Lopez, ‘Tonyboy’ merger talks on

The Lopez Group and businessman Antonio "Tonyboy" Cojuangco are in the midst of negotiations to fold in the latter’s satellite television business under the umbrella of Central CATV which operates Sky Cable, the country’s largest cable TV operation.

Highly placed sources told The STAR that as planned, Central CATV will acquire Philippine Multi-Media System Inc. (PMMSI) under a share-swap arrangement whereby Cojuangco will receive shares in Central CATV. How much PMMSI will be valued under the arrangement has not been disclosed, but Cojuangco earlier placed a price tag of $56 million for the company when the Philippine Long Distance Telephone Co. (PLDT) group offered to acquire it.

The negotiations with PLDT, however, collapsed after PLDT chairman Manuel V. Pangilinan said he was only willing to pay $22 million for PMMSI since he was only in effect acquiring the company’s franchise to operate a satellite tv business. At that time, PLDT had a joint venture agreement with US direct-to-home satellite tv giant Echostar Communications to offer DTH in the Philippines, but the venture did not have the necessary franchise. The joint venture agreement was no longer renewed.

In case the merger pushes through, Central CATV will be managing Sky Cable, Home Cable, and Dream Broadcasting. The assets of Home Cable were earlier acquired by Central CATV from the PLDT group in exchange for the latter acquiring shares in Central CATV. The Home Cable brand, however, is no longer used and the product now goes under the name of Sky Cable silver, and the original Sky Cable offering under Sky Cable gold.

After the merger, Central CATV will be owned by the Lopez group, the PLDT group, and by Cojuangco‚s group.

Sources close to the talks revealed that Cojuangco’s refusal to sell PMMSI to PLDT was not really because of disagreement on the pricing but for "personal reasons." But Pangilinan insists that it was he who backed out of the proposed acquisition saying "gone were the days when they would overpay for an acquisition."

The merger of Sky Cable and Dream Broadcasting would be beneficial for both parties as Sky Cable would be able to expand to areas which can only be reached via satellite while Dream will have access to the resources of the Lopez group and the goodwill of the Sky Cable brand.

"There will be no cannibalization of the market since Sky addresses a different market than that of Dream," a source pointed out.

The Sky Cable group has an 80 percent market share in Metro Manila which has around 200,000 subscribers. There are around 70,000 illegal connections and the group hopes to put a stop to signal piracy by installing digital addressable set-top boxes wherein the channels are encrypted into the box. Without the box, an illegal connection cannot pick up a signal.

A partnership between Sky Cable and Dream Broadcasting is also touted as a "broadcasting dream" as the Lopez group owns ABS-CBN Broadcasting which operates free tv channels 2 and 23 while Cojuangco owns Associated Broadcasting Corp.(ABC-5).

The merger is also expected to put to an end a legal battle between Channel 2 and Dream Broadcasting involving the latter’s airing of the former’s programs without paying for the right to do so, allegedly an infringement of intellectual property rights.

Due to the collapse of talks with Dream, PLDT is now looking at the possibility of offering IPTV or television via Internet Protocol. "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.

PLDT has expressed interest in acquiring RPN-9, one of the assets which the government plans to put up for sale during the second quarter of 2006. Pangilinan is reportedly tapping the services of Freddie Garcia, former ABS-CBN president, to run RPN-9 if PLDT succeeds in acquiring it.