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PLDT pension used to build Salim’s PH media empire

Philippine Long Distance Telephone Co. built its multi-platform media empire by nearly using up its 20,000 employees’ benefits and retirement fund, officially called the PLDT Beneficial Trust Fund.

PLDT’s controlling stockholder since 1998 has been the Indonesian magnate Anthoni Salim, with his top executive, Manuel V. Pangilinan, being his public face in the Philippines.

Company documents show that as of the end of 2012, PLDT’s Beneficial Trust Fund had put P14.47 billion in MediaQuest, the holding company of the Salim-MVP media giant.

That represents 80 percent of the Fund’s P18.4 billion total assets.

“That’s probably why (MediaQuest, TV-5, and PLDT Beneficial Trust Fund vice- chairman) Ray Espinosa can afford to pay a P1-billion talent fee to Sharon Cuneta for her “The Chairman” telenovela in TV-5,” a source in the Salim-MVP group quipped, partly in jest it seems. Television network TV-5 is the biggest enterprise in that media empire, and is the third biggest television network in the country.

Media industry executives, in fact, have been wondering at the huge amount of money flowing into the Salim-MVP media empire, as if unconcerned about costs. Its TV-5 reportedly has racked up losses of P8 billion over the last three years, while its rivals ABS-CBN and GMA-7 have been churning respectable profits.

The use of the Fund risks its capability in providing for the welfare of its employees in their old, post-productive years. Only a tiny 0.6 percent of the Fund has been invested in risk-free government securities and 17 percent in listed blue-chip firms.


Trust fund at the heart of the media empire

Trust fund at the heart of the media empire

Risky investments?
This is in sharp contrast to the conservative policy of most companies in investing their staff’s employee benefit funds in risk-free investments, to ensure that they don’t get thrown out to the streets when they can no longer work.

For instance, even in 2006, before the PLDT Beneficial Trust Fund was tapped to finance the group’s buying binge of media enterprises, 60 percent of its assets were in blue-chip companies (including shares in PLDT itself), 23 percent in risk-free fixed income securities and 16 percent in real estate.

PLDT’s Beneficial Trust Fund has been accumulated for decades in order to pay for its staff’s retirement pay and other benefits, as agreed upon in so many collective bargaining agreements with its unions in the past, as well as being part of the company’s incentive scheme for employees.

A media empire seems to have been in Mr. Pangilinan’s mind since his principal, Salim, took over control of PLDT in 1998 through a controversial sale of the Antonio Cojuangco family’s shares, allegedly brokered by President Joseph Estrada’s crony, Mark Jimenez, according to reports.

In 1999, just months after the turnover of control of PLDT, MediaQuest was set up. Pangilinan targeted GMA-7 in 2001, reportedly offering P20 billion. The plan fell through since the Salim conglomerate was at that time grappling with how to prevent its losing Fort Bonifacio project, for which Pangilinan bid way too high, from pulling the entire First Pacific conglomerate from keeling over.

MediaQuest has been the holding company for a vast media empire that covers TV-5, Radyo 5, Aksyon TV which has 25 UHF TV and FM radio stations in every major city of the country, satellite-to-home television firm Cignal, and even a heavily financed news portal, interaksyon.com. The empire also includes the BusinessWorld newspaper, as well as the Philippine Star and the Philippine Daily Inquirer, in which it has minority shares. Salim-MVP even attempted to buy last year GMA-7, one of the two biggest TV networks in the country, and is set to take full control of Philippine Star.

Tight hold
The PLDT management – and, therefore, its controlling stockholder, Salim — has a tight hold on the Beneficial Fund as it appoints its Board of Trustees, which consists of two members of the firm’s board of directors, “a senior member of the executive staff of PLDT,” and two who are not with the company. PLDT has not disclosed who the two other non-PLDT trustees are.

Alberto del Rosario, who had also been a board director in Salim’s holding firm, First Pacific in Hong Kong and in PLDT as well, from 1998 until 2011 when he was appointed to the Cabinet, was chairman of the Fund’s Board of Trustees, when most of the Fund’s assets were used by the group to enter the media industry in a big way.

However, lawyer Ray Espinosa, a PLDT board member since 1998, sources said, was the architect who designed the use of money from the PLDT Beneficial Trust Fund to fund its media empire.

Espinosa has been a member of the Fund’s board of trustees and Pangilinan’s point man for his media empire. He has been President and CEO of MediaQuest, as well as all of its media enterprises, among them ABC Development Corp., Nation Broadcasting Corp., and MediaScape.

(The PLDT management, including its chairman Pangilinan, has yet to grant my requests for an interview for them to present their side on this series.)

By using PLDT employees’ Trust Fund to fund his media empire, the tycoon Salim who controls PLDT, didn’t have to bring in capital from Hong Kong, where his holding firm is based, his home country Indonesia, or from his offshore firms in British Virgin Islands and Liberia that are the ultimate shareholders of his conglomerate in the Philippines.

It was the same modus operandi — using other entities’ finances – which he used to buy the controlling shares of Meralco in 2009. He used PLDT funds, coursed through Piltel (later renamed PLDT Communications and Energy Ventures Corp.) that initially bought 20 percent of the power utility’s shares — and money from the same PLDT Beneficial Trust Fund (See my column Feb. 26, “Salim bought in zero funds to capture Meralco.”)

There is, though, another major reason why the PLDT Beneficial Trust Fund was used: It was a clever way of skirting the strict constitutional ban on foreign involvement in media.

Constitutional ban
Article 16, Section 11 of the Philippine Constitution is categorical:

The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens.

“Wholly-owned”— which means a company with at least a single share owned by a foreigner, is barred from going into mass media.

Salim has gone around such restrictions on foreign ownership in controlling public utilities such as PLDT, Meralco, and Maynilad Water through the expedient of incorporating his Metro Pacific Investments and Metro Pacific Resources in the Philippines, which classified them as  “Philippine firms.”

These firms then took in as minority investors other firms that were also his subsidiaries. These utility firms were also listed on the stock market, so their shares, therefore, were dispersed to hundreds and even thousands of investors. A Salim company or companies, therefore, just had to own a big block of shares — 27 percent in the case of PLDT — to control that public utility firm.

But such artifice would not work in the case of media, as the constitution allows a firm in that industry only if it has 100 percent Filipino ownership.

Salim and his boys found a loophole, though. A company’s trust fund for its employees was defined by the 1991 Foreign Investments Act as a “Philippine national” if 60 percent of its benefits would go to Filipinos.

PLDT’s Beneficial Trust Fund was, by that definition, a “Philippine national,” which, therefore, could own media companies.

But the Trust Fund’s coffers couldn’t be totally emptied for building up the media empire. As early as 2011, 78 percent of its funds were already invested in media firms, and Salim-MVP had yet not captured the big fish in media, and its TV-5 seemed to be just accumulating huge losses.

It was a no-brainer, though, for Salim’s executives. They have found another way of funding the group’s media empire shopping binge, so that the Trust Fund could even offer to buy GMA-7 and Philippine Star, among the big fish in the industry. That is the subject of my column for Wednesday.