Will the entry of a third telecom player in the country bring about the much-needed reform in the industry? I seriously doubt it.
It’s going to be a security nightmare for a country like ours whose territorial waters are slowly being gobbled up by Beijing. President Duterte’s invitation for a Chinese telecom company—China Telecom (ChinaTel)—to compete here is akin to freely giving a third party the password to open up the country’s vault of classified national security secrets.
Also, ChinaTel will have an undue advantage over both Globe and Philippine Long Distance Telephone Co. (PLDT). Having no problem of heirloom equipment, it can always tap to the latest technology by means of advanced apparatus and systems that are not only service capable, but much cheaper than those developed a decade ago. It can also use the international gateway that the government has signed with Facebook at a cheaper broadband cost and use the Transco/NGCP nationwide Fiber Optic Cable (FOC) 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 ChinaTel spur healthy industry competition? Do we even need a third telco player? Perhaps not.
Now this: The US Senate plans to delist Chinese companies from the US Securities Exchanges which have not disclosed whether they are foreign state-backed, such as by the Chinese politburo. This runs parallel to the Philippine senators’ opposition to ChinaTel operating in the country. To compound the problems of Chinese companies like China Telecom Americas, China Unicom Americas, Pacific Networks and ComNet, the US Federal Communications Commission (FCC) is proceeding with the banning of these companies from operating in the US.
Both US government actions are based on concerns about these foreign companies being subjected to control, manipulation and exploitation by foreign governments. Based on past forays of China in other countries’ telecommunications industry, its goal appears to be total dominance—from infrastructure to data piracy, resources and debt-trap financing.
An alliance of the Philippines, Vietnam, Thailand, Malaysia, Indonesia, Australia and the United States sees to deal with the aggression that China is displaying—from its wanton use of the West Philippine Sea, the sovereign rights to which were awarded to the Philippines in an arbitration case decided at the Hague—to the control of the national power infrastructure by the State Grid Corp. of China, and now the telecommunications industry through by Dito Telecommunity Corp. Dito Telecommunity (formerly known as Mindanao Islamic Telephone Co. Inc. or Mislatel) is a consortium of China Tel and Davao businessman Dennis Uy’s Udenna Corp. and its subsidiary Chelsea Logistics Corp.
In the context of Chinese assertiveness, the Visiting Forces Agreement (VFA) which the Philippines signed with the United States was a major balancing factor of power that covers the region. Its termination was seen as a blow, not only to Philippine security, but to the whole of Southeast Asia.
The United States has long been cognizant of the need to restrict Chinese intrusion, especially on its home grounds. Such is the case with Chinese telecommunications companies that can exercise control over infrastructure at the risk of subjecting millions of American users of digital connectivity to cybercrime and electronic espionage.
In the Philippines, Sen. Francis Pangilinan has been consistently warning about ChinaTel’s mandate to gather and send intelligence information to China under China’s National Intelligence Law of 2017 and its Counter-Espionage Law of 2014.
Sen. Grace Poe, Chair of the Committee on Public Services, raised questions about ChinaTel having control of Internet traffic in compliance with the Chinese state’s objective of siphoning off information that can be used by their
government.
Sen. Francis Escudero observed that, in the context of an auditing issue recently raised by the Public Co. Auditing Oversight Board (PCAOB) on the US Senate Bill delisting issue, controlling interest of Dito Telecommunity Corp. could be transferred to ChinaTel by virtue of the former borrowing money from the latter for capital infusion. Escudero added that proxy votes could be given to creditors (in this case, ChinaTel), by virtue of a void of accountability that would go around the 60-40 rule. Current efforts at Congress, unfortunately, are focused on debating about allowing 100 percent foreign ownership of companies, such as telcos.
China Telecom Corp., Ltd. is listed as CSA at the New York Stock Exchange, NYSE, and at the Stock Exchange of Hong Kong (SEHK; also known as Hong Kong Stock exchange), under H, as a constituent of the Hang Seng China Enterprises Index. According to the PCAOB, their required audits of Chinese companies registered at both SEHK and at the Shanghai and Shenzhen Stock Exchanges (SSE) have been denied. The Holding Foreign Companies Accountable Act will run counter to the Chinese Securities Regulatory Commission, which requires audit records for Chinese companies listed abroad, like at the NYSE, to be kept in Beijing. Together with this unfulfilled PCAOB requirement of Chinese companies registered in both mainland and Hong Kong stock exchanges, the current US-planned revocation of Hong Kong’s special status due to Beijing’s infringement of the semi-autonomous rights in the city will further endanger the financial prospects for ChinaTel in the context of SSE’s affected condition.
Much like the US PCAOB complication encountered in China, accountability and transparency requirements of the Philippines will also be problematic, depending on how a China State-owned company like ChinaTel will handle the reporting of its operations and financial records to the Securities and Exchange Commission and other related agencies.
With a 40 percent stake in Dito Telecommunity, and the joint venture now listed as ISM:PM, the Philippine Stock Exchange should likewise subject the registered Philippine third telco player to further and more thorough scrutiny.
The intertwining issues brought about by the US Senate Bill on delisting Chinese telcos and the FCC move to ban ChinaTel along with three others are said to pose a great challenge to ChinaTel and its joint venture partner Dito Telecommunity.
Industry observers note that there is a need for the joint venture to strictly adhere to Philippine government regulations, corporate standards and good governance in order to preserve our national security and sovereignty. No other ultimate goal is of paramount importance.
For comments and suggestions, e-mail me at mvala.v@gmail.com
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