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Philippine telecom PLDT merging with GMA

by Matt Miller | Published July 11, 2012 at 2:12 PM

The Philippines' dominant telecommunications company is in the midst of a slow merger dance with the country's biggest broadcasting concern, raising the prospect of a multimedia conglomerate that could rival any in Southeast Asia. But like many corporate moves in the Philippines, the possible pairing of GMA Network Inc. and Philippine Long Distance Telephone Co. involves a lot of public posturing, some calculated feints and thrusts, and a healthy dose of self-enchantment.

This week, one of the country's major newspapers ran a story that set the price of the bid for GMA at 52.5 billion pesos ($1.25 billion). PLDT issued a statement to the Securities and Exchange Commission that no deal has been signed.

In April, GMA Network calculated its enterprise value at 47.04 billion pesos. The following month GMA's chairman said an acceptable price tag was 100 billion pesos.

At the center of the action is Manuel V. Pangilinan, the hyper-ambitious and hugely successful businessman who chairs PLDT and many other major corporate entities in the Philippines and Hong Kong. (He is known in the Philippines press as MVP.) Pangilinan publicly acknowledged a few weeks back that he is pursuing GMA. According to one source, PLDT wants to structure the transaction as a merger, not an acquisition.

Through an intermediary, Pangilinan declined to comment further.

Pangilinan's recent public statement followed a hefty increase in capital by MediaQuest Holdings Inc., the media subsidiary of PLDT's retirement fund, which is the designated vehicle of any broadcasting play. Two years ago, MediaQuest bought Associated Broadcasting Co.'s TV5 and has since built what was one of the Philippines' smaller national broadcasters into a strong third of five radio and television broadcasting networks with countrywide reach.

MediaQuest also owns stakes in newspapers, including the Inquirer, which published this week's take on the deal.

A merged GMA and TV5 would boast a national audience share of just under 50%, using figures compiled the end of last year by GMA. That would raise serious antitrust issues and would require what could be protracted government approval negotiations, something Pangilinan acknowledged in remarks to reporters last month. The Philippines' constitution limits media concentration, a nod to the years when longtime dictator Ferdinand Marcos shackled the country's rambunctious press and installed pliant owners.

However, the constitution is vague on what constitutes media concentration. As Pangilinan pointed out last month, the country is now awash with cable and satellite operations as well.

PLDT is itself in transition. The company for decades stood for inefficient operations, poor service and outdated technology, with a near-monopoly on terrestrial telephone service. In the past decade or so, it has moved aggressively into mobile technology. Last October, PLDT acquired majority control of rival wireless carrier Digital Telecommunications Philippines Inc., through a 69.2 billion pesos share swap.

However, PLDT has said it wants to evolve from strictly telecommunications into a multimedia company that offers content as well as carrier.

GMA fits the bill nicely. It produces popular television shows, music and film, with an emphasis on mass appeal. Its latest film offering is "Boy Pick-up: The Movie."

GMA and its rivals are more and more marketing that kind of populist fare on a global scale, through satellite and cable, both to millions of Filipinos who live and work abroad and to other audiences in developing countries. That kind of potential reach heightens the value of media assets.

In 2011, PLDT revenues topped 156.6 billion pesos, a 1% decline over 2010. PLDT is publicly traded in both the Philippines and on the New York Stock Exchange.

GMA is also publicly traded in the Philippines. However, it is 75% controlled by three prominent families, the Gozons, the Duavits and the Jimenezes. Under voting rules, all three must agree to any sale.

The country's biggest corporation, San Miguel Corp., has also figured in recent speculation about the fate of GMA. This week, the company reacted to media reports and issued a denial that it has proposed an investment in GMA to counter PLDT. While traditionally a food and beverage company, San Miguel has also been moving to diversify. In April, San Miguel invested $500 million in Philippine Airlines in return for a 49% stake.

PLDT unsuccessfully attempted to buy GMA in 2001.

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Tags: GMA Network Inc. | Philippine Long Distance Telephone Co

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Philippine telecom PLDT merging with GMA

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