Study sees risks in Dito-China Telecom as PH 3rd telco

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A telecommunications industry study released on Friday, Oct. 2, raised serious concerns, particularly on national security, on the selection and impending operation of Dito Telecommunity-China Telecom as the country’s third telecommunications player.

Creator-Tech-Study-compressed

The report, titled “A Study Into The Proposed New Telecommunications Operator In The Philippines: Critical Success Factors and Likely Risks” was undertaken by Asia Pacific consulting firm Creator Tech, an specialist consultancy based in Australia.

The study noted that the selection process appeared flawed and the agreement does nothing to incentivize the consortium to connect the unserved and underserved regions of the country.

The report, in particular, noted the role of China Telecom as a self-described “force for building a cyber power” and that it is accountable to the government of the People’s Republic of China.

The study also questioned the financial model being applied indicating the third telco will require a further $2.5 billion as a credit facility with the sole lender being the state-owned Bank of China, further reinforcing the pervasive influence of the Chinese government in the project.

The report’s author, Steve Mackay, said the study revealed many concerning matters in relation to the new entrant, highlighting that its plans to build a telecommunications network across the country could have serious repercussions for the Philippines.

“Firstly, it is clear the bidding and selection process was not undertaken in an even-handed way. A number of well-credentialed companies participated in the bid including Norway’s Telenor, Korea Telecom and a number of experienced local operators,” he said.

“Worryingly, most were either knocked out or forced out on spurious grounds. As a result, it would seem that China Telecom was pre-destined to secure the license. Worse, the Philippine partner in the winning bid — Dito Telecommunity — has no previous background in the telecommunications sector. Dito does, however, have close personal ties to the Philippines President Rodrigo Duterte via its owner Dennis Uy,” Mackay said.

The study also examined the challenges involved in constructing a telecommunications network in the Philippines, citing a raft of natural and man-made hurdles.

“The country features dense rainforests, jungles and mountain areas, making it extremely difficult to build the physical network,” remarked Mackay. “These obstacles are exacerbated further by significant regulatory and political issues. In addition to securing a myriad of permits, local bribes are often required to get a new base station across the line.”

The report said that although the Philippine government had made moves to streamline approval processes, it remained to be seen whether this will alleviate the delays and under the-table payments which add to the cost and timescale when rolling out new infrastructure.

“When you throw complex and opaque official, and unofficial, regulatory processes into the mix, as well as the prevalence of endemic corruption, one would have to question how the new entrant will go about delivering on its mandate to provide telecommunications coverage across the country, including regions currently unserved or underserved,” the study said.

The report also stated that a future administration could have multiple grounds on which to re-visit or withdraw Dito-ChinaTel’s license, representing a significant ongoing risk to the venture.

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