Philippines Allows 100% Foreign Ownership of Telcos

On Monday, March 21, the Philippine president Rodrigo Duterte signed the law Republic Act No. 11659 amending the 85-year-old Public Service Act (PSA), allowing foreigners to fully own companies in the telecommunication, shipping, airline, railway, toll road, and transport network vehicle industries. Previously, these industries had a 40% cap on foreign equity, as they were considered public utilities.

On 15 December 2021 the Philippines Senate approved a bill allowing full foreign ownership in some public services. Senate Bill No. 2094 differentiates ‘public services’ from ‘public utilities’, freeing certain services from requiring at least 60% Filipino ownership. Sectors now open to majority foreign ownership include airlines, local shipping industry, telecommunications, subways and railways. Those still requiring majority local ownership, include electricity transmission and distribution, seaports, airports, wastewater pipelines, water pipeline distribution, public utility vehicles, expressways and toll ways. 

Public services now freed from foreign equity restriction must still meet their responsibilities as public service providers and will remain subject to regulation. Furthermore, foreign state‑owned enterprises will still be banned from owning capital in any critical infrastructure, and foreign investments will still be subject to National Security Council vetting. A reciprocity clause prohibits foreign citizens from owning over 40% of critical infrastructure, unless their country provides similar access to Filipino investors.

The amended PSA limits public utilities to the distribution and transmission of electricity, petroleum and petroleum products pipeline transmission systems, water pipeline distribution and wastewater pipeline systems, seaports, and public utility vehicles.

The president thanked Congress for approving the measure that he said would help lead the country toward economic recovery amid the pandemic.

In telecommunications sector, the leading public service telecom operators in the Philippines, such as PLDT, Globe and Dito Telecommunity, are currently open to foreign ownership with the limit of 40%. PLDT is 20.35% owned by Japanese NTT, Globe is 21.44% owned by Singapore Singtel, while the new operator Dito Telecommunity is 40% owned by China Telecom.

The Philippines is becoming a rising hub for Trans-Pacific and Intra-Asia submarine cable networks. There are now 11 in-service international submarine cable systems connecting the Philippines, including AAG, APCN-2, ASE, EAC-C2C, Guam-Philippines, Jupiter, PLCN, TGN-IA, SEA-US, SJC and SMW3, and at least another 5 intra-Asia and transpacific subsea cables under construction, including ADC, Apricot, Bifrost, CAP-1, SEA-H2X, etc. Moreover, by 2024, there will be 7 trans-pacific subsea cables connecting the Philippines to the US, including Guam-Philippines, AAG, SEA-US, Jupiter, PLCN, CAP-1, Bifrost.

There are also new builds of hyperscale data centers in the Philippines, including PLDT's 100MW VITRO 11 hyperscale data center in Santa. Rosa, SpaceDC's 72MW hyperscale data center in Cainta, Digital Edge's 10MW data center in Santa Rosa. These new hyperscale data centers will attract global OTTs and telcos to establish cloud regions and point-of-presences in the Philippines.

The lasted reform, allowing 100% foreign ownership in telecommunication sector, will greatly change the regulatory barrier for global OTTs and telecos to enter into the Philippines and promote its position on the way to be a regional telecom hub in the APAC region.