Sky, Home Cable set to sign deal

The country’s two leading cable television operators – Sky Cable of the Lopez group and Home Cable of the PLDT group – are set to sign a definitive agreement and merge operations and management of the two companies within the month, or early next month at the latest.

SkyCable chairman and Benpres Holdings Corp. director Eugenio Lopez III said in an interview that they are now in the final stages of the due diligence (Sky Cable is doing its due diligence of Home Cable and vice-versa) which is expected to be completed this month.

For his part, PLDT president and chief executive officer Manuel V. Pangilinan said he expects the merger to take place by the end of June or early July. PLDT’s wholly owned subsidiary Mediaquest Holdings Inc. – which manages the PLDT retirement funds – controls Sky Cable.

Lopez and Pangilinan also disclosed that talks with a third party foreign strategic partner will commence as soon as the merger is completed.

Last April 3, Sky Cable and Home Cable, which account for at least 70 percent of total cable subscribers in the country, signed memorandum of agreement to merge their respective cable operations and create a holding company with an enterprise value of P14.5 billion to manage both brands.

The move is expected to improve the bottom lines of the two companies which have been in the red for sometime now.

The merger was subject to due diligence to be conducted by both parties within the next 75 days from the signing of the MOA as well as to other closing conditions, including relevant regulatory approvals.

According to Lopez, there is currently an ‘overbuild-situation’, not only in the cable industry but in the telecommunications industry as a whole, forcing companies into collaboration and cooperation.

Sky Cable will initially have a larger stake in the holding company that will be formed considering that it has a bigger share of the cable market and more assets. (Home Cable is about one half the size of Sky Cable in terms of market share and assets.)

However, Sky will be selling part of its stake to a third party foreign strategic investor, which is also part of the Lopez group’s bid to raise more funds for its losing businesses. Once the third party investor comes in, Sky and Home will have an equal share in the new holding company. All operating decisions will be shared by Sky and Home as well as any additional funds that may be required by the new company, Lopez and Pangilinan said.

Excess convertible notes of the new holding company given to Benpres in exchange for its additional shares in Sky will be offered to strategic investors which is envisaged to provide added value to the merged operation.

A transition team, whose members were drawn equally from both Sky and Home is managing the merger process to ensure its orderly completion. – Mary Ann Reyes