ABS-CBN Corp. managed to trim costs for its start-up mobile business, cutting annual fees it was paying network provider Globe Telecom by half, as subscribers continued to fall in the first semester of 2016, chief financial officer Aldrin Cerrado said.
The plan was in step with controlling expenses and curbing mounting losses, while finding a better growth strategy for ABS-CBN mobile.
This unit has reported a subscriber base of 520,000 as of the end of June, which was 13 percent lower than the level at the start of the year. The decline was steeper when compared to December 2014, when it had 1.5 million subscribers.
ABS-CBN mobile, a mobile virtual network operator, was launched in 2013 following a deal with Globe, which provides the wireless network infrastructure while ABS-CBN pays a fee for its use. It was among the broadcast giant’s key initiatives to diversify outside television ad revenues, and into the digital space.
“We are continuing [mobile], but we scaled down. We are managing our expenses,” Cerrado said in a recent interview. Up for evaluation, he said, was whether the company would renew its deal with Globe, which would expire in two years.
ABS-CBN recently negotiated the reduction in fees paid to Globe, Cerrado said.
He said the fee was cut from P400 million per year to P200 million. A Globe official did not immediately respond to a request for comment.
Cerrado said the agreement needed to be renegotiated to reflect challenges in the telecommunications sector. ABS-CBN had originally committed to pay the larger amount, reflecting its initial bullishness in this business. Part of its strategy was to lure fans of its television shows to view exclusive content via the iWant TV app.
Cerrado admitted the telco business was about “getting the scale” and the company had since shifted by opening up more of its content to the telcos.
“The driver is iWant TV. We’ve opened it up to Globe and Smart,” Cerrado said.
The move could help reverses the falling subscriber count, ABS-CBN Group CFO Rolando Valdueza said.
“If you are going into the digital space—you should have mobile with you,” Valdueza said.
In the first six months of 2016, ABS-CBN spent 60 percent of its P5.3 billion capital expenditure on its digital initiatives, which was lumped together with maintenance and “other” items, briefing materials from the company showed. This came as new businesses widened losses in the first half of the year to P745 million from P734 million during the same period in 2015.
The company saw overall profit jump 76 percent to P2.1 billion this first semester on higher political ad spending ahead of the May 9 polls.