Philippines' Duterte offers telecoms role to new ally China

By Karen Lema and Neil Jerome Morales

MANILA (Reuters) - Philippine President Rodrigo Duterte has offered China the "privilege" of being his country's third telecoms operator, his spokesman said on Monday, turning to a historic rival to break a longstanding duopoly that has frustrated consumers for years.

The Philippines' data and voice services rank among the Asia-Pacific's slowest and most intermittent, and Duterte last year warned providers PLDT Inc <TEL.PS> and Globe Telecom Inc <GLO.PS> to shape up or face new competition.

Duterte made the offer last week to visiting Chinese Premier Li Keqiang, the latest sign of his pursuit of closer political and economic ties with a country with which the Philippines has a long history of territorial disputes and mistrust.

"The good news is consumers can look forward now to better telecommunications, not just in terms of cellular technology but also in terms of internet speed, as well as access," presidential spokesman Harry Roque told a media briefing.

"The announcement is that telecoms duopoly is about to end."

No specific Chinese company had been lined up, Roque said.

In Beijing, Chinese Foreign Ministry spokesman Lu Kang referred questions to the "relevant responsible department", without elaborating.

Chinese telecoms equipment maker ZTE Corp <0763.HK) won a $330 million (250.1 million pounds) contract from the Philippine government to set up a broadband network linking state agencies in 2007, but the deal was scrapped that year over allegations of corruption.

It was high time a third player entered the market to boost competition, said Pierre Galla, co-founder of ICT advocacy group Democracy.Net.PH.

"There will, of course, be concerns, but these concerns we will identify and raise once we know what sort of telco is coming in," Galla told Reuters.

Ties with China have warmed under Duterte, who has put aside disputes with Beijing, looking to it to play a key role in building and funding urgently needed infrastructure.

Duterte recognised that China had the money and technology to make a difference in the Philippines, Roque said.

"Consider also the proximity and the fact that we want to avail of as much as economic advantage that we could, arising from the renewed friendly ties with China," he said.

PLDT and Globe have been accused of stifling competition and of failing to make necessary upgrades, accusations both have rejected. PLDT says it welcomes the competition.

Last year, they joined forces to buy prized mobile spectrum for $1.5 billion from a potential rival, San Miguel Corp, to kickstart telecom upgrades, widen coverage and boost internet speeds. Critics say services are still lacking, however.

This year, content delivery network service provider Akamai Intelligent Platform ranked the Philippines lowest among Asia-Pacific countries for its average internet connection speeds.

Opening up the telecoms sector is complex, however, as foreign ownership in domestic telecoms firms is limited to just 40 percent, a disincentive to investment in a fast-growing market of more than 100 million people.

(Additional reporting by Ben Blanchard in BEIJING; Editing by Martin Petty and Clarence Fernandez)