No miracles in sight

Just recently, Philippine Telegraph & Telephone Corp (PT&T) revealed that it is in an advanced stage of partnership discussions with a South Korean telecommunications company.

Last year, PT&T said it was exploring a possible partnership with China Telecom to become the third major telecommunications provider in the Philippines.

While PT&T would not disclose the identity of its prospective foreign partner, a Malacañang official disclosed that it is South Korea’s LG Corp. that the former is in talks with.

Meanwhile, China Telecom, according to news reports, has not found a local partner.

Unless they are able to put their money where their mouth is, all these talk about partnerships and plans to become the third telco in the country mean nothing.

Remember less than three years ago when reports that Australian telco Telstra was in talks with San Miguel Corp. (SMC) to become the third telco. In March of 2016, SMC announced that it had ended the talks because they were unable to come up with commercial arrangements that would have enabled them to proceed. For his part, Telstra CEO Andy Penn said it was obviously crucial that the commercial arrangements achieve the right risk-reward balance for all involved.

The problem with this third telco player talk is that it stems from the assumption that the problem with the local telecommunications industry is the current duopoly of PLDT and Globe Telecom, and that a third telco would be able to solve the problem of high internet costs, slow speeds, and unreliable connection.

Telstra may have realized that even if it was willing to spend $1.4 billion for a 40 percent stake in its joint venture with SMC, that amount was just a drop in the bucket and for many years, the Australian company would probably have to put in more funds to keep the venture going.

Goldman Sachs earlier warned of a potential cash burn for Telstra’s Philippines project, as it estimated that the project could cost both parties $3.5 billion over a three- to four-year period, more than double what Telstra planned to invest.

There was simply no assurance that the venture would make money. Operating a viable telco in the Philippines is simply expensive.

Tong said that a key problem was the lack of mandatory infrastructure sharing, which would force any new player to build their own mobile base stations and backhaul links. This is an expensive proposition considering that the nation is made up of more than 7,000 islands. Building a network across islands and seas is not as simple as building one across contiguous territory.

In the Philippines, telecom companies build or expand that network without any support from the government. Worse, government has made it difficult for them to expand and put up cell sites given the number of permits that need to be secured, not to mention the need to convince the barangay and the homeowners’ association that the residents are not going to get sick from radiation.

Acting Information and Communications Technology Secretary Eliseo Rio himself admitted that the roughly 25 permits needed to build one cell site tower has kept the total number of cell sites in the country at around 20,000 when the country needs at least 67,000.

The Philippines is said to be the only country in the ASEAN region where the government does not provide any infrastructure funding support for the telecommunications sector.

National Telecommunications Commission (NTC) chief Gamaliel Cordoba said at the recent Philippine Telecoms Summit that all other ASEAN countries have telecoms networks that are wholly-owned, partly financed, or operated by their respective governments.

It is only in the Philippines that the broadband networks are constructed, owned and operated by private companies, he emphasized.

In Singapore, Malaysia, Myanmar, Thailand, Cambodia, Indonesia, Vietnam, Laos and Brunei, the major telecom firms are either partly or wholly-owned by the government or are being assisted by their respective governments in term of financing the telco infrastructure and building the national broadband network.

Here, our two major telecommunications company have managed to survive on their own, with little, if any, help from the public sector.

Our telecom firms have spent as much as 30 percent of their revenues on capital expenditure compared to the global average of 16 percent. Those in Singapore and Malaysia are spending less at 15 percent.

The idea of a third telco player is good, but unless government realizes and admits what the fundamental problem is, then we cannot expect any major changes to happen. Especially not in the short to medium term.

Policy shift

Less than two years after he assumed office, President Duterte has made the Philippines an international by-word.

Almost every country now wants to be friends with us. The Philippines is no longer the United States’ little brown brother. We may not be there yet, but we are slowly becoming truly sovereign and independent.

Until lately, America’s friends were our friends and its enemies our enemies.

But for Duterte, he believes that our foreign policy should be dictated not by outsiders, but by what our country needs. The shift towards transformational diplomacy has become evident. The President has a clear grasp of how the country must strike a balance between taking care of its people and at the same time contributing to a new, developmental, and inclusive world order.

If before, our military was happy with hand-me-downs from its Big Brother, this time, our leadership will have none of that. Foreign leaders and diplomats alike will not dare tell us what to do lest they receive a severe tongue lashing from our president.

China is no longer viewed as simply an antagonist. It is amazing to watch how the President was able to maintain our country’s position as far as the West Philippine Sea dispute is concerned, but at the same time get China to increase its investments in the Philippines.

Duterte’s independent foreign policy has allowed even the so-called superpowers to finally treat us with respect and as an equally sovereign nation.

And so while our traditional trade partners like the US and Japan continue to be major investors, the so-called pie has become bigger as more countries have started to take notice and to actually put in money.

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