(UPDATE2) PLDT unit eyes majority stake in TV5

By Lala Rimando, abs-cbnNEWS.com/Newsbreak

Posted at Oct 14 2009 05:54 PM | Updated as of Oct 15 2009 11:48 PM

MANILA - The media arm of Philippine Long Distance Telephone Co. (PLDT) confirmed a report that it is eyeing a majority stake in a block timer of TV5, a channel owned and operated by Associated Broadcasting Company (ABC).

“MediaQuest is in the final stages of discussions with respect to acquiring a majority stake in Primedia, a Philippine domestic corporation engaged in developing programming content for television and radio, specifically ABC TV5,” said Ray Espinosa, director of MediaQuest Holdings Inc.

On Wednesday, Malaysian newspaper The Star reported that MBP Primedia Inc. is in the final stage of talks with PLDT for its 70% stake inTV5's block airtimer.

“The company is in the final stage of the disposal. It will happen very soon,” a source of The Star said.

The story was also reported earlier by the ABS-CBN News Channel.

Primedia has the exclusive right to schedule and manage the airtime sale of TV5, formerly called ABC-5.

Antonio "Tonyboy" Cojuangco, the current president and chief executive officer of ABC, used to be the chairman of PLDT.

The players

Primedia inked the blocktime deal with TV5 last March 2008. Primedia was then in charge of producing and sourcing most of the entertainment shows, while ABC 5 remained responsible for news programming and station operation.

Primedia is part of the overseas portfolio of Media Prima, the media arm of conglomerate Malaysian Resources Corp Bhd.

The Philippine deal was part of the Malaysian conglomerate’s efforts then to scour for opportunities abroad. Media Prima set up an investment vehicle that it poured seed funding to. The plan was to attract other investors to also join the venture.

But the global financial crisis happened and financing dried up.

On the other hand, Mediaquest Holdings Inc. is a unit of the PLDT's wholly-owned Philippine Long Distance Telephone Co. Beneficial Trust Fund.

MediaQuest has been the corporate vehicle for the PLDT group's various media-related ventures. Its portfolio includes a 30%stake in the business paper BusinessWorld; a controlling interest in National Broadcasting Corporation (NBC), which operates a network of radio and TV stations; a minority interest in cable TV company Sky Cable, and; a controlling stake in 360media, which broadcasts to Mobile TV and direct-to-home services.

It has a pending discussion to also purchase an 87.5% stake in another Philippine daily, The Philippine Star. The P4 billion deal was supposed to have been inked way back in April.

Media investments

The PLDT group has long been trying to enter the broadcast media industry as part of its convergence strategy.

In 2001, PLDT, through MediaQuest, signed an agreement with the owners of another broadcasting firm, GMA Network Inc, for an over P8 billion-worth controlling stake.

GMA Network Inc. operates several TV channels, including GMA 7.

The purchase deal did not push through after creditors of PLDT raised concerns over maturing dollar loans.

In 2004, PLDT, through mobile phone arm Smart Communications, renewed talks with GMA7. But that, too, fizzled out.

At the time, Cojuangco has left PLDT and eventually acquired ABC 5, a third liner. Local broadcast media firms were watching out for ABC 5’s moves as far as ratings and revenue games were concerned.

ABC 5, on the other hand, had to scour for investors to keep up with the ratings war.

Mass media firms, however, are restricted by the Constitution from tapping foreign investors.

Then Primedia came.

Primedia’s investment in ABC TV5 was in the form of a block-airtime and consultancy agreement. A few months after its entry, Primedia helped re-launched the channel to target young Filipinos with an affinity for reality TV, drama, teen programmes, movies and cartoons.

The TV5-Primedia partnership, however, was considered “unlawful” by GMA Network, which filed a suit last December 2008.

The suit questioned the alleged transfer of control and management of ABC-5's programming content and airtime sales to Primedia. GMA said the deal was a violation of the anti-dummy law since Primedia is actually a subsidiary of the Malaysian conglomerate and not a 100% Filipino-owned company as required by the Philippine Consitution.

The sale of Media Prima’s stake in Primedia to the PLDT group may bring closure to that legal battle, according to The Star.

Divestment

Before Abdul Rahman Ahmad, Media Prima’s former chief executive officer, stepped down last September 1, he informed analysts and investors of the plan to divest from Primedia.

The target then was to complete the divestment—or at worst, cease the entity’s operations—by end of September.

The deadline has since been moved to end-October.

Media Prima has been itching to divest from Primedia since the Philippine operations has been considered as the Malaysian group’s “Achilles' heel.”

ABC 5’s financial performance has been dragging the Malaysian firm’s bottomline. The Star reported that Media Prima’s accumulated losses incurred from ABC 5 stood at 68.1 million (est. P940 million).

Of this, RM 45.3 million (est. P625 million) was incurred as of end-2008, and RM 22.8 million (est. P315 million) in the first 6 months of 2009.