Selection of third major telco
by December on track
as gov’t issues final terms

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By Denise A. Valdez

THE DEPARTMENT of Information and Communications Technology (DICT) and the National Telecommunications Commission (NTC) published on Friday the final terms of reference (ToR) outlining the process by which the government will select by December a third major player in the telecommunications industry.

Memorandum Circular (MC) No. 09-09-2018 sets rules and regulations in awarding the third major telecommunications service provider according to three criteria: population coverage, minimum average broadband speed, as well as capital and operational expenditure (capex and opex), with each carrying varying weights.

The rules — signed on Sept. 20 by NTC Commissioner Gamaliel A. Cordoba as well as deputy commissioners Edgardo V. Cabarios and Delilah F. Deles — were posted on the NTC Web site and published in a newspaper on Friday.

A brief distributed to journalists in a press conference late Thursday said they will take effect on Oct. 6.

Interested parties have until Nov. 5 to submit “selection documents” and “are encouraged to prepare for bidding right away”.

Mr. Cordoba said in the press briefing that the government will soon issue an invitation to bid, opening the door for interested parties to buy bid documents for P1 million each.

He added that if the preliminary timetable were followed, the third major telco may be named by December.

After several versions of the ToR, the government decided to increase the weight of broadband speed to 25% from 20% in the last draft, reduce the weight of the combined capex and opex to 35% from 40%, while population coverage stays at 40%. Mr. Cordoba said government wanted to better ensure the quality of the winning bidder, hence the adjusted distribution of weights.

“And actually, use of money is a function of both. If you want to increase your coverage and speed, you really have to spend,” he added.

The winning bidder will be chosen according to the highest committed level of service, measured by the three criteria.

In terms of annual population coverage, the smallest qualified commitment is 10% of the national population which would be equivalent to zero points. The highest is 50% on the first year, increasing by 10% every year until the fifth year, which would earn a bidder 40 points.

In terms of average broadband speed, the final terms increased the fastest speed to 55 megabits per second (Mbps) from 45 Mbps in the last draft. Committing this fastest average speed would earn the bidder 25 points, while slowest speed commitment of 5 Mbps would merit zero points.

Lastly, a bidder could get a maximum 35 points if it commits annual combined capex and opex of P140 billion in the first year and P25 billion annually for the succeeding years, totaling P240 billion for that five-year period. On the other hand, it gets zero for committing the minimum P40 billion for the first year and P25 billion annually for the following four years, which would bring a total five-year commitment of P140 billion.

The final terms also said a bidder will get 3.5 points for every P10 billion it commits above the minimum capex and opex, a change from the previous draft that said bidders may earn a point for every P2.25-billion increase over the minimum spending commitment.

The highest score a bidder may get is 500 points.

Bids that fail to meet the minimum requirement in any of the three criteria will be automatically disqualified, while those that commit above the maximum requirement, while welcome, will not get additional points for doing so.

According to the final terms, in order to be eligible for auction, participants in the auction must have a congressional franchise, a paid-in capital of at least P10 billion, experience as a nationwide telco provider for the last 10 years, and be without outstanding liability to the NTC as of Oct. 1. Relation to existing telcos PLDT, Inc. and Globe Telecom, Inc. also disqualifies interested participants.

“We don’t have discretion (on who will win). It’s purely arithmetic. The computer computes it, then the computer says ‘ito ‘yung highest’. So we don’t judge,” Mr. Cordoba said on Thursday.

The NTC will verify and validate documents submitted by the best bidder within three days of Nov. 5.

The provisional winner will have 90 days to submit its company’s business and roll-out plans and other additional requirements before it is awarded a certificate of public convenience and necessity (CPCN).

Participants will also pay NTC a “participation security” of P700 million, equivalent to 0.5% of the minimum cumulative capex and opex, an increase from the P500 million in the preceding draft.

Before being awarded the CPCN, the terms said the winning bidder must also commit to the NTC a “performance security” that is 10% of its cumulative capex and opex.

The selection process will proceed even if only one company will participate in the auction.

DICT Acting Secretary Eliseo M. Rio, Jr. previously identified several local and foreign companies that have expressed interest in the government’s search for a third major telco player.

Among the local companies he identified were Philippine Telegraph and Telephone Corp. (PT&T); NOW Corp.; Converge ICT Solutions, Inc.; Transpacific Broadband Group International, Inc. (TBGI); EasyCall Communications Philippines, Inc. and TierOne Communications International, Inc.

Interested foreigners Mr. Rio named included China Telecom, South Korea’s KT Corp. and LG Uplus Corp., Vietnam’s Viettel Telecom, Norway’s Telenor Group as well as an unidentified US company and a Japanese firm.

President Rodrigo R. Duterte ordered the DICT and NTC to ensure the selection by yearend of a third major player in the telecommunications industry to contest the duopoly of PLDT and Globe. In a Sept. tete-a-tete with Chief Presidential Legal Counsel Salvador S. Panelo, he said he will “take over” the selection of the third player if it isn’t named by November.

“We are confident that we will be able to accomplish the President’s mandate to us,” Mr. Cordoba said.