ABS-CBN shutdown lifts GMA’s stock price

Published July 13, 2020, 10:00 PM

by Bloomberg

A government-engineered shutdown of one of the largest Philippine media companies has boosted a rival’s stock while sending a shock wave through shares of related companies.

GMA Network Inc. jumped as much as 41% in Manila trading, to the highest since 2014, on bets it will become the nation’s dominant television and radio network after lawmaker’s denied renewal of ABS-CBN Corp.’s franchise. Shares of Lopez Holdings Inc., owned by the same family that controls ABS-CBN, sank as much as 7.9%, amid speculation that the debacle exposes affiliated businesses to risk.

“Investors are hedging against potential fallout of ABS-CBN’s franchise rejection on the other Lopez companies,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “With ABS-CBN down and out, GMA will finally become the top network.”

A House of Representatives panel rejected renewal of ABS-CBN’s 25-year franchise on allegations of violations of a ban on foreign ownership of mass media and labor laws, tax evasion and biased reporting. Some have alleged that the Lopez family used the broadcaster to advance its commercial and political interests. ABS-CBN has denied the allegations, and critics of President Rodrigo Duterte say the government’s move is intended to muzzle the media.

GMA Network has seen its market cap expand about 37% to 22.3 billion pesos ($410 million) since its rival’s franchise expired on May 4. ABS-CBN, whose shares were suspended Monday, has shrunk 13% to 12.7 billion pesos since it was forced off the air. ABS-CBN has annual revenue of around 40 billion pesos compared with 16 billion pesos for GMA.

The Lopez family’s flagship holding company wasn’t the only stock to suffer Monday. First Philippine Holdings Corp., which houses the family’s power and infrastructure assets, fell as much as 4% while shares of its First Gen Corp. tumbled 6%.

The Lopezes set up Chronicle Broadcasting Network in 1956 and later acquired Alto Broadcasting System, which introduced television to the Philippines in 1953. GMA Network started broadcasting radio in 1950 and TV in 1961. The nation’s other major broadcasters include privately owned Associated Broadcasting Co. and government-controlled networks Intercontinental Broadcasting Corp., People’s Television Network and Radio Philippines Network.

While the market looks to price in GMA Network’s apparent rise to the top, some observers say its shares may have appreciated too much as traditional broadcasting battles newer competition from online media amid growing Internet access in the Philippines. “Investors have bought up GMA Network because without ABS-CBN it is now left without a competitor,” said Manny Cruz, a strategist at Papa Securities Corp. “GMA Network could become a virtual monopoly and will likely get the ads that would have gone to ABS-CBN. But this will not reverse the trend that traditional broadcasting business is getting outdated and will be replaced by online and digital.”