PLDT files $3-M settlement deal in US class action lawsuit

PLDT Inc. has proposed a $3 million settlement deal to resolve the class action lawsuit filed against them in a US court concerning an alleged P48 billion or $872-million capital expenditure (capex) spending overrun.

In a disclosure to the Philippine Stock Exchange (PSE) on Thursday, Feb. 22, the telco stated that it entered into a Stipulation of Settlement submitted to the US District Court for Central District of California on Feb. 16.

If approved by the Court, following notice to the settlement class, the settlement class will receive $3 million as payment.

“The proposed settlement agreement contains no admission of liability, fault or wrongdoing by any defendant. If approved by the Court, the settlement will resolve the U.S. Class Action in its entirety as against all defendants,” said the disclosure.

On Dec. 16, 2022, PLDT said in a disclosure that it was investigating the results of an internal audit that determined an aggregated capex investment amount of P379 billion from 2019 to 2022, including a budget overrun of P48 billion.

The P48 billion represented around 12 percent of total capex spent over the period, it noted.

“The investigation has, so far, not uncovered any fraudulent transactions, procurement anomalies, or loss of assets arising from the capex spend,” the telco affirmed.

In a separate disclosure on Dec. 22, 2022, PLDT explained that the “bulk of the P48 billion capex overspend involves the procurement of network equipment necessary to provide stronger connectivity to subscribers, specifically 5G cell sites for our mobile network and fiber rollout.”

However, after the disclosures, PLDT's saw an over 19 percent plunge in the price of its shares to P1,192 per piece as of Dec. 19, 2022.

Upon receiving a notice from the PSE to clarify their statements, the telco told the PSE on Dec. 27 that investigations remain ongoing.

Negotiations with vendors led to reduction of the capex overrun to P33 billion.

This disclosure triggered a class action suit in February 2023 filed by Sophia Olsson and Kevin Douglas, both shareholders of PLDT securities who claimed that PLDT made false or misleading statements and failed to disclose that “there were capital spending budget overruns, and failed to address weaknesses that allowed such budget overruns.”

Olsson claimed to have owned two shares and lost $22.69, while Douglas held 35 shares and suffered losses worth $240.23 after the budget overrun was disclosed.

The two lead plaintiffs reportedly filed the suit on behalf of many others who incurred losses after PLDT securities’ price dropped, and demanded compensation.

Olsson and Douglas were represented by Rosen Law Firm and Levi & Korsinsky, LLP.

In April last year, PLDT asked the California Court to deny the class action suit, particularly the rejection of Olsson and Douglas as lead plaintiffs, citing they did not meet the basic requirements in accordance to the US Private Securities Litigation Reform Act.

This policy disallows shareholders with small interests to file charges.