NOW Telecom, 3 others disqualified from 3G frequency bid

The Supreme Court affirmed the 2005 and 2008 orders of the National Telecommunications Commission (NTC) disqualifying Next Mobile Inc., currently operating as NOW Telecom, and three other companies in their application for a third-generation mobile communications technology or 3G radio frequency.

The three other disqualified telcos are then Lopez-owned Bayan Telecommunications (BayanTel), Multi-Media Telephony Inc. (MTI), and AZ Communications Inc.

The NTC, at that time had already awarded four of five 3G frequency slots to Smart, Globe, Digitel, and Connectivity Unlimited Resources Enterprise (CURE).

In a 44-page decision penned by Senior Associate Justice Marvic Leonen and promulgated on 13 November 2023, the high court’s Second Division denied the petitions challenging the NTC’s consolidated orders dated 28 December 2005 and 28 August 2008 regarding the disqualification of Next Mobile, et al.

It also granted the NTC’s petition questioning the 2010 ruling of the Court of Appeals (CA), which virtually ordered the regulatory body to allocate the fifth and final 3G slot to BayanTel.

Likewise, the SC ruled that the grant of the remaining 3G bandwidth assignment “shall be within the [NTC’s] discretion subject to the required application procedures as may be required under relevant laws, rules, and regulations.”

Republic Act (RA) 7925 designates radio frequency spectrum as a limited public asset, reserved for telecom providers demonstrating efficient use and embracing new technologies. 

The NTC oversees the frequency allocation process, with its decisions typically respected unless there are compelling reasons for reversal. It ensures telecom quality and explores 3G technology since 2002. 

Through Memorandum Circular (MC) No. 07-08-2005, NTC outlined rules for reallocating 3G frequencies, leading to applications from existing and new telecom entities. 

After evaluations, four 3G frequencies were granted to Smart, Globe, Digitel, and CURE.

As of 19 November 2018, the NTC named the consortium of Udenna Corporation, Chelsea Holdings, and China Telecom, known as Mislatel and later Dito Telecom, as the new major player.

In disqualifying Next Mobile, the NTC cited the firm’s unpaid spectrum user fees (SUFs) and supervision and regulations fees (SRFs) totaling P135.6 million, as of December 2005.

In 2009, the CA denied Next Mobile’s petition and affirmed the assessments of NTC on its unpaid SUFs and SRFs. The appellate court likewise dismissed the telco’s petition assailing its disqualification by the NTC. 

In its latest decision, the SC affirmed both rulings of the CA regarding Next Mobile.

The court explained that to qualify for a 3G frequency, MC 07-08-2005 mandates that the applicant must have no outstanding unpaid SRFs, SUFs, radio station license fees, permit fees, and other fees imposed by the NTC in accordance with applicable laws, rules, and regulations.

SUFs are based on spectrum usage, service type, and economic classification of covered areas, while SRFs are determined by the higher of subscribed or paid capital stock, capital invested, or property and equipment value.

The SC found no merit to Next Mobile’s argument that the NTC should not have considered its additional paid-in capital from its debt-to-equity conversion when assessing its SRFs, contending that the subscription did not constitute part of its capital stock.

“When Next Mobile converted its creditors' liabilities to stock subscriptions, there was a corresponding increase in its capital stock,” the SC explained. “It is erroneous for Next Mobile to argue that this could not be considered as part of the capital stock since no payment was received when the liabilities were converted into equity.”

It added, “The consideration in this instance would be the extinguishment of the liability. The stocks their creditors subscribed to are now considered as paid stocks. It would have formed part of their additional paid in capital.”

It noted that as of December 2005, Next Mobile had an unpaid SRFs of P126.09 million and SUFs of P9.67 million.

“As the [NTC] pointed out, Next Mobile did not pay these fees even under protest. Next Mobile was, thus, correctly disqualified for non-payment of fees,” the SC said.

In the same ruling, the high court affirmed the 2008 CA decision dismissing MTI’s petition against the NTC orders disqualifying it and three others from getting the last 3G slot.

The SC also held that the CA erred in finding that BayanTel was entitled to the last 3G frequency.

The SC found it peculiar for the CA to invalidate the point system used by the NTC in allocating 3G frequencies due to alleged non-compliance requirements, but still used it to argue for assigning the final slot to BayanTel.

The NTC had given Bayantel zero points for not meeting its obligations as a cellular mobile telecommunications service provider, but the CA suggested BayanTel should have received 6.5 points due to external factors affecting its compliance.

But the SC said the CA’s argument was flawed as Bayantel had the opportunity to operate since 2002.

It pointed out that the issuance of MC 07-08-2005 on Aug. 23, 2005, underscores the requirement for a track record, mandated by RA 7925, to ensure telecom providers fulfill their commitments. 

The SC said that failure to comply, even if due to circumstances beyond control, impacts service quality and undermines public interest.

In 2012, the SC denied a petition filed by AZ, saying the CA was correct in upholding the NTC orders which denied its application for a certificate of public convenience and necessity, as it did not meet the qualifications established in MC 07-08-2005.