ABS-CBN franchise denial to trigger network shares sell-off —analysts

The value of shares of embattled media giant ABS-CBN Corp. will suffer a blow in the coming trading week after the House Committee on Legislative Franchises voted to deny the franchise application of the broadcast network, analysts said Friday.

“The denial of the franchise is expected to have a negative impact on ABS CBN’s share price. Without the franchise, ABS-CBN will not be able to resume its radio and television broadcasting operations which has been an integral part of its business,” Philstocks Financial senior equity analyst Japhet Tantiangco said.

“This in turn is expected to lead to more revenue losses, which would ultimately weigh on the company’s fundamentals,” Tantiangco added.

The House panel on legislative franchises adopted the Technical Working Group’s (TWG) Committee Resolution recommending the denial of the network's franchise application through 70 yes votes, 11 no votes, two inhibitions, and one abstention.

Hours before the panel made its decision, share price of ABS-CBN dipped 2.64% to P14.78 apiece from Thursday’s finish at P15.18 per share.

“I expect another short term volatility towards the downside on ABS- CBN stock next week as traders and investors will try to look for an alternative such as GMA-7 shares,” Unicapital equity analyst Christopher San Pedro said.

In an earlier research note, London-based think tank Fitch Solutions flagged the National Telecommunications Commission’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,” following cease and desist orders it issued against ABS-CBN and its subsidiary SkyCable’s direct broadcast satellite service.

ABS-CBN went off the air on May 5 after the National Telecommunications Commission issued a cease and desist against the network for lack of franchise.

NTC’s May 5 action was a turnaround from NTC Commissioner Gamaliel Cordoba’s statement before the House of Representatives in March that they will issue a provisional authority to ABS-CBN given that the House and the Senate made communications stating they are in favor of such issuance.

The bills seeking franchise renewal for ABS-CBN have been pending since 2014 but the House only decided to start its deliberations on these proposals on March 10 this year.

“The vote at the committee level is just the first step in the gauntlet that ABS will have to endure to get a new franchise. There's still the plenary debates plus six readings between the lower House and the Senate. And anything can still happen during this time,” PNB Securities president Manuel Lisbona said.

“We will have to trust our honorable lawmakers to do the right thing and deliberate on the merits of the renewal,” Lisbona said. — DVM, GMA News