BOI withdrawal of perks may affect Smart‘s 3G plan

Smart Communications chairman Manuel V. Pangilinan yesterday warned that Smart’s 3G infrastructure expansion may not proceed as fast as originally envisioned, if the Board of Invesments (BOI) decides to withhold fiscal incentives for the project.

In an interview with newsmen, Pangilinan admitted that Smart has not gotten formal notification from the BOI that its application for registration of its 3G expansion has been approved.

However, Pangilinan said, Smart had already been informed that it had already undergone the approval process.

"We are playing by the rules of the game. That’s all we are doing. If they want to change the rules, they should tell us so," Pangilinan said.

However, if the BOI decides to withhold the income tax holiday for the project, Pangilinan warned, "we will still proceed with the project but the timing of the investment will be affected by the absence of the income tax holiday (ITH)."

Smart, Pangilinan said, needs the ITH "because we want to grow as fast as possible."

Smart’s 3G infrastructure expansion had been approved by the BOI last May as a pioneer investment in the telecommunications sector after also approving Globe Telecom’s 3G project.

The BOI registration would entitle Smart and Globe to ITH as well as duty-free importation of capital equipment.

The grant of incentives to the telcos has earned the ire of Congress which wants the profitable telcos to lower the cost to subscribers.

Smart is investing P33.178 billion for its 3G infrastructure.

The BOI, however, had stipulated that the ITH Smart and Globe would enjoy would only apply to the income generated from 3G services and would not apply to its previous investments and existing services.

The BOI has also imposed certain conditionalities to ensure that only income derived from 3G services are entitled to ITH.

Government has admitted though that it does not have the technology, nor the expertise, to determine exactly what portion of Smart and Globe’s income would be from its 3G services, thus, the BOI has to impose certain conditionalities to ensure that only income from the new 3G services are entitled to ITH.

The BOI approval of Smart and Globe’s additional infrastructure investment is supposed to encourage more investments in the telecommunications sector.

Aside from Globe and Smart, Sun Cellular has also applied and gotten approval from the National Telecommunications Commission (NTC) to engage in 3G services.

Smart is 100 percent owned by Philippine Long Distance Tel. Co.

Smart will finance its 3G expansion from a combination of internally generated cash (70 percent) and foreign currency denominated loans (30 percent).

Smart will invest in wireless telecommunication infrastructure using 3G technology compliant with the International Telecommunications Union (ITU).

The 3G technology will allow subscribers to enjoy video services, faster mobile internet connection and a host of other content and applications.

Full commercial operation of Smart’s 3G technology is targetted by July this year.