FRANCHISE REJECTION TO WEIGH ON ABS-CBN FINANCIAL POSITION

ABS-CBN Corp. may find it difficult to cope financially after lawmakers voted against the renewal of its franchise.

After a series of hearings, the majority of the House of Representatives committee handling the matter denied the Lopez-led media company’s franchise application last week. This means that 11,000 ABS-CBN employees will be let go as the firm shut down broadcast operations.

“Without the franchise, it puts a big question mark on how the company will generate enough revenues from other business units since most of the sales come from the ads that come out of the mother station,” Luis Limlingan, managing director at Regina Capital Development Corp., said.

Shares of ABS-CBN were last traded on Friday at the Philippine Stock Exchange at P14.78, already down from the previous day’s P15.18 apiece.

Many analysts expect shareholders of ABS-CBN will sell out their holdings when trading resumes.

“Their share price is [at risk] on Monday unless they suspend trading or do a share buy-back,” Christopher Mangun, research head at AAA Securities Inc. said.

Revenue channels

DE La Salle University economist Maria Ella C. Oplas told the Busi

nessmirror that it will not be a “nice picture” for ABS-CBN, financially speaking, as the nonrenewal of the franchise would weigh on its revenue channels.

Oplas said that this could then pose challenges to the network’s cash flow, thereby potentially affecting its ability to settle obligations. “Just imagine, they don’t operate now, I’m sure advertisers pulled out,” she said, noting that advertisements are a major income generator.

This leaves ABS-CBN with a troubled cash flow and liabilities yet to be paid off, Oplas said.

“It’s also not a good picture for their stockholders. I’m sure a lot are giving up their stake now,” she added.

Integral part

PHILSTOCKS Financial Inc. analyst Japhet Louis Tantiangco agreed that the denial of franchise renewal would adversely impact ABS-CBN’S financial position.

“With the denial of the franchise renewal, ABS CBN will not be able to resume its radio and television broadcasting operations which has been an integral part of its business,” Tantiangco told this newspaper.

This could result in revenue losses, he said, noting that this would then reflect on the company’s fundamentals.

ABS-CBN might also be forced to liquidate some of its assets to meet its obligations, he added.

Liabilities

ACCORDING to its latest unaudited financial report posted in the Philippine Stock Exchange, ABS-CBN has total liabilities amounting to P48.43 billion as of end-september 2019.

The current portion—to be settled within one year or less— of its liabilities is P14.56 billion. These are noninterest-bearing trade payables usually paid in 30 to 90-day term and accrued production costs, among others.

It also has loan agreements— total of P21.23 billion—with several banks throughout the years.

Most recently, according to the same report, ABS-CBN borrowed P5 billion from Union Bank of the Philippines on May 21, 2019, to partially fund its capital expenditures and general working capital needs.the 10-year loan has a fixed rate of 6.74 percent per annum and is payable quarterly.

The media firm assured that it was in compliance with the provisionsof its loan arrangements as of September 2019 and December 2018.

“Unamortized debt issue cost, presented as a deduction from the company’s outstanding loan, a mounted top 119 million andp 75 million as at September 30, 2019, and December 31, 2018, respectively,” the report noted. Assets

STILL, ABS-CBN has more assets than liabilities. Referring to the same report, the company assets have an aggregate amount of P85.65 billion as of end-september 2019.

A huge chunk of its assets comprises property and equipment amounting to P27.87 billion.

Of this amount, the biggest allocation—p7.97 billion—was for towers, transmission, television, radio, movie and auxiliary equipment.

Others include land and land improvements (P2.19 billion), buildings and improvements (P4.93 billion), other equipment (P5.02 billion) and construction in progress (P7.78 billion).

In the first nine months of 2019, ABS-CBN held cash and cash equivalents amounting to P13.32 billion.

Mitigating potential losses

WHILE ABS-CBN lost its broadcast franchise, Oplas said that the company still has followers.

“People will still follow them [ABS-CBN] in other platforms. Then, dun sila pwede kumuha ng ads [they can sell advertisements there],” she explained.

Op las, however, stressed that advertisement revenue may not be as big as it was before.

Tantiangco said that ABSCBN would need to trim expenses to keep its financial position at a manageable level.

“It [ABS-CBN] would also have to cut costs to production to save cash that can be used in servicing its debts,” he said.

Govt lost tax revenues

SHUTTING down ABS-CBN may also mean a loss for the government.

Ateneo De Manila University economist Philip Arnold P. Tuaño told the Businessmirror that abs-cbnh as substantial tax contribution, noting that even the Bureau of Internal Revenue reported the company paid

P15.3-billion worth of taxes in 2016 to 2019.

“What I can say is that the defeat of the House bill on the franchise renewal is unfortunate given that the firm has been contributing significantly to the government’s coffers,” Tuaño pointed out.

“[This] would be difficult to replace given the expected loss of tax revenue following the economic downturn this year,” he added.

Question of PDRS

MEANWHILE, Congress’ decision on the PDR or Philippine Depositary Receipt issued by a mass media company may have an effect on other companies that have this type of securities that allows foreigners to own shares.

The other listed company that also has PDR is GMA Network Inc., the country’s secondlargest media company.

A depositary receipt is a negotiable certificate issued by a bank representing shares in a foreign company traded on a local stock exchange. This security gives investors the opportunity to hold shares in the equity of foreign countries and gives them an alternative to trading on an international market.

The 1987 Constitution, however, only limited the ownership and management of local mass media to Filipinos

GMA Network has not responded at presstime to Busi

nessmirror’s query on the issue. In a previous statement, they said it was done in compliance with the rules of regulators.

GMA’S share price was up on Friday to P6.03 per share from the previous close of P5.71 per share.

Ephyro Luis B. Amatong, commissioner at the Securities and Exchange Commission, earlier said the agency did not have a reason to investigate on the PDR or look at the issues involved, and they received no complaints regarding the issue.