What we know about Mislatel, the 3rd telco player

A few days ago, the Department of Information and Communications Technology (DICT) and the National Telecommunications Commission (NTC) identified Mislatel as the provisional 3rd telco player in the Philippines. Now let’s ask who Mislatel is, the companies behind it, and what it has committed to deliver.

Who is the Mislatel consortium?

The consortium is led by Davao-based businessman Dennis A. Uy (Co-Founder, Chairman, CEO & President, Phoenix Petroleum Philippines, Inc.) and state-owned China Telecom Corp. Ltd. It is comprised of Mindanao Islamic Telephone Inc. (Mislatel), Udenna Corporation, Chelsea Logistics Holdings (CLC), and China Telecom.

The Mindanao Islamic Telephone Company, Inc. (Mislatel) may sound new, but the company has been around for quite a while now. It acquired its congressional franchise on April 19, 1998, under Republic Act No. 8627.

According to a recent statement of its local partner, Chelsea Logistics, Mislatel has a nationwide franchise to construct, operate and maintain telecommunication facilities until 2023, based on the NTC’s list of telecommunications entities with existing legislative franchises.

As for the companies behind the consortium, first up is Udenna Corporation. It is a holding company in the Philippines which is in the business of distribution and retail of petroleum products and lubricants under the Phoenix brand and is engaged in shipping and logistics through its wholly owned subsidiary, Chelsea Logistics Holdings Corp. Its business portfolio includes real estate and property development, education, leisure, gaming and tourism, and infrastructure.

Next is Chelsea Logistics Holdings Corp. (CLC) is the shipping business segment of Udenna Corporation and is one of the biggest shipping and logistics company in the Philippines. It offers integrated shipping and logistics solutions nationwide through major subsidiaries namely, Chelsea Shipping Corp. (CSC), Trans-Asia Shipping Lines, Incorporated (Trans-Asia), Worklink, Services, Inc. (WSI), and Starlite Ferries, Inc. (SFI). It also owns 28.15% indirect economic interest in 2Go Group, the largest supply chain enterprise and end-to-end solutions provider in the Philippines.

And then we have China Telecommunications Corporation, known as its trading name China Telecom, which is a Chinese state-owned telecommunication company. It is the largest fixed-line service and the third largest mobile telecommunication provider in China.

Looking at the profile summary of Mislatel and its committed investors submitted to the DICT, Udenna Corporation will hold 35% ownership, CLC at 25%, while China Telecom will hold 40% which is the maximum restriction imposed for foreign ownership in the Philippines.

Among the three, China Telecom is the only state-owned company and, based on their backgrounds, the only company with telecommunications operations experience.

3rd telco player selected

On November 7, 2018, the Department of Information and Communications Technology (DICT) identified Mislatel as the 3rd telco player in the Philippines. The bidding was live-streamed through the agency’s official Facebook page.

DICT Acting Secretary Eliseo Rio Jr. said that Mislatel is the only bidder who was able to submit the complete requirements. The Philippine Telephone and Telegraph Corporation (PT&T) and Sear Telecom Consortium of Tier One Communications and LCS Group of Companies were disqualified due to their failure to submit participation security and certification of technical capability, respectively. The two companies said they will file their respective Motion for Reconsideration in their attempt to still challenge the winning bid.

LOOK: Mislatel’s HCLOS bid with 456.80 points. The Selection Committee declares Mislatel, with Udenna Corp., Chelsea Holdings, and China Telecom, as the provisional NMP pic.twitter.com/4cAOWAEF3x

— Department of ICT PH (@DICTgovph) November 7, 2018

Mislatel’s highest committed level of service (HCLOS) bid posted 456.80 points out of 500 based on its highest committed level of service based on national coverage, Internet speed, and capital and operational expenditures over a five year period. Points are awarded based on commitments and the one with the highest score wins the bidding. Fortunately for Mislatel, they were the only player who completed all the required documents and, thus, winning the bid.

National security concerns

The presence of a Chinese state-owned company in the Mislatel consortium raised cybersecurity concerns. Senator Grace Poe said that security concerns “should not be sidestepped” and that the Armed Forces of the Philippines (AFP) and other intelligence agencies should weigh in on the qualifications of the new major player.

The National Security Adviser Hermogenes Esperon assured that the AFP played a role in the selection of the 3rd player. “Just to let you know, the Armed Forces was considered there,” Esperson said in a press briefing at the Malacañang Golf Clubhouse. “I agree lagi natin titingnan ang security ng ating Communications and that’s really the reason we are there. We have inputted provisions for national security in the entry of the third main player.” he added.

We want our national broadband to be secure and, as much as possible, since it will be a personal network for the whole of government. Kaya secured po ‘yan, secured. ‘Wag kayo mag-alala,” Esperon said.

Makati City Rep. Luis Campos Jr. and Senate Majority Leader Juan Miguel Zubiri also downplayed the concerns.

“Risks are everywhere, but we have regulators precisely to manage those risks. Besides, both PLDT and Globe are already at least 40 percent owned by foreign entities,” Campos said.

“We are counting on the newcomer to compete brutally with the nation’s two dominant players in delivering faster mobile Internet connection speeds at a lower price,” he added.

“National security concern, probably not because the National Grid Corporation of the Philippines (NGCP) is 40 percent owned by a state-owned Chinese company. They are doing their part in helping develop our energy sector,” Zubiri said.

“I believe China Telecom is a publicly listed firm in mainland China. The books are open, they are transparent,” he added.

Mislatel’s commitment

Mislatel has committed to provide 37.03% of the total Philippine population an average Internet speed of 27Mbps through a PHP 150USD 3INR 217EUR 2CNY 19-billion investment for the first year of its operation.

Through the second and fifth year of its commitment period, the consortium should have covered 84.01% of the total Philippine population with an average speed of 55Mbps, spending a total of Php258USD 4INR 373EUR 4CNY 32 billion.

If Mislatel failed to deliver its commitments, the Philippine government will be able to forfeit Mislatel’s Php14USD 0.24INR 20EUR 0.23CNY 2 billion performance bond. This bond serves as some sort of penalty should the service provider fail to deliver on any of its commitments.

Mislatel still needs to undergo a document verification phase before it is finally confirmed as the country’s third telco player.