PLDT, ABS-CBN ink deals that will bolster operations

PLDT Inc. and ABS-CBN Corp. have entered into two separate multibillion-peso deals that will allow the two groups to build a bigger media, broadband, and cable empire.

One of the deals involves the acquisition by ABS-CBN of 34.99 percent of total voting and outstanding capital stock in TV5 network Inc., a PLDT unit, for P2.16 billion.

Meanwhile, the other deal involves the P2.86-billion investment by Cignal Cable Corp., a PLDT unit, into Sky Cable Corp. This transaction represents 38.88 percent of the total issued and outstanding capital stock in Sky Cable.

Aside from these two transactions, the two groups are also executing—within the next eight years—other deals amounting to P11.5 billion, including the issuance of several convertible notes and debt instruments.

The transactions represent how ABS-CBN values its roots as a freeto-air television network, while for PLDT, its focus on paid cable TV subscription services.

TV5 shares

THE acquisition of TV5 shares signals a new era for ABS-CBN, which had lost its bid to renew its Congressional franchise in 2020.

“We are excited with this partnership as we see the opportunity to help TV5 grow and strengthen its free to air network. For ABS, it presents a fantastic platform for us to achieve synergies in production content and talent management as well as maximizing our content delivery,” ABS-CBN Chairman Mark Lopez said.

Aside from this initial transaction, the two groups will also execute a convertible note agreement, which will allow ABS-CBN to acquire additional primary common shares in TV after 8 years of the issuance of the P1.84-billion convertible note.

Once executed, this will allow ABS-CBN to increase its equity in TV to 49.92 percent.

The proceeds of the subscription in the primary common shares and the convertible note in the total amount of P4 billion will fund the capital expenditures and operating expenses of TV5 in pursuing the enhancements of its content and programming and public service offerings. “We welcome the entry and investment of ABS-CBN in TV5, as ABS-CBN has always been the leading developer and provider of Filipino-related entertainment content not only in the Philippines but overseas as well. Our companies have always had these cherished values of providing top and quality programs in the service of the Filipino people and together we believe we can achieve this in greater measure and success,” PLDT Chairman Manuel Pangilinan said.

ABS-CBN President Carlo Katigbak said the partnership is consistent with the strategic intention of ABSCBN “to evolve into a storytelling company whose goal is to reach as wide an audience as possible.”

“In partnership with TV5, we look forward to reaching viewers both on owned platforms and through other broadcast partners, thereby enriching the Philippine creative industry. We hope the industry evolves from being highly competitive to increasingly collaborative, which benefits all stakeholders in the long run,” he said.

Public policy think tank Infrawatch views the transaction as a “leap forward” for TV5, allowing it to compete head on with GMA network Inc. for advertising revenues, talent, and programming.

“Certainly, adversaries of ABSCBN at all levels of government will try to sabotage this partnership. In fact, we are already seeing this in Congress, as some congressmen are pushing for inquiries into the deal. However, this deal is not a franchise issue, as this involves no transfer of controlling stakes requiring congressional approval,” ridon said.

He added that Congress should focus on more important public concerns, such as economic recovery and social programs, “instead of wasting time inquiring on content sharing deals between media entities.”

Cignal-sky deal

MEANWHILE, the second transaction involves the acquisition by Cignal Cable of 38.88 percent of the shares in Sky Cable from Sky Vision Corp., ABS-CBN, and Lopez Inc.

Aside from the initial buy-in, the parties also executed a debt instruments agreement, whereby Sky Vision agreed to issue a P4.39-billion exchangeable debt instrument to Cignal.

This gives Cignal the option to acquire as much as 61.12 percent of the shares in Sky Cable after 8 years from its issuance. The said instrument also provides for the sale of a P250-million convertible note to Cignal, representing 1.84 percent of the outstanding capital stock.

“The proceeds of the sale of the Sale Shares, the Convertible Note and the issuance of the Debt Instrument in the total amount of Php7.5bn will be used to repay certain obligations of ABS-CBN and Sky Vision and to fund the investment of ABS-CBN in TV5,” PLDT said.

EPLDT is extending a loan to Cignal to fund the P7.5-billion acquisition cost.

The transaction is expected to close in August.

Merger review

When sought for comment, Philippine Competition Commission (PCC) OIC Chairperson Johannes Bernabe said the antitrust body has yet to be consulted and has not been notified of the two transactions.

“Transactions that meet the P50billion thresholds set by the Bayanihan

to Recover as One Act (Bayanihan 2) are required to be notified to the PCC for review to ensure that there is no harm to competition and detriment to consumer welfare. With the lapse of the period set under Bayanihan 2 on Sept. 15, the PCC notification thresholds will revert to appropriately lower levels that ref lect the relative size and performance of the economy,” Bernabe said.

he noted that the competition commission “may” also direct the Mergers and Acquisitions Office to “conduct an initial assessment if the effects of the transactions involving TV5 and ABS-CBN, and Cignal and Skycable, warrant a motu propio review.”

“A merger review will determine if the transaction may result in a substantial lessening of competition in the relevant markets,” Bernabe said. “The PCC’S mandate to review mergers and acquisitions is centered on protecting consumers from transactions that may result in unchecked market power.”

he added: “Mergers and acquisitions often mean (fewer) choices for consumers. Lack of competition may lead to higher prices or lower quality products and services, all to the disadvantage of consumers.”