Lopez group sets P5.5-B capex budget

The Lopez group has earmarked roughly P5.5 billion for capital expenditures of its communication units this year, anchored on the structural build-up of crown jewel ABS-CBN Broadcasting Corp. and the turnaround of Bayan Telecommunications into profitability.

J. Xavier Gonzales, chief operating officer of the Lopez holding firm Benpres Holdings Corp., said the bulk of the amount -- at P4 billion -- would be spent mainly on the completion of the building works and upgrading of the studio facilities, including the purchase of new equipment and boosting transmission capacity, of the main compound of ABS-CBN.

The flagship network, which contributes about 45 percent to the group's revenues, earned P1.7 billion in 1998 and is expected to add up 15 percent in profit growth over the past year and this year.

Gonzales said the earnings growth was mainly driven by the surge in advertising revenues, grossing between 18 percent to 20 percent annually, and the network's diversification to cover more areas in the broadcasting field.

ABS-CBN has a cable TV sister and offsprings in film and cinema production, theater, recording, licensing, merchandising, UHF broadcasting, and even a professional basketball league. SkyCable, the leading cable operator in the country, is setting the stage for cable-modern technology which will link up cable TV viewers to the Internet, another potentially lucrative ground to break.

Bayantel, the Benpres group's telecoms arm, on the other hand, is not expected to turn in profits at least for another year due to its continued absorption of losses from cellular operator Express Telecommunications Co. Inc.

Last year, Bayantel wrote off P4.7 billion in capital loss for its investment in Extelcom where it owns a 47 percent stake. The cellular unit, with some 140 thousand subscribers where (most of whom are pre-paid card users) has lagged behind the industry that has shifted to higher technology. Extelcom still uses the analog system as compared to the digital networks of Smart, Globe, Islacom and Piltel.

"If we have not made our investments in Extelcom, Bayantel would have been OK. At this point, we recognize the value impairment of our investments but this is not to say that these investments cannot be recovered," Gonzales said.

He estimated that Bayantel has given up P9 billion in a span of three years to opportunity losses that their P6 billion investments in Extelcom would have made.

Gonzales said with only 47 percent interest in Extelcom, the Lopez group remained a passive investor, particularly in management-still controlled by the Millicon -- GMA block.