Monday, January 6, 2020

ABS-CBN's franchise problems seen threatening investor confidence

President Rodrigo Duterte’s attacks against media conglomerate ABS-CBN Corp. could spook investors at a time more infrastructure projects heavily depend on private funding and as job-generating foreign investments continue to drop.

Duterte has repeatedly threatened to block the franchise extension of ABS-CBN, which he accused of bias and of not airing his paid political advertisement during the 2016 election campaign. The media company is racing against time as its franchise will expire in March this year. A bill to extend its license for another 25 years is pending in Congress.

“Yes, I believe it (non-renewal of ABS-CBN franchise) can affect investor confidence in the country,” Cid Terosa, economist at the University of Asia and the Pacific, said in an interview. “Any form of active meddling by government on business affairs is always viewed skeptically by businessmen and investors,” Terosa added.

Shares in ABS-CBN shed 21% at the end of 2019. Meanwhile, the Philippine Stock Exchange index, a barometer of investor confidence, rose 4.7% last year.

In a speech last December 30, Duterte told the owners of ABS-CBN to just sell the company, sending its shares tumbling by as much as 6.3% on the first trading day of 2020. Bloomberg expects ABS-CBN to fall to its lowest close since March 2009 as it struggles to recover amid Duterte’s verbal assaults.

“The franchise is crucial to their broadcasting operations so its non-renewal would have a negative impact on their business,” said Japhet Louis Tantiangco, researcher at Philstocks Financial Inc.

“The company could still survive given that it still has other business segments such as film and music production,” Tantiangco added.

Silver lining?
Aside from the troubled media company, Duterte also berated utility firms Manila Water Company Inc. and Maynilad Water Services Inc. and threatened to jail their owners for supposedly forging water contracts with “onerous” provisions. Analysts and business leaders have warned that the presidential tongue-lashing against some of the country’s biggest companies could turn off foreign investors and would not bode well with the Duterte administration’s eagerness to tap private capital to fund its big-ticket infrastructure projects.

Duterte’s rants could also worsen falling foreign direct investments in the country. Latest data from the central bank shows net FDI inflows from January to September last year stood at $5.12 billion, down by nearly 37% compared to the $8.11 billion recorded in the same period in 2018. Meanwhile, press freedom advocates fear that 10,000 to 11,000 people are at risk of losing their jobs if ABS-CBN’s broadcast services cease operation.

"For them (investors), it is an indication of the power and influence that government can wield on their activities," UA&P’s Terosa said.

"It raises apprehension and stimulates cautionary behavior that impedes or slows down progressive business and investment decision-making," he added.

In an unprecedented move, at least 12 lawmakers at the House of Representatives – mostly administration allies, including four deputy speakers – have reportedly filed bills seeking the renewal of ABS-CBN’s franchise, running counter to Duterte’s animosity towards the media giant. Citing an “insider,” The STAR reported last week that heated debates are expected when the committee on legislative franchises starts hearing the bills.

PLDT chairman and CEO Manuel Pangilinan said his TV5 Network Inc. is open, but cautious at the same time, to a blocktime deal with ABS-CBN.

"The president might say something so we are also reluctant," said Pangilinan, who is also the chairman of Maynilad. For Philstocks’ Tantiangco, there are still some “opportunities” for ABS-CBN in the event that its legislative franchise is not renewed, although tough times could be ahead for the company.

"It (ABS-CBN) could harness further the growing opportunities in the digital space. Finally, it could also engage in other industries such as cosmetics, food and financial technology," he said.

"Nonetheless, without the franchise, the company will most likely go through challenging times as they adjust to the new circumstances while implementing new business strategies," he added. Editor's Note: Manuel V. Pangilinan, the chairman of Maynilad, is also chief executive of PLDT and of TV5. A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs This article was independently produced following editorial guidelines.