ANALYSIS: Media - Philippines prepares for new media giant. PLDT's bid for GMA will see media competition spiral, says Sharon Desker Shaw

In reinventing itself as a telecommunications and media player, the

Philippine Long Distance Telephone company (PLDT) has raised

advertisers' hopes that it will also reshape the broadcast scene with

its proposed purchase of GMA Network.

PLDT's bid for the country's second largest radio and broadcast station

is now in due diligence, with the report due out in May. But even though

analysts have questioned the hefty 8.5 billion peso (USdollars 170

million) price tag GMA has asked for a two-thirds stake, media chiefs

are optimistic that PLDT will pay up.

To a large extent, PLDT needs GMA as much as GMA needs PLDT to mount a

credible challenge against publicly-listed ABS-CBN, the market

leader.

Since deregulation of the telecoms sector, PLDT's earnings have been

ravaged by competitors like Globe Telecoms. In February, the company

reported that net profits for 2000 had plummeted by 64 per cent to 1.1

billion pesos compared to 1999's 3.09 billion pesos. It blamed the drop

on higher expenses to promote its mobile phone business and a drive to

improve the group's facilities.

Which makes its push into media as part of its convergence strategy an

especially urgent task.

The company had been shopping around for a broadcaster for some

time.

Late last year it even looked at the government's financially-ailing RPN

network, before turning its attention to GMA.

If the purchase pushes ahead, GMA will represent the vital piece in

First Pacific's drive to reinvent PLDT, a strategy it embarked on after

the Hong Kong conglomerate acquired a 32 per cent stake in the company.

Executives at Mediaquest Holdings, the PLDT subsidiary behind the

proposed purchase, freely admit that GMA will plug "a big hole" in the

company's convergence strategy. According to MindShare business manager

Onel Querijero: "Ownership of a TV station is the last remaining piece

as far as the PLDT acquisition team is concerned."

Its acquisition target is a media group of seven wholly-owned

subsidiaries in film, music, post production and new media.

With GMA on-board, the PLDT media empire will encompass free-to-air

television, cable television (following its acquisition of Home Cable

Television), and internet data centres on top of its telecom service

offerings.

In the bigger picture, the purchase and overhaul of GMA will have

far-reaching competitive implications for Philippine broadcasting,

dominated for much of the past decade by ABS-CBN. The influential Lopez

family has transformed ABS-CBN into a broadcasting colossus since

regaining control of the station back in the early 1990s.

Through acquisitions and partnerships, ABS-CBN has grown to include 26

television broadcasting stations and 10 affiliate stations plus 22 owned

and affiliated radio stations. It broadcasts English language programmes

through its UHF network, Studio 23, and news 24 hours a day through the

ABS-CBN News Channel. ABS-CBN's overwhelming success can be traced to

giving Filipino audiences what they want.

"We love smut," says one media director of local programming tastes.

The broadcaster's diet of locally-produced and imported soap operas,

music specials, comedies and celebrity-laden chat and variety shows, has

proven irresistible, helping it gain an unassailable lead over its

rivals.

In contrast, GMA has taken the high road, which media directors link to

the strongly Christian beliefs of its owners. The station is proud of

programming concepts like its "worry-free kid TV" to assure parents of

suitable kiddy fare. GMA's news and current affairs programmes have

pulled in awards over the years, including the George Foster Peabody

Award, but not the audience numbers to edge ABS-CBN off the charts, say

media chiefs.

Latest available figures from ACNielsen show ABS-CBN programmes

dominating both day and evening segments and news and current affairs

programmes.

This programming mix, plus an extensive nationwide network of local and

affiliate stations have given ABS-CBN a reach of more than 95 per cent

of the country's television-owning households. Its chokehold on the

sprawling Metro Manila market is 99 per cent, according to media

directors. This compares with GMA's nation-wide reach of 78 per

cent.

Media chiefs complain that this clout has translated into an almost

monopolistic hold on advertisers, who have accused the station of being

inflexible, especially in introducing unpopular measures like last

year's pre-season buy.

Clearly, there are expectations that GMA will improve and provide an

effective alternative to ABS-CBN.

The first order of the day is for GMA to energise programming and expand

distribution beyond its strongholds of Metro Manila, Cebu and Davao, say

media chiefs. Funding had previously been an issue, but apparently this

is not the case today. The network has reportedly secured two billion

pesos worth of loans from 13 banks to finance the expansion of its

nation-wide television coverage.

At the same time, market sources say PLDT is itself putting together a

war chest of one billion pesos for equipment and programming

improvements.

According to Campaigns & Grey's vice-president for media, Rina

Bartolome: "GMA is a long way behind ABS-CBN. The additional funds will

greatly improve its programming and production."

Whether it can do this and more depends greatly on the route PLDT has

mapped for GMA and its part in bringing the company's convergence

strategy to life.