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

<p>In reinventing itself as a telecommunications and media player, the </p><p>Philippine Long Distance Telephone company (PLDT) has raised </p><p>advertisers' hopes that it will also reshape the broadcast scene with </p><p>its proposed purchase of GMA Network. </p><p><BR><BR> </p><p>PLDT's bid for the country's second largest radio and broadcast station </p><p>is now in due diligence, with the report due out in May. But even though </p><p>analysts have questioned the hefty 8.5 billion peso (USdollars 170 </p><p>million) price tag GMA has asked for a two-thirds stake, media chiefs </p><p>are optimistic that PLDT will pay up. </p><p><BR><BR> </p><p>To a large extent, PLDT needs GMA as much as GMA needs PLDT to mount a </p><p>credible challenge against publicly-listed ABS-CBN, the market </p><p>leader. </p><p><BR><BR> </p><p>Since deregulation of the telecoms sector, PLDT's earnings have been </p><p>ravaged by competitors like Globe Telecoms. In February, the company </p><p>reported that net profits for 2000 had plummeted by 64 per cent to 1.1 </p><p>billion pesos compared to 1999's 3.09 billion pesos. It blamed the drop </p><p>on higher expenses to promote its mobile phone business and a drive to </p><p>improve the group's facilities. </p><p><BR><BR> </p><p>Which makes its push into media as part of its convergence strategy an </p><p>especially urgent task. </p><p><BR><BR> </p><p>The company had been shopping around for a broadcaster for some </p><p>time. </p><p><BR><BR> </p><p>Late last year it even looked at the government's financially-ailing RPN </p><p>network, before turning its attention to GMA. </p><p><BR><BR> </p><p>If the purchase pushes ahead, GMA will represent the vital piece in </p><p>First Pacific's drive to reinvent PLDT, a strategy it embarked on after </p><p>the Hong Kong conglomerate acquired a 32 per cent stake in the company. </p><p>Executives at Mediaquest Holdings, the PLDT subsidiary behind the </p><p>proposed purchase, freely admit that GMA will plug "a big hole" in the </p><p>company's convergence strategy. According to MindShare business manager </p><p>Onel Querijero: "Ownership of a TV station is the last remaining piece </p><p>as far as the PLDT acquisition team is concerned." </p><p><BR><BR> </p><p>Its acquisition target is a media group of seven wholly-owned </p><p>subsidiaries in film, music, post production and new media. </p><p><BR><BR> </p><p>With GMA on-board, the PLDT media empire will encompass free-to-air </p><p>television, cable television (following its acquisition of Home Cable </p><p>Television), and internet data centres on top of its telecom service </p><p>offerings. </p><p><BR><BR> </p><p>In the bigger picture, the purchase and overhaul of GMA will have </p><p>far-reaching competitive implications for Philippine broadcasting, </p><p>dominated for much of the past decade by ABS-CBN. The influential Lopez </p><p>family has transformed ABS-CBN into a broadcasting colossus since </p><p>regaining control of the station back in the early 1990s. </p><p><BR><BR> </p><p>Through acquisitions and partnerships, ABS-CBN has grown to include 26 </p><p>television broadcasting stations and 10 affiliate stations plus 22 owned </p><p>and affiliated radio stations. It broadcasts English language programmes </p><p>through its UHF network, Studio 23, and news 24 hours a day through the </p><p>ABS-CBN News Channel. ABS-CBN's overwhelming success can be traced to </p><p>giving Filipino audiences what they want. </p><p><BR><BR> </p><p>"We love smut," says one media director of local programming tastes. </p><p><BR><BR> </p><p>The broadcaster's diet of locally-produced and imported soap operas, </p><p>music specials, comedies and celebrity-laden chat and variety shows, has </p><p>proven irresistible, helping it gain an unassailable lead over its </p><p>rivals. </p><p><BR><BR> </p><p>In contrast, GMA has taken the high road, which media directors link to </p><p>the strongly Christian beliefs of its owners. The station is proud of </p><p>programming concepts like its "worry-free kid TV" to assure parents of </p><p>suitable kiddy fare. GMA's news and current affairs programmes have </p><p>pulled in awards over the years, including the George Foster Peabody </p><p>Award, but not the audience numbers to edge ABS-CBN off the charts, say </p><p>media chiefs. </p><p><BR><BR> </p><p>Latest available figures from ACNielsen show ABS-CBN programmes </p><p>dominating both day and evening segments and news and current affairs </p><p>programmes. </p><p><BR><BR> </p><p>This programming mix, plus an extensive nationwide network of local and </p><p>affiliate stations have given ABS-CBN a reach of more than 95 per cent </p><p>of the country's television-owning households. Its chokehold on the </p><p>sprawling Metro Manila market is 99 per cent, according to media </p><p>directors. This compares with GMA's nation-wide reach of 78 per </p><p>cent. </p><p><BR><BR> </p><p>Media chiefs complain that this clout has translated into an almost </p><p>monopolistic hold on advertisers, who have accused the station of being </p><p>inflexible, especially in introducing unpopular measures like last </p><p>year's pre-season buy. </p><p><BR><BR> </p><p>Clearly, there are expectations that GMA will improve and provide an </p><p>effective alternative to ABS-CBN. </p><p><BR><BR> </p><p>The first order of the day is for GMA to energise programming and expand </p><p>distribution beyond its strongholds of Metro Manila, Cebu and Davao, say </p><p>media chiefs. Funding had previously been an issue, but apparently this </p><p>is not the case today. The network has reportedly secured two billion </p><p>pesos worth of loans from 13 banks to finance the expansion of its </p><p>nation-wide television coverage. </p><p><BR><BR> </p><p>At the same time, market sources say PLDT is itself putting together a </p><p>war chest of one billion pesos for equipment and programming </p><p>improvements. </p><p><BR><BR> </p><p>According to Campaigns & Grey's vice-president for media, Rina </p><p>Bartolome: "GMA is a long way behind ABS-CBN. The additional funds will </p><p>greatly improve its programming and production." </p><p><BR><BR> </p><p>Whether it can do this and more depends greatly on the route PLDT has </p><p>mapped for GMA and its part in bringing the company's convergence </p><p>strategy to life. </p><p><BR><BR> </p>