ABS-CBN franchise woes hurt investor sentiment — Fitch unit

The “politicization” of franchise hearings for embattled ABS-CBN Corp. is likely to turn off investors at a time job-generating foreign direct investments (FDI) are already pulling back due to the coronavirus pandemic, a Fitch unit warned Wednesday.

In a report sent to the media, Fitch Solutions, the research arm of debt watcher Fitch Ratings, said the twin halt orders slapped by the Duterte government against ABS-CBN and Sky Cable Corp., a subsidiary of the firm, have been “a deterrent to foreign investment.”

“The forceful termination of ABS-CBN and Sky’s broadcasts are highly politicized, and clearly linked to President Rodrigo Duterte’s opposition toward ABS-CBN,” Fitch said.

“While the Filipino government has begun the process of reviewing a new congressional franchise for ABS-CBN, the outcome of the review is uncertain,” it said.

According to Fitch, a key investor risk lies on the National Telecommunications Commission (NTC), which as regulator, shut down ABS-CBN’s free TV and radio channels last May 5 for fears of reprisal from Solicitor General Jose Calida.

That decision of NTC was topped up recently by its order to Sky Cable to halt its Sky Direct and TVPlus digital platform services after legislators hearing ABS-CBN’s franchise application threatened to file graft charges against NTC Commissioner Gamaliel Cordoba.

“The regulator’s apparent ability to be influenced by the government continues to be a key impediment to foreign investor sentiment, and has also made the telecoms landscape difficult for both new entrants and existing players,” Fitch Solutions said.

Commenting on the report, Finance Secretary Carlos Dominguez III told reporters the Duterte administration has nothing to do with ABS-CBN’s current woes. This, even as Fitch also noted, Duterte “has repeatedly stated his opposition” to a new franchise to the network in the past.

“The fact that ABS-CBN doesn't have its franchise is not an administration issue. Franchises are not provided by the administration, they are provided by Congress. That issue is strictly with them,” Dominguez said.

“Secondly, we have not seen any direct result of a slowdown in investment because of the ABS-CBN issue. We have seen a slowdown, yes, but that is essentially because of the COVID(-19) pandemic,” he added. Central bank data showed FDI net inflows have been on a sustained downtrend since 2017 even before the pandemic struck.

NTC ‘inefficient’ 
As it is, Fitch said the country already has a “fluid and inefficient telecoms regulatory regime” that highly prevents new players from coming in. The ABS-CBN’s debacle highlights this problem as it shows a “key impediment” for clients to shift to other platforms that would be left void should ABS-CBN go.

Because of “extremely patchy” network services, Fitch said some of Sky Cable’s 1.5 million subscribers who will opt not to wait for the outcome of franchise hearings may have difficulty “transitioning” to other cable providers or even access Netflix as an alternative.

Coupled with the country’s shortcomings to reform the telecom sector, Fitch was forced to scale down its grade for the Philippines under the agency’s Telecoms Industry Risk Reward score to 46.1 from 57.5 originally. A score of 100 signals least investment risk.

“The slow formulation of its tower sharing policy, which was released in a draft version in May 2020 following a protracted period of discussions and negotiations, highlights the slow pace of instituting reforms…,” Fitch said. By: Ian Nicolas Cigaral (Philstar.com)

Source: Peso Economics