Publicly listed Pilipino Telephone Corp. (Piltel) said Tuesday its revised revenue-sharing agreement with affiliate Smart Communications Inc., which would allow the latter to recover costs substantially, would be implemented for two years.

Piltel, the country's third-largest mobile phone operator, told the Philippine Stock Exchange that its board has affirmed the new 70-30 revenue-sharing ratio, in favor of the company, effective January 1 this year until December 31, 2010.

Prior to the amendment, the ratio was at 80-20, also in favor of Piltel.

The review of the revenue agreement was undertaken after Smart requested for a larger share, citing an unfavorable change in market conditions.

Smart said the growing popularity of bucket-price offerings, which were introduced in 2006, has altered Piltel's revenue mix and resulted in lower yields per text message and one-minute call. Due to this, Smart said its 20-percent share of Piltel's revenues was no longer enough to cover its related costs in servicing Piltel's growing subscriber base.

"The revised revenue share ratio is expected to allow Smart to substantially recover its costs while having a minimal negative impact on Piltel's profits," noted Piltel.

Last December, Piltel tapped Zurich-based consulting firm a-connect as independent advisor to validate the bases for the revision of the revenue agreement. According to Piltel, a-connect found the new ratio to be reasonable for a period of two years.

Since the launch of Talk 'N Text in 2000, Piltel has compensated Smart for the use of its network by way of a revenue-sharing. Starting with a 50-50 split, the arrangement was last amended in 2004 to 80-20 and now to 70-30, all in favor of Piltel.

Both Piltel and Smart are owned by telecommunications giant Philippine Long Distance Telephone Co., a unit of Hong Kong-based First Pacific Co. Ltd.