Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular Session

House Bill No. 5600

Introduced by Representative Giorgidi B, Aggabao

EXPLANATORY NOTE

This bill seeks to extend the franchise granted to Smart Technologies, Inc., now
popularly known as Smart Communications, Inc, or simply “Smart” 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, which is expiring in 2017

Smart was granted authority to operate a mobile cellular service in 1993 and has
since then, been actively operating as a telecommunications provider in the country for both
the domestic and the international public. Smart, has since it began its commercial operations,
grown as 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’s 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 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.

Representative Gioffidi B. Aggabao


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular

House Bill No. _ 5600

Introduced by Representative Giorgidi B. Aggabao

AN ACT

RENEWING THE FRANCHISE GRANTED TO SMART INFORMATION
TECHNOLOGIES, INC. (SMART) UNDER REPUBLIC ACT NO, 7294 OTHERWISE,
KNOWN AS “ AN ACT GRANTING SMART INFORMATION TECHNOLOGIES, INC.
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”, FOR
TWENTY-FIVE (25) YEARS FROM THE EFECTIVITY OF THIS ACT

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

SECTION 1. Nature and Scope of Franchise. - Subject to the provisions of the 1987
Philippine Constitution and applicable laws, rules and regulations, the franchise granted to
Smart Communications, Inc. (“SMART”) hereunder referred to as the grantee, its successors
or assigns a franchise to construct, establish, install, maintain, lease, co-use, purchase,
operate, and to carry on the business of providing telecommunications, including electronic
telecommunication or Electronic Communication Services throughout the Philippines and
between the Philippines and other countries and territories, including outer space, as public
interest may warrant, for public domestic and international telecommunications, is hereby
renewed for another 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 and convenient, or reasonable. In this Act, the term “telecommunications” includes


“Electronic Communications.” Electronic Communications Service” means a_ service
consisting in, or having. as its principal feature, the conveyance by means of an Electronic
Communications Network of signals, It includes, but is not limited to, wired, wireless, fixed,
cellular, and/or mobile, or integrated telecommunications/computer/electronic services,
including value added services, or technologies related to such services which are at present
available or made available through technical advances or innovations in the future, and fixed

and mobile stations.

In addition, the following terms shall have the meanings set forth herein:

a. “Electronic Communications Network” means —
(a.1) A transmission system for conveyance, by the use of electrical, magnetic or
electro-magnetic energy, of signals of any description; and
(a.2) Such of the following as are used, by the person providing the system and in
association with it, for the conveyance of the signals: (i) apparatus comprised in
the system; (ii) apparatus used for the switching or routing of the signals; and (iii)

software and stored data; “

SEC.2. Manner of Operation of Stations or Facilities. — The telecommunications stations,
satellites, lines, systems, networks, international gateways, local exchanges and platforms
installed by virtue of this franchise for the provision of the telecommunications systems or
the installation, operation and maintenance of the telecommunications stations, satellites,
lines, systems, networks, international gateways, local exchanges and platforms under this
franchise shall be constructed and operated in a manner as will at most result only in the
minimum interference on the wavelengths or frequencies of the existing stations or other
stations which may be established in accordance with law of other telecommunications
service grantees, without in any manner diminishing its own right to use its selected
wavelengths or frequencies and the quality of transmission or reception thereon as should
maximize rendition of the grantees’ services and/or the availability thereof.

SEC.3. Prior Approval of the National Telecommunications Commission. — The grantee
shall secure from the National Telecommunications Commission the appropriate permits,
licenses and certificates for its stations and shall not use any frequency in the radio spectrum
without having been authorized by the Commission

SEC.4. Responsibility to the Public. The grantee shall conform to the ethics of honest
enterprise and shall not use its stations for obscene or indecent transmissions, or for the
issemination of deliberately false information or willful misrepresentation, or assist in
subversive or treasonable acts,



SEC.5, Rates for Services. — The subscription charges and rates for services that the
grantee shall offer to the public shall be subject to the approval of the National
Telecommunications Commission or its legal successors.

SEC 6. Rights of Government. — The President of the Philippines, in times of war,
rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, may
take over and operate the stations, transmitter systems, facilities and equipment of the
grantee, temporarily suspend the operation of any station in the interest of public safety,
security and public welfare, or authorize the temporary use and operation thereof by any
agency of the Government, upon due compensation to the grantee, for the use of said stations,
transmitter systems, facilities and equipment during the period when they shall be so
operated.

SEC.7. Term of Franchise, — The franchise shall be for a term of twenty-five (25) years
from the date of approval 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

SEC. 8. Acceptance and Compliance. — Acceptance of this franchise shall be given in
writing sixty (60) days after approval of this Act. The grantee shall operate
telecommunications systems for which this franchise is granted within (2) years from the date
of its acceptance in writing of this franchise, Refusal or failure to accept the franchise or to
operate within the prescribed period shall render the franchise void.

SEC. 9. Tax Provisions. — The grantee, its successors or assigns, 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. In
addition thereto, the grantee, its successors or assigns, shall pay a franchise tax equivalent to
three percent (3%) of all gross receipts of the business transacted under this franchise by the
grantee, its successors or assigns, in the Philippines, in lieu 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 assigns shall continue to be liable for income taxes payable under
Title I of the National Internal Revenue Code pursuant to Sec. 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. 10. Warranty in Favor of National and Local Governments, — The grantee shall
hold the national, provincial and municipal governments of the Philippines harmless from all
claims, accounts, demands or actions arising out of accidents or injuries, whether to property
or to persons, caused by the construction or operation of the stations, systems, facilities and
equipment of the grantee.

SEC. 11. Sale, Lease, Transfer, Usufruet, ete, — The grantee shall not lease, transfer, grant
the usufruct of, sell or assign the franchise herein granted or the rights and privileges acquired
thereunder to any person, firm, company, corporation or entity, nor merge with any


corporation or entity without the prior approval of the Congress of the Philippines. Neither
shall the controlling interest in 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 without the prior approval of the Congress of the Philippines.

SEC.12. Ingress and Egress. — For the purpose of installing, operating and maintaining its
telecommunication lines, it shall be lawful for the grantee to make excavations or lay
conduits in any of the public places, highways, streets, lanes, sidewalks, bridges or
infrastructure in any provinces and municipalities: provided, however, that any public place
highway, street lane, sidewalk, bridge or infrastructure disturbed, altered, or changed thereby
shall be repaired and placed in a workmanlike manner by the grantee to the satisfaction of the
Department of Public Works and Highways or the local engineering office, as the case may
be, and/or in accordance with existing laws or rules on excavations and reconstitution of such
public civil works,

SEC. 13, Eminent Domain, — The grantee may acquire such private property as is actually
necessary for the realization of the purposes for which this franchise is granted: Provided,
that in case the owner refuses to sell or allow the use thereof, the proper proceedings shall be
instituted: provided, further, that just compensation is paid

SEC.14, Interconnection — The grantee is authorized to connect or demand interconnection

of its telecommunications systems to any other telecommunications systems installed,
maintained and operated by any other duly authorized person or entity in the Philippines for
the purpose of providing telecommunications services to the public under such terms and
conditions mutually agreed upon by the parties: provided, that the terms and conditions of
such interconnection shall be subject to the review of the National ‘Telecommunications
Commission, Provided further, that if the parties fail to agree the rules provided by the
National Telecommunications Commission for settling such disputes shall govern

SEC. 15. Public Offer of Shares. — In accordance with the constitutional provision to
encourage participation in public utilities the grantee shall offer at least thirty per centum
(30%) of its outstanding capital stock or a higher percentage that may hereafter be provided
by law in any securities exchange in the Philippines within two (2) years from the effectivity
of this Act

SEC. 16. Public Telecommunications Policy Act, — The grantee shall comply with and be
subject to the provisions of Republic Act No. 7925, the Public Telecommunications Policy
Act of the Philippines.

SEC. 17. Equality Clause, — If any franchise for telecommunications services is awarded or
granted by the Congress of the Philippines, or any amendment of 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 conditions shall, ipso facto, accrue to the herein grantee and be deemed part of
this Act.

SEC. 18. Repealability and Non-exclusivity Clauses. — The franchise herein granted shall
be subject to amendment, alteration or repeal by the Congress of the Philippines when the


public interest so requires and shall not be interpreted as an exclusive grant of the privileges
herein provided for.

SEC. 19. Separability Clause. — If any of the sections or provisions of this Act is held
invalid, all the other provisions not affected thereby shall remain valid

SEC. 20. Reportorial Requirement. — The grantee shall submit an annual report to the
Congress of the Philippines on its compliance with the terms and conditions of the franchise
and on its operations within sixty (60) days from the end of every year.

SEC. 21, Effectivity Clause. — This Act shall take effect fifteen (15) days from the date of
its publication in at least two (2) newspapers of general circulation in the Philippines

Approved,