4 firms eye 33.5% stake in Sky-Home Cable

At least four local and foreign companies have expressed keen interest in acquiring a 33.5-percent stake in the merged SkyCable and Home Cable, which currently accounts for 70 to 80 percent share of the total cable television market.

SkyVision managing director Antonio Tria said Sky and Home have engaged two investment companies, namely ING Barings and Bear Stearns to serve as financial adviser and help out not only in discussion with prospective investors but also in the preparation of the business plan and valuation of the merged company.

Recently, SkyCable, which is owned by the Lopez group, and the Home Cable, owned by the PLDT group, merged, resulting in a holding company with an enterprise value of P14.5 billion. The new company, Beyond Cable, is finalizing its registration papers with the Securities and Exchange Commission.

Under the consolidation agreement, the economic interest of MediaQuest and PLDT in Philippine Home Cable Holdings Inc., which is held by Unilink, and the Lopez Group’s shares in Sky Vision Corp. will be consolidated into a new holding company.

The Lopez group currently has a 66.5-percent economic interest in Beyond Cable, and the PLDT group, 33.5 percent, while their voting interest is equal. What will be offered to the third party strategic investor is the 33-percent stake of the Lopezes.

It is estimated that the new investor will have to put in at least $40 to $60 million (or around P3 billion). When asked to verify the amount, Tria said, everything will depend on the valuation. "There is no business plan yet that will serve as basis for assessing the value of the new company. But we expect our financial advisers to submit the plan within the month," he said.

Tria said they expect to have the foreign investor in by the first or second quarter of next year.

Because cable television is currently classified as part of broadcast, Tria explained that SkyCable-Home Cable plan to have instruments like PDRs which serve as certificate of economic right to allow foreign investor to come in.

The Constitution provides for a 100-percent Filipino ownership of mass media, including broadcast.

Sky and Home are also said to be looking at publicly offering their shares, but Tria said this will take some time.

The merger of SkyCable and Home Cable was resorted to improve the viability of the two companies, which have been losing in the past few years. According to Tria, the combined companies expect to register losses of at least P600 million this year due largely to increasing programming cost and the peso depreciation.

Tria said he expects the two cable firms to be profitable in two to three years’ time.

Benpres Holdings Corp., the publicly listed flagship of the Lopez Group has interests in communications, utilities, basic infrastructure, property development, information technology and health care. Together with ABS-CBN, it controls approximately 75 percent of Sky Vision Corp.

MediaQuest, meanwhile, is a 100-percent-owned subsidiary of the PLDT Beneficial Trust Fund. It controls Home Cable Inc., through a wholly-owned subsidiary. Unilink Communications Corp. It also holds a controlling interest in Nation Broadcasting Corp. (NBC) which operates a network of 30 radio stations and a UFH TV channel.