As a result of this, STAR sources disclosed that PLDT no longer renewed its agreement with US direct-to-home (DTH) satellite TVgiant Echostar Communications to enter into an $85-million DTH joint venture in the Philippines. The agreement lapsed last October and the agreement will not longer be pursued because acquiring PMMSI was key to the success of the deal.
PLDT chairman Manuel Pangilinan said in an interview that if Cojuangco continues to insist on a $56- million price tag for PMMSI, then he must be joking because the satellite TV company is not worth that much. PLDT’s offer price was $22 million.
Even at $22 million, industry experts believe that PMMSI is still overpriced because PLDT is in reality just acquiring the former’s license to engage in DTH satellite TV. As earlier planned, existing facilities and even the set-top boxes will be replaced and will be supplied by US DTH giant Echostar Communications.
Due to the collapse of talks with Dream, PLDT is now looking at the possibility of offering IPTV. "We now have to reassess what our approach will be regarding video and determine how best to deliver video programming," Pangilinan said, as PLDT moves towards triple play, or offering voice, data, and video. "We must make an investment in 2006," he added.
PLDT earlier entered into an agreement with Echostar to offer DTH service in the Philippines. PLDT then engaged in talks with Cojuangco for the possibility of acquiring his existing DTH satellite TV business. This way, PLDT not only acquires the DTH license it needs but also removes competition from the local market, observers note.
"Gone were the days when we would overpay for acquisitions," Pangilinan said. It will be recalled that First Pacific acquired PLDT and Pilipino Telephone Inc. (Piltel) from the Cojuangco family at a huge premium from its market value, considering that it was a "hostile takeover" and First Pacific desperately wanted to acquire PLDT which at that time was a virtual monopoly in the landline business.
Pangilinan noted that even for Pakistan Telecommunication Co. and PT Extelcomindo Pratama, a leading telco operator in Indonesia, talks bogged down for a possible acquisition by First Pacific because the asking price was "too much."
The PLDT top executive believes that Cojuangco has virtually shut the door on PLDT when it gave a $56 million price tag for PMMSI. "They basically gave us a take it or leave it offer," he said.
While Pangilinan raised the possibility of engaging in talks with other local holders of DTH licenses, company insiders said there is no point going into DTH if there will be two players in the market - PLDT and Dream.
PLDT’s planned entry into the DTH arena was supposed to follow its withdrawal from the local cable television business. PLDT earlier sold the assets of Home Cable to Lopez-owned Central CATV which owns Sky Cable. In exchange, PLDT received shares in Central CATV and now owns 33.33 percent of the latter. The Lopez group controls the remainder.
Earlier, Pangilinan said he decided to focus on the DTH business and move away from cable since he will have more control over the former compared to the latter.
He intimated that he wants DTH to be bigger than cable TV (CATV) in the Philippines, and this he hopes to achieve by bringing down the price of DTH subscription down to the level of CATV.
Dream Broadcasting is currently positioned for the high-end market because of its relatively high price compared to CATV. Dream reportedly has around 70,000 subscribers compared to the local cable TV industry which has a nationwide subscriber base of around 1.5 million.
PLDT is currently investing heavily on its next generation network or NGN which will allow the company to engage in triple play more efficiently and cost effectively.
Pangilinan noted that before, PLDT needed to invest $1000 per fixed line. "Now, the investment required is down to $150 to $200 per fixed line. Since we can deliver more services using our fixed line such as traditional voice, DSL, video, and data, we can further justify our investments," he said.
PLDT’s capital expenditure budget has increased, from P9 billion this year to P8 to P20 billion next year. The bigger bulk of next year’s investments will be on the NGN, wireless broadband, and 3G. "There will also be some line rollouts, and more fiber and copper, as well as expenditures in our international cable facility," PLDT’s top executive said.