First Pacific mulls regional approach in direct-to-home satellite TV venture

Hong Kong-based First Pacific Co. Ltd. is exploring a regional approach to its planned entry into the direct-to-home (DTH) satellite television business in partnership with US carrier Echostar Communications.

First Pacific managing director Manuel V. Pangilinan told The STAR that in addition to a planned joint venture with Philippine Long Distance Telephone Co. (PLDT) to offer a satellite, Echostar is also looking at a possible partnership with a DTH company in Indonesia owned by the Salims (the family which controls First Pacific).

PLDT and Echostar, America’s biggest DTH satellite TV operator, are currently finalizing plans to set up a "pervasive and cost-effective satellite pay TV service in the Philippines on a joint venture basis which Pangilinan said will cost around $85 million. As planned, Echostar will make available to PLDT more than 2,000 video and audio channels and video-on-demand services that it currently offers to its 11 million American subscribers.

Pangilinan told The STAR that they are currently working on the numbers and are hopeful they will be able to launch the newest DTH offering before the end of this year.

Industry experts earlier said that the only way Echostar and PLDT can make DTH cost-effective and lucrative for the joint venture is to enter into a regional arrangement. The planned joint venture will not only have to compete locally with existing player Dream Broadcasting owned by businessman and PLDT director Antonio Cojuangco, but also with the cable television (CATV) industry.

Pangilinan, chairman of the PLDT group, revealed in an earlier interview that he is optimistic DTH will be bigger than CATV in the Philippines, especially if it is priced competitively.

Cable television currently has between one to 1.5 million subscribers in the Philippines while Dream Broadcasting has around 70,000 subscribers. Insiders said lack of funding has prevented Dream from expanding, adding that this is partly due to the huge amounts still being spent by Cojuangco for TV station ABC-5.

The CATV subscriber base would have been bigger had it not been for the continuing cable TV piracy, which if totally abated could easily increase the number of cable TV subscribers by 50 to 100 percent. Aside from cable TV signal piracy, the increasing cost of foreign program acquisition has also affected the bottomline of many cable TV companies, including industry leaders Sky Cable and Home Cable which earlier successfully entered into a debt restructuring agreement with creditors.

PLDT used to own Home Cable, the country’s second largest CATV company, until it sold the assets to Lopez-owned Sky Cable in exchange for shares in Sky Cable’s parent company. As a result, PLDT now holds minority shareholdings (around 33 percent) in Central CATV which owns Sky Cable. Both the Sky Cable and Home Cable brands are now being offered by Central CATV.

PLDT’s stake in Central CATV is expected to be reduced further next year when a loan provided by ABS-CBN Broadcasting to Central CATV is converted into equity. PLDT was given the option to match a portion of the loan but Pangilinan has said that PLDT is no longer interested in shelling out additional funds for the cable TV business. As a result, the Lopez group will end up owning as much as 90 percent of the consolidated Sky-Home Cable, which currently accounts for 70 to 80 percent of the market.

Asked why PLDT let go of its cable TV company and instead opted to set up a DTH company, Pangilinan told The STAR that "in Home we are just a minority while in this new joint venture, we are the majority and therefore we have more control." PLDT will own 60 percent of the DTH joint venture while Echostar will have the remaining 40 percent.

PLDT is currently convincing the owners of GMA Network to sell initially a minority stake but with a clear path towards majority ownership. Owning a broadcasting company will provide part of the content which the planned DTH joint venture will need.