Biz Buzz: Spratlys tension in the boardroom

For the most part, business ties between the Philippines and the People’s Republic of China have remained immune from tensions that have plagued the relationship between both countries over the group of potentially resource-rich islands and reefs in the West Philippine Sea (or South China Sea, as the rest of the world calls it).

Left and right, we still see large Filipino conglomerates investing in projects in the mainland, while Chinese-made goods continue to proliferate in the many storefronts and shelves across the Philippines.

But the first signs of this tension have apparently spilled over into the business sector, Biz Buzz learned. And it’s not just any rinky dink business that’s affected, but a major firm whose operations have nationwide—and national security—implications.

Biz Buzz learned recently that several Chinese officials of National Grid Corporation of the Philippines, the company that owns and runs the country’s power transmission system, have been effectively barred by the government from returning to the country.

Recall, of course, that state-owned State Grid Corporation of China owns 40 percent of NGCP (a stake it acquired during the privatization of the assets of National Transmission Co. a few years ago), while the balance is owned by Filipino firms Monte Oro Grid Corp. and Calaca High Power Corp., which control a combined majority with 30 percent stake each.

According to a source familiar with the matter, the NGCP officials were subjected to a government policy of gradually phasing out of foreign nationals in the key utility firm, especially since relations between both countries are not at their friendliest.

Our source says that, from 20 officials—including technical people like engineers—the Chinese presence in NGCP will soon be whittled down to three, mainly their representatives on the firm’s board of directors. And even this number will not be commensurate to State Grid’s 40 percent stake, as they are presently entitled to four board seats on NGCP’s 10-man board. With only three seats to be held by Chinese nationals come June, the company that owns 40 percent of NGCP will effectively have only 30 percent representation.

This, of course, will not be a problem if they use videoconferencing technology during board meetings or if the Chinese side finds a Filipino national to physically represent their interests in the boardroom.

In any case, Biz Buzz checked with the Bureau of Immigration (which was responsible for the new policy) and we learned that the Chinese nationals were not denied working visas, but were instead limited to two terms of six-month validity each.

“Some of the visas will expire in June 2015 while others in July 2015,” our source said. “There are already Filipino understudies who will eventually take charge of running the system once the visas of the Chinese expire.”

Given the ongoing tensions between both countries, this policy makes sense. Although China would surely disagree.–Daxim L. Lucas

P-Noy at PSE (groan)

Stockbrokers working on the trading floor of the Philippine Stock Exchange in Makati City generally look forward to VIP guests who visit the bourse to ring the ceremonial opening bell to mark the start of buying and selling activities at 9:30 a.m.

This is especially so if these VIPs are celebrities who are brought in by listed firms for added star power during special occasions like initial public offerings or anniversaries.

But brokers are always jittery when President Aquino visits the trading floor. And their apprehensions seem to be rooted in statistical certainty.

You see, the President rang the opening bell last Tuesday to celebrate the Philippine Stock Exchange index having crossed over into 8,000 territory. That’s certainly something to be happy about but, by the end of trading last Tuesday, the PSEi declined by 16 points.

No big deal, but the following day, the PSEi dropped by a stomach-churning 150 points, wiping out billions of pesos worth of market capital.

This two-day losing streak had some brokers with long memories point out that, during the two previous visits of Aquino to the trading floor, the market also ended lower.

Biz Buzz checked this and confirmed that the markets did indeed decline in the immediate aftermath of the President’s visits in Sept. 2010 and March 2012.

Of course, to give credit where credit is due, the index has more than doubled since Aquino took the government’s helm in 2010—with a significant part of the credit going to good governance policies implemented during his term.

Nonetheless, one stock market participant notes that there is now a 100-percent correlation between the President’s visits to the PSE and the stock price declines after.

As they say in statistics, “Twice is a coincidence. Thrice is a trend.”–Daxim L. Lucas

Bearish Liberty?

Liberty Telecoms Holdings Inc. adopted a rather bleak tone in its 2014 annual report—a departure from previous reports when the provider of high-speed Internet services was more optimistic despite losing money in the face of fierce competition.

Liberty, which is backed by San Miguel Corp. and Qatar Telecom, is now talking about having “significant doubts about the group’s ability to continue.”

Take that with a continuous slide in revenues and annual reductions in its work force. Yes, costs have come down but that’s easily traced to a decline in business activity.

It’s interesting, though, that this is coming to light around the time that SMC is taking steps to “reboot” its telecommunications business.

SMC president Ramon Ang himself said the company was keen on launching a new mobile Internet product—one of the fastest-growing areas of the telecommunications industry today—by January 2016, and we hear that this won’t be under Liberty.

Our own market sources are saying SMC is in talks with a new foreign partner and that something may be announced within the year. As for Liberty, we hear that a potential “amicable” exit for Qatar Telecom is one of the possibilities.

It seems that dominant telcos are taking notice of these new developments. After all, the entry of SMC plus its partner would break the so-called duopoly between Philippine Long Distance Telephone Co. and the Ayala Group’s Globe Telecom. ( ABS-CBN’s mobile service is powered by Globe so we lump them over on their side).

Biz Buzz caught up with Globe CEO Ernest Cu and PLDT chair Manuel V. Pangilinan this week. Both acknowledged SMC’s efforts to break into the business while suggesting that they were ready to take on new competition.

Needless to say, 2016 should be an interesting time for the local telco business.–Miguel R. Camus

E-mail us at [email protected]. Get business alerts and a preview of Biz Buzz the evening before it comes out. Text ON INQ BUSINESS to 4467 (P2.50/alert).