MANILA, June 21, 2005
 (STAR) By Mary Ann Ll. Reyes - Plans of the Philippine Long Distance Telephone Co. (PLDT) group to go into the direct-to-home (DTH) satellite television business in partnership with US DTH giant Echostar Communications has reportedly created a rift between PLDT chairman Manuel V. Pangilinan and the Lopez group, highly placed sources told The STAR.

PLDT and the Lopez group are partners in the combined Sky Cable-Home Cable business, with the PLDT group owning a 33.33 percent stake and the Lopez group the remaining 66.67 percent in Central CATV, which in turn owns both the Sky and Home brands. PLDT used to own Home Cable, the country’s second largest CATV company, until it sold the Home Cable assets to Central CATV in exchange for shares in the latter.

PLDT’s stake in Central CATV is, however, expected to be reduced to around seven percent by next year when a loan by ABS-CBN to Sky Cable is converted into equity. ABS-CBN is also owned by the Lopezes. Pangilinan has said he has no plans of paying back part of the loan just to keep PLDT’s stake at 33 percent.

Asked earlier why he decided to give up CATV and shift to DTH, Pangilinan told The STAR that he has better control in the proposed DTH joint venture because PLDT will have a 60 percent stake in it compared to the cable TV business where he is just a minority.

Sources disclosed that Sky Cable president Eugenio Lopez III resents Pangilinan’s decision to enter the DTH business, since Pangilinan never discussed the matter with Lopez. The DTH joint venture of PLDT and Echostar, which is envisioned to be highly pervasive and cost-effective, is expected to eat into the market of the cable television business, especially that of Sky Cable and Home Cable which currently have a combined 70 to 80 percent market share.

Pangilinan said in an earlier interview with The STAR that he wants DTH to be bigger than cable TV (CATV) in the Philippines, and this he hopes to achieve by bringing down the price of DTH subscription down to the level of CATV.

PLDT and America’s biggest DTH satellite TV operator Echostar are currently finalizing plans to set up a "pervasive and cost-effective satellite pay TV service in the Philippines on a joint venture basis, which Pangilinan said will cost around $85 million. As planned, Echostar will make available to PLDT more than 2,000 video and audio channels and video-on-demand services that it currently offers to its 11 million Americans subscribers.

The country’s lone DTH satellite TV company, Dream Broadcasting owned by businessman Antonio Cojuangco, is currently positioned for the high-end market because of its relatively high price compared to CATV. Dream also reportedly has around 70,000 subscribers compared to the local cable TV industry which has a nationwide subscriber base of around 1.5 million.

When asked how he intends to resolve this conflict with the Lopez group, Pangilinan said: "With great difficulty," but did not elaborate. He, however, noted that the first step in resolving any conflict is disclosure, and this Pangilinan said, he has already done. Partly because of this difficulty, the DTH joint venture may not yet kick off end of this year as earlier planned.

Because of the conflict with the Lopez group, the PLDT-Echostar DTH venture may find it difficult to secure content or programs from ABS-CBN which owns and controls several cable TV programs.

PLDT is currently convincing the owners of GMA Network to sell initially a minority stake but with a clear path towards majority ownership. Owning a broadcasting company will provide part of the content which the planned DTH joint venture will need.

Earlier, The STAR revealed that PLDT, through its parent First Pacific Co. of Hongkong, and Echostar may take a regional approach to their planned entry into the DTH satellite TV business.

Pangilinan revealed that Echostar is also looking at a possible partnership with a DTH company in Indonesia owned by the Salims (the family which controls FPC).

Industry experts earlier said that the only way that Echostar and PLDT can make DTH cost-effective and lucrative for the joint venture is to enter into a regional arrangement.

Reported by: Sol Jose Vanzi

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