Aspiring 3rd telco balks at financial requirements, sues NTC

The Duterte administration’s third telco initiative received its first legal challenge a day after bidders were invited to participate, catching interested parties and the general public off-guard while casting a cloud over a selection process aimed at breaking the PLDT Inc. and Globe Telecom duopoly.

NOW Telecom, which is part of a group that had signaled its interest to become the country’s third mobile player, announced on Tuesday that it sued the National Telecommunications Commission (NTC) before the Manila Regional Trial Court on October 8, 2018, or the same day it acquired selection documents from the NTC.

NOW, an affiliate of publicly-listed NOW Corp., wants the NTC to remove key portions of the terms of reference that dealt with hefty financial commitments, branding these as “onerous, confiscatory and potentially extortionary.”

The terms of reference was meticulously drafted through most of the year with the help of a string of local and international experts, multiple government agencies, and third telco aspirants themselves.

Some of the areas being questioned under NOW’s petition, such as the 10 percent performance security, were included to ensure that a third player had enough financial muscle to compete with incumbent players and deliver on a promise to improve services and lower costs.

“NOW Telecom is suing NTC to protect the interest of its public shareholders and President Rodrigo Duterte from any suspicion that he is complicit to the money making schemes in the TOR for the third telco,” said Mel Velarde, NOW Corp. President and CEO.

Based on the terms of reference, the performance security would amount to anywhere from P14 billion to P24 billion. NOW also questioned the P700 million participation security and P10 million non-refundable appeal fee.

The NTC, in its final rules, allowed bidders more flexibility on how they wanted to post the various bonds. For example, the performance security can also be in the form of an irrevocable letter of credit to be issued by a domestic or foreign universal or commercial bank.

Elise Rio Jr., acting Secretary of the Department of Information and Communications Technology (DICT), defended the provisions, saying the government wanted to attract a strong contender, which is expected to spend between P140 billion and P240 billion to roll out a nationwide telecommunications network over a five-year period.

“The selection of a third telco is no small matter and to set the bar low for those who apparently cannot meet the standards is detrimental to the people who will directly benefit from a third telco that has not only the technical capacity, but more importantly the financial muscle to compete with the giants, Globe and [PLDT subsidiary] Smart,” Rio said Tuesday.

He said the issue on the performance security, which would be forfeited in case a new major telco player repeatedly breached its commitments, was not raised by other potential participants.

On the serious allegation that the government was embarking on a “money making scheme” with some of its requirements, Rio said the fees were consistent “and even lower” than the standards set under Republic Act 9184, also known as the Government Procurement Reform Act.

Rio also expressed worries that the legal suit would delay the selection process given that the bid submission deadline was already set this November 7.

“It is worth noting that the TOR was published for 15 days and could have been questioned at the onset but why is it that it is only now, when the TOR is effective, and the bid docs are available, that it is being subjected to legal challenge? Is it to further delay the entry of the third telco?”, the DICT chief said on Tuesday.

NOW’s lawsuit comes as several groups – including businessman Dennis Uy’s Udenna Corp. and Norway’s Telenor – have already acquired selection documents. Several other interested parties said they were studying the bid terms with their foreign partners.

Rio earlier said a new major telco player would be known by next month. President Duterte threatened last September that he would assume control of the selection process if the DICT failed to meet the deadline.

“The president will not be happy with this development,” Rio said in an interview, adding that the third telco initiative was of “national interest”.

Other interested bidders interviewed by the Inquirer declined go on the record on NOW’s actions. Privately, they rebuked the legal suit as a maneuver to buy more time or sabotage the selection process altogether.

Aldrich Dy, legal counsel for NOW Telecom, insisted on Tuesday that they were not seeking to derail the third telco initiative.

“The bidding can continue, we just don’t want them [the NTC] to insist we put up these amounts for the security or for NTC to impose an appeal fee,” Dy said.

NTC Deputy Commissioner Edgardo V. Cabarios said on Monday that the bidding will proceed “if no TRO [temporary restraining order] and injunction is issued.”

He added that the NTC had sought the position of the Solicitor General.

“The Sol Gen is our lawyer. We observe the protocol of referring questions and concerns regarding our cases to the Sol Gen in observance of the subjudice rules and respect for court processes,” Cabarios said.

The DICT is choosing a new major telco player that can offer the best internet speed, highest population population coverage and committed investment. The winner will get a set of 3G, 4G and potential 5G radio frequencies.

NOW had tangled with the NTC in the past, mainly over a set of 3G frequencies sought more than a decade ago by Bayan Telecommunications before the latter was acquired by Globe. Velarde said the company should have been granted frequencies as early as 2006. /kga