China Telecom, local tycoon’s joint bid poised to win Philippine telco license

Two other bids were rejected due to technical reasons. (File/AFP)
Updated 07 November 2018
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China Telecom, local tycoon’s joint bid poised to win Philippine telco license

  • Duterte had repeatedly expressed a preference for a Chinese telecoms firm to enter the Philippines
  • There were only two rival bids to Mislatel’s, from local companies, but both were rejected by the telecoms regulator for being incomplete

MANILA: A consortium of China Telecom and firms controlled by a Filipino tycoon appeared poised on Wednesday to win the Philippines’ third telecoms license, after two rival bids were rejected and foreign players tipped to participate opted out.
State-controlled China Telecom joined businessman Dennis Uy, whose interests include real estate, energy, shipping and logistics, under a consortium called Mislatel, hoping to win the right to challenge existing players Globe Telecom and rival PLDT.
The third license, which could be awarded by year-end, comes at the behest of Philippine President Rodrigo Duterte and aims to boost the country’s notoriously patchy services and end a domestic duopoly long accused of being uncompetitive.
Duterte, who has made strong business ties with China his top foreign policy priority, had repeatedly expressed a preference for a Chinese telecoms firm to enter the Philippines, and even verbally “offered” the license to Chinese Premier Li Keqiang.
Uy’s ties to the president are well known and he was a contributor to his 2016 election campaign, hailing from Davao, the city where Duterte was mayor for 22 years.
South Korea’s KT Corp. issued a statement with Philippine firm Converge ICT confirming they had decided against bidding, while Vietnam’s Viettel, which in August confirmed its interest in the Philippines, said it would not contest.
Norway’s Telenor had bought bid documents but did not enter the contest.
There were only two rival bids to Mislatel’s, from local companies, but both were rejected by the telecoms regulator for being incomplete.
The two disqualified bids were from Philippine Telegraph & Telephone Corp. and a consortium of TierOne and LCS Group. Both bidders said they would appeal the regulator’s decision.
Foreign firms are required by law to join a consortium due to a 40 percent ownership cap in a local telecoms outfit, which experts say has limited competitiveness in a sector worth about $5 billion a year in revenue.

Lucrative market
Analysts see the Philippines and its 105 million people as a potential growth market due to its thriving business process outsourcing sector and its underdeveloped mobile and fixed-line services, which consumer groups have complained are unreliable and expensive.
Both Globe and PLDT’s mobile unit, Smart, say they have been investing big in boosting network coverage — $950 million and $1 billion respectively this year — but are constrained by weak regulations that make acquiring permits for building infrastructure a painstakingly slow and complex process.
Telecoms Minister Elizeo Rio recently told Reuters moves are underway to streamline that, introduce tower-sharing requirements and eventually, raise foreign ownership caps.
A Viettel source told Reuters the time was “not appropriate” to bid, while KT Corp. and Converge said the Philippine market and industry outlook were financially viable, but “conditions imposed for participation render the venture commercially unviable.”
Aristoteles Elvina, a special assistant to the head of Converge, said there was no point bidding against a company owned by the Chinese government, or getting a license that demands a new entrant commits to things operators Globe and Smart were not required to do.
“We don’t feel it is a level playing field,” he told reporters.
“The existing players right now were not asked to do what we’re being asked. Like we have to put up speed, coverage.”
The Mislatel consortium includes three companies, China Telecom, and two of Uy’s firms, Udenna Corporation, a holding company, and Chelsea Logistics Holdings, one of its units.
Chelsea’s shares were up 35 percent on Wednesday afternoon after news that Mislatel’s was the lone qualified bid.


As worries about populism in Europe rise, investors bet on stock market volatility

Updated 13 min 3 sec ago
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As worries about populism in Europe rise, investors bet on stock market volatility

  • More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament
  • The vote will shape the future of the bloc amid a backlash against immigration and years of austerity

LONDON: Investors are betting on heightened political uncertainty and greater volatility in European stock markets ahead of European Parliament elections in May amid growing concerns about rising populism.
In one of the first concrete signs in financial markets that investors are bracing for political instability, VSTOXX futures , which reflect investor sentiment and economic uncertainty, have jumped in recent weeks.
While the classic gauge of fear — known as implied volatility, which tracks demand for options in European stocks — is currently at 15.68, futures that bet on the same thing over the coming months show a pronounced jump.
That’s because investors have piled on trades that bet on big swings in stocks as election day nears.
Implied volatility for futures contracts expiring in May show a pronounced jump to 16.8, compared with 15.35 in April. The contracts measure the 30-day implied volatility of the euro zone STOXX 50 index.
“We are seeing a bit of a kink around May when we have European elections and we have this wave of populism,” said Edmund Shing, head of equities and derivatives strategy at BNP Paribas.

Looming elections
More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament, a vote that will shape the future of the bloc amid a backlash against immigration and years of austerity.
Mainstream center-left and center-right lawmakers may lose control of the legislature for the first time, as euroskeptic and far-right candidates build support.
Herve Guyon, Societe Generale’s head of European equity derivatives flow strategy and solutions, said the rise of populism had triggered a recent flurry of speculative trades.
“Political uncertainty might be coming from the EU rather than the United States. We’ve seen investors doing very large trades to benefit from an increase in volatility around these events,” he said.
“We as a bank don’t expect the elections to be a massive game-changer. The populists won’t get enough to disrupt the political system, but we do note some investors did take some positions on this event.”
The implied volatility is still well below levels seen in late 2018 when global stock markets were routed amid worries about rising interest rates, slowing economic growth and the trade war between Beijing and Washington.
In late December, it shot to above 26, its highest since February.
But the flurry of activity suggests investors are seeking out new opportunities after a slide in implied volatility across major asset classes.
Edward Park, deputy chief investment officer at asset manager Brooks MacDonald, said some of the activity may also be due to persistent uncertainty about Britain’s exit from the European Union as the Brexit date of March 29 nears.
This year, volatility across currency, fixed income and stocks markets has plunged as the US Federal Reserve and European Central Bank have taken dovish policy stances.
The Deutsche Bank currency volatility indicator hit multi-year lows this week, while the proxy for fixed income volatility is languishing at all-time lows.
In stocks, the Cboe volatility index, Wall Street’s so-called “fear gauge,” fell to its weakest in six months this week.
“There’s been a cross-asset volatility crash — in euro-dollar, US rates and equities — in the aftermath of (ECB President Mario) Draghi’s and (Fed Chairman Jerome) Powell’s comments and the expectation of lower rates for longer,” said Guyon.