With Philippines’ President Rodrigo Duterte threatening to personally intervene and select the country’s third telecoms operator if no decision is made by November, the head of the country’s ICT department weighed in insisting “we will have a third telco before Christmas”.
Eliseo Rio, acting secretary of the Department of Information and Communications Technology (DICT), said in a statement: “After experiencing legal and technical hiccups in the past months, DICT reiterates its eagerness to finish facilitating the entry…by December 2018.”
Rio then deflected responsibility to the National Telecommunications Commission (NTC), urging the agency, “as the legally mandated institution of this procedure, to fast track the finalisation” of the terms for the selection process. A public hearing on the matter, which opened in late August, closed on 3 September.
He stated: “The ball is now at the hands of NTC.”
The licence was originally scheduled to be awarded in May, but has been pushed back numerous times. An oversight committee was set up in April to monitor the selection, but is yet to approve the draft terms of the process. The Philippine Competition Commission last month questioned some of the terms of reference and wants a ban on mergers introduced. The winner will receive 200MHz of spectrum across six bands, including 2x10MHz in the highly valuable 700MHz band.
Rio stood by the decision not to make the selection via a traditional auction or beauty contest, but instead use an approach called the highest committed level of service, which he is confident can “comprehensively identify the participant’s ability to compete with the incumbent telcos as it takes into account coverage, speed and cost of service”. Coverage will have a 40 per cent weighting in the decision, minimum average broadband speed 20 per cent and annual capital and operational expenditure the remaining 40 per cent.
Local media reported that at least 12 overseas operators are interested in partnering with four or five local companies to set up a third operator. They include China Telecom, KT and LG Uplus from South Korea, Japan-based KDDI and Viettel from Vietnam.
The push for a third player to compete against the PLDT-Globe Telecom duopoly dates back to October 2016 when Duterte warned the county’s two dominant mobile operators he would open the market to Chinese competition if they failed to improve their poor service.
Since then, both PLDT and Globe significantly increased their capex budgets (for 2018 PLDT earmarked $1.1 billion and Globe $950 million) and started to deliver faster mobile speeds. Data from OpenSignal showed overall download rates jumped 78 per cent to 7.4Mb/s at PLDT’s mobile unit Smart and 45 per cent to 4.9Mb/s at rival Globe in the year to end-April.
The entry of a third operator is credit negative for PLDT and Globe as it is likely to intensify competition and dilute the market share of incumbent operators, Fitch Ratings said. The threat of a new entrant is likely to slow revenue growth, which is already experiencing industry-wide structural declines in legacy revenues.
Bidding documents aren’t expected to be available until the end of September at the earliest, which leaves just two months for interested companies to prepare their bids, and for DICT to come up with a shortlist and the selection committee to identify a winner.
It’s a tight timeline given that, after more than four months, the draft selection criteria has yet to be finalised. The responsible agencies best speed up the process or the president will step in and make the choice for them.
There’s also the pesky question of the disputed 700MHz and 2.5GHz bands, which are tied up in legal cases with the Supreme Court and not likely to be resolved anytime soon. The risk that less spectrum may be available has to be top of mind for potential investors considering joining hands with a local partner to enter the market.
Another huge uncertainly is network sharing. Phil Marshall, chief research officer at Tolaga Research, noted the government has indicated it might force the incumbents to share their infrastructure.
He told Mobile World Live: “If this proves to be the avenue for achieving network sharing, it might be more trouble than it is worth since neither PLDT or Globe will be compelled to cooperate. It might prove more fruitful for the new entrant to be given preferential treatment for site zoning and acquisition, and possibly for a government led initiative to support an independent tower company to build and lease towers for all three players with the aim of addressing the significant coverage and capacity shortfall.”
With the licensing terms requiring a minimum population coverage of just 10 per cent after the first year and 50 per cent after five years, Filipinos certainly won’t have much to celebrate this Christmas if the new licence is in fact awarded.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.