DOJ defends terms for 3rd telco firm

MANILA, Philippines — The Department of Justice (DOJ) yesterday defended the requirements set by the National Telecommunications Commission (NTC) for the selection of the country’s third telco player.

Justice Secretary Menardo Guevarra said the provisions in the Terms of Reference (TOR) for the bidding procedures set by NTC – key terms of which are being questioned by one of the bidders before the Manila regional trial court – do not violate any law.

He said the legality of the TOR underwent thorough review by the DOJ and the government has opposed the bid of businessman Mel Velarde’s NOW Telecom Co. Inc. before the court to strike down the requirements.

“We are opposing the petition to stop the bidding for a third telco. The OSG (Office of the Solicitor General) has been tapped to represent the NTC in the NOW Telecom case as statutory counsel for the government,” Guevarra said.

He said the OSG has specifically defended the position of NTC that the terms under its Memorandum Circular No. 09-09-2018 have legal basis.

In answering NOW’s petition before the RTC, the government argued that the P700-million participation security, the P14 billion to P24-billion performance security and the P10-million non-refundable appeal fee are all necessary in the determination of financial eligibility of bidders and is not “money-making scheme” or “extortionary” as alleged by the petitioner.

The NTC stressed that the third telco must not only be technically capable but should also have the “financial muscle” to compete with current telecom giants Globe and Smart.

Through the OSG, it explained that the participation security aims to ensure serious contenders with financial capability would bid to be the third player and compete with the existing duopoly. Participation security may come in the form of cash, bank drafts or letters of credit.

Performance security, on the other hand, seeks to assure the government that the third telco will deliver on its promises throughout the five-year commitment period. 

Lastly, the NTC said the appeal or protest fee is a usual item in procurement processes, designed to discourage frivolous motions and protests.

The government further pointed out that the securities and fees imposed are consistent with the bidding and procurement processes and are actually even lower than those set by Republic Act 9184 or the Government Procurement Reform Act.

The NTC also denied NOW’s allegation that the commission did not hold consultations in approving the TOR, saying the TOR was the “result of public consultations and hearings, review by the Oversight Committee and lengthy and comprehensive studies with international consultants” and that “public and stakeholders also had the opportunity to submit their position papers on the matter.”

Guevarra also welcomed the decision of Manila RTC Branch 42 Judge Dinnah Aguila-Topacio to deny the plea of NOW for the issuance of a temporary restraining order (TRO).

“The denial of the application for TRO allows the NTC to proceed with the bidding after the deadline for submission of bids on Nov. 7,” he explained.

NOW Telecom is one of the 10 companies and consortiums that have participated in the bidding for the third telco so far and paid the P1-million participation fee. Its mother firm, Now Corp., only had operating income of P6.3 million in 2017.

The nine other bidders so far are Chinese state-owned firm China Telecommunications Corp., Austrian firm Mobiltel Holdings GmBH, Dennis Uy’s Udenna Corp., the joint venture of businessman Chavit Singson’s LSC Group of Companies and TierOne Communications, Norway’s Telenor Group, Philippine Telegraph and Telephone Corp. (PT&T), former congressman Felizardo Colambo’s AMA Telecommunications and two undisclosed companies.

The Streamtech Systems Technologies Inc. of former senator Manny Villar, which recently secured its franchise to operate, is also reportedly joining the bidding.

Last month, the Manila RTC denied NOW Telecom’s prayer for issuance of 20-day TRO for “lack of urgency in the meantime justifying such a provisional remedy.”

The court instead heard the case last Oct. 23 and 24 before it decides on petitioner’s plea for issuance of preliminary prohibitionary injunction.

Under the final TOR issued by NTC, the winning bidder would be chosen based on the highest committed level of service over a period of five years.

It set three criteria – national population coverage with a weight of 40 percent, minimum average broadband speed at 25 percent and capital and operating expenditure at 35 percent. 

The rules also provide that the minimum population coverage for the first year should be 10 percent, a figure that should reach 50 percent by the fifth year.

The new player is expected to invest a minimum of P40 billion in the first year and P240 billion in five years.

The selection committee will use a point system based on the documents submitted by the potential players. 

After submission of bid proposals, the NTC will formally open the bidding selection on Nov. 10. The government hopes to name the third telco before the end of this year.