GOTCHA, Published in The Philippine Star, Monday, February 18, 2008
The following is from a telecom expert, who shall remain anonymous for the moment because of his quaint ties to somebody drawn in the ZTE deal. But citing portions of the $330-million contract, he points out where the overpricing is — part of the $200-million kickback. In effect he debunks the prattle of admin spokesmen that there’s no evidence of fraud. It’s in the contract, to wit:
The DOTC touts WiMax as the way to wirelessly link government offices and barangays to the National Broadband Network. Its top officials insist there was no overprice in the ZTE deal. Facts will pin them to crime.
From annexes to the DOTC-ZTE contract, the portion entitled “NBN Project WiMax BoQ,” we can see the following:
CPEs (Customer Premise Equipment) Subscriber Units
Item: BMAX CPE ODU PRO SA 3.5
Quantity: 25,844
Unit Price ($): 1,784
Total Price ($): 46,107,524
Description: BreezeMAX PRO CPE Outdoor Radio Unit
This reveals that ZTE is not the manufacturer of WiMax equipment. It would be sourcing from
The Alvarion BreezeMAX PRO is an outdoor WiMax CPE unit that includes a modem and radio circuitry, and other components. Integral to it is the flat square antenna, measuring 21 x 21 x 5 cm. and weighs about 3 lbs.
The WiMax CPE antenna will just be clamped to a two- to four-foot metal pole bolted outside a building or structure in each of the 25,844 sites identified by the DOTC. To complete the picture, the antenna will be connected to a small network device the size of a shoebox, placed atop a table. The PCs are then connected to the network device. The setup is similar to a TV set connected to the rooftop aerial antenna.
A leading competing brand, the Proxim Tsunami MP.16 3500 Subscriber Station with Integrated 18 dBi Panel Antenna, can be ordered online for $579.99 apiece. Follow the link: http://www.wirelessnetworkproducts.com/index.asp?PageAction= VIEWPROD&ProdID=1404
Let’s use the competitive price of $580. Since ZTE would be buying the equipment from Alvarion, the former has to make a profit, so let’s assume it doubles the price to $1160. This gives ZTE a gross profit of 50 percent — rare in the highly competitive IT industry.
At the stated $1,784 per unit, the overpricing for the quantity of 25,844 units is over $16 million: (1,784 – 1,160) x 25,844 = 16,126,656.
Directly associated to the WiMax CPE equipment is the installation, testing and commissioning. In the DOTC-ZTE contract annex, the portion entitled “Site Engineering for Remote Office Site, we can see the following:
Item: Installation, Testing, Commissioning
Quantity: 25,844
Unit Price ($): 1,000
Total Price ($): 25,844,00
“Installation” simply means mounting the antenna outside the building or structure, and connecting the cables from the antenna to the network device and onto PCs. This can easily be done: just provide personnel in the 25,844 locations a three-page idiot-proof instruction manual. Installation can be completed in a couple of hours.
“Testing and commissioning” means testing the wireless connection from the remote site to the nearest base station (there are 300 planned base stations), and from the base station to the central network center. This requires Person 1 in the remote site talking on the phone to Person 2 in the base station and Person 3 in the central network center during the testing period.
Installation, testing and commissioning of one remote location can be completed in a couple of days. The cost for three persons working two days to perform these activities can be reasonably estimated at $250 per location, or a total of $6.5 million for 25,844 locations.
The total overprice for installation, testing and commissioning is over $19 million: (1,000 – 250) x 25,844 = 19,383,000.
On this one example alone — provision, installation, testing and commissioning of WiMax equipment — total overprice is $35 million.
Detailed analyses of annexes would show overpricing all over — in local materials, civil works, services and consultants. Anyone with IT or telecom management experience can easily spot them.
Again, top DOTC officials keep claiming there was no overprice in the ZTE contract. That’s because they know that laymen do not easily understand the NBN project. Corrupt officials always try to cover their tracks. But sometimes they are caught with pants down.
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At the opportune time, I will gladly introduce our telecom source. Too, the colleague who requested this price analysis, and was among those who convinced Jun Lozada to blow the whistle on the scam of the century.
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