What’s next for third telco?

The new major player or the third telco named by NTC is a consortium powered by China. The award came just in time for the visit of Chinese President Xi Jinping.

The Mislatel Consortium, the new third player, symbolizes the strong partnership between Davao and China. The main local mover is the Davao Dennis Uy, a very close business friend of President Duterte. The main technology and financial partner is China Telecom.

NTC resolved all the motions for reconsideration and appeals at the close of office hours last Friday (Nov. 16). Shortly thereafter, the NTC En Banc issued the confirmation order in favor of the Mislatel Consortium.

How soon before real competition in our telco market happens? Not any time soon. In the next 90 days, the Mislatel Consortium must undergo final examination of compliance to all the rules of the selection process. It may still, theoretically, be disqualified but that is not likely.

Mislatel, according to Acting DICT Secretary Eliseo Rio Jr., “made a commitment to greatly improve our telecommunication industry that can bring us at par with Singapore and is putting a hefty performance bond (P24B) if they fail in their commitments in a 5-year period.

“Globe and PLDT/Smart never made any commitment in the more than 20 years of their operation. They never posted any performance security. For the first time in our history, we required a new telco player to come up with time-bound commitments and putting their money where their mouths are.”

But does Mislatel have what it takes to deliver?

Let us put it this way. This is a China show. I understand Chinese banks will finance the Davao Dennis Uy’s stake in the consortium.

China Telecom will provide both money and technical knowhow. Expect China Telecom to call most, if not all, of the shots specially since the Davao Dennis Uy has no experience in the industry.

Indeed, Mislatel is a small telecoms company with little or no experience. Unlike some of the other local telcos it competed with, Mislatel has nothing much to contribute by way of experience and subscribers.

This led Sec. Rio to suggest that “one of the best ways Mislatel can comply with its commitments is to use all existing facilities and services of the other small players, like the tens of thousands kilometers of fiber optic cables of PT&T and Converge ICT, the satellite network of Chavit Singson’s SEAR, the fiber on air of NOW, etc.”

Responding to a question I posted on FB Messenger, Sec. Rio said he is calling on all other small telcos including CATV operators, to partner with Mislatel. “The new major player will spur business for all these small players, which they could not get from Globe and Smart. I will meet them on this.”

If this happens, the acting secretary said, it would be a welcome change in the industry.

“Globe and Smart are not patronizing these small telco players because both have built their own infrastructures. While the giant incumbent telcos treat these small players as customers, the new major telco player can treat them as partners, even sharing its facilities and frequencies with them.”

They can expect strong government support, Sec. Rio said. “The government will invest in telecommunication infrastructure that will be available to all players, big or small. These include a nationwide fiber optic cable backbone, cable landing stations, common towers and last mile facilities specially in underserved and unserved areas.

“DICT is now putting up strong cybersecurity infrastructure and programs that will effectively protect our cyberspace. Pending laws will soon be enacted like number portability, open access, revising the Public Service Act allowing more than 40 percent foreign ownership of telcos, equitable distribution of spectrum and spectrum management reform, etc., that will make possible the entry of a fourth, even a fifth major telco player.”

One disqualified player, PT &T went to court. But if they know what is good for them, they will withdraw any legal challenge and just work with the chosen new major player. This is what the President wants and it is better to move on.

One securities analyst is already looking at price erosion. “The impact is five to 35-percent EPS cuts for Globe and 11 to 32 percent cuts for PLDT. Our DCF-based TPs consequently drop by 19 percent and 23 percent to P1,730 and P1,070 respectively.”

Not too fast, guys! Definitely nothing will happen next year that threatens the market of the current duopoly. Maybe by 2020, we may see a glimmer of new competition.

But is the Davao Dennis Uy biting more than he can chew? If even the powerful Gokongwei business empire and lately, San Miguel Corp. threw in their towels, how can a local upstart succeed?

When I asked Ramon Ang why he gave up on the third telco promise, he said it was a personal and business decision.

SMC’s telco startup was taking as much as 90 percent of his time and only promises to deliver less than 10 percent of the SMC Conglomerate’s profits many years forward. Legal challenges from the duopoly that scared off its partner Telstra, are additional headaches. Capitulation was the only sane thing to do.

But the Davao Dennis Uy is young, daring, and feeling invincible with Duterte in power. He is the fastest growing businessman today with an estimated net worth of at least $350 million. His holding company, Udenna Corporation, now has 55 companies financed largely by debts.

There is apparently no company that Mr. Uy isn’t interested in acquiring, including a culinary college. His oil company, Phoenix, is now third largest after Petron and Shell. He is also involved in modernizing the Davao airport.

With China Telecom as partner and the Davao group in Malacanang, how can he go wrong?

Will this third telco live up to the promise? I am keeping my fingers crossed.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco