Photo from PCOO.
FOR ALL his tough talk against corruption, President Rodrigo Duterte makes no effort to mask the rampant cronyism in his administration. Among the presidents favored cohorts, the Davao businessman, Dennis Uy, is a major player behind the consortium, the Mindanao Islamic Telephone Company, Inc. (Mislatel).
Media dutifully reported what official sources said about the franchise awarded to Mislatel as the third telco; but coverage failed to inform the public about the presidents link to one of its owners.
The omission is a grave lapse in editorial judgment, missing an important issue that affects the context of the award. Uy was a major donor to Dutertes presidential campaign. Media should have taken the cue from Sen. Antonio Trillanes who raised the possibility of preferential treatment in the selection process, noting Uys close ties with the president. Reports seemed oblivious to a number of potential issues, among them, conflict-of-interest, cronyism and corruption.
CMFR monitored the broadsheets Manila Bulletin, Philippine Daily Inquirer and The Philippine Star; the primetime newscasts 24 Oras (GMA-7), Aksyon (TV5), News Night (CNN Philippines) and TV Patrol (ABS-CBN 2); as well as selected news websites from November 7, 2018 to February 6, 2019.
The owner of Udenna and Chelsea corporations, two major shareholders of Mislatel, Uys high profile is based only on his winning the race for the third telco service. But little else is known about the businessman from Davao. His sudden rise as a big player should have stoked medias curiosity about his background. The relative silence of the media on his background is disturbing.
CMFR notes the media organizations that provided more information about Uys remarkable rise to national prominence.
In November 2018, Inquirer.net published a report that cited Dennis Uys Bloomberg profile which included his ownership of several companies and his buyout of more companies, including FamilyMart convenience store chain and Contis Holdings Corp.
Rapplers January 2019 report noted that Uy had gone on a buying-spree of companies from oil, shipping, real estate, food, utilities, gambling to telecommunications. The report also cited a finance expert who said Uys connection to the president has allowed Udenna Corp. to acquire loans from banks despite its high debt-to-equity ratios. Udenna has at least 3 loans that have breached loan terms, yet they were still granted the funds, as banks assessed their ability to pay off loans on time and good relationships with banks. "It's a gray area, and banks are betting on Uy. It helps that he's close with Duterte," the source said.
Closer to the Telco Deal
Philstar.com gets into more detail about the deal itself. Uy teamed up with state-run China Telecom to form the Mislatel Group. Under their consortiums structure, Mislatel acts as the franchise holder, Udenna and Chelsea Corp. own 35 percent and 25 percent, respectively, while China Telecom holds a 40-percent share. China Telecom, a government corporation of China-a country that has illegally occupied the West Philippine Sea owns sizable shares in the consortium.
While the Palace claimed the president had no hand in the bidding, a report in the pcoo.gov.ph, the official website of the Presidential Communications Operations Office (PCOO) showed that as early as November 2017, Duterte had already approached the Chinese government about the possibility of its involvement in a third telco.
The same report also cited the statement of then Presidential Spokesperson Harry Roque: During the bilateral talks between President Duterte and the Chinese Premier, President Duterte offered to the Peoples Republic of China the privilege to operate the third telecoms carrier in the country.
Rappler reported that Senate President Pro Tempore Ralph Recto had pointed out that China may be able to acquire a controlling stake once Congress relaxes ownership limits under the Public Service Act which aims to increase competition and provide better services by reforming the foreign equity rule. Under the existing Foreign Investments Act of 1991, foreign ownership is limited to a maximum of forty percent, which is currently China Telecoms share in the Mislatel consortium.
Dutertes bias for his campaign donor and state-owned China Telecom is the foremost example of his cronyism. But the presidents assurance of participation for China or Chinas companies in the field of telecommunication should raise questions about the role of the Chinese government in the countrys political economy.
Medias function as watchdog should engage reporters in the examination of business ventures that rely on government connections as this can constitute abuse of government power.
November 19, 2018
Mislatel was awarded rights to operate as the third major telecommunications company after the disqualification of both its rivals, Philippine Telegraph and Telephone Corp (PT&T) and Sear, which includes former Ilocos Sur Gov. Luis "Chavit" Singson.
January 24, 2019
In a Senate hearing, Minority Leader Sen. Franklin Drilon pointed out that Mislatels franchise should be deemed revoked because it violated some of its conditions.
Drilon was referring to RA 8627, which granted Mislatel its franchise in April 19, 1998, stating that the franchise shall be deemed ipso facto revoked if it fails to commence operations within one year from the approval of its permit by the National Telecommunications Commission (NTC). Having never operated, Mislatel, said Drilon, directly violated that condition, which ipso facto revokes its franchise. Drilon added that Mislatel violated another condition in its franchise in 2015 when it transferred 70% of Mislatels shares without Congressional approval as the law required.
Drilon also criticized the National Telecommunications Commission for failing to exercise due diligence in the selection process, noting that it awarded a long-term contract to Mislatel whose 25-year franchise will expire in 2023.
In the same hearing, the Integrated Bar of the Philippines (IBP) shared Sen. Drilons view. IBP National President Atty. Abdiel Dan Fajardo said, "These have legal effect. In Black's Law Dictionary, ipso facto means by the very fact. Therefore, we are of the belief, at the present time, that such be considered with respect to the status of the winning bidder."
February 6, 2019
The Senate adopted House Concurrent Resolution No. 23 as a cure to the questionable franchise.