Study: 3rd telco player faces financial hurdle

While companies believed to be aspiring third telecommunications players have been sizzling amid a bearish market, a stock market analysis does not think it will be easy for new entrants to hurdle huge financial obstacles in the industry.

In a market study, Papa Securities noted that aspiring third telco players must start with a net worth of at least P10 billion, or at least the capacity to raise the amount plus a performance bond equivalent to 0.5 percent of the committed investment for five years.

The winning party must also deposit at least 30 percent of the committed investment for the first year to a financial institution chosen by the Finance Department within 30 days of the award.

“We believe that the new player would face significant challenges in meeting the stringent conditions set by the government,” noted Papa Securities.

It added that, given the massive capital infusion required from the new parties, the new player would have to raise a large amount of cash every year to meet the government’s P300.0 billion 5-year capital spending requirement.

“We find it difficult for the new entrants to form a robust business case moving forward considering the short timeline given by the government,” the study said.

Aside from having deep pockets, the new entrant will also have to deal with intense competition from the established telco giants PLDT and Globe Telecom which have been gearing up for the entry of the third player.