No deal: MVP-GMA7 talks fail

Rappler.com
Discussions between the groups for a possible acquisition deal have ended because they failed to arrive at 'mutually accepted terms'

MANILA, Philippines (2nd UPDATE) – The much-awaited and potentially game-changing deal between businessman Manuel V. Pangilinan and media firm GMA Network Inc. may no longer push through after talks failed.

In a disclosure to the Philippine Stock Exchange on Thursday, October 4, Manuel V. Pangilinan-led Philippine Long Distance Telephone Co. (PLDT) said that its unit MediaQuest Holdings Inc.’s discussions for a possible acquisition deal with major shareholders of GMA-7 have been “terminated” because they could not arrive at “mutually accepted terms.”

“The parties have been unable to arrive at a mutually acceptable terms despite the continual discussions and efforts exerted in good faith,” said the country’s largest telecommunications company.

Following the disclosures, GMA-7 chair Felipe Gozon said in an interview that “as far as we are concerned there is no more [deal].”

“Nothing is impossible but at this point wala na (no more).”

This is the second time that talks between the two fell through in the past decade. This recent announcement comes at a period when the business lines between telecommunications and media firms are blurring as both industries seek new revenue streams amid changing consumer demands and technology. 

In a separate statement, Pangilinan said, “the termination of the acquisition initiative is not expected to adversely impact the PLDT group’s strategy of evolving from a traditional telecommunications company into a multimedia service company.”

Not a price issue

While GMA-7 chairman Felipe Gozon had said in July that price and other issues were stalling the talks, he stressed on October 4 that price did not play a role in the decision to terminate talks.  

“It’s a non-price issue,” he told Rappler in a chance interview in Parañaque City.

“It has something to do with legal, commercial matters, but definitely non-price,” he added.

Pangilinan earlier said they had arranged the funds for the purchase, which was targeted to be finalized before the end of 2012 and reported to cost anywhere between P50 billion and P60 billion. He said, too, that the controlling families would be paid in cash.

Third time

The talks between the triumvirate that control GMA-7 — the Duavit, Gozon and Jimenez families — and Pangilinan started in December 2011.

PLDT had been wanting to acquire GMA-7 to be able to provide content that will complement its traditional telecom services amid declining returns.

It was not the first time the parties tried to get into bed together.

In 2001, PLDT, through MediaQuest, signed an agreement with the owners of GMA-7, for a controlling stake. The amount involved then was a more modest sum of P8 billion.

The purchase deal did not push through after creditors of PLDT raised concerns over maturing dollar loans.

In 2004, PLDT’s mobile phone arm Smart Communications renewed talks with GMA-7. But that, too, fizzled out.

In 2009, MediaQuest eventually acquired third liner ABC Development Corp., which operates TV-5, the third biggest media firm next to Lopez-led ABS-CBN Corp. and GMA-7. 

Convergence 

Pangilinan has pursued a convergence strategy, which marries content and delivery.

He said the termination of talks with GMA-7 will not affect this strategy.

“The PLDT group continues to believe that owning, producing and providing content across multiple platforms is an important component of its blueprint for growth and as such, intends to pursue its media strategy by building on Mediaquest’s current investments,” he said referring to TV-5 and Cignal TV, a direct-to-home satellite television service provider.

Telecommunication assets under PLDT play a major distributor role while its several media assets provide the content.

Pangilinan has always stressed the importance of “scale.” The bigger the assets, the more savings and the wider the reach the group could realize through synergies.

Changing media landscape

As PLDT and GMA-7 failed to seal a deal, their rivals are firming up discussions for synergies in the telecom, media, and cable businesses.

Globe Telecom Inc. President Ernest Cu, in a recent interview, disclosed he and ABS-CBN CEO Eugenio Lopez III have “always been talking” on “what do we partner with.”

Ayala-led Globe is second biggest telecommunications firm in the country while Lopez-led ABS-CBN is the media industry leader. 

Meanwhile, another media network is going through changes that may pave the way for the firming up of other media-and-telco players.

Debt-laden RPN-9 network is currently shedding off jobs as a consequence of a previous capital raising exercise that led to the entry of cable show provider Solar TV, the Benedicto groups, as well as diversifying group San Miguel Corp.

San Miguel also has a telco unit, Liberty Telecommunications, itself previously financially troubled.  

San Miguel president Ramon Ang had previously claimed he is personally close to the families that control GMA-7. 

A utility business — including telecommunications, media, cable — need government’s and lawmakers’ nods since frequencies are finite and their service affect millions. – Rappler.com