Udenna-China Telecom named provisional 3rd telco

Updated (7:30 p.m.)

The consortium of Davao-based businessman Dennis Uy’s Udenna Corp. and the state-run China Telecom was named the provisional third telco on Wednesday.

In its bid, Udenna-China Telecom promised a minimum average internet speed of 27 megabits per second on its first year. This compares to the Philippines’s current mobile speed of 6.03 Mbps as measured by OpenSignal last September. Udenna-China Telecom said its internet speed will rise to 55 Mbps for the remainder of the five-year commitment period.

The consortium also committed to spend P258 billion and bring coverage to 84 percent of the population in five years.

According to the rules of the National Telecommunications Commission (NTC), the provisional winner would need to undergo a three-day verification process before being named the final new major player.

Other bidders

Three groups submitted offers by the 10:00 a.m. deadline. These were Udenna-China Telecom, LCS Group TierOne Consortium, and Philippine Telegraph and Telephone Corp (PT&T).

Within hours, LCS-TierOne, whose backers include Ilocos Politician Luis “Chavit” Singson and PT&T, owned by the group of businessman Salvador Zamora II, were disqualified for lacking required documents.

According to the selection committee of the NTC, the LCS-TierOne Consortium’s Sear Telecom and PT&T failed to submit their participation security and certification of technical capability, respectively.

LCS-TierOne failed to qualify because it lacked the necessary letter of credit for its P700 million bid bond.  Meanwhile, PT&T was disqualified because it was unable to a secure a certification that it met the technical requirement of having 10 years of operations on a national scale.

PT&T, a day before, sought consideration through the Makati Regional Trial Court.

The NTC, however, said the groups may still file a motion for reconsideration for the ruling of the selection committee within three days.

Both Sear Telecom and PT&T Corporation said they will file the necessary motion of reconsideration.

“We have oral arguments for [Nov. 8] so hopefully we get some relief for the case that we filed,” James Velasquez, PT&T president and CEO said on Wednesday.

In dramatic fashion

The bid deadline, which came a year since the Duterte administration launched its third telco initiative to end the PLDT Inc. and Globe Telecom duopoly, unfolded in dramatic fashion as South Korea’s KT Corp. backed out and a disqualified group threatened legal action.

At the Philippine Stock Exchange, Uy-controlled companies associated with the third telco bid rallied while rivals saw double-digit losses.

Eliseo Rio Jr., acting secretary of the Department of Information and Communications Technology (DICT), defended the selection process on Wednesday against any insinuation that the results were pre-determined.

“The process was more or less open, objective and transparent,” Rio said on speculation that Udenna and China Telecom were favored given Uy’s friendship with President Duterte, whose administration initiated warmer ties with China.

Critics also pointed to statements made by Malacañang in November last year when it invited China to become the third mobile player.

Rio said he hoped that more players had submitted offers considering the only two other bidders were disqualified.

Possible hitch

Udenna-China Telecom, although the only group left in the race, is also facing a possible hitch as far as its qualifications are concerned.

A lawyer for LCS-TierOne said yesterday they plan to sue Mindanao Islamic Telephone Co. Inc. (Mislatel), the telco franchise holder tapped by Udenna-China Telecom, for breach of contract.

Raoul Creencia, external counsel for LCS-TierOne, said Mislatel failed to inform them they would partner with another group despite an existing agreement requiring the franchise holder to seek their consent.

On Wednesday, NOW Telecom and the consortium of KT and fixed broadband provider Converge ICT Solutions were present at the NTC but did not submit their bids.

“Mainly, the team concluded that while the market and industry outlook was financially viable, the conditions imposed for participation render the venture commercially unviable,” KT-Converge said in a statement.

NOW Telecom, in a statement on Wednesday, said it would pursue further legal action against the NTC, saying it had pre-existing rights to the frequencies to be awarded.

Shaking up the telco sector

The selection of a new mobile player delivers on a promise to shake up the telecommunications sector hinted at by the current administration as early as the 2016 presidential campaign.

President Duterte’s issues over dropped calls and delayed text messages — coupled with perennial complaints over the slow and costly internet — served as the springboard for the administration to launch its third telco initiative.

This led to the creation of the selection rules that used the so-called highest committed level of service (HCLoS) model. Up for grabs were a valuable set of 3G, 4G, and potential 5G frequencies.

The radio frequencies will be used by the new mobile player to provide voice calls, text messaging and mobile internet, putting it in direct competition with the services offered by PLDT and Globe.

The three major elements to be scored in the exercise were population coverage, internet speed and investment over the five-year commitment period.

The DICT also set steep financial safeguards to ensure compliance with the promises offered.

This included a 10 percent performance security based on the total five-year capital and operational spending commitment.

The rules also barred the new mobile player from selling out to large telcos such as PLDT and Globe — closing off a practice that allowed the incumbents to amass large frequency holdings. /ee