Olongapo Telecom & Information Technology

Friday, March 11, 2005

Texting to cost more with Senate VAT bill

The Senate proposal to raise P23 billion for government’s coffers from a five-year crediting of input value-added tax (VAT) on capital equipment would mean a 12-centavo increase in the price of the highly popular text messaging or short messaging system (SMS).

The proposed measure would also turn off prospective investors, who are counting on investment incentives like zero tariff on importation of capital equipment.

Albay Rep. Joey Sarte Salceda warned that the Senate proposal is nothing more than a tax on text as its principal burden would be borne by the telecom industry.

He said that since the earlier proposed tax on text was shot down due to public outcry, the Senate is “surreptitiously resurrecting the tax on text through this new scheme.”

“Another version under the guise of telecom franchise tax was similarly shelved by the House Committee on Ways and Means as it would primarily result in additional burden on text which accounts for 80 percent of the revenues of the telecom industry,” said Salceda in a statement.

He said that the full offset of the input VAT on its massive capital investments has essentially allowed cellular firms to keep the price of text constant at P1 per text since 1995.

For example, in 2003, the output VAT of the telecom industry was P15 billion, but its input VAT was P12 billion resulting in a net VAT payable of P3 billion to the Bureau of Internal Revenue (BIR) since they have essentially paid VAT to the Bureau of Customs.

“In its suspicious fixation to target the telecom industry, the Senate had to come up with a tax policy that is even much worse than a tax on text as it would impact on all firms that invest. So, let us catch the mouse by burning the whole house,” Salceda said.

He explained that the five-year crediting of input VAT on capital equipment will penalize firms that invest. Between two firms with the same sales, the firm that invests would pay higher taxes.

“That is simply a bad tax policy as it would undo spirited efforts of the country to attract investments to spur economic growth which would then expand the tax base. It kills the goose even before it could lay a golden egg,” Salceda said.

He explained that this is not really a tax as the government is essentially proposing a borrowing measure. In effect, government gets cash flows from the “uncredited input VAT” of the investing firms for five years at zero interest rate but that would eventually be offset by future tax liabilities.

“While other countries are falling all over just to compete for investments, with the five-year crediting of input VAT, the Philippines is telling investors to invest in the Philippines and lend the government for five years at zero interest.”

Thursday, March 10, 2005

Smart, PILTEL launch own price-cut promo

Smart Communications Inc. and Pilipino Telephone Corp. (PILTEL) have joined the bandwagon in the wireless market by launching Thursday its own version of unlimited voice service.

Dubbed as the Smart 25/8 Unlimited Call or Text promo, prepaid subscribers of Smart and PILTEL’s Talk ’N Text have the option to avail themselves of an unlimited number of on-network voice calls for 10 days or unlimited on-network texts for six days.

Unlimited Smart calls for every P115 load is valid for 10 days, while unlimited Smart text is available for P60 valid for six days. The promo will run for 30 days starting March 11.

Ninety-seven percent of Smart and PILTEL’s 19.2 million users subscribe to prepaid service.

Smart legal head Rogelio Quevedo assured that Smart’s network will not be congested and will maintain the highest quality of service and standard for its postpaid subscribers. This is because Smart has installed an access number that will queue all unlimited voice calls.

“Subscribers must have a load of at least P115 before he can participate. One must register through a short message service keyword command via an access number upon registration. It is the designated access number that will contact the intended party therefore it is assured that all calls will be queued thereby freeing the network of congestion,” explained Quevedo.

Smart and PILTEL’s 25/8 unlimited voice call service is a response of the PLDT group to the unlimited intra-call and text services offered by rival Touch Mobile.

Quevedo said Smart and PILTEL are ready to face competitors to “rock the new market segment” initiated by Sun Cellular, the brand name of the Gokongweis’ cellular business.

Following the lead of Sun Cellular’s 24/7 unlimited call and text pricing scheme, Touch Mobile, the cellular unit of Innove Communications Inc., started offering last week unlimited call and text services for P300 a month and unlimited text messaging for P50 for five days. The offer is limited only to Touch Mobile subscribers for 30 days until April 7.

Globe Telecom postpaid and prepaid subscribers are not entitled to the rate reduction promo of Touch Mobile, which targets the lower segment of the cellular market.

Globe had to respond to the buffet of pricing schemes currently offered in the wireless and wireline markets after its net new cellular subscribers dropped to 800,000 in the fourth quarter last year from 1.4 million in the third quarter

Monday, March 07, 2005

Villar questions legality of forfeiting cell-card values

By Patricia Esteves, Times Reporter

SEN. Manuel Villar, chair of the Senate Committee on Finance, on Sunday questioned the legality of the “unused value forfeiture policy” being put into practice by telecommunication companies to billions of prepaid cellular-phone subscribers in the country.

Villar filed Senate Resolution 200 directing the Senate Committee on Public Services to conduct an inquiry into the policy imposed by telecom firms for possible violation of Republic Act 7295, which provides that rates of telecom firms “must be fair, reflective of a fair return on their investments, reasonable and are not distorted such that the public is adversely affected.”

“It came to my attention that the value of prepaid cards that phone subscribers buy, if not consumed or used within a certain period of time, is being forfeited in favor of telecom companies. The forfeited values are then included in their operating revenue. I would like to know whether such policy or practice violates certain laws,” Villar said.

He stressed his point: “I also find the consumption or time limit on prepaid cards too short or restrictive especially for low-income senators. Those who buy prepaid cards are people with tight budgets, forfeiting the stored value of the phone cards they bought too soon or forfeiting them at all is like taking away their hard-earned money, even if it is just a few centavos or pesos.”

Villar said Globe Telecom has put a 15-day limit for a P100 prepaid card, and for a 60-day limit for P250, P300, P500 and P1,000 prepaid cards. Smart Communications, on the other hand, has placed a 60-day limit for P300, P500 and P1,000 cards and a three-day limit for P30 auto load, six days for P60 auto load, and 12 days for P115 load.

“Considering the number of prepaid-card subscribers have reached millions, we can already assume that the unused values that get forfeited also reach millions or even billions of pesos. In this case, the telecom companies’ gain becomes the phone subscribers’ loss.”

Smart Communications reported operating revenues of P4.99 billion in 2003, from which P4.09 billion, or 82 percent, came from its more than 10.7 million prepaid subscribers. Globe, on the other hand, reported P8.08-billion revenues from the nine months of 2003 from its more than 7.4 million prepaid subscribers

Telecom Towers in Mt. Cabalan

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Only Pt&T use to have a tower in this mountain ridge during the 90's, to date, seven towers are visible, some of the towers accomodate more than one telecom facility or cellsite.