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I had received feedback from people who couldn’t believe such media firms could be controlled by a foreigner, since the Constitution bars foreigners from owning a single share in a media enterprise: “The ownership and management of mass media shall be limited to citizens of the Philippines.” (Article 16, Section 11)
The reality established by indisputable facts, though, is that the Indonesian Salim has practically skirted our laws and the Constitution to control a local media conglomerate, just as he has in the case of his telecom, power and water companies in the country, in which foreign ownership is limited to 40 percent.
Indeed, that we have lost our sense of nationalism and the respect for the rule of law has been clearly demonstrated by the Filipinos’ nonchalance over an Indonesian tycoon’s control of a media empire.
Salim, through intermediary firms, controls 18 percent of the Philippine Daily Inquirer, 77 percent of BusinessWorld and 51 percent of the Philippine Star.
Salim is the country’s first multi-media mogul having control not only of print media outfits but two television and radio networks, TV5 and AksyonTV, which includes more than two dozen radio stations all over the country, the nation’s largest satellite-to-home Cignal TV, and even an internet-only news site, interaksyon.com.
With his takeover of the Philippine Star in 2014, Salim has become the biggest media mogul in the country, dwarfing the Prieto-Delgado clan of the Inquirer, Emilio Yap’s heirs in the Manila Bulletin, the Lopezes of ABS-CBN, and the three families owning GMA-7.
How has Salim been able to defy the Constitutional ban on foreigners in media? Through PLDT, of which he is the biggest controlling stockholder and as such, wields the power to determine who make up the telecom giant’s management. His control of PLDT itself is now on flimsy grounds because of the 2012 Supreme Court ruling that the firm violated the 40 percent limit on foreign ownership. The Court, strangely though, has not implemented this ruling.
With Salim’s First Pacific Co.’s 25.6 percent stake in PLDT, the 20 percent shares held by two Japanese NTT subsidiaries, and 28 percent by other foreign stockholders (mostly via the stock market), foreign ownership of the country’s biggest telecom totals 74 percent – a situation which, to use the Supreme Court’s words in its decision on the issue, “makes a mockery of our Constitution.”
PLDT’s management controls the pension trust fund, called the Beneficial Trust Fund (BTF), for its 20,000 employees. When BTF started buying into the media sector, its chairman was the same person who had been serving as adviser to Salim and his top executive Manuel V. Pangilinan since they came into the country in 1984 – Albert del Rosario, President Benigno S. Aquino’s foreign secretary since 2010 until he resigned a few months ago.
By 2012, BTF had invested P14.5 billion — or 80 percent of P18.4 billion of its cash assets at the time — in a company called MediaQuest, the holding firm for Salim’s media companies.
MediaQuest is the investing company for the two broadcast enterprises. The first is ABC Development Corp., which owns VHF TV5, its flagship, and the AM Radyo5 broadcast enterprise. The second is Nation Broadcasting Corp, which operates 10 UHF “Aksyon TV” stations and 15 FM radio outfits based in the country’s major cities outside metropolitan Manila.
It is also MediaQuest which owns an investing company, Satventures, which, in turn, owns Cignal TV, now the country’s largest satellite-to-home TV company with 1 million subscribers as of September last year. MediaQuest’s subsidiary, Hastings Holdings Inc., is the holding company for the group’s newspaper investments.
Clever use of pension fund
It has been obviously clever for Salim to use the PLDT employees’ trust fund to set up his media empire, which most probably has aims other than mere profits.
By having the BTF as investor in the media empire, Salim can pretend that his print and broadcast media empire does not violate the constitutional ban on foreign investors in local media enterprises.
Yet, through his power over PLDT as the biggest single stockholder, he controls the media empire through BTF’s Board of Trustees, which has been chaired since del Rosario stepped down to become the Aquino government’s foreign secretary – by Ray Espinosa, chief legal counsel of PLDT, said to be Salim’s and Pangilinan’s top legal adviser.
MediaQuest President Espinosa has been Salim’s man running the media conglomerate. He has been the publisher of Philippine Star and BusinessWorld.
It is astonishing how the Philippine ruling elite pretends that Salim isn’t in control of one of the biggest multi-media conglomerates in the country today, in violation of our Constitution.
BTF’s resources, however, were not enough to fund the huge requirements of Salim’s media enterprises. Its investment in MediaQuest already made up 80 percent of its assets. So Salim borrowed a page from his competitor, broadcast company ABS-CBN Holdings book, which first used in 2013 the so-called Philippine Depository Receipts (PDRs) to get foreign equity injected into its media conglomerate.
PDRs have been a recent invention by the country’s tycoons to go around the constitutional ban or limit on foreign investment in restricted industries. Each PDR represents a share in a restricted company, and when bought by a foreign entity, gives the buyer the right to all the dividends due the shares of stock acquired. The foreigner, therefore, does not technically own a share to create the legal fiction of compliance with the Constitutional restrictions, but will receive the income due that share.
Why would an investor hold a PDR if such paper does not give him a share of the company it represents? The answer is obvious in the case of PLDT’s subsidiary, ePLDT. It does not need to have any control of MediaScape or its subsidiaries since its mother firm, PLDT, already controls this media entity.
P10B for Cignal TV
By September 2013, ePLDT had invested P9.6 billion in MediaQuest to fund Cignal TV, a direct-to-home satellite television service. The massive infusion of funds explains why Cignal TV in just four years became the largest Direct to Home (DTH) Pay-TV operator in the country, with a claimed 1 million subscribers by September 2014.
In March 2013 and then March 2014, ePLDT put in a further P2.45 billion in the form of MediaQuest PDRs, in order to fund its subsidiary Hastings Holdings, Salim’s holding firm for his print enterprises. Some of the P2.45 billion new funding was apparently used as payment to House Speaker Feliciano Belmonte in exchange for his family’s holdings in Philippine Star in 2014.
PLDT, however, took a different tack in funding its TV5 unit. PLDT and its subsidiary Smart Telecommunications made advertising placements with it, paid in advance, which it committed to total P868 million in 2013 and a further P758 million in 2014.
PLDT’s contract with TV5 for these advertising placements started in 2010 for a five-year term, and has been renewed for another five years, to continue up to 2021.
PLDT’s advertising-money support for TV5 has worried the broadcast media industry, as it is obviously the template for channeling not only PLDT’s funds to finance Salim’s media outfits but those of his other firms, especially Meralco.
With advertising funds limited in the country, Salim’s competitors in the media industry could be hit badly, even driven to the ground if the Indonesian tycoon decides for two years to devote the entire amount of advertising funds of PLDT, Smart and Meralco to TV5 and its newspaper, the Philippine Star.
Why has Salim gone into a crowded industry, whose profits would never be really stellar because of the Philippines’ small market, and where the country’s richest tycoons such as the Sys, Gokongweis and the Ayalas haven’t dared to go?
One important reason involves the obvious fact that media plays a dominant role in forming public opinion in the modern era. It is also a major force in politics. Political leaders in the country all woo the friendship of owners and editors of the major broadsheets and TV networks as their media outfits have the power to demonize a political leader and prettify a preferred one.
Salim, in fact, now has in place a perfect machine for controlling a population’s mind. First, a content generator made up of his news enterprises in print, broadcast and the internet; and second, a content disseminator consisting of his cellphone firms Smart Communications, the biggest in the country (with Sun as a cheaper brand) and his direct-to-home satellite television service Cignal TV and his cable news network.
Never in our history has there been such a magnate controlling companies in all forms of media and communications.
The First Pacific conglomerate has become so huge in the Philippines, even if the legality of its controlling stake in public utility firms rests on flimsy legal grounds. Public opinion sympathetic with Salim, no matter if his companies violate the spirit of the Constitution, would be crucial for the holding company’s continued presence in the country. That makes me very curious if he has been a major player in our recent presidential elections.
An Indonesian disregards our Constitution and laws by skirting its regulatory, legal loopholes with the help of the best and brightest of Filipinos. An Indonesian controls a media conglomerate in an industry where the Constitution totally bans all foreign participation.
His conglomerate consists almost entirely of telecommunications, power, water services and infrastructure companies and, therefore, is heavily dependent on government regulation, the implementation, or lack of it, of which depends on the President.
Yet the Philippine elite looks the other way and pretends there is no conglomerate in strategic public utilities and in media controlled by an Indonesian tycoon.
What kind of a country have we become?
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