Numbers Don’t Lie

After a year in the works, the country’s third major telecommunications player has been named,…but not without controversy.
Last Nov. 7, the National Telecommunications Commission (NTC) named the Mindanao Islamic Telephone Company, Inc (Mislatel) as the country’s third major telco player, albeit provisionally. Mislatel is the consortium that includes the Udenna Group, belonging to Davaoeño businessman Dennis Uy, along with technical partner, China Telecom.
The two other bidders were the PT&T Group and the Sear Consortium. The former is backed by Salvador Zamora II of Nickel Asia fame and the latter is owned by Luis “Chavit” Singson. Both were disqualified.
The P&T Group was deemed ineligible due to its inability to secure a certification from NTC for the technical requirement. See, the NTC requires that the bidder must have experience delivering telecommunications services on a national scale for more than 10 years. While PT&T has been in the telco scene for much longer than that, it has not operated in the scale and scope that satisfies the NTC. PT&T does not have a foreign partner and this has proved to be its Achilles’ heel. A foreign technical partner like Vodafone, Moviestar or Orange could have satisfied this requirement.
The Sear Consortium was disqualified for not presenting a letter of credit in the amount of P700 million. This was required by the NTC as proof of capacity to participate in the telco industry.
The disqualification of the two paved the way for the Mislatel Consortium’s victory. But the story is far from over. Remember, Mislatel’s victory is only provisional. NTC’s selection committee must still submit its recommendation to the NTC En Banc, which will review the same. If it finds everything in order, then a Confirmation Order will be issued to Mislatel. If not, then it will be a failure of bid and a second round of bidding will likely ensue.
The NTC En Banc may also choose to withhold the issuance of the Confirmation Order until all appeals and petitions are resolved.
On Nov. 9, two days after the opening of bids, PT&T and the Sear Consortium filed their respective Motions for Reconsiderations before the NTC’s selection committee.
For PT&T part, it sought to overturn its disqualification claiming that the NTC’s bid bulletins effectively changed the requirements for technical capabilities, midstream. It further asserted that the terms of references discriminated Filipino telco companies.
The motion for reconsideration of the Sear Consortium has two components. On the first count, Sear questioned the conferment of the provisional award to Mislatel, citing Mislatel’s legal incapacity to enter into partnership with the Udenna Group. On the second count, it questioned the reason for which Sear was disqualified. Let me explain further.
Sear claims that Mislatel was in breach of contract by joining the Udenna Consortium in the first place. Sear, through a consortium member, Digiphil Technologies, Inc., has an active agreement with Mislatel that stipulates that the latter cannot enter into partnerships with other companies unless upon mutual consent. Digiphil also enjoys the right of first refusal in that should Mislatel intend to partner with another company, it should secure Digitel’s permission first.
This agreement was finalized in May, 2018, when Digiphil paid P5 million for a seat in Mislatel’s board and P5 million for the right of first refusal.
On the part of Mislatel, it claims that the exclusive rights and right of first refusal of Digiphil only applied to “small projects” and not all-encompassing endeavors such as being a national telco player.
Mislatel further asserts that it effectively terminated its agreement with Digiphil through a written notice last Oct. 5. It even offered to refund the P10 million paid by Digiphil.
On Digiphil’s side, it maintains that Mislatel cannot unilaterally terminate a binding agreement. It further insists that its exclusive rights to partnership covers being a national telco deal.
As to who is wrong or right in this legal juggernaut depends on legal interpretation. Suffice it to say that should the NTC favor the side of Sear, the Mislatel Consortium could be considered an illegal entity and therefore disqualified from bidding.
On the second count of Sear’s motion for reconsideration, it says that while it failed to present a Letter of Credit in the amount of P700 million, it still presented sufficient proof of having P700 million through a mix of letters of credit from the Industrial Bank of Korea and managers checks from BDO and Metrobank later on. Besides, it says that when it asked the NTC for guidance on the “proper language” to use for the letter of credit, the NTC did not respond. How, then, can it be faulted for not presenting an LC?
On Nov. 12, the NTC denied the Motions for Reconsideration by both parties. This opened the way for the Selection Committee to recommend Mislatel as the victor.
Legal complications aside, let us go back to why this government saw the need for a third telco player in the first place. The main intent is to break the cushy duopoly of PLDT and Globe by providing healthy competition. Competition between the three is meant to make all players more efficient. In the end, it should redound to faster internet speed, better cellular service, wider coverage and cheaper toll fees for all. All these are vital to make the economy more competitive, not to mention fulfill President Duterte’s campaign promise.
Respecting legal processes are important as it gives integrity to our institutions and assures us of fair play. But this is not the end-all, be-all of a public bidding. In the end, what matters is who can fulfill the third telco’s intended purpose in a manner most beneficial to the Filipino.
The PT&T Group signified its intent to have its bidding documents opened. This suggests confidence that its rollout plans are superior to that of Mislatel.
The Sear Consortium went on record to say that they are willing to spend P540 billion at the get-go to bring national internet speed to 55 Mbps and provide service to 100% of the archipelago. They even boasted of having a stake in a state-of-the-art US satellite built by Boeing due to be launched into orbit next year. This should give them unprecedented advantage in as far as quality of signal is concerned.
The ball is now in the hands of the NTC En Banc. It has the power to overturn the recommendation of the selection committee and take other matters into consideration.
Since the main intent is to provide the public with the best possible service at the most reasonable costs, I say the rollout plans of all three bidders should be taken into consideration. Beyond all the legal gray areas, the bidder with the superior technical plan and highest investment should be declared the winner. This way, the main intent of the 3rd Telco will be fulfilled and the Filipino wins.
Andrew J. Masigan is an economist.