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China Telecom's proposed entry into Philippines draws concern

Critics of President Duterte's plan warn of security threats

MANILA -- China Telecom's possible bid to break the Philippines' telecommunications duopoly has excited potential local partners, but it has also stirred security concerns.

China Telecom has been endorsed by the Chinese government to invest in the $5.3 billion Philippine telecom sector, officials in Manila said early this week. China Telecom told Reuters it was studying an investment. The state-owned company is one of the three telecom carriers in mainland China that serve the world's largest market as measured by mobile subscribers.

Foreign companies are limited to 40% ownership in Philippine public utilities, including telecom, which means China Telecom would be required to team with a local partner.

Philippine companies, which have assets that China Telecom could use for its expansion, are eager to partner. PT&T, which has a telecom franchise, is interested in joining up with China Telecom, Chairman Salvador Zamora told local media. "We are in preliminary talks with them, but it's their decision which company to partner with," he was quoted as saying by GMA News.

The National Transmission Corporation said it was willing to partner with China Telecom, which could use the Philippine government-run company's power transmission assets for broadband infrastructure.

Since 2011, the country's telecom sector has been a virtual duopoly of two private players -- Japan's NTT Group-backed PLDT and Globe Telecom, a joint venture between the Philippines' Ayala Corp. and Singapore Telecommunications. A planned joint venture between San Miguel and Australia's Telstra to challenge the duopoly collapsed last year, prompting San Miguel to sell its vital telecom assets to PLDT and Globe.

Clamor for a third player has grown in recent years amid customer complaints of slow internet speeds. 

At a meeting last month with Chinese Premier Li Keqiang, Philippine President Rodrigo Duterte invited China to invest in the telecom sector as part of Manila's efforts to deepen bilateral ties with Beijing.

However, "the privilege to operate the third telecoms carrier in the country," as Duterte's spokesperson Harry Roque disclosed last month, has sparked security concerns among some in the Philippines. 

Former President Benigno Aquino, whose administration took a tough stance on China's expansion in the South China Sea, late last month said entry by a Chinese telecom company into the Philippines would have "national security implications." 

On Thursday, former National Security Adviser Roilo Golez called the move "a grave national security threat."

"China remains a real territorial threat to our West Philippine Sea," Golez said on Twitter. "And now we will allow the Chinese government controlled telco to have access to our innards, brains and secrets." 

The Philippines and other Southeast Asian nations are engaged in a territorial dispute with China over parts of the South China Sea. Duterte, however, has temporarily set aside the maritime controversy in order to revitalize his country's ties with Beijing.

Security concerns over Chinese companies' participation in foreign telecom industries are not unique to the Philippines. The U.S. in 2012 banned the procurement of telecom equipment from China's Huawei and ZTE, citing risks to national security, and India made a similar move against China in 2010, according to earlier reports. 

The Chinese government uses its "Great Firewall" to frequently block unwanted web content from abroad and routinely cracks down on domestic websites.

Roque on Tuesday said the government will review the security issues. "Well, as far as security considerations are concerned, we will look into that because there are really concerns overall on cyber-security in general, and it's been a priority of the government anyway," he said.

Hermogenes Esperon, the president's national security adviser played down the concerns. "The two telcos have [shareholders from] Japan and Singapore. Is that a security threat?" he said on Tuesday.

Both PLDT and Globe Telecom also count Huawei and ZTE as major telecom equipment suppliers. 

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