Fitch Solutions flags bias in the selection of a 3rd telco

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Metro Manila (CNN Philippines, November 24) — Mislatel is now the official third major telecommunications player, but an arm of the international credit rater has doubts in the selection process.

Fitch Solutions, a unit of Fitch Group, said there was bias in the selection of Mislatel as the third major telco. Mislatel is a consortium consisting of Udenna Corporation, China Telecom and the Mindanao Islamic Telephone Holding, which has the existing franchise to operate as a telecommunications provider.

"The selection of China Telecom, which follows the almost immediate disqualification of the two other bidders, hints at the government's bias towards Chinese involvement in the telecoms sector, and is a clear sign of Duterte's warming posture towards China," Fitch Solutions said in a statement Thursday.

It noted that President Rodrigo Duterte has been vocal about his preference to having China Telecom operate in the Philippines as early as November last year.

It added that China Telecom does have the track record and the capability to compete in the currently duopolistic Philippine telecommunications sector.

"We believe that the selection of China Telecom would have been, from a technical perspective, the most feasible one as the state-owned telco has the experience, scale and financial capability needed to disrupt the Philippines telecoms sector that is otherwise lacking at the other contenders," Fitch Solutions said.

Fitch Solutions also said that  Udenna Corporation is the largest shareholder of Mislatel, which gives it the power to unilaterally make decisions for the consortium. It added that Dennis Uy, who owns Udenna, donated to Duterte's 2016 presidential campaign.

Whether the consortium would be able to compete in the same space as Globe and Smart PLDT, Fitch Solutions said that it will continue to be an uphill battle.

"The lack of existing fibre assets gives the new telco an uphill task in a market that has manoeuvered for years to keep new entrants out and has continuously undermined the supervisory power of the telecoms regulator. To succeed, the new entrant will need to have continued regulatory support from the government to operate," Fitch Solutions said.

In an interview with CNN Philippines, Mislatel spokesperson Adel Tamano said it is a Filipino company and that it will not let national security be compromised in its partnership with China Telecom.

READ: Mislatel: No compromise on national security in China Telecom partnership

"We are a Filipino company. China Telecom is a strong partner, a great partner, but they're a minority. As Filipinos we will never let our national security be undermined," Tamano said.

The spokesperson added that the company will be commercially operational in late 2019 or early 2020.