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DITO Telecom faces daunting challenge as upstart firm

DITO Telecom faces daunting challenge as upstart firmDITO Telecommunity Corp. is confronted with many challenges in its infancy stage. For one, the financial requirement of being the third major telecommunications player is enormous. Much bigger rivals have enlarged their footprints in the industry and established strong connections in the banking community. DITO must contend with these factors, like a runner trying to outsprint an opponent with a big head start.

The Senate Public Services Committee is watching the telecom race, albeit with caution, mainly because of the unproven financial track of DITO. It has deferred for the meantime the approval of its franchise renewal.

Senator Grace Poe, the committee’s chairperson, laid down the primary basis for the deferment, noting that “when Dito applied for this franchise and made all these commitments, they should have had the forecast of what they were going to spend already.”

DITO has been forced to turn to ChinaTelecommunications Corp. and the state-owned Bank of China for financial help. It had to borrow its first drawdown of $500 million from Bank of China. Over a period of five years, DITO must cough up P283.7 billion (including cost of bidding) to fulfill its commitment to the government as the third major telco player.

DITO’s parent firm –the Udenna Group–must be be feeling the pinch of funding an ambitious undertaking. It has sought a government guarantee to cover a P700-million loan. The government guarantee is on top of the P16-billion loans that the Udenna Group had obtained from the different financial institutions.

DITO could also be falling into the China debt trap. The debt-trap diplomacy  is a theory to some, but China or its financial institutions seem to be saddling DITO and the Philippines in general with enormous debt in order to increase their leverage over the borrowers.

The  Bank of China has become one of DITO’s the primary sources of credit. The dependence on China’s state-owned bank could eventually result in DITO’s stock dilution in favor of Bank of China. DITO’s loan could eventually be converted into equity and raise ChinaTel’s stake,

Sen.  Francis Pangilinan  warned about investments and infrastructure projects funded by China, as well as “debt exposure, geopolitical risks and sovereignty issues.” The Philippines, he says, should not be blinded by money and exchange the Philippines for a few pieces of silver.”

DITO’s emergence started with the request of President  Rodrigo Duterte  to the Premier of the State Council of the People’s Republic of China,  Li Keqian, for a Chinese telecommunications giant to be the Philippines’ third telco player.

The request is fraught with suspicion and danger. DITO’s partner is a key part of China’s intelligence network. ChinaTel reports to the Central People’s Government in China and has links to the People’s Liberation Army.

ChinaTel’s mandates are covered by the 2017 National Intelligence Law of China, which states “that any organization or citizen shall support, assist and cooperate with the state intelligence work in accordance with the law.”

This conflict of interests has already been affirmed by the New York Stock Exchange in delisting China Telecom and two other Chinese telcos – China Unicorn Hong Kong and China Mobile–for being connected to the operations of the Chinese military.

Twelve Chinese stocks were also delisted due to national security risks stemming, in part, from China’s insistence to bar the US Public Company Accounting Oversight Board to conduct audits.

The Philippine Senate continues to probe DITO’s actual links with ChinaTel and possible allegiances to foreign countries in renewing the local telecom franchise.

Meanwhile, DITO has passed the technical audit by an independent party as it prepares for commercial rollout this month. DITO is expected to deliver its commitments of 37.03 percent national population coverage with a minimum average broadband speed of 27 megabits per second in its first year of operation.

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Topics: DITO Telecommunity Corp. , Grace Poe , ChinaTelecommunications Corp.
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