Attys. Rosanno P. Nisce

May 31, 2001 ATTYS. ROSANNO P. NISCE AND BOB L. GUINTO Ponce Enrile Reyes & Manalastas 2nd Flr.,Vernida Bldg.,128 Leviste St., Salcedo Village 1227, Makati City, Philippines S i r : This refers to the letter of the Law firm of Ponce Enrile & Manalastas dated 15 March 2001 requesting opinion on the legal feasibility of Globe Telecom GMCR, Inc. ("Globe"),intention to carry out the following business activities: a) sell and distribute to the public mobile cellular telephones, wire-based telephones, telephone accessories and other related telecommunications equipment through its business centers which allegedly is a necessary and incidental corporate power in furtherance of Globe's business mandate as a franchised telecommunications operator/provider in the Philippines. b) to sell and distribute to the public telephone units, telephone equipment and its accessories without the need of complying with any other law or regulation that are otherwise applicable to ordinary traders, sellers or retailers. As alleged in the said letter Globe is one of the leading full service telecommunications operators and a Congressional franchise holder in the country. Globe intends to embark on a number of commercial projects this year. Among these projects is Globe's plan to accelerate and increase the sale and distribution to the public of Globe-activated mobile cellular telephones, wire-based telephones, telephone accessories and other related telecommunications equipment as well as those of its other enfranchised telecom subsidiary, Isla Communications, Co.,Inc. ("Islacom"),through Globe's head office and at least forty-three (43) business centers throughout the Philippines in order to provide even wider access to its broad range of telecommunications products and services. Globe's original franchise under B.P. 95 authorized the company to construct, maintain and operate "communications systems by radio, wire, cable, satellites, and any other means now known to science or which in the future may be developed for the reception and transmission of telecommunication between any point in the Philippines to points exterior thereto, . . ." By way of reply to the aforementioned query, the Commission affirms the first view of the letter-writer that the sale of cellular telephone units and other related accessories, units and paraphernalia are interrelated. The latter may be treated as reasonable and necessary activities to be engaged in by a telecommunications operator considering that by providing the necessary equipment to transmit the same, the conveyance of communication is thus assured and the availment by the subscriber or clients of the communication services offered by the firm is thus enhanced. The sale and distribution of cellular telephone units and related goods are well-within the coverage of article 2 of the Amended Articles of Incorporation of Globe Telecom Inc.,which provides, among others, to, "to supply facilities for such purpose" and "convey"..."personal property in any part of the Philippine Islands, or elsewhere as the purposes for which the Corporation is formed may permit, and as may be convenient or necessary for the transaction of the lawful business of the Corporation". The pertinent portion of the said provision is hereunder quoted as follows: That the purpose for which the Corporation is formed, is to carry on the business, insofar as the same may be now or hereafter permitted by law, of transmitting and receiving, for itself and for others, communications of every kind, news, music, messages, instruction, entertainment, pictures, advertising, light and energy in any form, by means of electricity, electromagnetic waves, or any other kind of energy, force, vibrations or impulses, whether conveyed by wires, radiated through space, or transmitted through any other medium, to supply facilities for such purpose; and to charge and receive compensation therefore for tolls and charges. To purchase, hold, operate, use, convey ,lease, rent, mortgage, encumber, or otherwise deal in such real and personal property in any part of the Philippine Islands, or elsewhere as the purposes for which the Corporation is formed may permit, and as may be convenient or necessary for the transaction of the lawful business of the Corporation ." Parenthetically, Globe's intended activities may be considered as one of its implied powers. The term "implied power" of the corporation has been defined as one which the law will regard as existing by implication; such power must be one in a sense necessary; that is needful; suitable and proper to accomplish the object of the grant one that is directly and immediately appropriate to the execution of the specific powers; and not one that has slight, indirect or remote relation to the specific purpose granted. (Ballantine Law Dictionary p. 614). Moreover, the activities in question conform with the test laid down in the case of Montelibano vs. Bacolod Murcia Milling Co., Inc. GR No. L-15092 May 18, 1962 citing 6 Fletcher Cyc. Corp. 1950 rev. ed., pp. 226-268) to the effect that: It is a question, therefore in each case of the logical relation of the act to the corporate purpose expressed in the charter. If that act is one which is lawful in itself and not otherwise prohibited, is done for the purpose of serving corporate ends and is reasonably tributary to the promotion of those ends in a substantial and not in a remote and fanciful sense, it may fairly be considered within charter powers. The test to be applied is whether the act in question is in direct and immediate furtherance of the corporation's business fairly incident to the express powers and reasonably necessary to their existence. If so, the corporation has the power to do it. Moreover, Globe's cogent power to sell and distribute to the public mobile cellular telephones, wire-based telephones, telephone accessories and other related telecommunications equipment is further bolstered by the explicit mandate of section 36, paragraphs (7) and (11) of the Corporation Code, which provides: "Sec. 36 Corporate powers and capacity . Every corporation incorporated under this Code has the power and capacity: xxx xxx xxx 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may be reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution. xxx xxx xxx 11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its articles of incorporation." (emphasis supplied) Based on the foregoing consideration, the Commission is of the opinion that Globe's power to distribute and sell to its clients and subscribers telephone units and accessories is within the corporate authority specified under its charter, congressional franchise and Section 36, paragraphs 7 and 11 of the Corporation Code of the Philippines. The intended activities are necessary, incidental and form an integral component of providing telecommunication services. Globe may sell cellular phones, accessories and other telecommunication equipment as part of its telecommunication services to the public. Otherwise, the same would constitute as engagement in retail business. As to the issue of whether Globe can sell and distribute to the public by itself or for its subsidiary, telephone units and accessories without the need of complying with any other law or regulation is an issue that need not be squarely resolved by the SEC. Globe being a corporation engaged in the business of providing telecommunication services is also under the mantle of regulatory authority of the National Telecommunications Commission pursuant to a special law governing the industry. Hence, as to related telecommunications transactions which are not corporate or securities related in nature, the answer to the second query is best left to other government agency which exercises jurisdiction over the said concerns. It is therefore deemed a prudent act on the part of the Commission to refrain from providing answer to issue beyond the area of its competence. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner