Smart asks government to cancel Digitel license

Attempts by Philippine Long Distance Telephone Co. (PLDT) to stop its parent firm First Pacific Co. Ltd. from selling its stake in PLDT to the Gokongwei group reached a new level yesterday after PLDT subsidiary Smart Communications Inc. asked the government to cancel the provisional license of Gokongwei wireless firm Digital Telecommunications Inc. (Digitel).

In a petition filed with the National Telecommunications Commission yesterday, a copy of which was obtained by The STAR, Smart said Digitel failed to complete the installation and commence commercial operations of its cellular mobile system within the prescribed period.

Smart officials told The STAR that one of the reasons why Digitel is probably holding back on its investments in the cellular network infrastructure is because this may no longer be necessary if the Gokongwei group succeeds in acquiring a controlling interest in PLDT, as well as in its wholly-owned subsidiary Smart.

It will be recalled that First Pacific entered into a memorandum of agreement with the Gokongwei group last June 4 for the sale of the former's 24.4-percent stake in PLDT to a joint venture company in which the Gokongwei group will have a two-thirds stake. The Gokongweis are paying $616.6 million for its participation in the joint venture arrangement.

The officials also noted that the purpose for which a cellular mobile telephone service (CMTS) provisional authority was given to Digitel, which is to become the country’s third CMTS operator, is no longer there.

"Apparently, Digitel has shifted its strategy. From operating as the third CMTS operator next to Smart and Globe Telecom, Digitel is now seeking to take over the leading position through the acquisition by the Gokongweis of PLDT. This defeats the purpose for which the provisional authority was granted to it, Smart legal affairs division head Rogelio Quevedo told The STAR.

It was also alleged in the complaint seeking to cancel Digitel‚s CMTS license that based on the findings of the NTC common carriers accreditation department itself, Digitel incurred considerable delay in the implementation of phase one of its mobile telephony project, which is to put up 98,696 lines within 18 months from the grant of the provisional authority.

Likewise, a comparison between the submitted rollout plan by Digitel for its Phase 1 and a tabulation of the installed/operational facilities showed glaring discrepancies, the complaint noted.

According to Smart, failure by Digitel to fulfill the conditions set in its provisional authority is a ground for the cancellation of its provisional authority to engage in the CMTS business.

Digitel was supposed to have began operations of its mobile telephony business during the first half of the year but this was delayed to the end of 2002. Digitel officials blame the delays in the bidding out of the contracts for the implementation project.

NTC should cancel their license as the third CMTS operator because they did not roll out as scheduled. Digitel clearly violated the terms and conditions of its PA by failing to commence commercial operations within one year from date of acceptance of its provisional license, Quevedo said.

Apparently, the reason why NTC granted Digitel the PA to become the third cellular operator is to break the supposed duopoly of Smart and Piltel on one side and Globe and Islacom on the other. But if the Gokongweis who own Digitel succeed in taking over a controlling interest in PLDT, there have been indications from the group that PLDT and Digitel might be merged operationally, as well as that of PLDT’s wireless group and that of Digitel.

Digitel was granted a PA to install, operate, and maintain a nationwide cellular mobile telephone service for a period of 18 months by the NTC on Aug. 7, 2000. The PA was subject to certain terms and conditions, including the complete installation and full commercial operations of its CMTS within one year from the date of acceptable of the provisional license.

In an NTC order dated July 22, 2002, Digitel‚s PA was extended until Feb. 7, 2005.

In the petition, Smart noted that Digitel submitted a plan to roll out eight base station controllers (BSC) and 145 base stations (BTS) for Phase I. However, NTC’s CCAD reported considerable delay in the implementation of the rollout plan when upon inspection, they only counted three BSC and five BTS ongoing installations or operational.

What’s causing the delay? Why do they appear to be holding back investments on the network infrastructure? Quevedo asked.