Dud or stud? Dito sends signal of impending arrival | Inquirer Business

Dud or stud? Dito sends signal of impending arrival

/ 04:05 AM December 07, 2020

The government has already streamlined its permitting processes, thus allowing telcos to put up badly needed cell towers by the thousands.

The arrival of Dito Telecommunity, the telco startup backed by China Telecom and Davao-based businessman Dennis A. Uy, is among the industry’s most anticipated events next year.

Aligned with the Duterte administration’s push for better service quality in telecommunications—Dito’s commercial launch by March 2021 is expected to shake up the sector the way Sun Cellular did nearly two decades ago.


While downplaying the threat for years, incumbents PLDT Inc. and Globe Telecom have signaled in other ways they are preparing for fresh competition by vastly upsizing investments in their networks.

This is apart from meeting the exponential growth in demand for internet services—even before the COVID-19 pandemic arrived and pushed businesses, employees and students online.


One of the government architects that brought in a new telco challenger is Eliseo Rio Jr., the former acting secretary of the Department of Information and Communications Technology (DICT) who oversaw the bidding process that crowned Dito Telecommunity as the “new major telco player” in late 2018.

This was familiar territory for Rio, who was the commissioner of the National Telecommunications Commission in the early 2000s when challenger Sun Cellular, established by the Gokongwei family’s JG Summit Holdings, entered the market.

“There will be a bigger change in the market than when Sun entered,” Rio told the Inquirer in an interview.

He said Sun had captured market share from PLDT and Globe with its pioneering unlimited call and text plans.

But this also triggered a price war and the pressure to the bottom line eventually led to its sale to PLDT in 2011, again leaving the Philippines with two dominant telco providers.

Just like how Sun did with calls and text messaging, Dito has an opportunity to win the market considering the soaring demand for high-speed internet.

Social media, video streaming and online gaming have been replacing legacy services at a rapid clip. This trend is expected to accelerate as more avenues for entertainment and business are shifted online.



Unencumbered by older technology, Dito can adjust its strategy more nimbly than larger rivals.

“Dito has the advantage of not carrying any legacy networks and can offer better services using the latest technology even for the same price range of its competitors,” Rio said. “Subscribers are now looking for quality of service and no longer the price.”

Overall, Filipino consumers stand to benefit.

“Competition will definitely bring the prices down and provide better services,” Rio said.

Still, Dito faces challenges before it is able to deliver on its promises.

Its nationwide rollout commitment within a five-year period would be unprecedented in its pace. It has unique features in its contract with the government, which bans it from selling to another major telco.

Moreover, Dito’s repeated failure to meet its commitments puts at risk billions of pesos via a security bond and assigned radio frequencies.

Under the terms of its award, Dito should cover a total of 84 percent of the Philippine population by 2024.

By its second year, or in mid-2021, it should start offering a minimum average internet speed of 55 megabits per second, which is roughly double the current download speed based on the Ookla Speedtest in the Philippines.

Rollout challenges emerged as Dito missed its first major milestone for a network audit last July 8, which marked its first anniversary.

Citing delays because of the lockdowns meant to stem the spread of COVID-19, the company won an extension to have the audit on Jan. 8, 2021.

This comes mere months before it is required to hold its commercial launch or when its paying subscribers can start using its text, calls and mobile internet services.

Critics again pointed to Uy’s close ties to the administration for winning this reprieve.

Uy, the owner of energy, transport, property and infrastructure conglomerate Udenna Corp., is a campaign donor of President Duterte. Udenna is the major shareholder of Dito, while state-backed China Telecom owns 40 percent.

The Duterte administration has also identified the telco sector as an area that needs rapid improvement.

Government bodies, including the DICT and the Anti-Red Tape Authority, joined forces last July to streamline the cumbersome permitting process. The usual 200 days to process about two dozen permits for a single cell site was slashed to less than 20 days.

This provided Dito with a powerful boost.

To be No. 1

From just 300 cell sites in July—when the company asked the government for more time—it announced on Oct. 29 that it had completed 1,532 cell sites.

This was a 400-percent increase in a span of months but, more importantly, this would allow the company to meet the requirements of its network audit in January, Dito chief administrative officer Adel Tamano said.

In addition, Dito plans to complete 2,200 cell sites by July 2021 to cover about half of the Philippine population.

Emboldened by the rapid progress, Dito chief technology officer Rodolfo Santiago said they were ready to take on PLDT and Globe.

“We don’t want to remain as the third telco, that’s why we said we’re the newest telco because we want to be No. 1,” Santiago said last October.

Dito plans to start offering services in 4G but is also laying the groundwork for 5G, the next-generation mobile standard that promises ultra-fast internet with minimal lag.

There are other signs that Dito is shaping up to become a serious competitor.

The company is planning to almost double its workforce by March next year, Tamano said.

Dito announced last August PLDT’s former No. 2 executive Ernesto Alberto would lead Dito CME Holdings, which would become the telco startup’s major corporate shareholder in an ongoing reorganization.

Battle ahead

PLDT and Globe are also rapidly expanding and upgrading their networks, benefiting from the government’s recent push to free up permitting bottlenecks.

While downplaying the threat of Dito, their rising investment budgets suggested they were gearing for battle.

Data compiled by the Inquirer going back 19 years showed PLDT and Globe spending a combined P1.1 trillion in capital expenses.

But nearly 25 percent of that amount was spent in just the last three years—a response to rising demand for internet and to the administration’s push for a new telco player.

Fitch Ratings expect the two companies to increase investments to defend their business from challengers.

“We expect competition to intensify in the medium term as new entrants expand coverage,” Fitch said in a Nov. 6 report.

Under the current regulatory regime, Globe and PLDT were able to secure hundreds of new permits in a matter of months, helping accelerate the expansion of their mobile and fixed line networks.

Once capped at building hundreds of towers annually, the incumbents can now roll out thousands. PLDT announced it was targeting to build as many as 2,000 cell sites in 2021.

More cell towers will decongest their mobile networks, ultimately resulting in better mobile communications and internet quality. Telcos said the challenge would be keeping up with demand.

“As you build more [cell sites], demand increases. You have to outpace demand and I think we’ve done that,” Globe CEO Ernest Cu said during a Nov. 4 press briefing.

Improvement is already showing, according to data from internet quality and speed test results released by OpenSignal and Ookla.

The China element

Beyond aggressive competitors, geopolitics may also come into play.

Dito has a strategic partnership with China Telecom, which has also opened up access to money from the Chinese government.

The company announced last February that part of its rollout would be backed by a $500-million (P24 billion) loan from Bank of China.

But against the backdrop of a territorial dispute and Chinese encroachment into the West Philippine Sea, the telco venture has also raised worries on possible spying by Beijing.

Critics have pointed to China’s intelligence and espionage laws mandating their companies to spy for the government when ordered.

And while much of equipment being used by PLDT and Globe are Chinese-made, Dito will be relying on China Telecom for operations because Uy’s Group has no prior experience in running a telecommunications business.

Already, certain quarters, particularly Senate Minority Leader Franklin Drilon and former Supreme Court Senior Associate Justice Antonio Carpio, have warned about Dito’s plan to install telecommunications equipment inside military camps even if PLDT and Globe were allowed to do so.

To allay those fears, Dito announced it had hired United States cybersecurity firm Fortinet as its “primary cybersecurity provider.”

It also agreed to submit to government cybersecurity audits as well as the rule of the Armed Forces of the Philippines barring the entry of non-Filipinos inside their bases.

At a press conference on Sept. 17, Tamano said Dito would not be used for spying for the Chinese, adding they were first and foremost a Filipino company.

“There is no truth when people say Dito is a Chinese company,” Tamano said.

A cybersecurity expert following developments on Dito said he was unconvinced.

“The real threat to our privacy, against mass surveillance, against wiretapping cannot be protected by these publicized tools,” the expert told the Inquirer.

The expert said concerns over China Telecom were unlikely to disappear as long as the territorial dispute remained unresolved.

Echoing the view was a white paper published by Creator Tech last October on the risk factors facing Dito. Among other items, Creator Tech said a “change in political administration to a government that is less China-friendly” remained a risk to the telco venture.

The report was released internationally but was not carried by major news outlets.

For now, Manila’s warmer embrace of Beijing under Mr. Duterte has pushed those concerns to the background.

Dito officials maintain their main objective is to pass the technical audit in January and launch commercial services to customers by the first quarter of 2021.

Jonathan Ravelas, chief strategist at BDO Unibank Inc., said Dito could win market share if it would execute its network and marketing correctly.

The company must also be ready with vast financial resources, learning from past examples where smaller rivals did not prosper or were sold to PLDT and Globe.

“What people need now is reliable internet,” Ravelas told the Inquirer. “The market demand is there.” INQ

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