W. LEE FLORES: HEART-TO-HEART TALK W/ GMA NETWORK 'KAPUSO' FELIPE GOZON
MANILA, September 27, 2004 (STAR) By Wilson Lee Flores - Can the debt-ridden, high-deficit and low-revenues Philippine government learn some lessons from GMA Network Inc. on slashing costs, raising revenues and becoming efficient? While our political leaders squabble over the fiscal crisis and pork barrel debates, GMA Network Inc. from January to July this year registered record revenues of P4.27 billion, the highest ever net income of P885 million, while total assets grew to P7.6 billion. Next year when it will undertake its historic initial public offering (IPO), GMA 7 expects to raise as much as P30 billion and hopes to be the undisputed No. 1.
Once a profitable No. 2 to traditional industry leader ABS-CBN Broadcasting Corp. of the powerful Lopez clan, GMA Network Inc., led by aggressive Yale-trained lawyer Felipe "Henry" Gozon, is aiming to be No. 1 in television and radio ratings, advertising revenues and over-all net incomes. The 65-year-old chairman, president and chief executive officer is part of the triumvirate who in the mid-1970s bought GMA from original American owner Robert "Uncle Bob" Stewart. The other two major owners of GMA are his estranged brother-in-law and former CEO Menardo "Nards" Jimenez, and former Rizal Congressman Gilberto "Bibit" Duavit represented in the firm by chief operating officer and EVP Jimmy Duavit Jr.
A top banker told The Philippine STAR: "The GMA media group is like China. The hard-driving Gozon is as aggressive and daring like Deng Xiaoping in creating so much profitability. His elder sister Kaye’s accountant husband Nards Jimenez, on the other hand, was like the founding father Mao Zedong who built a stable and strong base which made possible his amazing successes now. Both are essential to the GMA Network phenomenon."
Excerpts:
The Philippine STAR: How did you lead GMA Network Inc. into a leading media conglomerate now running neck-and-neck with traditional leader ABS-CBN?
FELIPE GOZON: I disagree, we’re already No. 1 in ratings, in revenues and definitely in net income. Let me be very honest to you, the previous administration settled for being No. 2 for many years. They didn’t even try to be No. 1, for what reason I do not know. I will not settle for anything less than being No. 1. I will only settle for that when I fail, but not before I try. Why don’t you want to be No. 1? Everybody should have this goal until you fail, but do not accept being No. 2 or No. 3 before you even try. I guess I have always been competitive, whether in school or sports.
Don’t you think your respected brother-in-law Menardo Jimenez was also a good CEO during his time, when you never lost money? Why did you take over as CEO?
The stockholders, the board of directors, just elected him out and elected me in. Remember this, the higher you are in the corporate ladder, the less secure your position becomes. If the board is no longer satisfied with your performance, then they can vote to replace you. It’s like a cabinet official, you serve at the pleasure of the President, here you serve at the pleasure of the board. Well, he doesn’t own the whole company….
How is the ownership structure of the three families – Gozon, Duavit and Jimenez?
The Jimenez and Duavit families own 35 percent each, and I own 30 percent, the smallest share, because I was then a starting lawyer in the 1970s and I didn’t have the money at that time. Also in the 1970s, I didn’t think GMA was a good business, because it was then a losing company under Stewart. I just invested out of pakikisama, because they were my law firm clients who practically forced me to buy the shares. That’s life, often those ventures you didn’t think would succeed, sometimes they’re the ones that do very well like GMA 7. Initially, I only had 10 percent of GMA 7, Duavit owned 30 percent, and Nards Jimenez owned 20 percent in 1975, while the balance was owned by the American Broadcasting Corp. (ABC) of the US. I later told Nards to get 20 percent and I’ll get 10 percent more. We were the ones who appointed Nards the CEO, but we feel that his performance was below our expectations.
Wouldn’t your saying that hurt his feelings and negate his past contributions?
If I were Nards Jimenez, I’d be very happy and ecstatic, because the market value of the whole company and his stocks have now doubled under my administration. We plan to take GMA Network public next year with a major IPO. We had already shortlisted three underwriters. We will have a foreign component. Foreign investors are looking for good buys in this rising economy of the Philippines, because opportunities here are much better than in the developed economies of the West. The prospects of earning more money are much better here in the Philippines.
How much of GMA Network stocks will be sold to the public?
We’ll sell about 20 to 30 percent of our stocks in the IPO.
Can you say some good things about the legacy of your predecessor Nards Jimenez in building up GMA Network?
In fairness, in the early part when we came in, Nards Jimenez had a lot of contributions. GMA 7 then started at the bottom of the ladder, there was the martial law clampdown on mass media. Under Jimenez, the finances of GMA 7 improved a lot and consistently. But when ABS-CBN came under Lopez family control after Edsa 1986, a lot of our people transferred to our rival and we immediately became No. 2, so I don’t really know if the previous success of GMA 7 was because of our executive Freddie Santos who moved to our competitor, or whether it was Nards who was doing it. Today, please do not be mistaken, we at GMA are no longer No. 2, we’re already No. 1.
Why didn’t the much-publicized PLDT purchase of GMA Network push through? Was it the fault of Manny Pangilinan or your side?
The proposed PLDT purchase of GMA Network in 2001 was a good deal. We agreed. We signed. The whole GMA was priced at P15 billion. PLDT was buying 67 percent of the company. But the real reason why PLDT backed out was because they didn’t have enough money then. They had problems with the Piltel debt, etc. In fairness, it wasn’t because of Manny Pangilinan. In fact, Manny was very honest with us. It was just that before the moment of truth, PLDT had no funds to buy us.
How much did Tony Boy Cojuangco buy ABC 5 from Edward Tan? Will this station be a major threat to you and ABS-CBN?
It was published in the Philippine STAR that Tony Boy Cojuangco bought it for P3 billion or P5 billion, but he had to assume their loans. Well, it will take ABC 5 a long time before they reach substantial shares of the TV market. They started in March this year, and their ratings are not yet even one percent now. It will be hard for them to beat the two major players, especially with TV ads 10 percent less than last year inspite of the political ads of the recent election.
What are your future plans for GMA, after you’ve received new capital next year from your IPO?
GMA Network is now earning more profit than what we need. Actually, we don’t need to go IPO for the additional capital. I don’t want to sound like I’m bragging, but the creditor banks are eager to lend to us, but next year our company will be totally debt-free. You know, the reason banks want to lend to firms like GMA is because there are not enough good debtors and the banks are awash with funds. We hope to have P2 billion in net profits next year. After our IPO, GMA Network will go international. We will grow in the regions like Cebu, Davao and others. We shall continue to upgrade equipment and technologies. In the future, hopefully, we shall be selling air-time not national, but regional, so we shall invest more in the regions. It’s a multiplier effect, like the cellular phone business, where you have the same frequency that you just re-use with more cellsites. GMA Network plans to reopen our UHF, to compete with our competitor’s Studio 23.
It’s inspiring to see a major corporation earning so much and being so well-managed. Do you have any recommendations how to turn the high-debt and high-deficit Philippine economy around?
You know, it’s no secret that there are a lot of things wrong with this country. You name it and we have it. We are fragmented. The leadership should rally all the people to one direction. Here at GMA 7, we used to have a defeatist attitude. We settled for being No. 2. When I came in, we changed the culture, or else how can you win the game? I rallied everybody to strive to be No. 1 in ratings and revenues, and I backed that up with action. Some of our people had culture shock. The hardest thing to do is to change the attitude and culture of the people, which meant I had to remove some of them.
Did you implement a lot of changes?
When the people saw that I was serious with the goal of becoming No. 1, they understood why I was closing losing companies where a lot of resources were being dissipated. I closed down losing GMA Films, which was winning awards but losing money, it was a financial drain. I closed losing firms like Ninja Graphics which was in magazines, I closed the UHF station Channel 27, I closed Infinity Records. I gave these people in these firms a chance, and they submitted business plans. I only closed those with no future. When I came in, the cameras of GMA Network were obsolete, our vans were dilapidated, and we lacked people. It’s like I reviewed for the bar exams all over again.
Didn’t you encounter resistance to all those drastic changes?
(Laughs) I had to surmount all the resistance without blood on the carpet, except for a few. It took a long time, at least one year and a half. It was a continuous process of reforms. There were monkey wrenches in the wheel.
When you see so much sloth, indecisiveness and wastage in government, aren’t you tempted to just enter politics and help clean up the mess we’re in?
Politics, that’s not in my horizon. I have no plans to run for public office. I don’t even think about it, but I believe I deserve to rest after this and have more time for myself to smell the roses (laughs).
Who are the media tycoons you admire and why?
It depends on what context. For commercial success, you have to admire Rupert Murdoch. On ethics, though, I don’t know if he’ll be the one we can admire. In broadcast media, Murdoch is the only big guy doing so well commercially. There’s really no substitute for success. No matter what you say, there’s no substitute for victory. Success should be based on actual results, not on lip service or press releases.
What are your assessments on the financial difficulties of the Lopez conglomerate in recent years?
They really have a very big problem, but I don’t want to discuss that because we’re competitors. By the way, we’re lawyers of foreign bond-holders and creditors of the Lopez-controlled Bayantel firm. They even tried to get Extelcom the wrong way before. But as a competitor, it’s not proper for me to make comments. I don’t want to criticize my competitor. I focus my attention on what I have to do to beat my competitor (laughs).
What is your ideal of leadership, whether in business or politics?
Leadership by example is a tremendous booster for attitude and cultural change. Here in the Philippines, if you’re a politician, especially the so-called trapo, they say – do things what I say but don’t do the things that I do. That is bad leadership. That is the concept of trapo, or traditional politicians. It is really unfair that the word "politician" has become a bad word, because politics is the art of achieving things through people. In a democracy, politics is a very fine art, it’s the management of people and doing what needs to be done through people.
Any unsolicited advice to President Gloria M. Arroyo and our leaders?
There are temporary solutions to our fiscal crisis, I think that is now being addressed. However, I think our leaders need to strike at the very root cause of our national problems. Don’t use aspirins to cure a cancer. A lot of our cultural, moral and political problems have been here since the time of Jose Rizal.
What is the real score on the GMA 7 controversy regarding Kris Aquino’s libel suit complaining your station had maligned her, and that column feed that she deserved her sexually transmitted disease due to her lifestyle?
Kris Aquino started her TV career here in GMA 7, then she transferred. To be honest with you, because of the media hype, I really believe that ABS-CBN had a hand in this whole affair and trying to influence our former PR employee Tet Defensor. That is my opinion. The case is still ongoing. In my view, there was nothing libelous in that column feed, but it was improper. I know, because as a lawyer, I have handled my share of libel cases before. Even before I knew that Kris had filed a libel case against us, I had immediately issued a public apology, because to me it was improper. I didn’t wait for anything to issue that apology. If I had known about that column feed, I would have stopped it, because it was no-brainer, it was just improper. I investigated, reprimanded and fired people involved there.
Any other latest developments on your station’s controversy with Kris Aquino?
Kris Aquino recently criticized the acting of Richard Gutierrez, which angered his mother Anabelle Rama, that’s what I read. There was a public quarrel with Melanie Marquez over a son of hers with Senator Lito Lapid. Melanie said that’s none of her business.
What message would you want to give Kris Aquino or her mother ex-President Cory Aquino?
I don’t want to give a message to her, I may mean well but might be misunderstood. Kris started her first TV job here, and we are proud of that. We are actually friends with Tita Cory. Even during the time of President Marcos, we had interviewed Cory when she was then in the opposition. We were the only TV station in the Philippines to cover the funeral of her husband Ninoy Aquino. We really have no ax to grand, in fact, President Cory Aquino had our full support when she was in power. We highly respect her and admire her, and you can quote me on that.
Isn’t the intense rivalry between GMA Network and your competitor causing so much negative and sensationalistic journalism, focusing too much on the negative and the gory?
We at GMA Network are trying our best to elevate the standards of Philippine TV, especially news programs like Saksi and 24 Oras. We know if we do certain things, we’ll beat our competition decisively, but we draw the line somewhere.
As a business leader with a profitable firm, can you give us some reasons why we should be optimistic about the mismanaged Philippine economy?
The Philippines is not beyond hope and not beyond repair. There’s always room for growth and progress. There’s really something wrong with the nation, but the problems are not beyond solution. It’s just a question of political leadership. The solutions our leaders will come up with must be long-term, and not the ningas cogon mentality, not a patched-up job. Long-term solutions are what will count. We have these high-profile donations to Bayanihan Fund, so what will happen next year? We should strike at a long-term solution. Our government bureaucracy is over-bloated. Reduce people, and maybe the government will become more efficient. Look at how private corporations retrench, cut costs and be efficient.
Instead of asking donations which harass entrepreneurs, don’t you think government should just work harder and smarter to raise revenues?
While studying my masters degree in Yale Law School, one of my specialties was taxation. Do you know that in the US, the government there will spend $100,000 to run after a $100 tax cheat? No deals or corruption there on taxes. They apply the full force of the tax laws, so tax cheating is rare in America, even politicians cannot cheat. The donations to the Bayanihan Fund will help, but that will not be the lasting solution. I think the President is in the right direction.
Philippine big business firms have been wracked by ugly high-profile squabbles. Even your three major families do not agree. What are your recommendations to prevent more of these problems?
I wish to clarify, GMA Network is not a family-owned company, not the same as the quarreling Marcelo business clan of Malabon or the different Chinese clans. GMA Network was not built by a clan patriarch, we are different in history and in our disagreements. GMA is going public, and that will make the situation even better here. We want the public to have equity in this profitable business. Second, after all these years, the investors have to be given more returns and dividends may not be enough, so this IPO is good for all investors. Duavit and Nards Jimenez, they’re both past 70 years old, their sun is about to set. To prevent family squabbles in big corporations, first and foremost, it is important to professionalize the management of the business. Promote a culture of competence, integrity and efficiency.
Is it true the country’s wealthiest billionaire Lucio Tan once consulted you before he acquired Philippine Airlines? What was your advice?
Yes, Lucio Tan consulted me when he acquired PAL. What I told him as advice, it’s a secret (laughs), huwag na lang. But in hindsight, he is now partly doing what I said, I think. He is a talented entrepreneur.
Who are other entrepreneurs you admire?
Tony Tan Caktiong of Jollibee, because he is a self-made man competing with a multinational giant. Abroad, I admire Bill Gates. Other tycoons, we don’t know how they became filthy rich. Until you know how they amassed their wealth, only then can you admire them. I don’t admire rich people who have not earned their wealth properly.
Most big Philippine businesses do not plan for succession. Who will be your successor?
Nobody can really do that. You cannot plan beyond, and maybe you will not be followed in the future when you’re gone. You just hope that people after you and even your children will do a better job. Some of these family business patriarchs must be turning over in their graves, what they had worked so hard to build up had been wasted by heirs. I don’t think or plan that far. I’m sure I will not turn over in my grave. I accept that I cannot control everything. I don’t want to be like Don Quixote. I want to be content. We are not here on earth forever. Let the future take care of itself. In this life, this is the first rule – be practical. Even in business, you cannot be ruled by formulas and theories, that’s why the Chinese are so good in business and successful, for they are very practical and realistic. My late grandmother Magdalena Santos Lapus was very practical and entrepreneurial. I don’t think she graduated from high school, but she was good in business. She was my inspiration and role model. You know what she told me which I cannot forget? Walang mahal na bagay kung may pera ka, lahat naman mahal kung wala kang ibibili. She was like China’s Deng Xiaoping, very practical when he said he didn’t care about whether the cat was black or white, as long as it caught the mice! Don’t get lost in formulas and theories in business!
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Thanks for all your messages, as well as the explanations of Congressman Miles Roces and the Binondo Suites management that this new establishment will not be a casino but a private club with slot machines. This writer believes that gambling is bad for the Philippine economy, especially its excessive proliferation nowadays.
Comments and suggestions are welcome at wilson_lee_flores@yahoo.com or wilson_lee_flores@hotmail.com or wilson_lee_ flores@newyork.com, or P.O. Box 14277, Ortigas Center, Pasig City.
Reported by: Sol Jose Vanzi
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