Find out why China Telecom can only own a 50% interest in DITO

Dennis Uy’s DITO Telecommunity, was largely seen as the primary winner of the effort to liberalize international telecoms investment.

If Congress had permitted his DITO partner, China Telecom, to extend its interest in the third telco carrier above the 40 percent cap on foreign investments, the debt-ridden businessman, who was one of the biggest backers to President Rodrigo Duterte’s campaign, would have earned a significant break.

Unfortunately, according to a source, the final version of the Public Services Act modifications adopted by the Senate and House included a reciprocity provision prohibiting China Telecom from acquiring a majority share in DITO.

Foreign nationals are prohibited from owning more than 50% of telos and other enterprises involved in the operation and management of essential infrastructure under the reciprocity clause unless their home country grants reciprocity to Filipinos. Foreign investment in China’s telecommunications sector is prohibited.

According to the source, the reciprocity provision was included in the Public Services Act revisions especially to prevent Chinese enterprises from being viewed as security concerns.

While Elon Musk’s Space X could own up to 100 percent of the country’s Starlink low-orbit satellite broadband services, Uy will still be responsible for at least half of DITO’s large capital requirements.

Uy won the third telco franchise (after all other competitors were disqualified), but he clearly lacks the financial power to support his 60 percent majority stake, as seen by his recent decision to pass on DITO Holdings CME’s P8 billion stock rights offering. The reciprocity provision, according to the source, has thwarted Uy’s anticipated attempt to sell his stake to China Telecom.

Telecommunications, domestic shipping, trains and subways, airlines, expressways and tollways, and airports were removed from the list of public utilities where foreign ownership is limited to 40% under the Constitution, according to the Public Services Act. The President has yet to sign the new legislation.

Source: Bilyonaryo

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