ABS-CBN income falls 99% to P3.8M

An industry-wide decline in advertising revenues and higher operating costs weighed heavily on ABS-CBN Broadcasting Corp. which posted a meager P3.82 million net income in the first quarter of 2002, or a 99-percent drop from a year earlier.

Chairman and CEO Eugenio Lopez III said the company’s revenue stream was hit hard by the 20 to 25 percent decline in advertising minutes experience by the entire broadcast industry during the period, along with increases in operational expenses such as depreciation costs and interest charges.

However, Lopez remained optimistic that despite the weak first quarter, the company would bounce back by the third quarter, depending on the state of the local economy which would translate to higher advertising spending.

"Our March to April numbers have shown improvement, coming off losses in the early part of the year," he said. For the first two months, the broadcast giant lost about P40 million, primarily as a result of the vacuum from the P100-million windfall generated by the spate of election-related political advertisements in the same period last year.

Lopez said in line with the company’s cost rationalization program, it would "no longer entertain political and government ads which do not bring cash to us." Instead of cash payment, the company used to rely on the government’s waiver of custom duties for imported equipment used in the company’s operations in exchange for the various political and public propaganda materials aired over its TV and radio stations.

But with an outstanding tax credit balance of P2 billion and with little need for more imported equipment, ABS-CBN will now be charging the government ads at market rates to add to its revenue stream.

"Our revenues would drop by 50 percent with the loss of these political ads but these are non-cash items anyway," Lopez said.

In the first quarter, airtime revenues dropped 22 percent to P1.64 billion, brought about by the softening of industry advertising spending and the loss of government ads. Despite this drop, ABS-CBN maintained its dominance of the local broadcasting industry with an average audience share and ratings at an all-time high of 44 percent and 18 percent, respectively – more than all of its free-to-air competitors combined.

Lopez also said the company was able to tap a new revenue source to compensate for the increases in their costs items such as depreciation, production, general and administrative, and interest expense – miscellaneous income in the form of the popular text messaging scheme.