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A new telco in town? Maybe not

A few days ago, an e-mail with a subject line "Invitation to the exclusive launch of a new telco" greeted me as I opened my inbox. Not knowing the person who sent it, I mistook it first as a spam mail.
Written by Joel D. Pinaroc, Contributor and  Melvin G. Calimag, Contributor

A few days ago, an e-mail with a subject line "Invitation to the exclusive launch of a new telco" greeted me as I opened my inbox. Not knowing the person who sent it, I mistook it first as a spam mail.

I was informed about this launch by a PR firm some time back, but I had completely forgotten it since there was hardly any news (or so I thought) about a certain company wanting to enter the Philippine telecommunications space. And it was stupid, I thought, for a company to even consider going into this type of business when 3G hasn't exactly taken off the ground.

It turned out the invite was for real. As I opened the item, I learned that the event is going to be held next Monday, May 19, at a posh location in Makati City, the country's financial district. It's the coming-out party for CURE, short for Connectivity Unlimited Resource Enterprise, a company that was granted by the government to operate 3G phone services in the country.

CURE raised a lot of eyebrows when it applied and was given a 3G license by the National Telecommunications Commission (NTC) in 2006. Without any infrastructure or track record to speak of, it provoked questions as to why a virtual unknown could possibly get a 3G license alongside established telecom operators such as Globe, Smart and Sun Cellular.

Aside from its odd name, which can lead some people to think that it is in the healthcare business, nothing much is known about this company. It has been shrouded in mystery since bursting into public consciousness with that license win from the NTC.

Its Web site doesn't reveal much either, except to say that--and I was surprised to know this--the company has been around since 2001 when it was granted a telecom franchise by Congress. If that were so, how come no one knew it existed?

I haven't met its top executive, Eric Recto, but some of my colleagues don't seem to have a favorable impression of him. But, in a rare interview Recto gave in 2006 to the Philippine Business magazine after getting its 3G license, he appeared to have made a good case in arguing for the business model of his company.

Let me quote a part of the interview: "I don't think displacing [mobile operators] Globe, Smart and Sun should be an objective. What we want to do is to compete well, and to give them a run for their money. This much you can be sure of, consumers will have a great time choosing which provider they prefer and which content they would like to spend their money on. Not having the same baggage that the other telcos have should give us a platform from which we can be a lot more aggressive and imaginative in terms of how we will approach the market."

That business philosophy, at that time, seemed logical. But the harsh business reality soon caught up with the company. As I burrowed the Internet for information, I learned that its owners, just two weeks ago, sold CURE to dominant mobile operator Smart Communications for 419.5 million pesos (US$10 million). PLDT, the parent company of Smart, said in a statement that it plans to pump in 210 million pesos (US$4.9 million) more to the newly-acquired company as a way of expanding Smart's 3G services nationwide.

That got me confused now. If Smart bought CURE to expand its 3G services, how come CURE is making its debut next week? And what radio frequency will CURE use if Smart plans to utilize it for its own 3G service?

I called up an executive of the public affairs office of Smart Communications for a clarification but she said they, too, are still sorting things out. She said, however, that since CURE has already been bought by Smart, it is likely that CURE will be using Smart's infrastructure to operate its soon-to-be-launched network.

There's a prevailing consensus in the industry, that now seems to be confirmed by CURE's acquisition, that the only reason it applied for a 3G license was to sell it later for a profit. From the very start, industry players have questioned its financial capability to roll out an expensive 3G network. It faced the specter of a sanction by the NTC if it did not implement a rollout by June. Smart somewhat bailed it out by purchasing the company--and not just its 3G license--although Smart has made public its intention to beef up its 3G network.

It's true that CURE has announced its plan to launch its operations even before the acquisition by Smart. But it could also possibly be true that it was already negotiating with Smart during those times, and that's why they had the confidence to go ahead with its launch.

In my view, the problem goes back to the NTC when it decided to award the 3G license to a company that has not demonstrated any financial capability. Well, one can't fault CURE for having big ambition about 3G despite its limitations, but was the NTC expecting investors to come to CURE's rescue once it grants the 3G license?

A new telco in town by next week? Well, not exactly.

On a separate note, in my previous blog, I mentioned that PSIA (Philippine Software Industry Association) event that I attended three weeks ago was sponsored by Morph Labs. Actually, it was hosted by Exist Global.

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