How Foreigners Can Own 100% of Philippine Telecom and Transport Firms: Why the Revised Public Service Act is a Historic Opportunity
Introduction: why this matters now
For decades, foreign investors looking at Philippine telecommunications and many transport-related businesses often assumed a strict 60% Filipino ownership rule applied because these sectors were broadly treated as “public utilities.” That assumption materially changed in 2022 with the amendment of the Public Service Act. The result is a wider pathway for up to 100% foreign ownership in telecom and many transport services—subject to sectoral licensing, national security review mechanisms, and competition regulation.
This article explains what the Revised Public Service Act changed, how it interacts with the Constitution and Supreme Court doctrine, and what foreign investors and Philippine partners should verify before structuring or acquiring a telecom or transport business in the Philippines.
Governing legal framework
The current landscape is shaped by three major legal sources: (1) the amended Public Service Act, (2) the Foreign Investments Act and the Foreign Investment Negative List framework, and (3) Supreme Court decisions interpreting the constitutional “public utility” ownership restriction and how to measure foreign equity where the restriction still applies.
1) The Revised Public Service Act (RA 11659, 2022): the decisive shift
Republic Act No. 11659 (2022) amended Commonwealth Act No. 146 (Public Service Act) and narrowed the statutory definition of “public utility”. This matters because the Philippine Constitution’s 60-40 ownership rule applies to public utilities—so narrowing the category reduces the number of industries captured by the constitutional foreign equity cap.
RA 11659 (2022) also contains an express repealing/modifying clause that modifies inconsistent laws and administrative issuances, including those that previously classified telecom entities and certain transport network services as public utilities. This is explicitly stated in its repealing clause, including its reference to the law on telecommunications policy and to a Department of Transportation issuance on classifying transport network companies/vehicles as public utilities (RA 11659, 2022).
2) The Foreign Investments Act (RA 8179, 1996): the default rule is openness
Republic Act No. 8179 (1996), which amended the Foreign Investments Act, reflects a general policy that allows up to 100% foreign ownership in many businesses unless restricted by the Constitution, existing statutes, or the Foreign Investment Negative List. In effect, after RA 11659 (2022) narrowed what counts as a public utility, telecom and several transport services are more likely to fall under the Foreign Investments Act’s default openness—subject to specific regulatory requirements and any remaining statutory limitations.
3) Supreme Court doctrine: what “60% Filipino-owned” means when the constitutional cap applies
Even after RA 11659 (2022), the 60-40 constitutional rule remains fully relevant for the sectors that still qualify as “public utilities” under the revised definition (and for other constitutionally restricted industries). Two Supreme Court rulings are central to structuring investments where the cap applies.
Gamboa v. Teves (2011) held that “capital” for purposes of the constitutional 60-40 rule in public utilities refers to shares entitled to vote in the election of directors (typically common shares), not the total outstanding capital stock that includes non-voting preferred shares. It also emphasized that compliance requires legal and beneficial ownership by Filipinos, not merely record ownership (Gamboa v. Teves, 2011).
De Leon v. PLDT (2021)
What exactly changed: “public utility” is now a narrower set of sectors
RA 11659 (2022) limits “public utilities” to specific sectors (as summarized in the law’s policy direction and reflected in how it amended inconsistent prior classifications). Under this revised approach, telecommunications are no longer automatically treated as public utilities for nationality restriction purposes, and some transport-related classifications previously treated as public utilities were modified accordingly (RA 11659, 2022).
How foreigners can own 100% of Philippine telecom companies
With telecommunications no longer generally classified as a “public utility” under the amended Public Service Act framework, the constitutional 60-40 public utility cap is no longer the default barrier for telecom equity. This opens the door to structures such as:
Example scenario: A foreign telecom operator incorporates a Philippine subsidiary and holds 100% of its shares (subject to compliance with investment registration, licensing/permits, and any applicable national security review processes). If the business model includes facilities, spectrum use, or other regulated activities, it must still comply with the appropriate Philippine regulatory authorizations.
How foreigners can own 100% of many Philippine transport-related companies
The impact on transport depends on the specific activity. RA 11659 (2022) expressly addressed and modified inconsistent rules and issuances that had previously treated certain transport network companies/vehicles as public utilities (RA 11659, 2022). This supports a more open equity environment for some transport services that are not within the revised definition of “public utility.”
Example scenario: A foreign investor acquires 100% of a Philippine corporation providing logistics technology services or operating a platform-related transport service that is no longer classified as a “public utility” under the amended framework, while ensuring compliance with sectoral transport regulations and licensing conditions.
When 60-40 still applies: public utilities that remain restricted
RA 11659 (2022) does not abolish the constitutional rule. It narrows the industries where that rule is triggered by statute. Where an activity remains a public utility, the 60% Filipino ownership requirement remains controlling, and the Supreme Court’s voting-share and beneficial ownership tests govern compliance (Gamboa v. Teves, 2011; De Leon v. Philippine Long Distance Telephone Company, Inc., 2021).
Summary table: ownership ceiling before and after RA 11659 (high-level)
| Sector / Activity | Typical pre-RA 11659 treatment | Post-RA 11659 general direction | Foreign ownership possibility |
|---|---|---|---|
| Telecommunications | Often treated as “public utility” under prior classifications | Not generally classified as “public utility” under the narrowed framework; inconsistent classifications modified | Up to 100%, subject to licensing and safeguards |
| Transport network services (classification issue) | Some issuances classified these as public utilities | Inconsistent issuance classifications modified by RA 11659’s repealing/modifying clause | Potentially up to 100%, depending on the regulated activity |
| Activities still within the statutory “public utility” definition | Public utility (restricted) | Still public utility (restricted) | 60-40 applies; “capital” = voting shares; beneficial ownership required |
Deal structuring and compliance: what to verify in acquisitions and joint ventures
Even where 100% foreign ownership is allowed, transactions should be structured around regulatory reality. A legally sound structure typically requires verifying: (1) whether the target activity is within the revised “public utility” definition, (2) what primary licenses/authorizations are needed for operations, and (3) whether any nationality restrictions remain under other laws or under the Negative List framework (RA 8179, 1996; RA 11659, 2022).
Where the public utility restriction does apply, corporate structuring must follow the Supreme Court’s voting-share doctrine and the requirement of Filipino legal and beneficial ownership—meaning nominee or layering arrangements that conceal beneficial ownership can create constitutional and regulatory exposure (Gamboa v. Teves, 2011).
Common compliance pitfalls (with examples)
1) Misclassifying the activity. A company may be “transport-related” but not necessarily a “public utility.” Conversely, a firm may provide multiple services, some of which remain restricted. A mixed-activity company may need ring-fencing or separate subsidiaries depending on which lines are within the public utility definition (RA 11659, 2022).
2) Relying on shareholding that looks compliant on paper but fails the voting-share test. If the activity is restricted, nationality compliance is determined by voting shares and beneficial ownership, not by total outstanding shares (Gamboa v. Teves, 2011; De Leon v. Philippine Long Distance Telephone Company, Inc., 2021).
3) Ignoring downstream consequences in contracts. Financing, shareholder arrangements, and control rights must be aligned with nationality rules where applicable. In restricted sectors, control rights that effectively transfer governance to foreigners can create enforcement risk even if the cap is met numerically (Based on internal knowledge of Philippine law).
Procedural outline: a typical foreign entry path (telecom/transport)
- Step 1: Confirm whether the business activity remains a “public utility” under RA 11659 (2022) or is otherwise restricted under other laws/Negative List (RA 8179, 1996).
- Step 2: Choose an entry structure: greenfield incorporation, asset acquisition, share acquisition, or joint venture; align governance rights and shareholder protections with regulatory limits.
- Step 3: Secure the required operational authorizations and registrations applicable to the sector and the business model (e.g., permits, certificates, and other regulatory approvals).
- Step 4: If the activity is restricted, validate compliance under the voting-share and beneficial ownership doctrine (Gamboa v. Teves, 2011; De Leon v. Philippine Long Distance Telephone Company, Inc., 2021).
- Step 5: Prepare a compliance file for diligence and audits: cap table, voting rights, beneficial ownership declarations, and board/management citizenship where applicable.
Why RA 11659 is a historic opportunity (and why diligence still matters)
RA 11659 (2022) is a turning point because it re-anchors foreign equity analysis on a narrower definition of “public utility,” reducing friction for foreign participation in telecom and several transport-related services. This can expand capital formation, technology transfer, and competition in sectors that have historically been constrained by equity limitations.
However, the opportunity is best realized when investors perform activity-level classification, match structure to licensing, and ensure that—where restrictions remain—nationality compliance follows Supreme Court doctrine on voting shares and beneficial ownership (Gamboa v. Teves, 2011; De Leon v. Philippine Long Distance Telephone Company, Inc., 2021).
Final observations and recommendations
- Confirm the activity classification early under RA 11659 (2022); do not assume all “transport” or all “telecom-adjacent” services share the same rules.
- Use the right nationality test where restrictions apply: measure compliance using voting shares and verify beneficial ownership (Gamboa v. Teves, 2011).
- Align governance rights with ownership limits to avoid de facto foreign control risks in restricted segments (Based on internal knowledge of Philippine law).
- Document compliance with a diligence-ready cap table, voting rights schedule, and beneficial ownership support, especially for regulated industries.
About Nicolas and De Vega Law Offices
Nicolas and de Vega Law Offices is a full-service law firm in the Philippines. You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines. You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.
References (Philippine law and jurisprudence cited): Republic Act No. 11659 (2022); Republic Act No. 8179 (1996); Gamboa v. Teves (2011); De Leon v. Philippine Long Distance Telephone Company, Inc. (2021).
