First Pacific keeps 24.4% PLDT stake

Hong Kong-based First Pacific Co. Ltd. (FPC) is no longer selling its 24.4-percent controlling stake in Philippine Long Distance Telephone Co. (PLDT) until the latter’s value improves to a point that will allow FPC to recover its investment in the country’s largest telecommunications company.

This means that an offer by US investment firm Newbridge for the purchase of FPC’s shares shares in PLDT will have to wait. "There is intention on the part of First Pacific to maintain some level of management control in the meantime," an official source said.

The STAR also learned that a ‘truce’ has been called at First Pacific, primarily between FPC controlling shareholder Anthoni Salim and FPC executive chairman and PLDT president and CEO Manuel V. Pangilinan. As a result, Pangilinan has been assured of maintaining his posts at PLDT, despite opposition from FPC director Michael Healy and general counsel Roland Brown, who, sources claim, are still bent on discrediting Pangilinan in the eyes of Salim.

It was Salim who offered to sell FPC’s stake in PLDT to John Gokongwei Jr. which resulted in the signing of a memorandum of understanding between FPC and the Gokongwei group. The Gokongweis, however, withdrew their offer to buy out part of FPC’s stake in PLDT and Bonifacio Land Corp. in early October after the PLDT board and management prevented the conduct of due diligence investigations on the company by their staunch rival in the landline telephone business (the Gokongweis own Digitel).

Highly placed sources revealed that FPC has realized that if they sell their stakes in PLDT now, they will have to write down a substancial portion of what they invested in the telecommunications business. PLDT share prices have gone down 40 percent since the signing of the MOU between FPC and the Gokongwei group last June 4, 2002. FPC bought the PLDT shares from the Philippine Telecommunications Investment Corp. (PITC), owned by the Cojuangco family, for around P1,400 per share. As of yesterday, PLDT shares were trading P272.50 per share.

One of the primary reasons FPC was selling its Philippine telecommunications and real estate interests was to raise funds to pay off maturing debts of the company and allegedly, those which Salim owes to the Indonesian government.

Sources said that with $90 million in cash that will be forthcoming from the sale of part of its stake in Bonifacio Land Corp. to the consortium of Ayala Land Inc. and Greenfield Development Corp., FPC will be adequately covered in the meantime.

Also, there are reports that Anthoni Salim has already paid a sizable amount to the Indonesian government just two weeks ago (although where the money came from is unknown) and is no longer in a hurry to dispose off the Salim family’s investments, which also includes the world’s biggest noodle maker Indofood.

In the case of PLDT, company officials explained that what First Pacific now wants is for PLDT achieve a strong balance sheet, attain fiscal stability, and improve liquidity.

PLDT just completed its liability management exercise involving around $1.3 billion in debts falling due between 2002-2004 via the issuance of $350 million in global notes, a $149-million loan from Germany’s KfW, and a $145 million syndicated term loan facility and is now focusing on reducing debt.

During the first nine months of 2002, PLDT was able to reduce its debt by $82 million using free cash flows. Also during the last 12 months ending Sept. 30, 2002, the company increased its free cash flow level from a negative position to P10.2 billion.