It looks like China is out. So far, the Koreans are still in, and India has yet to be seen. This sums up the latest news in the telecommunications industry as the search for the country’s third telecommunications company that will break the duopoly control of PLDT/Smart and Globe continues.
China Telecom, which President Duterte named last year as the telecommunications company that would challenge the dominance of PLDT and Globe Telecom has not seemed too happy to bite, and as the date of bidding approaches, has its presence become even scarcer.
On the other hand, Salvador Zamora’s PT&T seems to be more comfortable partnering with South Korea’s LG Corp. after its blitzkrieg negotiations last year with several Chinese telecommunications companies, including China Telecom, fizzled out.
In fact, the PT&T-LG partnership has now become a shoo-in in the race after it added the National Transmission Co. and the National Grid Corp. of the Philippines (NGCP) with their fiber-optic backbone in its consortium.
After his visit to India in January, Duterte announced that several Indian companies expressed interest to enter the local telecommunications market. So far, no name has been given, and neither has any company from India come forth.
New entry realities
Partnership with a foreign company is deemed critical for any consortium that will bid for the position of a third telecommunications company in the Philippines given the minimum P300 billion spending that the Department of Information and Communications Technology (DICT) estimates is needed to be spent in the first five years.
But this reality is not reflected in the stringent requirements that the DICT has laid out for foreign partners. The Chinese, for example, supposedly became disinterested upon learning that it could not own more than 40 percent of the joint venture with a local company.
Furthermore, with the entrenched history of PLDT and Globe in the local telecommunications environment, a contending third player would need to look at getting any real returns only after three to five years.
A more stringent requirement for the third telco would be its inability to sell to either PLDT or Globe in the event that it wanted to quit.
Changing local stage
As the investment environment from foreign partners remains fluid, so has the local stage.
A year ago, Manny Villar’s Streamtech Systems Technologies, applied for a congressional franchise to “construct, install, establish, operate and maintain telecommunications systems throughout the Philippines.” Its franchise application was recently approved.
In recent news, however, Streamtech has been noticeably been absent. Instead, it is the Velarde-led NOW Corp., formerly Infocom Communications Network, which has been very visible especially after it was awarded an extension of its congressional franchise to build and operate a telecommunications network for another 25 years, or until 2043.
NOW Corp. is now in frenzy lining up partners in a consortium that would be formidable and credible enough to win the new May 18 bidding recently set by the DICT. Whether the company will be able to muster enough firepower in two months time is still questionable.
However, NOW’s updates on plans to become the country’s third telco have jacked up its market value by almost 400 percent in recent weeks. With this alone, NOW Corp. finds itself ahead in terms of market value by a couple or more billion pesos. Not bad.
Arm-twisting
In the current administration’s desire to have a third telco up and starting within the year, it has resorted to some arm-twisting, the most scandalous being the demand for PLDT to give back some of its radio frequencies for free.
PLDT’s Manny Pangilinan, in a bid to diffuse building tensions between the duopoly and the government, has foregone multibillions of pesos that it had originally paid to acquire the frequencies.
Then, there is the more recent move by DICT to force all telecommunication companies operating in the Philippines to share in the use of cell towers, to be built by a third independent company. Globe had initially protested, but lately announced that it was in talks with third parties to form an independent company that would build and lease cell towers.
More of the same for Duterte
Smart, PLDT’s wireless subsidiary, and Globe admit that the entry of a third telco will pose new challenges on their profitability in the medium term, just as when Sun Cellular, TNT and TM were introduced in the market.
PLDT, on the other hand, expects to benefit from a third telco which will need to piggy-back on that extensive nationwide backbone that the company had built over its 90 years of operations.
One thing for sure, the third telco will be in for some tough riding in its first years as it continues to invest in expensive telecommunications equipment, while seeing little returns from it investments.
The challenges that PLDT, Smart and Globe faced and continue to face in upgrading and expanding its network will be double that for a third telco. Ironically, if the third telco does succeed in posing some decent competition to the duopoly, it will be the next President and his administration that will harvest any goodwill.
Well, the next President could still be Mr. Duterte, if his allies’ attempt to extend his term succeeds. So, that should be well and good for the President.
Any Filipino would want to see internet speeds to be at par with global standards. It may indeed happen, but don’t expect it within the next couple of years, and definitely not because of a third telco.
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