Friday, June 22, 2018
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Breaktime

Business with pressure

Our “third” telecom player may still be in the region of fantasy, but we know one thing: The motorbiking Duterte Harley wants it to be an outfit from China.

It is a political decision, according to Malacañang, because the President wants to reinforce diplomatic ties between the Philippines and China.

Well and good! To make a business decision, the administration uses political pressure. Hmmm.

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China is said to have the largest telecommunications network in the world today in both capacity and subscribers. Its leading maker of telco equipment, Huawei Technologies, is already the second biggest in the world, after overtaking the US company Apple last year. Its biggest telco player, China Telecom, rakes in revenues of more than $55 billion a year.

And China Telecom happens to be the very choice of Duterte Harley!

As a business move, his going for the Chinese company, with its vaunted technical expertise and—more importantly—shiploads of capital, Duterte Harley thus may be doing the right thing.

But how do we take the politics behind it?

Indeed, Duterte Harley may be banking on the relatively new approach of Beijing in its foreign policy, now labelled the “Community of Common Destiny.”

China President Xi Jingping talked about it lengthily during the 19th National Congress of the Chinese Communist Party, which is the most important political event in that country.

Of course he also delved into his “achievements” for more than two hours of the three-hour speech, but he still caught the attention of the world as he expounded on that particular foreign policy.

We now have a buffet of analyses on the supposed “new era” in China, this move toward a common destiny, now considered as a “sacred principle” among Chinese top officials.

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Based on those oodles of analyses, it seemed that the Chinese president already floated the principle during the “Conference on the Diplomatic Work with Neighboring Countries” —way back in 2013.

And Xi actually took his cue from his predecessor, former President Hu Jintao, who years ago talked about his plan for “peripheral diplomacy.”

In that same year in 2013—not by coincidence—China launched what it called the “Belt Road Initiative,” the much analyzed BRI by media worldwide, focusing on Chinese investments in infrastructure in neighboring countries.

In 2016, when Duterte Harley assumed power from the anti-China Aquino (Part II) administration, he jumped on the BRI for his “Build, Build, Build” program.

It seems that his choice of China Telecom for our “third” telco player also has something to do with billions of pesos of funding that he expected from China for the BRI projects.

The government-controlled Chinese media also indicated that the entry of China Telecom in the Philippines was the “latest signal” from Beijing to push Chinese companies to venture overseas.

There—it’s all systems go for Duterte Harley!

And so the politics in the choice of Duterte Harley for our “third” telecom player will indicate that, well, it will still be a deal between two governments.

The President moreover declared that he was so in a hurry that he would want the project to be running by 2018.

To think, it is still just a pipe dream.

To start with, China Telecom will need a local partner, because our rules limit foreign ownership in a telecommunications player to 30 percent at most.

That means that the local partner will have to put up more than P100 billion, based on the estimate that a new telco player will need at least P150 billion to compete in this developed market that has been hungry for a technology upgrade.

What local group has that kind of money?

From what I gathered, the San Miguel group went all over the world, looking for partners in its telco venture that did not push through eventually, and one of them was China Telecom itself.

China Telecom was cold to the proposal. Look, San Miguel had the money!

While Duterte Harley has China Telecom down pat as our “third” telecom player, the local partner remains the biggest mystery—just one year to go in his target date to get the project up and running.

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