Window narrows for Smart’s 25-year franchise extension

MANILA, Philippines – The window is narrowing for Smart Communications to get a 25-year franchise extension, as it awaits anew the Senate’s approval.

Sponsored by Senator Juan Miguel Zubiri, a bill was filed on January 19 this year, seeking to extend the franchise of the PLDT unit by another 25 years.

Under Republic Act (RA) No. 7294, Smart was granted its 25-year franchise in March 1992. The franchise is set to expire this March.

RA 7294 allowed Smart “to establish, install, maintain, lease, and operate integrated telecommunications/computer/electronic services and stations throughout the Philippines for public domestic and international telecommunications.”

Last January 16, the House of Representatives approved House Bill 4637, extending Smart’s franchise for another 25 years and adding some perks for telco franchises.

The previous 16th Congress had adjourned in June 2016 without approving Smart’s franchise, after some senators raised issues like slow Internet service and dropped calls.

But with the refiling of the bill under the 17th Congress, some changes have been introduced to RA 7294, such as relaxing the public offering requirement and adding new equality and penalty clauses.

New perks, relaxed requirements

Before, telcos were required to make an initial public offering of at least 30% of their authorized capital stock within two years from implementation of the law.

But this requirement was changed under Senate Bill 1302 by excluding those which are “wholly owned by a public listed company.”

In effect, Smart – which is a wholly-owned subsidiary of listed PLDT – will be exempted from the public offering requirement.

Under Senate Bill 1302, equality and penalty clauses were also introduced.

“If any franchise for telecommunications services awarded or granted by Congress of the Philippines or any amendment or revision to any franchise for telecommunications services, subsequent to the approval of this Act, provide terms, privileges, exemptions, exceptions and conditions that are more favorable and beneficial than those contained in or otherwise granted under this Act, then the same terms, privileges, exemptions, exceptions, or conditions, shall, ipso facto, accrue to the herein grantee and be deemed part of this act,” the equality clause reads.

Under the penalty clause, should Smart fail to submit its annual report to Congress, it will be fined P500 per working day of non-compliance. The fine will be collected by the National Telecommunications Commission.

The Senate bill also seeks to exempt telcos with franchises from paying Customs duties, tariffs, and taxes on radio telecommunications and electronic communications equipment, machinery, and spare parts. (READ: PLDT’s income drops by 33% on Rocket Internet losses)

Smart was granted authority to operate as a mobile cellular service provider in 1992 and has since been operating as a telecommunications provider for both domestic and international customers.

Smart runs cell sites, mobile broadband base stations, and fixed wireless broadband-enabled base stations, covering 1,634 cities and municipalities in the Philippines. – Rappler.com