HOW has the Indonesian Anthoni Salim been able to defy the constitutional ban on foreign ownership in media? Through an entity under the Philippine Long Distance Telephone Co. (PLDT) which he controls as its biggest single stockholder, through several intermediate corporate layers.
As in his takeover of Meralco**, Salim did not use his own funds brought in from Indonesia or Hong Kong, but local capital to establish his media empire.
He used the pension funds of PLDT, called the Beneficial Trust Fund (BTF). One of the biggest such private pension funds in the country, the BTF had grown over the decades in order to pay for the PLDT staff’s retirement pensions and other benefits, as agreed upon in so many collective bargaining agreements with its unions and as part of the company’s incentive scheme for its employees.
In its 2012 annual report, PLDT reported that BTF had invested — when exactly it wasn’t disclosed — a huge P14.5 billion in a firm called MediaQuest. That accounted for 80 percent of the pension fund’s P18.4 billion assets, a total reversal of its portfolio mix before, for instance in 2005, when 60 percent of its assets were in blue chip companies (including shares in PLDT itself) and 23 percent in risk-free, fixed income securities.
It is strange though that PLDT’s annual reports before 2012 had not reported that its BTF had such huge investments in MediaQuest, a largely unknown unlisted firm. PLDT in fact hadn’t even reported the distribution of BTF’s investments in unlisted firms and listed companies.
PLDT’s management, whose members Salim is the ultimate appointing power of since he is the firm’s biggest controlling stockholder, controls the pension trust fund for its 20,000 employees. PLDT management in turn appoints three of the five members of its board of trustees, two of whom are from the PLDT’s board of directors and one is “a senior member of the executive staff of PLDT.” The remaining two are not with the company, whose identities have not been publicly disclosed by PLDT.
When BTF money was first used to invest in media companies, the fund’s chairman then was Albert del Rosario, Salim’s long-time associate who helped him start his operations in the Philippines in the early 1980s and who was a key figure in Salim’s takeover of PLDT in 1998.
MediaQuest, funded by BTF, is Salim’s holding company for his media empire, under which are: Hastings Holdings, the investment firm for his newspapers, the two broadcast media corporations (ABC and Nation Broadcasting), and Satventure, which through an intermediary firm MediaScape, owns Cignal TV (see Fig. 8.1).
BTF’s funds, however, were not enough to fund the huge requirements of Salim’s media enterprises, even as its exposure in MediaQuest already made up 80 percent of its assets.
MediaQuest’s investments in fact weren’t generating profits in the tight, competitive media market, so PLDT had to report huge actuarial losses on these: P6.8 billion, P11 billion, and P5.1 billion for 2012, 2013 and 2014 respectively. As a result, the value of the pension plan’s assets — which determines its capability to meet pension payments — was drastically reduced to P6 billion, or one-fourth of its P24 billion value in 2011. Salim could no longer raise funds from his employees’ BTF to fund his media empire.
Indeed, it is astonishing why PLDT employees haven’t protested the loss in their pension fund’s value, and the risky industry — in the overcrowded and highly competitive media — in which much of its fund has been invested in.
PLDT itself couldn’t put even a single centavo in media enterprises, since being 56 to 76 percent foreign-owned, a portion of it would have been classified as foreign money in a media firm, in violation of the Constitution.
So, instead of directly using PLDT funds, Salim cloaked these by providing Cignal TV with a huge amount of funds through purchases by its subsidiary ePLDT of Philippine Depository Receipts (PDRs) that its mother firm MediaQuest issued.
PDRs are a recent invention of a few of 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, it gives the buyer the right to all of the dividends due the shares of stock acquired. The foreigner therefore does not technically own a share, but created is the legal fiction of compliance with the constitutional restrictions, even if the foreigner has the right to all the income generated by that share.
Why would an investor hold a PDR if such paper does not make him an owner of the company it represents, but entitled only to its dividends, which likely won’t be given by a new media company? The answer is obvious in the case of PLDT’s subsidiary ePLDT, which bought MediaQuest’s PDRs. It does not need to have any control of MediaQuest since its mother firm, PLDT, already controls this media entity.
From 2012 to September 2013, PLDT subsidiary ePLDT invested P9.6 billion in MediaQuest’s PDRs, which was then used to fund Cignal TV, the direct-to-home satellite television service. The massive infusion of funds explains why Cignal TV has in just four years become the largest in the industry.
In March 2013 and then March 2014, ePLDT bought another P2.45 billion MediaQuest PDRs, in order to fund its subsidiary Hastings Holdings, the holding company for PLDT’s newspaper investments. This was used to partly pay the P4 billion that the Belmonte family asked for its Philippine Star shares.
PLDT took another tack in funding its TV5 network, especially since the broadcast company was in dire need of more money since it hadn’t been able to get a significant share of the advertising market from the two networks, ABS-CBN and GMA7.
PLDT and its subsidiary, Smart Communications, gave advanced payments for its advertising placements, which it committed to total P868 million in 2013 and a further P758 million in 2014. It is not clear how much the total placements amounted to although these could have reached P1 billion annually from 2010 to 2014 — a credible figure given PLDT and Smart’s P8 billion annual advertising budget.
PLDT actually entered into a contract with TV5 for these advertising placements starting in 2010 for a five-year term. The contract 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 funds to finance Salim’s media outfits but also those of his other firms, such as 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.
By having the BTF as investor in the media empire, Salim isn’t risking his or his conglomerate’s funds in companies in the media sector, but the employees’ pension money. More importantly, by having BTF as the stockholder in his media firms, Salim calculates that he is skirting the constitutional ban on foreign investments in local media enterprises, since BTF is technically a Filipino entity as its beneficiaries are Filipinos who constitute the overwhelming majority of PLDT’s staff.
The reality though is that the controlling entity of media enterprises in the Philippines is a foreigner, the Indonesian Salim. He can rely on the executives he appoints in PLDT, in BTF, and in his main media holding firm MediaQuest to follow his orders. The top executive in MediaQuest is Espinosa, his chief counsel in the Philippines and a director in First Pacific itself.
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 the Constitution.
Salim’s media enterprises, combined with his telecom industries, make up a powerful political and opinion-forming force, which is the reason framers of our Constitution totally banned foreigners from these sectors.
Salim in fact now has in place a perfect machine for controlling a population’s views and ways of thinking. He has a content generator made up of his news enterprises in print, broadcast, and the Internet. In addition, he has 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 post-war history has there been a foreigner with such a media empire, and in all forms of media.
*As explained in my column last Friday, this is the second part of an abridged version of the chapter ““Salim’s Media Empire: Ultimate transgression of RP sovereignty” in my 2016 book Colossal Deception: How Foreigners Control Our Telecom Sector.
** This is explained in detail in the Colossal Deception book.