ISM Communications suffers 50% profit drop to P149.4 million in 2009

MANILA, Philippines - ISM Communications suffered a 50 percent drop in its consolidated net income to P149.4 million in 2009 from P301 million in 2008.

Company officials explained that the high net income in 2008 was due to negative goodwill amounting to P168 million resulting from its acquisition of Eastern Telecommunications Phils., Inc. (ETPI). No negative goodwill was recognized in 2009.

ISM owns 77 percent of ETPI, which the former is offering for sale to San Miguel Corp. (SMC). But SMC president Ramon Ang told The STAR earlier that ETPI is just one of the telecommunications assets being offered to them. Other telcos that have been offered for sale to SMC include Bell Telecommunications and Express Telecommunications (Extelcom).

Extelcom is controlled by Transdigital Excel (TDE), a company owned by businessman Roberto Ongpin who also controls ISM and ETPI. However, Transdigital is engaged in a court battle with Lopez-owned Marifil Holdings which claims that the reduction of its stake in Extelcom and the resulting increase in Transdigital’s stake was illegal.

Meanwhile, ISM officials said last year’s net income was substantially contributed by the company’s operation, interest income and dividend income from foreign associate.

ISM also generated higher operating revenues of P987.2 million last year from P901.9 million in 2008 and lower operating expenses of P909.5 million in 2009 from P950.9 million the previous year.

The company also reported that a total of P360.65 million was spent for the construction, installation and commissioning of the Makati-Nasugbu Backhaul Fiber-Optic Cable System project that started in 2009. Around 53 percent or P192.45 million was spent last year.

The project covers the laying down of a 240-kilometer fiber network to service industrial parks and economic zones in Tagaytay, Cavite, Laguna and Batangas.

ISM was originally incorporated in 1925 under the name Itogon-Suyoc Mines Inc. to engage in the mining business. In 2001, the board and stockholders of ISM approved an agreement between ISM and PhilWeb Corp. under which PhilWeb shall manage the transformation of ISM from a mining company to a company engaged in information technology, multimedia telecommunications, and other similar industries. As of end-2009, PhilWeb has a 24.3 percent direct and indirect stake in ISM.

In 2002, the stockholders of ISM approved a restructuring plan for the company, which involved the change in corporate name to ISM Communications and change in primary purpose to engage in the business of telecommunications, multimedia and information technology.

In accordance with the restructuring plan, ISM ceased its mining operations and assigned all of its rights over its two Benguet mining properties, Sangilo and Suyoc, to Itogon-Suyoc Resources Inc. (ISRI). In 2005, ISM acquired 40 percent in ETPI through ISM’s acquisition of AGN Philippines, a subsidiary of Australian Gigahertz Network International Pty Ltd.

ETPI is a provider of data and Internet services to the business process outsourcing and contact center market. ISM has no operations and only holds investments in ETPI.