Dennis Uy

[Vantage Point] Dennis Uy and Lady Luck

Val A. Villanueva

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[Vantage Point] Dennis Uy and Lady Luck
With Rodrigo Duterte no longer around to keep the creditors at bay, Uy is left juggling his finances to keep his empire afloat

Just how lucky is former president Rodrigo Duterte’s crony Dennis A. Uy?

In 2010 and 2011 he, as president and chief executive officer of Phoenix Petroleum Philippines, and custom broker Jorlan Cabanes were hauled off to court by then-justice secretary Leila M. De Lima and the Bureau of Customs for allegedly smuggling P5.9 billion worth of petroleum products.

The case dragged on for 10 years only to be decided by the Supreme Court (SC) in Uy’s favor in 2021. While De Lima was serving jail time for false drug charges, the SC affirmed the decision of the Court of Appeals throwing out the criminal cases filed against Uy and Cabanes. 

Legal luminaries believed then that the government had a strong case against Uy, but nevertheless respected the High Court’s decision. Uy was lucky to have hurdled his legal woes; and from there, since 2016, he had either bought or invested in several companies in a dizzying pace.

He had set his eyes on capital-intensive businesses which crisscrossed telecoms, casinos and real estate, as well as energy and shipping. His initial success, described by his colleagues as akin to a “surging meteor,” was credited by many to his closeness to his longtime friend Duterte who, according to Uy, advised him to stand up against bullies.

After having been exonerated of smuggling charges, he rolled on to quadruple the profit of Phoenix Petroleum through the end of 2018 or in a short span of five years. But investing in capital-intensive businesses proved to be his downfall. He funded the expansion of his empire through borrowings which led to high levels of debt. In a nutshell, the expected returns from the expansion did not materialize as quickly as he had anticipated. Servicing these debts became a burden which left him with too little elbow room to get out of financial distress.

During the first semester of this year, Phoenix Petroleum recorded a net loss of P2.066 billion, a sharp drop from P62.11 million during the same period last year, which represented a 3,200% colossal dive! This only reflects the folly of him spreading his business too thinly.

He has eaten more than he could chew, as the table below shows:

Chelsea and Dito Telecommunity

The post-Duterte environment may have given Uy some minor successes, but unlike when his longtime friend was behind him, these successes are now few and far between. Uy’s logistics and telco businesses have gotten some reprieve when they shrunk their losses, but they still remain in the red. 

Based on its financial report, Chelsea Logistics and Infrastructure Holdings Corp. trimmed its net loss by 30% to P1.04 billion from January to September 2023 compared with its P1.49 billion for the same period last year. This is mainly due to improving revenues, a 16% increase of P5.35 billion, coupled with only a 1% dip in expenses to P4.24 billion.

This success, however, could be fleeting. 

What the company should be concerned about are the economic headwinds which could derail its full recovery. What I heard is that the company is trying to focus on vessel availability issues to convey the mounting cargo demand and passenger services.

Chelsea chief financial officer Ignacia Braga IV, however, remains confident that the shipper could sustain its thrust in the fourth quarter, buoyed by its “expanded menu of services and the rebounding demand for logistics.”

For the period ending September 30 this year, Dito Telecommunity’s parent company DITO CME’s net loss slightly improved to only P9.769 billion from P10.996 billion for the same period last  year. 

The company isn’t losing hope.

It believes that it can turn around by 2028 by continuing to invest in signal coverage after meeting its regulatory target. Dito claims to have passed its 4th technical audit, having reached a population coverage of 80.65%. Its  minimum average broadband speed is said to have touched 74.97 Mbps for 4G and 639.32 Mbps for 5G. 

Dito CEO Eric Alberto, said that the company has established its presence in 810 cities and municipalities with a subscriber base of 17 million since it launching in March 2021. Dito claimed to have achieved 12 million subscribers as of November 2022.

Once again, Lady Luck seems to have smiled on Uy. In September, Dito was able to secure a $3.9-billion (around P221.95 billion) loan, proceeds of which will be used to pay off loans and finance projects.

The company says that the facility has been supported by a group of multinational banks. It is a 15-year long-term financing scheme to be used to repay another loan facility amounting to $1.3 billion, while portions of the proceeds will also support Dito’s network expansion.

The telco noted that the additional funding will enable it to improve its network infrastructure and overall mobile service for its customers.

“Given such progress and based on the business plan of Dito Telecommunity,” Alberto said, “the telco is looking for EBITDA breakeven by 2025, and it continues to endeavor onwards to achieve net profitability by [the] end of 2028.” EBITDA refers to Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures the company’s overall financial performance and is often used as an alternative to other metrics, including earnings, revenue, and income.

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But it’s a new loan to pay off an old debt. It’s basically an accounting rigmarole, the success of which relies heavily on how the company fares against stiff competition. Uy has to contend with telco players which are way ahead in terms of tower acquisitions to technical capabilities. It has to triple its effort to win over its competitors’ subscribers and recruit new ones. The question remains: Could its assets carry the load of its liabilities?

Transparency

Critics have pointed to perceived issues of transparency in Uy’s business dealings. Some have questioned the extent to which his business transactions are conducted vis-a-vis full disclosure and adherence to corporate governance standards.

When Uy’s “meteor” was at its brightest, business raised concerns about potential conflicts of interest, especially given his diverse portfolio of businesses. The concern over whether his various ventures could lead to conflicts that affect fair competition and business ethics was a hot topic of discussion.

There was also apprehension about his monopolistic practices and the potential for undue concentration of economic power. His rapid expansion in various sectors, including telecommunications, energy, and gaming, has raised questions about fair competition and whether his companies may dominate certain industries.

But alas, Dennis Uy burst into the scene like a meteor, and like a meteor has fizzled out just as fast.

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The general public only heard of him when he set up Dito Telecommunity with Chinese money and, many people believe, with then-president Duterte pulling the strings behind the scenes.

It is understandable, of course. Many people – too poor to pursue a more fruitful preoccupation – relied on their mobile phones for entertainment. They thus welcomed the idea, promised by Uy, of breaking the duopoly of Smart Communications and Globe Telecom by providing them with fast, uninterrupted, and cheap Internet.

The promise did not materialize. With Duterte no longer around to keep the creditors at bay, Uy is left juggling his finances to keep his empire afloat. Will Lady Luck continue to be kind to him and rescue him once more? – Rappler.com

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