PLDT: From voice to multi-media ( First of two parts)

MANILA, Philippines - The state of the country’s telecommunications industry is most reflected by the state, and transformation, of its biggest player – the Philippine Long Distance Telephone Co. (PLDT).

In her book “Getting a Dial Tone,” the author Lorraine Carlos Salazar explained how the initial management control of PLDT lay in the hands of Americans through the General Telephone and Electronic Corp. (GTE), how in 1967, GTE decided to dispose of its 28 percent controlling interest in PLDT to the Philippine Telecommunications Investment Corp. (PTIC) whose main incorporators included Ramon Cojuangco, his wife Imelda, Alfonso Yuchengco, Leonides Virata, and Antonio Meer, and how PTIC formally took control of PLDT in 1968. It was alleged that with the intervention of then President Marcos, PLDT was sold to a company that was reportedly owned by a dummy on his behalf. (Just a few years back, the Supreme Court ruled that Cojuangco’s shares were ill-gotten and the government sold Cojuangco’s shares in PTIC to the group of Manuel V. Pangilinan.)

PLDT, says Salazar, became the dominant player in telecommunications because it was the only company authorized to operate a national network, although company officials dispute the monopoly criticism because of the existence of the government telephone system, about 60 provincial companies, four international, two domestic data carriers, and two satellite services companies.

During martial law, she added, PLDT was able to consolidate its dominant position due to state policies that favored the company and its privileged access to international funding. But despite this, teledensity remained at one telephone per 100 people for two decades until 1991.

 “It was in 1992 when then President Ramos liberalized the telecommunications industry. Executive Order 59 provided for mandatory interconnection among all telecommunication carriers while EO 109 laid down the ‘universal service policy’ that divided the country into 11 service areas. Nine new companies were allowed to operate cellular or international gateway facilities. Cellular phone companies were required to expand the national infrastructure by installing 400,000 lines in three years while international carriers were mandated to install 300,000 in five years. To secure these improvements, the Public Telecommunications Act (RA 7925) was enacted in 1995. It designed the National Telecommunications Commission to exercise regulatory power over all telecom services. Teledensity rose from 1.0 in 1991 to 9.08 in 1998. The cost of national and international calls decreased as much as 66 percent per minute.  With nine international gateway facilities, five cellular mobile phone providers, and 14 paging companies at its height, consumers were given a much wider choice of services,” Salazar continued. 

Salazar’s book likewise discussed how on Nov. 24, 1998, Hongkong-based First Pacific, announced its acquisition of a 17.3 percent stake in PLDT for P29.7 billion. “This stake represented 27.2 percent voting interest in the company. First Pacific acquired control of PLDT in a two-step process. First, it bought a 5.9 percent stake in PLDT in the open market. Second, it acquired an indirect 11.3 percent stake by purchasing 52.7 percent of PTIC. In 1998, PTIC controlled 21.5 percent of PLDT’s voting stock.” It was also during this time that First Pacific announced the merger of PLDT and Smart, where it had significant interest.

PLDT then and now

First Pacific managing director and chief executive officer Manuel V. Pangilinan, who also chairs PLDT, explained to the STAR how the value of PLDT has grown leaps and bounds since the time they took over in 1998.

 “The value of PLDT has exponentially increased since we acquired it in November 1998.  Comparing full year 1998 versus full year 2011, consolidated revenues have increased by 3X (from P47.072 billion to P144,017 billion); EBITDA by 3.6X (from P22.319 billion to P79.959 billion); core profit after tax by 25X (from P1.575 billion to P39.035 billion).  Share price has increased from P1,000 per share at the end of 1998 to P2,542 at the end of 2011 and at P2,734 at end of August 2012 (with a high of P3,175 at the end of 2007).  Market capitalization grew from P137 billion in 1998 to P591 billion as of August 2012 (and P624.4 billion as of 17th September 2012),” he said.

Pangilinan also emphasized that in the last eight years since they started paying out dividends, PLDT has declared and paid cumulative dividends of P1,237 per share versus the eight-year cumulative dividends paid out amounting to P43.98 per share before they acquired PLDT.  Total dividends paid to common shareholders for this 8-year period (2004-2011) amounted to P236.354 billion.

More important, from the consumer point of view, is that fact that efficiencies have also been realized - from a high capital expenditure to revenue ratio of 53 percent in 1998 to world telco industry levels of 20 percent in 2011, he said.

 “In 1998, PLDT was only servicing 1.7 million fixed line - voice subscribers.  As of July 2012, we had 2.1 million fixed line - voice subscribers, 915.8 thousand fixed line - broadband subscribers, 68.2 million wireless subscribers, and 2.2 million wireless - broadband subscribers, thereby servicing more Filipinos nationwide.  We have diversified PLDT from being just a traditional fixed line company to a full telecommunications provider in the entire country, expanding our business to information and communications technology (ICT) and business process outsourcing (BPO) services as well.  There is no other Group in our industry that has the strength, breadth and depth of consumer and enterprise relationships as the PLDT Group has,” Pangilinan stressed.

PLDT’s road to transformation has not been smooth however. The inroads made by social networking (Facebook, YouTube, Twitter, and the likes) has given consumers alternative and cheaper means of communication. Telecommunications companies all over the world had to transform if they are to continue being relevant.

PLDT as a media company

Pangilinan explained to The STAR how he plans to make PLDT’s vision to transform itself from a voice company to a multi-media company a reality.

Transforming PLDT into a multi-media company, he said, means that “we want our products and services to deliver multiple forms of media over multiple platforms into the future.”

 “When we took over PLDT, we already saw that telecommunications, broadcast, the internet, media, and entertainment will all converge.  That’s why we launched the tagline,  ‘Power of Convergence’ as early as then.  Now it is happening, and we are at the forefront of transforming our business to lead this coming convergence,” Pangilinan pointed out.

Now how does PLDT’s various businesses fit into this vision? Pangilinan explained it as follows:

 “If we break down each business and look at its individual strengths, no other telco conglomerate comes close to what we have built to drive convergence.  PLDT now has the capability to deliver high speed broadband to homes across the country.  We are talking of speeds of up to 100 MB to the home which is already being enjoyed by some of our subscribers.  Smart (Communications) and Sun (Cellular) dominate the wireless business reaching almost 70 million Filipinos.  The explosion of smartphones and tablets will accelerate convergence with more and more Filipinos using the Smart and Sun infrastructure to access all forms of data, media and entertainment to their personal devices.  Cignal TV (our direct-to-home satellite tv business) gives us the ability to provide robust video content nationwide at HD quality. TV5 gives us the competence not just to distribute content over the television screen but to produce multiple forms of content from news, to entertainment, to movies, to mobisodes, to sports, and everything in between.  In simple terms, whatever platform, whatever content, and whatever device comes up now or in the future, the PLDT group can and will be able to bring that to the hands of every Filipino,” he said.

According to Pangilinan, their thrust has always been to fortify PLDT’s strength as the leading telecommunications company in the Philippines and to diversify their business to expand their revenue base. 

He explained:” Globally, telecommunications and media have started to merge and blend into a seamless and converged service.  Content by various media outfits is only as powerful as valuable as the distribution channels available, and the PLDT Group has the resources to process, store, aggregate, deliver and analyze the consumption of content.  With media and content, the PLDT Group’s telecommunications offerings are strengthened and made sticky with content/media passing through our pipes and wireless access points.  We in the PLDT Group are able to deliver content seamlessly over multiple screens through different devices, and therefore, we are able to provide a total content experience which the new generation of consumers are looking for.”

(To be continued)