Duterte govt publishes final rules for third telco: bidding may start in November

21 Sep 2018

The government of the Philippines today (21 September) published its final terms of reference (TOR) for the selection of the country’s New Major Player (NMP) – a.k.a. the so-called ‘third telco’ – paving the way for the bid process which could finally begin in November 2018. With President Duterte determined to announce the name of the NMP before the end of this year, the Department of Information and Communications Technology (DICT), working with the National Telecommunications Commission (NTC), issued the final TOR which includes a number of key amendments – such as an increased emphasis on how higher internet speeds can be achieved. In addition, the final version of the rules are thought to include more flexible arrangements vis-a-vis the winning bidder’s performance security: the rules allow the NMP to lodge a 10% security of around PHP700 million (USD12.95 million) (payable either through cheque, bank draft or confirmed letter of credit), whereas previously it was thought DICT would seek a 10% cash bond or 30% surety bond. The final TOR also confirms that the performance security would also be fixed at 10% of the remaining capital and operational expenditures through the commitment period.

Going forward, NTC Commissioner Gamaliel Cordoba told journalists that with the publication of the final TOR, the rules would become effective 6 October 2018, at which date bid documents can also be purchased for PHP1 million. The bid deadline for submissions is set at 5 November 2018.

Among the key revisions to getting agreement for the final TOR, the government amended the weighting for minimum average broadband speed, which was increased to 25% from 20% in the latest draft. The weight for national population coverage was maintained at 40% while capital and operational expenditures, previously at 40%, have been trimmed to 35%. Bids will be assessed with a maximum of 500 points awarded on these criteria over a five-year period, while for national population coverage, the minimum requirement for the first year is 10% while the maximum is at 50%. The minimum average broadband speed for both fixed and mobile broadband services, has been set at 5Mbps – although bidders receive extra points for every 2Mbps increase they promise above the minimum. Bids below 5Mbps will not be considered. In terms of CAPEX, the minimum in the first year is set at PHP40 billion while the maximum is PHP140 billion, and additional points can be earned for every PHP10 billion allocated above the base line.

Based on the final TOR, radio frequencies in the 700MHz, 2100MHz, 2000MHz, 2.5GHz, 3.3GHz and 3.5GHz bands will be awarded. Companies wishing to participate in the process must: hold a valid Congressional franchise; not be a subsidiary, affiliate, or have any corporate or financial interest with incumbent mobile operators PLDT Inc. and Globe Telecom as of 31 December 2017; and must have a written and binding commitment from a foreign venture company. DICT Memorandum Order No. 1 (issued 8 January 2018) confirmed that, ‘the applicant with the highest committed investment for the first five years shall be selected’.

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