TV5 offers early retirement incentive to curb losses

MANILA, Philippines–TV5 network operator Associated Broadcasting Corp. has offered a generous early retirement package to employees as the Manuel V. Pangilinan (MVP)-led firm affirmed commitment to curb financial hemorrhage and challenge a long-entrenched Philippine broadcasting duopoly.

“TV5 management is offering its employees opting for early retirement a two- month salary per year of service, among other benefits, included in its special limited voluntary retirement package,” the network’s corporate communications team said Monday in a reply to a query from Inquirer.

“All organizations go through a cycle of growth and adjustments and TV5 is similarly going through a transition phase,” TV5 said in its official reply.

The usual separation package in case of redundancy under the country’s Labor Code is only one month per year of service. Doubling the incentive is seen as a way for TV5 to reduce overhead cost by giving its staff an attractive early retirement option. TV5 has a current headcount of 4,000 employees and talents.

TV5, a challenger in the industry dominated by ABS-CBN and GMA-7, also refuted rumors that filing for bankruptcy was an option for MVP.

“On the contrary, MVP reiterated his commitment to TV5 and assured management and employees that he is in it for the long haul. Considering that TV5’s major competitors have been around for decades now, TV5’s growth in these past years has been remarkable and this is due to the work and dedication that management, talents, staff and personnel have invested in the network. In fact, we can look forward to MVP’s more active involvement in TV-5′s operations,” the company said.

Asked about other measures to improve its balance sheet, TV5 said that beyond belt-tightening measures, plans were under way to boost its revenue centers. “Apart from looking at convergence platforms that will enable us to be accessible to audiences both here and abroad, we are also looking at improving our programming,” the company said.

MVP-led Philippine Long Distance Telephone Co. group ventured into the broadcasting business in 2009 with a deal to take over a 75-percent stake in ABC from a consortium led by businessman Antonio “Tonyboy” Cojuangco. The acquisition was made through MediaQuest Holdings Inc., a subsidiary of PLDT Beneficial Trust Fund, the telecommunication giant’s retirement fund.

Last year, MVP also rekindled moves to acquire GMA Network Inc. which would have given his group a majority market share of the broadcasting market (GMA-7 and TV5 combined) but the talks fizzled out. Since then, the businessman has committed to build up TV5 as a stand-alone business but analysts don’t rule out a return to the negotiating table with GMA7 owners in the future.

“TV5 is theoretically doing the right thing. Given the intensification of industry rivalry, TV5 should be trying to improve or rationalize its cost structure. And this is probably what the early retirement program is trying to achieve,” said Jose Mari Lacson, head of research at local stock brokerage Campos Lanuza & Co.

But Lacson said TV5 would also need to expand market share and this would entail heavy investments in talent and network infrastructure.

“Combining a move to a low-cost structure and heavy investments in talents and network infrastructure is expected to press a heavy burden on the company’s financial position. This strategy of attrition, however, will only work if TV5’s long-term access to capital is greater and longer than peers and if the company is indeed able to capture enough market share to induce price concessions from its competitors,” he said.

Last January, MVP announced plans to pour more cash into TV5 in a bid to grab a larger share of the broadcast advertising pie. For this year, TV5 has budgeted over P6 billion to improve its program lineup and expand nationwide coverage.

The group’s decision to shell out another P6 billion for TV5 was made after the network incurred P2.8 billion in the first half of 2012. The network lost P4.1 billion in 2011, double the level in the previous year.

“If progress is too slow, TV5 may go back to the negotiating board with GMA Network. However, they take the risk that the asking price has risen because of their current financial condition – if they do it now,” Lacson said.

“TV5 may also change strategy and follow a more blue ocean-driven path, which is akin to a niche market strategy. Ultimately it will boil down to PPP: patience, progression of the strategic plan, and of course, the availability of and cost of pera (money),” Lacson said. –Doris C. Dumlao, Philippine Daily Inquirer