Smart acquires PLDT preferred shares in Piltel for P2.066B
() - July 3, 2004 - 12:00am
Smart Communications entered into a sale and purchase agreement yesterday with parent Philippine Long Distance Telephone Co. (PLDT) to acquire the latter’s 59.3 million Series K convertible preferred shares in PLDT-subsidiary Pilipino Telephone Inc. (Piltel) for P2.066 billion.

On full conversion, Smart and PLDT will own 92.1 percent of Piltel. PLDT’s stake in Piltel consists of 767 million common shares and 59 million Series K PLDT preferred shares convertible into Piltel common shares at a ratio of 170 to one.

Before the end of the year, Smart said it intends to acquire another 45 percent of Piltel held by PLDT via the acquisition of Piltel’s common shares, thereby consolidating PLDT’s wireless holdings.

Smart intends to convert, as an initial step, 4.825 million of these 59.3 million preferred shares into 820.25 million common shares of Piltel. Such initial conversion will result in Smart owning 32.7 percent of Piltel’s expanded common shares and diluting PLDT’s ownership to 30.5 percent of Piltel.

In aggregate, therefore, ownership of Piltel by PLDT and Smart will be 63.2 percent. The balance of 54.468 million preferred shares will be converted into common shares after Piltel has increased its authorized capital stock. On full conversion, PLDT and Smart together would own 92.1 per cent of the common stock of Piltel.

The board of directors of Piltel earlier approved an increase in the company’s authorized capital stock from P3.5 billion to P12.8 billion to accommodate any conversion of the shares of convertible preferred stock of Piltel, including the Class I Series K preferred stock. The board has scheduled a special stockholders‚ meeting on Sept. 3, 2004 to consider the proposed increase in Piltel’s authorized capital stock.

Also yesterday, Smart announced that it had successfully closed the Piltel debt exchange transaction.

This concludes the process began in March this year when Smart invited various creditors of Piltel to exchange their indebtedness for various types of Smart debt and/or cash.

By the end of the offer period last June 8, Smart had received offers from Piltel’s creditors representing approximately 69.4 percent in aggregate of the outstanding restructured Piltel debt. In addition, it had received, from a significant portion of the Piltel creditors who did not participate in the transaction, waivers to certain provisions of the agreements governing Piltel‚s restructured indebtedness, allowing Smart to close the transaction.

As a result, Smart is now Piltel’s largest creditor, holding $289 million of Piltel’s $417 million restructured debt. Based on the options chosen by the participating creditors, Smart has issued to them $283 million in new debt and paid $1.5 million in cash.

Smart is the Philippines‚ largest wireless services provider with over 15 million subscribers on its GSM network. Piltel is the third largest wireless service operator in the country with over three million subscribers on its prepaid GSM service, Talk ‘N Text, which operates under a reseller arrangement with Smart. Piltel also operates local exchange services in selected Luzon and Mindanao areas.

Smart and Piltel together account for 57 percent of the local mobile market with Globe Telecom Inc. holding a 40 percent market share, and the remainder, by Gokongwei-owned Digitel Mobile.

Earlier, market analysts hinted that PLDT would merge Piltel and Smart, to prevent the latter from undertaking an initial public offering (IPO), that is supposed to happen by August of this year, according to its franchise. However, PLDT and Smart have categorically denied that Smart’s acquisition of Piltel is not aimed at doing a backdoor listing. "Smart reiterates that should it successfully acquire PLDT’s equity interests in Piltel, it is not Smart’s intention to enter into a legal statutory merger with Piltel, nor does it intend to use Piltel as a backdoor listing vehicle," it said.

CLASS I SERIES K COMMON DIGITEL MOBILE GLOBE TELECOM INC MILLION PILTEL PLDT SERIES K SHARES SMART
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