SMART Broadband Inc. (SBI), the wireless broadband unit of Smart Communications Inc., is acquiring some assets of Mindano-based Cruz Telephone Co. Inc. (Cruztelco).

Besides allowing the company to expand its services in Mindanao, the acquisition will enable the wireless broadband provider to offer wireless Internet to customers, Smart spokesman Ramon Isberto said.

Undertaken last month, the conditional sale agreement will enable Cruztelco to transfer its physical plant, equipment and facilities in the Philippines’ second-largest island. The transaction, worth P371.30 million, also includes the transfer of Cruztelco’s corresponding local exchange carrier (LEC) permits to SBI. 

Once finalized, SBI, which is authorized to operate data-leased channel network service, international leased line service and other value-added services, will operate in Surigao City; Butuan City, Cabadbaran and Nasipit in Agusan del Norte; Tagum City in Davao del Norte; Bayugan, Prosperidad and San Francisco in Agusan del Sur; Cagayan de Oro, Medina and Balingasag in Misamis Oriental.

The agreement—a copy of which was obtained by BusinessMirror—was signed September 6, 2007 by Smart president Napoleon Nazareno, SBI president Roland Peña and Cruztelco president Julio Cruz and his spouse Priscila.

However, the agreement will be formalized only after it secures the green light from the National Telecommunications Commission (NTC), as indicated in a provision under the Public Service Act.

Early this month, SBI and Cruztelco asked the telecommunications regulator to approve the sale and transfer of the properties of Cruztelco in the Cluster 3 areas to SBI.

“Petitioners pray that the Commission issue an order granting approval for Cruztelco to sell and transfer to SBI, and for SBI to acquire and assume from Cruztelco, all the rights, privileges, including the authority of Cruztelco to operate LEC services in the Cluster 3, and accordingly, for the transfer from Cruztelco to SBI of the certificate of public conveniences and necessities and provisional authorities (PAs), which evidence Cruztelco’s authority to operate the said LEC services in the Cluster 3 areas,” the petition to the NTC said.

Under the September agreement, once the NTC approves the sale and transfer of the LEC service of Cruztelco in the Cluster 3 areas to SBI, the parties will execute the definitive agreements that will pave the way for the implementation of the conditional sale deal.

In an interview, Cruztelco vice president for operations and marketing Enrico de los Reyes said the proceeds will be partly used to finance the company’s investments in the next generation network (NGN).

“Our goal is to be NGN ready by 2010. We will comply with the government’s mandate,” de los Reyes said, adding that Cruztelco may pour in P70 million in initial investments to roll out the NGN.

Negotiations with SBI to sell Cruztelco’s assets in Cluster 3 started early this year, according to de los Reyes.

“It was a business decision on the part of Cruztelco why the company entered into an agreement with SBI. Most likely the proceeds will go to Cruztelco because the owners of Cruztelco have other businesses,” added the official.

Cruztelco is a member of the Philippine Association of Private Telephone Companies (Paptelco), a group which, along with other phone giants Philippine Long Distance Telephone Co., Globe Telecom, Digital Telecommunications Philippines Inc., Bayan Telecommunications Inc., promised to help the government in building a broadband network.

SBI’s wireless broadband service, branded SmartBro, meanwhile is an integrated part of the PLDT Group’s strategy to be at the forefront of “broadbanding” the country.

SmartBro is a fixed wireless solution to provide broadband Internet access. It rides on the nationwide cellular network of Smart to wirelessly deliver broadband Internet service to a subscriber’s personal computer, eliminating the need for a phone line.

SmartBro has grown its wireless broadband subscriber base to about 210,000 at the end of June 2007, adding 88,000 new subscribers in the first six months of the year. Revenues from wireless broadband grew 211 percent, from P300 million in the first half of 2006 to about P930 million in the first half of 2007.

Smart now has over 2,610 wireless broadband-enabled base stations providing high-speed internet access to over 500 cities and municipalities all over the country.

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SMART Broadband Inc. (SBI), the wireless broadband unit of Smart Communications Inc., is acquiring some assets of Mindano-based Cruz Telephone Co. Inc. (Cruztelco).

A CONVERTIBLE share is that kind of share which is changeable by the shareholder from one class to another class at a certain price and within a certain period (De Leon, The Corporation Code of the Philippines, Annotated, 2002 Ed., p. 83). It can be said also that this is tantamount to a right to convert stock into a new kind of stock given to the stockholder by the contract under which he acquires the said stock (In re Phoenix Hotel Co. of Lexington, Ky., 83 F2d 724, affg 13 F Supp 229).