5 foreign firms vying for third telco player

3rd telco player must invest $2.7 B initially

At least five other foreign firms aside from China Telecom are vying in a “beauty contest” for the third telco player slot in the country that will require initial investments of $2.7 billion to be able to put up a good competition against the existing duopoly of Smart and Globe.

ICT Secretary Eliseo M. Rio Jr. revealed Wednesday at the signing of joint memorandum circular with the Department of Trade and Industry (DTI) and National Telecommunications Commission (NTC) to extend to one year the expiry of prepaid loads for the protection of consumers. The one year expiry date does not include promotional activities of telco providers.

Rio identified the interested foreign firms from South Korea, Japan, US, and South Australia (Telstra) without identifying all the specific firms.

“We have already Singtel and NTT Japan which are interested to be a foreign partner,” he said but added these firms have to thresh out how this would affect their existing partnership with Globe and Smart.

Rio identified these interested players to clarify what President Rodrigo meant when he invited Chinese Premier Li Keqiang to invest in the country’s telco industry during their bilateral meeting last November 16 at the ASEAN Summit here.

Rio said that the President did not actually refer to a particular Chinese telco company but China as a government. It just happened, he said, that China was quick to act on the offer as they immediately called his counterpart to decide which among the Chinese telco players should participate in the Philippine telco industry.

“It is not deliberate that we have to choose China Telecom, but we invited the China government to invest. Of course we could not dictate to China who they are going to choose to participate in this beauty contest,” Rio clarified.

The DICT Secretary also made clear that interested foreign firms have to partner with local telco players, form a group or consortium and it is up for the local players to choose their foreign partners. The consortium will then participate in the competi-

tive bidding for the third telco player. Once granted the frequency, Rio said, the winding third telco player can already roll out because some of their members have existing facilities already.

There are at least five small telco players including NOW Telecom, Inc., ABS-CBN Converge, and PT & T, which is apparently a partner of China Telecom. These small players and NTC account for the remaining 30 percent available frequencies.

“If they work together, this is big enough to be able to compete with the 35 percent each of Globe and Smart,” said Rio as he addressed the issue of viability of the third telco player given the smaller frequency left.

At present, Rio said, there are only two – NOW and ABS-CBN Convergence, Inc. – small telco with CMTS (cable modem termination system) franchise services like Globe and Smart. He said that bidders have to tie up with existing small players with provisional authority to operate because it will take time if they still have to apply for a franchise.

“It will be a competitive bidding and we will make sure it will be a transparent process and all stakeholders, even media, are represented,” he stressed.

Financial capability will be given the highest criteria in the government’s decision to choose the winning bidder, which has to invest $2.7 billion initially.

Aside from financial muscle, the winning bidder must be able to present what kind of services they can offer whether it is mobile or fixed landline.

Rio expressed confidence that the entry of the third player, which President Duterte wanted to start within the first quarter next year, will ensure efficient internet service at affordable cost.

The set of criteria will ensure that the third telco player will have enough muscle to compete in the local market and cannot just be “gobbled up” by the existing duopoly as what they did to the previous third player San Miguel Corp.

According to Rio, the slow and expensive internet service in the country, which is one of the slowest in the region, is largely because everybody is accessing through the cellists of Globe and Smart, which have combined cellists of 20,000 only as against the need of at least 60,000. Vietnam has 70,000 while Indonesia has already 100,000 cellists.

Thus, there is a need to put up fixed landline facilities so that not all will be accessing through the congested cellists. Rio noted that 80 percent of the daily activity of an individual is actually fixed landline as he is normally working in a building or at home. The fixed landline services or wifi hotspot can free up the limited cellsites, making it more efficient to service the mobile consumers. This could also be one criteria in the bidding.