HOUSE OF REPRE:

RECEIVED
Republic of the Philippines pate; 15 AUG 2016
HOUSE OF REPRESENTATIVES Me CRe

CONGRESS OF THE PHILIPPINES.

Quezon City, Metro Manila BY,

SEVENTEENTH CONGRESS [ iit REOISTRATION UNIT.
First Regular Session BILLS AND INDEX SERVICE

House Bill No. 2930

Introduced by Honorable REYNALDO V. UMALI

EXPLANATORY NOTE

This bill seeks to amend and extend the twenty-five (25) years franchise
granted to Smart Communications, Inc. (SMART, formerly Smart Information
Technologies, Inc.) which will expire in 2017 pursuant to Republic Act No.
7294. Smart Communications, Inc. shall be granted authority to construct,
establish, install, maintain, lease, co-use, purchase and operate and carry on
the business of providing integrated telecomunications/computer/electronic
services and stations throughout the Philippines for public domestic and
international telecommunications.

In 1992, Smart was granted authority to operate a mobile cellular service and
since then, it has been actively operating as a telecommunications provider in
the country for both domestic and international public. Since it began its
commercial operations, Smart has grown as one of the country’s leading
telecommunication providers. It is operating cell sites, cellular/mobile
broadband base stations, and fixed wireless broadband-enabled base stations,
covering 1,634 cities and municipalities in the country.

In recognition of Smart’s commitment and leadership as a telecommunication
provider in the social, cultural and economic facets of our society, and its
efforts to keep pace with technological and capital requirements of its
operations, the immediate renewal of its franchise is recommended to ensure
the uninterrupted and improved delivery of its services to the Filipino people.

In view thereof, the passage of thi§ ryeasure is earnestly sought.

[ALDO V. UMALI

Representative
Second District, Province of Oriental Mindoro

TAT



Republic of the Philippines

HOUSE OF REPRESENTATIVES

CONGRESS OF THE PHILIPPINES
Quezon City, Metro Manila

SEVENTEENTH CONGRESS
First Regular Session

House Bill No.2980

Introduced by Honorable REYNALDO V. UMALI

AN ACT AMENDING AND EXTENDING FOR TWENTY-FIVE (25) YEARS THE
FRANCHISE GRANTED TO SMART COMMUNICATIONS, INC. (FORMERLY
SMART INFORMATION TECHNOLOGIES, INC.) UNDER REPUBLIC ACT NO.
7294, ENTITLED “AN ACT GRANTING SMART INFORMATION
TECHNOLOGIES, INC. (SMART) A FRANCHISE TO ESTABLISH, INSTALL,
MAINTAIN, LEASE AND OPERATE INTEGRATED
TELECOMMUNICATIONS/COMPUTER/ELECTRONIC SERVICES AND
STATIONS THROUGHOUT THE PHILIPPINES FOR PUBLIC DOMESTIC AND
INTERNATIONAL TELECOMMUNICATIONS, AND FOR OTHER PURPOSES”

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Section 1 of Republic Act No. 7294 is hereby amended to read as
follows:

“SECTION 1. Nature and Scope of Franchise. - Subject to the provisions
of the Philippine Constitution and applicable laws, rules, and regulations, the
franchise granted to the Smart Communications Inc., hereunder referred to as
the grantee, its successors or assignees, to construct, establish, install,
maintain, lease, co-use, purchase, operate and carry on the business of
providing telecommunications, including electronic communications or
electronic communications services throughout the Philippines and between
the Philippines and other country and territories, including other space, as
public interest may warrant, for public domestic and international
telecommunications is hereby extended for twenty-five (25) years from the
effectivity of this Act. For this purpose, the grantee is hereby granted the right
to construct, establish, install, maintain, lease, co-use, purchase and operate
the corresponding transmitting and receiving stations, satellites, lines,
systems, networks, international gateways, local exchanges, and platforms as
it may consider necessary, convenient, or reasonable.

In this Act, the term “Telecommunications” shall include “Electric
Communications’. In addition, the following terms shall have the meaning set
forth herein:

ELECTRONIC COMMUNICATIONS NETWORK shall mean (A) A
transmission system for conveyance, by use of electrical, magnetic or electro-
magnetic energy, of signals of any description; and, (B) Any of the following as


are used, by the person providing the system and in association with it, for
conveyance of the signals: (1) Apparatus comprised in the system; (2)
Apparatus used for the switching and routing of the signals; and, (3) Software
and stored data;

ELECTRONIC COMMUNICATIONS SERVICE shall mean a service
consisting in, or having as its principal feature, the conveyance by means of an
electronic communications network or signals. It includes wired, wireless,
fixed, cellular, and/or mobile, or integrated
telecommunications/computer/electronic services, including value-added
services, or technologies related to such service which are at present available
or made available through technical advances or innovations in the future, and
fixed and mobile stations.”

SECTION 2. Section 7 of Republic Act No. 7294 is hereby amended to read as
follows:

“SEC. 7. Term of Franchise. - This franchise shall be extended and in
effect for a period of twenty-five (25) years from the date of the effectivity of this
Act, unless sooner revoked or cancelled. In the event the grantee fails to
operate continuously for two (2) years, this franchise shall be deemed ipso facto
revoked.”

SECTION 3. Section 8 of Republic Act No. 7294 is hereby amended to read as
follows:

“SEC. 8. Acceptance and Compliance. ~ Acceptance of this franchise shall
be given in writing to Congress of the Philippines, through the Committee on
Legislative Franchises of the House of Representatives and the Committee on
Public Services of the Senate, within sixty (60) days form the effectivity of this
Act, Upon giving the acceptance, the grantee shall exercise the privileges
granted under this Act. Refusal of failure to accept the franchise within the
prescribed period shall render the franchise void.”

SECTION 4. Section 9 of Republic Act No. 7294 is hereby amended to read as
follows:

“SEC. 9 Tax Provisions. - The grantee, its successor or assignees, shall
be liable to pay the same taxes on their real estate, buildings, and personal
property, exclusive of this franchise, as other persons or corporations which
are now or hereafter may be required by law to pay, except radio
telecommunications and electronic communications equipment, machinery
and spare parts needed in connection with the business of the grantee which
shall be exempt from customs duties, tariffs and other taxes, as well as those
declared exempt in this section. In addition thereto, the grantee, its successors
or assignees shall pay a value-added tax on all gross receipts of the business
transacted under this franchise by the grantee, its successors or assignees in
the Philippines, in tieu of any and all taxes of any kind, nature or description
levied, established or collected by an authority whatsoever, including but not
limited to, city, municipal, provincial or national, from which the grantee is
hereby expressly exempted effective from the date of the approval of this Act:
Provided, that the grantee, its successors or assignees shall continue to be
liable for income taxes payable under Title II of the National Internal Revenue
Code pursuant to Section 2 of Executive Order No. 72 unless the latter
enactment is amended or repealed, in which case the amendment or repeal
shall be applicable thereto.


Nothing herein shall be construed as repealing any specific tax
exemption, incentive or privilege granted under any relevant law: Provided, that
all rights, privileges, benefits and exemptions relating to customs duties,
tariffs, and other taxes accorded to existing and future telecommunications
shall likewise be extended to the grantee.

The grantee shall file the return with and pay the tax due thereon to the
Commissioner of Internal Revenue or his duly authorized representative in
accordance with the National Internal Revenue Code and the return shall be
subject to audit by the Bureau of Internal Revenue.”

SECTION 5. Section 11 of Republic Act No. 7294 is hereby amended to read as
follows:

“SEC 11. Sale, Lease, Transfer, Usufruct or Assignment of Franchise ~ The
grantee shall not lease, transfer, grant the usufruct of, sell nor assign the
franchise herein granted or the rights and privileges acquired thereunder to
any person, firm, company, corporation or other commercial or legal entity, nor
merge with any corporation or entity, nor shall transfer the controlling interest
of the grantee, whether as a whole or in part, and whether simultaneously or
contemporaneously, to any person, firm, company, corporation or entity
without the prior approval of the Congress of the Philippines: Provided, that the
foregoing limitations shall not apply: (A) when transfer is done through a Stock
Exchange; (B) for purposes of qualifying persons for election to the Board: (C)
when transfer to a corporation that is controlled by the same stockholders
controlling the grantee: (D) to any transfer or issuances of shares of stock in
the implementation of the requirement for the dispersal of the grantees
ownership consistent with Section 13 of Republic Act No. 7294: (E) to any
transfer of sale of shares to a foreign investor or investors; (F) to any issuance
of shares to any foreign or local investors, pursuant to or in connection with
any increase in the grantee’s authorized capital stock, which shall result in the
dilution of the stockholdings of the grantee’s then existing stockholders; (G) to
any transfer to another corporation which is a grantee of another congressional
franchise for provision of telecommunication services; and (H) to any
combination thereof where such transfer, sale or issuance is effected in order
to enable the grantee to raise any of the services authorized by this Act and/or
to carry out any of the purposes for which the grantee has been incorporated or
organized; Provided, Further, that any transfer, sale or issuance is in
accordance with any applicable constitutional limitations: Provided,
Furthermore, that Congress shall be informed of any sale, lease, transfer, grant
of usufruct, or assignment of franchise or the rights or privileges acquired
thereunder, or the merger, or transfer of the controlling interest of the grantee,
within sixty (60) days after the completion of the transaction: Provided,
Moreover, that failure to report to Congress the change of ownership shall
render the franchise Ipso Facto revoked: Provided, Finally, that Any person or
entity to which the franchise herein granted is validly sold, transferred or
assigned shall be subject to the same conditions, terms, restrictions and
limitations of this Act."

SECTION 6. A new section is hereby inserted after Section 15 of Republic Act
No. 7294, to read as follows:

“SEC. 16. Equality Clause. - If any franchise for telecommunications
services is awarded or granted by the Congress Of the Philippines, or any
amendment or revision to any franchise for telecommunications services,
subsequent to the approval of this Act, with 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 continuous shall Ipso Facto, accrue to
the herein grantee and be deemed part of this Act."

SECTION 7. The present Section 16 of Republic Act No. 7294 is hereby
renumbered as Section 17.

SECTION 8. A new Section 18 is hereby inserted to read as follows:

“SEC. 18. Penalty Clause. - Failure of the grantee to submit the requisite
annual report to Congress shall be penalized by a fine in the amount of Five
Hundred Pesos (P500.00) per working day of noncompliance. The fine shall be
collected by the National Telecommunications Commission (NTC) from the
delinquent franchise grantee separate from the reportorial penalties imposed
by the NTC.”

SECTION 9. Applicability Clause. - All other provisions of Republic Act No.
7294 which are not inconsistent with the provisions of this Act and remain
unrepealed shall continue to be in full force and effect.

SECTION 10. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in two (2) national newspapers of general
circulation.

Approved.