San Miguel, Ongpin group merge stakes in Meralco

By Miguel R. Camus, Business Mirror

Posted at 04/13/2011 12:50 AM | Updated as of 04/13/2011 2:17 PM

 

MANILA, Philippines - San Miguel Corp. (SMC) has started to consolidate its minority interest in Manila Electric Co. (Meralco) with another stake held by the group of former trade minister Roberto Ongpin.
At an investor’s briefing earlier this week, SMC said it now controls 33.2% of Meralco.

This is higher than the previously disclosed 27% interest that it acquired from the Government Service Insurance System (GSIS) in 2008, marking SMC’s entry into the utility.

Asked to clarify, SMC president Ramon S. Ang said the increase was the result of a stake consolidation. Ongpin, who is also behind SMC’s controlling shareholder, Top Frontier Investments Holdings Inc., is considered a business ally of Ang.

“When [ the consolidation is done ], our stake will rise to 37%,” Ang told reporters.

It was previously reported that Ongpin’s group controlled over 7% of Meralco, referring to shares acquired from government financial institutions Social Security System and Development Bank of the Philippines back in 2009.

At that time, the group was reportedly interested in another 3.8% Meralco stake held by Land Bank of the Philippines, which could not be sold due to an ownership dispute.

Ang declined to comment on whether SMC is interested in acquiring more shares of Meralco, which now has a market capitalization of P278.21 billion, or almost triple its value since SMC first entered.

SMC is not the only company consolidating its Meralco shares.

Perceived corporate rival First Pacific Co. Ltd, led by businessman Manuel V. Pangilinan, is also studying the transfer of a 6.1% Meralco stake held by its telecommunications unit to holding company Beacon Electric Asset Holdings Inc.

Beacon Electric, a 50-50 joint venture between the group’s infrastructure arm Metro Pacific Investments Corp. (MPIC) and PLDT Communications and Energy Ventures Inc. (PCEV), is already the utility’s single largest shareholder with a 34.8% interest following consolidation moves last year.

Once completed, Beacon Electric will own about 41% of the country’s biggest power distributor.

The potential ownership consolidation comes ahead of Meralco’s plan to venture into power generation, which is expected to cost up to $2.3 billion, involving the creation of 1,500 megawatts of capacity until 2016.
Meralco said earlier its net income rose 61% to P9.69 billion in 2010 as energy sales rose 10% on the back of higher consumption.

SMC and Top Frontier announced earlier this week a plan to raise $850 million selling common shares and convertible bonds. SMC will use proceeds to fund new investments while Top Frontier intends to pay off shareholder advances.

SMC declined for a second day, losing 4.38% to P153 each on Tuesday.

Villar group readies retail store network expansion

Offers franchise to overseas Filipino workers
By: Doris C. Dumlao
Philippine Daily Inquirer 10:13 pm | Sunday, May 22nd, 2011 

MANILA, Philippines—The Villar group plans an aggressive expansion into the retailing business by setting up a 150-branch network of convenience stores within the next two years, partly by franchising the brand to enterprising overseas Filipino workers.

Finds Convenience Stores Inc. (FCS) was initially conceptualized to complement the villages and subdivisions developed by Vista Land nationwide and to serve the daily needs of its residents. Since its establishment in 2008, FCS now has 25 stores located within Vista Land’s thriving communities.

In a press statement, FCS chief operating officer Wilfredo Camarillo—an industry veteran with a solid track record in convenience store set-up, operations and management—said the expansion program would boost sales to the P1-billion mark by next year when it would have opened 100 stores.

“The next 50 stores will be opened to franchisees. In fact, the retail group is already inking partnership agreements,” Camarillo said.

FCS intends to open the next 50 stores by year’s end and then launch 100 more stores in the next two years, he added.

The Villar-owned retailing network seeks to make quality products and value-added services more accessible to consumers by establishing stores that are conveniently located in every Filipino community. The chain has adopted global standards with the use of a supply chain management system that allows it to restock rapidly to ensure that goods on its shelves are fresh and of the best quality. FCS has also put up an al fresco dining concept, which offers all-day breakfast meals and ready-to-go meals.

“Finds C-Store is set up as a community-based outlet, primarily servicing the needs of homeowners. More than anyone else, Finds is positioned to assist enterprising OFWs and their families back home set up a business they can fall back on,” Camarillo said.

“We want to help OFWs bring home the fruits of their hard labor overseas and utilize it for something tangible and productive for them. The affordable franchising fees, as well as store models prove its flexibility as we put to fore the possible needs of our future franchisees,” he added.

In the franchise setup, the franchisee and the company become partners and share their investments. A flexible profit (and loss) sharing scheme is also available. FCS’s potential franchisees can choose from three store models: Community (100 square meters), Express (50 sqm) and Express Jr. (35 sqm).

Potential franchisees are allowed to choose their store location and determine the operating hours, for as long as it meets its required minimum operating hours. This allows the franchisee to make the most out of store operations during the peak hours and save on cost during slack hours.

Govt to revoke SCTEx deal

Sunday, 22 May 2011 22:40 Lenie Lectura / Reporter 

HONG KONG—Over “money points,” the government has informed the Metro Pacific group that it was revoking its contract for a 25-year operations and management concession to operate the 94-kilometer Subic-Clark-Tarlac Expressway (SCTEx).

Metro Pacific Investments Corp. (MPIC) chairman Manuel V. Pangilinan, revealing this, said while his group does not want to sue the government, obviously for breach of contract, it also could not walk away from enforcing that contract.

According to Pangilinan, just before the entire management of the Bases Conversion and Development Authority retired to give way to the new management, the state firm wrote MPIC, saying, “We would like to terminate the contract because we would like you to concede on the following points.” The reasons BCDA cited for wanting to revoke the contract concerned “money points,” Pangilinan said but refused to elaborate.

“We can understand if these are new points but these are points that we already discussed, negotiated and agreed on. We can’t guess their motivation. If they are favoring another, then why don’t they tell us? If we are  not welcome, then, fine, just tell us,” said Pangilinan.

As the SCTEx concessionaire, the Metro North Tollways Corp. (MNTC) is responsible for, among other things, the overall management and supervision of the tollway; management of the toll operations center, toll plazas, and all other related ancillary facilities and equipment.

MNTC is a subsidiary of listed firm Metro Pacific Tollways Corp., which, in turn, is the infrastructure arm of MPIC.

“You don’t want to sue the government because the contract is a perfected contract, one that has been approved by the TRB [Toll Regulatory Board] and by the Office of Government Counsel, and we have received certificates saying that the negotiations between MNTC and the BCDA have concluded already,” Pangilinan said.

“On the other hand, if we decide to walk away from the contract, we will be asked why and we would then have to tell the truth that these guys are reneging on the contract. I don’t think the country will look good; nor will its Public-Private Partnership Program. Contracts are sacred, especially if the fulcrum of your economic program is the PPP. We don’t want to sue the government but we also have to honor the perfected contracts. That’s our dilemma,” he added.

For now, Pangilinan’s group is in discussions with the new BCDA management rather than bringing the matter directly to Malacañang, “We are leaving it up to the BCDA; it is the appropriate agency. We have to give a chance to the new management to understand what the old management did,” Pangilinan said.

Under the agreement, MNTC will operate and manage about 200 km of tollway that starts from the 89-km North Luzon Expressway (Nlex) in Balintawak, Quezon City, to Santa Ines in Tarlac; and the 94-km SCTEx from Subic Bay Freeport to Tarlac Techno Park in Hacienda Luisita. MNTC built and currently operates the Nlex to which the SCTEx is now seamlessly connected.

Built at the cost of P34.106 billion, the SCTEx was funded by the Japan International Cooperation Agency (Jica) and the government, which contributed a subsidy amounting to P3.949 billion.

The contract states that the BCDA shall assign to MNTC its toll operations rights under the Toll Operation Agreement, which the BCDA signed with the TRB on June 13, 2007, including the right to collect toll revenues.

In return the MNTC shall pay the BCDA a semiannual lease/concession fee amounting to the peso equivalent of the yen-denominated debt-service requirement for the years 2010 to 2016.

From 2017 to 2043, MNTC will pay, as lease concession fee, 20 percent of the gross revenues from the SCTEx, with the provision that if the lease concession fee falls short of the Jica debt-service requirement, MNTC will advance the shortfall to the BCDA without interest and recover the amount from the BCDA’s future 20-percent share in gross revenues if it exceeds the debt-service requirement.

Based on MNTC’s estimates, it will pay a total of P64.4 billion in lease concession fees for the concession period.

Traditional telco revenue sources declining

PLDT net profit down 6% in Q1; Globe’s up 1%

By Paolo Montecillo
Philippine Daily Inquirer
First Posted 22:25:00 05/10/2011

MANILA, Philippines—Industry leader Philippine Long Distance Telephone Co. expects 2011 profits to decline as earnings from its new businesses fail to offset the steady drop in its traditional revenue streams.

Competition on all fronts—from fellow telecom players and “over the top” Internet services such as Skype.com—forced the company to keep prices low, leading to thinner margins.

“While management has done a good job of controlling expenses in order to protect margins, there is only so much that can be done without affecting operations,” PLDT chairman Manuel V. Pangilinan said in a statement.

The company reported Tuesday that its average revenue per user, or ARPU, had dropped 13 percent year on year, leading to net profit slipping 6 percent to P10.7 billion in the first quarter.

This marked the second consecutive quarter of lower profits for PLDT, the country’s biggest listed firm. The company said this was in line with the company’s full-year guidance of a slight dip in net income.

In a separate statement, Globe Telecom Inc. said its net profit rose 1 percent in the January-to-March period—the first increase in quarterly profit since the start of last year.

Net income after tax of P3 billion in the first quarter was also a 30-percent improvement from the fourth quarter of 2010. Excluding foreign exchange and mark-to-market gains and losses as well as nonrecurring items, core net income was 6 percent higher than last year and 52 percent better than the previous quarter.

“Our earlier programs are already translating to improvements in our financial results,” Globe president and CEO Ernest Cu said. “This will provide us the momentum to take on greater challenges ahead, with the market consolidating and Globe now up against an even larger competitor,” he said.

Net of foreign exchange and derivative gains or losses, PLDT’s core net income improved 1 percent to P10.6 billion, although officials said this was mainly due to lower expenses during the period.

Last year, the company implemented job cuts that removed about 800 redundant posts by offering employees early-retirement packages. This helped keep growth in expenses in check.

But the company reported a 4-percent decline in consolidated service revenues, led by PLDT unit Smart Communication’s text messaging business, which was down 2 percent year on year. Mobile voice call revenues also fell 5 percent.

The company said its long-distance voice call business posted a 10-percent drop in the three-month period due to the depreciation of the dollar as well as competition from Skype and other similar service providers that allowed people to make calls over the Internet for free.

Philippine port handler sees gold amid turmoil

By Mynardo Macaraig, Agence France-Presse

Posted at 05/08/2011 6:10 PM | Updated as of 05/08/2011 6:10 PM

 

MANILA, Philippines - Violent protests in the Middle East may have shaken the world economy but Philippine port operator ICTSI sees opportunity amid the turmoil.

ICTSI, run by billionaire Enrique Razon, is one of only a few Philippine companies to have become a successful global player and it has done so largely by boldly going where others may feel trepidation.

"What is happening in the Middle East, as far as it affects the global economy, has an impact... but in the long term I think it is a good thing," Razon said at a recent stockholders' meeting, outlining his company's strategy.

"These countries who are toppling their dictators will need to restructure, go into privatisation, open up their economies.

"There will be a lot of opportunities there... and that is our thrust."

Aside from dominating in the Philippines, ICTSI, or International Container Terminal Services Inc., manages ports in countries as diverse as Syria, Georgia, Mexico, Colombia, Brazil, Croatia, Japan, Brunei and Madagascar.

It also has operations in the United States and China, while it has just signed a contract to manage a port in Tamil Nadu, India, which will give it a presence in 17 countries.

Its global expansion strategy helped give ICTSI a net profit of $98.3 million in 2010, up 79 percent from 2009, with all its overseas subsidiaries showing growth, according to Razon.

Chief researcher for stockbrokerage CitisecOnline April Lee-Tan said ICTSI had found a winning strategy in targeting relatively small and developing markets, after making its first foray overseas in 1995 in Argentina.

"The beauty of being in a smaller country is the huge potential for growth because it is not a mature market yet so they earn higher yields," she told AFP, adding that ICTSI had a reputation for getting things done in tough places.

"They try to diversify by acquiring a lot of ports. They don't just go to one country, they go to several and they have shown they have the track record of successfully executing their plans."

ICTSI sometimes takes over and manages an existing port but in other cases actually builds and develops the facility as part of its concession.

Company officials acknowledge that ICTSI is not in the same league as the global port handling giants, such as Hong Kong's Hutchison Port Holdings and Singapore's PSA International.

But Lee-Tan pointed out that no other Philippine company in any sector had set up operations in such a wide variety of countries as ICTSI.

"No one has gone to places like Madagascar. They've gone to places no one else would think of," she said.

ICTSI senior vice-president Ed Abesamis said the company's origins in the Philippines, an extremely poor and corrupt country that has long endured political chaos, had prepared it to operate amid uncertainty overseas.

"Coming from a developing country, we have a healthier appreciation at how to look at temporary political noise and go through it and say, this will pass... and business will be possible in the long term," he said.

The company won its first major tender to manage the Philippines' main container terminal in 1987 -- just a year after an uprising toppled longtime dictator Ferdinand Marcos, Abesamis recalled.

At the time, Marcos's successor, Corazon Aquino, was fighting off violent military coup plotters, some of whom besieged her in the presidential palace and waged gun battles with loyal troops in the streets of Manila.

But the coup plots did not affect the port project and ICTSI management learnt valuable lessons about doing business amid political chaos, according to Abesamis.

"In a sense, our officers and our board are not easily shaken by a disturbing political event. It might be looked at as a passing thing in which we could still do long-term business," he said.

So far, ICTSI ports have not been seriously disrupted by various political crises around the world.

Its port in Georgia closed down for a week during the brief war between Georgia and Russia in 2008 but quickly resumed operations, according to Abesamis.

And its port in Syria has not been affected by the current deadly unrest there, he added.

Speaking at the shareholders' meeting, Razon said ICTSI was always on the lookout for another opportunity overseas, and could spend more than the $456 million earmarked for capital expenditures this year if an opportunity arose.

"Definitely, if something interesting comes up, we will make a move. We look at many things," he said.

While Razon would not give specifics, Abesamis said ICTSI was looking at establishing a presence in Africa.
"That continent is waking up," he said.