Any Telecommunications firm looking to challenge the Globe and PLDT duopoly should be worth at least P10 billion based on draft rules released by the Department of Information and Communications Technology (DICT).
Under a proposed joint memorandum circular to be issued by the DICT, Department of Finance, National Telecommunications Commission (NTC) and the National Security Council, telcos looking to become a “new major player” or NMP should also have a congressional franchise and proven technical capabilities.
Interested consortiums should be at least 60 percent Filipino-owned and prospective bidders must also not be a related party to “any telecom group with a mobile and broadband wireless market share of at least 40 percent”.
With regard to the financial capability requirement, consortiums should prove their capability to raise the P10 billion “provided that all ownership requirements under the law are complied with”.
The winning NMP will be awarded frequencies in the 700, 850, 2100 and 2010 megahertz bands, with the turnover of several frequency ranges contingent on the Supreme Court deciding on pending cases.
The highest bid will be based on the net present value of the committed investment for five years plus the net book value of the bidder’s existing telecommunications facilities, if any, rounded down to the nearest peso.
The investment pledge should be limited to the “installation, operation, and maintenance of fixed (wired and wireless) networks, mobile networks, and national and international telecommunication services,” the draft rules state.
A March 6 public hearing has been set for the proposed joint memorandum circular and the timeline beyond that has yet to be finalized, the DICT said.
President Rodrigo Duterte wants the third telco player to be operational by the end of the first quarter but DICT officer-in-charge Eliseo Rio Jr. has said that the bid submission deadline will be moved to April 18.
“The request is coming from the contenders themselves. If we force the end-of-March deadline, there might not be any bidders,” he said.
Based on the draft circular, a pre-selection conference will be held later this year. For the auction itself, qualified bidders will have to submit two envelopes, the first containing their credentials, including financial statements and proof of their congressional franchise, and the second holding the financial offer and a bid bond equivalent to 2 percent of the first year’s committed investment.
The envelopes will be opened for preliminary evaluation once the auction is over and the highest bid announced. This offer will still undergo post-qualification before an award is made by the NTC.
Should the highest bid fail to pass post-qualification, the second-biggest offer will be considered “and so on as the case may be until an NMP is determined and declared”.
The draft rules also require the winning bidder, if a consortium, to finalize “a valid and appropriate business combination” within a fixed period. The NMP will also be required to post a performance bond equivalent to half a percent of the committed investment for the first five years, which will be forfeited if the funding pledges fail to materialize.
“To comply with a 70:30 debt-to-equity ratio, the NMP shall increase its paid equity accordingly in the first two years within 60 days from date of award,” the rules also state.
A minimum 30 percent of the committed investment for the first year must be deposited with a specified government bank within 30 days, to be repeated annually until the fifth year.
The winning bidder should submit a roll-out plan not later than 15 days after the award and commit to the start of commercial operations within a year. At least 80 percent of provincial capital cities/towns and chartered cities should be covered within five years.
“Failure to comply with any of the provisions of this joint memorandum circular shall result in the automatic recall of the assigned radio frequencies,” the draft states.
Also, “failure of the NMP to comply with the debt-to-equity ratio shall result in the recall of the award, and the participant that submitted the second highest bid shall undergo post-qualification.”
The auction will be declared a failure if no offers are received, if all participants are declared ineligible, all bids fail post-qualification and the participant with the highest or next-highest offer refuses “without justifiable cause” to accept the award.