No. 7908, as TELEPHONY, INC. amended by R.A. No. {incorporated on 8332 | September 20, 1993} 39Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R.No. Xen October 15, 2010 Sapientis became a wholly owned subsidiary of respondent ABS-CBN Corporation ABS-CBN Corporation had acquirec from PCCI Equities, Inc. all i2s subscription rights over the 250,000 shares in Sapientis Holding Corporation (Sapientis), with a par value of #1 per share, for 0.1 million y December 29, 2011 Sapientis acquired Columbus Technology, Inc. (CTI) ¢ Sapientis acquired 70% interest through conversion 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. y March 5, 2015 « ABS-CBN Corporation entered into a merger with Sapientis, a wholly owned subsidiary. e ABS-CBN Corporation became the surviving Corporation.Republic rep. by Solicitor General Calida vs, ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. x 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 ABS- CBN Corporation or Sapientis through CTI, and this trarsfer of the legislative franchise or the rights and priviieges 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 a legislative franchise under R.A. No, 8135.112 110. Amcara was incorporated or April 11, 1994 and was granted a legislative franchise which lapsed into law on July 16, 1995,*13 and will expire on July 16. 2020. Amcara started its broadcasts using Channel 23. Chanel 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 Otherwise known as’ “AN ACT GRANTING THE AMCARA BROADCASTING NETWORK, INCORPORATED, A FRANCHISE TO ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION BROADCASTING STATIONS IN THE PHILIPPINES,” Section 1 of the law pertinently provides: SECTION 1. Nature and Scope of Franchise. — Subject to the provisions of the Constitution and applicable laws, rules and regulaions, there is hereby granted 0 the Ameara Broadcasting Network, Incorporated, hereunder referred to as the grantee, its successors or assigns, a franchise to construct, install, ‘operate and maintain for commercial purposes and in the public imerest, radio and television broadcasting stations, including VHF-TV, UHF-TV, AM radio, FM radio, direct broadcast via satellite, MATV, CATV, digital audio broadcast, digital television, HDTV, MMDS and other forms of radio and television broadcasting in the Philippines, with the corresponding technological auxiliaries or facilities, special broadcast and other program and distribution services and relay stations, and to install radio commurication “acilties for the grantee’s private use in its broadcast services, +5 See Explanatory Note in House Bill No, 3297 See Annex “K,” ABS-CBN Corporation’s 2C12 Amended Annzal Report pursuant to Section 17 of the SRC and Section 141 of Corporat:on Code of the Philippines, SEC Form 17-A. 4Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto nx Amcara amounted to P41 million as of December 31, 2012 and 2011.15 112. 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 held 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 thrcugh that role that it becomes legally viable for the government to impose its own values and goals through a regulatory regime that extends beyond the assignation of frequencies, 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. 7908, as amended, mandates that ABS-CBN Convergence as a legislative ‘ranchise 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: 5 fd, p. 60. 16 Divinagracia, supra. 42Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto GR. No. x 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 cr 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. Regrettably, 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 legislative 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 “7 Emphasis supplied. 118 See Annex "J," ABS-CBN Cor-vergence, Inc.’s Articles of Incorporation. 11° hups://edge.pse.com.pl/companyDirectory/form.do (last accessec January 15, 2020). BRepublic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto natural that the Censtitution gives primacy in regulating it. To iterate, Section 1 of R.A. 7966, the ABS-CBN’s legislative franchise dictates: Section 1. Nature and Scope of Franchise. - Subject to the provisions of the Constitution and applicable laws, rules and regulations, the ABS-CBN Broadcasting Corporation, hereunder referred to as the grantee, its successors or assigns, is hereby granted a 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 technoiogies in television and radio systems, with the corresponding technological auxiliaries or facilities, special broadcast and other broadcast distribution services and relay stations.120 117. The 1987 Constitution, the most basic and Paramount law to 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 shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens. The Congress shall regulate or prohibit monopolies in commercial mass media when the public interest so requires. No combinations in restraint of trade or unfair competition therein shall be allowed....*21 118. 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 2° annex "B,"" Emphasis suppliee. 21 Emphasis added.Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR.No. a Investment Act, as amended by R.A. 817912, Executive Crder No. 184123, Presidential Decree No. 1018124 and cther issuances, emphasizing that no foreign 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 different 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. !25 120. 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 ownership 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 Corporation shares. The PDRs are secured by the Pledge of Shares in favor of the Security Agent acting on behalf of each holder of a PDR over the ABS-CBN Corporation shares. Each PDR grants the PDR holders, upon payment of the exercise price of P0.10 and ® An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for other purposes (1991). ® Promulgating the Tenth Regular Foreign Investment Negative List (2015). % Limiting the Ownership and Management of Mass Media to Citizens of the Philippines and for Other 2umposes (1976). 25 See https://www.investopedia.com/investing/introduction-depositary-receipts/. % The Philippine Stock Exchange Glossary, htips://www.pse.com.ph/stockMarke/home.html# (last accessed on January 10, 2020). 45Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto GR.N x 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.?27 The PDRs 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 PDRs are issued.128 123. The details and movements of PDRs and the underlying shares as reported by ABS Holdings in 2016 and 2017 are as follows: 179 Number of Investment in PORs Shares ABS-CBN Balance at 325,051,900 PI5,102,724,489 P15,070,219,299 December 31, 2016 Conversion of (1,078,200) (40,548,772) (40,440,952) PDRs Exchanges of ABS-CBN shares — with PDRs. 870,000 37,207,300 37,120,300 Balance at 324,843,700 15,099,383,017 15,066,898,647 December 31, 2017 Conversion of (2,221,100) (62,972,126) (62,750,016) PDRs Exchanges of - - - ABS-CBN shares with PDRs 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 * Annex 4S,” ABS Holdings’ 2018 Information Statement, SEC Form 20-1, p 3 of Notes to Finencial Statement. 38 See Annex “S,” ABS Holdings’ 2018 Information Statement, SEC Form 20-IS, pursuant to Section 17.1 (b) of the Securities Regulatior. Code. "9 1d., p. 3 of Notes to Financial Statement, 46Republic rep. by Solicitor Gene-al Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto G.R. No. 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:13° Name of PDR Holder No. of Shares Percentage 1. PCD NOMINEE CORP ~ (FOREIGN) 198,667,338 61.78% 2. PCD NOMINEE CORP - (FILIPINO) 114,374,019 35.57% 3. LOPEZ, INC. 1,578,436 0.49% 4, EUGENIO L. LOPEZ IIL 1,344,725 0.42% 5. MANUEL LOPEZ &/OR MA.THERESA LOPEZ 1,280,881 0.49% 6. MANDARIN SECURITIES CORPORATION 530,000 0.15% 7. EDWARD T. GABALDON 500,000 0.15% 8. OSCAR M, LOPEZ 371,607 0.12% 9. ELERS REALTY & DEVELOPMENT CO., INC. 370,000 0.12% 10, LOPEZ HOLDINGS CORPORATION 369,900 0.12% 11, MANTES INSURANCE TRADERS INC. 310,260 0.10% 12. MA. ROSARIO N, SANTOS-CONCIO 274,678 0.09% 13. BP INSURANCE AGENCY, INC. 266,340 0.08% 14. MA. CONSUELO R. LOFEZ 261,400 €.08% 15. HMR ENTERPRISES, INC, 120,000 6.04% 16. LIANG OUYANG 53,400 C.02% 17. VICKY CHAN 50,000.00 C.02% 18. NARDO R. LEVISTE 50,000.00 0.02% 19. ROLADNO P. VALDUEZA 44,464.00 0.02% 20. MERCEDES L. VARGAS 41,556 TOTAL OUTSTANDING - TOP 20 PDR HOLDERS 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 he'd in various funds managed by its subsidiary Eastspring Investment Singapore Limited, also a Singaporean corporation. 13! 126.In May 2013, Mercury Media Holdings Ltd., purchased PDRs 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 of Companies, one of the world’s largest investment management organizations. The 3° See Annex “S,” p. 17. 3! Annex “S-1,” ABS Holdings’ Beneficial Ownership Disclosure dated October 28, 2019, SEC Form: 18- A 47Republic rep. by Solicitor Genera: Calida vs. A3S-CBN Corp. and ABS-CBN Convergence Inc, Petition for Quo Warranto GR.No. Xe sale and purchase of the PDRs was effected as a specia’ block sale on the Philippine Stock Exchange.132 127.In June 2013, a US-Based fund, Capital International Private Equity Fund VI, L.P., acting through Mercury Media Holdings Finance I Ltd., completed the subscription of P2.5 billion worth of PDRs of ABS-CBN. In the reported disclosure, the issuance of the PDRs was made to infuse fresh funds to ABS-CBN.133 128. From its own disclosure, ABS Holdings cash distributions are made to the PDR holders and declared as interest. Dividends declared as interest due to PDR hoiders amounted to P187.2 million in 2018, P334.2 million in 2017 and 239.9 million in 2016.1*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 PDR 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. 135 130. Nonetheless, Section 3.1.2 of the 2015 Implementing Rules and Regulations of the Securities Regulation Code, R.A. No. Act 8799, reads: Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which includes the 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 Mercury Media Holdings Ltd. in its purchase of PDRs issued by ABS-CBN Holdings Comp. from Marathon Asset Management LLP,’ 3yCipLaw News, June 14, 2013, accessed Ianuary 10, 2020, -, 3 “ABS-CBN completed P4-B fund raising’, Business World Online, June 6, 2613, last accessed January 10, 2020, . Pd ns qq, 48Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto 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 PDRs which necessarily falls 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 =he number of shares owned by the stockholders, which may be in the form of cash, stock, or property .*3¢ 134. Dividends are thus given to shareholder as a right: 5. Right to Dividends Shareholders have the right to receive dividends subject to the discretior of the Board. However, the Commission may direct the corporation to declare dividends when its retained earnings is in excess of 100% of its paid- in capital stock, except: a) when ‘ustified by definite corporate expansion projects or progrems approved by the Board or b) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declarirg dividends without its consert, and such consent has not been secured; or c) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when zhere is a need for special reserve for probable contingencies, +3” 86 See https://www.pseacademy.com.ph/LM/glossary/Glossary.htm#P (last accessed on January 10, 2920). 7 See Stockholders’ Rights and Protection of Minority Stockholders’ Interests, SRC Code of Corporate Governance. 49Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. — 135. Section 73 (A) of the Tax Code!3® also provides that "[t]he term ‘dividends’ ... means any distribution made by a corporation to its shareholders out of its earnings or profits and payable to its shareholders, whether in money or in other property."129 136. ABS-CBN Corporation’s issuance of PDRs to non- Filipino citizens is therefore a contravention of Section 11, Article XVI of the Constitution which provides that ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens. PDR holders who are foreign investors may not only profit from a corporation which cannot have foreign equity such as ABS-CBN, but indirectly own the corporation through their investments. 137. The PDRs of ABS Holdings imposed a condition to PDR holders that shares resulting from an exercise of the PDRs may only be issued to Filipinos. However, this does not negate the fact that PDR holders, whether they exercise the right to purchase the shares or not, and who are non-Filipino citizens, are indirectly the owners of the underlying shares of ABS-CBN Corporation precisely because no PDRs can be issued. without a corresponding share of the issuing corporation. 138.In the evolving era of financial market, there are various ways by which a corporation can be controlled or owned regardless of actual ownership of the shares of stock or existence of voting rights. Justice Presbitero Velasco, Jr., in Jose M. Roy III v. Herbosa,1#° a case involving the interpretation of the so-called 60-40 requirement of Section 11, Article XII of the Constitution, gave the following analysis: '58 SEC. 73. Distribution of Dividends or Assets. by Corporations. ~ (A) Definition of Dividends, — The term “dividends” when used in this Title means any distribution made by a corporation to its shareholders out of its eamings or profits and payable to its shareholders, whetaer in money or in other property. Where a corporation distributes all of its assets in complete liquidation or dissolution, the gain real:zed or Joss sustained by the stockholder, whether individual or corporate, isa taxable income or a dedictibie loss, as the case may be. ©° CIR vs. Goodyear Phils, Inc., G.R. No, 216130, August 3, 2016. *° GR. No. 207246, Noven 12, 2016. 50Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. for Quo Warranto Petition GR. No. — A construction of "capital" as referring to the total shareholdings of the company is an acknowledgment of the existence of numerous corporate control-enhancing mechanisms, besides owrership of voting rights, that limits the proportion between the separate and distinct concepts of economic right to the cash flow of the corporation and the right to corporate control (hence, they are also referrec to as proportionality limiting measures). This corporate reality is reflected in SRC Rule 3 (E) of the Amended Implementing Rules and Regulations (IRR) of the SRC and Sec. 3 (g) of The Real Estate Investment Trust Act (REIT) of 2009, which both provide that control can exist regardless of ownership of voting shares. The SRC IRR states: Conirol is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or indirectly threugh subsidiaries, mo-e than one half of the voting power of an enterprise unless, in exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control. rol als ists even when the parent owns one half or less of the voting power of an enterprise when there is: i, Power over more than one half of the voting rights by virtue of an agreement with other investors; li. Power to govern the financial and operating policies of the ente-prise under a statute or an agreement; iii, Power to appoint or remove the majority of the members of the board of directors or equivalent governing body; iv. Power to cast the majority of votes at meetings of the board of directors or equivalent governing body. As shown above, ownership of voting shares or power alone without economic controi of the company does not necessarily equate to corporate control. A shareholder's agreement can effectively clip the voting power of a shareholder holding voting shares. In the same way, a voting right ceiling, which is “a ~estriction prohibiting shareholders to vote above a certain threshold irrespective of the number of voting shares they hold,” can limit the control 51Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc, Petition for Quo Warranto GR.No. Xe that may be exerted by a person whc owns voting stocks but who does not have a substantial economic interest over the company. So also does the use of financial derivatives wi=h attached conditions to ensure the acquisition of corporate contro! separately from the ownership of voting shares, or the use of supermajority provisions in the by-laws and articles of incorporation or association. Indeed, there are innumerable ways and means, both explicit and implicit, by which the control of a corporation can be attained and retained even with very limited voting shares, i.e., there are a number of ways by which control can be disproportionately increasec compared to ownership so long as economic rights over tre majority of the assets and equity of the corporation are maintained. Hence, if We follow tne construction of "capital" in Sec, 11, Art. XII stated in the ponencia of Zune 28, 2011 and turn a blind eye to these realities of the business world, this Court may have veritably put a limit on the foreign ownership of common shares but have indirectly allowed foreigners to acquire greater economi right to the cash flow of public utility corporations, which is a leverage to bargain for far greater control through the various enhancing mechanisms or proportionality-limiting measures available in the business world. In our extremely hypothetical public utility corporatioi with the equity structure as thus described, since the majorizy recognized only the 100 common skares as the "capital’ referred to in the Constitution, the entire economic right to the cash flow arising “rom the 1,000,000 non-voting preferred shares can be acquired by foreigners. With this economic power, the foreign holders of the minority common shares will, as they easily can, bargain with the holders of the majority common shares for more corporate control in order to protect their economic interest and reduce their economic risk in the public utility corporation. For instance, they can easily demand the right te cast the majority of votes during the meeting of the board of directors. After all, money commands control. The Court cannot, and ought not, accept as correct a holding that routinely disregards legal and practical considerations as significant as above indicated. Committing an error is bad enough, persisting in it is worse. (emphasis and underscoring supplied; citations orritted) 139. In line with this concurring opinion, while the actual ownership of the underlying shares of ABS-CBN Corporation is maintained by ABS Holdings, the PDRs issued to ncn- 52Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GR. No. xe Filipino citizens give foreigners a right to the cash flow of mass media corporations such as ABS-CBN Corporations “which is a leverage to bargain for far greater control through the various enhancing mechanisms or proportionality-limiting measures available in the business world.”!41 140. ABS Hoidings even admits that the purpose of PDRs is to obtain foreigr investment to increase their undervaiued shares, and to allow foreigner to participate in mass media.142 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 PDRs. 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 vazidly 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 transacticr: 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. 43 Mtg *© See Annex “S,” ABS Holdings’ 2018 Information Sheet 2019, SEC Form 2041S. “© See Philippine Depositary Receipts: Mass Media’s Existing or Emerging Loophole to Constitutonally Mandated Full Filipino Ownership? By Lorenzo E. Delgado citing La Bugel-B’ Laan Tribal Associaticn, Inc, etal. vs. Ramos, et al, G.R. No. 127882, December 1, 2004, and Tawang Multi-Purpose Cooperative vs, La ‘Trinidad Water District, G.R. No. 166471, Marck 22, 2011. 33Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto G.R.No. x Application for a Temporary Restraining Order or Writ of Preliminary Injunction 144.A temporary restraining order and writ of preliminary injunction are’ preservative 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 injury would arise unless it is issued immediately."“* Or the other hand, to be entitled 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 in 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. !45 145. 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.!46 An injunczion 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.!4” In the absence of a clear legal right, the issuance of the injunctive relief constitutes grave abuse of discretion.148 146. 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 * Australian Professional Realty, Inc. vs. Municipality of Padre Garcia Batangas Province, G. R. No. 183367, March 14, 2012. i’ DPWH vs. City Advertising Ventures Corporation, November 9, 2016, G.R. No. 182944. “6 Office of City Mayor of Parafiaque vs. Ebio, G.R. No. 156303, December 19, 2007. ‘Heirs of Yu, et al. vs. Honorable Court of Appeals, et al, G.R. Nc. 182371, September 4, 2013. 8 Equitable PCI Bank vs. OJ-Mack Trading, G.E. No. 165950, Augast 11, 2010. 34Republic rep. by Solicitor Generel Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto GR.No. Xen 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 tie 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 a/. vs. Court of Appeals,*° 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 their amount can be measured with reasonable accuracy. “An i-reparable iniury which a court of equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce Aurt, inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of measurement.” An irreparable injury to authorize 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 that its ¥° GR. No. 182371, September 4. 2013. 55Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Ine. Petition for Quo Warranto GR.No. Xen 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, “Wimium ne crede colori."5° Although Respondents portray themselves as law- abiding entities, the reverse is true. As extensively demonstrated, Respondents are circumventing not only zheir legislative franchises but also the Constitution. The facts laid out in the petition unmistakably show their true side. This Court must therefore seize this opportunity to revoke Respondents’ legislative ‘franchises. | These congressional grants cannot 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 enjoining ABS-CBN Corporation from “urther operating the KBO Channel and offering it to the general public; 2. render judgment as follows: ‘9 Trust not too much in a beautif.at complexion, 56Republic rep. by Solicitor General Calida vs. ABS-CBN Corp. and ABS-CBN Convergence Inc. Petition for Quo Warranto GRNo. we a. forfeiting the franchise of ABS-CBN Corporation under Republic Act No. 7966; b. forfeiting the franchise 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 February 2020. 37Rollo. 24852 IBP Lifetime No. 015360, 08-18-16 MCLE Exemption No. VII-OSG000228 / 11-08-19 aw ec Ae RENAN E. RAMOS Assistant Solicitor General Roll No. 33792 IBP Lifetime No. 015360, 08-18-16 MCLE Exemption No. VII-OSG000223, 11-05-19 Assistant Solicitor General Roll No. 33774 IBP Lifetime No. 010284, 12-12-11 MCLE Exemption No. VII-OSG000219, 11-05-19 MARISSA B. DELA CRUZ-GALANDINES Assistant Solicitor General Roll No. 37023 IBP No. 066502, 01-10-19 MCLE Exemption No. VII-OSG000214, 11-05-19 BERNARD G. 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HERNANDEZ Assistant Solicitor General Roll No. 35338 IBP Lifetime No. 07708, 8-13-08 MCLE Exemption No. VII-OSG000221, 11-05-19 j 4 b. i £ f>- RAYMUND I. RIGODON “ Assistant Solicitor General Roll No. 39730 IBP Lifetime No. 013395, 2-12-15 MCLE Exemption No. VII-000217, 11-05-19 Maca MARIA HAZEL V. ACANTILADO Assistant Solicitor General Roll No. 43682 IBP Lifetim . 02780 . Ys 04-02-18 MIRANDA Assistant Solicitor General Roll No. 42949 IBP Lifetime No. 02113 MCLE Exemption No. VII-OSG000211, 11-05-19 HENRY S. ANGELES Assistant Solicitor General Roll No. 45837 IBP Lifetime No. 016075, 4-21-17 MCLE Exemption No. VI-062494, 04-24-19 Miao EXAND LVADOR Assistant Solicitor General Roll No. 42940 IBP Lifetime No. 613968 MCLE Exemption No. VII-OSG002146, 12-19-19PENAFRANC: CARPIO DEVESA Assistant Soliciter General Roll No. 37203 IBP Lifetime No. 018148, 11-7-17 MCLE Exemption No. VII-OSG-000136, 09-10-19 JOSEPH UEVARRA a cito- General Roll No. 36854 IBP Lifetime No. 010364, 1-6-12 MCLE Compliance No. VI-0026445, 05-31-19 hoa Vietorug ¥- YO MARIA VICTORIA V. SARDILLO Assistant Sollciar eeyrersl Roll No, 472 IBP Lifetime No. 07223 MCLE Compliance No. VI-0029360, 11-19-19 pptle Catt oy— DIANA C. DE VERA Assistant Solicitor General Roll No. 42914 IBP Lifetime No. 08543 MCLE Compliance No. V-0008863, 07-01-15 QuWnolhowm, GILBERT U. MEDRANO Assistant Solicitor General Roll No, 47392 IBP Lifetime No. 93598 MCLE Compliance No. VI-0021105 - 03/26/19 OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legaspi Village, 1229 Makati City Tel. No.: 988-1674 (Trunkline) Fax No.: 813-4585 Website: www.osg.gov.ph Email: docket@osq.gov.phRepublic rep. by Solicitor General Calida vs. ABS-CBN Corp. Copy furnished: ABS-CBN CORPORATION ABS-CBN Boradcasting Center Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City ABS-CBN CONVERGENCE INC. ABS-CBN Boradcasting Center Sgt. Esguerra Avenue corner Mother Ignacia St., Quezon City EXPLANATION (Pursuant to Section 11, Rule 13 of the 1997 Rules of Civil Procedure) The foregoing Petition will be filed personally to this Honorable Court and served to the parties by registered mail due to limited office personnel to effect personal service. WWM aun GILBERT U. MEDRANO Assistant Solicitor General 33