BMI: Third telco search shows ‘little momentum’
The search for a new telco player has shown “little momentum” despite the release of proposed selection rules, BMI Research said, with an alternative to the PLDT-Globe duopoly likely to be up and running only by the end of next year “at the earliest.”
Commenting on a draft terms of reference (TOR) released last week, the Fitch Group unit said that new criteria had eased some technical requirements but also raised new demands for the prospective challenger.
The Department of Information and Communications Technology (DICT) has proposed a points-based system based on national population coverage, annual capital and operational expenditures and minimum average broadband speed commitments over a five-year period.
A P10-billion capital requirement was maintained, the population coverage was lowered to a minimum of 50 percent from 80 percent and the floor for average broadband speeds was set at 5 megabits per second, BMI noted.
“The new scoring system will allow the DICT to look beyond its previous criteria of selecting the operator with the highest committed investment and book value of existing assets and accelerate discussions with the industry on selection criteria,” it said.
However, it said the new parameters “will not widen the scope for more operators to participate in the process.”
“We maintain that [the]requirements are still stringent, and the biggest hurdle to investment, the 40-percent foreign ownership cap, has not budged,” it added.
“The commitments in the three criteria will also have to be further guaranteed by a performance security amounting to 10 percent of annual budgeted capital and operational expenditure, which will be forfeited if the operator fails to meet its requirements.”
While it described the draft TOR’s release as a “step forward”, BMI said it expected the “process will likely entail further delays.”
In scored the DICT for being “anything but transparent” and noted that the draft — originally due to be issued in April — was only published after pressure from President Rodrigo Duterte.
The lack of transparency, BMI said, also raises concerns regarding corruption, pointing to the 2007 collapse of the proposed National Broadband Network over alleged price fixing.
“We maintain that the new operator, if any, will only begin operations by end-2019 at the earliest.”
DICT officials were not immediately available for comment.
The BMI report did not touch on another draft TOR, issued a few days later, that proposed a spectrum user fee auction instead of the points-based process.
DICT officer-in-charge Eliseo Rio said on Friday that both sets would be considered in deciding how to choose the so-called “new major player”.
Duterte had wanted the third telco to be operational by the first quarter of this year.
Rio has acknowledged delays in crafting the selection rules but claims that the third telco player will be named before the end of the year.
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