Bayan revises business plan

MANILA, Philippines – Lopez-owned Bayan Telecommunications is revising its business plan to focus more on the growing broadband and data market and less on the wireless landline business.

Bayan managing director Fred Bernardo told The STAR that the change in the company’s business plan is being made at the request of its creditors who believe that the plan should better reflect Bayan’s current business focus.

“Actually, while the current business plan focuses on the wireless landline business as the main driver, what we have been doing is devoting more of our resources to the broadband and data business,” he said.

He pointed out that Bayan’s new business model will be closer to the original model when the company first went into corporate rehabilitation in 2004. “Somewhere along the way, the model changed and adopted the wireless landline business as the main activity. But our wireless landline business is no longer attractive as it used to be,” he said.

Last year, around P250 million that was supposedly allocated for the expansion of the wireless landline network was scrapped.

The new business plan will be submitted to both the company’s creditors and the rehabilitation court for approval.

Bernardo also revealed that for the first six months of 2010, Bayan’s revenues dropped slightly by around 2.5 percent, but earnings before interests, taxes, depreciation and amortization (EBITDA) were stable compared to the same period last year and “better than budget.”

Of the company’s total revenues, more than 40 percent was generated from the broadband and data business.

And this year, of the P1.2 billion total capital expenditure, no amount was set aside for wireless landline.

Bernardo explained that because of the increasing competition in the wireless landline business, it is becoming more and more a losing proposition for Bayan.

“But we intend to keep the wireless landline business, but we will not expand it nor devote capital expenditure for it,” he said.

Bayan pioneered the wireless landline business in the country and it was a very profitable venture for the company then, but because bigger companies like Philippine Long Distance Telephone Co. (PLDT), Globe Telecom and Digital Telecommunications Phils. (Digitel) have also entered the business, this segment has stopped growing for Bayan.

“To break-even now, you need at least 300,000 subscribers. What we have right now is around 250,000 subscribers,” Bernardo pointed out.

On the other hand, he revealed that the data business, particularly corporate data, is becoming more and more attractive for the company.

He noted that based on their customer satisfaction survey, Bayan’s corporate data business fared much better compared to its competitors.

The new business plan, he said, will focus on growing both the wireless and wired (DSL) broadband business.

Bayan earlier said it expects to grow its broadband subscriber base by double-digit rates this year, sustaining last year’s performance.

Bayan vice president for business segment Aniceto Franco III said the company’s broadband base grew 40 percent in 2009 to more than 100,000 subscribers. “We expect to maintain that rate of growth, or maybe even surpass that,” he said.

Franco said the company has been investing heavily on the National Digital Transmission Network (NDTN), a network of fiber-optic cables spanning the length of the entire country.

The NDTN is owned by a consortium composed of  Bayan (65 percent), Smart Communications, Globe, Express Telecommunications (Extelcom), Eastern Telecommunications (ETPI), Philippine Telephone & Telegraph Co. (PT&T) and Digitel.

During the first quarter of 2010, Bayan trimmed its net loss to P464 million from P556 million a year ago while its revenues improved five percent to P1.64 billion from P1.56 billion.

However, for the first half of this year, revenues went down slightly, which Bernardo said is being experienced by most telecommunications companies due to the difficult economic situation.

Bernardo said the new business model will prove to be more profitable for Bayan, but the company has no plans of exiting from rehab earlier than 2023.

Bayan’s chief executive was earlier quoted as saying that they are considering the entry of potential investors. “The telecom business is a capital intensive industry so we need big investors,” he said.

The company’s total debt had reached $325 million and is scheduled for full payment in 2023. About 92 percent of the debts are dollar-denominated.

Bayan paid its creditors P498 million last month. Of this amount, principal payment amounted to P341 million while interest payment from April to June this year reached P157 million.

In all, the Lopez-owned phone firm posted P1.68 billion in principal payment and P3.61 billion in interest payment for a total of P5.30 billion since it went into rehabilitation in July 2004.