By Julie M. Aurelio and Leila B. Salaverria, January 25 2019; Philippine Daily Inquirer

Image Credit to Manila Bulletin

The Philippine government may consider looking for another company to serve as a third carrier in the telco industry should Mislatel consortium be found to have no valid congressional franchise, Malacañang said on Thursday.

“If they don’t have a franchise, how can they operate? We will look for another company that has a franchise,” said presidential spokesperson Salvador Panelo.

Panelo made the remarks after Senate Minority Leader Franklin Drilon said Mislatel’s franchise was deemed revoked and thus, the consortium was not eligible to be the third telco carrier.

Mislatel, the 60-40 venture between Davao businessman Dennis Uy’s Udenna Corp. and Chelsea Logistics Holdings, and state-owned China Telecom, was declared the winning bidder in November last year.

At a Senate hearing on Thursday, Drilon said the consortium had failed to meet the legal requirement to operate within a year from the grant of its franchise in 1998.

Should Mislatel’s franchise be considered revoked, Panelo said the government would consider selecting another qualified company.

Qualified company

“Regardless of whoever is the owner, doesn’t matter who, as long as the firm’s qualified,” he said.

The senators also questioned the propriety of Mislatel’s selection as the third carrier because of Uy’s close ties to President Duterte and administration officials who oversaw the selection process.

Malacañang maintained that the government intended to tap a company that could meet all the government’s requirements, especially a valid franchise.

“There were many bidders, right? So I suppose we can always go, or these losing bidders can come in the event of the default of the winning bidder,” Panelo said.

Uy told the senators during the hearing that he did not violate any rules.

Drilon contended that the transfer of the Mislatel franchise to the current majority owners in 2015 was void because it lacked congressional approval.

He noted that the group of Mislatel president Nicanor Escalante owned 70 percent of the company when they bought into it, but they did not secure Congress’ nod for this.

Escalante said his lawyer had advised that no congressional approval was needed because the group was not acquiring the existing shares of the then incumbent shareholders.

But Drilon said the terms of the franchise—a privilege granted by Congress—prevented the transfer of controlling interest without the legislature’s go-signal. This deprived Congress of the opportunity to examine the new majority owners’ capability to exercise rights under the franchise, he said.

“Under the very terms of the franchise, the transfer of this control is void because of the lack of congressional approval,” Drilon said.

Moreover, the Senate minority leader said the original franchise holder had failed to fulfill its obligation, including operating within a year.

Without franchise

Secretary Eliseo Rio of the Department of Information and Communications Technology (DICT) said that during its exercise of due diligence, it obtained a letter from Congress saying the franchise was valid.

Rio said the matter would be resolved during the post-qualification process.

The transfer of Mislatel ownership to the consortium was approved by the House of Representatives last December. It is pending approval in the Senate.


Sen. Grace Poe, who chairs the committee on public services, said the DICT should have looked into the validity of the company’s franchise.

Duterte pushed for the selection of a third carrier to break the duopoly of PLDT Inc. and Globe Telecom, and improve internet service.

At the hearing, Uy said his companies were operating on the highest standard of accountability and that Mislatel had passed scrutiny before being selected.

“We want to assure the committee and the public that Mislatel did not violate any rules, and it would do everything to protect the security of the Philippines,” he said.

Mislatel wants to be the “best telco” that offers fast, affordable and secure service, according to Uy.

‘Preferential treatment’

Sen. Antonio Trillanes IV charged that Uy was given preferential treatment in the selection of the third carrier.

Trillanes said Uy had given P30 million to Duterte’s 2016 campaign, while his wife Cherylyn had donated P1 million. Other officers of Chelsea Logistics donated amounts ranging from P150,000 to P3.5 million.

The Davao-based Uy admitted to being friends with Duterte and his former special assistant, Christopher Go, now a senatorial candidate.

Cabinet men on Uy plane

Trillanes also said Uy was joined on his private plane by Executive Secretary Salvador Medialdea, Finance Secretary Carlos Dominguez III, and National Security Adviser Hermogenes Esperon Jr. sometime in 2018 when the process for the selection of the third carrier was going on.

Dominguez also stayed in Uy’s house in Baguio City, Trillanes said.

Uy did not dispute this.

All three officials are members of the oversight committee involved in the selection process.

“It’s oozing with preferential treatment or, worse, cronyism,” he said.

There is a conflict of interest, as well as graft and indirect bribery, he added.