BoI managing head Elmer C. Hernandez, also Trade and Industry Undersecretary, said the huge investment would be spread out over a period of six years with P4.386 billion to be poured on the first year.

Hernandez explained that the requirements it imposed on the Smart 3G project would also be imposed to previous and subsequent 3G project registrations of the BoI. Earlier, the BoI also approved the P5.48 billion 3G project of Globe Telecom Inc.

"Before they can avail of the income tax holiday, they must submit the program," Hernandez. A similar requirement was imposed by BoI when it granted an additional oneyear ITH for Manila Water, which was asked to submit a program on how the additional ITH could translate to lower water tariffs to consumers.

Hernandez further said that the pioneer set of fiscal incentives granted would be limited only to the revenues generated from its 3G operations. A project classified as pioneer would enjoy six-years in income tax holidays and duty-free importation of capital equipment, among others.

To ensure that the incentives granted to Smart’s 3G project is not unduly extended to the company’s other telecommunication services, Hernandez said the BoI is crafting a standard set of measures.

One measure being required by the BoI for 3G projects is to submit and maintain a separate book of accounts for its 3G operation.

"This is to avoid a situation whereby incentives for this particular project are also extended to previous projects or to its projects, which incentives had already lapsed," Hernandez said.

Hernandez admitted that because this is a complex technology it would be difficult for the BoI to determine which income is derived from 3G and which would be credited for other operations like 2G and others.

He noted that some 3G services like internet can also be availed using a 2G phone system.

Based on its project proposal, the mobile phone unit of Philippine Long Distance Telephone Co. the project assumes an aggressive 3G subscriber take-up over a period of 6 years.

On the first year, Smart’s 3G is expected to have a subscriber base of over 479,646 with coverage areas limited to highly urbanized centers in the country.

On the second year, the coverage would be widened to include 58 cities, 71 first class and 92 second class municipalities.

By the fifth year, the program showed that Smart 3G has already covered most areas in the country reaching out to 6th class municipalities. The sixth year would be dedicated to quality improvement in services to dense urban areas and major cities.

The huge project cost of Smart would be funded through 81 percent equity and 19 percent loan. The 3G service, which is going to start commercial operation in July this year, would generate 107 individuals.