It has big issues it’ll have to solve to become the third telco

Philippine netizens are rejoicing, as news of another possible telco has emerged, again. After San Miguel Corporation’s aborted partnership with Australian firm Telstra, the news of a possible third player to break PLDT and Globe’s duopoly is fantastic news for people fed up with the service that they’re getting from the two local players. But like Telstra, China Telecom faces serious hurdles if it wants to set up shop in the Philippines.

The biggest one is the 60/40 rule mandated by our constitution. It was one of the biggest stumbling blocks faced by Telstra when it was in talks with San Miguel Corp, as SMC needed to match and exceed Telstra’s projected $1 billion investment when they started work in the Philippines. Remember, as a public utility, China Telecom is bound by the 60/40 rule, which means that they’re limited to just 40 percent in ownership (as well as investment) in any joint venture in the Philippines. A local partner will need to match and exceed whatever their investment is.

So whoever China Telecom partners up with in the Philippines will need deep pockets, and will have to know the telco business inside and out. They’ll also have to grab essential wireless spectrum that was left over from PLDT and Globe’s acquisition of SMC’s telco assets, and start putting up capital-intensive infrastructure like cell towers and repeaters.

We’re hoping that the government extends whatever assistance it can to China Telecom and whoever their local partner will be because believe us, they’ll need it.