Exec details PLDT and Meralco synergies

ABS-CBN News

Posted at Mar 09 2009 11:49 PM | Updated as of Apr 24 2009 04:58 AM

A top executive of the conglomerate that now has an assured seat in the board of power giant Meralco recently detailed why it accumulated billions-peso worth of Meralco shares in the open market.

Ray Espinosa, vice chairman of PLDT Beneficial Trust Fund, the corporate vehicle of the PLDT Group for the Meralco stake, told ABS-CBN News that it is interested in Meralco because it could share in the latter's network of poles and could realize savings in servicing common set of clients.

PLDT has accumulated a billion-peso worth 10.17 percent stake in Meralco that is enough to ensure it a seat in the power firm.

PLDT’s entry into Meralco is widely assumed to have had the blessing of the Lopez family, whose allies currently dominate the 11-man board.

The Lopez-PLDT Group alliance is likely to engage in a battle for board control with another Meralco major shareholder, San Miguel Corporation, in the run up to the annual stockholders meeting of the power firm in May 26.

PLDT and San Miguel are both engaged in telecommunications. Both were previously in a contest to bag a former Meralco shareholder’s 27 percent block, but San Miguel beat PLDT to the draw. (Read background here.)

‘Pole relationship’

Espinosa said PLDT, the conglomerate’s telecommunication arm and cash cow, is dependent on the poles of Meralco to put up its own telephone lines.

“We use the poles of Meralco to put up our own telephone lines. That arrangement has been in place for quite a long time already. We would like to expand that pole relationship as we roll out new technology,” Espinosa shared.

Meralco’s poles are made of wood, concrete or steel, and usually more than 30 feet high. These have attachments, like wires, cable, streetlights, transformers, and in some instance, communication cables, including those of PLDT's.

The poles are strategically located all over Meralco’s franchise areas, including Metro Manila and nearby provinces—the most profitable markets for telecommunications businesses.

Espinosa also shared that the PLDT Group has plans to pursue other businesses that are dependent on the ‘pole relationship’ with Meralco.

He cited future plans to offer high-speed broadband services via the power lines. “You've also heard in the news about power line broadband. It means delivering hi-speed Internet broadband using the power lines of an electricity company. That technology exists today. We would like to look at that technology with Meralco.”

The executive mentioned eMeralco Ventures Inc. which has a potential to course data communications. “It's a company that operates quite an extensive fiber optic network in Metro Manila.”

eMeralco is the information and communications technology vehicle of Meralco established in 2003 to eventually pave the way toward a seamless migration of legacy infrastructure into next-generation network platforms--an area that PLDT is aggressively pursuing now.

Earlier, an executive of another Meralco major shareholder, San Miguel Corporation, said the former food and drinks giant is also eyeing Meralco’s poles for their new telecommunications venture.

San Miguel recently partnered with a Qatar-based telecommunications firm to offer broadband services in the Philippines.

Printing costs

Espinosa also cited other synergies between the PLDT Group and Meralco.

“A vast majority of Miracle customers are also PLDT customers…It's quite logical to tap each others assets,” he said.

Both issue millions of printed copies of statement of clients’ accounts, which, Espinosa said, could be streamlined to realize savings.

“PLDT has a large base and Meralco as well. That is an area we would look into to bring down cost of printing. Combined, both send statements to 15 million people,” he explained

Bayantel

When asked if the entry into Meralco took into consideration opportunities to acquire Bayan Telecommunications, a cash-strapped sister company of Meralco, Espinosa was less specific.

“PLDT as a telco always keep an eye out for strategic opportunities. Looking at other telcos in the Philippines is something that we constantly do,” he said, adding that they have acquired other existing telecommunications firms in the past.

Nevertheless, he hinted that a good relationship with the Lopez family is key in efforts to acquire any more Lopez family-controlled asset.

“We could look at Bayantel but obviously any discussion regarding Bayantel would follow only if the Lopez family is willing to discuss that with us,” he said.

Retirement fund

On the topic of coursing the 10 percent Meralco stake acquisition through PLDT’s pension fund, Espinosa explained that PLDT Beneficial Trust Fund has investments in blue chip assets.

The trustee-run billions-worth pension fund is used to fund retirement benefits of the PLDT employees. “We're mindful of the need to secure those returns… We decide on what is good for the portfolio,” he said.-- with ABS-CBN News and Lala Rimando, abs-cbnnews.com/Newsbreak

abs-cbnNEWS.com is the online news department of ABS-CBN Interactive Inc., a subsidiary of ABS-CBN Broadcasting Corp. ABS-CBN and Meralco are both part of the Lopez Group of Companies.