MISLATEL Consortium—the group led by Davao-based businessman Dennis A. Uy and state-owned China Telecom Corp. Ltd.—was declared as the provisional third telco player in the Philippines, after submitting the only compliant bid on Wednesday’s much-awaited selection process for the new major player in the local telco industry.
Based on its bid, it committed to provide 37.03 percent of the total Philippine population with an average Internet speed of 27 Mbps through a P150-billion investment for the first year of its operation.
A year after, another 13.99 percent of the Philippines will be covered, this time, with Internet connection that averages at a speed of 55 Mbps through a P27-billion investment.
By the third, fourth and fifth years, Mislatel should have covered another 18.99 percent, 10 percent and 4 percent of the population, respectively, with the same speed of 55 Mbps and the same level of capital and operating expenses at P27 billion.
At the end of its fifth year, it should have covered 84.01 percent of the total Philippine population. The group would have spent a total of P258 billion by the end of its commitment period, offering Internet services with an average speed of 55 Mbps.
Beauty contest
Mislatel garnered a total score of 456.8 points, based on the terms of reference for the third telco selection. The government is basing its decision on naming the official new major player through a so-called beauty contest, wherein contenders will get points for exceeding the minimum for the following categories: speed, coverage and financial capability.
The consortium is composed of Udenna Corp., Chelsea Logistics Holdings Corp. and China Telecom Corp. Ltd. The first two Filipino companies are owned and controlled by Uy, known to be a close associate of President Duterte.
It used the congressional franchise of Mindanao Islamic Telephone Co. Inc. to qualify to bid.
According to Udenna Spokesman Adel A. Tamano, whose group has a prepared printed press statement, should it be declared the winning bidder, the consortium is thankful for the “fair and transparent process.”
“We are humbled to be chosen, and once we are confirmed as the new major player, we promise to work very hard to give Filipinos the best telecommunications services that Filipinos have been aspiring for,” he said in a chance interview.
(Related story, “With 3rd player, Poe sees telecom reforms” in Companies section, page B1.)
Udenna’s win didn’t come smoothly, though. Two other parties that submitted their bids—Sear Telecommunications Inc. of politician Luis Chavit C. Singson and Philippine Telegraph and Telephone Corp.—were disqualified from the process, after submitting incomplete bid documents.
Sear, corporate vehicle for TierOne Communications International Inc., Fujian Torch Electron Technology Co. Ltd., Miller Pte. Ltd. Southeast Asia Telecom (Cambodia) Co. Ltd. and LCS Holdings Inc. of Singson., was disqualified from the selection process after it failed to submit the P700-million participation security, a form bid bond, which should be in the form of “cash, check, draft, or irrevocable letter of credit issued by a universal or commercial bank in the Philippines.”
PT&T was also taken out of the bidding process after its failure to include the certification of technical capability in its bid.
Only three parties submitted bids for the third telco spot. Together they represent 4 out of the 10 parties that bought bid documents earlier this quarter. The others have backed out due to issues on economic viability and legal tussles, among others.
Reconsiderations?
Citing the bidding rules on objection, Selection Committee Chairman Ella Blanca B. Lopez of the National Telecommunications Commission (NTC) said the parties may exercise a relief option of filing for a P10-million motion for reconsideration.
“They have three calendar days to file, and we have three days to act upon it,”
she said.
The two groups manifested that they will be filing for separate motions of reconsideration, with PT&T President James G. Velasquez also citing their company’s pending case before a Makati local court for a declaratory relief.
Tuesday saw the listed company filing for declaratory relief from a local court to allow its bid to be accepted given alleged discrepancies on the definition of one of the auction’s top requirements—a proven track record of providing telco services on a national scale.
“We are still hoping that our bid will be considered. The court has asked the oral arguments tomorrow [Thursday],” he said.
Mislatel bid illegal–Sear
The winningest bidder should not celebrate too soon, as it may soon face court cases, according to officials from Sear.
Raoul C. Creencia, a managing partner at Creencia Carillo and Velasco law firm, which represented Sear, said his group will file legal cases against Mislatel for allegedly allowing other parties to use its franchise despite having an outstanding agreement with his group’s partner, Digiphil Technology Inc.
“Mislatel cannot allow and is not allowed to have its franchise and permits used by somebody else without a prior official consent of Digiphil. In other words, Digiphil has the right of first refusal,” he said.
Creencia noted that the “prohibition is not absolute.”
“For as long as we get the consent of Digiphil, Mislatel can actually consort and partner with someone else but they did not,” he explained.
He added: “If Mislatel will be adjudged to have breached the contract, it is, therefore, not eligible to partner with, so there’s no congressional franchise for Mislatel Consortium—that’s a fatal flaw.”
The case being eyed might be filed either in a Makati or Pasig court, Creencia said.
‘Generally satisfied’
Despite all the legal tussles, amid the somewhat-subtle shouting here and there, and the disqualification of 2 out of 3 parties, Department of Information and Communications Technology (DICT) Secretary Eliseo M. Rio Jr. said he is “generally satisfied” with the turnout.
“I just wished that there were more parties that submitted their bids,” he said.
There were 10 parties that bought selection documents throughout a one-month buying period for the P1-million selection papers.
Aside from Udenna, China Telecom, TierOne and PT&T, the other groups that bought bid documents were: Mobitel Holdings Gmbh, European telco Telenor, Now Corp., Converge ICT Solutions Inc., Ama Telecommunications Inc., and an unknown group.
Juan Miguel M. Honorico-Lopez, who heads the investor relations division of Now Corp., said his group decided to back out of the bidding because of its outstanding case against the telco regulator.
The injunction case, which was denied by a local court in Manila, involved the questioning of certain provisions of the terms of reference for the selection process, specifically the following financial provisions: the P700-million participation security, the P14 billion to P24 billion performance security, and the P10-million nonrefundable appeal fee.
“We are withdrawing from the new major player bidding due to our case with the NTC,” Lopez said. “We are choosing to elevate this to the Court of Appeals.”
He explained that if it submitted a bid for the third telco spot, it could “potentially affect the case,” hence its withdrawal.
For its part, Converge ICT Solutions Inc. and partners KT Corp. and Teltech Group, pulled out of the bidding after noting a discrepancy in the playing field that is already dominated by incumbents Globe Telecom Inc. and Smart Communications Inc.
“It’s not a level playing field because the existing players right now were not asked to do what we’re being asked to do,” Aristoteles Z. Elviña, special assistant to the president of Converge, said in a chance interview. “What is demanded from the bidders today were not asked from the dominant players before.”
Unlike the two existing players, the third telco has been required by the government to exceed the minimum thresholds for speed, coverage and capital.
Elviña also alluded to the participation of a “state-owned” company as another issue in the bidding.
“If one of the bidders won, it’s a state-owned company. Can they now go against the state if they do not fulfill the requirements? Can we file charges or go against them? I don’t think so. Because even what they did with the South China Sea, we didn’t do anything,” he said. It was an apparent reference to Mislatel’s partner China Telecom.
‘Start of reforms’
Mary Grace Mirandilla-Santos, who sat as the representative of Freedom for Media Alternatives, a consumer group that was appointed as an observer in the process, said the whole selection exercise was transparent.
“Generally, we find the selection process to be very transparent from the start. I think this is one of a kind because the public has been involved from the drafting of the memorandum circular to the opening and evaluation,” she said in an interview.
Santos added that this could be the starting line for the reforms in the local telco industry, which has been tagged as one of the worst in terms of Internet quality in the Asean region by different third-party and independent organizations.
“We hope that this is just the start. We also need reforms in terms of spectrum management. We need open access, and we also need our telcos to follow these new standards set during the third telco bidding,” she said.
The third telco player is seen to spur competition in a market dominated by two large corporations, potentially bringing price down and service levels up.
Rio said barring all other delays, the official third telco player will be named sometime this month. It could start offering its services by the first half of 2019.
Image credits: Lorenz S. Marasigan