040307: Dream Satellite TV gets court relief for P1.2-B obligations

By Lenie Lectura

Reporter

PHILIPPINE Multi-Media System, Inc. (PMMSI), which operates Dream Satellite TV, a direct-to-home (DTH) satellite TV service provider reportedly owned by businessman Antonio "Tonyboy" Cojuangco, was allowed Friday by a Makati court to suspend payment of its outstanding liabilities amounting to P1.15 billion. Dream TV told the court that it suffered recurring losses since 2004 up to present and will continue to be in the red until 2009. That is why it sought the help of the court by filing a petition for rehabilitation which covers a period of 12 years, including a three-year grace period, and a repayment scheme of its outstanding obligations over a period of nine years on equal annual installments. The proposed rehabilitation plan was filed on March 28, 2007. Two days later, Judge Elmo Alaneda of Branch 149 of the Makati Regional Trial Court, issued a stay-order on all claims against PMMSI. "Petitioner has been experiencing severe cash flow problems from the onset of its operations due to high start-up operating costs vis-à-vis low subscriber revenues due to low subscriber base, which prevented it from paying its obligations as and when they fell due," said the court. Dream TV has assets amounting to P1,246,733,008.00 and liabilities of  P1,157,362,239.00, net of stockholders' equity as of February 28, 2007. The court prohibited Dream TV from disposing of its properties. While it was prohibited from paying any of its outstanding liabilities, the suppliers of Dream TV were also prohibited from withholding "supply of services and goods for ordinary course of business." Court records stated that the DTH firm owes Mabuhay Satellite Corp. (MSC), a subsidiary of Philippine Long Distance Telephone Co. (PLDT), P396 million in unpaid rental fees since August 2003. Dream TV is the first and only commercially operational nationwide DTH provider in the country. Channel content is received from program providers, compressed and broadcast via MSC's Aguila II satellite. In a bid to reduce operational costs, PMMSI told the court it intends to transfer to a different satellite provider offering lower rates; it also cited the near end-life of the transponders of MSC. "It would be economical for the company to implement the transfer at this time as all paying subscribers have to be considered in the cost provisioning for the possible realignment of the subscribers' small satellite dishes or outdoor units," PMMSI said in its proposed rehab plan. It is expected that MSC will file a civil case for collection, added PMMSI. With the planned reduction in the number of transponders to be leased, some content shall be dropped in the current channel lineup. PMMSI said this move will result in lower channel acquisition costs. On a long-term basis, channel acquisition cost shall level off at 30 percent of DTH revenues. PMMSI plans to embark on a revised distribution strategy referred to as "preferred area distribution" program, whereby a particular dealer shall be given a specific area to manage its subscriber base. This program, it added, shall target to improve paying subscriber base through a more focused subscriber management, especially in terms of prepaid card loading in exchange for additional dealer margin.  "Revenues are seen to improve from P511 million in 2006 to P1.73 billion by 2018," said PMMSI. The DTH firm also owes Bank of Commerce P458.97 million and foreign program providers more than P130 million in unpaid fees. PMMSI proposed to temporarily suspend servicing interest charges until it starts to amortize the bank loan principal, which shall begin after the proposed three-year grace period. When it resumes servicing interest expense, outstanding bank loan shall be subject to a preferential interest rate at 5 percent per annum. Based on its financial program for rehabilitation, PMMSI will incur losses this year up to 2009. However, upon turnaround beginning 2010, it will post healthy net profits over time. PMMSI posted net losses of P520.45 million in 2004; P661.1 million in 2005; and P467.41 million in 2006. This year, PMMSI expects losses to reach P369.3 million. In 2008 and 2009, the company expects to post losses at P205.6 million and P195.8 million, respectively. But by 2010, PMMSI will realize profits at P63.9 million; P202.1 million in 2011; P241.7 million in 2012; P223.4 million in 2013; P261.8 million in 2014; P298.5 million in 2015; P340.4 million in 2016; P371.7 million in 2017 and P399.8 million in profits in 2018. "By 2008, the company shall show a positive net cash flow, albeit minimal. By 2009, cash flows shall still be insufficient to trigger any repayment of outstanding obligations. Thus, the proposed repayment under the rehab plan shall assume a three-year grace period and a nine-year equal annual installment," said PMMSI.   As of February 2007, PMMSI's total debt stood at about P1 billion, including dollar-denominated obligations of $10.6 million. To provide the company some relief, and allow it to turn around operations, PMMSI sought a temporary suspension of principal payments. The court, meanwhile, appointed Miguel Hernandez as rehabilitation receiver. Initial hearing of the petition is set on May 22, 2007.

 

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