Frequently Asked Questions
On ABS-CBN’s Financials
How do you expect to grow airtime revenue given that you and your nearest competitor have cornered about 80% of TV advertising budgets?
For Channel 2, there is still room for advertising growth in our daytime programming. Our investments in multiple platforms also ensure that we are able to reach all the significant target markets our advertiser clients need to reach.
Our strength in content creation also allow us to provide more value to our advertisers by way of innovative creative executions across free TV, cable TV, radio, print and the new media platforms (mobile and the Internet). Licensing and branded entertainment, including brand and product integration in our programming, also enhance our airtime revenue potential.
Any guidance for 2009?
Generally, we do not give guidance on earnings as a matter of policy.
While our business is largely dependent on consumer advertising, we have gradually diversified our revenue sources. Direct sales to consumers (i.e., subscription fees and other non-airtime revenues) now account for about 40% of the Company’s gross revenues.
How are you addressing cost pressures, especially in production costs?
Reining in cost remains to be a challenging exercise. Nonetheless, we remain steadfast in protecting our margins and overall profitability. In 2008, we have been able to reduce production costs – our Company’s largest expense item – by 3%, or a Php202 million reduction year-on-year.
Our second largest expense item, general and administrative expenses or GAEX, likewise went down by 5% year-on-year in 2008. This is before including SkyCable’s GAEX, whose contributions to ABS-CBN’s consolidated financial statements were included starting April 2008.
The standards and controls we have put in place in 2008 have already begun to yield cost savings. Still, we continue to look for new ways of improving efficiencies and streamlining our processes.
Why did cost of sales and services shoot up in 2008?
We invested in new cable channels in 2008 to address the diversifying needs of the premium, male and young female markets. Foreign program acquisitions were necessary to build the cable channels’ equities and following. Generally, foreign acquired programs are less costly than locally produced shows.
Further, ABS-CBN Global’s expansion into new territories (e.g., Canada, Japan) and a focus on growing its non-subscription business (i.e., money remittance, cargo forwarding, long-distance telecommunications) have led to an increase in the subsidiary’s cost of sales and services.
How much revenue do you make from selling your own original content?
Our locally produced programs are licensed to other countries in Southeast Asia, Eastern Europe and Africa. Revenues from these licenses are still a small part of our business for now.
Are profit and EBITDA margins slowing?
Our profit margins are improving as our earlier investments in direct sales businesses start to deliver profit and as our process improvement and cost-containment measures yield savings. Our EBITDA margin for 2008 is at a healthy 27% of gross revenues.
About Ratings and Audience Share
What is the difference between household ratings and audience share?
Ratings refer to the proportion of households viewing a channel or a program. Audience share, meanwhile, is the percentage of households viewing a channel or a program out of all households watching TV at the same time period.
How has ABS-CBN performed ratings-wise?
In February 2009, TNS Philippines released its official national TV audience measurement results. Since their official release, ratings and audience share continue to prove that ABS-CBN is the national leader in total day (6am to 12mn), and especially in primetime where bulk of airtime revenues are sourced.
ABS-CBN leads in most of the country’s major geographical areas, including North Luzon, South Luzon, Visayas and Mindanao. In Metro Manila, ABS-CBN is at parity with its closest competitor. Vulnerable areas are Central Luzon and the Suburbs of Metro Manila (which comprise of nearby provinces Rizal, Bulacan, Laguna, Cavite and parts of Pampanga) due to ABS-CBN’s signal and reception issues.
ABS-CBN’s channel frequency in Mega Manila, Channel 2, is considered to be at the Very Low Frequency band or VLF. Television signals from this frequency tend to be easily disturbed and interfered. Channel numbers above 5 do not have this inherent vulnerability. ABS-CBN’s signal and reception issues in these areas are currently being addressed by transmitter upgrades and UHF alternatives in the area. Digital television is the long-term solution.
Why not simply change frequencies?
In Metro Manila, all available analog channel frequencies are already assigned and there are no more analog frequencies for Channel 2 to occupy.
What steps are being taken to ensure competitiveness in terms of ratings?
For ABS-CBN Channel 2, it is a two-pronged strategy: engaging programming and transmission network infrastructure. We will continue to produce programming that satisfies the needs of our viewers. We are also taking steps to improve our transmission systems and eliminate the inherent disadvantage of being in the VLF range.
For the long-term, digital terrestrial television or digital TV will address our analog TV signal and reception issues. Digital TV is already being adopted by numerous countries worldwide.
On the switch to Digital TV
When are you going to introduce Digital TV?
We are still awaiting the issuance of guidelines from the National Telecommunications Commission (NTC), the Philippines’ regulatory agency for broadcasters and telecommunication operators. The NTC has yet to decide on the technology standard for digital video broadcasting that will be adopted by the Philippines. Thus, we cannot make any further plans or investments until those guidelines are issued.
How much do you expect to spend on Digital TV?
Based on preliminary studies we have made, assuming a certain technology standard is adopted, we expect to spend about an additional Php1 billion a year for Digital TV in the next five years to cover a big part of the country.
Besides improved TV reception, what other benefits would Digital TV bring that would justify an immense investment?
Countries all over the world are gradually switching to digital TV transmission and have adopted an analog switch-off ruling wherein all broadcasters will be forced to switch-over to digital frequencies by a set date.
Digital transmission is significantly less susceptible to interference or other reception problems currently being experienced by analog transmission. Further, digital channels take up less bandwidth. This means that broadcasters can provide more digital channels within the same assigned frequency. Digital broadcasting can also allow broadcast of high-definition content and provide other interactive services. For ABS-CBN, this opens up several additional revenue sources.
On ABS-CBN’s International Business (ABS-CBN Global)
How large is your subscription base?
ABS-CBN Global reaches close to 2 million viewers worldwide, out of a potential universe of 8.2 million overseas Filipino workers. Subscriber growth has been at 19% over the past five years.
How large is the geographic reach of ABS-CBN Global?
Our programming, through The Filipino Channel (TFC), is available via cable, direct-to-home satellite, internet protocol television (IPTV) and the internet in the United States, Canada, the Middle East, Europe, Australia, Japan and other Asia-Pacific countries.
ABS-CBN Global also provides other services relevant to the overseas Filipino. These services include remittance, cargo forwarding, telecoms and retail of Filipino products.
How much does it contribute to the business? ABS-CBN Global accounts for about 22% of our consolidated revenues. Revenue from ABS-CBN Global is expected to grow in the coming years as we will begin reaping the benefits of our investments in expansion areas such as Europe, Australia, Japan and Canada.
How is the global economic crisis affecting your international revenue?
Bleak economic conditions in other countries may force many of our OFWs to reduce expenses. However, we believe that sacrificing their TFC subscriptions will be at the bottom, if not, last on their list of household expenses to cut down on. It is the luxuries that will go first (e.g., eating out, owning a car, buying pasalubongs, gadgets/tech expenses, etc.)
Additionally, we expect to receive a more substantial contribution from our operations outside North America and the Middle East. We expect our investments in the past couple of years in Europe, Canada, Australia and Japan to positively contribute soon.
Recent Consolidation of SkyCable
How much of SkyCable does ABS-CBN Broadcasting Corporation own? When did you begin including SkyCable’s financial results into the consolidated financial statements of ABS-CBN?
ABS-CBN owns about two-thirds of the equity of SkyCable. ABS-CBN Broadcasting Corporation began consolidating SkyCable’s financial statements in April 2008.
Describe the cable TV landscape in the Philippines. Cable TV has relatively low penetration. Cable TV service is concentrated among the middle and upper income class segments of the country since the recurring monthly subscription fees is prohibitive for the lower-income classes.
Cable TV in the Philippines is distributed through an analog network, which is very susceptible to pilferage. Based on our estimates, there are 2 illegal cable TV connections for every legal cable TV connection. Out of the 14 million television households in the Philippines, there are only about 1 million legal cable TV connections.
SkyCable is the largest cable TV service provider in the country. It has about 500,000 subscribers, half of which are in Metro Manila. This total also includes the subscriber count of provincial affiliates. To address the issue of illegal connections, SkyCable is gradually shifting to digital encryption through cable TV set-top boxes allowing SkyCable to offer low-priced, short-period prepaid cable TV access to lower-income households. Encryption of cable TV signal also curtails cable TV signal theft.
Also, digital encryption allowed SkyCable to use its existing bandwidth to provide data and voice services through Sky Broadband, an internet service product, and Sky Voice, a VoIP service.
How much is ad spending on cable TV? How much are advertising rates on cable TV?
SkyCable also sells airtime spots of some foreign cable channels to advertisers. Currently, ad spend on cable TV is about 10% of total TV spending. Cable advertising rates are between 5% to 10% of free-to-air TV advertising rates.
ABS-CBN Stock Information
When was the initial public offering?
The common shares of ABS-CBN (PSE: ABS) were first offered in July 1992. The PDRs (PSE: ABSP) were offered in October 1999.
What was the unadjusted offering price of the IPO? The common shares were offered at an unadjusted price of Php15.00 per share. The PDRs were offered at Php46.00 per share.
What is the number of current shares outstanding? Total issued and outstanding stock of ABS-CBN (PSE: ABS) is 779,584,602. As of March 31, 2009, there are 270,042,200 outstanding PDRs of ABS-CBN (PSE: ABSP).
What is the fiscal year and corresponding earnings release dates?
ABS-CBN Broadcasting Corporation's fiscal year is the same as the calendar year. The deadline for submission of quarterly earnings reports to the Securities and Exchange Commission and the Philippine Stock Exchange is 45 calendar days at the end of each quarter. For audited annual financial statements, the deadline set by the Securities and Exchange Commission is 105 days at the end of each fiscal year.
We regularly hold quarterly briefings for investors, analysts and the business press. In these briefings, we present the Company’s financial and operating results for the quarter. Invitations to the quarterly briefings are disclosed to the Securities and Exchange Commission and to the Philippine Stock Exchange at least a week prior to the briefing date.
What is your dividend policy?
Our policy is that dividend payout is up to 50% of previous year’s net income, as prescribed by our loan covenants.