zte

There may be some omissions and oversights, some of it done on purpose.
The Madriaga file on broadband deal
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.
  THE following document landed in my mailbox. It's supposed to have
been written by a certain Dante Madriaga. (A check with UP alumni activities

show a Dante Madriaga as earning a BSE from UP in 1966.). For what it's
worth, here it is.
***
  I am an electronic/electric al engineer by profession. I attended the
University of the Philippines and Texas A&M University .   I have been
in the communications industry for over 30 years.
.
  I was a part owner of a company in the LISP in Cabuyao, Laguna that
exported microwave radio transmitters. I was involved in the original
design of the ARESCOM proposal using a concept similar to what Joey
de Venecia thought about. I have been involved in the preparation and
design of the NBN ZTE proposal since the beginning.
.
  I have been a technical consultant for the project involved not only in
the
design but as a liaison to NEDA, DOTC/TELOF/CICT. I was involved in
all discussions regarding the project including the names of other people
involved, margins and actual pricing details.
.
  ZTE International signed an MOU with the government on March 14 on
a National Broadband Network project. The following is my account of the
project from the start to the time when the negotiations were turned over to

the finance group. With the exception of the China trips I was present in
all the meetings. There may be some omissions and oversights, some of it
done on purpose.
.
  May 2006: The project was brought to ZTE on May 5 by a person
named Stephen Lai, who was originally with Arescom and is a personal
friend of the Arescom president Cris Ching. ZTE approached Chairman
Abalos whom they knew to help on the political side.  Chairman Abalos
enlisted the help of Ruben Reyes a golfing buddy to come up with a team
to expedite matters. Ruben Reyes contacted General Quirino de la Torre
and Leo San Miguel. I was approached by Leo San Miguel whom I had
known before to work on the project. I provided Leo inputs on the
Arescom proposal which ZTE used as a basis to start their design.
.
  June 2006: Ruben Reyes, Leo San Miguel, General De la Torre,
Stephen Lai, Yu Yong, Fan Yang met on June 16 at the Makati Shangri-
La in a private environment to discuss the NBN project. They were later
joined by Chairman Abalos who left first. We start the design work but
are hindered by cost constrains. There is no possible way to achieve the
$130M Arescom budget with the commissions that were needed. They
decide to increase it to $190M and later added some more components
to make it $262M.
.
  Same group meets on June 18 with the addition of Secretary Mike
Defensor and Abalos chief of staff Paz and without Stephen Lai meet
in Wack-Wack to discuss details on the commissions.
.
  July 2006: We make initial presentations to CICT and Telof at the
CICT office. Chairman Sales was present together with then Telof
Asec Frank Perez, the son of Sec Nani Perez, Commissioner Lorenzo
Formoso, ZTE personnel and the DOTC/CICT technical staff.
  Chairman Sales initial comment was that the NBN project was best
left up to private but promised to review the proposal and make
recommendations.
  We made similar presentations to the NEDA infrastructure group,
present was the ZTE group including Fan Yang and the accounting
personnel of ZTE.  NEDA writes a letter to us citing objections to the
initial design.
  PGMA signs an MOU on July 12 designating Sec Favila to negotiate
with ZTE on the government's behalf. Group meets on July 25 in Wack-
Wack to solve the problems.
.
  August 2006: Then DOTC Asec Perez makes a presentation and
objects to the cost and the design. I work with the NEDA group to
smooth out their objections.
 Asec Perez who openly discredits the project is promptly replaced by
Commissioner Formoso who vowed to help with the implementation.
Asec Formoso is a better choice than Asec Perez because he is an
engineer and a lawyer and can defend the project well.
  Chairman Sales reviews the project but is still not convinced; through
back door channels he changes his tune at a later date.
 .
  Group on August 11 goes to China and demands an advance payment
upon orders from the boss ostensibly to facilitate the approval and for
PR. Chairman Abalos leaves first over the weekend. They get it after
mentioning the name of the FG. Ruben Reyes is designated as the recipient.
Group comes back from China on August 15 and meets again with
Chairman Abalos to tell of their success. US$1M was doled out, Ruben
Reyes was designated as the recipient.
.
September 2006: Group meets regularly at Wack-Wack every weekend
at night to discuss ways to facilitate the approval of the project.  NEDA
status is ok but all of a sudden meets a sudden resistance from Director
General Neri. Group meets at Wack-Wack on September 22 to address
the problem.
.
We meet Sec Mendoza at his office and make representations. Secretary
 does not hear the full presentation but endorses us to the then head of
legal Atty. Noel Cruz.
  DOTC legal returns the endorsement of the NBN project to the CICT.
Design is changed again trying to fit the commitments. ZTE and group
argue on the profit margins, they finally decide on September 28 that the
increasing the project amount to $270M will give them a margin of $70M
each.
.
October 2006: The name Joey de Venecia suddenly comes into play
and makes the group worried. He wants the same project but on a BOT
scheme and is adamant about it, he had the idea long before Arescom
and ZTE conceptualized it; in fact the whole idea the Arescom proposal
came from Joey.
.
Leo San Miguel is tasked to fix the problem since he personally knows
Joey. The negotiations do not progress because of Joey's distrust for
the group. Group meets at Wack-Wack on October 11 and decides to
ask the FG for help on how to handle Joey.
.
Ruben Reyes, Chairman Abalos and General De La Torre fly to China
on October 14 and discuss the problem with the ZTE officials about
Joey. ZTE is alarmed but is reassured that everything will be taken care
of with the intervention of the FG.
.
November 2006: Group is notified on November 12 that the President
does not want to borrow and instead wants a BOT scheme similar to
the AHI proposal.
  Group decides to compete with Joey and brings an alternate solution
by bringing out a competing BOT offer.
  Joey is unfazed since he holds all the cards at NEDA with his father's
help and stonewalls the group's effort. Group meets almost daily to
discuss ways to resolve the issues. ZTE is furious at group for not
controlling the situation.
  Group decides that the only way that Secretary Neri would not object
is to offer him a commission of US$4M at that time the exchange rate of
50-1. Chairman Abalos is designated to fix the problem.
.
December 2006: Group submits a proposal to Chairman Sales changing
strategy and hoping to revive the NBN proposal to a BOT similar to
Joey's proposal.
  In a meeting in Wack-Wack in December 5, FG and Abalos try to
convince Joey to just partner with them and quit his objection. In the
meeting at Wack Wack FG threatens Joey by telling him to back off and
stay out of the project.
  ZTE tries to help out in the conflict and even designs the AHI network
thereby exposing their pricing to Joey's group.
.
  Group goes to China on December 27 with Joey to fix the problem,
they meet with ZTE officials at ZTE HQ but the negotiation fails. It was
during these negotiations that Joey brought up the idea of ZTE partnering
with Hwawei, another Chinese supplier. The suggestion is promptly
dismissed by ZTE and negotiations break down. Group demands an
advance and promptly got it from ZTE before the arrival of Joey De
Venecia. Ruben Reyes is again designated as the recipient. US$5M was
doled out.
.
January 2007: Group abandons the BOT proposal and decides to meet
Joey De Venecia's AHI group head-on with their own BOT proposal.
Asec Formoso organizes a defense by creating a Technical Working
Group (TWG) to evaluate the proposals of ZTE, AHI and Arescom.
It comes as no surprise that the TWG comes up with a report tilted in
favor of ZTE because all of the members are either TELOF or DOTC
personnel, they do not want the offer of AHI since it will be implemented
by the private AHI group.
  Group plots strategy and enlists Secretary Mendoza since Chairman
Sales is a technocrat and Secretary Mendoza is a long-time ally. Group
decides to move Telof back to DOTC citing the reason that CICT is a
commission and cannot implement a project of this magnitude. In the end
Secretary Sales signs the endorsement of the project anyway.
.
February 2007: TWG finishes the evaluation and hands it to the
Technical Working Committee (TWC) who promptly endorses it to
Secretary Mendoza.
  ZTE is endorsed to NEDA by both Mendoza and Sales. Joey is not
impressed and files a complaint about the ZTE proposal to whoever
would listen citing the disadvantages to the government. The project at
NEDA is delayed and the much needed NEDA approval is stalled.
Secretary Neri does not seem to be favoring the NBN and appears to be
part of the problem because he likes the AHI proposal rather than the
NBN which requires a government guarantee.
.
March 2007: On March 8, approval of GMA is secured in order to meet
the deadline for final NEDA approval by the executive.
  Group meets on March 12 in Wack Wack with Yu Yong and Fan Yang.
They finally expand the proposed coverage to increase the amount to
$329M.
  Joey is furious when the NBN proposal is approved and threatens to
expose all the dealings that stopped his much superior proposal. Group
does not appear to be worried and thinks it is just sour graping. Upon
approval by the NEDA, group meets on March 28 in Wack Wack with
ZTE and demands another cash advance which they got. Ruben Reyes
is the designated recipient again. US$10M is again doled out.
.
April 2006: Group meets again in Makati Shangri-La on April 4 with
Yu Yong and Fan Yang of ZTE to discuss ways of getting upfront
money to finance partly the elections and some personal needs. Ruben
Reyes is again designated as the recipient. US$ 30M is again doled out.
Yu Yong agrees but on the condition that PGMA be present at the signing.
PGMA promptly goes to China to witness the signing.
  FG cannot participate since he is hospitalized and Abalos is busy with
the elections. Ruben Reyes takes over all of the negotiations and transfer
of funds.
.
Upon arrival from China on April 27, Secretary Mendoza and Secretary
Favila visit the FG and inform him of the good news.
.
May 2007: Loan negotiation starts.