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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

FAMILY AFFAIR

The coming Estrada-Lopez nuptials have Manila investors abuzz about love, money, power and profit

By Antonio Lopez / Manila

Holdings Gems of the family empire
PHILIPPINE PRESIDENT JOSEPH EJERCITO Estrada has mixed feelings about the coming wedding of his daughter, Jacqueline "Jackie" Ejercito, 32, to Manuel "Beaver" Lopez Jr., 31, a scion of one of the country's wealthiest business clans. "He's a fine man," says Estrada. "I don't think I will have any worry." Still, it's not easy to give away a daughter who "has been very good, very religious and very loving. But what can I do? It's their future."

Well, not exactly. The future of the Lopez business empire, as well as the thrust of the Estrada administration's economic policies, may also be at stake. The nuptials will link the Philippines' most powerful political family, Estrada's, and its most influential business clan, the Lopezes. That makes the tying of knots on Sept. 8, a day after Jackie turns 33, arguably Manila's wedding of the decade.

Beaver feels he needs to explain some things: "I have no hidden agenda. My intentions are just for Jackie. My parents have assured me that not in any way will any business issue affect our relationship. If there's a problem, let my father or my uncles take care of it." He gave Jackie a two-carat ring on April 11, the night the Lopez family made the traditional pamamanhikan or marriage proposal at the bride's home, culminating a six-month courtship. Beaver's parents, Manuel Sr. and Maritess, came with tycoon Eugenio Lopez Jr., Manuel Sr.'s elder brother.

Estrada himself dismisses talk of his in-laws-to-be wielding inordinate influence in Malaca"ang Palace as "mere speculations which we cannot prevent." He declared on his weekly show at the Lopez radio station DZMM: "We will continue to be fair. Everybody should abide by the law, even my mother, my brothers and sisters. So maybe there is no reason for any public apprehension about this."

What has tongues wagging is the sweep of major Lopez enterprises - all dependent on state franchises. The crown jewel is Meralco (formerly Manila Electric Rail & Light Co.), the principal power distributor on the main island of Luzon. It is 21%-owned by First Philippine Holdings Corp. (FPHC), which is in turn 46%-owned by Benpres, the family's listed holding company. Also held by Benpres: 30.2% of fifth-ranked Philippine Commercial International Bank; 47% of BayanTel, the capital's No. 2 land-line phone service; 59% of Maynilad Water Services, which provides 60% of Metro Manila's water; and 70% of First Philippine Infrastructure Development Corp., which controls a 171-km toll expressway linking the capital to the north.

Besides power, banking, phone, water and toll-road franchises, the Lopezes have broadcast licenses. They own 70% of listed ABS-CBN, the country's largest broadcaster, with a 67% audience share nationwide. The company itself owns SkyCable, the top cable-TV firm, and 49% of Studio 23, the biggest UHF channel, and produces films and recordings. Amply demonstrating ABS-CBN's clout, two of its talk-show hosts, Loren Legarda and Rene Cayetano, topped the May 1998 senatorial race.

As if the franchised interests weren't enough reason to see more than just romance in the Estrada-Lopez nuptials, there is a long history of political involvement by the business clan. Fernando Lopez, an uncle of Eugenio Jr. and Manuel Sr., was Ferdinand Marcos's vice president. Marcos himself courted the clan's support for his presidential bids in 1965 and 1969. Relations between them soured; by 1970, ABS-CBN and The Manila Chronicle, then a Lopez paper, were attacking Marcos. He shut them down under martial law in 1972, and jailed Eugenio Jr., partly to pressure his father, Eugenio Sr., to sell major businesses to Marcos cronies and entities.

The Lopezes got most of their ventures back during Corazon Aquino's presidency. In last year's presidential election, they both backed former Manila mayor Alfredo Lim. When President Estrada ousted archrival Richard Gordon from the Subic freeport chairmanship, ABS-CBN reporting tended to favor Gordon. This led Estrada to boycott DZMM's anniversary bash last year. Alarmed, network executives led by chairman Eugenio Lopez III, Eugenio Jr.'s son, hosted a lunch for the president and offered him a weekly radio and TV show - no doubt a big help in his 67% net approval rating so far this year.

Cementing the support of such a media juggernaut would be a considerable asset for Estrada, whose frictions with the press recently led to an apology from The Manila Times and resignations among its staff over alleged palace pressure on the paper's owners. A broadcast ally may also help the Estrada family's ambitions, which do not stop with the end of this presidency in 2004. His son Jinggoy, now in his last term as mayor of San Juan, their Metro Manila hometown, may try for the Senate in 2001. And despite his on-air protestations, Estrada does not seem averse to being associated with tycoons like beer, banking and airline magnate Lucio Tan and plastics king William Gatchalian. Manila recently was planning controls on plastics and petrochemicals imports, but reviewed the idea in the face of private-sector opposition.

Investors seem delighted by the Beaver-Jackie engagement. The day it was headline news, Meralco B-shares jumped 7%, Benpres nearly 5%, and FPHC B-shares 10%. Meralco charges are based on a rate formula vetted by the Energy Regulatory Board. In February 1998, the board ordered Meralco to cut its fees and refund customers a whopping $276 million in excess collections since 1994. The Court of Appeals, under Estrada, has overturned that ruling. Analysts believe Meralco is due for a rate increase and may ask for one as early as September, with approval expected by mid-2000.

ING Barings recommends a buy for three of the five Lopez-linked stocks - ABS-CBN, Benpres, and FPHC - and a hold on the two others, Meralco and PCIBank. The brokerage firm thinks ABS-CBN is a particularly good buy because of its "undiminished market dominance and lower cost for audience share. Its ad revenues rose 10% last year even as the industry's went down 14%." Meanwhile, ABN Amro Philippines Research recommends Meralco, saying it could easily gain 30% if a rate increase is approved within a year.

Stock analyst Jose Salceda, now a congressman, says the power giant's franchises in 80% of its operating area have to be renewed in two or three years - even as Congress, dominated by Estrada's party, favors opening up the electricity sector. Frets company president Manuel Lopez, Beaver's father: "1998 may be the last year we can consider Meralco as a monopoly." Adds an analyst of ING Barings: "The nature of its business makes the company susceptible to political investigation and criticism, particularly in elections."

Congress is also due to review ABS-CBN's licenses expiring in 2003, a year before Estrada leaves office. In addition, a state censorship board vets the network's taped programs and, under a recent Justice Department ruling, even cable TV shows. Charges for the Lopez group's tollways, water and telephone services are subject to official approval. On the other hand, the Lopezes want to sell their PCIBank interests. The Bangko Sentral, the national monetary authority, will have to approve the buyer. "It is the politics of regulation," sums up J. Xavier Gonzales, Benpres's chief operating officer. "Our businesses have political and economic aspects."

For Salceda, the wedding "gives the Lopezes downside protection." Columnist and political analyst Art Borjal believes: "Some of the big and powerful people around President Estrada definitely do not like the Lopezes and want to strip them of their power and strategic industries. After the Jackie-Beaver marriage, though . . . the Lopezes will no longer be vulnerable to dirty schemes and wicked plots."

The Estrada administration is conducting a tax audit of 25 leading conglomerates, including the Lopez group. Also of possible concern to the clan are rumors that Meralco may become the takeover target of buyers friendly to Estrada, as the phone company PLDT was. While the Lopezes run the electric company, the government controls the biggest share bloc - 31.9% - 10% in sequestered shares and 21.9% owned by three state financial institutions. For a while, Finance Secretary Edgardo Espiritu was shopping around for buyers of the sequestered 10% to raise some $250 million for depleted state coffers. But he shelved the plan this year as Congress considered the Omnibus Power Bill expected to open up the electricity sector.

Benpres's Gonzales argues: "We should separate the wedding from the businesses. These are just two young people in love." Since 1986, he insists, "the Lopezes have withdrawn from politics." Beaver, nicknamed after the title role in a 1960s American TV comedy, proposed to Jackie during a trip out of town in early March.

A business administration graduate of Manila's De La Salle University, Beaver manages SkyCable's program acquisitions. The deeply religious Jackie led him to attend daily mass and join her in weekly novena prayers. He has assured his future father-in-law: "I'll take good care of Jackie." But what investors want to know is how Estrada will treat Beaver's family businesses.

GEMS OF THE EMPIRE
In Million Dollars 1997 1998 % Change
Meralco
Revenues 1,736.70 2,110.50 21.50%
Net profit 149.2 129.7 -13.10%
P/E Ratio 15.9 16.9 17.9*
ABS-CBN
Revenues 145.9 171 17.20%
Net profit 45.1 45.3 0.40%
P/E Ratio 11.2 11.2 9.3*
FPHC
Revenues 41.7 54.6 30.90%
Net profit 38.8 32.4 -16.50%
P/E Ratio 7.7 9.2 10.8*
PCIBank
Revenues est. 203.9 215 5.40%
Net Profit est. 93.9 53.1 -43.40%
P/E Ratio 9.1 16.1 14.9*
*1999 proj. p/e. All ratios based on April 8 closing prices
Source: Meralco; ING Barings Philippines Research


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