Efficient heterogeneous communication technologies are critical components to provide flawless connectivity in smart cities. The proliferation of wireless technologies, services and communication devices has created the need for green and spectrally efficient communication technologies. Physical- layer network coding (PNC) is now well-known as a potential candidate for delay-sensitive and spectrally efficient communication applications, especially in bidirectional relaying, and is therefore well-suited for smart city applications. In this paper, we provide a brief introduction to PNC and the associated distance shortening phenomenon which occurs at the relay. We discuss the issues with existing schemes that mitigate the deleterious effect of distance shortening, and we propose simple and effective solutions based on the use of multiple antenna systems. Simulation results confirm that full diversity order can be achieved in a PNC system by using antenna selection schemes based on the Euclidean distance metric.