Poisoned chalice?

The introduction of a third telecommunications player in the country is now playing out to be a poisoned chalice. It seemed good when it was first raised, yet the identification of a dubious player is now raising doubts on whether this initiative would do more harm than  good in the long run.

Legal questions abound regarding the qualification of Mindanao Islamic Telephone Co. (Mislatel) as the new provisional third telco player in the country, yet the consortium is now resorting to skirting these questions, which cast heavy aspersions on this firm’s integrity and its qualification to get involved in handling public utilities.

In the past week, we have pointed out that the Mislatel consortium should be disqualified from applying as the third telco player due to its failure to comply with one of the requirements of its congressional franchise: joining any securities exchange, like the Philippine stock market, five years from receiving its franchise in 1998.

Here are the facts: Mislatel’s franchise is nonoperational, and has in fact been automatically revoked for its failure to join the stock market. Section 16 of Mislacom’s congressional franchise requires the company to “offer at least thirty percentum (30%) of its outstanding capital stock or a higher percentage that may hereafter be provided by law in any securities exchange in the Philippines within five (5) years from the commencement of its operations.”

We have not monitored the entry and participation of Mislacom or Mislatel in the Philippine Stock Exchange (PSE) at present, and we highly doubt that Mislacom had ever participated in the PSE in the past.

This reeks of gross misrepresentation, and should be enough reason for the Department of Information and Communications Technology (DICT) and the National Telecommunications Commission (NTC) to not only withhold the preliminary award to the Mislatel consortium, but also to outrightly disqualify this group. Mislatel lost its franchise in 2003, yet it is now representing itself as possessing a valid and subsisting franchise.

Instead of clarifying questions about this validity of its franchise, the consortium has resorted to simply asserting otherwise, as consortium partner Chelsea Logistics did recently in a clarification to the PSE. “We wish to clarify that prior to the selection process for the third telco, the NTC published a list of telecommunications entities with existing legislative franchises. Mindanao Islamic Telephone Co. Inc. was included in the list,” it said. The company also said the NTC “has accepted the validity” of the franchise when it vetted the documents during the review of the third telco bids.

One glaring fact can be gleaned from this clarification: It did not refute the fact that Mislatel never listed in the PSE as was required by its congressional franchise. Correspondingly, if Mislatel never listed in the stock market, its very own franchise law provides that Mislatel’s franchise will automatically be revoked.

It is therefore irrelevant whether the NTC “has accepted the validity” of the franchise when it vetted the documents during its recent review. If the NTC had proceeded with the selection of Mislatel despite the automatic revocation of the Mislatel franchise per its own franchise law, we are certain that the NTC and the DICT will find themselves acting with grave abuse of discretion.

In fact, the provisional “new major player” (NMP) should not blame the NTC if the latter mistakenly accepted its bid, despite a supposed nonoperational congressional franchise. The consortium should have conducted “comprehensive due diligence” to ensure that its bid is iron-clad and without weak spots.

Allowing the provisional NMP to proceed despite unanswered legal questions such as these bodes ill for the transparency and legitimacy of the entire process. We hope that NTC Commissioner Gamaliel Cordoba and DICT Secretary Eliseo Rio Jr. will be able to raise these concerns to the Mislatel consortium during the postqualification stage. Anything less than an acceptable and direct response on why Mislatel has failed to list in the stock exchange should warrant its disqualification from the selection process.

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Terry Ridon is the convenor of think tank Infrawatch, and a former member of the House committee on legislative franchises.