How Duterte taught Philippine tycoon to toughen up
Philippine tycoon Dennis Uy has built an empire spanning oil, shipping, casinos and telecommunications, but eight years ago his oil-trading business was in trouble over government allegations of fuel smuggling.
Uy went to see the local mayor, a family friend from childhood, for advice. The mayor was Rodrigo Duterte, the country’s current president.
“He said my image is soft, so I should practise before a mirror saying, ‘You son of a bitch,’ 100 times,” Uy said in an interview in Manila. “He doesn’t like it when a person is bullied.”
Uy says Duterte hasn’t played a direct role in his businesses, but the advice worked. He was cleared of the smuggling charges and went on to quadruple profit at his Phoenix Petroleum Philippines Inc in the five years to the end of 2018.
Along the way, he says, he gained the toughness Duterte had been trying to instill in him.
“If you survive petroleum and shipping, it trains you to be battle ready,” said Uy, 46. “In petroleum, to get your one-peso margin, you watch everything from storage to trucking, and it’s common to give credit and deal with currency and oil price fluctuations.”
Before Duterte’s rise, the southern province of Davao was better known for tropical fruit and an endangered species of monkey-eating eagle than for business powerhouses such as Phoenix.
But in the past few years, Uy, who donated to Duterte’s presidential campaign, has spread far beyond the region, assembling assets that are eating into industries ruled by some of the country’s richest and oldest business dynasties.
In 2018, he teamed up with China Telecommunications Corp to win a licence to challenge the duopoly of Smart Communications and Globe Telecom. Uy had no previous experience in the sector, but his company, Dito Telecommunity Corp, emerged as the sole bidder.
Duterte has repeatedly called for greater competition in the industry, which has some of the highest mobile rates and slowest service in Southeast Asia.
After Duterte encouraged the Chinese wireless giant to join the competition, Norway’s Telenor and Austria’s Mobiltel, which had bought bidding documents, pulled out. Streamtech Systems Technologies, led by the country’s richest person, Manuel Villar, also withdrew.
Smart is owned by PLDT Inc, whose chairman Manuel Pangilinan has been repeatedly criticised by Duterte as an out-of-touch elite. The carrier’s largest shareholders include JG Summit Holdings, the banking, aviation and retail conglomerate now run by Lance Gokongwei, the son of founder John Gokongwei.
The other telecom operator, Globe, has Ayala Corp as one of its largest shareholders. Ayala is led by chairman Jaime Augusto Zobel de Ayala II, a frequent Duterte target.
Duterte has also been a strong critic of the current duopoly.
“The Philippines has been gravely fooled by the rich people in the Philippines. Just like Ayala and Pangilinan who own Globe and Smart. They are all thieves, those sons of bitches,” he said in a speech on Jan 23, according to an official transcript.
Uy also lacked experience in the gambling resort business, but won the first such licence offered after Duterte became president, gaining permission to build a US$300-million casino complex on a resort island in Cebu.
With a casino, Uy will be in competition with Enrique Razon, a third-generation heir of a ports and cargo empire who founded Bloomberry Resorts, the developer of the Solaire Resort and Casino in the Entertainment City suburb of Manila. Razon, with a net worth of about $4.6 billion, is the country’s richest person after Villar, according to the Bloomberg Billionaires Index.
Uy’s gambling resort will also put him in competition with the family behind Belle Corp, which owns a stake in the City of Dreams casino in Manila. Belle is part of the family-controlled empire built by the late Henry Sy. The Sy group also owns BDO Unibank, Uy’s biggest creditor, and has a shipping and logistics venture with him, 2GO Group.
“You always have to look out for opportunities whether small or big or whether it’s aligned to what you’re doing or not,” Uy said. “We look at industries where we can be in the top 5, or where we have the means to compete or there is room to serve the customer better.”
Uy has built his empire around Phoenix Petroleum, which he founded in 2002, four years after the country deregulated its oil industry. It is now the third-largest Philippine petrol retailer after taking market share from Shell and Petron by offering round-the-clock service to business clients such as Cebu Air, part of the Gokongwei group. Uy said he is open to more acquisitions.
“We can’t say now I am full; for tomorrow, I may be hungry,” he said. “We have businesses that we need to grow organically or through acquisition.”
The rise to conglomerate status has been largely financed by borrowing. Total debt has mushroomed from about 14 billion pesos ($275 million) to 111.5 billion pesos in 2018, based on the most recent regulatory filing from Udenna Corp, Uy’s holding company.
“His friendship with Duterte opened opportunities to enter into new business that he grabbed aggressively,” said Rachelle Cruz, an analyst at AP Securities in Manila. “Uy’s main challenge now is making these businesses work and turning Udenna into a holding that would last beyond Duterte.”
Uy says his connection to the president isn’t the reason for his success.
“I am not close to the president,” he said. “He isn’t involved in any of our deals. He only gets to know from what he reads from newspapers.”
Uy said his aggressive expansion under Duterte is partly based on confidence that the president has created a level playing field that allows an outsider like him to do business.
“I’ve been always confident on the Philippines, but it’s different when you know the leadership and you are both from the same place,” he said.
“You always have to look out for opportunities, whether small or big, or whether it’s aligned to what you’re doing or not”
DENNIS UY