Globe, Smart to get long-term license

Government is set to issue in the next few weeks the much-awaited certificates for public convenience and necessity (CPCN) for the country’s two largest cellular mobile telephone service (CMTS) providers Globe Telecom and Smart Communications, The STAR learned yesterday.

The issuance of the CPCN is seen as a positive signal by the investing community as well as creditors who will now be more or less assured that the two will be here to stay for a long time. Unlike the provisional authority (PA) which is a temporary license to operate (three years), the CPCN (25 years subject to renewal) is a permanent license.

"This is good news for us. Investors and creditors have been asking for our CPCN as some form of assurance that we will have the license to operate for a longer term," Globe assistant vice-president for corporate and regulatory affairs Froilan Castelo said.

For his part, lawyer Rogelio Quevedo, head of Smart’s legal services department who is now in Geneva, declined to comment saying the he would just wait for the actual issuance of the CPCN.

National Telecommunications Commission (NTC) chief Eliseo Rio told The STAR that the issuance of Globe and Smart’s CPCN will be some form of a "reward" for the two companies which have overcomplied in terms of their commitments under the government’s service area scheme (SAS) program.

A CPCN is a 25-year license to operate in the country. It is issued by the NTC supposed to be after the grant of a congressional franchise.

However, in the case of Globe and Smart, which were issued their CMTS franchises in 1994 and 1992, respectively, the government has withheld the issuance of CPCNs and instead simply issued PAs to operate.

An industry official said that the NTC used to issue 18-month PAs until these were extended to three years during the term of Rio. "We simply kept on renewing our PAs and their issuance was sometimes used by the NTC as a form of leverage to force public telecommunications entities into complying with government’s demands," the official pointed out.

During the interview, Rio explained that the NTC has just reviewed the compliance of the various participants to the government’s SAS program, which required companies which were issued licenses to engage in the cellular business and operate an international gateway facility (IGF) to put 400,000 and 300,000 landlines, respectively. Those with both CMTS and IGF have to install a total of 700,000 lines.

In the case of Globe and Smart, he said that the two have overcomplied in terms of the number of lines required to be put up under SAS. "However, they failed to comply in terms of a requirement that for every 10 lines that they put up in a profitable area, they install one in a less profitable or missionary area," Rio pointed out.

He said that NTC will give Globe and Smart enough time to comply with the 10:1 ratio requirement.

When asked why it took a long time before government decided to issue a CPCN to the two cellular companies, Rio explained that it is only now that they have set up a nationwide network.

The SAS has resulted in an overcapacity in the number of fixed telephone lines. According to the NTC, there are now around 3.8 million unsubscribed fixed lines, and this has hurt many companies, like Bayan Telecommunications, that borrowed heavily (billions of dollars) in an infrastructure that had very few takers.

Many companies also no longer want to comply with the SAS and have now focused on the data business.

Because of this overcapacity, the NTC will be amending the provision on compliance in the SAS. "The SAS was very specific such that companies have to install a certain number of fixed lines. It will be very illogical to force them to comply now that there is an overcapacity," Rio noted.