"Chinese companies may soon be barred from trading in US stock exchanges."
It seems Dennis Uy’s problems with his newest baby, DITO Telecom, is far from over.
Last week, DITO was able to get a six-month extension from the National Telecommunications Commission granted DITO Telecommunity Corp., a joint venture of businessman Dennis Uy and China Telecoms, another six months for the technical audit of its network rollout.
The NTC extension for the technical audit under the certificate of public convenience and necessity provisions of DITO was actually a no-brainer as DITO’s failure to comply with its original schedule was caused the COVID-19 crisis.
Under the current extension, DITO was given six months to deliver the commitments for the technical audit requirements, including providing a speed of 27 megabits per second to cover 37 percent of the population.
However, DITO is expected to encounter another major problem even before its expected kick-off by the first quarter of 2021. Its chief administrative officer, Adel Tamano announced that the United States Congress may finally approve a measure which seeks to delist Chinese-controlled companies from the US Securities Exchanges.
Last May 20, the US Senate passed on third reading Senate Bill No. 945 or the proposed “Holding Foreign Companies Accountable Act,” which will bar many Chinese companies from listing shares on US stock markets like the New York Stock Exchange and rival Nasdaq.
Principally authored by Republican Sen. John Neely Kennedy, the said measure would require companies in US to establish and prove that they are not owned or controlled by any foreign government.
China Telecom – which controls 40 percent stake in Uy’s DITO Telecom – is owned by the People’s Republic of China under the Ministry of Posts and Telecommunications. It will most likely be a subject of delisting by the US Federal Communications once S.945 is signed into law by US President Donald Trump.
Dow Jones’ MarketWatch reported on May 27 that the approval by the US Senate of S.945 “has generated talk that all Chinese firms could disappear from US exchanges.”
China Telecom is listed in NYSE as CHA.
The measure which is expected to be signed by Trump once approved by the Lower House, would require all companies listed on US stock exchanges submit to audits reviewable by the US Public Company Accounting Oversight Board – non-compliant firms could be delisted after three years.
In his May 21 article in Fortune Magazine, journalist Eamon Barret reported that “the forced delisting would strip affected companies of billions in market value and cause a great deal of reputational damage too.”
According to sources, with a 40 percent stake in DITO Telecommunity and the Joint Venture now listed as ISM:PM, the Philippine Stock Exchange will likewise subject the registered Philippine third telco player to further scrutiny.
Aside from NYSE, China Telecom is also listed at the Stock Exchange of Hong Kong and in Hang Seng China Enterprises Index.
Based on PCAOB’s report, their required audits of Chinese companies registered at both SEHK and/or the Shanghai and Shenzhen Stock Exchanges have been denied.
The source explained that with this unfulfilled PCAOB requirement of Chinese companies registered in both mainland and Hong Kong stock exchanges, the current US-planned revocation of Hong Kong’s special status due to Beijing's infringement of the semi-autonomous rights in the city also “will further endanger the financial prospects” for China Telecom in the context of SSE’s affected condition.
It added that the US government’s plan to delist Chinese companies is also “in line” with some of our own senators’ opposition to entry of China Telecom in the Philippine market.
Senator Francis Pangilinan has been consistently warning about China Telecom’s mandate to gather and send intelligence information to China under China’s National Intelligence Law of 2017 and its Counter-Espionage Law of 2014.
Senator Grace Poe, chair of the Senate Committee on Public Services, also raised questions about China Telecom having control of internet traffic in compliance with Beijing’s objective of siphoning off information that can be used by their government.
While Pangilinan’s and Poe’s apprehensions appear unfounded, with no concrete basis to stand on, the US move is something Uy cannot ignore – its impact on his fledgling project is simply too enormous.