Mancom formed to review 50-50 revenue sharing scheme between Smart and Piltel

A management committee has been constituted to review the existing 50-50 revenue sharing scheme between Smart Communications Inc. and Pilipino Telephone Inc. (Piltel).

Philippine Long Distance Telephone Co. (PLDT) and Smart president and CEO Napoleon Nazareno said that within the next 30 days, management will know what should be the ideal revenue sharing between the two PLDT wireless subsidiaries.

Piltel launched Talk ‘N Text in April 2000 under a reseller arrangement with Smart. Piltel’s analog network has been phased out and now utilizes Smart’s GSM or digital mobile network in exchange for which revenues derived from Talk ‘N Text are equally split.

Nazareno also announced that Smart will own 92 percent of Piltel before the end of the year. Last July 2, Smart entered into a sale and purchase agreement with PLDT to acquire the latter’s 59.29 million shares of Piltel Series K preferred stocks. Of the total, 4.8 million shares were converted recently into 820.2 millions shares of Piltel common stock, making Smart the owner of 32.7 percent of Piltel’s common shares.

Smart said it intends to convert the remaining 54.47 million Piltel Series K preferred shares into 9.26 million Piltel common shares from the increase in authorized capital stock of Piltel, which has been scheduled for approval by the stockholders in a meeting on Sept. 3. "We had to split the conversion into two phases because Piltel did not have enough shares to issue," Nazareno said.

The equity transaction would come in two stages: One is the purchase of 59 million Series K convertible preferred shares equivalent to about 47 percent, to be followed with the acquisition of 767 million common shares equivalent to about 45 percent.

Smart is also Piltel’s largest creditor, holding $289 million of Piltel’s $417 million restructured debt, after Smart invited various creditors of Piltel to exchange their debts for various types of Smart debt and/or cash.

Sources said Piltel may end up getting 80-85 percent of the net revenue from its cellular business once a new sharing agreement with Smart is completed, although Nazareno earlier said this sounds too much in favor of Piltel.

Piltel ended the first half of 2004 with a net income of P810 million, a complete turnaround from the P535 million loss posted in the same period last year.