Conclusion
Can China Telecom spur healthy industry competition?
The $1.2-billion sale of San Miguel Corp.’s (SMC) stake in Bell Telecommunication Philippines Inc., Liberty Telecoms Holdings Inc., Eastern Telecommunications Philippines Inc. and the company’s hold on the coveted 700 MHz bandwidth was heralded to bring about drastic and much-awaited improvements in the country’s telecom industry.
But it was not to be.
It doesn’t take might and power to overhaul the country’s Jurassic telecom infrastructure. Globe Telecom Inc. and Philippine Long Distance Telephone Inc. (PLDT) may have a vast war chest and a gigantic bandwidth at their disposal. But how to make full use of them in a not so friendly environment has effectively stalled their expansion plans.
There are just not enough cell sites to distribute the needed signal to speed up Internet connectivity in the country. A good friend and a major player in cell site construction—whose company has built almost all the tower requirements of both Globe and PLDT and has also done business overseas—told BusinessWise that in a perfect world, it takes two years for single tower to be put up. But in the Philippines, where bureaucratic red tape rules, it may take forever. He says prolonged license tenders and corruption in local government weigh down the rollout of the much-needed infrastructure to improve the country’s Internet connectivity.
The country’s Internet delivery will remain at snail’s pace, no thanks to ridiculous expanse of certifications and the time it takes for local government units (LGUs) to approve them. Compared with other countries where digital processing takes only a day, my friend says that without red tape or any other obstructions, it takes at least 24 stages and close to a hundred days just to secure a construction permit, still excruciatingly slow: “More often than not, it will take 10 times slower because of corruption and inefficiency.”
Not only that, he says that most of the charges that local governments levy is unjustified. “Just to give you an example local government charges P200,000 per year on a single tower.”
There are other permits and requirements—including the environmental impact and the concern in building cell sites in protected areas—but it will take more than three series of columns to tackle them all. The point is if the Duterte administration is that serious in improving the country’s Internet connectivity why didn’t he address these problems with dispatch? Why is it always China that he always runs to for help? Do we really need a third telecom player?
Don’t get me wrong, healthy competition is enhanced by several players, which can offer the best package from which consumers can choose from, and China Telecom brings with it a fairly impressive pedigree.
Owned by the Chinese government, China Telecom is the third biggest mobile phone company in China after China Mobile and China Unicom, both are also state-owned, according to a May 2017 report of DBS Group Research. China Mobile controlled 64 percent of the mobile subscriber market, followed by China Unicom, 20 percent and China Telecom, 16 percent.
Internationally, it is ranked by Forbes magazine as the world’s ninth biggest publicly listed telecom company based on a composite metric that includes sales, profit, assets and market value. It is 142nd among the world’s largest 2,000 public-listed companies.
If and when China Telecom finally finds a local company to comply with the 60/40 constitutionally-mandated ownership structure in favor of Filipinos, it will operate within the same working environment Globe and PLDT have had difficulty navigating.
President Duterte has not walked the talk. Traffic remains at a standstill; MRT 3 is still mired in the same problem, which he promised to solve in three months. Most of his campaign promises have just been that: a promise. How can we trust him this time when he says that the entry of a third telecom player augurs well for the telecom industry?
I’m reminded by the telecom liberalization policy adopted by former President Fidel V. Ramos during his reign. It was half-baked. The policy opened the doors to other players such as Liberty Telecom, Eastern Telecom, Bayantel, among others. The problem is that only PLDT was allowed to operate nationwide, while the other players, including Globe, were consigned to operating only in their assigned franchise areas. And where are these small players now?
I’m not optimistic that the entry of China Telecom will bring about the needed telecom reforms. Worse, it could only pose a serious security problem for a country whose territorial waters are slowly being gobbled up by Beijing. Duterte’s invitation for a Chinese telecom company to compete here is akin to handing it the password to open up the country’s vault of classified national security secrets. Several senators have already aired their concern in consenting to a Chinese state-run firm to build and manage crucial Internet and telecoms system, given Beijing’s repute for high-tech proficiency.
Also, China Telecom will have an undue advantage to both Globe and PLDT, putting the competition on an uneven field.
China Telecom has no problem of heirloom equipment. It can always tap to latest technology by means of advanced apparatus and systems, which are not only service capable, but a lot cheaper than those developed a decade ago. By early-2020, it can use the international gateway the government signed with Facebook at a cheaper broadband cost.
It can also use the Transco/NGCP nationwide fiber-optic cable as its backbone and other government telecommunication facilities. Both, Globe and PLDT poured in money for their own backbones, which eventually limited their ability to deliver fast and cheaper services to remote areas.
Can China Telecom spur healthy industry competition? Or do we actually need a third telco player? Perhaps not.
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