Is ABS-CBN Preparing for a Shutdown? Why Have Regularized Employees Been Reduced By Over 60%?

In 2017, ABS-CBN's worker headcount was 11,068 persons as detailed in its 2017 Annual Report. Around 60% of the worker headcount was composed of regularized employees. The rest consisted of Non-Regular Employees, Talents, and Project-Based Employees.

In 2018, ABS-CBN's worker headcount was roughly 2% smaller - only 10,855 person as detailed in its 2018 Annual Report. However, the number of Regularized Employees grew by 2.5% that year. As a result, they comprised a slightly higher percentage of the total workforce - 62%.

ABS-CBN has said time and again that the non-renewal of its broadcast franchise will threaten the livelehoods of its 11 thousand workers. The government claimed otherwise. It said that ABS-CBN only has 4,401 employees.

"In a letter to SolGen Jose Calida dated 21 February 2020, the BIR said ABS-CBN Corp. and ABS-CBN Convergence Inc. have a total of only 4,401 employees, way below the 11,000 the Kapamilya network has been claiming in its efforts to renew its franchise which expires 30 March.

The Internal Revenue based its findings on the Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes submitted by both ABS-CBN Corp. and ABS-CBN Convergence Inc.

The BIR document showed ABS-CBN Corp. has 4,322 employees while ABS-CBN Convergence Inc. has 79 as of 31 December 2018."

 To counter this confusion, ABS-CBN released this statement detailing that it had 11,071 workers as of December 31, 2019.

It said that 5,918 people worked directly for ABS-CBN. Of this number, only 2,661 people were regular employees. The rest were Project-Based Seasonal Workers, Independent Contractors and On-Camera Talents, and Project Employees. An additional 5,153 unclassified workers brought the total ABS-CBN workforce to 11,071.

Classification	2019
Regular	2,661
Project Based	2,096
Independent Contractors	1,069
Project Employees	92
Subtotal	5,918
Others	5,153
Grand Total	11,071

This reveals that the number of permanent, regularized employees has declined substantially - by over 60%, in fact. The rest are expendable. Non-regularized employees tend to have less rights, less benefits, and can be let go at the discretion of ABS-CBN's management, especially in a country like the Philippines where the wheels of justice tend to turn very slowly.

The reduced regular employee headcount took place at a time when ABS-CBN's revenues have, in fact, increased by a healthy 4.9% over the previous year.

The reduced number of regular employees gives ABS-CBN maximum flexibility to let go of employees in the event of a broadcast shutdown and it switches completely to an internet streaming service.

The question is: Is ABS-CBN fighting for its workers or fighting for the right to exploit its workers?

The Beginnings of Wage Inflation

Last year, we estimated that pointed out that there were still 7.4 million workers missing from the labor force. The presence of so many missing workers would dampen wage growth for some time to come. Today, the number of missing workers is down slightly to 6.8 million workers as of January 2020.

And, true enough, wage growth has remained rather subdued given the low official unemployment rate of 3.6% as of January 2020.

But certain sectors of the labor market are starting to tighten. For instance, the prime age (25 to 54 years old) working group is now reflecting a shortage of workers of 191 thousand people.

This indicates that wages for this age group could tighten in the not too distant future.

The tightness of the prime working age group is not shared equally among the sexes. The labor market for Prime Age Women Workers is very tight, with an estimated shortage of almost 1 million women as of January 2020.

For men, it is an altogether a different story. There are still around 800K Prime Age men missing from the labor market..

This gap for Prime Age men is being filled very slowly, only a few thousand a month. But once that gap is filled, wages should start rising up.

Related Posts: Why There Is Still No Wage Inflation: There are 8.1 Million Missing American Workers

In the Last Twelve Years, Philippine Income Inequality Has Declined Substantially

In the last twelve years, Income Inequality in the Philippines has declined substantially, primarily because income growth in the lowest classes have outpaced that of the upper classes. From 2006 to 2018, average per capita incomes for the poorest decile grew by a CAGR of 11.1% a year, while the incomes for the richest decile grew by a CAGR of only 2.81% during the same period. The average Filipino's income also grew by a decent CAGR of 5.1% a year.  As a result, the richest decile, which once towered over the poorest decile by almost 20 times income in 2006, now has a less intimidating ratio of less than 8 times income of the poorest class. For the average Filipino, that ratio has been cut in half, from 5.4 times the poorest decile in 2006 to just 2.8 times in 2018.

Related Links: Why Do Filipinos Love Duterte So Much? Because Income Growth was Fastest Among the Poorer Classes!

Source: Family Income and Expenditure Survey 2018

Just How Reasonable are the Rates of Return of the Water Concessionaires: Manila Water Company and Maynilad?

President Duterte has gone to war with two of the biggest oligarchs in the country, namely the Ayalas and Manny Pangilinan, who operate the water concessionaires Manila Water and Maynilad. He has threatened to arrest them and have them thrown in jail for plunder and syndicated estafa. Specifically, they have been accused of the following:

1. Renegotiating and extending their 1997 contracts thirteen years prior to their expiration in 2022 without the benefit of public bidding.
2. Attaching onerous provisions in the revised contracts that include transferring their income tax burden to the consumers and prohibiting government regulators, the MWSS (Metropolitan Waterworks and Sewerage System), from discharging its mandate to regulate the rate of charges that the companies will collect from the consumers.
3. Collecting environmental fees intended to build water treatment facilities without actually building such facilities, resulting in the pollution of Manila Bay.

As a result, the MWSS has cancelled the extension of the water contracts to 2037 and the government is drafting revised water concession contracts that exclude the terms the President considers onerous.

Plunging Share Prices

Unsurprisingly, with their futures in limbo, the stocks of the water concessionaires have taken deep dives since the President launched his war late last year but have recovered some ground with the prospect of impending contract renegotiations.

Here is the chart for Manila Water:

And here's the chart for Metro Pacific Investments Corporation, Maynilad Water Services' holding company. Maynilad itself was publicly listed in the Philippine Stock Exchange (PSE) until its voluntary delisting in 2017.

Impressive Financials

Both companies have been among the biggest and most profitable companies listed in the PSE, pulling roughly Php 20.0 billion (US$ 392 million) in revenues and Php 6.0 billion (US$ 118 million) in net income each.

Naturally, both companies have stacked up very decent rates of return for their respective shareholders in the last five years. For instance, Manila Water's Return on Equity (ROE) for the last five years (2014 to 2018 plus the last 12 months) have averaged 14.34%. Maynilad's ROE (2015 to 2017) was an even more impressive 21.41%.

Global Comparisons

Now how do these returns stack up, globally?

After scanning Capital IQ for publicly-listed companies comparable to the Water Concessionaires, I arrived at a list of 74 companies that are primarily in the business of Water Supply. Here's the list:

Company Name	Exchange:Ticker	Country of Operations	Revenue (US$ M)	Market Cap (US$ M)
Aguas Andinas S.A. (SNSE:AGUAS-A)	SNSE:AGUAS-A	Chile	703.00	2,622.70
American States Water Company (NYSE:AWR)	NYSE:AWR	California	471.90	3,107.00
American Water Works Company, Inc. (NYSE:AWK)	NYSE:AWK	USA	3,558.00	22,519.30
Aqua Spólka Akcyjna (WSE:AQU)	WSE:AQU	Poland	40.71	54.47
AquaVenture Holdings Limited (NYSE:WAAS)	NYSE:WAAS	Americas	192.70	856.00
Artesian Resources Corporation (NasdaqGS:ARTN.A)	NasdaqGS:ARTN.A	USA	81.90	344.40
AS Tallinna Vesi (TLSE:TVEAT)	TLSE:TVEAT	Estonia	70.90	259.90
Athens Water Supply and Sewerage Company S.A. (ATSE:EYDAP)	ATSE:EYDAP	Greece	357.70	895.80
Beijing Capital Co.,Ltd (SHSE:600008)	SHSE:600008	China	7,873.40
Beijing Enterprises Water Group Limited (SEHK:371)	SEHK:371	Global	3,528.10	5,235.50
Beijing Water Business Doctor Co., Ltd. (SZSE:300055)	SZSE:300055	China	130.30	905.30
Ben Thanh Water Supply Joint Stock Company (HNX:BTW)	HNX:BTW	Vietnam	20.10	9.43
Binh Duong Water - Environment Joint Stock Company (HOSE:BWE)	HOSE:BWE	Vietnam	109.60	142.10
Bohai Water Industry Co.,Ltd (SZSE:000605)	SZSE:000605	China	232.90	368.00
California Water Service Group (NYSE:CWT)	NYSE:CWT	USA	705.10	2,383.20
Chengdu Xingrong Environment Co., Ltd. (SZSE:000598)	SZSE:000598	China	643.90	2,033.50
China Everbright Water Limited (SGX:U9E)	SGX:U9E	China	673.10	690.70
China International Holdings Limited (SGX:BEH)	SGX:BEH	China	10.26	16.90
China Water Affairs Group Limited (SEHK:855)	SEHK:855	China	1,095.70	1,250.80
China Water Industry Group Limited (SEHK:1129)	SEHK:1129	China	124.30	97.60
Chongqing Water Group Co.,Ltd. (SHSE:601158)	SHSE:601158	China	818.70	3,956.80
Compagnie des Eaux de Royan (ENXTPA:MLEDR)	ENXTPA:MLEDR	France	41.93	26.61
Companhia Catarinense de Águas e Saneamento - CASAN (BOVESPA:CASN3)	BOVESPA:CASN3	Brazil	264.90
Companhia de Saneamento Básico do Estado de São Paulo - SABESP (BOVESPA:SBSP3)	BOVESPA:SBSP3	Brazil	4,351.00	10,007.80
Companhia de Saneamento de Minas Gerais (BOVESPA:CSMG3)	BOVESPA:CSMG3	Brazil	1,196.80	2,049.30
Companhia de Saneamento do Paraná - SANEPAR (BOVESPA:SAPR4)	BOVESPA:SAPR4	Brazil	1,071.90	2,406.70
Consolidated Water Co. Ltd. (NasdaqGS:CWCO)	NasdaqGS:CWCO	Global	69.20	251.30
Eastern Water Resources Development and Management Public Company Limited (SET:EASTW)	SET:EASTW	Thailand	150.80	636.80
Essbio S.A. (SNSE:ESSBIO-C)	SNSE:ESSBIO-C	Chile	217.30	409.10
Esval S.A. (SNSE:ESVAL-C)	SNSE:ESVAL-C	Chile	253.70	328.10
Global Water Resources, Inc. (NasdaqGM:GWRS)	NasdaqGM:GWRS	USA	35.04	276.53
Grandblue Environment Co., Ltd. (SHSE:600323)	SHSE:600323	China	802.80	2,219.70
Guangdong Investment Limited (SEHK:270)	SEHK:270	China	1,899.70	14,122.20
Guangxi Nanning Waterworks Co., Ltd. (SHSE:601368)	SHSE:601368	China	210.20	757.30
Heilongjiang Interchina Water Treatment Co.,Ltd. (SHSE:600187)	SHSE:600187	China	66.70	615.70
Hyflux Ltd (OTCPK:HYFX.F)	OTCPK:HYFX.F	Global	111.60	7.90
Iguá Saneamento S.A. (BOVESPA:IGSN3)	BOVESPA:IGSN3	Brazil	214.30
Inversiones Aguas Metropolitanas S.A. (SNSE:IAM)	SNSE:IAM	Chile	703.00	1,071.90
Jiangsu Jiangnan Water Co., Ltd. (SHSE:601199)	SHSE:601199	China	138.30	528.00
Jiangxi Hongcheng Waterworks Co., Ltd. (SHSE:600461)	SHSE:600461	China	689.60	835.40
Kunming Dianchi Water Treatment Co., Ltd. (SEHK:3768)	SEHK:3768	China	230.00	309.70
Luzhou Xinglu Water (Group) Co., Ltd. (SEHK:2281)	SEHK:2281	China	207.80	147.00
Lydec S.A. (CBSE:LYD)	CBSE:LYD	Morocco	786.20	401.30
Manila Water Company, Inc. (PSE:MWC)		Philippines	417.10	462.80
Middlesex Water Company (NasdaqGS:MSEX)	NasdaqGS:MSEX	USA	135.10	1,084.40
Muscat City Desalination Company S.A.O.C. (MSM:MCDE)	MSM:MCDE	Oman	43.67	43.64
New England Service Company, Inc. (OTCPK:NESW)	OTCPK:NESW	USA	7.52	21.49
Nha Be Water Supply Joint Stock Company (HNX:NBW)	HNX:NBW	Vietnam	28.29	20.14
PBA Holdings Bhd (KLSE:PBA)	KLSE:PBA	Malaysia	83.30	88.00
Pennon Group Plc (LSE:PNN)	LSE:PNN	United Kingdom	1,869.20	5,822.40
Puncak Niaga Holdings Berhad (KLSE:PUNCAK)	KLSE:PUNCAK	Malaysia	106.00	33.00
Pure Cycle Corporation (NasdaqCM:PCYO)	NasdaqCM:PCYO	USA	27.75	296.05
Qian Jiang Water Resources Development Co;Ltd (SHSE:600283)	SHSE:600283	China	165.30	522.00
Ranhill Holdings Berhad (KLSE:RANHILL)	KLSE:RANHILL	Global	406.80	280.10
Saigon Water Infrastructure Corporation (HOSE:SII)	HOSE:SII	Vietnam	7.82	49.73
Salcon Berhad (KLSE:SALCON)	KLSE:SALCON	Malaysia	43.26	43.05
Severn Trent Plc (LSE:SVT)	LSE:SVT	United Kingdom	2,344.40	7,997.20
SIIC Environment Holdings Ltd. (SGX:BHK)	SGX:BHK	China	853.60	512.00
SJW Group (NYSE:SJW)	NYSE:SJW	USA	393.40	1,976.00
Société de Distribution d'Eau de la Côte d'Ivoire, S.A. (BRVM:SDCC)	BRVM:SDCC	Ivory Coast	176.60	42.70
Taliworks Corporation Berhad (KLSE:TALIWRK)	KLSE:TALIWRK	Malaysia	90.70	431.50
The Torrington Water Company (OTCPK:TORW)	OTCPK:TORW	USA	7.34	35.42
The York Water Company (NasdaqGS:YORW)	NasdaqGS:YORW		50.60	622.00
Thessaloniki Water Supply & Sewerage Co S.A. (ATSE:EYAPS)	ATSE:EYAPS	Greece	76.80	192.70
Thu Duc Water Supply Joint Stock Company (HOSE:TDW)	HOSE:TDW	Vietnam	21.13	8.80
TTW Public Company Limited (SET:TTW)	SET:TTW	Thailand	201.40	1,830.10
United Utilities Group PLC (LSE:UU.)	LSE:UU.	United Kingdom	2,393.80	8,867.70
Universal Technologies Holdings Limited (SEHK:1026)	SEHK:1026	China	34.54	148.32
Watlington Waterworks Limited (BER:WWW.BH)	BER:WWW.BH	Bermuda	11.99	26.66
WHA Utilities and Power Public Company Limited (SET:WHAUP)	SET:WHAUP	Thailand	59.60	731.60
Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji S.A. (WSE:WOD)	WSE:WOD	Poland	9.82	8.36
Wuhan Sanzhen Industry Holding Co.,Ltd (SHSE:600168)	SHSE:600168	China	225.70	710.50
Yunnan Water Investment Co., Limited (SEHK:6839)	SEHK:6839	China	912.90	255.10
Zhongshan Public Utilities Group Co.,Ltd. (SZSE:000685)	SZSE:000685	China	300.10	1,821.80

Some are big, some are small. Many are in China or the ASEAN. But in every case, both Manila Water and Maynilad's Rates of Return tended to gravitate to the upper end of the spectrum, be it globally, Asia-wide, or in Southeast Asia and in every category of return. Manila Water's returns are highlighted in orange while Maynilad's are highlighted in yellow.

Global Returns:

Asian Returns:

Southeast Asian Returns:

Statistical Rankings

Both Manila Water's and Maynilad's Rates of Return are far above average on a global, Asian-wide, and Southeast Asian-wide basis.

Manila Water's Rates of Return are above the 75th percentile (meaning only 25% of the companies have higher returns) globally and in Southeast Asia in terms of ROA and ROC. Asia-wide, its returns are at least in the 83rd percentile in all categories of returns.

Maynilad's Rates of Return rank above the 90th percentile in all geographic categories and in all categories of return except one: global Return on Common Equity (ROCE) - where it ranks in the 65th percentile.

Conclusion:

The impending contract renegotiations and removal of the provisions deemed "onerous" by the Duterte administration will inevitably result in a much slower growth in water tariffs and higher costs for the water concessionaires. They will no longer be able to pass on their income tax burdens to the consumers, they will have to build expensive water treatment plants, and they will no longer enjoy uncontested and automatic rate increases.

All this will serve to lower their rates of return  and align them with international averages. The returns of Manila Water and Maynilad will closely resemble that of a regular water utility stock: safe but boring.

Source: Capital IQ, www.edge.pse.com.ph