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Naia’s new runway; Third telco a dream?

The sorry state of the Ninoy Aquino International Airport, at last, has drawn the attention of the country’s biggest conglomerates. Two groups in recent weeks submitted unsolicited proposals to the government, both promising to help improve Naia’s airside and terminal capacities.

The Naia Consortium, comprising of Aboitiz InfraCapital Inc., AC Infrastructure Holdings Corp., Alliance Global Group Inc., AEDC, Filinvest Development Corp., JG Summit Holdings Inc. and Metro Pacific Investments Corp., proposed to invest $7 billion to expand Naia’s passenger capacity to 65 million a year in exchange for a concession period of 35 years.

Megawide Construction Corp. and partner India-based GMR Infrastructure Ltd., the current operators of Mactan-Cebu Airport, offered to invest $3 billion to increase Naia’s capacity to 72 million within a much shorter concession period of only 18 years.

But the key difference between the two proposals is the development of a third runway in Naia, which Megawide-GMR has criticized. The Naia Consortium believes the third runway would resolve the capacity constraints plaguing the airport and increase the airport’s handling capability to 90 million passengers.

Megawide-GMR is not convinced. A third runway, it said, would create a whole new set-up, comprising of terminals and common processing facilities such as baggage handling and screening. It is like putting a new airport altogether. There is also the possibility that some airplanes can’t go from Naia to the new runway. Controllers, for one, can’t just ask an aircraft to land on the new runway if the same plane is scheduled to depart next from Terminal 3.

Reclaiming a land to accommodate the new runway will also have an environmental cost. The Las Piñas-Parañaque Critical Habitat and Ecotourism Area is a lush nature preserve surrounded by water and known for its variety of migratory birds. The inevitable reclamation activity will damage this delicate ecosystem.

Aviation experts, meanwhile, said two runways close to each other cannot be operated as two standalone runways. Even with the two runways at Naia, experts estimate the system is as good as 1.3 runways in terms of capacity. When one runway is being used for landing, the other cannot be used for landing or take-off.

The Naia Consortium initially said it would work with the Department of Transportation to finalize the location of the third runway. But one of its top executives conceded that building a third runway is effectively equivalent to constructing a new airport.

Telecom challenges

Adding a third telecommunications company in the Philippines to break the duopoly of Smart Communications Inc. and Globe Telecom Inc. is the ideal set-up, but with the high financial requirements and other barriers, the entry of a new industry player could just be a dream. 

The outlook on a successful entry of a third telco player in the country may be dim, with ICT Davao president Samuel Matunog describing the wannabe company ‘a very challenging project.’ Matunog stressed a start-up would require a lot of resources and operate in an industry not easy to penetrate. ICT Davao is the umbrella organization of all information and communication technology groups hosted by Davao City.

Matunog’s findings are borne out by global research analysts, such as Morgan Stanley, Macquarie Capital Securities and HSBC, which evaluate prospects of foreign telcos in addressing the challenges of extremely tough entry barriers such as high capital expenditures. These obstructions make it difficult for a new telecom player to enter the industry in spite of new draft terms set by the Department of Information and Communications Technology.

The DICT earlier assured the public a third major telecommunications player would be operational by March of this year as directed by President Rodrigo Duterte. That timetable has been pushed back to May or later, however. DICT officer-in-charge Eliseo Rio said the agency moved the deadline since “there may not be any bidders if they force the issue on the President’s original deadline.”

While the amount and spread of frequencies available to support a new telco, studies found that the 40-percent foreign ownership limit coupled with other capital requirements of the government might be too daunting for a new player to comply with. The new entity, which should not be related to any telecom group with at least 40 percent market share in either mobile or broadband wireless services, is required to have at least P10 billion in net worth.

The prospective telco will have to bid for a slot with an amount equal to the net present value of what it is willing to invest within five years. Researchers also noted that the winning entity was required to deposit 30 percent of the pledged investment with the government every year and cover at least 80 percent of provincial capital cities and 80 percent of chartered cities within five years. 

The lack of a national broadband network infrastructure and years of minimal government support for incumbent telcos, coupled with the archipelagic nature of the Philippines, only add to the difficulty of having to cover at least “80 percent” of the territory.

 

 

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Topics: Ninoy Aquino International Airport , Rodrigo Duterte , Morgan Stanley , Macquarie Capital Securities , HSBC , Samuel Matunog , Megawide Construction Corp. , Smart Communications Inc.
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