Drilon says franchise of Mislatel 'deemed revoked' due to violations

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Metro Manila (CNN Philippines, January 24) — A senator said the franchise of Mindanao Islamic Telephone Company (mislatel), a firm under the consortium chosen to be the country's next major telecommunications player, is considered void due to numerous violations.

Mislatel received its congressional franchise to operate in Mindanao in April 1998, but it has yet to start operations. Senator Franklin Drilon said according to the franchise, it should operate within a year after its franchise is granted.

"A franchise is a privilege, the privilege has conditions. Among the conditions you must operate within one year and operate continuously. Number two you must seek the approval of Congress when you seek control. When you violate the terms, the franchise is ipso facto revoked," he said.

Mislatel president Nicanor Escalante explained "peace and order problems" became an issue for their operations in Parang, Maguindanao.

Escalante also said he and two other businessmen were invited merely as additional stakeholders of Mislatel in 2015 before the turnover of leadership. He said their lawyer told them they did not have to get the approval of Congress since they were acquiring the existing shares of the incumbent shareholders.

However, Drilon cited Section 15 of Mislatel's franchise which states that the sale, lease, or transfer of controlling interest requires congressional approval.

A valid franchise is a requirement under the guidelines of selection of the National Telecommunications Commission of the third player.

Drilon then asked Department of Information and Communications Technology Acting Secretary Eliseo Rio Jr. if this affects the case of the Mislatel consortium, which was named the new telco player. Rio said if Mislatel fails to meet the qualifications, the selection process will return to "square one."

"We were under time pressure," Rio said. "What we did was you have to take the risk in the post-qualification."

Drilon said pressure is not an excuse to violate its own guidelines.

But Mislatel consortium legal counsel and spokesperson Atty. Adel Tamano said a quo warranto petition filed by the state is the "proper action" to revoke a franchise.

"The Supreme Court made a very simple decision here that since a franchise is a property right, there is a due process requirement for it to be revoked and a direct action for a quo warranto is the proper action to take. So until such action is undertaken by the state, collateral attacks on a franchise are not permitted," Tamano said.

No Chinese capital

Meanwhile, Senator Grace Poe grilled Udenna Corporation's Dennis Uy for Mislatel consortium's capitalization. Udenna Corporation, in line with Mislatel, and Chelsea Logistics Holdings, are the Filipino firms teaming up with Chinese state-owned firm China Telecommunications Corporation (China for the consortium.

Uy clarified that there will only be loans coming from China, adding that the transaction is a private endeavor and will have no effect on Philippine sovereignty and security.

"Wala pong kapital galing sa China. Nangungutang lang po tayo," he said.

[Translation: There is no capital from China. We are just borrowing.]

Uy said China is willing to invest up to 40 percent of Mislatel's capital, compliant with state laws on foreign ownership.

The ownership structure of the Mislatel Consortium is 35 percent Udenna Corporation, 25 percent Chelsea Logistics Holdings Corporation and 40 percent China Telecom. Chelsea Logistics Holdings Corporation is a subsidiary of Udenna Corporation.