On Friday, top executives from ABS-CBN Corp. and Sky Cable Corp. signed a commercial deal with Converge ICT Solutions, led by founders Dennis Anthony Uy and Maria Grace Uy, at Converge’s headquarters in Pasig City, Metro Manila.
On the other side were ABS-CBN chair Mark Lopez, CEO Carlo Katigbak and Sky’s management team.
The infrastructure sharing deal differed significantly from the unsuccessful acquisition attempt by PLDT Inc., which backed away from late-stage negotiations earlier this year amid worries over Sky’s debts.
But there was no hint of regret over those failed and long-running negotiations during the Sky-Converge partnership event, according to insiders.
“It was very positive, just good vibes in that meeting,” a source told InsiderPH on Monday.
Sky’s the limit
A key feature of the agreement was the commitment of the Uys to preserving the Sky brand.
This was important to the Lopezes and Katigbak, the former president of Sky, who was at the helm of what was once the dominant cable TV company in the Philippines.
Finding common ground
After the food was served, speeches followed, delivered on the spot with little to no prior preparation.
Katigbak praised Uy’s vision to ensure no Filipino is left behind in terms of connectivity and quality internet access. He said this vision was born from the same DNA as ABS-CBN’s motto, “In the service of the Filipino.”
Dennis Uy, one of the richest Filipinos following Converge’s public listing four years ago, stressed the importance of supporting the Sky brand.
He made it clear that the signing was just the start, and all parties need to work together to make it a success.
Business losses
While the Uys soared to new heights in 2020, ABS-CBN hit rock bottom that same year after President Duterte’s allies in Congress killed its broadcast franchise, leading to thousands of layoffs and plunging the firm into deep financial trouble.
This move also crippled Sky’s thriving satellite TV business, making debt payments difficult.
The ABS-CBN leadership has managed to keep the business afloat by selling assets and leaning on its extensive experience in content creation. It has now become the country’s leading content provider, visible across numerous channels and platforms.
In 2020, the company entered into a debt standstill agreement to keep creditors at bay.
Uy spearheads new debt deal
Despite looming loan deadlines, insiders are confident the new partnership will help Sky meet its P4.5 billion loans to Bank of the Philippine Islands, Robinsons Bank (which was acquired by BPI), and Security Bank, originally due this year.
InsiderPH learned that Uy is taking an active role negotiating easier loan terms for Sky in his personal capacity.
This includes requesting banks to grant an extension of 5-7 years and accept a reduction in interest payments, though the full principal will still be repaid.
“[Dennis] knows the cable business very well and will be helping rehabilitate Sky in the background. Once its debts are cleared, then parties can talk about an investment in Sky,” a source told InsiderPH.
“This is also a win-win for all since banks don’t need those cable assets. They just want to be paid their money back,” the source added.
Stock market catalyst
AP Securities senior research analyst Francis Ferdinand Subido issued a “Buy” rating on both ABS-CBN Corp. and Converge (CNVRG) with a target price of P5.44 per share and P14.39 per share, respectively.
“Under the technical cooperation agreement, Sky will be migrating from its traditional cable-based infrastructure over to a fiber-based one. The arrangement therefore allows Sky to gain access to a much larger viewership pool without having to spend much, if at all, on [capital spending],” he said.
“On CNVRG’s part, the agreement allows the company to take a well-known industry name into its fold, which could draw even more attention to its own internet-based streaming services (Blast and Vision). Lastly, the setup also allows CNVRG to further monetize its excess network capacity,” he added.
CNVRG dividends next year?
Adrian Yu, head of institutional sales at stockbrokerage house COL Financial Group, welcomed the current deal structure that minimizes the impact to Converge’s minority investors.
He said any deal “should not hinder CNVRG’s plans to start paying out dividends in 2025, given the large set of investors looking at CNVRG to finally start paying dividends.”
What’s next?
Under the commercial arrangement, the companies are expected to commence the immediate migration of Sky customers to Converge’s nationwide network.
Existing subscribers will enjoy faster internet speed options, thanks to Converge’s modern fiber network. At the same time, Sky will be able to attract new customers, overcoming its previous network limitations, while Converge benefits from revenue sharing.
This migration process could take about a year, an insider said.
“From this point, it’s about execution,” he added.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
