Senate to Smart: Conduct IPO and we’ll extend franchise

MANILA, Philippines – Senate wants Smart Communications Incorporated to conduct an inital public offering (IPO) within two years before it grants the telecommunications giant’s 25-year franchise extension, which will also give the Manuel V. Pangilinan-led telco some tax breaks.

Senator Grace Poe, chairperson of the Senate public services committee, on Wednesday, March 1, endorsed to the plenary a measure extending the legislative franchise of Smart for another 25 years, even as she sought for further improvements in the quality of service to millions of subscribers.

Poe recommended the approval of House Bill Number 4637, taking into consideration Senate Bill Number 1302.

She said a committee report signed by 15 senators introduced amendments to Republic Act 7294, which originally granted Smart a 25-year legislative franchise in 1992. (READ: Smart seen to get 25-year franchise extension by March)

Among the key provisions of the Senate-endorsed measure is the prerequisite for Smart to make a public offering, restoring the original wording in its original franchise mandating that 30% of its authorized capital stock must be listed through the stock exchange. The House had deleted this original wording.

To recall, the approved House version in January 2016 effectively exempted Smart, the wholly-owned subsidiary of listed PLDT Incorporated, from the IPO requirement by adding, “Unless the grantee is wholly owned by a publicly listed company.”

Poe said the Senate deleted this phrase to comply with the original mandate under RA 7294.

Smart legal counsel Ray Espinosa had earlier said 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 in a previous Senate hearing.

No more ‘co-use’

Other than the IPO requirement, the Senate committee also removed the adoption of the “co-use” term in the bill.

Philippine Competition Commission (PCC) Commissioner Johannes Benjamin Bernabe and civil group Democracy.Net.PH had earlier expressed concerns on the co-use term adoption.

“The adoption of the term ‘co-use’ will potentially legitimize and make legal future collusion and anti-competitive behavior,” said Pierre Tito Galla, co-founder and co-convener of Democracy.Net.PH.

“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,” he added.

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

“This cannot be invoked in employing anti-competition practices,” Poe said.

Although the co-use term was removed, the committee retains the provision on exemption for 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.

Congress has only two weeks or until March 15 to extend the mobile telecommunications giant’s legislative franchise, which will expire later this month. – Rappler.com