DICT issues draft rules for 3rd telco player

February 20, 2018 - 10:25 AM
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Court_of_Appeals_Facade_PLDT_Globe_logos_inset
The logos of PLDT and Globe Telecom are superimposed on the facade of the Court of Appeals. The government is moving to pave the way for the entry of a third player in a market dominated by the duopoly. INTERAKSYON FILE IMAGE
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MANILA – The government’s bid to improve telecommunications services in the country has taken a step forward with the Department of Information and Communications Technology’s (DICT) release on Monday of draft criteria for selecting the third major service provider.

The draft joint memorandum circular — to be issued by the Department of Finance (DoF), DICT, National Security Council and the National Telecommunications Commission (NTC) — that was posted on the DICT’s Web site provided that the prospective third player:

• should have a net worth of at least P10 billion;
• should prove, in the case of a consortium, that it has the capacity to raise equity from potential consortium members to enable it to have a net worth of at least P10 billion;
• by itself, “or at least one of the members of the consortium,” should have “proven technical capability” to provide telecommunications services;
• has a congressional franchise — or if a consortium, Filipinos must have at least 60% in the group with at least one of the members holding such a franchise;
• is not related to any telecom group with mobile and broadband wireless market share of at least 40% — in reference to PLDT, Inc. and Globe Telecom, Inc.; and
• should not have any “bidder’s liabilities,” defined as “uncontested obligations” to the NTC as of Jan. 31, including supervision and regulation fees, spectrum user fees, penalties, surcharges and interest.

Once chosen, the third major telecommunications player should also have a 70:30 maximum debt-to-equity ratio; will have to post a performance bond equivalent to one-half of one percent, or 0.005%, of investment committed for the first five years of operation; and will have to deposit at least 30% of the committed investment for the first year with a government financial institution specified by the Finance department within 30 days of the award, among others.

The new player should also submit its rollout plan within 15 days from date of award, start commercial operations by the 12th month from such date and cover at least 80% of provincial capital cities and towns and 80% of chartered cities within five years.

The DICT will present the draft to stakeholders in a Feb. 27 consultation at Novotel Manila, Araneta Center in Quezon City. The department said it expects “at least 300 participants” in that event “to provide inputs on the draft MC before it will be finalized and take effect…” Another consultation will be held on March 6 at the NTC Building along BIR Road in Diliman, Quezon City.

DICT Officer-in-Charge-Secretary Eliseo M. Rio, Jr. said last week that the department aims to issue the final joint memorandum circular on March 21 with April 5 as effectivity date, hold the auction on May 18 and announce the winner that same month.

With this tentative timetable, the DICT hopes to give interested parties more time to prepare, despite President Rodrigo R. Duterte’s order to have the third player selected by next month.

Interested companies include NOW Corp., Philippine Telegraph and Telephone Corp. and Converge ICT Solutions, Inc., among others. Mr. Rio said by phone yesterday that over 30 companies have congressional franchises.

“The third player will have to shell out big to be able to compete with Globe and PLDT,” Jervin S. de Celis, equities trader at Timson Securities, Inc., said in a mobile phone message. “It will be capital-intensive, so raising cash through issuance of debt or additional shares in the open market may help the potential player raise additional funds.”

For Luis A. Limlingan, managing director at Regina Capital Development Corp., interested parties also face time constraints. “The drafts will definitely narrow the third player if ever to a few suspects, if you look at some of the terms such as the 60:40 ownership rule, no bidders liabilities, a net worth of at least P10 billion, must have a congressional franchise, etc…,” Mr. Limlingan said in separate text. “My main concern is the timing issue because proposals need to be sent in a few months. Perhaps some potential players may find this a huge obstacle as they could be seeking a foreign partner.” — Patrizia Paola C. Marcelo