DICT publishes draft guidelines for selecting third telco

19 Feb 2018

The Department of Information and Communications Technology (DICT) of the Philippines today published its draft proposal on how it intends to select a third ‘major’ telecoms player to compete with the de facto duopoly of PLDT Inc. and Globe Telecom. The Inquirer Business daily notes that the DICT’s initial terms are structured to ensure that the newcomer can secure the valuable radio frequencies currently unassigned by the state to cement its position as a credible challenger to the status quo. Among the key requirements laid down by the Department is the stipulation that the new licensee must have a valid congressional franchise to install and operate nationwide telecommunications facilities and services. Further, that franchise should be valid at least until 31 December 2023, it confirmed. In addition, the bidding consortia for the third licence must be at least 60% Filipino-owned and must have no connection to any group currently enjoying at least a 40% share in the mobile and/or broadband wireless segments (i.e. by definition, that means PLDT and Globe).

Moreover, the guidelines suggest that there should be ‘no bidder’s liabilities,’ and the new major player should have a debt to equity ratio of 70:30. Participants should also have a ‘net worth’ of at least PHP10 billion (USD191 million) or ‘provide evidence that it could raise the amount’, and at least one member of the consortium should possess the necessary technical expertise and experience of operating a telecommunications network, the DICT said. Per the Department’s proposal, the winning bidder will be selected based on the ‘highest calculated and responsive bid’ – which the paper confirmed is defined as ‘the net present value of committed investment for five years plus the net book value of existing telco facilities, in case this applied.’ The DICT also clarified that the proposed investment level only covers the installation, operations, and maintenance of telecommunications facilities and services. Meanwhile, it has also ruled (as had been expected) that a new player would be ‘barred from merging with a company with a market share of at least 40%, noting that the penalty for so doing is the ‘automatic’ return of all assigned radio frequencies.

A provisional deadline date for the submission of bids has been set as 18 May 2018, with the hope that the successful bidder can be named before the end of the month. Last week, CommsUpdate reported the acting chief of the DICT, Eliseo Rio Jr, as saying that it had decided to move the deadline for the auction of the Philippines’ third telco position: ‘If we force the [previously proposed] end-of-March deadline, there might not be any bidders,’ he is quoted as saying in a text message to reporters, noting that the request to delay actually comes from the groups wishing to participate themselves.

The DICT has reportedly outlined the following 3G, 4G and potential 5G frequencies in its guidelines: 700MHz band (20MHz), 850MHz (10MHz), 2100MHz (40MHz – portions of which are tied up in the Supreme Court), 2010MHz (15MHz), 2.5GHz (20MHz), 3.3GHz (100MHz), 3.5GHz (40MHz) and 10.5GHz (182MHz). It notes too that all 2G-suitable frequencies have been exhausted and are all held by and being used, by PLDT and Globe. The Department wants the third telco to launch commercial services within twelve months of receiving its frequencies and cover at least 80% of provincial capital cities, towns, and chartered cities within five years of receiving its award. A number of groups are interested in bidding, including Now Corp, Philippine Telegraph & Telephone Corp, Converge ICT Solutions Inc. and G.Telecoms.