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DICT issues draft terms for picking 3rd telco player in PH

/ 10:29 AM February 19, 2018

The Department of Information and Communications Technology (DICT) released on Monday the draft terms of reference outlining how it would select a “new major telco player,” or a competitor to the PLDT Inc. and Globe Telecom duopoly.

The initial terms, which would determine which company or group would get valuable radio frequencies currently unassigned by the state, were first posted by DICT Acting Secretary Eliseio Rio Jr. on Facebook. A public consultation was set on February 27 to discuss the terms further.

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Among the key requirements were items the DICT had hinted at before, including a valid congressional franchise to install and operate nationwide telecommunications facilities and services. The franchise should be valid at least until December 31, 2023.

The interested groups should be at least be 60 percent Filipino-owned, and should not be a  “related party” to any group with at least 40 percent market share in the “mobile and broadband wireless” segments. So far, that definition covers PLDT and Globe.

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Moreover, there should be “no bidder’s liabilities,” the draft rules showed. This was not clarified within the terms on Monday although the DICT noted that a new major player should have a debt to equity ratio of 70:30.

Participants should also have a “net worth” of at least P10 billion or provide evidence that it could raise the amount, and that at least one member of the consortium should have technical expertise in operating a telecommunications network, the DICT said.

The winning bidder, according to the DICT, will be selected based on the “highest calculated and responsive bid” – defined as the net present value of committed investment for five years plus the net book value of existing telco facilities, in case this applied.

The DICT clarified the investment amount will only cover the installation, operations, and maintenance of telecommunications facilities and services.

In addition, the DICT said that a new telco player would be barred from merging with a company with a market share of at least 40 percent. The penalty is the “automatic” return of all assigned radio frequencies.

The DICT chief, in a text message last Thursday, said they are targeting to set the bidding deadline on May 18, 2018. He said that they also plan to name a winning bidder by May.

Earlier, President Rodrigo Duterte demanded a March 2018 auction, however, Rio said prospective bidders had requested an additional two months.

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At stake are coveted radio frequencies, which a third telco can use to launch mobile services such as text messaging, calls, and internet-powered apps, where demand is growing the fastest.

The DICT outlined the following 3G, 4G and potential 5G frequencies:  700 Megahertz (20 MHz), 850 MHz (10 MHz), 2100 MHz (40 MHz—portions of which are tied up in the Supreme Court), 2010 MHz (15 MHz), 2.5 gigahertz (20 MHz), 3.3 GHz (100 MHz), 3.5 GHz ( 40 MHz) and 10.5 GHz ( 182 MHz).

As the DICT noted before, there were no more 2G frequencies as these were fully allocated and being used by PLDT and Globe.

While there were still a number of Filipinos using 2G handsets, typically lower priced phones with basic call and text features, the DICT downplayed this by arguing that more were expected to shift to newer 3G models in the coming years.

Based on the terms, the DICT wants a new major telco to roll out commercial services within 12 months after being awarded the frequency. Moreover, the new player should cover at least 80 percent of provincial capital cities, towns, and chartered cities within five years of receiving its award.

A performance bond of half a percent of the total committed investment was set. This will be pro-rated on an annual basis. Failure to spend the specific amount for the year would cause the new player to forfeit the bond for that period.

The DICT estimated that a new player could spend anywhere from P150 billion to P300 billion in its first five years.

Private groups like Now Corp., Philippine Telegraph & Telephone Corp., Converge ICT Solutions Inc. and G.Telecoms were said to be among those keen on becoming the third telco player.

Rio earlier said that telco firms from China, Japan, Taiwan, and South Korea had expressed their interest but they would first need to partner with local groups, given the 40 percent foreign ownership limit set by the 1987 Constitution.             /kga

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TAGS: 3rd player, dict, Globe, PLDT, Telecommunications
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