Stage set for 3rd telco selection

The Duterte administration finally published yesterday the final rules governing its major telecom initiative, setting the stage for a showdown among aspiring companies seeking to become the country’s third major telco player in a bidding that could happen as early as November this year.

The release of the terms of reference (TOR), mainly through the efforts of the Department of Information and Communications Technology and National Telecommunications Commission (NTC), is a key step in the government’s goal to name a new major telco player before the end of 2018.

The development was welcomed by internet advocates and the head of the country’s antitrust body, which earlier gave its inputs for the TOR.

“The release of the final TOR in the search for the third player in the telecom sector brings us closer to the goal of having a choice beyond the existing duopoly,” said Philippine Competition Commission chair  Arsenio M. Balisacan, referring to PLDT Inc. and Globe Telecom.

The TOR outlined a series of modifications on the last draft, notably on how internet speed was given a heavier weight in the scoring system, reflecting the government’s desire for faster internet services.

The final rules allowed more flexible terms on the performance security required of the winning bidder. The bidder will be allowed to post a 10-percent security, likely to amount to billions of pesos through the five-year commitment period, either in the form of a cashier’s check, draft or irrevocable letter of credit from a local or foreign universal or commercial bank. The last draft provided for security in the form of a 10-percent cash bond or 30-percent surety bond.

The performance security was fixed at 10 percent of the remaining capital and operational expenditures through the commitment period. This means the security will drop yearly as the player rolls out its services and complies with its investment commitments.

NTC Commissioner Gamaliel Cordoba said in a press conference that the rules would take effect on Oct. 6. By this time, bid documents could already be purchased for P1 million each.

Cordoba said bids should be submitted on Nov. 5, giving aspiring groups about a month to prepare their offers.

“Those who are interested should really work double time,” he said.

The TOR has undergone multiple revisions since the first draft was released in February this year. Its final version got the nod last week of the multi-agency oversight committee whose members just months ago were in disagreement over crucial items on the bid mechanics.

The method adopted was the highest committed level of service (HCLoS) model. Under this, the winner will be the party that will offer the best population coverage, highest internet speed and biggest investment over the five-year commitment period.

These inputs led to the tweaking of the weighting of the three criteria in the final TOR. Modified was the weight for minimum average broadband speed, which was raised to 25 percent from 20 percent in the last draft. The weight for national population coverage was maintained at 40 percent while capital and operational expenditures, previously at 40 percent, went down to 35 percent.

Bidders would be scored to a maximum of 500 points for their bid commitments based on those three criteria.

For national population coverage, the minimum requirement for the first year is 10 percent while the maximum is 50 percent.

Bidders will receive points for exceeding the minimum but they will not win added points beyond 50 percent coverage for the first year. Offers below the minimum “shall no longer be processed further.” By the fifth year, the NTC expects a minimum coverage of 50 percent and the maximum of 90 percent.

The minimum average broadband speed, defined as applicable to both fixed and mobile broadband services, was set at 5 megabits per second (Mbps). Bidders can receive points for every added 2 Mbps above the minimum and only up to 55 Mbps. Bids below 5 Mbps will not be considered.

In terms of capital and operational expenditures, the minimum in the first year was set at P40 billion while the maximum was P140 billion. Bidders earn points for every P10 billion above the minimum.

By the fifth year, the NTC will award points for a cumulative committed spending of P140 billion up to a maximum of P240 billion.

Cordoba said there would be no discretion involved and the winner would be chosen based on the point system. Provisions were also made in the event of a tie. Under the rules, if the tiebreaker mechanics still result in a draw after the third attempt, a measure based on chance such as “draw lots” can be employed.

At stake is a set of mobile frequencies that the winning group can use to  provide telecom services, putting it in direct competition with incumbents PLDT Inc. and Globe Telecom. Based on the final TOR, radio frequencies in the 700 Megahertz, 2100 MHz, 2000 MHz, 2.5 Gigahertz, 3.3 GHz, and 3.5 GHz bands will be awarded.

The DICT had identified local firms such as Converge ICT Solutions, EasyCall Communications Philippines, NOW Corp., Philippine Telegraph and Telephone Corp., TierOne and Transpacific Broadband Group as among those keen on submitting offers.

Interested foreign groups include China Telecom, South Korean companies KT Corp. and LG Uplus, Norway’s Telenor and United States-based AT&T. A spokesperson for Hanoi, Vietnam-based Viettel earlier confirmed its interest in an e-mail.