By Imee Charlee C. Delavin,
Senior Reporter
TELECOMMUNICATIONS companies renewing their legislative franchise can expect to get the same perks granted to other telcos, according to the chairman of the House Committee on Legislative Franchises, as the government seeks to further level the playing field in the industry.
The House of Representatives recently approved the measure extending the franchise of Smart Communications, Inc. by another 25 years. The bill introduced several amendments to Republic Act 7294, which originally granted Smart a 25-year legislative franchise in 1992. Smart’s franchise is due to expire this March.
“As to the application of the same privileges — under Section 23 of RA 7295 (Public Telecommunications Policy Act of the Philippines) — there is an equality treatment in the telecommunications industry,” House Committee on Legislative Franchises Chairman and Palawan Rep. Franz E. Alvarez (1st district) said in a mobile phone reply when asked whether Congress will grant similar incentives to other telco firms renewing their license.
Section 23 of the Public Telecommunications Policy Act states that “any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, that the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise.”
Mr. Alvarez said Congress conducts hearings to determine if the telcos are “fit to operate” and “compete in the telecommunications industry which the state has declared to be a healthy competitive environment.”
“The grant of such equality treatment is part and parcel of that environment, provided the public has benefitted and the applicant has to show that it is fit to operate,” he added.
Under House Bill (HB) 4637 — which extended the franchise of PLDT, Inc.’s wireless unit — Smart will be exempted from paying Customs duties, tariffs and taxes on radio telecommunications and electronic communications equipment.
A new “equality clause” was also added to Smart’s legislative franchise which will allow the company to enjoy future incentives that will be granted to new players.
“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 read.
Mr. Alvarez said exemption from Customs duties was given “to provide equality” since Smart committed to further improve its services, and the same incentive was already given to another telco firm.
“These were already given to another franchisee, Bell Telecommunications. To provide equality, and upon the express and categorical undertaking of Smart that it will improve its service, it was decided to give them as well,” he added.
The equality provision is also “not new”, as it is already found in the franchises given to San Miguel Corp.’s Bell Telecommunications, as wellas Bright Star Broadcasting Network Corporation.
Smart’s original franchise also required it to make a public offering of at least 30% of its authorized capital stock in any securities exchange in the country within two years from the measure’s effectivity. This was amended however under HB 4637 — which the lower house already forwarded to the Senate — by adding the phrase: “unless the grantee is wholly owned by a publicly listed company.”
“Smart was not exempted from public offering. Under its old franchise, it was required that at least 30% of its ownership be offered to the public. As a wholly owned corporation of PLDT, which is publicly listed, Smart substantially complied with this requirement,” Mr. Alvarez explained.
“The grant of the exemptions foster healthy competition in the telecoms industry which will in fact persuade potential investors in the market.”
Smart declined to comment the franchise extension.
Ayala-led Globe Telecom Inc., meanwhile, could opt to seek the same package once it renews its franchise.
“Globe is not due yet [but] we will keep our options open,” Yolanda C. Crisanto, Globe senior vice-president for corporate communications said in a separate text message.
Luis A. Limlingan, managing director of Regina Capital Development Corp., said the provisions will help Smart — and other telco firms to better compete.
“Given how competitive the industry already is, even at a duopoly, and given the ever changing technology and low switching costs of users, these provisions should help Smart should it get final approval from the Senate… Other players wanting to break this same duopoly or its main rival Globe will probably seek the same or even more incentives looking forward,” he said.
News reports earlier said Smart asked the House of Representatives to exempt it from paying local taxes, citing the 25-year franchise it gave to Bell Telecommunications — whose franchise is valid until mid-2040 — which contained such a privilege.
Smart failed to have its franchise extended in the previous Congress as the Senate deferred the adoption of the bill from the House of Representatives due to questions from some lawmakers, particularly the “standing objection” of then Senate Deputy Minority Leader Vicente C. Sotto III.
Senator Grace Poe-Llamanzares, who currently chairs the public services committee, was not immediately available for comment as of press time.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.
