Business as usual

When the President, in this year’s State of the Nation Address (Sona), directed a warning at the Philippine telecoms duopoly of Smart and Globe, the Nikkei Asian Review’s point of view was that it was a “warning [aimed at] PLDT, backed by Japan’s NTT Group, and Globe Telecom, a unit of Singapore Telecommunications.” From this perspective, the entry of the so-called third player in telecoms could be seen as the China-backed firm of Dennis Uy muscling in on the turf of two other nations. For their own reasons—both Smart and Globe have faced not only criticism, but legal challenges, to their ownership structure which critics claim plays fast and free with Philippine constitutional requirements on ownership—the two firms would be the first to contest this point of view.

I’ve been following the story of this so-called “third player” in telecoms for four years now (see my columns on this topic from Nov. 22, 2017, Feb. 14, 2018, and Jul. 17, 2019). When last I’d left off, back in 2019, the story of Dito Telecommunity was that it had to go about obtaining a congressional franchise the old-fashioned way, with more radical solutions such as Charter change having failed over the previous two years. It turned out the final step of securing that franchise would take another year: Just on Monday, the House of Representatives approved the franchise bill, which now goes upstairs to the Senate for deliberation. The administration retains a healthy majority in the upper chamber, so it’s more than likely the bill will be approved by the Senate before the current Congress expires in 2022.

Nikkei in its Aug. 7 story on Dito Telecommunity pointed out the firm had picked the President’s birthday, March 28, for the commercial launch of its network, only to substitute a low-key event because of COVID-19. It was then supposed to undergo a “technical audit” last July 8 to confirm that its network was in place, but this has been pushed back to January next year, since it had only built a fourth of the cell sites (300 out of 1,600 it committed to) it was supposed to have by that date. Dito can only miss its targets twice, otherwise it forfeits a P24-billion bond.

Claiming that it can compensate for what it claims is a COVID-19-related failure, and that it can build 2,000 cell sites within the six-month extension it’s been granted, might have convinced some investors the aspiring third telecom is talking, but not playing, a big game. Industry watchers reported that on July 16, Singaporean Accion Fund had disclosed it had sold its 30-percent stake in Dito CME Holdings. But such reports had mixed conclusions, ranging from shares being unloaded due to “deployment difficulties” (the failure to meet targets for cell sites) or because share prices in Dito were booming in expectation of the DICT and NTC formally declaring it the third telco. But this turned out, soon enough, to be old news: 20 days after Dito missed its July 8 target, the President, in his Sona, seemingly out of the blue blasted Globe and Smart, threatening them with expropriation for failing to meet their cellphone-construction targets.

In what seemed an unusually gutsy move, the President then disclosed that Globe’s CEO Ernest Cu had told him the LGUs were to blame for dragging out cell tower permit requirement approval periods. The President then bared his fangs at the LGUs, and everyone heaved a big sigh of relief—including Dito Telecommunity, which now had the most bona fide of alibis for missing its own targets—courtesy of one of its established competitors-to-be, Globe. The President won points for seemingly threatening the established telecoms players for poor service. Everybody happy: In shifting the heat from the telecoms to the LGUs, the President also sent the signal to the foreign partners of domestic telecoms that their stakes will be left alone (as well they should: if the ownership structures of the existing players get too dissected, it would mean similar dissection might be in store for the incoming third player).

Email: [email protected]; Twitter: @mlq3