Friday, 6 July 2007

US firm disputes DOTC ad on ZTE

By Jarius Bondoc
Original article at the Philippine Star

Scott Arey is CFO of Arescom, the California firm that offered to supply the national broadband network for $135 million. He has been in contact since the exposure of government’s rush to buy the same system from ZTE Corp. of China for $330 million — more than double. Arey’s latest e-mail, edited for brevity:

“The DOTC took an unprecedented public position to defend its ill-conceived selection of ZTE. The misinformation and inadequate statements in (the) full-page newspaper ad by DOTC must be addressed for the record. The public should be aware of at least the following untruths:

“(1) DOTC’s ad stated our ‘objective’ was to establish a ‘satellite based network’ — a statement contrary to fact. We consistently told the government that a satellite network will be too expensive to operate and will not work properly for some of its requirements. Only at its insistence did we include satellite, and only as a backup system.

“(2) DOTC’s ad stated that the ‘Nature of (our) Proposal’ is ‘not clear’. If this is the case, then why did Sec. Leandro Mendoza endorse our proposal on Mar. 14, 2007?

(Note: In that attached letter to NEDA Sec. Romulo Neri, Mendoza asked for a “review and study specifically of the feasibility” of Arescom’s proposal. He said it is “designed to overcome barriers in the area of telecommunications through the use of latest broadband networking technology.”)

“(3) DOTC’s ad stated that the ‘Financial Capability of (Arescom)’ has ‘No Information’. Please see the attached letters dated Aug. 1 and Aug. 5, 2005, to the government addressing this issue. Note the stamps of different offices indicating receipt of these correspondences. In Nov. 2005 a delegation from the Philippine government actually visited US Eximbank with Arescom. Shortly after that visit, in Jan. 2006, the project was passed to NEDA. In Mar. 2006, after NEDA’s endorsement had been received, DOTC insisted on taking over the project. All prior information was turned over to DOTC. They were completely informed.

(The Aug. 1, 2005 letter of Arescom president Chris Ching to NEDA’s Augusto Santos states: “This project will be fully supported by 100% Official Development Assistance, through the United States Export-Import Bank.” It bears the receipt stamps of NEDA, DILG and Office of the President. The Aug. 5 letter of Ching to President Arroyo, thru Malacañang External Affairs chief Danilo Mendoza, states: “The financing will be arranged with a guarantee from the Export-Import Bank of the United States that includes the 24-month availability period and a 12-and-one-half-year repayment period depending on the useful life of the underlying equipment.” It bears the receipt stamps of the DILG and the Office of the President, with barcode.)

“(4) DOTC’s ad states that Arescom has no ‘Technical Capability’. Arescom has been an exclusive technology provider to Microsoft. Arescom’s integrated products are installed in telcos in more than 40 countries. Arescom hired as its integrator Wireless Facilities (NASDAQ: WFII), which has met with DOTC and shown military grade networks deployed by WFI for the US Department of Defense.

“(5) DOTC’s ad states that Arescom’s ‘Coverage’ is only 21 selected regional centers. The reason for this is we were asked to provide service to those centers over a backbone that could be expanded to serve the entire nation. We can easily expand the scope. Given what the DOTC has listed as equipment for the $330-million ZTE project, we would do the same project for $279 million at most, and this price includes key elements that the DOTC has omitted but are necessary for the project to work.

(Arey attached a breakdown of Arescom’s $279 million against ZTE’s $330 million in the DOTC ad. Included in the $279 million is $12 million for training and $15 million for maintenance, items lacking in ZTE’s $330 million.)

“We hope you will provide the public the truth, so that the Filipino people will not have to pay an extra $50 million. We will be happy to answer any of your questions.”

At this point, any answering must be done perhaps by DOTC.

* * *

DOTC has accused ZTE’s competitors of disinformation and possibly even the “theft” of the contract copies. To this, bidder Amsterdam Holdings Inc., which offered to build the NBN on its own for $240 million at no cost to government, fires back:

“AHI cannot take credit for DOTC’s and ZTE’s difficulties. If (their) contract is indeed regular and above board, then they should have nothing to fear from the scrutiny of lawmakers, the press and the public.

“AHI’s unsolicited proposal thru B-O-O mechanism under the B-O-T Law is strictly our private sector initiative, using American and Chinese equipment and technology, among which Hua Wei is the largest telecoms manufacturer in China and second in the world. AHI does not have anything against ZTE. Broadband Philippines, the premier service provider of scarce broadband spectrum nationwide, of which Jose de Venecia III is chairman, currently uses some ZTE equipment for its broadband mobile business.

“De Venecia III is one of the stockholders in AHI. He believes that the identity of the people behind its proposal is important, but should not stand in the way of evaluating technical competence. He believes the AHI proposal is good for the country and can stand on its own merits.

AHI’s proposal does not involve any government loan or equity or sovereign guarantee. It is totally an AHI investment, expense and risk.

“AHI’s unsolicited proposal to the DOTC remains unanswered until today.”

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