ABS-CBN, Sky Direct shutdown to further dampen investor sentiment towards PH – Fitch Solutions

Metro Manila (CNN Philippines, July 8) – The "highly politicized" shutdown of ABS-CBN and cable provider Sky Direct would turn more investors away from the Philippines, a unit of a credit rating agency said.

In a report released Wednesday, Fitch Solutions Country Risk & Industry Research said the cease and desist orders from the National Telecommunications Commission against the two Lopez-owned companies revealed the "politicization of telecoms services in the Philippines," which adds to earlier concerns of an inefficient regulatory regime which has already kept potential investors hesitant.

"The forceful termination of ABS-CBN and Sky’s broadcasts are highly politicized and clearly linked to President Rodrigo Duterte’s opposition toward ABS-CBN," the report read. "Duterte has repeatedly stated his opposition toward the renewal of ABSCBN's franchise, perceiving that the broadcaster had unduly favoured a rival presidential candidate in the 2016 presidential election."

The NTC ordered the network to stop its TV and radio broadcasts on May 5 following the expiration of its 25-year franchise, despite the request of lawmakers to grant a provisional authority to sustain operations pending a new franchise law. Meanwhile, the digital TV transmissions of Sky Direct as well as of TV Plus programs in Metro Manila have also been halted due to a separate NTC order on June 30.

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ABS-CBN has been the subject of the President's public rants the past year. At one point he said that he will make sure that the network will be out of business this year.

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Duterte's spokesman Harry Roque, however, repeatedly said that the President is "neutral" to the grant of a fresh franchise to the network, adding that he has since accepted the apology of ABS-CBN President Carlo Katigbak for unaired ads during the 2016 campaign season where he won.

The House of Representatives hosted 12 committee hearings so far to tackle various issues thrown against the media giant, among them the dual citizenship of its former chairman Gabby Lopez, foreign ownership and control through Philippine depositary receipts, and even their supposed biases in coverage.

"While the Filipino government has begun the process of reviewing a new congressional franchise for ABS-CBN, the outcome of the review is uncertain," the commentary added.

The Fitch unit said the "challenging" outlook of the local telecommunications sector coupled with this treatment towards media services triggered bigger risks for the industry. It downgraded the country's score to 41.6 from 57.5 out of 100, where a higher rating indicates lower risks.

The research arm also worried about Sky's balance sheet, saying the NTC order to refund subscribers as they go off the air could be an opportunity for them to back out of their contracts.

"The regulator’s apparent ability to be influenced by the government continues to be a key impediment to foreign investor sentiment, and has also made the telecoms landscape difficult for both new entrants and existing players," Fitch Solutions added. Its analysts pointed out that telco authorities have also been slow to form its policy on common towers, which added to delays in the rollout of third player Dito Telecommunity.

Inbound investments have fallen in recent months as the global economy suffers from the COVID-19 pandemic and lockdowns meant to prevent the spread of infection.

RELATED: NTC extends Dito Telecommunity deadline to deliver on technical audit requirements

However, Finance Secretary Carlos Dominguez III said he has not seen a direct impact between the ABS-CBN shutdown and investment inflows.

"We have seen a slowdown, yes, but that is essentially because of the COVID pandemic... Investment is down around the world," he said, adding that the franchise issue is largely on Congress' end rather than on the Executive. However, it was NTC – an Executive office – which issued such orders.

Dominguez added that the government was able to raise $2.35 billion in Treasury bonds in late April, saying the country remains attractive to foreigners.