Creator Tech is a boutique analyst company that has written reports for large global companies and organisations like the Communications Alliance. Its co-founder, Steve Mackay, said Hong Kong-based executive Ferdi Stolzenberg had commissioned the paper on behalf of some potential Telstra investors. Mr Mackay said the high profit margins enjoyed by incumbent mobile providers Globe Telecom and PLDT meant it made sense for Telstra to be interested in the Philippines. "The business case for 4G in the Philippines, where both of the incumbents are making profit margins that nobody else is making, is a no-brainer and I can absolutely see why they'd do it," he said. "But what are the costs, what are the risks to the costs and why doesn't Telstra seem to be disclosing any of those?" 'Speculative reporting' Mr Mackay also called for more detail about how much the project would cost to build in the Philippines, where large projects often experience delays, and how much San Miguel would charge Telstra for using its vital spectrum resources.

One of the biggest advantages of Telstra working with San Miguel is the latter's control over the 700MHz mobile spectrum, which is the electronic airspace needed for all broadcast technologies. This is a hugely valuable resource that Mr Mackay believed was worth between $US930 million and $US2.78 billion. "Telstra's 40 per cent share of this equals $507 million to $1.52 billion," the Creator Tech report said. "San Miguel may choose to gift the spectrum to the joint venture at below-market value or 'mate's rates', although, based on public statements, we see no commercial reason why they would do this. "The total cost, including IT infrastructure and backhaul, but excluding spectrum, could be in the region of $US3.5 billion." A spokeswoman for Telstra said the Creator Tech report was "speculative reporting" and that its position remained unchanged from previous comments. "At this stage no deal has been reached and there is no certainty one will be," she said. "If and when a deal is to proceed, we would disclose the appropriate amount of detail to our shareholders."

Competition intensifying Perpetual deputy head of equities and portfolio manager Nathan Parkin​ said Telstra's biggest problem was the rising levels of competition from local rivals. "I think it's a sign that they feel like they need to achieve some growth somewhere and that it's not going to be in the domestic business any more," he said. "This looks like one of those projects that takes investment upfront and then the pay-off is over a long period of time. "The market wouldn't rate that too highly and we would be in the same boat." Mr Parkin also said the track record of Australian businesses heading overseas remained relatively patchy.

"I personally don't think that investment is going to cover what they will lose domestically," he said. "What we have seen, though, is that we should be cautious when companies talk about investing billions of dollars offshore. "In some cases, it has been great – with CSL and the like – but more often than not, there's caution warranted." Infrastructure hurdles Goldman Sachs analyst Raymond Tong released last week an unrelated report into Telstra that also warned of potential cash burn for the Philippines project. Like Mr Mackay, he also estimated the project could cost both parties $US3.5 billion over a three- to four-year period.

He said the joint venture would need to catch about 30 per cent of the market and get profit margins of around 35 per cent in order to make a positive return on the potential $US3.5 billion investment. A key problem was the lack of mandatory infrastructure sharing, which would force any new player to build their own mobile base stations and backhaul links – expensive propositions in a nation made up of more than 7000 islands. "We expect both incumbents will respond aggressively to protect their shares through increased mobile network investment and higher marketing," Mr Tong said. "Any new entrant will likely incur significant cash burn. "Both Globe and PLDT have asked the regulator to reassign part of SM's 700MHz holding in a more equitable way [and] this would significantly reduce SM's competitive advantage." But the Goldman Sachs report also noted the substantial potential market for any 4G play in the country, thanks to the lack of fixed-line broadband and the widespread use of mobile phones.

"Although risks are higher … we see potential long-term opportunity for Telstra and San Miguel," the report said. "Our analysis indicates that the Philippines market is the most concentrated market in Asia. "Theoretically, we believe San Miguel should be able to deliver a superior network and performance to its competitors."