Content is king

At the rate all the fixed line companies are pumping money to develop broadband, it’s just a matter of time before they can deliver ultra high speeds and bandwidth to the consumer. In Japan for example, delivering 50 megabits of bandwidth to a computer is standard. At this level of speed and capacity, telecom companies can provide consumers with hundreds of video channels in high resolution. Imagine your telephone line transforming into your cable provider but with better quality and interactivity.

When this happens, and local telcos say it’s going to happen sooner than later, then content becomes king. Using the telephone line for voice calls or internet browsing will take a backseat to the telephone line providing interactive video.

Surveying all the telcos today, I think BayanTel will have the edge when broadband is used for this purpose. Being the sister company of ABS-CBN, BayanTel will have access to local and exclusive content that its competitors won’t have access to.

In fact, BayanTel has started to leverage on this strength already. If you want to watch "behind the scenes" exclusive video of the ABS-CBN hit show, "Pinoy Big Brother," you can only do so if you subscribe to BayanTel’s Sky DSL service. Telecom giants PLDT, Globelines or even Smart Wi-Fi have no answer to this offering. My sources inside ABS-CBN say more tie-ups with BayanTel are forthcoming.

Content may not play a crucial part in the growth of broadband yet, since the bandwidth being offered by the telcos still cannot sustain high resolutions or multiple channels. But in time, content will be the driver of subscriber growth.

PLDT, Smart and Globe still have the time to figure out their counter attack. But they have to move quickly. If they can’t tie-up with a network like BayanTel has, then they need to consolidate the expertise and competence to produce their own content, from movies, to music, to short features, TV shows, concerts, plays, musicals, etc.

I hear Globe is making moves to also tie up with Channel 2. Manny Pangilinan of PLDT has always had his sights set on GMA, but PLDT’s plan to acquire Tonyboy’s Dream may result in a tie up with Channel 5 as well.

The next transformation of the telco should be towards content development and acquisition. I must say, convergence has begun.

Conspiracy at Nicphil

Corporate boardroom battles are oftentimes dirtier than political infightings.

The Nicphil issue is a case in point. Formerly Netherlands Insurance Company (Philippines), the company was purchased by Emmanuel Ticzon in 1994 and renamed NICPhil Insurance in 1998.

Based on SEC and audited financial statements from 1994 to 2004, Nicphil was a model for growth in the non-life insurance industry with Ticzon at the helm as president throughout the period.

The industry’s comparative statistics for 2003 ranks Nicphil among the top 35 direct insurers in the country. Although it was capitalized with only P65 million with a growing market share, Nicphil’s performance is a feat considering being among giants such as Philam, Malayan, and Pioneer whose net worth have breached the billion peso mark.

Nicphil is accredited by the Supreme Court and the Bureau of Customs to issue surety bonds, and the Insurance Commission for judicial bonds.

In Sept. 2004, Nicphil chairman Jesus Jacinto Jr. asked Ticzon to undertake a study on the growth of the industry for the possibility of increasing the company’s capitalization from P65 million to P100 million for 2005 to be at least be at par with the top players. A study showed that Nicphil had the lowest level of stockholders equity among the top 35 companies.

Of the current board, only Jacinto and Ticzon had the capacity to infuse additional capital. Roberto J.L. Castillo, Vicente Mills, Atty. Noel Laman, and Cesar Virtusio either did not have the capacity or were mere nominees of other shareholders or of Ticzon.

By late 2004, given Nicphils’s 10-year established track and growth record combined with the feasibility of the industry, Ticzon was tasked by Jacinto to contact investment bankers to raise the additional P35 million. But the banks would only underwrite investments above P200 million which Nicphil did not need at that time.

Infusion of the P35 milion would mean dilution of most of the current board members‚ shares, thereby losing their seats.

Ticzon was suspended as company president January this year, citing that the company is in a bind with P12 million in arrears. His suspension was lifted on April 11, after which he was unceremoniously terminated a week later during a special board meeting.

The board’s suspension and ouster of Ticzon resulted in poor collection of premiums and renewal of insurers leading to a severe liquidity crisis.

In a move highly supported by agents, brokers, employees, and policyholders, Ticzon offered to buy out the shares at a price to be determined by a third party. Ticzon offered to buy at P144 per share which was slightly higher than the estimated book value as of Dec. 31, 2004.

The deal did not push through because the shareholders demanded P175 per share.

Unable to steer out of the tailspin, the board requested the Insurance Commission (IC) for a 90-day partial cessation of operations in July. This caused further irreversible damage to the company with massive requests for cancellation of paid policies from agents and larged-sized intermediary brokers, demand of cash collateral returns from agents, and demands for immediate release of contingent profit commissions.

Since Ticzon’s ouster, the board had initiated highly suspicious corporate maneuvers which further sunk the company in the quagmire.

The board reportedly approved a P200,000 stipend for the IC-appointed conservator when the prevailing industry rates ranged from P25,000 to P50,000. The board also approved a P50,000 salary of her assistant.

According to agents and brokers who recently trooped to IC Commissioner Ben Santos‚ office recently, the conservator has not allowed payment of agent’s commissions, refund of premiums, and payment of claims. Employees have complained about delays in payment of wages although the conservator and her assistant are released on time.

Phone lines have been cut, SSS premiums and withholding taxes remain unremitted. Nicphil has also been paying P5,000 for every day of delay as penalty to the Insurance Commission for its non-submission of its annual statement last April 30.

Ticzon, as the single largest Nicphil shareholder with 37-percent stake in the company, has requested but is still waiting to officially receive a copy of the conservator’s report and the 2004 audited financial statements.

Recently, a special shareholders meeting was constituted where Nicphil assistant corporate secretary Atty. Miguel Robillo of the Castillo Laman Law Office, a non-shareholder, reportedly moved for the dissolution of the company. Probably unknown to him and to all those present, there should be at least 67 percent of the total shareholders concurring to dissolve the company. With Ticzon holding on to 37-percent shares, well, you do the math.

Aside from Ticzon’s actions which threatened to dilute the holdings of the other shareholders, insiders say that the motive for his ouster may also be personal.

Ticzon was once partner with Laman and Westwind Holdings of Dean Dayao, Carmelo and Estelle Ortiz in a venture called EAT Holdings, the local franchisee of the UK-based Pizza Milano.

With the franchise, the group formed Pizza Express, a short-lived restaurant in Greenbelt 1, with Laman placing his shares under his daughter, Christine, who by the way is also partner in the Big Chill franchise. Ticzon was introduced to the Westwind group by Laman. Westwind owns Pretiolas Philippines which manages the Auntie Ann’s franchise.

The relationship soured when Ticzon learned that employees and supplies were being shared and diverted to Auntie Ann’s. Throughout its existence, Ticzon never interfered with the operations and was also never furnished any audited financial statements.

Since Laman only owned two-percent direct shares in Nicphil, he was nominated by Ticzon to reach the required 14.5 percent for a board seat. The Pizza Milano incident allegedly gave Ticzon compelling grounds to withdraw his Nicphil nomination from Laman in the 2005 annual stockholders meeting. Laman was reportedly part of the group who instigated and successfully ousted Ticzon as president.

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