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DICT Warns Choosing 3rd Telco Through Auction May Cut Contenders to Only Two

Three-fourths of telecom firms with legislative franchise favor alternative modes, survey shows
By Elyssa Christine Lopez |

The panel during the third public consultation on the entry of a new major telco player included (from left) NTC Director Edgardo Cabarios, Presidential Adviser on Economic Affairs and Information Technology Communications Ramon Jacinto, DICT Acting Secretary Eliseo Rio, NTC Commissioner Gamaliel Cordoba and DICT Chief of Staff John Henry Naga

 

Acting Secretary Eliseo Rio of the Department of Information and Communications Technology (DICT) said pushing for spectrum auction as mode of selection for the new major player (NMP) in the telecommunications market will limit the number of qualified bidders.

 

“If we force the auction, no more than two bidders will join,” he said at the sidelines of a public consultation held by DICT on draft rules that will govern the selection of a third telco player on Friday, July 6.

 

He said the two potential bidders are telecommunication companies that have signified their preference for the auction model compared to the other means, called the Highest Committed Level of Service (HCLoS), in a survey conducted by DICT among participants at the public consultation.

 

“You don’t know where they are coming from. I cannot give you their names but they don’t have any foreign partners,” Rio described the two companies.

 

The government released two versions of draft guidelines that will govern the selection of third telco player to compete with what is widely considered the duopoly of PLDT Inc. and Globe Telecom Inc., the two largest telecom companies in the Philippines. One draft favors the HCLoS formula, which Rio is pushing, while the other draft adopts the auction model, which is favored by Secretary Carlos Dominguez III of the Department of Finance. Rio is chairman while Dominguez is vice chairman of the oversight committee overseeing the selection of a third telco.

 

 

Beauty Contest or Bidding War: What’s the Best Way to Select the 3rd Telco Player?

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Over a hundred participated in the public consultation, which included representatives from telecom industry players, national government agenices, non-government organizations and embassies.

 

A survey of 45 participants in the public consultation showed an overwhelming majority of both telecom industry players as well as government agencies and NGOs favored the HCLoS approach, which entails lesser financial burden on the contenders for the third telco slot. About 75 percent of participants from the telecoms industry and 96 percent of respondents from government agencies and other organization favored HCLoS, also referred to as a ”beauty contest.”

 

“This is a DICT affair. Therefore, I have full responsibility and I have to decide. I have to go forward because I’m also being instructed by the President,” Rio told the press. “Secretary Dominguez can come up with his own and file his own position. But as far as the DICT is concerned, I think we have enough data and encouragement to go ahead with the HCLoS.”

 

The public consultation was attended by representatives from 15 telco companies that hold congressional franchises, national government agencies, including the Philippine Competition Commission and the Department of Finance, and private companies. Some representatives from the embassies and chambers of commerce of Germany, Canada, Norway, the US, Japan, South Korea, Mexico and the United Kingdom were also present.

 

The participation of various foreign stakeholders is encouraging for Rio as he had long advocated that having foreign investors would bring in the investments needed by the NMP to compete against the dominance of Globe Telecom and PLDT.

 

“[If we will choose the NMP from] the local telcos, they really don’t have the qualifications [based on the ToR],” Rio added. “They really need a foreign partner.”

 

Foreign investors that have shown interest in the selection of the NMP include China Telecoms, LG, a South Korean telecommunications company and an unnamed Japanese telco company.

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However, some foreign stakeholders say that the selection process will only attract international investors if foreign restrictions in the ownership of local telco companies are lifted. Currently, foreign investors are not allowed to own more than 40 percent of a company engaged in telecommunications operations.

 

“If a major foreign company is going to put up a huge investment [in a local telco company], they would want to know what is the environment for foreign investment control and they don’t know it yet,” Canadian Chamber of Commerce of the Philippines President Julian Payne said.

 

Rio said he is confident that the amendments on the Public Service Act, which aims to remove telecommunications among the industries considered as public utilities, will be passed by 2019. He added he is hopeful that a third telco player will be named by around September or October 2018.

 

 

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Elyssa Christine Lopez is a staff writer of Entrepreneur PH. Follow her on Twitter @elysalopz

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