NEC to pursue $237-M claim vs Digitel

NEC Philippines Inc. said yesterday it will vigorously pursue its claim before the international arbitration court against Gokongwei-owned Digital Telecommunications Phils. Inc. (Digitel) for the payment of $237 million in unpaid equipment.

Company president Yoshifumi Matsubara said that they are also demanding that JG Summit Holdings, Inc., parent company of Digitel, step into the shoes of its subsidiary and settle 57 percent of the outstanding debt of Digitel to NEC which JG Summit has guaranteed.

Matsubara revealed that the arbitrators are scheduled to meet in Singapore next month, possibly with the counsel from both NEC and Digitel, to start hearings on the matter. "We are confident that we have a strong case," he said.

The unpaid equipment, costing a total of $260 million was supplied by NEC to Digitel pursuant to a supply contract entered into in April 1995 for the NX2 project, an expansion of Digitel’s public switched telephone network in Regions I to IV in Luzon. NEC installed substantially all of the 250,000 telephone lines.

According to Matsubara, Digitel paid around $40 million as advance payment, leaving around $220 million to be paid in 14 installments. Digitel was able to pay for the first two installments (for a total of 15 percent of the contract price) but in late 2001, it requested a deferment of the payment schedule due to cash flow problems. However, NEC did not accept Digitel’s proposal for the latter’s failure to provide the agreed securities, including the standby letters of credit.

NEC terminated the supply contract with Digitel in 2002, after which it commenced arbitration pursuant to the rules of the International Chamber of Commerce, claiming unpaid principal and interests amounting to $237 million.

In November 2002, Digitel filed a petition with the Makati Regional Trial Court to prevent NEC from terminating the supply contract. It alleged that NEC had committed various breaches of the contract, but the court dismissed the petition as it declared that the alleged breaches do not justify non-payment of the installment payments on the dates agreed upon by the parties.

Matsubara disputed yesterday Digitel’s contention that it had lost up to $200 million because of faulty equipment provided by NEC and because of late delivery. "The supply contract provides for various remedies in case there is dissatisfaction, but refusal to pay is not one of them," he said.

NEC has also asked the Philippines’ National Telecommunications Commission (NTC) to disapprove a petition filed by Digitel to allow it to transfer some of its assets to a new subsidiary — Digitel Mobile Phils. According to NEC, it might be left holding an empty bag.

In an earlier interview with The STAR, NTC Commissioner Armi Jane Borje said the agency’s legal group is now looking into the matter. "The resolution of NEC’s complaint is something that we have to resolve first before we can act on Digitel’s petition," she said.