No IPO for Smart this year

Smart Communications will not engage in an initial public offering (IPO) next month even if required under its congressional franchise to offer at least 30 percent of its shares to the public.

Smart president and chief executive officer Napoleon Nazareno said over the weekend that the company needs at least one year to prepare for an IPO. "How can we comply with only a month remaining," he stressed.

Nazareno, who is also president and CEO of Smart’s parent Philippine Long Distance Telephone Co. (PLDT), revealed that it is only by 2006 that the company will review whether the conditions are right for a public offering.

"It will depend on a lot of factors. One is the market condition. Second is whether PLDT’s debt level has gone down to such level as to allow it to let go of a portion of Smart’s income. Third is how PLDT as a whole is performing," he said.

For the past few years, PLDT has relied heavily on dividends from Smart, wholly owned by the country’s largest telecommunications company, to pay off its debts and to sustain operations. While PLDT’s cash flow is positive, it is still not enough to pay off its maturing debts.

But more importantly, Nazareno emphasized that shareholders of PLDT will be disadvantaged by a sale of a portion of Smart. "We can expect the value of PLDT shares to go down once we let go of Smart," he pointed out.

Earlier, PLDT and Smart officials said that the earliest that the company can go into an IPO is 2006 or 2007. Now, Nazareno is saying that even that timetable is not yet sure.

The National Telecommunications Commission (NTC) is poised to send letters to Smart, Bayan Telecommunications (Bayantel), and Eastern Telecoms, to remind them of the requirement under their respective congressional franchises to go into an IPO.

If push comes to shove, PLDT and Smart officials intend to cite the fact that a wholly owned subsidiary like Smart no longer has to publicly list its shares when its parent (PLDT) is also a publicly listed company.

Smart is also set to become the biggest shareholder of another listed company Pilipino Telephone Inc. (Piltel) once the former completes the acquisition of PLDT common shares in Piltel before the end of the year. Already, Smart owns about 30 percent of Piltel following its acquisition of Series K convertible shares held by PLDT which have been converted into shares in Piltel.

They are also looking at citing the experience of oil companies in the country which have no listed their shares because of prevailing market conditions.