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3rd telco plan hits a snag

Prospective bidder files suit questioning financial commitments
/ 05:40 AM October 10, 2018

The Duterte administration’s third telco initiative received its first legal challenge a mere 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 had sued the National Telecommunications Commission (NTC) at the Manila Regional Trial Court last Oct. 8, or the same day it acquired selection documents from the NTC.

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NOW, an affiliate of publicly listed NOW Corp., wanted 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 the 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.

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Elise Rio Jr., Department of Information and Communications Technology (DICT) acting secretary, defended the provisions, saying the government wanted to attract a strong contender.

“The bond is there because we want a third telco who can compete with Globe and [PLDT subsidiary] Smart Communications,” Rio said in an interview 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.

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

Several groups, including businessman Dennis Uy’s Udenna Corp. and Norway’s Telenor, have acquired selection documents while 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, adding that the third telco initiative was of “national interest”.

Whether the bid will proceed is now up to the court.

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

Aldrich Dy, legal counsel for NOW Telecom, insisted on Tuesday that they were not seeking to derail the selection process, although that could be the natural outcome.

“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.

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TAGS: Globe telecom, National Telecommunications Commission (NTC), Now Telecom, PLDT Inc., third mobile player
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