DOTC rushing to favor Chinese firm by today

Amid cries of undue haste, the Dept. of Transportation and Communications peddled last month a dubious Chinese telecom deal. Cabinet men in the National Economic & Development Authority in turn approved it in a huff. Today, President Gloria Arroyo no less will witness the hurried contract signing in China with favored ZTE Corp.

Amsterdam Holdings Inc. (AHI), a Filipino firm that first thought of the project to be awarded to ZTE, is preparing to sue. It had sent DOTC on Dec. 5 an unsolicited proposal to fuse all of government’s landline, cellular and Internet needs under a national broadband network — for free. Though such infrastructure costs $240 million, AHI will recover investments from private subscribers who would subsidize the giant government telecom. For, who wouldn’t want to be linked up to national offices and government firms, provincial capitols, city and town halls, state colleges, and public and private hospitals? Under the Build-Operate-Transfer Law, an agency must initiate in 60 days a feasibility study, and then open it to "Swiss challenge". The DOTC did no such thing with AHI’s project. Instead it entertained an unsolicited proposal that came much later, in Feb., from ZTE.

ZTE’s offer was inferior in all respects. For starters it cost much more: first at $300 million, then negotiated down in March to $262 million, but now restored to $300 million for the signing ceremonies. ZTE will only build the infrastructure, and then hand it over to the DOTC to operate — a breach of government policy to privatize. Government will have to borrow the $300 million too. Taxpayers would be saddled with annual appropriations to run the system, on top of loan repayments. In contrast, AHI would build and run the network on its own at no cost to government. ZTE’s scheme would take five years to set up, for less agencies covered; AHI’s no-cost but wider coverage would take only three. Worse, ZTE would require government to issue a sovereign guarantee of loan payment, prohibited by the B-O-T Law.

DOTC Sec. Leandro Mendoza came out to explain late in March why he ditched AHI. He claimed that the company had not submitted papers to back up its financial and technical knowhow. "The AHI plan remains a plan until we see its capability to execute," Assistant Sec. Lorenzo Formoso told this writer in Mendoza’s presence.

AHI head Nathaniel Sauz disputed this, averring that they reviewed all requirements before filing the unsolicited bid. He constantly spoke with Assistant Sec. Elmer Soneja about the feasibility study. They even gave a copy of AHI’s supply pact with Huawei, China’s No. 1 and the world’s No. 2 maker of telecoms equipment (with annual sales of $11 billion compared to $3 billion for ZTE, China’s No. 3). This is why AHI was surprised to suddenly receive from Soneja a letter on March 26 saying their documents were deficient. It came amidst loud murmurs at the DOTC that Mendoza was favoring latecomer ZTE in behalf of a powerful official’s spouse and a high election officer.

No less than DOTC memos uphold Sauz and belie Mendoza, Soneja and Formoso. A Technical Working Group, headed by Soneja, apparently had evaluated both the AHI and ZTE proposals on March 6, on orders of Mendoza. Citing the Group’s irregular preference for ZTE, Mendoza then endorsed ZTE to NEDA Sec. Romulo Neri. Only much later did Soneja fire off the letter to AHI about the supposedly lacking papers — well after the evaluation memos.

AHI on Wednesday publicly pleaded one last time for DOTC to hold a transparent comparison of its offer with ZTE’s. In a repeat of the inaction on its proposal, it was ignored.

The law is on AHI’s side, though. In approving ZTE’s late proposal, NEDA must first put it to the B-O-T Law’s mandatory Swiss challenge; that is, for other parties to try to beat the price offer under the same terms. By rushing to sign in China today, the DOTC is setting itself up for indictment for gross breaches and corruption.

The corruption angle is about to explode. Already being documented were the frequent trips to Shenzhen of the ZTE-backing election man. The role of the powerful official’s spouse also will de publicized even if it gives him a heart attack. An AHI principal, local telecom’s broadband expert, is seething from losing the deal to a dirty $300-million (P15-billion) copycat.

Some clues of fraud have in fact surfaced, though not from AHI. An American firm, Arescom, appears to have filed an unsolicited bid similar to ZTE’s, but again much earlier and for only $135 million, or less than half the cost. In a letter to NEDA’s Neri, Arescom is demanding to know why the Chinese proponent took precedent. Neri has yet to reply.

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