Editor’s Note: Manuel V. Pangilinan shared his insights on crisis leadership to members of the Penn-Wharton Club of the Philippines on June 25, 2020. He spoke about how the MVP Group of Companies responded to the pandemic and its impact on their businesses. Pangilinan, who heads telecom giant PLDT, infrastructure conglomerate Metro Pacific Investments Corp., and HK-based First Pacific Company Limited among others, is an alumnus of the Wharton Business School, University of Pennsylvania.
It is a privilege to join the fellowship of my Wharton colleagues — especially this time, when a crisis is upon us. I’d like to thank Duane Santos, Wharton-Penn Club president; Lindy Castillo; and Julie Carceller for putting this event together, and of course Cathy Yang for moderating.
The pandemic and our response
When the pandemic broke loose mid-March, our immediate attention was concentrated on 3 of our most important constituents:
First, the health and financial well-being of our employees;
Second, maintaining connectivity and service excellence to our customers;
Third, assistance to the government in caring for those most affected.
COVID is said to be a great leveler – from one perspective, yes -because it can affect anyone – regardless of economic class, gender, or age. From another, it isn’t – because it has inflicted the most pain on our daily wage earners and MSMEs.
During the lockdown, our principal concern was cash flows – to ensure funding for cash OPEX such as salaries, and our capital expenditures for continued network build-out in the teeth of the lockdown. A fortress balance sheet was a paramount goal. Profitability took a back seat, for the meantime.
Let me now turn to COVID’s impact on our major companies.
Impact on PLDT
As to PLDT, revenues in the first four weeks of the lockdown – last half March until first half April – were hardest hit. However, starting Easter Sunday week in April, following through the balance of April, then May, and onwards to June, we have seen a steady, upward march of PLDT’s revenues – especially in wireless and home broadband.
We are probably one of the few companies here to realize service revenues improve over last year’s – despite the pandemic. And our core income for the first half, and full year 2020 ahead of last year – again despite the pandemic.
The pandemic has offered tough challenges, but also large opportunities. It has, in fact, widened the aperture of opportunities for PLDT by accelerating digital adoption by individuals, homes, and business – who all have turned to technologies to adapt to the changes caused by the lockdown.
At the same time, the need for IT solutions in logistics, warehousing correlated with a national supply chain blueprint, track and tracing of COVID patients complemented by a National ID system which I think Sec. Karl Chua has emphasized in one of his latest speeches to the Makati Business Club, e-learning: we’re working intently with the Department of Education to address the possible issues with our students – 32 million students to be precise – when public schools open in August, and telemedicine is increasingly becoming recognized. All this, plus the necessity for increased food production and security.
Impact on MPIC
The effect of COVID on the MPIC portfolio has not been as kind as it has been on PLDT. Although there has been no disaster in any of their companies. Despite this, each operating company will stay profitable for 2020.
For Meralco and Maynilad
- Demand for power and water have a similar profile – significant revenue growth in residential consumption, declines in commercial and industrial volumes. Sales of both declined in April, started to recover in May, and are approaching pre-COVID levels in June.
- Meralco profits are expected to reduce modestly this year – around 10 percent lower— versus last year. Maynilad’s profit for 2020 will also decline by around 15 to 20 percent.
- Cash collections for both Meralco and Maynilad dropped significantly in April—but have recovered this month to almost pre-COVID numbers.
For Tollways and LRT-1
the hardest-hit are our transportation-related businesses.
- The government shut down the operations of all light rail systems. LRT-1 was opened only first week of June. LTFRB however required more than the typical social distancing requirement, thereby restricting capacity utilization to just 13 percent of capacity. Why 13 percent? We don’t know the magic behind 13 percent. Our people have already requested the government to allow up to 50 percent, because they have already done all the social distancing means to promote the safety of the riders. LRT-1 will show a loss this second quarter.
- As to tollways – April was the cruelest month, to quote T.S. Elliott. Traffic dropped 90 percent in the first month of the lockdown, but June is seeing ridership rising to about 2/3 of normal. At this rate, tollways are cash flow and P&L positive.
That’s it for the summary.
In closing, crisis is said to be either a Black Swan (unforeseen but with a huge blast effect) or a Grey Rhino (highly probable but ignored— like the elephant in the room). COVID has painfully reminded us that businesses operate in a Darwinian landscape – it will not be the biggest or smartest who will survive – but those who best adapt to change.
Finally, to lend perspective to what this crisis is all about, I refer to a recent homily made by Fr. Danny Huang S.J., former provincial of the Philippine Jesuit province, which reads – “one concept I have found helpful in naming our time is that of liminality – that strange and unsettling time and state… that space between no longer and not yet.”
This best describes where we are today – in transition, a passage into ambiguity and disorientation – a point in time where the doors of the past are closing behind us, and we, standing at the threshold of a future that is fluid and unknown.
This makes our job of telling what’s ahead— dangerous. I’m reminded of what was once said– “if you want to make God laugh, just tell him your plans.”