PLDT eyes P30B from Smart IPO

Telecommunications leader Philippine Long Distance Telephone Co.(PLDT) is expected to raise as much as P30 billion from the planned initial public offering of up to 30 percent of its stake in wireless subsidiary Smart Communications Inc.

The STAR earlier reported that Smart, a wholly owned subsidiary of PLDT, plans to go public next year and list as much as 30 percent of its shares in the local stock exchange, although it is mandated by law as a public franchise to go public only on 2004.

"Smart will definitely go public before 2004. We will not wait until we are mandated to do so," a highly placed source said.

Proceeds from the planned IPO will be used to finance PLDT’s convergence strategy that involves making full use of the existing landline business to go into the next generation wireless and data business, the source said. Part of the proceeds will also be used to settle maturing loan obligations.

PLDT was earlier engaged in discussions with prospective investors, including US-based American International Group (AIG) for the sale of a five but decided to just raise funds from other "cheaper" sources such as loans.

The telecommunications conglomerate has around P1.3 billion in loans that are maturing between 2002 and 2004, of which half will be paid using external sources such as refinancing loans and bond offering, and half from internally generated funds.

Of the $650 million from externally generated funds, PLDT was already able to source 90 percent. These include the $149-million loan from Germany’s KfW, an $80-million loan from the Japan Bank for International Cooperation (JBIC), and $350 million from a highly successful international bond offering.

PLDT president and chief executive officer Manuel V. Pangilinan expressed confidence that the remaining $650 million can be raised from internal cash flow, including substantial dividends from PLDT’s investment in Smart.

The STAR learned that PLDT expects to get around P1.5 billion this year as dividends from Smart, representing around 40 percent of the wireless subsidiary’s net profit in 2001.

One of the reasons why PLDT decided not to sell a stake in Smart this year is to continue receiving dividends from its subsidiary, which for the past few years has been its perennial cash cow.

In an analysis of PLDT’s performance, DBS Vickers Securities said: "We believe investors would prefer PLDT to keep 100 percent of its stake in Smart intact until such time when it will be floated in the market in 2004. By doing that, it can keep 100 percent of the dividends from Smart for the next two to three years," DBS Vickers telecom analyst Gina Roa-Dipaling noted.