Smart seen to get 25-year franchise extension by March

Chrisee Dela Paz
Smart seen to get 25-year franchise extension by March

Alecs Ongcal

But the franchise extension might require the telco giant to list on the Philippine Stock Exchange

MANILA, Philippines – The Senate is fast-tracking the approval of the 25-year franchise extension of Smart Communications Incorporated which, if delayed, will stall the telco’s operations and affect its over 60 million subscribers.

Senator Juan Miguel Zubiri said on the sidelines of a hearing that the Senate is planning to ask the House of Representatives to adopt its version so as not to delay Smart’s operations. (READ: Window narrows for Smart’s 25-year franchise extension)

“We are pressed for time. We cannot allow the franchise to expire. What would happen is a temporary cut-off of their services to the people. I say, let us bring out all problems to the floor. But we stressed to them the need to pass it on March 17,” said Zubiri, who authored Senate Bill 1302 or the bill to extend Smart’s franchise.

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

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

“We go on break on March 15. So what I proposed during the caucus is that if we do make amendments and these are acceptable on all sides, let us ask the House to adopt these amendments. This is the quicker route,” Zubiri said.

But the franchise extension might require the telco giant to list on the Philippine Stock Exchange.

“If the listing issue is taken up and they want it on the franchise, I don’t see any harm that Smart should be listed on the stock exchange. I will not go against it if they require Smart to have mandatory listing,” Zubiri said.

Listing required?

For Smart legal counsel Ray Espinosa, the listing requirement has already been fulfilled.

“Fulfilled na siya eh (It’s already fulfilled). I’m not trying to make an excuse, it’s public ownership of the company, but PLDT Incorporated is already publicly-owned, we’re looking at dividends and profits straight up,” Espinosa said.

“PLDT and Smart may be separate, but all of the rules and regulations with respect to listed companies, we are not withholding,” he added.

When asked what would happen if Smart is separately listed from PLDT, Espinosa replied: “It will orphan the value of PLDT. The value of PLDT will depress. This will be detrimental to the PLDT stockholders.”

Amendments before extension

Before the franchise extension gets approved, Philippine Competition Commission (PCC) Commissioner Johannes Benjamin Bernabe and civil group Democracy.Net.PH also want some amendments to be made.

“The adoption of the term ‘co-use’ will potentially legitimize and make legal future collusion and anti-competitive behavior. It also appears to be a means to ensure that the current dispute between the telecommunications giants and the PCC in the Court of Appeals becomes moot and academic, and resolved in favor of Smart,” said Pierre Tito Galla, co-founder and co-convener of Democracy.Net.PH.

This was echoed by Bernabe, who said that “from a competition perspective, [a] co-use agreement will enhance telcos’ dominance.”

Bernabe said he wants the equality clause to be revisited. “It should be calibrated towards enticing new entrants to come in.”

The previous 16th Congress had adjourned in June 2016 without approving Smart’s franchise extension, 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.

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. 

For Galla, tax exemptions allow dominant players to maintain and potentially abuse their dominant market position against new and emerging players, “who will still have to establish their networks and need such incentives more than established players.”

“I believe some of our colleagues are looking at amendments on tax exemptions. In fairness to Smart, they had mentioned that their competitors have already tax exemption to their franchise. It is really equality clause,” Zubiri said.

“It is moot and academic to put it there. It is not harmful to have this on the franchise,” he added.

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. –

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