Almost but not quite

Manny Pangilinan, CEO of Philippine Long Distance Telephone Company (PLDT), knows a money maker when he sees it.

Hence his recent play for ownership of Philippine Multimedia Systems, Inc., owner of Dream TV, the Philippines only digital Direct-to-Home (DTH) broadcast service.

Pundits, however, claim Dream TV doesn’t fit the description of a profitable business. Dream’s subscriber base stands somewhere from 20-30,000 despite hefty subscription rate cuts and other marketing perks aimed at boosting subscription among its mainly upper crust clientele. Dream was founded in 2001.

And although the company doesn’t release revenue figures, analysts said the company is barely keeping its head above water and is saddled with debt.

But Pangilinan’s vision for a PLDT-run Dream TV is quite practical. It’s to make DTH more affordable by cutting subscription costs so Filipinos cable TV subscribers have more incentive to switch to DTH. Dream’s three subscription plans begin at P7,600.00 (US$138), a figure Pangilinan wants to bring down to about P800 (US$15) or lower.

He also wants to expand content to some 200 channels (another come on for cable subs) by teaming up with Echostar Communications, the US’ second largest DTH provider.

That goal remains a dream since PLDT balked at paying the US$56 million asking price of Dream TV owner Tony Cojuangco, PLDT’s ex-owner. With this deal a non-starter, Pangilinan has sought out the next best thing: IPTV (Internet Protocol Television).

IPTV, basically TV over broadband connections such as DSL, FTTH and Ethernet, is pay TV’s hot new service. It enables broadband Internet users to access TV broadcasts (both live streams and video on demand) via computers.

It carries a promise of high market growth and, for telecom operators like PLDT, minimal investment in new IP networks. The value of Asia’s IPTV industry was estimated at US$300 million in 2005. China’s IPTV market alone was valued at US$36 million last year.

IPTV is currently the only service that enables swift entry into the lucrative broadcast media by telecom operators like PLDT, the Philippines’ largest. Pangilinan is known to be keen on diversifying into broadcasting. In 2001, he sought to buy two-thirds of industry leader GMA Network for P8.5 billion.

IPTV might yet get PLDT into broadcasting, and without much legal pain since the Philippines lacks regulations governing IPTV.

PLDT operates the Philippines largest broadband IP network and also owns Netopia, the Philippines’ largest Internet café chain. It also owns Mabuhay Philippine Satellite Corporation, the country’s only satellite company. It operates Agila-2, the only in-orbit satellite that is also Dream TV’s satellite platform. The convergence is obvious.

For the present, however, Pangilinan is seeking out buyers for PLDT’s one-third stake in Beyond Cable, which controls two-thirds of all cable TV subscribers. PLDT paid P3 billion for Beyond Cable in 2001. The company is co-owned by ABS-CBN Broadcasting, the second largest network.

Divesting its cable TV holdings gives PLDT a clear shot at the cable and DTH subscribers to be targeted by its nascent IPTV business. Another smart move.

Whatever happens in Pangilinan’s latest quest for supremacy in convergence seems to ensure the existence of only one DTH provider in the Philippines. And one dominant IPTV provider.