NTC to release 3G spectrum terms shortly

The Philippine National Telecommunications Commission (NTC) is planning to release the final terms of reference for 3G spectrum that was returned by Philippine Long Distance Telephone (PLDT) last year, the Philippine Daily Inquirer reports.

MANILA, Philippines – The National Telecommunications Commission (NTC) is set to release next week the Terms of Reference (TOR) for the auction of 3G (third generation) license earlier surrendered by Connectivity Unlimited Resource Enterprises Inc. (CURE).

“We are in the final stages of finishing the TOR. We are just settling some items. Most likely, we can issue the same next week,” NTC commissioner Gamaliel Cordoba said.

Bidders should possess congressional telecom franchises, with the financial capability to undertake this capital intensive service offering, said NTC deputy commissioner Carlo Jose Martinez.

Martinez pointed out that not all telco firms, particularly new entrants, may qualify. “A new entrant may not have a good background to speak of simply because it is new to the business. We don’t want to risk that and someday learn that this new entrant, presumably it will in the auction, had sold the frequencies to someone else,” he said.

Aside from the TOR, the NTC is also working on the bid floor price, which includes the recovery cost of the spectrum’s previous authorized user.

Cordoba said the agency is currently verifying the financial records submitted by Philippine Long Distance Telephone Co. (PLDT), which owned CURE.

When the NTC approved PLDT’s acquisition of Digitel, the agency said that in exchange for giving up CURE’s 3G license the phone giant can recover its investment in acquiring, developing and operating CURE, including, among others, the $10 million acquisition price of the company and its P65 million annual spectrum users’ fee.

According to PLDT, CURE’s 3G spectrum should fetch a minimum bid price of P2.125 billion. The price includes the total cost of equity investments in CURE; advances from Smart Communications Inc. for operating requirements; advances from stockholders and associated funding costs.

The phone giant also wants the winning bidder to shoulder costs stemming from any taxes due on the transaction and its incidents, including capital gains tax, documentary stamp tax, value added-tax and withholding tax.

Globe Telecom Inc. and the telco affiliates of the San Miguel Corp. have expressed interest to participate in the auction.

CURE’s value

Based on PLDT’s computation, advances from Smart Communications, Inc. amount to just over P936 million. However, CURE applied the proceeds of the short-term investment in the mount of P45 million against its liability to Smart. After deducting such proceeds, CURE’s net liability to Smart stands at around P891 million.

Meanwhile, advances from stockholders amount to P335 million. However, in addition to this amount, the PLDT group needs to recover investment cost paid in 2008 by Smart for its acquisition of CURE in the form of capital stocks in PH Communications Holdings Corp. and Francom Holdings Inc. in the amount of P419 million.

“In sum, the CRA should be at least P2.125 million to enable the PLDT group to recover its investment in CURE,” said PLDT.

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