By Roderick T. dela Cruz

Pilipino Telephone Corp., a subsidiary of Philippine Long Distance Telephone Co., will exit from the mobile phone business to serve as the investment arm of the PLDT group in the energy sector.

Piltel said in a disclosure to the Philippine Stock Exchange that it will seek approval of shareholders and regulators on certain arrangements with its parent firm Smart Communications Inc., which will take over its mobile phone brand Talk ’N Text.

The arrangements include the licensing of the Talk ’N Text brand. Under this setup, Smart will pay Piltel a lump sum royalty fee based on a percentage of projected net service revenues.

Piltel is a 92.81 percent-owned subsidiary of Smart Communications, which is wholly owned by PLDT. Piltel’s articles of incorporation allow it to make investments in other businesses outside of telecommunications.

Piltel in 2008 booked a net income of P11.3 billion, up 37 percent from a year ago, after increasing its number of subscribers by more than 4 million.

“With a subscriber base of 14.3 million at the end of 2008, Talk ’N Text is now the second-largest cellular brand in the country,” the company said earlier.

The PLDT group had 20.9 million Smart subscribers and 14.3 million Talk ’N Text subscribers as of December 2008.

Piltel will also transfer its existing Talk ’N Text subscriber base to Smart for a one-time payment equivalent to the subscriber acquisition cost, which Smart would have incurred for the acquisition of its own subscribers.

The transaction will also include the sale of Piltel’s GSM fixed assets to Smart at net book value. No amount was disclosed.

Piltel booked a net income of P11.3 billion in 2008, up by 37 percent from a year ago, after increasing its number of subscribers by more than 4 million last year.

Smart expressed an interest to undertake a tender offer for shares of the common stock of Piltel held by minority shareholders, representing 7.19 percent.

“It is expected that the proposed tender offer of Smart will provide an exit opportunity for Piltel’s minority shareholders, given the change in Piltel’s business direction,” the PLDT group said.

“The terms, conditions and timing of said offer will be announced once they have been approved by the board of directors of Smart in consultation with independent financial advisors,” the PLDT group said.

The PLDT group said the arrangements between Piltel and Smart would “consolidate the PLDT group’s cellular business under Smart, thereby maximizing revenues streams and eliminating any lingering regulatory issues relating to the traffic between the two companies.”