DITO Telecommunity:

Boon or Bane for the

Philippines?
Prepared by:

Stratbase ADR Institute for

Strategic and International Studies,
The Philippines
2021
The Stratbase ADR Institute for Strategic and International
Studies (ADRi) is an independent international research
organization focused on the in-depth analysis of economic,
social, political, and strategic issues influencing the Philippines
and the Indo-Pacific region. In the age of geopolitical
uncertainties and technological advancements, ADRi gives
equal importance to the interdependent nature of states,
sectors, and stakeholders in its strategic analyses and
solutions design.
 Photo by Christina Telep / Unsplash
Introduction
Filipinos are so enamored with digital technology that the average user spends nine hours and 45
minutes online daily—among the highest in the world.1 Still, the digital divide in the Philippines is vast:
some 60 percent of households do not have access to the Internet, and some 30 percent do not have
access to a high-speed mobile network. 2

The country’s connectivity issues have been blamed historically on the lack of competition. Indeed, the
telecommunications sector has been dominated for years by the duopoly of Globe Telecom and Smart
Communications.

Dropped calls. Unstable connections. Relentless spam. Slow-loading web pages. Short-lived prepaid, or
“load value,” plans. Misleading terms in Internet service packages. What began in the early 2000s with
steady complaints from subscribers morphed into criticism of the availability and quality of telecom
services nationwide by 2012. Even the state Commission on Elections blamed weak signals for delays in
the reporting of results. 3

1 Jimbo Gulle, “Pinoys spend 10 hours online, 4 hours on socmed,” Manila Standard, February 1, 2020 https://manilastandard.net/news/
national/316243/pinoys-spend-10-hours-online-4-hours-on-socmed.html
2 Christina Mendez, “Duterte seeks Philippine growth through global digital economy”, PhilStar, May 23, 2021 https://www.philstar.
com/headlines/2021/05/23/2100232/duterte-seeks-philippine-growth-through-global-digital-economy; Louie Montemar, “The Need
for a stronger Philippine ICT Infrastructure,” Rappler, June 25, 2021 https://www.rappler.com/voices/imho/opinion-need-stronger-
philippine-information-communications-technology-infrastructure
3 Philip Tubeza, “Brillantes blames telcos anew for failure to transmit results,” Inquirer.net, May 24, 2013 https://newsinfo.inquirer.
net/414315/brillantes-blames-telcos-anew-for-failure-to-transmit-results

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By 2016, then-presidential candidate Rodrigo Duterte had seized on public discontent with the telecoms
by pledging that, should he win the election, Filipinos could expect true competition in the sector
through the entry of a third operator.4

While Globe and Smart attacked each other with accusations of cut-throat promotions and illegal use of
frequencies, Duterte won the presidency—reportedly extending to China the opportunity to become
the third telecommunications player in November 2017. 5

While the introduction of a third operator was seen by Filipinos as a welcome development—and the
fulfillment by Duterte of a campaign promise—telecom industry experts cautioned that the preferential
treatment afforded to China was creating a collateral issue: the potential compromise of national security
in the Philippines. 6 Senator Ana Theresia Hontiveros, one of only two senators who opposed the third
company’s franchise, said the extension puts the Philippines at considerable risk of cyber intrusion by
China: “DITO seems merely the Filipino mask over China Telecom.”7

Nevertheless, Duterte directed government agencies to ensure that the new player would be “up and
about” by early 2018. 8 After a complicated bidding process fraught with allegations of cronyism and a
lack of transparency, Duterte awarded a Certificate of Public Convenience and Necessity (CPCN) to
DITO Telecommunity Corporation (DITO) in 2019.

Originally known as the Mislatel Consortium, DITO is owned by China Telecom Corporation and two
Philippines-based companies founded by Dennis Uy, a major financial backer of Duterte.

DITO launched in March 2021 in the Mindanao and Visayas island groups. As of September 2021, the
third telecommunications company (telco) reportedly had spread into 233 cities and municipalities
across the country and was expected to expand into another 53 service areas by October.9

As competition heats up, access improves, and prices fall, a major question remains: What are the long-
term consequences of giving a Chinese company access to Philippine military bases during a territorial
dispute between the two countries in the West Philippine Sea?

In short: Is DITO Telecommunity a boon or bane for the Philippines?

4 “Duterte’s 30 Promises,” Inquirer.net, accessed October 2020 https://www.inquirer.net/duterte/promises/

5 Darwin Amojelar, “Smart files on Globe, Altimax frequency misuse,” Manila Times, September 9, 2011 https://www.manilatimes.
net/2011/09/09/business/business-top/smart-files-case-on-globe-altimax-frequency-misuse/721456; Miguel Camus and Philip C.
Tubeza, “Duterte offers China 3rd telco carrier slot,” Inquirer.net, November 21, 2017 https://newsinfo.inquirer.net/946465/duterte-
offers-china-3rd-telco-carrier-slot
6 “Study looks into Dito-Chinatel risks,” The Associated Press, October 30, 2020 https://apnews.com/press-release/globe-newswire/
technology-business-greater-china-industrial-products-and-services-philippines-2fa671f6c284f549e14e4ea8d6be7b05
7 Bernadette Tamayo,“Senate renews Dito’s 25-year franchise,” Manila Times, March 24, 2021 https://www.manilatimes.net/2021/03/24/
news/senate-renews-ditos-25-year-franchise/855014
8  Trishia Billones, “Duterte wants third telco player ‘up and about’ by early 2018,” ABS-CBN News, December 19 2017 https://news.
abs-cbn.com/business/12/19/17/duterte-wants-third-telco-player-up-and-about-by-early-2018
9 Lismet Esmael, “DITO targets to launch fiber-like broadband service using 5G network in Q4”, CNN Philippines, September 9, 2021
https://www.cnnphilippines.com/business/2021/9/9/DITO-targets-to-launch-fiber-like-broadband-service-using-5G-network-in-Q4-.
html

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The Players
Globe Telecom is currently the largest telco in the Philippines, with a mobile subscriber base of
76,645,567 in 2020.10 As of September 2020, its principal stockholders were: Asiacom Philippines, Inc.
(51 percent), Singtel Group (20 percent), and Ayala Corporation (13 percent), with the remaining shares
held by the public (16 percent) and company executives.11 Because Asiacom Philippines is an investment
holding company majority-owned by Ayala, the company’s share is effectively 64 percent.12

Smart Communications is the second largest operator, with a subscriber base of 72,933,839 in late
2020.13 The company is a wholly-owned subsidiary of PLDT, Inc., formerly known as the Philippine Long
Distance Telephone Company and the country’s oldest and largest telecom.14

Dito Telecommunity Corporation (DITO), formerly known as Mislatel Consortium is a joint-venture

company comprised of China Telecommunications Corporation (40 percent), Udenna Corporation (35
percent), and Chelsea Logistics and Infrastructure Holdings Corporation (25 percent).

According to publicly available documents, the key officials in DITO are:

Chairman and CEO : Dennis Uy

President : Ernesto R. Alberto
Chief Administrative Officer : Adel A. Tamano
Chief Technology Officer : Rodolfo Santiago Jr.

Udenna Corporation is described on its website as:

the parent company of the Udenna Group of Companies. It is in the business of distribution
and retail of petroleum products and lubricants under the Phoenix brand. It is also engaged in
shipping and logistics through its majority-owned subsidiary, Chelsea Logistics and Infrastructure
Holdings Corp. In recent years, the continued expansion of the group has allowed Udenna
to grow exponentially and diversify its business portfolio to include property development,
education, food, gaming, tourism, infrastructure, and telecommunications.15

10 Securities and Exchange Commission SEC Form 17-C of Globe Telecom, Inc., accessed October 20, 2021 https://www.globe.com.
ph/content/dam/globe/brie/About-us/investor-relations/documents/SEC-PSE-Disclosures/2020/Quarterly/Quarterly-Results-Press-
Release/GLO-4Q20-Press-Release.pdf
11 Globe Telecom, “Shareholding Structure,” accessed October 2020 https://web.archive.org/web/20201115171251/https://www.
globe.com.ph/about-us/corporate-governance/shareholding-structure.html
12 Ayala holds 60 percent of shares in Asiacom Philippines. The other 40 percent of shares are held by Singtel. Globe Telecom,
Form 20-F, as filed with the U.S. Securities and Exchange Commission on March 31, 2004 https://www.sec.gov/Archives/edgar/
data/1096692/000119312504054707/d20f.htm.
13 PLDT Certification, accessed October 2021 https://www.pldt.com/docs/default-source/annual-reports/phil.-sec-form-17-a/pldt-inc-
_2020-sec-form-17-a_29march2021.pdf?sfvrsn=2
14 PLDT Smart Foundation, “About us,” accessed October 2020 https://www.pldtsmartfoundation.org/about
15 Udenna Group, “About Udenna,” accessed October 2020 https://www.udenna.ph/about-us

DITO TELEC OMMUN IT Y: 5

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Chelsea Logistics and Infrastructure Holdings Corporation is described on its website as:

the biggest shipping and logistics company in the Philippines, operat[ing] through its wholly-owned
subsidiaries and its associates: Chelsea Shipping Corp., Trans-Asia Shipping Lines, Inc., Worklink
Services, Inc., Starlite Ferries, Inc., SuperCat Fast Ferry Corporation, and 2GO Group, Inc.16

Dennis Uy, a businessman based in Davao City — Duterte’s hometown — founded both Udenna and
Chelsea. He is CEO and chairman of Udenna and chairman of Chelsea.17

State-owned China Telecom is described on its website as:

China Telecom Corporation Limited (“China Telecom” or the “Company,” a joint-stock limited
company incorporated in the People’s Republic of China with limited liability, together with its
subsidiaries, collectively the “Group”) is a large-scale and leading integrated intelligent information
services operator in the world, providing wireline & mobile telecommunications services, Internet
access services, information services, and other value-added telecommunications services
primarily in the PRC.18

In late 2019, China Telecom reported a mobile subscriber base of about 336 million and a wireline
broadband subscriber base of about 153 million. The company reportedly has about 111 million access
lines in service.19 Ke Ruiwen is listed as the Chairman and CEO, while Li Zhengmao is the President and
Chief Operating Officer (COO). China’s government controls China Telecom. 20

Case Study Timeline

In 1928, the Philippine Long Distance Telephone Company, now known as PLDT, Inc., was
incorporated. 21 In 1935, Globe Wireless Limited joined the sector. 22 In 1992, Globe Wireless changed
its name to Globe Telecom, Inc., and the following year welcomed Singapore Telecom, Inc. as a
foreign par tner. 23 In 1995, President Fidel V. Ramos signed into law Republic Act No. 7925 (The Public
Telecommunications Policy Act of the Philippines), par t of an ambitious effor t to break up monopolies
in state-regulated industries.

16 Chelsea, “Who We Are,” accessed October 2020 https://www.chelsealogistics.ph/who-we-are/

17 Chelsea, “Dennis A. Uy,” accessed October 2020 https://www.chelsealogistics.ph/portfolio/dennis-a-uy/; Udenna, “Dennis Uy,”
accessed October 2020 https://www.udenna.ph/board-of-directors/dennis-uy
18 China Telecom, Overview, accessed October 2020 https://www.chinatelecom-h.com/en/company/company_overview.php
19 “Annual Report 2019,” China Telecom, accessed October 2020 http://ar2019.chinatelecom-h.com/reports/china_telecom/
annual/2019/gb/English/1010/-about-china-telecom.html
20 Ralf Rivas, ”Fast Facts: Mislatel, the new major telco player,” Rappler, February 6, 2019 https://www.rappler.com/business/things-to-
know-about-mislatel-new-major-telco-player-philippines
21 “PLDT Company Timeline”, accessed September 2021 http://www.pldt.com/about-us/company-timeline
22 Ralf Rivas, “Manny Pangilinan, PLDT’s most valuable player, passes the ball,” Rappler, June 8, 2021 https://www.rappler.com/business/
manny-pangilinan-legacy-pldt-telecommunications-industry
23 “Company Information: Globe Telecom, Inc.” PSE Edge, accessed September 2021 https://edge.pse.com.ph/companyInformation/
form.do?cmpy_id=69

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Although the new law was intended to open the telecom sector to private players in a bid to improve
services, the bureaucratic landscape did not favor new players. 24 The Constitution limits foreign
investment in the telco industry to 40 percent. 25 Private players must obtain a legislative franchise, a
process that takes an average of five years. A franchise in this case is granted by Congress for an entity to
engage in telecommunications service, while the CPCN is granted by the National Telecommunications
Commission that allows an entity to install, operate, and maintain public telecommunications facilities
and services. 26 New players also needed to navigate the country’s complex web of licenses, permits,
and CPCNs. 27

Improvements were slow in coming. Over the ensuing decades it became clear that a stable and
modern digital infrastructure was increasingly necessary to suppor t the country’s rapidly growing
economy, as well as promote global competitiveness. Still, according to the news service Nikkei Asia,
telecom service in the Philippines “was a hair-pulling combination of dropped calls, webpages that
struggled to load, unstable connections, and buffering video broken up by brief spells of pixelated
images. The poor service was a drag on businesses dependent on Internet services. In Asia, the only
country with slower service than the Philippines was Afghanistan, and access costs more than triple
the global average.” 28

In 2016—against the backdrop of a national election, and mounting complaints of inferior and expensive
services—President Benigno Aquino III signed into law Republic Act No. 19844, which created the
Department of Information and Communications Technology (DICT).

That same year, then-candidate Duterte took aim at Globe and Smart, threatening the underperforming
duopoly with greater competition supported by foreign investors. 29 Among his first acts as president,
Duterte in 2016 tasked DICT to develop a National Broadband Plan (NBP) “to respond to the clamor
of the public for faster and cheaper internet.”30

By 2018 Duterte had directed various state agencies, led by the National Telecommunications
Commission (NTC), to select a new telco player according to three criteria: national coverage (40

24 Rivas, 2021
25 Cai Ordinario, “Legislative franchises for telcos should be removed – PIDS study”, BusinessMirror, May 21, 2019 https://businessmirror.
com.ph/2019/05/21/legislative-franchises-for-telcos-should-be-removed-pids-study/
26 Republic Act No. 7925, “The Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery
of Public Telecommunications Services,” accessed October 2020 https://region7.ntc.gov.ph/images/LawsRulesAndRegulations/
RA/RA_7925_Telecomm.pdf ; National Telecommunications Commission, “FAQs – Telecommunications” https://ntc.gov.ph/faqs-
telecommunication/
27 Republic Act No. 7925. “The Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery
of Public Telecommunications Services,” accessed October 2020 https://region7.ntc.gov.ph/images/LawsRulesAndRegulations/RA/
RA_7925_Telecomm.pdf
28 Aurora Almendral, “Crony capital: How Duterte embraced in the oligarchs,” Nikkei Asia, December 4, 2019 https://asia.nikkei.com/
Spotlight/The-Big-Story/Crony-capital-How-Duterte-embraced-the-oligarchs
29 Dharel Placido, “Duterte tells telco firms to shape up,” ABS-CBN News, May 22, 2016 https://news.abs-cbn.com/business/05/22/16/
duterte-tells-telco-firms-to-shape-up
30 Department of Information and Communications Technology, “National Broadband Plan,” 3027, accessed October 2020 https://dict.
gov.ph/wp-content/uploads/2017/09/2017.08.09-National-Broadband-Plan.pdf

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percent), Internet speed (25 percent), and capital expenditures (35 percent). 31 The NTC was established
in 1979 under former President Ferdinand Marcos with the power to regulate the installation, operation,
and maintenance of broadcast stations. The NTC operates under administrative supervision by the
DICT. 32

Ten groups declared intent to participate in the bidding process, but only three submitted bids by
the deadline in the fall of 2018. After two of the bidders were disqualified—ostensibly for incomplete
documents—the telco fell to the remaining bidder, Mislatel Consortium, which would become DITO.

In 2019, Duterte awarded a CPCN to DITO, which officially began operating in the country in March 2021.

By September 2021, DITO passed two technical audits and month-long periods of monitoring to ensure
compliance with the terms of its franchise. 33 Some observers questioned the veracity of the second
audit, citing alleged discrepancies in the data provided by government regulators and independent
analysts. 34

Since then questions about DITO ownership and the legitimacy of its franchise have begun to lose
traction. 35 In fact, the term of DITO’s franchise—originally set to expire in 2023—was extended by
Duterte by another 25 years. 36

The Bidding Process

In 2018, the NTC released Memorandum Circular No. 09-09-2018, which presented Terms of Reference
(ToR) for companies interested in becoming the country’s third telecom operator. 37 Interested companies
could acquire bidding documents at P1 million (USD $20,000) each; ten companies purchased bidding
documents. 38

Table 4 compares the would-be bidders.

31 The selection process for third major telco through bidding was set into motion by the National Telecommunications Commission
(NTC). An oversight committee was instituted by President Duterte by virtue of Administrative Order No. 11, series of 2018 to
assist the NTC. The oversight committee is comprised of representatives from the DICT (Chairperson), the Department of Finance
(Vice Chairperson), the Office of the Executive Secretary, and the National Security Adviser; Aerol John Patena, “Bidding for 3rd telco
set on Wednesday,” Philippine News Agency, November 6, 2018 https://www.pna.gov.ph/articles/1053110
32 Pauline Macaraeg, “Fast Facts: The National Telecommunications Commission,” Rappler, May 6, 2020 https://www.rappler.com/
newsbreak/iq/things-to-know-national-telecommunications-commission
33 Emmie Abadilla, “Infrawatch PH urging NTC to disclose DITO’s 2nd tech audit,” Manila Bulletin, September 20, 2021 https://mb.com.
ph/2021/09/20/infrawatch-ph-urging-ntc-to-disclose-ditos-2nd-tech-audit/
34 Abadilla, 2021
35 Luchi de Guzman, “Senate allows transfer of Mislatel control to Udenna, China Telecom”, CNN Philippines, February 7, 2019 https://
www.cnn.ph/business/2019/2/6/senate-mislatel-udenna-china-telecom-chelsea-logistics.html
36 Azer Parrocha, “Duterte renews DITO Telecommunity franchise for 25 years”, Philippine News Agency, May 18, 2021 https://www.
pna.gov.ph/articles/1140666
37 Republic of the Philippines National Telecommunications Commission, “Rules and Regulations on the Selection Process for a New
Major Player in the Philippine Telecommunications Market,” Memorandum Circular No. 09-09-2018, September 9, 2018 https://ntc.
gov.ph/wp-content/uploads/2018/MC/MC-09-09-2018.pdf
38 Ralf Rivas, “List: Potential 3rd telco bidders,” Rappler, November 5, 2018 https://www.rappler.com/newsbreak/iq/list-potential-3rd-
telco-bidders-philippines

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Table 4. List of companies declaring intent to participate in bidding

Net Income
No. Company General Information
(USD)39

China · Third largest telecom provider in China

Telecommunications $18.1 billion · Listed in the Hong Kong Stock Exchange and the New
1 York Stock Exchange
Corporation (2017) · With 250 million subscribers
(China Telcom) · Ranked 174th in the Forbes Global 2000 list
· Norwegian multinational telco
$13.4 billion · Operates in Scandinavia, Eastern Europe, and Asia
2 Telenor · With 172 million customers worldwide
(2017) · Founded in 1855; with more than 160 years of telecom
experience
· Based in Austria
A1 Telekom (Mobitel · Listed in the Vienna Stock Exchange
3 $5 billion (2017) · With 24 million customers
Holding GmbH) · Operates in Austria, Bulgaria, Croatia, Slovenia, Belarus,
Serbia, and Macedonia
· Subsidiary of the publicly-listed NOW Corporation
4 NOW Telecom $130,000 (2017)
· Specializes in broadband connectivity

$3.1 billion · Consortium with Luis Chavit Singson (LCS)

5 Sear Consortium Group, Mindanao-based Internet provider TierOne
(combined) Communications, etc.

$505,176 · Fiber optic network spans to over 1,000 kilometers and

6 PT&T serves customers in Greater Manila Area, northern and
(net loss, 2017) southern Luzon and Cebu
· Based in Davao
$15.5 million · Holding firm of Dennis Uy for business interests,
7 Udenna Corporation
(2014) including Phoenix Petroleum, Chelsea Logistics Holdings
Corporation, etc.
· Offers end-to-end fiber Internet network in the country
· Owned by Pampanga-based Dennis Anthony Uy
Information not · Has partnerships with Verizon, Singtel, Telstra, Facebook,
8 Converge ICT Netflix, Google, and Sprint for various services
available · Poised to team up with Korea Telecom (KT) which services
about 90% of South Korea’s fixed-line subscribers and 45%
of high-speed Internet users

AMA · Subsidiary of AMA Education System

Information not · Has no digital footprint, but acquired a congressional
9 Telecommunications
available franchise in 2016
Corporation · Foreign partners are undisclosed

Streamtech Information not · Owned by real-estate tycoon Manny Villar

10 · Dropped the bid to focus on internal expansion programs
Technologies available and strategies

Source: Ralf Rivas, “List: Potential 3rd telco bidders”

39 No net income data available for Converge ICT, AMA Telecommunications Corporation, and Streamtech Technologies.

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 Among the ten potential bidders, only three submitted offers on November 7, 2018: Philippine
Telegraph & Telephone Corporation (PT&T); the Mislatel Consortium; and Sear Consortium. The
Mislatel Consortium consisted of two of the potential bidders—China Telecom and Udenna—as well
as Chelsea Logistics and the Mindanao Islamic Telephone Company (Mislatel), which had been granted a
telecom franchise in 1998. China Telecom, Udenna, and Chelsea provided the capital for the bid, while
Mislatel served as the franchise holder.40 Ultimately, PT&T and Sear Consortium were disqualified for
submitting incomplete documents, paving the way for the Mislatel Consortium—now DITO—to be
granted provisional third telco status.41 Issues with the Mislatel franchise are discussed in greater depth
in the following paragraphs.

The Digital Landscape

Availability, Affordability, and Speed of Internet Access

The Inclusive Internet Index, published by The Economist Intelligence Unit, provides “a rigorous
benchmark of national-level Internet inclusion in one hundred countries across four categories:
availability, affordability, relevance, and readiness.”42 In the Inclusive Internet Index 2020 (see Table 1),
the Philippines ranked 63rd in availability among 100 countries, and sixth among nine countries in the
Association of Southeast Asian Nations (ASEAN), excluding Brunei. The Philippines also ranked sixth in
readiness and fourth in relevance.

Table 1. Inclusive Internet Index 2020, ASEAN member countries

Overall Availability Affordability Relevance Readiness

Country
World ASEAN World ASEAN World ASEAN World ASEAN World ASEAN

Cambodia 73 8 66 7 71 7 77 8 92 9

Indonesia 57 5 55 5 61 6 62 6 40 3

Lao PDR 78 9 75 9 73 8 89 9 91 8

Malaysia 35 2 38 3 43 3 33 1 3 1

Philippines 63 6 57 6 82 9 59 4 59 6

Myanmar 67 7 74 8 47 4 69 7 57 5

Singapore 15 1 2 1 29 2 46 3 22 2

Thailand 39 3 29 2 24 1 60 5 69 7

Vietnam 50 4 50 4 48 5 41 2 44 4

Source: Economist 2020

40 “Congress OKs Mislatel’s transfer to Dennis Uy-China Telecom group”, CNN Philippines, May 23, 2019 https://cnnphilippines.com/
business/2019/5/23/Congress-Mislatel-franchise.html
41 “Only Dennis Uy-China Telecom bid qualified, 2 others incomplete”, Rappler, November 7, 2018 https://www.rappler.com/business/
only-dennis-uy-china-telecom-bid-qualified-2-others-incomplete-3rd-telco-player-philippines
42 “The Inclusive Internet Index,” The Economist, accessed October 2020 https://theinclusiveinternet.eiu.com/summary

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While the Philippines hovers in the middle of the pack, overall, among ASEAN members, the country
ranks last in affordability, according to The Economist Intelligence Unit.

Similarly, according to the 2020 Digital Quality of Life (DQL) Index published by Surfshark, an Internet
security company, the Philippines ranked 82nd out of 85 countries in Internet affordability—surpassed
only by Guatemala, Costa Rica, and Albania.43 In Internet stability, the Philippines ranked 77th in the DQL
index.

In 2021, however, the Philippines began to show some improvement in broadband and mobile network
speeds, as well as mobile availability. Average download speeds for fixed broadband increased to 72.56
megabits per second (Mbps) in August from 71.17 Mbps in July, while average download speeds for
mobile networks increased to 33.77 Mbps from 33.69 Mbps over the same period, according to the
Ookla Speedtest Global Index.44 Over the past two and a half years, moreover, mobile 4G availability
has increased to a level approaching the global average of 86.8 percent, according to an OpenSignal
Mobile Network Experience report.45

Table 2. Ookla Speedtest Global Index (August 2021)

Rank
Country Mobile Fixed Broadband
(out of 140) (out of 180)
Brunei 36 105
Cambodia 104 120
Indonesia 112 114
Lao PDR 82 87
Malaysia 89 46
Philippines 73 63
Myanmar 93 139
Singapore 18 1
Thailand 50 5
Vietnam 57 59

Source: Ookla Speedtest Global Index

Internet speeds continue to improve across the board. For the third quarter of 2021, according to
Ookla, the country’s fastest mobile operator was Smart, followed by Globe and DITO, respectively.46

43 “Digital Quality of Life Index,” Surfshark, accessed October 2020 https://surfshark.com/dql2020-slides.pdf

44 Zacarian Sarao, “Ookla claims PH internet speeds improved in August,” Inquirer, September 29, 2021 https://technology.inquirer.
net/112152/ph-internet-speeds-improve-in-august-ookla
45 “Philippines Mobile Network Experience Report April 2021,” OpenSignal, accessed September 2021 https://www.opensignal.com/
reports/2021/04/philippines/mobile-network-experience
46 “Smart’s speed score highest in Q3 – Ookla,” BusinessWorld, October 22, 2021 https://www.bworldonline.com/smarts-speed-score-
highest-in-q3-ookla/

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 Telecommunications Infrastructure

Even though the Philippines consistently ranks low in global digital competitiveness—the International
Institute for Management Development (IMD) ranked the country 57th among 63 countries in 2020—the
standing primarily reflects deficits in know-how and preparedness for the future.47 In terms of investment
in technology, however, the Philippines ranks 10 th in the world in spending as a percentage of GDP.48

Interestingly, such investment is driven almost exclusively by the private sector, notes NTC Commissioner
Gamaliel Cordoba.49

For example, the DICT’s NBP—a state-owned broadband network that would improve Internet quality,
coverage, and affordability—calls for a budget of P18 billion (USD $356 million). In 2020, however, the
DICT was allotted less than P2 billion (USD $40 million) toward the network. 50

The DICT estimated in 2019 that the country needed at least 50,000 more cell towers; experts point
to the low density of cell sites throughout the Philippines as the primary reason for the country’s slow
Internet speeds. 51 Yet even as private-sector operators lined up to fund the construction of the new
towers, DICT Acting Secretary Eliseo Rio Jr. told the Philippine News Agency that efforts were being
hampered by “so much red tape” and “the problem of corruption — under-the-table deals.”52

Rio also pointed toward the high number of permits required to build the towers. Globe Telecom
President Ernest Cu said the company must obtain nearly 30 permits in order to build only one tower,
a process that requires about eight months. 53

According to Gil Genio, Globe’s Chief Technology and Information Officer, the lengthy permit process
can be attributed to the roles of various local government units (LGUs), homeowner associations, and
other stakeholders. 54

Table 3 compares cell sites in the Philippines to select countries in Asia.

47 “IMD World Digital Competitiveness Ranking 2020,” International Institute for Management Development, June 2020 https://www.imd.
org/news/updates/imd-2020-world-competitiveness-ranking-revealed/
48 “PH among Top 10 countries worldwide in telco investments,” Inquirer, October 7, 2020 https://business.inquirer.net/309043/ph-
among-top-10-countries-worldwide-in-telco-investments
49 Ben Rosario, “2-B allocation for Nat’l Broadband Plan cited”, Manila Bulletin, January 4, 2021 https://mb.com.ph/2021/01/04/p2-b-
allocation-for-natl-broadband-plan-cited/
50 Department of Information and Communications Technology, “National Broadband Plan,” 3027, accessed October 2020 https://dict.
gov.ph/wp-content/uploads/2017/09/2017.08.09-National-Broadband-Plan.pdf; “Government’s National Broadband Plan to boost
‘digital inclusion,’” BusinessMirror, January 4, 2021 https://businessmirror.com.ph/2021/01/04/governments-national-broadband-plan-
to-boost-digital-inclusion/
51 Aerol John Patena, “50K additional cell sites needed to improve services: DICT,” Philippine News Agency, January 17, 2019 https://
www.pna.gov.ph/articles/1059240; “More Pinoys Using the Internet; Cost of Mobile Data ‘Cheaper’ in Philippines vs Thailand,” Globe
Newsroom, February 2, 2021 https://www.globe.com.ph/about-us/newsroom/consumer/more-pinoys-using-internet-mobile-data-
cheaper-ph.html#gref
52 Aerol John Patena, “50K additional cell sites needed to improve services: DICT,” Philippine News Agency, January 17, 2019 https://
www.pna.gov.ph/articles/1059240
53 Julie M. Aurelio, “Globe president meets Duterte; blames red tape for lack of cell tower,” Inquirer.net, August 1, 2020 https://newsinfo.
inquirer.net/1315134/globe-president-meets-duterte-blames-red-tape
54 “Putting up cell sites is telco industry’s single biggest challenge,” Inquirer.net, November 21, 2018 https://business.inquirer.net/260913/
putting-up-cell-sites-is-telco-industrys-single-biggest-challenge

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Table 3. Comparative data on cell sites (2018)

No. of Internet Users No. of Cell Sites User-Per-Site

Country
(in millions) (in thousands) Ratio

Philippines 67 16.6 4,036

Indonesia 133 91.7 1,446

Vietnam 64 70.0 914

China 751 1,900.0 384

India 462 1,400.0 316

Source: Globe Telecom

In an effor t to hasten tower construction the DICT issued Depar tment Circular No. 008 in 2020,
which empowered independent companies to build towers and telecom operators to lease them. 55
In addition, the DICT, in conjunction with the Depar tment of the Interior and Local Government,
the Anti-Red Tape Authority, and other government agencies, issued the Joint Memorandum Circular
(JMC) No. 01 in 2021, which aims to streamline the process of securing permits and licenses for cell
tower construction. 56

The latest government measures appear to be working. In 2019, some 1,636 permits for tower
construction were issued to Globe, Smart, and DITO. In 2020—on the heels of the issuance of the
DICT circular—the number of permits jumped to 6,451, an increase of 294 percent. 57

Governance Gaps

The bidding process revealed the following gaps in governance:

1. Lack of Competition/Uneven Playing Field:

The Mislatel Consortium, now DITO, effectively was unopposed—permitted to meet merely
minimum requirements—after competitors PT&T and Sear Consortium were disqualified by the
government over what observers characterized as technicalities.

55 The Philippines Department of Information and Communications Technology, Department Circular No. 008, May 29, 2020 https://
dict.gov.ph/wp-content/uploads/2020/06/Department_Circular_No_008_Policy_Guidelines_on_the_Co_Location.pdf
56 “ARTA, key agencies sign expanded JMC for streamlining of telco towers permitting process,” Anti-Red Tape Authority, July 1, 2021
https://arta.gov.ph/press-releases/arta-key-agencies-sign-expanded-jmc-for-streamlining-of-telco-towers-permitting-process/
57 “Faster issuances of LGU permits result in improved telco infrastructure,” Manila Bulletin, May 31, 2021 https://mb.com.ph/2021/05/31/
faster-issuances-of-lgu-permits-result-in-improved-telco-infrastructure/

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BOON OR B ANE F OR THE PHILIPPIN E S?
 2. Lack of Clarity/Transparency in Bidding Rules:

PT&T, which has operated in regions across the Philippines for some 56 years, was disqualified
after the NTC declined to certify that the company has been operating on a national scale for the
past 10 years. The original ToR, however, require only that bidders carry out the “provisioning,
delivery and operation of telecommunications services for a country, or particular regions
thereof, as geographically designated by the telecommunications authority of that country.”58
The NTC subsequently amended the terms to stipulate that regional operations applied only
to foreign telcos. 59 In other words, foreign firms with regional operations would qualify, but
Philippine firms—such as PT&T—would not. (PT&T would need to operate, too, in the regions
of Luzon, Visayas, and Mindanao to qualify as national, not regional, in scale.) PT&T President and
CEO James Velasquez characterized the ruling as “discriminatory and, in a way, anti-Filipino.”60

3. Legal Challenges:

TierOne and Luis Chavit Singson Group

The venture between TierOne and the Luis Chavit Singson (LCS) Group filed a lawsuit to
disqualify Mislatel. About a year later, DITO and LCS Holdings signed an agreement for the lease
of common towers that the LCS Group will be constructing in key areas of the country.61

Digiphil

Digiphil, on the other hand, sued Mislatel; its chair, Danilo Cor tez; and its president, Nicanor
Escalante, for breach of contract. In the lawsuit, Digiphil asser ted that its agreement with
Mislatel to provide affordable broadband services and also venture into the third telco selection
process included both exclusivity and a right of first refusal, which required Mislatel to seek the
consent of Digiphil before par tnering or selling shares to any other group. 62 It was repor ted
fur ther that a copy of the contract showed that a broad range of activities was covered,
including venturing into “cellular mobile telephony” and “in general any other business or
service that is within the scope of the legislative franchise.”63

58 Republic of the Philippines National Telecommunications Commission, 2018

59 Republic of the Philippines National Telecommunications Commission, “NMP Selection Process,” Clarification/Amendatory Bulletin No.
1, October 11, 2018 https://ncr.ntc.gov.ph/wp-content/uploads/2019/Memorandum_Circulars/2018/MC-09-09-2018-Clarificatory-
Bulletin-No.-01-dated-20181011.pdf; Republic of the Philippines National Telecommunications Commission, “New Major Player
(NMP) Selection Process,” Clarification/Amendatory Bulletin No. 5, October 11, 2018 https://ncr.ntc.gov.ph/wp-content/uploads/2019/
Memorandum_Circulars/2018/MC-09-09-2018-Clarificatory-Bulletin-No.-05-dated-20181029.pdf
60 “PT&T to appeal disqualification in 3rd telco bidding,” CNN Philippines, November 8, 2018 https://cnnphilippines.com/
business/2018/11/07/ptt-motion-for-recosnideration-disqualification-3rd-telco-bidding.html
61 Ralf Rivas, “From rivals to partners: Chavit Singson teams up with Dennis Uy for 3rd telco,” Rappler, October 8, 2019 https://www.
rappler.com/business/chavit-singson-teams-up-with-dennis-uy-dito-telecommunity
62 Miguel Camus, “Chavit group files case against Mislatel,” Inquirer.net, December 12, 2018 https://business.inquirer.net/262079/chavit-
group-files-case-against-mislatel
63 Memorandum of Agreement, DigiPhil, May 30, 2018, http://digiphil.net/mislatel/files/01%20DigiPhil%20+%20Mislatel%20MOA2.pdf;
Camus, 2018

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 NOW Telecom

In October 2018, NOW Telecom filed a request for a temporary restraining order and
injunction against the NTC with the Manila Regional Trial Cour t (RTC) alleging that specific
provisions in the ToR were not discussed during public hearings; there were barriers to entry;
and the selection process was a money-making scheme. The provisions in the ToR at issue
were: the new requirements for a P700-million (USD $13.8 million) par ticipation security, P14
– to P24-billion (USD $276.8 to USD $474.6 million) performance security, and P10-million
(USD $198,000) non-refundable appeal fee. The company said that these requirements could
be declared “onerous, confiscatory, [and] potentially extor tionary.”64 On November 5, 2018,
RTC Judge Dinnah Aguila Topacio dismissed the company’s request for lack of merit. 65

NOW Telecom appealed the ruling, petitioning for certiorari — a judicial review of a lower
court or government agency’s decision. (The company declined to submit a bid, calling the
process “flawed.”66) The Court of Appeals dismissed the petition on March 18, 2019, finding “no
grave and irreparable injury” occurred. 67 The dismissal came two months after Duterte warned
courts not to intervene in the selection of a third telco.68

4. Lack of Transparency in Granting Legislative Franchise:

The third telco required a valid congressional (legislative) franchise before it could begin
operations. 69 Mislatel, which had possessed a legislative franchise since 1998, was poised to
transfer controlling interest to DITO. However, the same law under which Mislatel was granted
the franchise also states explicitly that:

The grantee shall not lease, transfer, grant the usufruct of, sell nor assign this franchise
or the rights and privileges acquired thereunder to any person, firm, company, corporation
or other commercial or legal entity, nor merge with any corporation or entity, nor shall
the controlling interest of the grantee be transferred, whether as a whole or in parts
and whether simultaneously or contemporaneously, to any such person, firm, company,
corporation or entity without the prior approval of the Congress of the Philippines.
Any person or entity to which this franchise is sold, transferred, or assigned, shall be
subject to the same conditions, terms, restrictions, and limitations of this Act.70

The DICT directed the NTC to ensure the transfer had the blessing of Congress before Mislatel
could move forward.

64 “Bidder for third telco sues NTC, calls selection process ‘money-making scheme,’” ABS-CBN News, October 8, 2019 https://news.
abs-cbn.com/business/10/09/18/bidder-for-third-telco-sues-ntc-calls-selection-process-money-making-scheme
65 Ted Cordero, “Court denies Now Telecom’s plea to invalidate provisions in 3rd telco terms of reference,” GMA News Online,
November 6, 2018 https://www.gmanetwork.com/news/money/companies/673738/court-denies-now-telecom-s-plea-to-invalidate-
provisions-in-3rd-telco-terms-of-reference/story/
66 Jomar Canlas, “PT&T Drops Bid, Now Telcom Goes to Appellate Court,” Manila Times, November 8, 2018 https://www.manilatimes.
net/2018/11/08/latest-stories/breakingnews/ptt-drops-bid-now-telcom-goes-to-appellate-court/464365
67 Canlas, 2018
68 Billones, 2019
69 Vanne Elaine Terrazola, “Senate hearing casts doubts on validity of third telco’s franchise,” Manila Bulletin, January 24, 2019 https://
mb.com.ph/2019/01/24/senate-hearing-casts-doubts-on-validity-of-third-telcos-franchise/
70 Emphasis supplied.

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BOON OR B ANE F OR THE PHILIPPIN E S?
 In December 2018, the Committee on Legislative Franchises of the House of Representatives
passed a resolution approving the transfer of Mislatel’s controlling interest to DITO.71 In January
2019, the Committee on Public Services in the Senate conducted a hearing on the compliance
of Mislatel with the conditions of its franchise. During the hearing, Senator Franklin Drilon cited
three potential violations he said could warrant the ipso facto revocation of Mislatel’s franchise:
the absence of congressional approval of a change of ownership of the consortium in 2015; the
failure of Mislatel to begin operations within a year of franchise approval, as required by law; and
the failure of Mislatel to make a public offering of 30 percent of its outstanding capital stock, as
required by law, within five years of the commencement of operations.72

Nevertheless, in February 2019, the Senate authorized the transfer of ownership of Mislatel to
DITO, effectively resolving the legal issues concerning the franchise.73

5. Fairness and Propriety:

The announcement that Mislatel won the bidding to become the third major player in the
telecom industry was received with much criticism and little surprise. After all, the winning bid
was spearheaded by Dennis Uy, the businessman who contributed P30 million (USD $593,222)
to the Duterte presidential campaign, according to Duterte’s Statement of Contributions and
Expenditures (SOCE).74 The statement revealed other campaign donors with links to the Mislatel
consortium who together contributed some P35.55 million (USD $702,968), notably: Cherylyn
Uy, wife of Dennis Uy and treasurer of Udenna Corporation and Chelsea Logistics (P1 million,
USD $19,900); Efren Uy, Chelsea board member (P3.5 million, USD $69,210); Chryss Alfonsus
Damus, the officer-in-charge of Udenna and president and CEO of Chelsea (P500,000, USD
$9,887); Ma. Henedina San Juan, corporate secretary for both Udenna and Chelsea (P400,000,
USD $7,910); and Ignacia Braga IV, vice president for finance at both Udenna and Chelsea
(P150,000, USD $2,966).75

Former Senator Antonio Trillanes IV referred to the selection of Mislatel as “oozing with
preferential treatment and, at worst, cronyism.”76

Arguably, most of these observations regarding the connection between contributions and
crony capitalism are circumstantial and by themselves—financially suppor ting a presidential
candidate at the time of a campaign, for instance—do not necessarily constitute graft or
corruption. Indeed, there is nothing criminal about being friends with someone who is elected
president. However, the issues here involve propriety and fairness. As early as 2017, Duter te

71 “Concurrent Resolution Approving the Transfer, Sale, or Assignment of the Controlling Interest of Mindanao Islamic Telephone
Company, Inc.” December 18, 2018 https://legacy.senate.gov.ph/lis/bill_res.aspx?congress=17&q=HCR-23
72 “Drilon: Mislatel franchise ‘deemed revoked’ due to ‘patent violations,’” PhilStar, January 24, 2019 https://www.philstar.com/
business/2019/01/24/1887808/drilon-mislatel-franchise-deemed-revoked-due-patent-violations
73 “SolGen urges SC to junk PT&T petition vs 3rd telco bidding,” ABS-CBN, March 26 2019 https://news.abs-cbn.com/business/03/26/19/
solgen-urges-sc-to-junk-ptt-petition-vs-3rd-telco-bidding
74 Michael Rueza, “Who’s who in Duterte’s poll contributors list,” Rappler, December 9, 2016 https://www.rappler.com/newsbreak/iq/
duterte-contributors-list-2016-presidential-elections
75 Jamaica Jane Pascual, “Dennis Uy, execs of firms behind third telco, gave P35.55M to Duterte campaign,” GMA News Online,
November 7, 2018 https://www.gmanetwork.com/news/money/companies/673950/dennis-uy-other-execs-of-firms-behind-third-
telco-contributed-over-p35-55m-to-duterte-campaign/story/
76 Ralf Rivas, “Trillanes calls Dennis Uy’s 3rd telco venture ‘cronyism’,” Rappler, January 24, 2019 https://www.rappler.com/business/
trillanes-calls-dennis-uy-3rd-telco-venture-cronyism

D I TO T E L E C O M MU N I T Y :
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 offered China the privilege of a license.77 ChinaTel par tnered with Dennis Uy to eventually
become the only qualified bid. While there was a bidding process, some circumstances
behind it—though not conclusively proving that it was maneuvered in favor of the Mislatel
consor tium—indicate it was not entirely above board, as indicated in the previous sections.

Furthermore, these allegations of cronyism simply contradict Duterte’s populist persona. In his
presidential campaign in 2016, he would call ruling families “cancers on society” and “illustrious
idiots” for flying around in their private planes while the Filipino people suffered.78 Duterte has
also repeatedly rallied against the abuse and inefficiencies of big corporations.79 Upon Mislatel’s
selection for the bid, however, it became easier for oppositions to point to how Duterte’s
attacks on the existing telecom companies are merely a part of his theatrics to advance a new
wave of businessmen and give loyalists access to lucrative government contracts. 80

Presidential Communications Operations Office (PCOO) Secretary Martin Andanar calls these
alleged cases of cronyism under the Duterte administration as “baseless and “erroneous.” 81
Andanar then reassured that the current administration is committed to enforcing rules and
regulations that would make the country’s business climate “competitive.”’ 82 He even identified
the administration’s plan to amend the 1987 Constitution on business ownership to open up the
Philippine economy more to foreign investments. 83

The allegations, however, have proven to be difficult to dismiss, especially with how the
telecom industry has observably favored DITO. For example, Duter te’s threat to shut down
Globe and Smar t in 2020 has led to a nearly 11 percent increase of the shares of the holding
company for DITO. 84 When PT&T, the Sear Consor tium, and NOW Telecom decided to bring
their respective cases before the cour ts in 2017, Duter te’s admonition for the cour ts not to
issue any TROs or injunctions could have been instrumental in the denial of their petitions and
eventual dismissal of the cases that would have put the fate of DITO as the third telco under
serious threat. 85

The common tower policy adopted by the government—where independent contractors may
build cell towers for lease by the telcos—and its mandate to local governments to relax their
processes concerning permits and licensing would contribute significantly to DITO meeting its
national coverage commitment and playing catch-up with the two existing players.

77 Miguel Camus and Philip Tubeza, “Duterte offers China 3rd telco carrier slot,” Inquirer.net, November 21, 2017 https://newsinfo.
inquirer.net/946465/duterte-offers-china-3rd-telco-carrier-slot
78 Aurora Alemendral, “Crony capital: How Duterte embraced the oligarchs,” Nikkei Asia, December 4, 2019 https://asia.nikkei.com/
Spotlight/The-Big-Story/Crony-capital-How-Duterte-embraced-the-oligarchs
79 Almendral, 2019
80 Almendral, 2019
81 Ruth Abbey Gita-Carlos, “Andanar slams Nikkei’s ‘baseless’ report on ‘cronyism’ in PH,” Philippine News Agency, December 7, 2019
https://www.pna.gov.ph/articles/1088167
82 Gita-Carlos, 2019
83 Gita-Carlos, 2019
84 Jon Viktor Cabuenas, “Dito Telecom shares surge; Globe and PLDT plunge following Duterte’s shutdown threats,” GMA News, July 28,
2020 https://www.gmanetwork.com/news/money/companies/748778/dito-telecom-shares-surge-globe-and-pldt-plunge-following-
duterte-s-shutdown-threats/story/
85 Cabuenas, 2020

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BOON OR B ANE F OR THE PHILIPPIN E S?
 Under the Policy on Shared Passive Telecommunications Tower Infrastructure (PTTI), the DICT
encourages the growth and development of Independent Tower Companies (ITCs) to spearhead
the genesis and development of a robust ICT environment of Shared PTTIs in line with their
ultimate objective of enhancing wireless network coverage and quality of ICT services across the
country. It seeks to widen the base of tower providers to fast-track the deployment of Shared
PTTIs across all regions of the country, especially in the unserved and underserved areas. 86

The construction of more common towers will also allow telcos to free up their capital allocation
for the construction of towers and instead redirect it to other strategic investments and projects.
Taking advantage of DICT’s initiative to open the sector to ITCs, PLDT, Globe, and DITO have
sealed deals with tower contractors.

6. Threat to National Security:

Fears over cybersecurity vulnerabilities, even espionage, surfaced after National Defense
Secretary Delfin Lorenzana signed a memorandum of agreement (MOA) between the Armed
Forces of the Philippines (AFP) and DITO in the fall of 2020, giving the green light to the
operator to install network infrastructure in military bases. 87 The Duterte administration has
repeatedly defended the agreement by citing similar agreements between operators Globe and
Smart and their respective foreign partners, Singapore Telecommunications and Japan’s NTT
Group. In response to concerns over possible breaches in cybersecurity, DITO has emphasized
that it is a Filipino firm, further stressing that it “will not and shall not comply with” the China
National Intelligence Law. 88 These assurances, however, have failed to satisfy critics who have
strong concerns about the potential threat to the national security and sovereignty posed by the
Philippines DITO’s ties with China.

China’s Commercial Interest in the Philippines

Reputedly, Ambassador of the People’s Republic of China to the Philippines Huang Xilian
presented statistics to convey an uptrend in the commercial activities between China and
the Philippines in a public statement on the for ty-fifth anniversary of the establishment
of diplomatic ties between China and the Philippines on July 23, 2020. Huang cited USD
$3.11 billion wor th of Chinese projects in the Philippines from January to May of 2020. 89
According to the ambassador, China remains the Philippines’ largest trading par tner, with
bilateral trade reaching USD $19.37 billion for the same period.90 Moreover, Xilian repor ted
that China’s foreign direct investments in the Philippines increased in 2020 by 82.5 percent.91

86 Republic of the Philippines Department of Information and Communications Technology, “DICT Releases Guidelines for the
Common Tower Policy,” June 9, 2020 https://dict.gov.ph/dict-releases-guidelines-for-the-common-tower-policy/
87 Frances Mangosing, “Lorenzana says he signed deal to let China-backed Dito telco build cell sites in military camps,” Inquirer.net,
September 8, 2020 https://newsinfo.inquirer.net/1332892/lorenzana-says-he-signed-deal-to-let-china-backed-dito-telco-build-cell-
sites-in-military-camps#ixzz7Drr6tJeq
88 Lisbet Esmael, “DITO seen clashing with Globe, Smart,” Manila Times, December 26, 2020 https://www.manilatimes.
net/2020/12/26/ business/business-top/dito-seen-clashing-with-globe-smart/817663
89 Gillian Ropero, “More Chinese projects in PH seen to ‘upgrade’ nations’ ties: envoy,” ABS-CBN News, July 21, 2020 https://news.abs-
cbn.com/news/07/21/20/more-chinese-projects-in-ph-seen-to-upgrade-nations-ties-envoy
90 Ropero, 2020
91 Recto Mercene, “China connects to PHL via BRI, digital ‘Silk Road,’” Business Mirror, July 23, 2020 https://businessmirror.com.
ph/2020/07/23/china-connects-to-phl-via-bri-digital-silk-road/

D I TO T E L E C O M MU N I T Y :
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 The ambassador stated that DITO “has now come to the stage of full construction, as work
and production have been proceeding smoothly” and that more China cooperative projects in
the Philippines would be coming.92

Existing Maritime Disputes

Given the political tension created by the maritime dispute between China and the Philippines
and Filipinos’ general mistrust of China, increased skepticism about the entry of China Telecom
could only be expected.93 Thus, when the AFP announced its MOA with DITO to “co-locate
some of its microwave relay and base transceiver stations for mobile communications services
and equipment with that of AFP,” antagonism against the third telco was reignited.94

AFP spokesperson Major General Edgard Arevalo defended the agreement by saying that
stringent requirements on the construction of cell sites and towers would still be imposed.
Arevalo added that access to the camps—during construction and beyond—would also be
stringent. Other assurances were given by Arevalo, such as the possibility of having a third-party
cybersecurity audit; unannounced physical and virtual inspection of the facilities; and a guarantee
from DITO that “it will not allow any of the parties affiliated to them to use the information
obtained from the customers.” 95

Cybersecurity challenges

The strong opposition to the AFP-DITO deal is anchored in the fear of espionage and other
cybersecurity threats, especially given China’s reputation in the cyberspace. Serious concerns
have also been expressed by policymakers on allowing DITO inside vital facilities like military
camps due to the increased risk of China spying on the Philippines.96 AFP spokesperson Major
General Arevalo assured that there is no cause for alarm in allowing DITO to set up facilities
inside military camps, citing similar arrangements that the AFP has with Globe and Smart.97
Globe has partnership ties with Singapore’s SingTel and Smart with Japan’s Nippon Telegraph
and Telephone (NTT). However, a significant difference lies in the absence of tensions in the
Philippines’ relations with Singapore and Japan.

Additionally, China’s cyber record is not particularly positive. Crowdstrike, one of the world’s
largest cybersecurity firms, dubbed China as “ahead of Russia as the most prolific nation-state
mounting attacks on firms, universities, government departments, think tanks and NGOs.” 98

92 Mercene, 2020
93 Julie Aurelio, “SWS: Most Filipinos don’t trust China,” Inquirer.net, November 22, 2019 https://newsinfo.inquirer.net/1193117/sws-
most-pinoys-dont-trust-china
94 Martin Sadongdong, “AFP bares agreement with Dito telco on cell sites inside camps,” Manila Bulletin, September 16, 2020 https://
mb.com.ph/2020/09/16/afp-bares-agreement-with-dito-telco-on-cell-sites-inside-camps/
95 Sadongdong, 2020
96 Christia Marie Ramos, “At Dito franchise hearing, senators hit lack of cyber defense plan vs attacks,” Philippine Daily Inquirer, December
8, 2020 https://technology.inquirer.net/106226/at-china-backed-ditos-franchise-hearing-senators-hit-lack-of-cyber-defense-plan-vs-
attacks
97 Jeanette Andrade, “Military allays fears over telco facilities inside camps,” Inquirer.net, September 16, 2020 https://newsinfo.inquirer.
net/1164964/military-allays-fears-over-telco-facilities-inside-camps
98 Charles Hymax, “China is ahead of Russia ‘as biggest state sponsor of cyber-attacks on the West,’” The Telegraph, October 9, 2018
https://www.telegraph.co.uk/technology/2018/10/09/china-ahead-russia-biggest-state-sponsor-cyber-attacks-west/

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 China Telecom has been allegedly involved in the misdirection of large amounts of Internet
traffic to China and is likely to assist China’s government’s “surveillance of Western countries
and companies.” 99 In another report, Robert Limmergård wrote “it is clear that China runs an
elaborate system to scout our technologies, acquire them by all conceivable means and convert
them into competitive products—or military advantages.”100

Even the AFP itself recognizes the high likelihood of spying threats and the resulting damage
posed by its deal, which would allow the China-backed telco to build cell sites in its camps and
bases all over the Philippines.101 Moreover, the risk analysis prepared by the AFP raised the
following points:

1. The cell sites of Globe and Smart inside AFP properties since 1998 pose the same risks.
But, DITO’s direct link to China’s government poses a more imminent security threat.

2. China seeks ownership and control of the West Philippine Sea, while the Philippine
government is tied up in China loans worth billions of pesos.

3. Under China’s National Intelligence Law of 2017, Chinese companies—including

ChinaTel—are required to “suppor t, assist, and cooperate with state intelligence
work” and under the 2017 Cybersecurity Law companies are required to “provide
technical suppor t and assistance to public security organs.”102 The Australian Strategic
Policy Institute notes that for “Chinese citizens and companies alike, par ticipation in
‘intelligence work’ is a legal responsibility and obligation, regardless of geographic
boundaries.”103

4. ChinaTel would have some digital access and control over DITO’s equipment placed
inside military properties and personnel.

The risk analysis document also identified specific vulnerabilities—eavesdropping, interception,

and jamming—of the AFP’s existing wireless communication systems.

News reports quoted an anonymous Philippine intelligence official who raised concerns not
only about the AFP deal but about the presence of a telco that has links to China’s government,
saying that it could pose “irreversible consequences” to national security and is a “recipe for
disaster.”104 The points raised by the anonymous official are as follows:

99 JC Punongbayan, “[Analysis] Disturbing red flags in the 3rd telco selection,” Rappler, November 15, 2018 https://www.rappler.com/
voices/thought-leaders/analysis-red-flags-3rd-telco-player-philippines-selection
100 Swedish Security & Defence Industry Association, “State sponsored cyber attacks,” https://soff.se/wp-content/uploads/2018/03/
Cybersecurity_statsunderst%C3%B6dda-akt%C3%B6rer.pdf
101 JC Gotinga, “Dito, DICT dismiss Chinese spying concerns about deal with AFP,” Rappler, September 27, 2019 https://www.rappler.
com/nation/dito-dict-dismiss-chinese-spying-concerns-about-deal-afp
102 Murray Scot Tanner, “Beijing’s New National Intelligence Law: From Defense to Offence,” Lawfare, July 20, 2017 https://www.
lawfareblog.com/beijings-new-national-intelligence-law-defense-offense; National Intelligence Law, 2017; Rogier Creemers, Paul
Triolo, and Graham Webster, “Translation: Cybersecurity Law of the People’s Republic of China,” New America, June 29, 2018 https://
www.newamerica.org/cybersecurityinitiative/digichina/blog/translation-cybersecurity-law-peoples-republic-china/
103 Samantha Hoffman, “Huawei and the ambiguity of China’s intelligence and counter-espionage laws,” The Strategist, September 13,
2018 https://www.aspistrategist.org.au/huawei-and-the-ambiguity-of-chinas-intelligence-and-counter-espionage-laws/
104 Frances Mangosing, “‘Recipe for disaster’: Intel official warns vs China-backed telco in PH,” Inquirer.net, September 17, 2019 https://
newsinfo.inquirer.net/1165400/recipe-for-disaster-intel-official-warns-vs-china-backed-telco-in-ph

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 1. Several countries, including Australia, the United States, Japan, Taiwan, and New Zealand,
have banned or reconsidered business deals with China’s largest telco and phone
manufacturer Huawei Technologies due to suspicions of potential state espionage.105

2. The Philippines “is not prepared to fight this kind of war.”106 Even the United States, with
the most advanced cybersecurity infrastructure, was not adequately prepared, to the
point that its 2016 elections were undermined. The Philippines, the official said, has weak
cyber defenses and is not ready for complex challenges.

DITO—through its Chief Administrative Officer Adel Tamano—assured the public that the
telco company would protect the national and cybersecurity interests of the Philippines, saying
that “as a Filipino company, in terms of cybersecurity, in terms of national security, DITO will
always make these paramount, and we will never allow any country to violate our national and
cybersecurity.”107

Conclusion

Because telecom services present popular and relatable issues for most Filipinos, it is not difficult to
ride high on promises to make the system better and more affordable. Duterte did just this—capturing
the imaginations of the people and, ultimately, the presidency. Duterte sought a third major player to
break the country’s duopoly and bring about the changes he promised to voters. In 2017, he made his
preference clear, extending to China the opportunity to become a third operator. Toward the end of
2018, the Mislatel Consortium—a partnership between China Telecom and the business conglomerate
founded by one of Duterte’s staunch supporters—was chosen after a controversial bidding process. By
mid-2019, DITO Telecommunity—as Mislatel Consortium would be known—was awarded a CPCN.
DITO launched commercially in March 2021.

However, gaps in governance — coupled with DITO’s partnership with China Telecom — have
tainted otherwise welcome developments. Outwardly, the bidding process appeared routine, but the
disqualification of two of the three bidders on technicalities raises concerns that the outcome was
preordained. While legal remedies were available to disqualified and would-be bidders, formidable
obstacles were thrown in their way: Substantial, non-refundable, court fees were levied on those who
appealed, and Duterte admonished the courts and government agencies not to issue any restraining
orders or injunctions that might interfere in swiftly awarding a franchise to a third operator. Legal
appeals were dismissed and settled, but legal questions were not.

Moreover, questions persist about the unexplained withdrawals of several would-be bidders whose
reputations and technical capabilities might exceed those of the winning bidder.

Some in Congress argued that DITO’s legislative franchise should be revoked because the consortium
failed, as specified by law, to begin operations within one year. After all, PT&T, a Philippine bidder, was
disqualified for not operating nationwide despite regional operations spanning most of the country for

105 Mangosing, 2019

106 Mangosing, 2019
107 Chiara Zambrano, “Will Dito Telecommunity expose Philippines to unhampered espionage?” ABS-CBN News, September 17, 2019
https://news.abs-cbn.com/spotlight/09/17/19/will-dito-telecommunity-expose-philippines-to-unhampered-espionage

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BOON OR B ANE F OR THE PHILIPPIN E S?
 more than 50 years. The Duterte-controlled Congress, however, overlooked the violation of law and
allowed the DITO franchise to stand.

The tenacity with which the government defended the position of Mislatel Consortium during the
bidding process lent credence to claims of cronyism. Such claims were inescapable: Mislatel’s (DITO’s)
controlling interest is held by Dennis Uy, Duterte’s staunch supporter and major campaign contributor.

The most significant cause for concern, however, surrounds the involvement of China. Concerns
encompass much more than just the preferential treatment accorded to the regional power. The
strongest pushback stems from the friction between the Philippines and China over a maritime dispute
in the West Philippine Sea. Moreover, the Duterte administration has gone to extraordinary lengths to
strengthen relations between the two countries as part of what it calls “independent foreign policy.”108
Unclear is the extent to which the national security of the Philippines has been, or will be, put at risk given
China’s uncompromising position in the maritime dispute, its dismal standing in global cyber security,
the general mistrust of China among Filipinos, and the decision to allow China Telecom equipment and
personnel on Philippine military bases.

Moreover, amendments currently under consideration to the Public Services Act of the Philippines—
which, if passed into law, would permit full foreign ownership of public utility companies, including
telecoms—could present such an opportunity to China on a silver platter. Any amendment should
require foreign ownership in critical investments to undergo review by the Philippines National Security
Council.

Government responses to these concerns have been blanket assurances without legal merit. In particular,
spokespersons for DITO and the AFP have pledged never to allow the national security and privacy
of Filipinos to be compromised, but have yet to release details about the measures they are ostensibly
taking in order to uphold the pledge. And what happens when current government officials leave their
positions? Can anyone—even Duterte—truly back up these assurances?

The best way to protect the Philippines is to limit the opportunities to compromise its security.

This paper is founded on the belief that all countries need foreign investment in accordance with their
respective needs, conditions, and intentions, including the need to generate jobs, improve infrastructure,
and spur economic growth. And the investments that the Philippines need most are from reputable
players unlikely to corrode its institutions or democratic way of life.

Finally, simply having a third telco player does not guarantee that the benefits of competition will
materialize. That is, even with a third operator, Filipinos still might experience the same low levels of
service at the same high prices.

Given all these concerns, there is wisdom in rethinking the approach to foreign involvement in the
telecom sector in the Philippines, particularly the role of China Telecom. Whatever benefits, if any,
Filipinos might derive from a third telco player, they will never outweigh the threat DITO poses to
national security.

108 Philstar.com, “Government to pursue independent foreign policy, says Duterte,” Philippine Star, September 10, 2016 https://
www.philstar.com/headlines/2016/09/10/1622357/government-pursue-independent-foreign-policy-says-duterte

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 What is BRI Monitor?

BRI Monitor is a collaborative effort by five civil society

organizations in Southeast Asia and the Pacific: the Institute
for Democracy and Economic Affairs (IDEAS) of Malaysia,
Stratbase Albert Del Rosario Institute (ADRi) of the
Philippines, Sandhi Governance Institute (SGI) of Myanmar,
the Institute of National Affairs (INA) of Papua New Guinea
and the Future Forum of Cambodia to promote transparency
and accountability in major infrastructure projects funded
through the Belt and Road Initiative (BRI) in the region.

These organizations have studied the regulatory environments

governing these large infrastructure projects in respective
countries, including public procurement, official development
assistance, public private partnership (PPP), and more, to
identify regulatory gaps. They have each researched a set of
case studies to identify implementation gaps and governance
gaps. Each case study assesses the level of transparency based
on almost 40 data points, from basic project information to
the tendering process to project completion. Last but not
least, each organization maps out the structure of the projects
in question in order to identify domestic and international
entities involved in the project and to understand the degree
of public financial exposure resulting from each project.

This website is intended to be a platform for the publication

of our research outputs and as a knowledge repository. We
also hope that the website can be used as a platform for
knowledge sharing and a tool to advocate better governance
of major infrastructure projects in the region.

BRI Monitor is supported by the Center for International

Private Enterprise (CIPE).