Tax the text? Killing the goose that lays.

It’s that time of the year when media practitioners from the Visayas and Mindanao are invited to join our Manila counterparts to cover Globe Telecom’s Annual Stockholders’ Meeting held at InterContinental Manila and look at the company’s 2008 performance. Globe Chairman Jaime Augusto Zobel de Ayala reported an after-tax net income of P11.3 billion that is markedly 15 percent lower than its 2007 income of P13.277 billion. Of course, all this can be blamed on the current global financial crisis that began in 2008 and worsened this year.

All told, Globe’s performance level was still better than its 2005 income of P10.315 billion. Globe reported a P63-billion gross income, from its 24.7 million mobile subscribers, and today, it has 650,000 wireline and broadband customers and has installed 6,400 cell sites all over the country with a capital expenditure of P20.354 billion in 2008.

The latest news from Globe Telecom is it just invested another P4.32 billion ($90 million) for its second international submarine cable landing station in Ballesteros, Cagayan (which was recently finished) to strengthen its lead and growth in broadband interconnection. Its first submarine cable station is in Nasugbu, Batangas. This new cable undoubtedly goes a lot to improve the stability of Globe’s broadband connection.

In his outgoing speech, Globe president Gerry Ablaza (who presided over his last Globe stockholders’ meeting and got promoted to Globe’s mother company, Ayala Corp.) reported that Globe’s robust performance despite the financial challenges proves the resilience of the Philippine economy, where today, total revenues from the entire telecom industry has reached P250 billion, of which P63 billion belongs to Globe as its gross revenue. Of this amount, Globe Telecom paid P12 billion to the Bureau of Internal Revenue (BIR) for 2008. He got a standing ovation for his speech.

On taxation, I’m sure that the other telecom companies also paid a similar amount to the BIR, except that Globe is the only telecom company that doesn’t pay revolutionary taxes because it is the only telco whose cell sites have been bombed by the New People’s Army (NPA), while the other telcos were never bombed, much less threatened by the NPA for reasons that we can only reckon.

Talking about taxes, this is the question that I threw to Globe’s new president and CEO Ernest L. Cu. He pointed out that in the last 10 years, Globe had paid P61 billion in taxes, while its shareholders had been paid P51 billion in cash dividends. This only shows that the government has a lot more at stake in making sure that telcos like Globe make more money. In short, the message is simple, “Do not kill the goose that lays the golden eggs!” So this brings us to the question, why is Congress resurrecting the issue of “taxing the text” again like the proverbial Phoenix rising?

Cu pointed out that taxing the text would mean that they could no longer give very valuable promos like unlimited texting, which all telcos are doing. So even if our congressmen or congresswomen insist that they are not passing this tax to the consumer, in the end it would still affect them. You folks in Metro Manila might find this proposed tax very minimal, but it becomes huge for far-flung areas, especially in the Visayas and Mindanao, which are now enjoying the benefits of these promos, thus bringing the cell phone into the hands of students, low-income fishermen and farmers. 

What I find quite disturbing or discomforting about this newly revived proposal to tax the text is that it seems to have a three-year cycle in bringing this question on the floor of Congress. My suspicious mind tells me that this could very well be a “pre-election collection” effort by Congress to squeeze money out of the telcos in the guise of improving our educational system, but in reality, it is really a fund-raiser for the coming 2010 polls! Have our noble members of Congress stooped so low to engage in legal extortion?

Is the P12 billion that Globe paid to the national government not enough for Congress that they still have to find other ways to tax this industry literally to death? Let me remind Congress of another heavily taxed industry… the movie industry, where today, few moviehouses have remained, except those in the malls, because they were taxed to extinction! I heard that finally Congress approved a reduction in amusement taxes, but it’s just too late for many moviehouses that have shut down, thanks to taxes and film piracy. Does Congress want this to happen to the telecom industry? I hope not!

Finally, I got to meet Ernest Cu, Globe’s new president and CEO, and I found out that he is the first telecom CEO to come from the IT industry. The CEOs of Globe’s competitors are either marketing or finance people, which mean that Globe has the right driver for the direction they’re planning for the future. We can expect a lot of new IT stuff from Mr. Cu.

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For e-mail responses to this article, write to [email protected]. Bobit Avila’s columns can also be accessed through www.philstar.com. He also hosts a weekly talkshow, “Straight from the Sky,” every Monday, 8 p.m., only in Metro Cebu on Channel 15 of SkyCable.