PNB SEARCHING FORNEW PRESIDENT ANDCEO

Lucio Tan- owned Philippine National Bank is in the market for a new president and CEO after its current one, industry veteran Reynal

do Maclang, announced plans to his inner circle last week to finally retire.

Biz Buzz learned that Maclang—the tobacco and beer magnate’s trusted banker since his Allied Bank days— quietly told his closest associates at the bank late last week that he was going to retire.

The soft-spoken banker turns 80 years old this year and has done a great job making sure that the 2014 merger of Allied Bank and PNB would work, given the very different cultures of both institutions.

Today, PNB is the country’s fifth largest financial institution, just one notch behind government-run Land Bank of the Philippines in terms of total assets.

We’re told that the search has already begun for a new president who not only will be tasked with “taking the bank to the next level of growth”, but will also have the intestinal fortitude to contend with the internal politics and various factions of the Lucio Tan group of companies. Now that’s challenging. —DAXIML. LUCAS

Maynilad’s game plan

The heavy rains over the last couple of weeks highlighted a key weakness in the water supply of Metro Manila, which only has one source of potable drinking water, making it vulnerable to any kind of supply disruption.

Unfortunately for Maynilad Water Services Inc., it sources its water straight from Ipo dam, which goes straight to its own water treatment facilities, unlike Ayala-controlled Manila Water Co. which has exclusive use of the Balara treatment plant.

Thus, millions of Maynilad customers were inconvenienced last week when high water turbidity at Ipo dam forced the Metro Pacific-owned firm to cut water supply to its service areas for three days. Maynilad president Ramonci

to Fernandez told Biz Buzz that deforestation in the watershed north of Metro Manila resulted in pure mud flowing into the reservoir when the heavy rains came.

Since current reforestation efforts will need many years to have an effect, Maynilad will instead invest in a middle-ofthe-pipe solution to prevent another water outage.

That means investing substantial resources to upgrade its two La Mesa treatment plants in Quezon City to make it better able to purify murky water from Ipo dam. At the same time, it will also make the large pipes from Ipo dam to its treatment plans (over 20 kilometers long) more resilient against earthquake damage.

Howmuch will all this cost? A whopping P8 billion in capital expenditures over the next three years.

Of course, nothing is free and consumers will ultimately bear that cost. But a few pesos more in the monthly water bill is definitely better than having no water for a morning shower when you’re late for work. —DAXIM L. LUCAS

DAU vs DAU

As the race to become the country’s third telecom player heats up, two gentlemen sharing the same name and both backed by strong foreign mobile players (both market leaders) are believed to be among the front-runners. We’re talking about the two

Dennis Uys, one is the acquisitive businessman from Davao—the big boss of companies like Phoenix Petroleum, 2GO Group and Chelsea Logistics Holdings Corp.—and the other from Clark, Pampanga, who runs Converge ICT.

Dennis Anthony Uy of Pampanga has teamed up with Korea Telecom (KT) on a 1,700-kilometer fiber optic rollout in North Luzon for its broadband service. This is part of Converge ICT’s $1.8-billion investment spending program to expand nationwide. DAU of Pampanga had said that he had no aspiration to be the third telco. However, we heard that KT is very much keen on bidding for the slot and has been laying the groundwork for this. If and when given the opportunity to be KT’s local partner, DAU is unlikely to shy away.

Dennis Ang Uy of Davao, on the other hand, has deeper political connections in this administration and also enjoys massive support from Chinese investors. There are at least two Chinese telco players interested in this territory, namely, China Mobile and China Telecom, but according to the grapevine, DAU of Davao is gravitating more toward China Telecom, seen to be the most serious Chinese telecom player out there.

There are other local and foreign aspirants for the third telco slot, of course, but many believe that in the end, it will be a battle between China and Korea.

But no matter who bags the third telco slot, the longer it takes to get this, the more difficult it is to break the PLDTGlobe Telecom duopoly.

COL Financial head of research April Lee-Tan, for instance, has become more bullish on the incumbent telecom players now that both players were generating much more business from data services.

“What really has changed is the delay in the announcement of the third telco is actually allowing Globe and PLDT to strengthen their position,” she said.

Every year, Globe and PLDT shell out at least P40 billion each for capital outlays, which means that since 2016 when Mr. Duterte announced plans to bring in a new player, each has invested an additional P80 billion to boost their respective backbone. This has only increased the hurdle rate for any new player, Lee-Tan said.

At the same time, the price of data has gone down in the last two years, which narrows the leeway for a new player to do further price cuts, she said. Both Globe and PLDT offer data service for P50 in variants that sum up to 4GB, which means that to compete, a new player will have to offer more than 4GB for P50.

“The hurdle for a new player has increased,” she said. —DORIS DUMLAO-ABADILLA

Investing for growth

We’ve highlighted in this space how the country’s two telco giants, PLDT Inc. and Globe Telecom, are doing quite well on the profit side.

But underpinning all that profit is the vast amount of spending as well. Sure, there’s plenty of earnings potential in the local telco scene. And while rules and regulations may change over time, the requirement for having deep pockets has been constant.

This is clear in the capital spending budgets of the two companies. Based on their annual reports from 2000 to 2017, PLDT spent more than P500 billion while Globe spent almost P423 billion.

The data showed that PLDT —versus Globe—was traditionally more generous when it came to cash dividends. However, that figure had been on the decline in recent years as it invested more in in its network.

And for this year alone, Globe has committed to increase spending to about P50 billion while PLDT set a “historic” budget of P58 billion.

For certain, the threat of a third telco player has helped spur the pace of investment, most of which would go toward upgrading wireless and fixedline internet. Now, if services will get better, abangan! —MIGUEL R. CAMUS

Rethinking Coca-Cola

Mexican firm Coca-Cola Femsa didn’t talk about why it decided to sell back a majority stake in the Philippine bottling operations but every one would bet that a big part of the reason was the imposition of excise taxes on sugary beverages. Elsewhere in the world where such sugar taxes were imposed, sales volume of soft drinks declined, at least on the first year or two.

But the buyback of the stake by The Coca-Cola Co. of Atlanta could be an opportunity for other consumer groups to eventually bid for this 51-percent stake in Coca-Cola Bottlers Philippines Inc. ( CCBPI) that was dropped by Femsa.

One of the potential buyers is no less than San Miguel Food and Beverage (FB), which at one point in time controlled the local Coke business. We’ve reported that in recent years, San Miguel has gone back to the soft drink business, albeit not in a big way, with the bottling of San Mig Cola.

Note that SMC sold its 65percent stake in CCBPI in 2006, after buying back this business in 2001. It was not because it didn’t like the soft drink business per se but due to differences in management strategy.

“San Miguel Food and Beverage should buy back the stake sold by Femsa [to Coca-Cola]. FB would then truly be the SMC of old,” Abacus Securities head of research Nicky Franco tweeted.

We asked San Miguel’s big boss Ramon S. Ang whether the group would be interested to buy back control of CCBPI at this time and he said “maybe.”

FB is now preparing to sell up to 20 percent of its equity in an offering that could hit as much as $2.4 billion, potentially the largest capital-raising in the history of the local stock exchange.

The biggest capital-raising activity in PSE’s history to date is likewise one that was executed by the group in 2012, when San Miguel Corp. raised P80 billion from an issuance of preferred shares.

This time, FB is selling 1.2 billion common shares through a follow-on offering which is seen to be supported by “cornerstone” and “anchor” institutional investors. The banks backing this equity deal are UBS, Morgan Stanley, JP Morgan, Deutsche Bank, BDO Capital and BPI Capital. E-mail us at bizbuzz@inquirer.com.ph. Get business alerts and a preview of Biz Buzz the evening before it comes out. Text ONINQ BUSINESS to 4467 (P2.50/alert)