One month after securing approval from the Philippine Competition Commission (PCC) to proceed with Cignal\u2019s acquisition of Sky Cable, and one week before Sky Cable was due to go off the air, ABS and TEL announced that they have mutually agreed to terminate the Sale and Purchase Agreement signed by the parties in March 2023. <\/p>\n\n\n\n
It is interesting to note that this is TEL\u2019s third failed attempt to take-over Sky Cable. Following the announcement, ABS said that Sky\u2019s cable TV services will continue and that subscribers can maintain their subscriptions. Sky\u2019s broadband business, on the other hand, will remain under the company and will no longer be folded into Cignal.<\/p>\n\n\n\n
Neither party provided a reason for the cancellation of the deal, and it remains unclear how ABS will now fund its payment for around P6.6-Billion worth of liabilities coming due within the next 18 months. Debt reduction and cash management was cited as one of the reasons for the sale, which would have fetched around P4.0-Billion for ABS. <\/p>\n\n\n\n
Further, when ABS forged the deal to sell Sky Cable to TEL, the company said that it does not have enough cash flow to fund the capex requirements necessary to keep Sky competitive. It is now unclear how ABS will fund these aforementioned requirements.<\/p>\n\n\n\n
The first possible reason that comes to mind is that losing Sky Cable will reduce the reach of ANC, ABS\u2019s flagship news channel, as Cignal has instead chosen to carry its own ONE News channel. ABS has even launched ANC Prestige, a paid YouTube service that would give users access to livestreams, in preparation for Sky Cable going off the air. However, a smaller reach would make ANC less appealing to advertisers and could further dry up the company\u2019s ad revenues.<\/p>\n\n\n\n
The cable and broadband business under Sky contributed P8.1-Billion to total revenues in 2022, and P5.5-Billion in 9-month (9M) 2023. The segment\u2019s net loss amounted to P397-Million in 2022 and P420-Million in 9M 2023. In contrast, ABS\u2019s content production and distribution segment lost P2.2-Billion on the back of
P11.1-Billion revenues in 2022 and posted a net loss of P3.0-Billion on the back of P8.1-Billion revenues in 9M 2023. <\/p>\n\n\n\n
While it would be a stretch to call Sky a \u201cmore profitable\u201d venture at this point, it is at best \u201cless unprofitable\u201d. It could also be a possibility that TEL\u2019s management got cold feet on the eve of the wedding, so to speak, upon realizing that they would be absorbing a loss-making enterprise.<\/p>\n\n\n\n
There are other speculations over why the deal was aborted, including possible political pressure, or ABS securing funding from a white knight. At this point, we would remain a HOLD on the stock in the face of uncertainty over the fate of ABS. However, there may be fresh speculative action on the stock which may turn out to be profitable for the braver souls.<\/p>\n\n\n\n