PLDT'S MVP EXPANDS HIS EMPIRE


MANILA
, JULY 3, 2012 (STANDARD) By Lailany P. Gomez - When Manuel V. Pangilinan (photo) walks into the ballroom of the JW Marriott Hotel in Hong Kong to address a group of financial executives during a recent regional conference, everyone turns attentive, anticipating with excitement what the top Filipino executive of First Pacific’s business empire has to say.

Pangilinan, the managing director and chief executive of the Hong Kong-based First Pacific, is straightforward in his speech, giving participants of the Earth’s Resources Conference insights on how he runs his businesses and his vision for the future.

“Wherever we do invest, we insist on achieving control, or at the very least, significant influence. Our job at First Pacific is to generate cash flow up to head office,” Pangilinan says, summing up his business philosophy that enabled First Pacific to post a net profit of $600 million in 2011 and expand in new areas in the Philippines.

First Pacific, although operating from its headquarters in Hong Kong, exercises vast economic influence in the Philippines and Indonesia. It has management control of Philippine Long Distance Telephone Co., which has ten times more SIM cards on its network than there are people in Hong Kong, as well as other major corporations in the Philippines.

Although Forbes magazine failed to include him in its list of 40 richest Filipinos, Pangilinan, known in the business and media circles as MVP, is easily the most influential Filipino businessman, who moves stock markets with a simple quip, jolts political alliance with TV ad placements and is a force in the sports and entertainment industries.

MVP Olympics

The 65-year-old Pampanga native, who engages Filipino-Chinese taipans and Filipino-Spanish magnates either in joint ventures or competition, is a living testament that Filipinos can run a business.

And what a business the MVP empire is. His First Pacific Group controls at least 17 of the largest corporations in the Philippines, with total market capitalization of over P1 trillion. These companies are so huge they hold their own annual Olympics aptly called MVP Olympics.

The five largest corporations he manages as chairman have combined annual sales equivalent to nearly 5 percent of the country’s gross domestic product.

In the Philippines, the MVP empire owns stakes in the largest corporation by market value (PLDT), controls power and water distribution, operates the largest hospitals, runs the longest expressways, mines the largest gold deposits, dominates mobile, broadcast and Internet services, secures the largest outsourcing contracts, and explores what can be the largest natural gas field. It also plans to venture to railways, port and airport operation soon.

Five of the largest companies he manages as chairman—PLDT, Manila Electric Co., Maynilad Water Services Inc., Philex Mining Corp. and Metro Pacific Investment Corp.—reported a combined profit of P61.8 billion in 2011 and total revenues of P462 billion.

Those revenues represented 4.8 percent of the Philippine gross domestic product estimated at P9.7 trillion in 2011.

Pangilinan says First Pacific is very keen on growing its business in the Philippines, particularly the mining and agriculture sectors. “Of the four areas of the economy where we feel we have some advantage of experience or strength, we are very excited about the opportunities in natural resources, particularly mining but also in plantations, whether they be oil palms or sugar or even bananas,” he says.

He is confident about mining, because of rising global demand for minerals. First Pacific-controlled Philex Mining Corp., the Philippines’ top producer of gold and copper, in fact looks at three possible acquisitions in Southeast Asia to sustain profitability.

Pangilinan sees Philex Mining posting a fourfold increase in ore production over the medium term. Philex operates the Padcal mine in Benguet, producing about 25,000 metric tons of ore a day. Its Silangan project in Mindanao targets to produce about 35,000 tons a day.

Asian expansion

First Pacific’s investments are presently concentrated in two countries, with 70 percent in the Philippines and the rest in Indonesia. Pangilinan says the conglomerate is now looking at the potential of Myanmar, Vietnam, Malaysia and other Southeast Asian countries.

Pangilinan says First Pacific will stick to emerging markets, where it has thrived amid faster economic growth. “In a mature economy, you don’t see the kind of growth you get in less wealthy countries. China has been able to grow at 10 percent a year for the past several years precisely because it began from such a low base. A big, wealthy economy is very unlikely to match that. For us, it’s simply that the opportunities in emerging markets are so much greater than in mature markets. And we’ve been there for many years. Emerging markets are familiar to us. They are home,” says Pangilinan.

First Pacific group, through the publicly-listed Metro Pacific Investment Corp., also considers investing in airports, light rail, electricity generation and plantations.

Pangilinan says the conglomerate looks at developing the former Clark air base into a secondary international hub because it has a longer runway which can accommodate heavier and larger airlines that the Ninoy Aquino International Airport cannot.

“We like the idea of investing in airports for the same reason that we like emerging markets and we like infrastructure: for growth. Anyone who flies to Manila is familiar with the delays, discomfort and inefficiencies of the main airport,” he says.

Light rail is another area of infrastructure in need of investment, he says. Metro Pacific and the Ayala Group have recently formed a joint-venture firm that would pursue the expansion of the country’s light railway system.

In control

While exploring other opportunities, PLDT remains the crown jewel of the MVP business empire and continues to deliver cash for the Salim family, the Indonesian top shareholders of First Pacific.

“It’s no secret that PLDT’s dividend payout has been 100 percent of core profit for the past five years running. I don’t see that stopping soon. Why am I so confident? Because of our insistence on significant influence or control,” says Pangilinan.

Pangilinan says without control or influence, he cannot be confident about the company’s dividend flow. First Pacific’s dividend income reached $322 million in 2011, the highest it has ever been.

“And when I look ahead over the next few years, I see continuing strong growth. This is vital for returning value to our shareholders whether it be via share price appreciation or dividend payouts of our own. I won’t be confident in our growing dividend income if we aren’t in control of it,” he says.


Chief News Editor: Sol Jose Vanzi

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