Taking the high—and difficult—road on the Verizon sale

Jose Ricardo P.R. Delgado of Pacific Telecom Inc., the prospective buyer of Verizon’s local operations, was on Saipan last week for a three-day visit, during which he called on various government officials and met with Verizon’s top management to discuss the status of the sale. Despite his hectic schedule, he still managed to squeeze in this interview, allowing the Saipan Tribune a few minutes to pick his brain on several issues related to the sale and his plans for the company.

Q. Why are you being so stubborn about this deal? Why have you hung on this long, considering that, as the investor, you can just wash your hands of the whole affair and go find another place more hospitable?

A. For four reasons. First of all, because we feel that we have the competence to actually do a good job and manage this asset. Second, because we have invested a lot of time and effort in going through the process in a very transparent and professional manner; and based on the success so far in going through the [Federal Communications Commission], going through the U.S. Department of Justice, going through Homeland Security, going through the [Commonwealth Telecommunications Commission] with a temporary provisional approval; it shows that the system is working. Three, because I don’t think it’s fair for anyone to dissuade a person whose true intentions are noble from doing a transaction like this; and fourth, because I think that it’s something good for our business and something that we should try to finish, considering we’re almost done.

Q. So where are you now in the process?

A. From my point of view, since we cleared the FCC about a year ago, we only have a couple of things pending. One is the economic study, meaning if the CNMI goes through difficult economic times—more severe than they are today—will PTI be able to continue to manage this project and have the company in good financial health? I firmly believe the answer to that question is yes and the banks that are financing this acquisition for me obviously believe the same thing because if they weren’t convinced that they’re going to get their money back, they wouldn’t be lending to the project. And you know banks are very conservative now, so I think that if it’s good enough for the banks, it’s going to be good enough for Deloitte and Touche. That’s my personal opinion. So I think that issue, I’m confident that that issue will take care of itself because I fully trust the integrity of Deloitte and Touche.

The second issue was for the funding for the CTC, which I think is being addressed as we speak. We’ve got assurances from the House and the Senate; they support the bill to put funding for the CTC. On this particular trip I have campaigned to honor that agreement, which the governor and his lawyers are also in agreement with. So we’re all on the same page now.

And the third issue, which is the cable, if you read the CTC’s charter, regulating that cable has nothing to do with them deciding whether or not to transfer ownership to another company. So that issue is separate and should not be confused with the actual transfer application. As far as I am concerned, all I’ve needed to prove to the CTC were two things: financial capability, which I have; and technical capability, and by virtue of keeping all the employees and bringing in a very good board, I think that anybody in an unbiased manner would definitely see that we are technically and financially qualified. Everything else—national security issues, competition issues—these have all been addressed by the Federal Communications Commission a year ago, so we’re okay. And again, the federal government reserves the right to regulate inter-state commerce, which is the cable. No one else [can do that]. That’s pretty clear to Verizon, pretty clear to me. I think that the CTC probably knows that.

Q. Once the deal pushes through, what are some of your plans for the existing subscribers?

A. One of the things that is important to me is that the services we offer are comparable to the best places in the world. I come from a country that has a very high cell phone penetration rate (the text messaging capital of the world), which has a thousand different features in the network to the benefit of the subscribers, and as much as possible and as financially advisable, I would really like to mimic or copy the best that these different operators have and try to implement them here. Every market is different but certainly you can count on a very fast response time from a smaller private company than from a company that gets its orders all the way from New York, where there are a million other things more important than Micronesian Telecommunications Co.

Q. What’s in it for the existing employees?

A. I think that the existing employees, with my plan, have a chance to actually go up in the company and a chance to maybe even work in other places for the company—something that they can’t do now because, as far as Verizon is concerned, they’re just here and this company is never going to go outside to anywhere else. My plan is different; I want to grow this business and I want to make employees, especially the high contributing employees, owners, who have a stake in it just like I do. And I think that, with that, it’s night and day, from the way things are today to the way things would be in two years.

Q. How’s your relationship with the CTC?

A. I think it’s positive. Again, I’ve said it many times that, I know it hasn’t been easy for them because of all of the outside noise in the process but I think that they’ve acted with a lot of integrity, and one of the reasons why I’m still here is because I actually believe that these guys want to do the right thing. And I think that they’re tired of all these different wrangling and delays and they just want to render a decision that is supported by the merits of my case. So, I think my relationship with them is fine and I think they are all decent people who just want to do the right thing for the community.

Q. How about Verizon? How’s your relationship holding up after all these time?

A. I think it’s very strong because they’ve always commended me for taking the high road, for not resorting to all sorts of other measures to try and forward my cause. I’m looking at other investments with Verizon as a partner and, honestly, I think that if I hadn’t conducted myself in the manner I did, they wouldn’t be looking at me to do something with them, or with one of their subsidiaries or affiliates in other parts of the world.

Q. With the governor giving you such a hard time, hasn’t it ever occurred to Verizon to just choose somebody else to purchase MTC?

A. You know, Verizon has demonstrated to me that they’re also a company of integrity. The people I’ve met [in the company] are men of their word and they’ve said it to me many times: ‘We’re joined at the hip with you. You’ve done everything right. We’re not the kind of company that does this kind of things. Hey, this is nothing to us. It doesn’t even affect our earnings.’ Verizon is so big but it’s a matter of doing the right thing and, for that, I commend them.

Q. Verizon is known for its active involvement in community affairs. Do you intend to continue this tradition?

A. Yes, I believe very much in the power of a good education. In fact, one of the reasons why I feel the governor and I do have some things in common is that I know he’s a believer in that as well. I went to his inauguration speech and he spoke about it a lot and I would really like to make that my core issue here—making sure that the local population and the people here have access to the best education. This is something that is close to my heart because, at the end of the day, I’m a product—luckily—of a good education. And I don’t think I would have had the confidence to do a transaction like this at my age if I hadn’t gone to school in the states, if I hadn’t done well, if I hadn’t taken the chance and worked hard. So that’s close to my heart; that’s where I think I’m going to spend a lot of attention—on education—because the future of this small nation is their youth and we need to make sure that everyone is prepared and armed with a good education.

Q. Tan Holdings Corp. has withdrawn from the original consortium that won the bid for MTC but there are persistent reports that THC is actually still part of the deal. Is this true?

A. I think that we can dispel those rumors once and for all because there is no way I would stand in front of the Department of Justice in the United States of America and misrepresent the ownership of this company. Or to get in front of Homeland Security and do the same thing. There is no way I’d ever do that. I think it’s also somewhat painful to hear that people would think that I would resort to that, or that Willie Tan would resort to that, in the sense that, obviously I have a track record in the Philippines, I have the capital to do this transaction, I have the wherewithal to meet the right financial institutions who believe in me, and we’re doing the deal all aboveboard. These are huge institutions behind me and, if I was up to no good, I very much doubt that they would be behind me. And I think that Mr. Tan has a lot of other things to do and businesses to run. Of course he felt bad about leaving the consortium, but he’s doing pretty well in other things.

Q. Any messages for Gov. Juan Babauta?

A. I think Gov. Babauta should know that I’m really here to do a good job. He’s stated many times that he’s doing all of these for the benefit of the Commonwealth and, if that is the case, I think he has nothing to fear with me being the owner of this phone company. I am very much committed to live up to my promises precisely because of the difficulties that I’ve gone through and I have every intention when this deal closes—and I believe we’ll close sooner or later—to work with him in a pro-active way and let bygones be bygones. Forget the past; I’m not one to dwell on the past. There are competitors out there, there are promises made that I’ve got to live up to, and so, even though, of course, just like any human being would feel pain after three years of this, I wouldn’t be doing myself any favors either by dwelling on the past. So, my message to him is, ‘I want to work with you and that there can be a government-business partnership for social progress.’ That’s my message to him.

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Curriculum Vitae

Jose Ricardo P.R. Delgado, 32, is the only son of four children. He has three sisters, two of whom are married. His parents’ names are Ricardo and Luli Delgado. He went to a small school in Manila for high school, one of only 14 graduates. He was accepted to Brown University at the age of 17 and graduated magna cum laude, with majors in history and international relations.

“Obviously, it was difficult for me, being from a small country like the Philippines to go to a place so far away but I learned a lot. It was a challenge and it was very difficult, coming from a small Catholic school, to compete with all these people from the best boarding schools in America.”

After graduation, he worked with the family business, Islacom, one of the leading telecommunications company in the Philippines. Two years later, he was accepted to the Kellogg School of Management, where he majored in Finance and Strategy (The Kellogg School of Management is ranked as the best master of business administration program in the world, and the number one graduate school of business in the United States, according to Business Week and the Economist Intelligence Unit). In 1997, Delgado returned to the Philippines were he has been working with the family business, Citadel Holdings Inc., for seven years.

Citadel Holdings does airport services, air freight forwarding, is tied up with one of the world’s biggest logistics companies called Excel, which does logistics work for Ford Motor Co., Motorola, and Procter and Gamble. “We are about to start an international cargo airline, probably in the first quarter.”