3rd telco player in PH open to highest bidder with no ceiling

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By Lara Climaco
FilAm Star Correspondent

Looking for the highest bidder, the oversight panel on selecting the new major player in Philippine telecommunications has set no ceiling and a floor of PHP 36.58 billion for the third telco slot.

The draft guidelines slate an auction for the slot rather than an intricate point system based on committed levels of service initially pegged by the National Telecommunications Commission (NTC). The shift happened within two days, with the DICT posting on June 26 the draft prepared by NTC and then later supplanting it with the joint memo from the oversight panel. Everything looked the same, except for the selection process, reflecting the influence being exerted by the Department of Finance, a member of the oversight panel.

Last month, Finance Sec. Carlos Dominguez III made a rare statement about the situation. “I’ve expressed my concerns on the proposed process as I find the pre-qualification criteria as being weak, and I think that scoring should not be based on ‘commitments’. You know, the beauty contest in the past resulted to frequency hoarding and those companies failed to improve service. They just made money by flipping assets government owns. I don’t want that to happen again,” he said last June 9.

Announcing the latest draft guidelines last June 28, the Department of Information and Communications Technology (DICT) said public consultations would be held this week. “The minimum bid amount is pegged from the spectrum user fees being paid by existing telecommunications companies and does not yet consider the inputs/recommendations of experts from International Telecommunication Union and best practices from other countries, and hence, is in no way final,” it added.

DICT also noted there will be no cap on the bid amount and that the highest bidder would be selected as the NMP.

Based on what’s out so far, participants must have a paid-up capital of PHP 10 billion and post a bond of PHP 500 million to qualify for the bidding. The NMP is required to cover at least 30 percent of the population on the first year, then 50 percent of the population after five years. Broadband connection must average at least 10Mbps.

Aside from paying its bid amount within 30 days from selection, the NMP must also post performance security equivalent to 10 percent of its bid amount if in cash or 30 percent of the bid amount if posting a surety bond. It will be given three months to come up with a detailed roll-out plan that also addresses cybersecurity.

In return, it would get the privilege of operating assigned radio frequencies for at least 15 years with a possible renewal.

A two-envelope system is proposed to be employed in the auction. The selection committee will be chaired by the NTC and have four other members. The proceedings, including a pre-selection information session, will be recorded on video and representatives from the Commission on Audit and the oversight panel will be on hand to observe. If there is a tie in the bidding, it will be settled by a toss-coin.

The draft guidelines also state that the NMP selection is exempted from court injunction because it is a priority infrastructure project.

The upgrade of telecoms services in the Philippines has been loosely estimated to cost around PHP 200 billion, making the third telco slot auction one of the most exciting in a country tired of slow internet connectivity and dropped calls. The opening of the third telco slot in the country was first announced as an invitation for China to invest in Philippine telecoms, made by President Rodrigo Duterte during a meeting with Chinese Premier Le Keqiang in November last year. China Telecom, a state-owned enterprise, was later announced as the one nominated by the Chinese government. The NMP auction, however, is open to all foreign investors that might form a consortium with existing telco players holding a congressional franchise and have been operational for at least five years.

Duterte initially gave DICT until March this year to have the third telco player up and running but the agency deferred to an industry plea for more time to prepare. DICT Acting Sec. Eliseo Rio Jr. expects to finalize the schedule of the bidding by mid-July, according to news reports. Earlier, he had set the State of the Nation Address of the President as the internal deadline for selecting the NMP. Based on procedures outlined in the draft guidelines, however, it looks like it will take some six months to complete the selection process and for the NMP to submit a roll-out plan. This means the actual roll-out is likely to take place next year at the earliest.

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