MONOPOLY
BY SHEILA S. CORONEL

Giraffe is a swanky bar at 6750 Ayala Avenue. It is the hangout of Makati's well heeled. At night, slinky women in short skirts and high heels balance themselves on the barstools. Bankers and brokers, congressmen and corporate sharks all like it there. They stand around the small tables, nursing their drinks and ogling the women in low-cut dresses. Friday and Saturday nights Giraffe is sometimes so full that patrons stand shoulder to shoulder, trying to make conversation amid the loud music. It's like one big cocktail party. Noel C. Onate, a 40-something financial consultant who is the assistant treasurer of Lakas, swaggers around Giraffe as if he were the host of the party. He hops from table to tables, swinging his hips and snapping his fingers to the beat of the music. Glib and self-assured, he makes small talk and trades jokes, gossip and funny little stories about "tabako", the man in Malacanang, President Fidel V. Ramos.

Little known outside the small, intimate circle of the politically well-connected, Onate is a power broker who leverages his connections to the presidential palace and puts them at the service of businessman who know that their enterprises will not survive-or flourish-if they did not have a lobbyist in Malacanang. Onate also uses these connections for his own private, and by most accounts lucrative, business deals. Before the 1992 presidential campaign, Noel Onate was, in the words of a fellow political operator, a "Makati hustler". He volunteered for Ramos' presidential campaign and made himself particularly useful by supplying his candidate with airplanes, some of them borrowed from the executive of big companies, others paid for from contributions. His efficiency was rewarded by the affection of Ramos, who liked to make appreciative jokes about the "Onate air force". He was also given a board seat in the government-owned Philippine national Oil Company (PNOC). Onate's access to Ramos is enhanced by a happy coincidence: his brother-in-law Gabriel Claudio is presidential adviser on Political affairs and the Lakas operative in the palace. Perhaps because of his long years as a general, Ramos likes to surround himself with lieutenants like Onate who are ingenious, eager to please and loyal. "I didn't know whether we could deal with him or trust him with money," recalls a senior member of the Ramos campaign staff. "He has no track record of having built anything. He was a wheeler-dealer who could find connections to powerful people but the President really seems to like him." Every president has them-a slew of savvy men and women bound by the rules because they often do not occupy official posts. They are the operators who do what needs to be done: get campaign funds, talk to potential allies, gather or pass information, and especially in the case of Ramos, mount a semblance of popular support for the presidency. Businessman say that Onate solicited contributions for Lakas in exchange for friendly treatment." Noel is an investment banker, "says businessman Antonio Abaya, a staunch Ramos supporter and another of Malacanang's backroom operators. "By definition, that means he can cut deals. "By his own admission, Onate was the shadowy orchestrator of the ill-starred Pirma, a campaign to gather two million signatures that would compel Congress to call a constitutional convention, which in turn would allow Ramos to run for a second term. Onate put together a ragtag band of Ramos loyalist to front for the campaign, which eventually foundered in late 1997. He also collected the funds, mainly from businessmen friendly to Malacanang. Every president is surrounded by them: a band of big-time businessmen whose enterprises rise or fall depending on the sufferance-or goodwill-of the administration in power. These businessmen invest, often heavily, in a Palace connection. For such is the power of the president: he can make or unmake businesses, provide openings and relax the rules for those in his favor, while depriving those who have fallen from grace the opportunities for deal making. That is why every new administration is stormed by favor-seekers who come to Malacanang for assurances of friendly treatment." In any administration, now and in the future, any major contract, any major franchise, any major concession, is always cleared with Malacanang", says Senator Ernesto Maceda, whose assessments of Philippine politics are often cynical but accurate. "Every president feels that he should know what's going on, and he should have control. And in the end, it's the president himself or the people around him or the members of his family who benefit or get concessions from any major project that requires Malacanang approval." American scholar Paul Hutchcroft couched this in more academic terms. "In the Philippines, access to the political machinery has been the major avenue to private accumulation and the quest for personalistic privilege brings a stampede of favored elites and would-be favored elites to the gates of the presidential palace," he wrote. "Whether it is headed by democratic administration or an authoritarian regime, the Philippine state has long been choked by an anarchy of particularistic demands from, and particularistic actions on behalf of, those oligarchs and cronies who are currently most favored by its top officials: one will obtain a highly coveted loan or import license, another will enjoy a stake in a cartelized industry protected by highly discretionary governmental regulations."

Among the businessmen most dependent on the graciousness of Malacanang is Antonio "Tony Boy" Cojuangco, who sits at the helm of the telecommunications giant, the Philippine Long Distance Telephone Co.(PLDT). As a public utility that operates on the basis of a congressional franchise, telecommunications has traditionally been subject to the heavy, if sometimes whimsical, hand of government regulation. For the longest time, telecommunications in the Philippine was also a monopoly. By definition "a monopoly is a heavily regulated entity," explains PLDT senior vice president Antonio R. Samson. "Any change of rules will affect you, so almost necessarily you are forced to deal with the political issue." Through most of its 70-year existence, PLDT was nurtured by friendly presidents. The friendliest among them was Ferdinand E. Marcos. Although Corazon C.Aquino vowed to go after the deposed president's business cronies, PLDT was among those who got off easy in the investigation of "ill-gotten"wealth". After all, Cory is Tony Boy's cousin, and PLDT used its clout, connections and cash to parry the blows from the media, the Presidential Commission on Good Government(PCGG) and the courts. PLDT's case is instructive because it shows how a company manages to retain unusual privileges in both dictatorship and democracy, and both heavily regulated regime and a liberalized one. During the 1992 Presidential elections, Tony Boy adept as he was at maneuvering among the various branches of his fractious family did the prudent thing. He donated to the campaign of Eddie Ramos, who was his cousin Cory's anointed. The PLDT president put the company planes at the disposal of his friend Noel Onate, who was running around on errands for Ramos. But it is believed that Tony Boy contributed more substantially to the war chests of the other contenders: Eduardo Cojuangco Jr., his cousin and one of Marcos's foremost business cronies; and the early favorite, Ramon Mitra. Because Tony Boy had hedged his bets, many were surprised, when, just six months after Ramos became president, PLDT became the target of a determined Palace faction headed by national security Jose Almonte.

A retired general who was the self-styled ideologue of the Ramos' administration, Almonte started talking about deregulating the economy and striking" at the very heart of oligarchic dominance by bringing down the whole regime of protectionism on which the elite had fattened for a generation and a half. "He warned of the dangers of monopoly and he did not mean a harmless board game. Woefully inefficient and maligned by a public hungry for telephones, PLDT was the popular-and inevitable-target that an Almonte strike. It was also particularly vulnerable as the controlling chunk of its shares was believed to be owned by Marcos and the issue of its ownership had yet to be settled in court. For the first time since they bought into the company in the late 1960s, the Cojuangco quaked. They knew that once the government asserted its right to vote its shares in PLDT, the family's 30-year reign over the immensely profitable firm could end. Adrift in what seemed to be a sea of hostility that surrounded Malacanang, they found allies who could sway the President's mind: Cory Aquino who, Ramos aides attest, obliged a cousin in distressed; defense chief Renato de Villa, who belong who belong to a rival faction that challenged Almonte's ; and Noel Onate, the eager lieutenant who found in Tony Boy Cojuangco a willing client for his brokering skills. "I saved Tony Boy's life," Onate would boast four years later over late-night drinks at Giraffe. "He nearly lost PLDT." Never modest, Onate recounted how he appealed to Ramos at the crucial time when the President was making up his mind on whether the government should move to oust the 42-year-old Cojuangco from PLDT chairmanship. "Noel was one of those used to deliver the message of Tony Boy, which was, huwag daw siyang apihin(don't prosecute him), he would cooperate," says Abaya, a Ramos campaigner who was in Almonte's inner circle. " Of course, Cory also helped," adds Onate, who understates her role while overstating his. Ramos aides says that Aquino appealed on her cousin's behalf to the man she had anointed as her successor. De Villa, meanwhile, worried about Almonte's intentions, presented to the President a white paper that accused Almonte and his allies of themselves planning to take control of the telecommunications industry. In the public arena, Cojuangco used PLDT's clout as a major advertiser and his own position as part owner of the respected Manila Chronicle to plant the stories in the press of how the Ramos administration was on the verge of taking the business. Although Onate claims credit, Tony Boy probably deserves it more. Like his father Ramon, who headed PLDT for nearly two decades, he has shown an uncanny knack for negotiating through the minefield that is Philippine politics by building alliances and pitting one Palace faction against another. In the end, Ramos pulled back. Although the government asserted its right to name six representatives to the 11 person PLDT board and the firm's virtual monopoly over telephones was eventually broken up, Tony Boy Cojuangco kept his crown and his company made even more money that it can had in the past. In exchange, he swore allegiance to the new administration. More than that, says Onate, "He supports the party. He contributes to the party." Cojuangco was generous donor to PIRMA and to Lakas. In a country where the law on political donations is pathetically inadequate, such contributions are taken as a matter of course, as part of the cost of doing business. While the Omnibus Election Code bans political parties from accepting campaign funds from, among others, companies operating public utilities or those the government franchises, the law is observed more in the breach. Moreover, there is no provision against such donation outside of the election campaign. Cojuangco also spent for projects like the short-lived Evening Paper, a pro-administration afternoon daily published with Malacanang's enthusiastic encouragement.

In addition, he maintains some of the highly paid Palace courtiers that Ramos likes to have around. "Whenever corporate support is needed, Tony Boy is there," says Abaya. " It's corporate philanthropy in a different sense." Cojuangco also bought into Giraffe, which was set up by another Ramos loyalist and backroom boy, Perfecto Quincho, a former Hyatt hotel manager. For a time a presidential assistant for Metro Manila, Quicho no longer has an official portfolio although he is part of the select Wednesday group that meets regularly at the Palace to assess Ramos' media performance and advise him on how to handle current issues. Today Giraffe is a favorite hang out of some of the Ramos operators. Tony Boy himself is a regular patron. He is now also part of the presidential entourage, dutifully accompanying Ramos on just about every overseas trip. He is close enough to have a choice seat in the presidential jet and chummy enough to nap beside the President on those long flights. He's come a long way from 1993, when he was Makati's most nervous CEO. As far as PLDT is concerned, it is more like old times. Today, as in the past, the Cojuangcos are enjoying the coziness with Malacanang to which they had been accustomed. They remain, in the language of Philippine politics, which has an entire vocabulary for the well-connected, malakas(strong), malapit(close), may konek(with connections). PLDT is the classic example of how a company with privileged access to the presidential palace can flourish, its competitors kept at bay even if it provides inefficient and expensive service. In the 30 years the company has been in the hands of the Ramon U. Cojuangco family, PLDT has come to typify the close link between power and wealth. A monopoly run by a politically influential family that made profit by wresting privileges from the state rather than through sheer enterprises, PLDT would seem to be the epitome of what is wrong with the Philippines. Even Lee Kwan Yew said so. On a visit to Manila in November 1992, the Singaporean leader singled out PLDT as an "example of a powerful vested interest...which has had a monopoly for 64 years." Lee told the newly elected Ramos his priority should be to "free the country from controls and monopolies." The World Bank, too, in an influential 1992 study, concluded that the country's economic growth was stunted by "oligopoly and rent-seeking behavior," and cited telecommunications among the key sectors of the economy that were aching for reform. Through the shrewd assertion of presidential powers, Marcos had fashioned PLDT into a formidable entity even before he declared martial law, and in full view of an assertive and eagle-eyed opposition. Ramos would use his powers in a similar fashion nearly 25 years later, but he used them to break up PLDT's monopoly and open up the telecommunications industry to competition. By merely signing two executive orders, he removed the barriers to the entry of rival firms into the profitable telephone market. He surprised most observes by demonstrating that a strong executive can bring about overnight reforms in an industry that remained closed and dominated by a single company for over half a century. But the events since 1993 also show the limits of reform, and how new compromises are worked out between officials and entrenched elites. If anything, Ramos' retreat from his staunch anti-oligarchy position reveals that his relative weakness of the coalition that supported his economic reforms in relation to the entrenched interests that his administration initially sought to dislodge. Certainly, he deserves credit for doing what his predecessors did not: liberalize the telecommunications industry and speed up the establishments of a modern telecommunications infrastructure for the Philippines.

But competition did not eliminate the use of political patronage for economic gain. On the contrary, the entry of more firms also provided fresh opportunities for deal making between enterprising officials and equally enterprising business interests. Dictatorship allows for few surprises, if only because the rules are determined by one man. In a democracy, where institutions are often at odds with each other, there is far less control and greater potential for anarchy. Democracy under Aquino brought out into the open popular disenchantment with PLDT. But despite attempts at more assertive government control, the company emerged with its near-monopoly intact because of dead-ended investigation and half-hearted regulation. With Ramos, PLDT lost its monopoly but kept its privileges as the dominant carrier by influencing decision making in Malacanang, Congress, and the courts. "The decentralization of decision making and the provision of oversight mechanisms in democracy afford great opportunities for rent seeking and influence peddling" says UP political science professor Amado Mendoza Jr." If one can get a favorable decision from one agency, one can do so for another. Should there be a clash in agency decisions, then the courts and judges are available for prostitution. Beyond the courts, there are two chambers of Congress." The PLDT story attests the astuteness of the Cojuangco family in negotiating the terms of its engagement not only with various government but also with various agencies of the same government. Not to be outdone, many of its competitors seem equally agile in the game of politics. The controlled competition that is taking place in telecommunications in the 1990s provides evidence of the persistence, even in the era of deregulation and liberalization, of the "rent-seeking behavior" that often takes place when a weak states uses regulation to restrict entry in the market. "In the rent-seeking society, the operations of the state determine the assignment and the continued enjoyment of economic advantage," economist Manuel Montes wrote of the Philippines. He made a distinction between profits that "arise out of the internal efficiencies and investments of the firm" and rents, which are " due to its success in obtaining and retaining some economic advantage by the state." The telecommunication industry makes for a fascinating study, if only because it has brought out the propensity of the business elite for such rent-seeking behavior. Four years after deregulation, it can be said that corrupt politician and bureaucrats can actually be happier in a liberalized and deregulated environment, where there are many more players trying to outbid one another in order to have the rules bent in their favor. Liberalization has created new sources of rents and politics has simply adjusted to market reforms.

RAMON COJUANGCO, BANKER AND SCION OF A WEALTHY AND politically active Tarlac clan, was to the oligarchy born. His family was the biggest landowner in Tarlac and perhaps the whole Central Luzon. His grandfather Melecio and uncle Jose Sr. had represented Tarlac in the American era National Assembly, while his cousins Eduardo and Jose Jr. fought over the same seat in the pre-martial law Congress. His second wife, the quintessential socialite Imelda Ongsiako, graced the salons of Malacanang as one of Imelda Marcos's Blue Ladies. Ramon first became involved with PLDT in 1967, when the General Telephone and Electronics Corp.(GTE), the U.S. company which set up PLDT in 1928, was preparing to divest itself of the company in anticipation of the expiration of the parity agreement with the Americans. Several Filipino businessmen were interested in buying GTE's controlling block of 28 percent of PLDT shares. Among them were a group of prominent entrepreneurs led by Ayala Corporation's Enrique Zobel, who got together with Benigno "Ninoy" Aquino Jr. and the latters brother-in-law, Pedro Cojuangco, to bid for the shares. The negotiations began, and by Aquino's account, he and his brother-in-law were invited by GTE to finalize the deal in the United States. "In four days, everything had been ironed out," Aquino narrated in an interview then." We were going to take over PLDT. We came home in August (1967) and the agreement was that not till November 15 were we to announce our take over." The announcement was never made because in the intervening months Marcos got into the picture. He told GTE executives that the Cojuangcos that Ninoy Aquino had married into were not acceptable. "Marcos said that he was going to give the Americans a better Cojuangco, since we were (supposedly)`Huk coddlers and communist sympathizers," Pedro Cojuangco remembers. By then, Marcos had been in Malacanang for two years, and Ninoy Aquino, the young Tarlac governor, was now widely considered to be the thorn in President's side. Marcos was determined that rival could not take control of the country's second largest public utility (the largest was Meralco, the Lopez-owned electric company). In fact, Marcos also refused Chase Manhattan Bank a permit to set up a finance company in partnership with the branch of the Cojuangco family allied with Ninoy. Instead, according to a recent biography of Ninoy's father-in-law Jose Cojuangco Sr. the bank was told to find itself a new partner and was given a permit only when it did. It is the sort of power, which Philippine presidents use to keep opponents in line. Because key business decisions are subject to the discretion of top officials, rather than strictly bound by rules, presidents could favor friends and emasculate enemies. Ramon Cojuangco, then president of the family-owned Philippine Bank of Commerce, was a willing partner to Marcos's machinations. With Malacanang's support, he was able to ease our Chinese-Filipino insurance tycoon Alfonso Yuchengco, a major PLDT investor, who was also interested in taking control of the company. As Yuchengco revealed in a 1988 affidavit filed with the Sandiganbayan, Marcos resorted to blackmail to wrest control of the firm: "(He) instructed the PNB (Philippine National Bank) and the NIDC (National Investment Development Corporation) not to provide the financial assistance to PLDT unless GTE sold its shareholdings to the Marcos group. The American company had signed a $15-million contract to supply PLDT's phone equipments, which GTE would ship on the basis of a letter of credit from PNB and a loan guarantee from the NIDC. Caught in a bind, GTE had no choice. Yuchengco, who owned 10 percent of PLDT stock in 1967,recounted going to Malacanang and being ordered to travel to the U.S. with Ramon Cojuangco and negotiate for the purchase of the shares by a shell company where Marcos himself had controlling interest. "I had no choice but to agree", Yuchengco would say years later. The front Company was the Philippine Telecommunications Investment Corp.(PTIC), formed the sole purpose of acquiring PLDT. In the beginning, the majority of PTIC shares-57 percent-were owned by Ramon Cojuangco, his wife Imelda, brother-in-law Luis Tirso Rivilla, and other relatives. The rest were divided among GTE(25 percent, as partial payment for the PLDT stock), the Yuchengco group, financial consultants Gregorio Romulo and Leonides Virata and some minor stockholders. For a company with the majority stake in one of the country's biggest firm, PTIC does not even have an office, is not listed in PLDT's own telephone book, and does not seem to have any employees. Neither was it paid any dividends on the billions of pesos worth of PLDT stocks that it owned. Clearly, PTIC was a fiction to mask Marcos's role. The PCGG, formed in 1986 to investigate the ill-gotten wealth of Marcos and his cronies, Believes that the deposed president's shares in PTIC were in the name of Cojuangco and Rival, and represent 40 percent of the company. This proportion increased over the years as Marcos's appetite refused to be sated. In 1968,when Romulo and Virata decided to divest themselves of their combined six percent of PTIC stocks, they sold to Yuchengco. Again, the businessman was rebuffed. PLDT lawyer Meer went to Yuchengco to tell him that "Marcos objected to his purchase of the shares and that his business interests would suffer if he persisted. "Yuchengco desisted, even if he had already paid for the stocks. In fact, the president and his business allies acquired control of PLDT for practically nothing. To begin with, PITC's incorporators had no money to pay GTE some $14 million for its shares in the telephone company. So they borrowed from government-owned Development Bank of the Philippine, a loan which apparently has not yet been paid. GTE also helped finance the purchase of its own shares by agreeing to lend Ramon Cojuangco and his group money and pay them commissions. In exchange, PLDT would buy its equipment from GTE. In all, the American company gave PTIC officials led by Cojuangco $4.5 million in secret commissions and loans over 10 years. Some of the payments were coursed through a Bahamian company and would have remained secret, had the U.S. Securities and Exchange Commission (SEC) not investigated GTE and PTIC for violations of anti-fraud laws and the SEC's reporting requirements. In the course of the investigation, GTE admitted to the SEC that the equipment it sold to PLDT was overpriced. It was also mostly secondhand, according to Enrique Zobel, who had spoken to GTE officials. Little wonder that even as it was an efficient moneymaking machine for its owners, PLDT was, as a provider of telephone services, a dinosaur weighed down by obsolete and expensive equipment. In 1976, even as the SEC investigation was taking place, Marcos forced GTE to transfer its 25 percent share in PTIC to the Cojuangco group. Then, two years later, apparently on the President's orders, Ramon Cojuangco quietly maneuvered to shift 46 percent of PTIC shares to another shell company called Prime Holdings Inc.(PHI), formed by a group led by businessman Jose Yao Campos who has since admitted that it was a front for Marcos. This complex of layers of front companies was a tactic perfected by Marcos, a consummate lawyer who knew how to hide his ownership of the country's top business firms. Only when he fell in 1986 did this network unravel.

DURING THE YEARS OF MARTIAL RULE, PLDT CONSOLIDATED ITS status and privileges as a monopoly through presidential decrees and other executive issuances. On June 16,1973, just nine months after he declared martial law, Marcos signed Presidential Decree 217,which instituted the subscriber investment plan designed to raise equity for PLDT and finance its expansion. The decree mandated that all PLDT clients buy preferred shares in the company so that they theoretically became the owners. Subscriber's shares still account for close to 75 percent of the firm, but they carry no voting rights. Only 26 percent of the shares have such rights, but nearly half of these are in the hands of U.S. investors. The remaining half is held by PTIC, the government's Social Security System, the Cojuangco family and its associates, the Yuchengco group, and individual investors. In reality, the Cojuangcos and their allies have only about 2.7 percent of the equity of PLDT, but up to 1993 they had six of the 11 seats in the PLDT board. They also have, till now, almost complete managerial control of the company. All throughout the martial law period, PLDT's privileges were protected. Except for small telephone providers in the provinces and the government's own telephone system, no firms were allowed to complete with the PLDT's virtual monopoly of the lucrative telephone market. For PLDT, the early martial law years were a period of consolidation and gobbling up of competition. Between 1975 and 1980, it acquired five privately owned telephone companies operating in various parts of the country.[1] The prize catch, however, was Republic Telephone Co.(Retelco), then the country's second largest telephone provider. In 1981, Retelco was ordered to merge with PLDT in a buyout that gave the latter a monopoly in Metro Manila, the country's biggest and most profitable phone market. In 1982, the Ministry of Transportation and Communications went further to enhance PLDT's monopoly by issuing Ministry Circular 82-046 that provided for a single, integrated national backbone for voice, telegraph, telex and data transmission". That backbone was of course PLDT's. To speed up the process, the Government Telephone Service (GTS) which maintained its own national backbone of telephone trunklines, was turned over to the company.

A backbone is like a highway through which all phone calls pass. Up to the late 1990's PLDT had the only complete national telephone backbone in the Philippines, giving it an edge over competitors who had to negotiate with PLDT the terms of interconnection, or use of that highway. Until now, PLDT remains very jealous of its backbone. Its rivals say that the company is doing everything it can to bar, or at the very least delay, interconnections. Through the years, PLDT defended itself by saying that it was not a monopoly as there were 60 other telephone companies operating in the country. That was true, but most of this companies were small, and up to 1993, PLDT accounted for nearly 90 percent of all the phones in the Philippines. It was, critics said, a case of PLDT and the 60 dwarfs. To be sure there were a couple of other big players in the field. Eastern Telecommunications Philippines, Inc.(ETPI) had exclusive rights to submarine cables to Hong Kong, Singapore and Taiwan, the use of which PLDT had to pay for. But ETPI was allowed this privilege only because it was partly owned by Marcos cronies as well, and Marcos liked to spread the gravy around among his friends.[2] The Philippine Global Communications (Philcom), too, monopolized the submarine cables to Japan, built then it was also owned by Marcos men, including then defense chief Juan Ponce Enrile. Both ETPI and Philcom also remain dependent on PLDT's backbone. As of the late 1990's, despite a law providing for mandatory interconnections, both companies have not yet managed to link their system to PLDT's. A monopoly, however, is not intrinsically inefficient. Up to the 1980's the conventional wisdom in telecommunications was that, because of the huge capital outlays required, it was more efficient and cost-effective to have a dominant carrier than several small companies crowding the telephone market. In many countries, telephone ,monopolies provide reasonably affordable and good service. PLDT, however did not. The woes of Filipino telephone subscribers are legendary and for years have been the stuff of angry and desperate letters to newspaper editors. Up to the early 1990's the average waiting time for a phone line was three years. Even big, well-connected companies had to wait that long, or even longer, for a phone connection, and almost as long to have a busted phone repaired. Phones were such a scarce commodity that customers were willing to pay substantial bribes to PLDT employees just so they could get a line. There was also a thriving black market for telephones, where one could trade a PLDT connection for as much as 10 times its cost. Thus, the World Bank, in its October 1992 report, scolded the company for not fulfilling" its responsibility as a protected monopoly-to meet demand. "It said that telecommunications was the least developed infrastructure in the Philippines, which at that time had only 1.2 phone lines for every 100 people, compared with 62.5 in Hong Kong, and 11.4 in Malaysia. By then, PLDT had provided only some 500,000 lines after over 60 years of operation, and had a backlog of 700,000 more. In its defense, PLDT blamed the foreign exchange crisis that followed the debt moratorium declared by the Philippines in 1983, shortly after the Aquino assassination. Foreign exchange restrictions in the next two years set back the company's expansion program. When the situation normalized, PLDT asked the government to approve its plan to set up 500,000 new lines, but the National Telecommunications Commission (NTC) slashed this number to 130,000 arguing that the company did not have the foreign exchange needed to carry out such an ambitious plan. PLDT reasoned out that its costs were high partly because it was compelled to use the facilities of the Philippine Communications Satellite Inc.(Philcomsat) for up to 22 times the normal world rates. Philcomsat was owned by Marcos cronies. While these reasons were valid, it is also true that PLDT's commitment to serve its public seemed sorely lacking. The problem lay partly in regulation.

The NTC, which was created in 1979 and given broad powers to regulate the industry, remained practically toothless all throughout the Marcos and most of the Aquino years. Though in a powerful body whose decisions can be overturned only by the Supreme Court, the NTC was for the most part in PLDT's thrall. Ill-funded and ill equipped, it could not discipline a rich and powerful dominant carrier nor compel it to provide more phones and better service. To begin with, the NTC was in the anomalous situation of being "dependent on the regulated for information about its performance," wrote Jacinto Gavino in a 1992 doctoral dissertation on telecommunications regulation prepared for the UP College of Public Administration. Moreover, Gavino pointed out, even if the NTC had rules that provided for fines and suspensions for shoddy service, it could not very well suspend the operations of the only company providing telephone service. In the Philippines, monopoly meant that even if telephone connections were bad, repairs were slow, and customers had to wait years to get a phone, it was better than the prospect of having no telephones at all. The NTC could neither regulate PLDT's rates, which were among the highest in Asia, nor ensure that PLDT kept its profits to the maximum 12 percent rate of return mandated by law. Until now, it is impossible for the NTC to determine what real telephone rates should be because it has no way of establishing PLDT's real costs, apart from what the company itself claims. "What is clear is that to do a good job of regulating rates of return means analyzing in great detail the expenses and investments of the utility to find out if they are justified," said Gavino. "It is difficult to imagine the regulator doing a thorough job on this issue given its present capabilities and resources....NTC clearly does not have the administrative capacity to do comprehensive financial audits." The NTC's dependence on the resources and Information provided by the company it was supposed to regulate meant that the Cojuangcos could run PLDT the way they wanted. And they have done just that. The other reason for PLDT's efficiency was that the company was being milked by its owners. In 1986,the PCGG management team in charge of the firm concluded: "The biggest source of graft and corruption in PLDT is in the area of procurement of materials and supplies." It discovered that the firm's directors were also the owners of companies that were PLDT's biggest suppliers. Not only that, most of the equipment provided to PLDT by these suppliers was overpriced by anywhere from 10 to 50 percent.* In addition, the PLDT board was accused of misappropriating company funds. For example, in early 1986 when Marcos was seeking reelection, $1 million was given to "donations that could not be reflected in the books of PLDT," Tony Boy Cojuangco admitted to the PCGG. PLDT officers were also accused of making profits from money market placements in the U.S., which were not reflected in PLDT's accounts. Moreover, they deposited foreign exchange revenues in overseas accounts whose interests earnings were not recorded in PLDT's books, said the PCGG. This was illegal as a Central Bank regulation required that foreign exchange earnings be remitted to the Philippines within 15 days. In fairness, the manner in which PLDT operated was not scandalous in the context of the plunder that characterized the Marcos era. The rapaciousness in some crony companies was on a grander scale, but this is at best a lame defense.

When Corazon C. Aquino became Presdent, there were sincere attempts to undo what Marcos had done. But this sincerity was soon worn down by the many demands made on a government torn apart by irreconcilable interests. The failure of the PCGG to set things right in PLDT was indicative of its failure most everywhere else. It was a failure to shield itself from the pressures-and temptations-brought by those who had everything to gain by keeping things as they were. PLDT was among the first companies sequestered by the newly established PCGG. On March 14,1986, barely 10 days after the Aquino government was sworn into office, the company was taken over by the government. But the terms of the takeover were modified less than a week later, on March 20, on the appeal of PLDT, which said that its loan agreements called for an acceleration of payments in case of a Government takeover. This, it argued, could compel the company to default on its foreign and domestic debt. Instead, a PCGG-appointed management supervisory team led by an Aquino supporter, businessman Luis Sison, was formed to determine the extent of Marcos's ownership of the firm and to conduct an audit of its operations. In a conference room at the PLDT main office in Makati, the team sifted through documents,talked to informants in and outside the company, and kept tab of accounts and disbursements. All of PLDT's financial transactions were vetted by the team, which included a representative of the Commission on Audit and another from the company's management. Till then, PLDT had been a closed book. Little was known about the company, as it was tightly controlled by a board composed of the reclusive Ramon Cojuangco, his relatives, and longtime business associates. Sison discovered the layer of front companies that Marcos had formed to hide his of ownership of PLDT shares. His team found evidence of financial anomalies and misappropriation of company funds. It uncovered interlocking directorates in PLDT and that supplied its equipment. Sison submitted his report to the PCGG on April 21,1986 and recommended that the government sequester PLDT shares in the name of prime Holdings Inc. and the Ramon Cojuangco family. His team also put together a plan to remove the Cojuangcos from PLDT getting to government to vote the Marcos shares, forming an alliance with PLDT chairman Alfonso Yuchengco, and then installing a majority of directors in the PLDT board. "I think I was getting a little bit too controversial," Sison recalls. "It was too hot. People beginning realize, ba, malaki pala ito (wow, this is big).Finally I was to stop by the PCGG." Eleven days after Sison submitted his report, PCGG Commissioner Raul Daza did the opposite of what the management team had recommended. He signed an order completely lifting the sequestration of PLDT provided that feasible plans were drawn up to lower telephone rates, abolish the subscriber investment plan, and implement a profit- sharing scheme with employees. Daza also told Sison of accusations that the businessman's brother was interfering in the disbursement of PLDT checks. "The other accusation was that I was about to turn over PLDT to the communist, "Sison says. "I think it was a political maneuver. They found it convenient to create some kind of accusation, I was asked to stop." Sison says that he discussed the PLDT case with PCGG chairman Divot Salonga, but the latter did not seem interested when they met in his office. In an interview with the FAR Eastern economic Review in 1993,Salonga admitted that he distanced himself from the case after President Aquino had told him that "the Antonio Cojuangco family is not that bad, and different from Danding's." Aquino has acknowledged the conversation took place, but that it was misinterpreted, adding that the PCGG "had the full authority to pursue cases that they thought should be prosecuted." The President, Salonga said in a more recent interview with this writer, treated the PLDT case "with benign neglect, although she made a show of being neutral." Behind the scenes, however, "(Antonio) Cojuangco pulled out the stops to use family connections to convince Aquino that despite questions over his father's relationship with Marcos, the current management was the only one capable of running PLDT," the review reported. On May 12, 1986 the PCGG team was barred from entering PLDT's premises. In a letter of PCGG commissioner Mary Conception Bautista, who was in charge of telecommunications, Sison protested that his team was not even given the courtesy of being shown Daza's order lifting PLDT sequestration. Much less was it consulted about the matter, he said. "The PCGG has chosen to hear only PLDT," Sison lamented in the letter, adding that the entire process in which the sequestration had been withdrawn was "shrouded in secrecy."

Abandoned by his superiors, Sison acknowledged defeat and asked only for a graceful exit. He and his group were allowed to wind up their operations; they finished their work on May 22. just days later, on Malacanang's suggestion, Benjamin Guingona and Mario Locsin were appointed PCGG's fiscal agents for PHI and PTIC, the two companies which have substantial PLDT shares. Soon after, the two men were asked to represent the PCGG in the PLDT board as well. Less than four months after their appointment, Locsin and Guingona issued a new report that reversed Sison's findings. They said that there was no solid evidence Ramon Cojuangco was a Marcos crony or that the PLDT shares in his belonged to Marcos. They also said that they found no evidence that "management irregularities were a means of making unlawful profits from PLDT." In addition, they said that a new policy of procuring equipment had resolved the problem of interlocking ownership. Thus, within six months after it was taken over by the government, PLDT was virtually off the hook. There was no mention of the conditions the PCCG had imposed on the company when it decided to lift PLDT's sequestration. Despite a free press and a still lively protest movement, there was initially little public reaction to PLDT's settlement with the new government. Those were, after all, extremely nervous times. Ambitious military factions were continuously plotting to overthrow the Aquino government. The left was engaged in its own debates and in ongoing negotiations with the new administration. A new construction was being drafted and a multitude of causes demanded to be heard. For the most part, Locsin and Guingona were passive members of the PLDT board. They had none of Sison's inquisitiveness. So concerned was a PCGG consultant about this lack of government inquiry into PLDT that he wrote a letter to Commissioner Bautista, saying that PCGG nominees should be more assertive in querying PLDT about its transactions. He warned that it was dangerous to have the same nominees sit on the boards of PHI,PTIC and PLDT and expressed dismay at the "political pressure" that was behind these appointments. So cozy was the relationship between PLDT management and the PCGG representatives that they did not even report to the PCGG. On March 21,1988,then PCGG chief Ramon Diaz wrote an angry letter to Tony Boy Cojuangco, scolding him for not even bothering to reply to queries from the PCGG chairman's office. Diaz said that he did not even know who PTIC's officers were as "our two men up there have never informed me." In 1988, Locsin and Guingona were ousted from the PLDT board for protecting the company's interest rather than the government's. Locsin was subsequently appointed PLDT vice president. In 1993,when a consortium organized by Tony Boy Cojuangco took control of Philippine Airlines, it asked Locsin to be PAL executive vice president. Guingona was taken in as a PLDT consultant. In the meantime, government did nothing to assert its right to more board seats even if, through PTIC and PHI, it was actually entitled to have the majority in the PLDT board. The PCGG, however, continued the investigations of the Marcos wealth. Among the depositions the commission took were those of self-confessed Marcos cronies Jose Yao Campos and Rolando Gapud, who attested to Marcos ownership of Prime Holdings, which owns 46 percent of PTIC, the company that owns the controlling block of PLDT shares. Yuchengco, an Aquino supporter who was named ambassador to China, also issued an affidavit narrating how Marcos maneuvered to take over PLDT through PTIC. The investigations, however, dragged on. Only in 1990 did David Castro, the new PCGG chairman, order the filing of a criminal case against the incorporators of Prime Holdings and PTIC, including members of the Cojuangco family. Tony Boy Cojuangco was not included in the case, as he was only 16 years old in 1967,the time of the PLDT purchase, and could therefore not be held liable for what his father and his associates had done. The lawsuit languishes in the anti-graft court to this day. In 1993,presidential legal adviser Antonio Carpio was surprised to find that the case had not moved in three years and that government lawyers had not even bothered with the routine procedure of taking the depositions of Gapud and Campos, who were both living abroad. By then, Campos was seriously ill and there was the danger that his testimony would be lost forever.

DESPITE ITS TIMIDITY IN RESOLVING THE ISSUE OF PLDT's ownership, the Aquino government took efforts to whip the company into line. It helped that a noisy Congress was in place by the second half of 1987,and a maverick political operator, Jose Luis "Linggoy"Alcuaz, was appointed to head the NTC. Alcuaz, a member of the April 6 Movement outlawed during the Marcos years, had a patron in Tarlac Rep. Jose "Peping" Cojuangco Jr., the President's brother who exerted a great deal of influence in the House of Representatives. Cory Aquino herself was enough of a populist to respond clamor for telephones. After all, the constituency that brought her to power was made up of urban, middle-class professionals and businessmen, the very people who were most aggrieved by the state of the country's telephone system. In a speech before business groups in October 1987,Aquino asked PLDT to meet the demand for more phones and to attend to complaints about telephone service within 48 hours. Tony Boy Cojuangco, who became CEO of PLDT at the age of 33,shortly after his father's death in 1984,was quick on the draw. Educated at Ateneo (where he graduated summa cum laude) and Stanford and having grown up amid the roller-coaster political and financial fortunes of his feuding family, he recognized the handwriting on the wall. He knew that PLDT had to adjust to the times. He initiated a P400 million expansion program and slowly replaced his father's cronies with a more professional management team that tightened up the company's finances. Tony Boy, however, was also smart enough to ensure his family's control over the firm to raise money for its expansion, PLDT did not issue any common stock that would dilute the Cojuangco ownership even more. Instead it borrowed heavily from foreign banks. Most of all, Tony Boy was shrewd enough to gamble that with the right connections and good public relations, he could maintain PLDT's monopoly. Through a combination of business acumen and political astuteness, not to mention the financial largesse at its disposal, PLDT was able to keep its market share. It also made stockholders happy: between 1987 and 1992,the company's net income after tax more than tripled from P1.4 billion to P5 billion, even if it was increasing the number of lines by less than four percent every year only. These, after all, are what monopolies are all about: the rewards of inefficiency. It became clear in the early Aquino years that while Cojuangco control over PLDT would remain, it would not be business as usual for the company. For one thing, decision was no longer centralized in Malacanang; Congress, telecommunications regulators, and the noisy press had to be dealt with as well. Moreover, with Marcos out of the picture, there was a free-for-all among the crony companies involved in telecommunications: PLDT, Philcomsat, ETPI and Philcom. All of these companies had sequestered shares, and each of them was now trying to get a bigger share of the pie from the others. If monopoly were a game, there were now many more players, and the rules had changed. In late 1986,an executive order subjected PLDT for the first time to corporate income tax on gross profit and raised its franchise tax.

Aquino's first transportation and communications secretary, lawyer and anti-Marcos oppositionists Hernando Perez, also directed PLDT to reduce its Metro Manila rates by 10 percent. In addition ,he slashed PLDT's expansion program while reviving a government program to establish phone networks in the provinces in an effort to have PLDT to compete in the government. In 1987, a series of congressional inquiries on the ownership of PLDT was initiated. Although none of these inquiries got very far, they created a lot of noise and generated media comment. At the same time, The Department of Transportation and Communications(DOTC) under Rainerio Reyes issued a new policy of "regulated competition" and poured more money into setting up more government-funded phone systems in rural areas. The NTC also became more assertive. Alcuaz ordered a cut in Philcomsat charges in order to compel PLDT to slash its own rates. Philcomsat, however, contested the ruling in the Supreme Court. Alcuaz also accepted applications for new international gateway's, the channels through which overseas calls pass, thereby hoping to break PLDT's monopoly over the long distance market, which provided 60 percent of the company's revenues. Despite being a complete political animal, Alcuaz, a Lumbering giant of a man, found himself outflanked by forces that loomed larger than he did. Backed by Peping Cojuangco, cozy enough with Malacanang where his wife was on Aquino's staff, he was well positioned and thought he could function fairly independently. With an activists past and a keen political sense, he knew that the right-and popular-thing to do was chip at PLDT's monopoly. His delusion, he would recall later, was that he could fight the company. The warning signs were there. Just one week after Alcuaz was appointed NTC commissioner, PLDT got into a fight with ETPI over the sharing of revenues on calls from Hong Kong. PLDT had the gateway, but ETPI owned the submarine cables. Alcuaz said he would study the matter." But in the process, "he remembers," one of the top PLDT officials told me, they had already cleared it with (Aquino's Brother-in-law Ricardo)`Baby' Lopa. I should rule against ETPI. At that time, to them, I was a Cory boy." Alcuaz was caught in a bind. DOTC Secretary Reyes had made known that he was in favor of ETPI as he was afraid that any move against it would affect foreign investments. ETPI is 40 percent owned by the British company Cable and Wireless. Eventually, the controversy had to be settled in court. In 1989,when Alcuaz ordered PLDT to interconnect with a rival phone company in Davao City, PLDT refused." It was, "he says ruefully," a case of the tail (PLDT) wagging the dog (government)."Without interconnection, the Davao company could not route calls to and from the PLDT network or overseas, because PLDT also controlled the international gateway. Raging at PLDT's stubbornness, Alcuaz threatened to revoke the company's franchise and ask another phone company to interconnect with Davao.

Eventually, PLDT relented. Alcuaz, however was less successful in compelling PLDT to interconnect with Express Telecommunications Co.(Extelcom),a cellular phone provider. PLDT not only refused to interconnect, it also questioned Extelcom's franchise all the way up to the Supreme Court. When Extelcom won, the Cojuangcos simply bought into the company. By then, those around the president had already discovered that the NTC was a key post. Not only in charge of the exploding medium of television. In fact, NTC's two deputy commissioners were recommended by the President's-in-law. Alcuaz also remembers being called to House Speaker Ramon Mitra's private office to brief the Speaker and Peping Cojuangco on the agency. Both congressmen were particularly interested in broadcasting and relayed the requests of business groups interested in acquiring TV stations. In October 1989,when the NTC was hearing applications for new international gateways from ETPI and Philcom, the pressures on Alcuaz became more intense. He was inclined to grant both applications, but given the history of enmity between ETPI and PLDT, he thought it more prudent to give Philcom's license first. His two deputies were similarly inclined. But as they were about to issue the discussion, Aloysius Santos, the NTC deputy recommended by the President's son-in-law Eldon Cruz, came to see Alcuaz in his office. Santos was carrying the Philcom case folder. "His hands were shaking" Alcuaz said he got a call from Eldon. Harangin raw ang license ng Philcom (Block Philcom's license)."It seems the phones were constantly ringing at the NTC then. "Mitra was also trying to call me several times, I surmised on PLDT's behalf, "Alcuaz remembers. "Mitra was sort of assigned to me. Eldon was watching over Santos, and Manolo Abellada, another son-in-law of Cory, and her cousin (Rizal Rep. Emigdio`Ding' Tanjuatco were assigned to Florentino Ampil, the other deputy commissioner." Despite the phone calls, Alcuaz signed Philcom's license on October 11,1989. That same night, he got other call, this time from an Aquino relative who was a ranking member of the house of Representatives. "Linggoy,"the relative said, "Bakit tinutulungan mo ang kalaban(why are you aiding the enemy)?"The enemy was Enrile, Aquino's former defense chief, who was part owner of Phicom and the key plotter of the failed coups against the President. The following day, October 12, Alcuaz's forty-first birthday he withheld the release of the Philcom decision. Instead he went to see his caller at the latter's home in Makati. "I showed him folders of clippings, "Alcuaz recalls. "I said PLDT as the dominant carrier was pushing its weight around too much. They refused to interconnect in Davao, etc. He did not say anything, but he asked two guys from PLDT to come over. "To get out of a tight situation, Alcuaz told the PLDT representatives, "Tarantado kayo, eto na yung disisyon, bakit ngayon lang ninyo kinausap ang amo ko?(You fools, the decision has been signed, why did you not speak to my master earlier?)"The Aquino relative, however, did not tell Alcuaz how to decide on the master. He simply told the two parties to talk things over. In the end, Alcuaz released Philcom's license. By this time, his relationship with the president was deteriorating. Alcuaz is a voluble man who likes to rake the coals of controversy and his real passion is politics, not telecommunications. His pastime then was giving press interview where he made provocative comments on the issue of the moment . By late 1989, he was attacking the Aquino administration and issuing in flammatory statements about the possibility of another coup attempt. That hardly endeared him to the President who, especially when she was under siege by coup-plotting military officers, put a premium on loyalty. In early November 1989,a piqued Aquino summoned Alcuaz to a meeting, demanding an explanation for the day's radio interview, which the president heard while she was in her car. "She said, your job is telecoms. Why are you talking about a coup?" recounts Alcuaz. "I had smart-alecky answers. I felt she was asking, are you for me or against me? She was conveying the message that it's okay to be corrupt, inefficient, but are you for me?" That conversation, which lasted more than an hour, apparently sealed Alcuaz's fate. He did not know that on November 12, 1989, when he had scheduled a press conference announcing the approval of ETPI's license for an international gateway, Aquino had already written a letter firing him. When he found out, Alcuaz told the press that he had been fired because of PLDT pressure, citing the interference in the NTC of Aquino's sons-in-law. Alcuaz concedes now that this was only partly true: what precipitated his removal were his personal differences with the President. But he also blames Aquino's in-laws. "They hastened my removal because they knew I was going to sign the ETPI decision. They were fanning the flames against me with Cory. But in all honestly, I cannot say that she removed me to favor PLDT." At that time, Aquino was probably too focused on the survival of her government against determined military plotters to bother with the corporate intramurals of a favored very laissez-faire in her approach to governing. That only made for more frantic lobbying and more diversified approaches. PLDT had to resort to making its appeals through an assortment of in-laws. ETPI, too, sought its own lobbyists in Malacanang. Among those who approached Alcuaz was Catalino Macaraig, Aquino's executive secretary, who asked the NTC chief to grant ETPI's request for a gateway. After all, Macaraig pointed out, the PCGG appointed chairman of the company, Melquiades Gutierrez, had once worked for Aquino's family, and it would not hurt to give him what he wanted.

ANY COMPANY THAT DOES WITH THE GOVERNMENT or is subject to official regulation inevitably searches for connections to the powerful. A network of intercessors sooner or later forms around a wielder of power or interpreter of government rules, be or she a mayor, police chief, district highway supervisor, or even a justice of the Supreme Court. This is how we do business in this country. It is also how we pray: seldom to God himself, but also through the intercession of Jesus or the Virgin Mary or a pantheon of saints. When Josefina Lichauco took over from Linggoy Alquaz, it was already well known that she had no love lost for PLDT. Appointed by Aquino as DOTC undersecretary, she had encouraged the moves toward demonopolization. As a lawyer who had been with the department since its formation in 1979, she was well aware of PLDT's tremendous clout. She also resented it, as would any bureaucrat serious about her job as regulator. A widow of independent means, Lichauco was also not without connections. Her husband's brother is married to Ninoy Aquino's sister Maur. One of Lichauco's first tasks as NTC chief was to rule on ETPI's application for an international gateway, which PLDT had questioned, saying the Alquaz's was a midnight approval not decided collegially with the two deputy commissioners. Lichauco reaffirmed Alquaz's decision. As a result, PLDT cut its international call rates in order to compete with the lower charges offered by both Philcom and ETPI.

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