BROADCAST giant TV5 abruptly terminated its talks for a partnership with the Lopez-owned ABS-CBN after its executives learned that the congressional committee scrutinizing the proposal would be zeroing in on exposing the multi-media conglomerate’s allegedly blatant violation of the constitutional ban on foreign investments in media.
While previous administrations looked the other way when confronted with this colossal anomaly, officials of PLDT — which owns TV5 through its multi-media arm, MediaQuest Holdings — were reportedly wary that the congressional hearings would train a strong spotlight on it, drawing the attention the new President Ferdinand Marcos Jr.’s whose stand on it cannot as yet be determined.
Indeed, it’s a demonstration of a foreign conglomerate’s vast control of a people’s consciousness and of government regulatory bodies that TV5 as well as its sister companies in media — BusinessWorld, Philippine Star and partly, the Philippine Daily Inquirer — have been operating even if these are owned through corporate layers by PLDT Inc. This telecom giant is owned 25.6 percent by the Indonesian-controlled First Pacific Co. (according to its 2021 annual report) and 10.6 percent by the Japanese NTT Docomo (according to the PLDT’s general information sheet submitted to the Securities and Exchange Commission last month).
First Pacific and NTT Docomo were recently able to legalize their investments in PLDT because of the passage of a law in March this year that in effect excludes telecoms from the list of industries in which the Constitution allows only 40 percent of capital to be owned by foreigners. This was done through the really preposterous maneuver of redefining telecoms not as “public utilities” — as the Constitution referred to restricted industries — but “public services.”
However, the constitutional requirement for 100 percent Filipino ownership of mass media remains, and only through the tedious process of amending or totally rewriting the Constitution can the ban be lifted.
The Securities and Exchange Commission in fact ruled in the Rappler case that the ban on foreign ownership and control is absolute, that not a single peso nor the slightest control in a media firm can be made by a foreign entity. The SEC even emphasized that Presidential Decree 1018 had also declared that “the ownership and management of mass media be limited to citizens of the Philippines or to corporations wholly owned and managed by such citizens.
TV5 and its sister media firms are 100 percent-owned by a firm called MediaQuest which was funded with P14.5 billion in 2012 by PLDT Inc.’s pension fund called Beneficial Trust Fund (BTF). The fund is controlled by a five-man board of trustees, three of which are PLDT executives, and all five appointed by its board of directors.
Out of PLDT’s 13-man board, nine are designated by the foreign First Pacific Co. and NTT Docomo. Control by these two foreign firms is therefore transmitted first through the Beneficial Trust Fund to MediaQuest and then to the media firms, a clear violation of the Constitution if the corporate veil is pierced.
For instance, Ray Espinosa, chairman of Philippine Star, is certainly Filipino. But he doesn’t represent himself since he has only token shares in Philstar, as required for him to be on the board. He is in Philippine Star’s board because he ultimately represents First Pacific, where he is an associate director.
First Pacific is tightly controlled by the Indonesian tycoon Anthoni Salim, who owns 45 percent of its shares, with the rest widely distributed in the Hong Kong stock market. Manuel V. Pangilinan is Salim’s prime executive, whose PR though has very successfully portrayed him as the First Pacific’s Philippine conglomerate’s main stockholder, with media even calling it the MVP Group. Pangilinan actually owns only 1.6 percent of the holding firm, and roughly the same tiny percentages in its companies. Pangilinan has a mere 0.13 percent shares of PLDT.
BTF’s funds, however, were not enough to fund the huge requirements of Salim’s media enterprises, since its capital in MediaQuest had eaten up 80 percent of its assets.
MediaQuest’s media investments in fact hasn’t been 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.*
MediaQuest’s rapid expansion as a media conglomerate was due to PLDT’s massive infusion of capital, disguised as Philippine Depositary Receipts (PDRs). That is, PLDT gave MediaQuest additional capital, a violation of the constitutional ban as PLDT is 36-percent owned by foreigners. These were disguised though as PDRs issued by MediaQuest.
A PDR represents the holder’s right to the dividend income of a share in a company but without the formal ownership of it. Thus, a foreigner owning a PDR in a media firm isn’t — technically at least — violating the constitutional ban on foreign participation in a media firm.
However, the SEC decision on the Rappler case declared: “The Commission’s definition of ‘control’ is neither limited to stock ownership nor to management in the board, but rather embraces a broad range of schemes that grant influence over corporate policy.” Indeed, except for its chairman (currently Ray Espinosa, a First Pacific executive), the BTF’s board members are obscure PLDT executives obviously put there to comply with the legal requirements for a pension fund.
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 a few 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 First Pacific’s newspaper investments in the country. This was reportedly used to partly pay the P4 billion that the Belmonte family asked for its Philippine Star shares in 2012.
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 major 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.
However, by having the BTF as an investor in the media empire, Salim isn’t risking his own nor 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 thinks 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 incontrovertible reality though is that the controlling entity of these media conglomerates is a foreigner, the Indonesian Salim, which the Constitution bans. He can rely on the executives he appoints in PLDT, in BTF, and in his main media holding firm MediaQuest to follow his orders.
Salim’s media enterprises, combined with his telecom industries, make up a powerful political and opinion-forming force, which is the reason the framers of our Constitution totally banned foreigners from these sectors. A foreigner in fact now has in place a perfect machine for controlling a population’s views and way 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 firm, Smart Communications, the biggest in the country, 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 media platforms. This is a fact largely hidden by the Salim group’s tremendous control of media — including journalists working in his competitors’ firms. It would have been exposed if Congress had continued its investigation of the deal being worked out by TV5 and ABS-CBN.
*This as well as First Pacific’s growth in the Philippines is described in detail, with sources provided in my 2016 book Colossal Deception: How Foreigners Control Our Telecoms Sector, available for online at rigobertotiglao.com/shop and at amazon.com. Neither First Pacific nor PLDT has contested anything written in the book. A new edition is scheduled for publication at the end of this year.
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