Bank of China (Manila Branch) provides RMB 144.2 million term loan to DTC for Phase 1 of 4G/5G Telecommunications Network Project

Project narrative

In 2018, Dito Holdings Corporation and China Telecommunications Corporation created a special purpose vehicle and joint venture called Mindanao Islamic Telephone Company (Mislatel). They each hold 60% and 40% ownership stakes in the joint venture, respectively. Mislatel was later renamed Dito Telecommunity Corporation (also known as Dito Telecommunity), which became the third largest telecommunications service provider company in the Philippines through a public tender. It received its operating license in June 2019. Then, on July 8, 2019, Dito Telecommunity was granted a Certificate of Public Convenience and Necessity by the Government of the Philippines, authorizing it to begin building telecommunications infrastructure and offering telecommunications services nationwide. Between December 2019 and October 2021, Dito Tel signed multiple loan agreements totaling USD 1.3 billion: - One loan with Bank of China (BOC) Manila in two tranches: one tranche for USD 30 million (Record ID#108845) and one tranche for RMB 144.2 million (Record ID#108846); - Two loans with BOC Hong Kong: one USD 250 million loan (Record ID#96069) and another USD 200 million loan (Record ID#108844); - Two loans with BOC Singapore: one USD 200 million loan (Record ID#96037) and one USD 100 million loan (Record ID#96036); - One loan with China Minsheng Banking Corp. Ltd. Shanghai Pilot Free Trade Zone Branch (CMBC) (a private bank) for USD 500 million. According to Dito Tel, all drawdowns on these loans were used as payment for the cost of the EPC services and roll-out of 4G/5G ready telecommunication network. On October 27, 2020, Dito Tel signed a one year loan agreement with BOC Manila. The loan has two tranches: a USD 30 million tranche and an RMB 144.2 million tranche. Interest payment is based on three month and six month LIBOR plus fixed margin of 1.9% per annum and three month and six month HIBOR plus fixed margin of 1.8% per annum for USD and RMB tranches, respectively. On October 19, 2021, Dito Tel signed an amendment to extend the maturity of the loan to August 20, 2022. On August 17, 2022, the Company signed a second amendment to extend the maturity of the loan to May 26, 2023. On May 26, 2023, the Company signed an amendment to extend the maturity of the loan to July 10, 2023. On July 10, 2023, Dito Tel signed a Request and Consent Letter which extends the maturity of the loan to November 15, 2023. As of June 30, 2023 and December 31, 2022, Dito Tel has drawn RMB 115.7 million and USD 30 million (P2,313.3 million) from the loan facility. Carrying value of the loan as of June 30, 2023 and December 31, 2022 amounted to P2,544.3 million and P2,613.2 million, respectively. The loan proceeds were to be used to partially finance an RMB 28 billion commercial (EPC) contract with ZTE Corporation (for Phases 1, 2, and 3 of the 4G/5G Telecommunications Network Project), which was signed in October 2019. The purpose of the Phase 1 was to undertake land acquisition activities, the construction of 1600 telecommunication towers, and the purchase of 4G radio equipment on the islands of Luzon, Visayas, and Mindanao. The full scope of the 4G/5G Telecommunications Network Project includes engineering works in wireless stations and the laying of fiber optic cables in 187 cities. ZTE Corporation, China Railway 25th Bureau, Huawei Technologies Co., Ltd., and Nokia were all involved in Phase 1 implementation. Construction began in October 2019. China Railway 25th Bureau installed the first telecommunication tower — including the construction of a base station, communications equipment installation, and fiber-optic cable laying — on June 5, 2020. Phase 1 was originally scheduled for completion (its commercial operations date) in March 2021 and Dito Telecommunity began its commercial operations — in 15 selected areas in Visayas and Mindanao, particularly in Metro Cebu and Metro Davao — on March 8, 2021. However, Phase 1 was not completed until December 2021. The Philippine Government declined to grant Dito Telecommunity special extensions to its rollout commitments despite the ongoing COVID-19 crisis. If Dito Telecommunity failed to meet its commitments, the Philippine Government was able to seize its $490 million performance bond and recall its assigned radio frequencies. Then, on April 16, 2021, Dito Telecommunity expanded its services to select areas in Luzon provinces, initially in five provinces covering a total of 18 cities and municipalities. On May 17, 2021, Dito Telecommunity service became available in Metro Manila. One day later, on May 18, 2021, President Duterte signed Republic Act No. 11537 which renewed Dito's license for another 25 years. The law granted Dito Telecommunity a franchise to construct, establish, install, maintain and operate wire and/or wireless telecommunications systems in the Philippines. As of August 2022, Dito Telecommunity's total mobile subscriber base had reached 12 million. This loan was refinanced by the USD 3.9 billion syndicated loan for Phases 2 and 3 of the 4GW and 5GW Telecommunications Network Construction Project (see Parent ID#2963).