The union of influential Filipino businessman Ramon S. Ang and second-liner Philippine media group GMA Network Inc. sounds like an arranged marriage between one party that has run out of options and another that has yet to make its media-telecom strategy take root.
When another businessman, Manuel V. Pangilinan, announced months ago that he’s “tired” of chasing after GMA-7 following at least 3 failed rounds for over a decade, GMA-7’s future looked bleak. It isn’t enough anymore to have a business producing content, like news and entertainment, and blasting these to TV screens of Filipinos here and abroad. Viewers are, more and more, watching and following content – video, text, photos – on smaller screens, such as their mobile phones and tablets, and accessing them via social media. A stand-alone media group will not survive in the future without a telecommunications or cable partner, so say industry watchers.
When it was Pangilinan who was doing the chasing, he seemed like a suitor who was promising a house, car, and a trust fund for future kids, all available after the marriage vows have been said and done. After all, the Philippine empire Pangilinan controls in behalf of the Salim-led First Pacific already has in its fold the Philippine Long Distance Telephone Co. (PLDT), which serves a spectacular 70% of the market. He also has other media assets, such as third-liner TV-5 and at least 3 broadsheets, to complement the deal.
On the other hand, Ang, the top honcho of San Miguel Corporation, the country’s biggest business group, is like a diamond-in-the-rough suitor oozing with possibilities. Ang’s out-of-the-box ways of doing business have earned him critics as well as fans, having shepherded San Miguel’s massive diversification from food and drinks and into energy, fuel and oil, infrastructure, airlines, mining, banking – and telecoms.
He has yet to earn his stripes in San Miguel’s telecom and media ventures.
Meantime, the other players have found new or are sticking to their current partners. Pangilinan has decided to stick to TV-5 while growing his other media outlets that can piggyback on PLDT’s massive nationwide infrastructure. PLDT’s rival and second largest player, Globe Telecom of the Ayala Group, has already sealed a deal with ABS-CBN Corporation, the biggest media group and GMA-7’s and TV-5’s rival.
There seemed to be no one else on the horizon for GMA-7 and Ang but… GMA-7 and Ang.
Ang in telco and media
Ang has always been vocal about his interest in GMA-7, even saying at one point that he’ll likely beat Pangilinan to it since he is friends with the owners of the network. (Menardo Jimenez, a representative of one of the 3 families that jointly own and control GMA-7, is a San Miguel board member since 2002.)
The Ang-led group has yet to get its feet wet in media.
San Miguel, which is almost 9% owned by foreigners, cannot buy into GMA-7 or any media group since the Philippine Constitution has specifically mandated industry players to be 100% Filipino owned. In his own capacity, Ang has been pursuing businessman Wilson Tieng who controls TV cable Solar Entertainment Corporation, which in turn owns 34% of financially distressed Radio Philippines Network Inc., operator of RPN-9. Ang had told reporters in January that his talks with Tieng have yet to make progress.
San Miguel’s telecom assets have not yet taken off. Ang recently admitted that the strategy for Liberty Telecoms Holdings Inc., a joint venture inked in 2009 with Ooredoo (formerly known as Qatar Telecom), needs some tweaking for it to start earning and to stop being a billion-peso failure. Liberty’s flagship brand, wi-Tribe, was “a tribe that decreased,” joked a former San Miguel executive familiar with wi-Tribe’s woes.
The initial strategy for San Miguel’s telecom foray seemed to have revolved around the acquisition of critical assets that could give it a leg-up, namely: a fibre-optic backbone (via power retailer Manila Electric Co. or Meralco), a cellular spectrum (Liberty and Express Telecom or Extelcom), and international gateways (Eastern Telecommunications Philippines Inc. or ETPI).
So far, the Meralco stake has been sold to beef up San Miguel’s financial muscle for its previous and future acquisitions. Other non-performing but telecommunication franchise holders have been added, including Bell Telecommunications (BellTel) and ETPI, but the crucial Extelcom deal remains mired in legal troubles.
Ang’s goal of crushing the duopoly of PLDT/Smart and Globe Telecoms has proven to be elusive.
Why minority stake?
More details have yet to be disclosed following the announcement of the GMA-Ramon Ang handshake. What is the deal price and structure? Who is selling? Will there be someone else selling more than a minority stake in the future? What is Ang’s corporate vehicle for the deal? Will it be Privado Holdings, which has a 15.7% stake in San Miguel, that Ang fully owns?
Unlike Pangilinan who wanted control of GMA-7, Ang seems fine with just having a minority stake – for now. Reports say Ang is eyeing at least a 30% stake. At that level, Ang’s group is entitled to a board seat, allowing them to have an overview of the media business and help shape GMA-7’s future.
A stake that’s less than 35% also means they are spared the mandatory tender offer rule, which compels a buyer to offer the same deal price to other minority shareholders, in effect, jacking up the aggregate purchase price by unknown billions of pesos.
In previous San Miguel acquisitions, Ang was fine with a minority stake. Incidentally, these were also deals that Pangilinan had first eyed. For example, San Miguel, through subsidiary Petron, acquired only 35% of Manila North Harbor Point in 2011, after Pangilinan gave up since he couldn’t get majority. The conglomerate has only 4% of Indophil Resources, which has 15% interest in the entity that has rights over the Tampakan gold and copper mine in Mindanao. The Pangilinan-led Philex Mining Corporation has a smaller 1.3% in Indophil.
The battle for control of Meralco board in 2008 to 2009 was a classic case of the Ang-Pangilinan rivalry, with one jockeying for support of other shareholder groups to get the upper hand. Ang won round one, after beating Pangilinan to the draw for the shares of state-owned fund GSIS, but Pangilinan won rounds 2 and 3. Meralco’s legacy owners, the Lopezes, sided with Pangilinan.
The one deal Ang decidedly won involved Philippine Airlines (PAL). He cozied up to PAL’s octogenarian owner Lucio Tan, who sold him a minority stake – only 49% – but handed over to him the reins of Asia’s oldest carrier. Ang successfully dealt with PAL’s long-standing labor issue, reaching an agreement with the unions whose strikes have caused PAL massive losses in the past. He also helped the aviation body get off the blacklists of the US and EU, opening up the profitable trans-Pacific and long-haul Europe routes.
PAL remains in the red, but at least it’s not stuck in uncertainties anymore.
How Ang will beef up his telco assets to complement GMA-7’s resources so that the media company will also be spared the uncertainties it faces now remains to be seen. – Rappler.com
Lala Rimando was former business editor of Rappler. She specializes in stories on political economy, boardroom dramas, infrastructure and energy issues, and corporate governance. She is currently doing strategic consulting for multilateral agencies and foreign groups keen on investing in the Philippines. Aside from writing perspective pieces, she is also preparing to write a book on Philippine conglomerates.