SECTION 1. Nature and Scope of Franchise – Subject to the provisions of the Constitution and applicable laws, rules and regulations, there is hereby granted to the Calapan Telephone System, Inc. hereunder referred to as the grantee, its successors or assigns, a franchise to construct, establish, install, maintain and operate for commercial purposes and in the public interest, local exchange network, including public calling stations or pay telephone stations or wireless local loop and for such purpose provide basic telephone service or other means related to the foregoing now known to science or which in the future may be developed, is the Province of Oriental Mindoro, for public domestic telecommunications.

        SECTION 2. Manner of Operation of Stations or Facilities – The stations or facilities of the grantee 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 by law, without in any way diminishing it own right to use its selected wavelengths of frequencies and the quality of transmission or reception thereon as should maximize rendition of the grantee’s services and / or the availability thereof. In no way shall the operations of the grantee, nor the radiated power of its stations or facilities, exceed that required to cover the area where it is allowed to operate.

        SECTION 6. Right of Government – A special right is hereby reserved to the President of the Philippines, in times of war, rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, to temporarily take over and operate the stations, transmitters, facilities or equipment of the grantee, to temporarily suspend the operation of any station, transmitter, facility or equipment in the interest of public safety, security and public welfare, or to the government, upon due compensation to the grantee, for the use of said stations, transmitter, facilities or equipment during the period when they shall be so operated.

        The radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege conferred upon the grantee by the State and may be withdrawn anytime after due process.

        SECTION 7. Term of Franchise – This franchise shall be for a term of twenty-five (25) years from the date of effectivity of this Act, unless sooner revoked or cancelled. This franchise shall be deemed ipso facto revoked, in the event the grantee fails to comply with any of the following conditions:

        SECTION 8. Acceptance and Compliance – Acceptance of this franchise shall be given in writing within sixty (60) days from the effectivity of this Act. Upon giving such acceptance, the grantee shall exercise the privileges granted under this Act. Nonacceptance shall render the franchise void.

        SECTION 9. Bond – If the grantee is not yet operational, the grantee shall file a bond issued in favor of the National Telecommunications Commission, which shall determine the amount, to guarantee the compliance with and fulfillment of the conditions under which this franchise is granted. If after five (5) years from the date of the approval of it permit by the Commission, the grantee shall have fulfilled the same, the bond shall be cancelled by the Commission. Otherwise, the bond shall be forfeited in favor of the government and the franchise ipso facto revoked.

        SECTION 10. Right of Interconnection – The grantee is hereby authorized to connect or demand connection of its telecommunications systems to any other telecommunications system installed, operated and maintained by any other duly-authorized person or entity in the Philippines for the purpose of providing extended and improved telecommunications services to the public under such terms and conditions mutually agreed upon by the parties concerned and the same shall be subject to the review or modification of the Commission.

        SECTION 11. 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 are now or hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns, shall pay the value-added tax under Republic Act. No. 7716 or a franchise tax of three percent (3%) per annum or at such percentage as may be prescribed by law, on all gross receipts of its telecommunications business transacted under this franchise, whichever is higher: Provided, That the grantee, its successors or assigns shall continue to be liable for income taxes payable under Title II of the national Internal Revenue Code pursuant to Section 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.

        SECTION 12. Gross Receipts. – The grantee, its successors or assigns, shall keep a separate account of the gross receipts of the business transacted by it and shall furnish the Commission on Audit and the National Treasury a copy of such account not later than the 31^st day of January of each year, for the preceding twelve (12) months.

        SECTION 13. Books and Accounts. – The books and accounts of the grantee, its successors or assigns shall always be open to the inspection of the Commissioner on Audit or his authorized representatives, and it shall be the duty of the grantee to submit to the Commission on Audit, two (2) copies of the quarterly reports on the gross receipts, the net profits and the general condition of the business.

        SECTION 14. Warranty in Favor of National and Local Governments. – The grantee shall hold the national, provincial, city 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, transmitter, facilities and equipment of the grantee.

        SECTION 15. Sale, Lease, Transfer, Usufruct, etc. – The grantee shall not lease, transfer, grant the usufruct of sell nor assign this franchise or the rights and privileges acquired thereunder to any person firm company, corporation or other commercial or legal entity, nor merge with any corporation or count nor shall the controlling interest in the grantee be transferred whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm company, corporation or entity without the prior approval of the Congress of the Philippines, except when such person, firm company, corporation or entity has a valid and existing legislative franchise for telecommunications or its is in pursuance of the provisions of Section 16 of this Act. Any person or entity to which this franchise is solid transferred or assigned shall be subject to the same conditions terms restrictions and limitations of this Act.

        SECTION 16. Dispersal of Ownership – In accordance with the constitutional provisions to encourage public participation in the 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 ten (10) years from the commencement of its operations of from the effectivity of this Act, whichever is later. Noncompliance therewith shall render the franchise ipso facto revoked.

        SECTION 17. 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.

        SECTION 18. Repealability and Nonexclusivity Clause. – This franchises 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.

        SECTION 19. – Reportorial Requirement – The grantee shall submit an annual report to the Congress of the Philippines on its compliance with the terms and conditions of its franchise and on its operations within sixty (60) days from the end of every year.

        SECTION 20. – Effectivity Clause. – This Act shall take effect fifteen (15) days from the date of its publication in at least two (2) newspapers of general publications.

Approved,

This Act, which originated in the House of Representatives was finally passed by the House of Representatives and the Senate on June 5, 1997.

Lapsed into law on September 05, 1997 without the signature of the President, in accordance with Article VI, Section 27 (1) of the Constitution.