SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE P H IL IP P IN E S  ) 
F irs t R e g u la r S e ssion 
)
SENATE 
S. No. 1302
Senate
o( tt)f frfcretarp
■17 
JAN 19 
P I 2 5
RECtIVEDBt;
,r
i:'
In tro d u c e d  by SENATOR JUAN M IG UEL F. Z U B IR I
AN ACT
EXTENDING FOR TW EN TY-FIVE (2 5 ) YEARS THE FRANCHISE GRANTED TO 
SMART 
C O M M U N IC ATIO N S , 
IN C . 
(FORMERLY 
SM ART 
IN FO R M A TIO N  
TECHNOLOGIES, IN C .) AM EN D IN G  FOR THE PURPOSE REPUBLIC ACT NO. 
7 2 9 4  ENTITLED "A N  ACT G RAN TING  SM ART IN FO R M A TIO N  TECHNOLOGIES, 
IN C . (SM AR T) A FRANCHISE TO ESTABLISH, IN STALL, M A IN T A IN , LEASE AND 
OPERATE 
INTEGRATED 
TE LEC O M M U NICATIO NS/C O M PU TER /ELEC TRO NIC 
SERVICES AN D STATIO NS THROUGHOUT THE P H IL IP P IN E S  FOR PUBLIC 
DOMESTIC AN D IN TE R N A TIO N A L TELECO M M UNICATIO NS, AN D FOR OTHER 
PURPOSES"
EXPLANATORY NOTE
This bill seeks to extend the franchise granted to Snnart Technologies, Inc. now 
popularly known as Smart Communications, Inc. or simply "Sm art" pursuant to Republic 
Act 
No. 
7294 
to 
establish, 
install, 
maintain, 
lease 
and 
operate 
integrated 
telecommunications/computer/electronic services and stations throughout the Philippines 
for public domestic and international telecommunications. The existing franchise o f Smart 
is expiring in 2017.
Smart was granted authority to operate a mobile cellular service in 1993 and has 
since been actively operating as a telecommunications provider in the country for both 
the domestic and the international public. 
Smart, since it began its commercial 
operations, has grown to be one of the country's leading telecommunications 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'6 commitment and leadership as a telecommunications 
provider in the social, cultural and economic facets of our society, and its efforts to keep 
pace with technological and the capital requirements o f its operations, the immediate 
renewal of its franchise is recommended to ensure the uninterrupted, reliable and 
improved delivery of its vital services to the Filipino people.
In view o f the foregoing, immediate approval of this bill is earnestly sought.
lN M IG U E L F. Z U B IR I
Senator


Tr.h% 
^2nate
SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE P H IL IP P IN E S  ) 
F irs t R e g u la r S e ssion  
)
SENATE
S. No. 1302
•17 
JM119 
P I 2 5
received 8T.
In tro d u c e d  by SENATOR JUAN M IG UEL F. Z U B IR I
1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
AN ACT
EXTENDING FOR TW EN TY-FIVE (2 5 ) YEARS THE FRANCHISE GRANTED 
TO SMART C O M M U N IC ATIO N S , IN C . (FORMERLY SM ART IN FO R M A TIO N  
TECHNOLOGIES, IN C .) AM EN D IN G  FOR THE PURPOSE REPUBLIC ACT 
NO. 
7 2 9 4  
ENTITLED "A N  
ACT G RANTING  
SMART IN FO R M A TIO N  
TECHNOLOGIES, IN C . (SM AR T) A FRANCHISE TO ESTABLISH, IN STALL, 
M A IN T A IN , 
LEASE 
AND 
OPERATE 
INTEGRATED
TELEC O M M U N IC ATIO N S/C O M PU TER /ELEC TR O N IC  
SERVICES 
AND 
STATIO NS THROUGHOUT THE P H ILIP P IN E S  FOR PUBLIC DOMESTIC 
AND 
IN TE R N A TIO N A L 
TELECO M M UNICATIO NS, 
AN D 
FOR 
OTHER 
PURPOSES"
Be it  enacted b y the Senate and the House o f Representatives o f 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 o f Franchise -  S u b je ct'to  the 
provisions of the P H IL IP P IN E  Constitution and applicable laws, rules and 
regulations, [there is hereby] THE FRANCHISE granted to the SMART 
C O M M U N IC ATIO N S , IN C . 
(''SMART", FORMERLY Smart Information 
Technologies, Inc.) hereunder referred to as the grantee,.its successors or 
assignees, [a franchise] to CONSTRUCT, establish, install, maintain, lease, 
CO-USE, PURCHASE, [and] operate AN D CARRY ON THE BUSINESS 
OF 
P R O V ID IN G  
[integrated] 
telecommunications 
[/com puter/], 
IN C LU D IN G  ELECTRONIC TELEC O M M U NICATIO NS OR electronic 
C O M M U N IC ATIO N S services [and fixed and mobile stations] throughout 
the Philippines AN D BETWEEN THE P H IL IP P IN E S  AN D OTHER 
COUNTRIES AN D TER RITO RIES IN C LU D IN G  OUTER SPACE, AS 
PUBLIC 
INTEREST 
MAY 
W ARRANT, 
for 
public 
domestic 
and 
international telecommunications IS  HEREBY EXTENDED FOR TW ENTY 
FIVE (2 5 ) YEARS FROM THE EFFECTIVITY OF T H IS  ACT [and]. FOR 
T H IS  PURPOSE, THE GRANTEE IS  HEREBY GRANTED THE R IG H T to 
CONSTRUCT, 
ESTABLISH, 
M A IN T A IN , 
install, 
LEASE, CO-USE, 
PURCHASE 
AND 
OPERATE THE 
corresponding 
transmitting 
and 
receiving 
stations, 
SATELLITES, 
LINES, 
SYSTEMS, 
NETWORKS, 
IN TE R N A TIO N A L 
GATEWAYS, 
LOCAL 
EXCHANGES, 
AND 
PLATFORMS [a t such places in the Philippines] as it may consider 
necessary, [a n d ] convenient, OR REASONABLE.


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
IN  T H IS  ACT, THE TERM "TE LE C O M M U N IC A TIO N S " SHALL 
INCLUDE "ELECTRO NIC C O M M U N IC A TIO N S ". IN  A D D IT IO N , THE 
FO LLO W ING  TERMS SHALL HAVE THE M EAN IN G S SET FORTH 
H E R E IN ."
"ELECTRO NIC C O M M U N IC ATIO N S N ETW O R K" SHALL MEAN 
(A ) A TR AN S M ISS IO N  SYSTEM FOR CONVEYANCE, BY USE OF 
ELECTRICAL, M AG NETIC OR ELECTRO-M AGNETIC ENERGY, OF 
SIG NALS 
OF 
ANY 
DESC RIPTIO N ; 
AND, 
(B ) 
ANY 
OF 
THE 
FO LLO W ING  AS ARE USED, BY THE PERSON P R O V ID IN G  THE 
SYSTEM AN D IN  ASSO CIATIO N W IT H  IT , FOR CONVEYANCE OF 
THE SIG NALS: (1 ) APPARATUS COM PROM ISED IN  THE SYSTEM; 
(2 ) APPARATUS USED FOR THE S W ITC H IN G  AND RO UTING  OF THE 
SIG NALS; AND, (3 ) SOFTWARE AND STORED DATA;
"ELECTRO NIC C O M M U N IC ATIO N S SERVICE" SHALL MEAN A 
SERVICE 
CO NSISTING  
IN , 
OR 
H A VIN G  
AS 
ITS  
P R IN C IP A L 
FEATURE, THE CONVEYANCE BY MEANS OF AN ELECTRONIC 
C O M M U N IC ATIO N S NETW ORK OF SIG NALS. IT  INCLUDES W IR ED , 
W IRELESS, FIXED, CELLULAR A N D /O R  M O BILE, ON INTEGRATED 
TE LEC O M M U N IC A TIO N S / COM PUTER/ ELECTRONIC SERVICES, 
IN C LU D IN G  
VALUE-ADDED 
SERVICES 
OR 
TECHNOLOGIES 
RELATED TO SUCH SERVICE W H IC H  ARE AT PRESENT AVAILABLE 
OR MADE AVAILABLE THROUGH TECHNICAL ADVANCES OR 
IN N O V A TIO N S  
IN  
THE 
FUTURE, 
AN D 
FIXED 
AND 
M OBILE 
S TA TIO N S ."
SEC. 2. Section 7 of Republic Act No. 7294 is hereby amended to read as follows:
"SEC. 7. 
Term o f Franchise. -  The franchise shall be EXTENDED 
AND IN  EFFECT for a [te rm ] PERIOD of twenty-five (25) years from the 
date of THE approval of this Act, unless sooner revoked or cancelled. In the 
event the grantee falls to operate continuously for tw o (2) years, this 
franchise shall be deemed ipso facto revoked."
SEC. 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 THE CONGRESS OF THE P H ILIP P IN E S , 
THROUGH THE COM MITTEE ON LEGISLATIVE FRANCHISES OF THE 
HOUSE OF REPRESENTATIVES AND THE COM M ITTEE ON PUBLIC 
SERVICES OF THE SENATE, W IT H IN  sixty (60) days [after approval] 
FROM THE EFFECTIVITY of this Act. [The grantee shall operate 
telecommunications systems for which this franchise is granted within two 
(2) years from the date of its acceptance in writing of this franchise]. 
UPON G IV IN G  THE ACCEPTANCE, THE GRANTEE SHALL EXERCISE 
THE PR IVILEG ES GRANTED UNDER T H IS  ACT. Refusal or failure to 
accept the franchise [o r to operate] within the prescribed period shall 
render the franchise void."
SEC. 4. Section 9 of Republic Act No. 7294 is hereby amended to read as follows:
"SEC. 9. Tax Provisions. -  The grantee, its successors or assignees 
shall be liable to pay the same taxes on their real estate, buildings and


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
personal property, exclusive of this franchise, as other persons or 
corporations which are now or hereafter may be required by law to pay [.], 
EXCEPT 
R A D IO  
TELECO M M UNICATIO NS 
AN D  
ELECTRONIC 
C O M M U N IC ATIO N S EQUIPM ENT, M ACH IN ER Y AND SPARE PARTS 
NEEDED IN  CONNECTION W IT H  THE BUSINESS OF THE GRANTEE 
W H IC H  SHALL BE EXEMPT FROM CUSTOM DUTIES, TARIFFS AND 
OTHER TAXES, AS W ELL AS THOSE DECLARED EXEMPT IN  T H IS  
SECTION. In addition thereto, the grantee, its successors or assignees 
shall pay a VALUE ADDED TAX [franchise tax equivalent to three percent 
(3% ) o f] ON all gross receipts of the business transacted under this 
franchise 
by 
the 
grantee, 
its 
successors 
or 
assignees 
IN  
THE 
P H IL IP P IN E S , [and the said percentage shall be] in lieu of ANY AND all 
taxes [on this franchise or earnings thereof] OF AN Y K IN D , NATURE OR 
DESCRIPTIO N LEVIED, ESTABLISHED OR COLLECTED BY AN 
AU TH O R ITY WHATSOEVER, IN C LU D IN G  BUT NOT LIM IT E D  TO 
CITY, M U N IC IP A L, P R O V IN C IA L OR N ATIO N AL, FROM W H IC H  THE 
GRANTEE IS  HEREBY EXPRESSLY EXEMPTED EFFECTIVE FROM 
THE DATE OF THE APPROVAL OF T H IS  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].
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.
SEC. 5. Section 11 of Republic Act No. 7294 is hereby amended to read as follows:
"SEC. 11. Sale, Lease, Transfer, Usufruct [ e t c ]  OR A S S IG N M E N T 
O F FRANCHISE. -  The grantee shall not SELL, lease,, transfer, grant the 
usufruct of [se ll] Nor assign the franchise herein granted or the rights and 
privileges acquired thereunder to any person, firm, company, corporation 
or OTHER CO M M ERCIAL OR LEGAL entity, nor merge with any 
corporation or entity, [w ithout the prior approval o f the Congress of the 
Philippines. Neither] NOR shall TRANSFER the controlling interest [in ] OF 
the grantee [be transferred], whether as a whole or in part, and whether 
simultaneously or contemporaneously, to any 
[such] 
person, 
firm, 
company, corporation or entity w ithout the prior approval o f the Congress 
o f the Philippines: PROVIDED, THAT THE FOREGOING LIM IT A T IO N S  
SHALL NOT APPLY: (A ) W HEN TRANSFER IS  DONE THROUGH A 
STOCK EXCHANGE; (B ) FOR PURPOSES OF Q U A LIFY IN G  PERSONS 
FOR ELECTION TO THE BOARD; (C ) W HEN TRANSFER IS  TO A 
CORPORATION 
THAT 
IS  
CONTROLLED 
BY 
THE 
SAME 
STOCKHOLDERS CONTROLLING THE 
GRANTEE; 
(D ) TO ANY 
TRANSFER 
OR 
ISSUANCE 
OF 
SHARES 
OF 
STOCK 
IN  
THE 
IM P LE M E N TA TIO N  OF THE REQUIREM ENT FOR THE DISPERSAL 
OF THE GRANTEE'S O W NERSHIP CONSISTENT W IT H  SECTION 13 
OF REPUBLIC ACT 7 2 9 4 ; (E ) TO ANY TRANSFER OR 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 W IT H  ANY INCREASE IN  THE


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
GRANTEE'S AU THO RIZED CAPITAL STOCK, W H IC H  SHALL RESULT 
IN  THE D ILU T IO N  OF THE STOCKHOLDINGS OF THE GRANTEE'S 
THEN E X IS TIN G  STOCKHOLDERS; (G ) TO AN Y TRANSFER TO 
ANOTHER CORPORATION W H IC H  IS  A GRANTEE OF ANOTHER 
CONGRESSIONAL 
FRANCHISE 
FOR 
P R O V IS IO N  
OF
TELEC O M M U NICATIO NS 
SERVICES; 
AN D 
(H ) 
TO 
ANY 
C O M B IN A T IO N  THEREOF WHERE SUCH TRANSFER, SALE OR 
ISSUANCE IS  EFFECTED IN  ORDER TO ENABLE THE GRANTEE TO 
RAISE THE 
NECESSARY C APITAL OR 
F IN A N C IN G  
FOR THE 
PR O V IS IO N  OF ANY OF THE SERVICES AU TH O R IZED  BY T H IS  ACT 
A N D /O R  TO CARRY OUT ANY OF THE PURPOSES FOR W H IC H  THE 
GRANTEE HAS BEEN INCORPORATED OR O RG ANIZED. PR O VID ED 
FURTHER, TH AT ANY TRANSFER, SALE, OR ISSUANCE IS  IN  
ACCORDANCE 
W IT H  
AN Y 
APPLICABLE 
C O N S TITU TIO N AL 
L IM IT A T IO N .
PR O VIDED, FURTHERMORE, THAT CONGRESS SHALL BE 
IN FO R M ED  
OF 
ANY 
SALE, 
LEASE, 
TRANSFER, 
GRANT 
OF 
USUFRUCT, OR ASSIG N M ENT OF FRANCHISE OR THE RIG HTS OR 
PR IVILEG ES ACQUIRED THEREUNDER, OR THE MERGER, OR 
TRANSFER OF THE CONTROLLING INTEREST OF THE GRANTEE, 
W IT H IN  S IX T Y  (6 0 ) DAYS AFTER THE CO M PLETIO N OF THE 
TR ANSACTIO N:
PROVIDED, FINALLY, THAT [A ]any person or entity to which the 
franchise herein is granted validly sold, transferred or assigned shall be 
subject to the same conditions, terms, restrictions, and limitations of this 
Act.
SEC. 6. Section 13 of Republic Act No. 7294 is hereby amended to read as follows:
"SEC. 13. Listing o f  Shares. -  The grantee shall list, subject to the 
requirements o f the Securities and Exchange Commission and the stock 
exchange concerned, and make a public offering through the stock 
exchange [o f the shares representing at least thirty per centum (30% ) of 
its authorized capital stock] in any securities exchange in the Philippines 
within two (2) years from the effectivity of this Act, UNLESS THE 
GRANTEE IS  W HO LLY OW NED BY A PUBLICLY LISTED CO M PAN Y."
SEC. 7. A new section is hereby inserted after Section 15 of Republic Act No. 7294 
to read as follows: 
'
"SEC. 16. E Q U A LITY  CLAUSE -  IF  ANY FRANCHISE FOR 
TELEC O M M U NICATIO NS SERVICES AW ARDED OR GRANTED BY 
THE CONGRESS OF THE P H ILIP P IN E S , OR ANY AM EN DM EN T OR 
R E VIS IO N  TO ANY FRANCHISE 
FOR TELECO M M UNICATIO NS 
SERVICES, 
SUBSEQUENT TO THE APPROVAL OF T H IS  ACT 
PROVIDE TERMS, PRIVILEG ES, EXEMPTIONS, EXCEPTIONS AND 
C O N D IT IO N S  TH AT ARE MORE FAVORABLE AN D BENEFIC IAL 
THAN THOSE CO NTAINED IN  OR OTHERW ISE GRANTED UNDER 
T H IS  ACT, THEN THE SAME TERMS, PRIVILEG ES, EXEMPTIONS, 
EXCEPTIONS, OR C O N D ITIO N S  SHALL, IPSO  FACTO, ACCRUE TO 
THE HEREIN GRANTEE AN D BE DEEMED PART OF T H IS  AC T."


1
2
3
4
5
6
■1
8
9
10
11
12
13
14
15
16
17
18
19
20 
21
SEC. 8. The present Section 16 of Republic Act No. 7294 is hereby renumbered 
as Section 17.
SEC. 9. A new Section 18 is hereby inserted to read as follows:
"SEC. 18. PENALTY C L A U S E - FAILURE OF THE GRANTEE TO 
S U B M IT THE REQ UISITE AN N U AL REPORT TO CONGRESS SHALL 
BE PENALIZED BY A FINE IN  THE AM O UNT OF FIVE HUNDRED 
PESOS (P 5 0 0 .0 0 ) PER W O R KIN G  DAY OF NONCOM PLIANCE. THE 
FINE 
SHALL 
BE 
COLLECTED 
BY 
THE 
N A TIO N AL 
TELEC O M M U NICATIO NS 
C O M M ISS IO N  
(N TC ) 
FROM 
THE 
DELINQ UEN T 
FRANCHISE 
GRANTEE 
SEPARATE 
FROM 
THE 
REPO RTO RIAL PENALTIES IM POSED BY THE NTC."
SEC. 10. Applicability Clause- All other provisions of Republic Act No. 7294 which 
are not inconsistent with the provisions o f this Act and remain un-repealed shall 
continue to be in full force and effect.
SEC. 11. E ffectivity- This Act shall take effect fifteen (15) days after its publication 
in the Official Gazette or in a newspaper o f general circulation.
Approved.