Zubiri urges swift approval of Smart franchise

MANILA, Philippines - With less than a month before Congress goes on break, Sen. Juan Miguel Zubiri urged the immediate approval of a measure that seeks to extend the legislative franchise of Smart Communications to avoid the sudden interruption of mobile phone service of 50 million subscribers.

“It’s a very serious problem that we have to face because they have 60 million subscribers. What could happen with the termination is the temporary cut off of its systems, the service provided to the people and we can’t allow that,” said Zubiri, author of Senate Bill 1302.

During the first hearing of the Senate Committee on Public Services on the proposed renewal of Smart’s franchise yesterday, National Telecommunications Commission deputy commissioner Edgardo Cabarios said once the franchise of Smart expires, its authority to operate also ends.

Cabarios said Republic Act 7925 or the Public Telecommunications Policy Act of the Philippines specifically states that only entities with franchises granted by Congress are allowed to operate in the country.

During the senators’ caucus yesterday, Zubiri said that he would push for the House of Representatives to adopt the version that would be approved by the Senate in order to shorten the process and grant Smart the extension of its franchise before its franchise ends on March 17.

“What I proposed was if we do make amendments and the amendments are acceptable to all sides, let’s ask the House to adopt the version (of the Senate),” Zubiri said.

“It’s really cutting it close and I’m worried about the public’s reaction to a closure of a major telco that will affect the lives of 60 million Smart subscribers,” he added.

Senator Grace Poe, the chairperson of the public services committee, recognized the urgency of the bill but said there are several matters that need to be clarified first.

“The fact that Smart has 70 percent of the country as customers does not mean that we in the Senate have no other option but rubberstamp our conformity with the bill that was passed by the House. Smart may have 70 million subscribers but it must also subscribe to our laws,” Poe said.

I have mentioned how large Smart’s footprint is to underscore its status that approximates that of a vital industry. After power and water, broadband has become the third utility. Its penetration can be seen in the fact that there are more phones than people, and more SIM than the population,” she added.

In the event Congress fails to approve the extension of Smart’s franchise by March 17, several options are still available for the company to continue operating.

Cabarios said a directive from Congress to NTC could pave the way for the government regulator to recognize the continued operation of Smart, pending the approval of its franchise extension.

Smart, a wholly-owned subsidiary of telecom giant PLDT, argued that its operation as a public service provider could still continue ever, if Congress fails to approve its franchise extension on time.

“From a public service standpoint, unless NTC tells us to stop operations the day after the expiry of the franchise, the public service would have to continue because that would be in the best interest actually of the public service,” said Ray Espinosa, Chief Corporate Services officer of PLDT.

Espinosa, however, noted the expiry of its franchise would have serious implications on the loan obligations of both PLDT and Smart.

“The continuing validity of the franchise of Smart is a continuing obligation under the loan obligations of PLDT and Smart. So the expiry of the Smart franchise without its renewal would actually result in an event of default of all Smart obligations and it would trigger a cross default on the PLDT obligations,” Espinosa said.

“So this would create a scenario where the PLDT group may fall under general default in all of its loan obligations,” he added.

Several issues have been raised about the franchise of Smart, including the tax exemptions it currently enjoys, the co-use provision added in the new franchise, and the listing of Smart in the Philippine Stock Exchange.