The Philippine foreign minister sparked a diplomatic fight over Twitter by asserting ownership over the Malaysian state of Sabah on the island of Borneo, reviving a longstanding territorial dispute between the Southeast Asian nations.
Malaysian Foreign Minister Hishamuddin Hussein, on his official Twitter account, said he will summon the Philippine ambassador on Monday in reaction to his Philippine counterpart’s July 27 tweet.
Philippine Foreign Secretary Teodoro L. Locsin, Jr., tweeted that “Sabah is not in Malaysia if you want to have anything to do with the Philippines,” reacting to a US Embassy item describing the area straddling both nations as part of Malaysia.
This is an irresponsible statement that affects bilateral ties. @MalaysiaMFA will summon the Philippines Ambassador on Monday to explain. Sabah is, and will always be, part of Malaysia. https://t.co/KcUnDxOySl
— Hishammuddin Hussein 🇲🇾 (@HishammuddinH2O) July 29, 2020
You summoned our ambassador for a historically factual statement I made: that Malaysia tried to derail the Arbitral Award. This was reported to us by our diplomats on the scene and our German lawyer. None may share our Hague victory who worked against it. https://t.co/BzmWvE5NGQ
Sabah is a long-standing, on-and-off flashpoint between the neighbors, with the most recent flare-up in February 2013 when followers of a self-proclaimed sultan of Sulu, sought to claim sovereignty and led to clashes that killed dozens.
The sultans of Sulu once ruled over Sabah and the Sulu islands in southern Philippines. The state fell under British control after World War II and joined Malaysia in 1963, shortly after Sulu ceded its sovereignty to the Philippines.
The Sabah state itself is facing its own domestic political upheaval as the opposition party said it has enough majority in state parliament to take over—leading Chief Minister Shafie Apdal, who has also been touted as a possible prime minister candidate, to hold a lengthy meeting with the state governor late Wednesday amid talks of a snap state election. — Bloomberg
The Philippine government has been studying how to capture the potential value-added tax (VAT) leakages in the digital economy. Among those that may be affected are services offered by global tech giants such as Netflix, Inc. — GABBY JONES/BLOOMBERG
By Charmaine A. Tadalan, Reporter
THE House Ways and Means Committee on Wednesday approved a measure that would impose a 12% value-added tax (VAT) on digital services, particularly those offered by foreign technology companies such as Facebook, Netflix, Inc., Alibaba’s Lazada and Alphabet’s Google.
The move to tax the digital economy comes as the government seeks new sources of revenues after tax collections plunged due to the coronavirus pandemic.
“Based on the estimates, it (will generate) P10.66 billion (in annual revenues). Around P9.31 billion will come from transactions with non-residents and around P1.36 billion will come from (local companies),”Finance Assistant Secretary Dakila Elteen M. Napao said during the House panel’s hearing on Wednesday. “This is on top of the existing VAT on e-commerce that is being collected.”
The bill will be sponsored in the plenary next week, House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente S. Salceda said in a phone message.
Under the measure, all digital transactions will be subjected to a 12% VAT. This would apply to service providers that operate online platforms for buying and selling, supply online advertisement services, and provide digital services in exchange for a subscription fee, among others.
The bill said digital services include mobile apps, video and online games, online software licensing, webinars, search engine services, social networks, electronic marketplaces, file sharing and cloud storage services, advertising platform, website-hosting, internet-based telecommunication, online training, e-learning, online newspapers and payment processing services.
The digital economy has been booming in the Philippines, as the lockdown measures forced people to stay at home and businesses to close brick-and-mortar shops.
Many small businesses have expressed dismay at the government’s plan to tax digital services, but Mr. Salceda assured the digital transaction tax will not affect them.
“If your net income as a sole proprietor is below P250,000, you are exempt from paying and filing income taxes. So, the small Facebook online seller will not be taxed. I guarantee you,” he said in a statement.
Mr. Salceda also noted under the VAT law, businesses with gross sales below P3 million are exempted.
The bill also states that non-resident digital service providers that sell digital services in the Philippines should register for VAT if their gross sales or receipts in the last 12 months have exceeded P3 million or “there are reasonable grounds to believe” their gross sales or receipts will exceed P3 million in the next 12 months.
The digital transaction tax measure is one of the House panel’s priorities, along with the proposal to tax Philippine Offshore Gaming Operations and update the road users’ tax.
Based on his tax impact analysis, Mr. Salceda said 76.91% of the revenues will come from upper middle-income families and above, while 20.38% will come from households that earn at least P100,000 but below P250,000 annually. Only 0.04% of all revenues will come from the bottom 20% of the population.
“This is the mildest imposition you can make when the country is in severe need of new revenues. And it covers a mostly discretionary spending,” he said.
Mr. Salceda noted the bill does not impose new taxes, rather it seeks to capture VAT that should have been imposed on digital transactions under the present tax code.
“We imposed no new taxes. We’re simply clarifying that they should be ‘VATed.’ In general, if you sell, you pay VAT, unless you fall under the exemptions for small businesses,” Mr. Salceda also said.
AAMBIS-OWA Rep. Sharon S. Garin, House Ways and Means Committee vice chairperson, said during the hearing the bill intends to “level the playing field” by covering foreign corporations.
“What we’re addressing here is… the service providers from outside because they are gaining profit from us and from our constituents and hindi sila nagbabayad ng tax (they’re not paying tax),” she said. “While kung dito ka nag-bebenta, mag-babayad ka ng tax. (While if you do business here, you’re subject to tax).”
No counterpart measure has so far been filed in the Senate, but a resolution has been introduced asking the Senate Ways and Means Committee to study the possibility of collecting taxes from the digital economy as a way to generate revenues for the government’s pandemic response.
Senate President Pro Tempore Ralph G. Recto, however, said in a phone message that the proposal “will be difficult to implement.”
“Having said that I do not think it is wise to impose new taxes at this time,” he said.
The government set a P170-billion borrowing program for August. — BRENT LEWIN/BLOOMBERG
THE government is planning to borrow P170 billion from the domestic market in August, nearly a fifth lower than the July borrowing program, the Treasury said on Wednesday.
The Bureau of the Treasury (BTr) is also offering longer term papers next month as investors seek higher returns.
In an advisory on Wednesday, BTr said it plans to raise P110 billion in Treasury bills (T-bills) and P60 billion in Treasury bonds (T-bonds) next month. This is 17% lower than the P205-billion borrowing plan for July, but similar to the program in June and May.
Auctions for T-bills will be held every week, while T-bonds will be offered fortnightly.
BTr will offer P5 billion worth of 91- and 182-day debt papers each, and P10 billion worth of 364-day securities every Monday. It will auction off P15 billion worth of 35-day instruments every other Tuesday — on Aug. 4 and Aug. 18.
The Treasury is looking to raise P30 billion from the issuance of 10-year notes on Aug. 11, and another P30 billion from 20-year T-bonds on Aug. 25.
National Treasurer Rosalia V. de Leon said the longer tenors are being offered to accommodate investors seeking higher returns, as rates continued to slide.
“(Market participants are in) search for yields and some investors need long tenors to match their asset liability management like insurance companies,” Ms. De Leon said in a text message on Wednesday.
Kevin Palma, peso sovereign debt trader of Robinsons Bank Corp., said investors will continue to flock to government securities for safety next month, but some players will shift to longer tenors for higher yields.
“Demand for (government securities) is still expected to spill over in August more so for the offerings on the front end of the curve as dealers and investors alike may continue to park excess liquidity on that sector,” Mr. Palma said via Viber.
“With local bond yields not expected to tick higher anytime soon due to relatively benign inflation amid our current battle with the global pandemic, the market may continue to hunt for higher yields which the 10-year and 20-year can offer,” he added.
In July, the government raised P165.5 billion via government securities.
The Treasury has canceled three scheduled auctions during the month to give way to the public offer of retail Treasury bonds (RTBs) which is set to run until Aug. 7.
Ms. De Leon has said the amount so far has already exceeded the record P310 billion in three-year retail bonds sold in February. — Beatrice M. Laforga
THE Philippine economy may have contracted by as much as 20% in the second quarter, when the strict lockdown was in place. — BLOOMBERG
By Beatrice M. Laforga and Luz Wendy T. Noble, Reporters
BANGKO Sentral ng Pilipinas Governor Benjamin E. Diokno on Wednesday said the “worst is over” for the economy after it already hit the lowest point of the crisis.
Think tank Capital Economics projected Philippine gross domestic product (GDP) to have shrank by nearly 20% in the second quarter as the strict lockdown came into full swing.
“We estimate that the Philippines economy shrank by almost 20% year-on-year in Q2, after output fell 0.2% in Q1,” Capital Economics said in a July 28 report titled “Emerging Asia Chart Book: A mixed second quarter.”
A 20% contraction, if realized, will be the steepest decline in quarterly GDP in history and plunge the Philippines into a recession.
The PSA will release second-quarter GDP data on Aug. 6.
“I foresee a ‘hockey stick’ like recovery, with the lowest point in the second quarter…The worst is over,” Mr. Diokno said in a speech at an online forum on Wednesday.
“But the third quarter will be better and the fourth quarter will be even stronger. We expect a strong rebound in 2021 and 2020,” he added.
The government sees GDP shrinking by 2-3.4% this year, but expects growth of 8-9% in 2021 and 6-7% by 2022.
Capital Economics attributed the grim second-quarter GDP performance to the government’s stringent containment measures. Metro Manila and other parts of the country were placed under a strict lockdown from mid-March to May, causing a “massive economic impact” as nearly all economic activity was halted.
While restrictions on mobility are slowly being eased, Capital Economics said economic activity remained “depressed and is recovering much slower than elsewhere.“ It noted, however, the economic contraction may have already bottomed out in May.
“There has been more evidence that the fiscal response in the Philippines has been inadequate in the face of a huge slump in activity,” it added.
The Philippines, along with Thailand and India, are projected to be the “worst-performing economies” in the emerging Asia region due to prolonged strict lockdown measures and large exposure to the tourism sector, Capital Economics said.
Raul V. Fabela, professor emeritus at the University of the Philippines, said a slow reopening of the economy might push the government to release more funds for jobless Filipinos.
“The deficit and credit rating worry is misplaced. The economy is in the ICU (intensive care unit) but the government is acting like it is in the outpatient clinic! The recovery fund in Bayanihan II should be larger,”’ Mr. Fabella said in an e-mail, referring to the P140-billion stimulus measure approved by the Senate on Tuesday.
University of Asia and the Pacific School of Economics Dean Cid L. Terosa said further opening up the economy should be complemented by “confidence-building health measures,” good governance and digitalization to assure the public that the government can control the escalating coronavirus pandemic.
“I believe the approach should shift to building the resilience of cities and local communities so that they canbecome active regenerators of economic and business activities. Opening up the economy and keeping it afloat means preparing, shielding, and nurturing the geographical spaces that cradle businesses, entrepreneurs, investors, and workers,” Mr. Terosa said via e-mail.
President Rodrigo R. Duterte said in his State of the Nation Address on Monday that opening up the economy to a pre-pandemic level “is not an option” for now as they assess the tradeoffs between public health and the economic impact.
NO STRICT LOCKDOWN
Amid the continued surge in coronavirus infections, Mr. Diokno said the country has built enough capacity to respond to the health crisis. Wider, stricter lockdowns will no longer be needed,and only targeted ones may be imposed in the barangay-level, he added.
“We have to be hopeful that things are starting to open up and that more people are going to get employed,” he said.
The country’s jobless rate rose to a 17.7% in April from the 5.1% a year ago. This is the highest since 2005 and represents 7.25 million jobless Filipinos. To add to this, more than 102,000 overseas Filipino workers (OFWs) have been repatriated due to the pandemic.
Mr. Diokno expressed confidence the July unemployment numbers to be reported by the PSA on Sept. 4 will not be as bad as the April figures.
But Philippine Chamber of Commerce and Industry (PCCI) Benedicto V. Yujuico said more Filipinos are likely to be jobless as the crisis stretches on.
“For unemployment, I see that it will continue to get worse — that is the report I am getting in the field — unless business actually opens up with a certain degree of safety,” he said during the forum.
“The key is consumer confidence, the key is businesses to recover slowly, and for us to manage the COVID-19 (coronavirus disease 2019) crisis. And all of this together will actually bring back the employment,” he added.
The Department of Health (DoH) on Wednesday reported 1,874 new coronavirus infections and 16 additional COVID-19 deaths. In a bulletin, the DoH said total deaths have increased to 1,962 while confirmed cases have reached 85,486.
Wednesday marked the 15th successive day of 1,000 or more new cases, which has pushed many hospitals nearer their patient capacity. — withReuters
THE National Government’s (NG) outstanding debt breached the P9-trillion mark as of end-June, on increased government borrowings to finance the coronavirus response.
In its latest report released on Wednesday, the Bureau of the Treasury (BTr) said outstanding debt climbed 1.8% to P9.054 trillion, from the P8.89 trillion logged as of end-May. This was also 15.1% bigger than P7.869 trillion recorded as of June 2019.
The NG debt portfolio rose by P1.32 billion or 17.1% from P7.73 trillion as of end-December 2019.
Around two-thirds of the debt sourced domestically, while 32% came from external sources.
Outstanding domestic debt increased by 2.6% month on month to P6.19 trillion as of end-June on the back of higher issuance of local government securities. Local debt papers issued jumped 2.7% to P5.89 trillion from the month prior and 11.2% year on year.
Total foreign debt reached P2.864 trillion, up 0.3% from the month prior and 11% higher from a year ago.
“For June, net availment of external loans amounted to P48.81 billion which was offset by the P41.5 billion mainly due to local currency appreciation,” the Treasury said. The peso hit P49.79 against the greenback last month from P50.585-a-dollar level seen in the period ending May.
Despite the rising debt stock, World Bank Country Director for Brunei, Malaysia, the Philippines and Thailand Ndiame Diop said the country was still able to maintain “prudent fiscal management” which would allow it to boost its fiscal response to the pandemic.
“We are looking at the Philippines and comparing to other countries in the region and looking at the initial condition, what is the economic condition when the pandemic hit.… I think the prudent fiscal management of the past few years has really positioned the country to be among the countries that are really at the forefront in terms of capacity to respond on the fiscal side,” Mr. Diop was quoted as saying in a statement released Wednesday by the Finance department.
Debt-to-gross domestic product (GDP) ratio hit a low of 39.6% in 2019.
The Development Budget Coordination Council (DBCC) projected outstanding debt to balloon to a record P9.589 trillion or 49.8% of GDP by end-2020.
As revenues slide amid the pandemic, the government is planning to borrow more to plug the budget deficit that may reach 8-9% of GDP. — Beatrice M. Laforga
FIBER internet provider Converge ICT Solutions, Inc. is stepping up its nationwide expansion as it aims to connect “millions of unserved and underserved” households and businesses by 2021, its top official said.
“We plan to continue to execute a dual-pronged network expansion strategy: first, under our ‘Go-National’ strategy, we plan to expand our domestic backbone nationwide to connect regions we have not covered to date; second, under our ‘Go-Deep’ strategy, we plan to further deepen our distribution and last mile networks within existing and new coverage areas,” Dennis Anthony H. Uy, founder and chief executive officer of Converge, told BusinessWorld in an e-mail interview on Tuesday.
Converge currently operates an end-to-end high-speed fiber network in the country with more than 30,000 kilometers in length. The company is working to expand its domestic backbone from Luzon to the Visayas and Mindanao islands.
“We expect to provide nationwide backbone infrastructure coverage by 2021. In parallel, we are continuing to build out the capillaries of our distribution and last-mile networks throughout Luzon, as well as expanding beyond Luzon to Visayas and Mindanao,” Pampanga-based businessman Mr. Uy added.
In an effort to help improve the internet traffic across the country, Converge recently doubled its bandwidth to PhOpenIX, a carrier-neutral internet exchange platform.
The company saw an acceleration of new subscribers in the first half of the year, mainly because of the coronavirus pandemic.
“In May 2020, we acquired approximately 50,000 new residential subscribers (gross), the highest monthly gross adds on record, compared to monthly new residential subscriptions (gross) of approximately 33,000 in each of January and February 2020. In June 2020, we added approximately 60,000 new residential subscribers, exceeding the May 2020 record by 20%,” Mr. Uy said.
The company has also commissioned an innovative and flexible high-capacity backbone. “The new 400G metro backbone utilizes industry-leading optical solutions from a United States-based networking systems, services and software company,” he said.
“The 400G optical solution will enable us to be flexible and efficiently improve the capacity of our nationwide backbone to deliver a more seamless user experience for our existing and potential customers,” he added.
NETWORK ROLLOUT AMID PANDEMIC
Mr. Uy said Converge slightly slowed its network rollouts during the strict community quarantine period.
By May 2020, rollouts had returned to, and in some areas exceeded, the pre-pandemic rollout pace, he added.
The company was able to add 438,648 new ports in the first half, compared with 295,074 new ports rolled out during the same period last year.
Converge recently submitted an application to the Securities and Exchange Commission to do a P35.92-billion initial public offering.
The target retail offer period is from Oct. 13 to 19 and listing on Oct. 26. About 90% of the proceeds from the offering will be used for capital expenditures, while the remainder would go to general corporate purposes.
RFM CORP. is cutting its capital expenditures (capex) this year to less than P100 million as it preserves liquidity to cope with the coronavirus disease 2019 (COVID-19) pandemic.
In an e-mail to BusinessWorld on Wednesday, RFM Chief Financial Officer Enrique Oliver I. Rey-Matias said the company’s 2020 capex is more than three-fourths down from a year ago, when it spent more than P400 million.
“If last year [capex] was over P400 million, this year would be less than P100 million so far. Capex [is currently] put on hold,” he said.
In a statement to the exchange, RFM said it had “tightened on expenses and capex spending to conserve liquidity and maintain profitability in light of changing consumption patterns.”
The company’s revenues are only starting to pick up in the second quarter, after it suffered a 4% profit decline in the first three months of the year due to supply chain disruptions when Luzon was on a strict lockdown.
In the April-to-June period, RFM’s attributable net income increased 11% to P399 million, while revenues remained flat at P3.87 billion, based on its regulatory filing on Wednesday. Its gross expenses were also flat at P3.26 billion.
This brought profits up 5% to P611 million for the year-to-date, which Mr. Rey-Matias said is due to the recovery of its ice cream and bread businesses.
During RFM’s annual stockholders’ meeting on Wednesday, the CFO reported the company’s net sales improved 2% to P7.09 billion in the first half, largely due to the 18% sales growth of its pasta, milk, sauce and flour businesses.
“Sales for the second quarter of 2020 showed that the first-quarter slowdown in ice cream and institutional bread has seen some signs of reversal, and the strong demand for milk and pasta continued to be sustained,” Mr. Rey-Matias.
He noted the stay-at-home setup has left many customers buying RFM’s pasta, sauce and milk products to aid them in cooking their own meals from home.
“In terms of the 2020 outlook, RFM continues to be cautiously optimistic for the full year,” Mr. Matias said. “With the initial P7 billion in sales for the first half, and the estimated P611 million net income, we foresee that we will be continuing with this growth trend for the rest of the year.”
Aside from being in the “essentials” sector, RFM is also banking on the upcoming Christmas season as a driver for its sustained growth in the months ahead.
“I believe the coming months will be the strongest period where Filipinos will start buying for Christmas. That starts as early as September all the way to December,” RFM President and CEO Jose Ma. “Joey” A. Concepcion III said in the meeting.
Also on Wednesday, RFM’s board of directors approved a plan to add P500 million to its share buyback program, increasing the budget for the plan to P1.4 billion.
Shares in RFM at the stock exchange increased six centavos or 1.45% to close at P4.20 each at the end of trading.
THE METROPOLITAN Waterworks and Sewerage System (MWSS) Regulatory Office has served a show-cause order to Manila Water Co., Inc. and Maynilad Water Services, Inc. in response to over 400 billing complaints filed by the customers of the two water providers.
In a statement, Wednesday, MWSS Chief Regulator Patrick Lester N. Ty ordered the water concessionaires to explain their noncompliance to the regulatory agency’s directive to check for billing irregularities, to verify the consumption patterns of customers, and to withhold any customer billing statements with significant deviation from the said patterns.
Further, Mr. Ty ordered Maynilad and Manila Water to submit an explanation regarding their failure to communicate all information concerning the directives to their customers and concerned stakeholders.
MWSS gave the two water providers until the end of this week to issue an official explanation and to resolve the observed violations.
In a statement, east zone water concessionaire Manila Water said it was confident that it had followed every guideline issued by the MWSS on the implementation of average billing during the lockdown and the actual billing after, including the provision of installment payments and disconnection grace periods.
Manila Water said that based on the data it gathered from June 1 to July 27, only 7% or 73,588 of its 1 million customers have asked for clarifications on their billing statements.
“Of these, 90% were resolved by the call center or by business area frontliners. Only 0.7% of customers, or 7,937, have cases that were endorsed for further handling and of these, 6,246 were verified to have been billed based on actual consumption of customers,” Manila Water said.
“We take all our customers’ concerns seriously and have always strived to respond and resolve these above and beyond regulatory standards,” it added.
Meanwhile, west zone water provider Maynilad said that it had actively implemented measures to avoid customer confusion on how water consumption during the stricter lockdown period will be computed.
In a statement, Maynilad added that its field personnel had postponed the issuance of water bills that deviated from usual consumption patterns for verification and appropriate adjustments.
“These interventions helped, given the minimal number of bill-related inquiries and concerns raised — only 1.33% of 1.46 million accounts,” Maynilad said.
Both water concessionaires said they would comply with the show-cause order and deadline set by MWSS.
On July 23, the MWSS issued a “notices to explain” to Manila Water and Maynilad over the rising number of customer complaints it received with regard to water bills.
Average billing policy was applied by the two water concessionaires after meter reading and billing activities were suspended due to the coronavirus disease 2019 (COVID-19) pandemic.
Metro Pacific Investments Corp., which has majority stake in Maynilad, is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Revin Mikhael D. Ochave
LOPEZ-LED First Gen Corp. is expecting to start building its liquefied natural gas (LNG) terminal project in Batangas in the second half of the year.
“We are hoping to start construction in the second half of this year,” said First Gen President Francis Giles B. Puno during the company’s annual stockholders’ meeting, Wednesday.
In March, the company’s subsidiary FGEN LNG Corp. submitted to the Department of Energy (DoE) its application for a permit to construct, expand, rehabilitate, and modify (PCERM) for its gas terminal project.
The construction kickoff is dependent on the approval of the said permit, Mr. Puno said.
First Gen is developing an interim offshore LNG terminal within its Clean Energy Complex in Batangas City.
The project will modify its existing liquid fuel jetty to become multi-use and build an adjunct gas-receiving facility.
Once completed, the terminal will utilize a floating storage and regasification unit (FSRU), a carrier that is capable of storing LNG and returning it back to its gaseous state.
On July 16, First Gen told the stock exchange that it chose three foreign firms to likely participate in its bid invitation for the lease of the project’s FSRU. The bidding will commence in September.
The potential bidders are BW Gas Ltd. of global gas shipping company BW Group; New York-listed GasLog’s unit GasLog LNG Services Ltd.; and Hoegh LNG Asia Pte Ltd., owned by the Norwegian LNG carrier provider Hoegh LNG Holdings.
Since January, the company spent $60 million out of the allotted $300-million budget for the project.
“The remainder of the amount will be disbursed over the next two to three years. This is likewise contingent on receiving the permit to construct from the [DoE],” Mr. Puno said.
The government’s Energy Investment Coordinating Council declared the LNG terminal project as an Energy Project of National Significance under Executive Order No. 30.
Meanwhile, First Gen has earmarked $18 million for its gas plants in 2021. This includes a $2.5-million budget for the life extension of its Santa Rita and San Lorenzo plants and another $2.5 million for the 97-MW Avion generator.
On Wednesday, shares in First Gen grew by 5.91% to close at P26 each. — Adam J. Ang
APPLE, INC.’s newest services have yet to generate meaningful revenue, making it harder for the largest technology company to expand beyond the iPhone and other hardware.
Last year, the Cupertino, California-based company launched four new services: TV+, Arcade, News+ and the Apple Card. After a few quarters on the market, the offerings haven’t contributed much to Apple’s top line.
When Apple reports results on July 30, investors will be looking for updates on these offerings. Services growth has been a bright spot in recent years as iPhone sales have slowed. For the fiscal third quarter, analysts forecast $13.1 billion in revenue from services, up 15% from a year earlier. Most of those gains will come from existing services, such as the App Store and licensing deals, rather than the new offerings.
The TV+ videostreaming service, which launched last November, has had no blockbusters yet, though some shows and movies have been well-received. Apple offered a one-year free trial with the purchase of a new iPhone or other hardware. Sanford C. Bernstein analyst Toni Sacconaghi estimated earlier this year that fewer than 15% of eligible customers had signed up.
During a keynote presentation at last month’s WWDC conference, Apple said little about the streaming service, according to Mr. Sacconaghi. He said there’s “potential need for a strategic reevaluation of TV+” and suggested the company should consider spending more on original content.
Apple introduced its Arcade mobile game subscription last September with 100 titles and praise from reviewers. However, the company recently shifted strategy, canceling contracts for some games in development while seeking other titles that it believes will better retain subscribers. Some developers said that suggests subscriber growth has been weaker than expected so far.
The Apple Card came out in the US last August. It has no annual fee, but the company likely takes a cut of the interest charged by partner Goldman Sachs Group, Inc. The bank accumulated about $2 billion in credit lines since launch, a fraction of other co-branded cards, according to a February update by the Nilson Report.
The News+ subscription offering may be the least successful so far. When it launched in March 2019, the highest-profile US newspapers — The New York Times and The Washington Post — didn’t take part. Since then, several publishers have complained about lower-than-expected income from the app. The head of business for Apple News stepped down, Bloomberg reported earlier this year.
These new services may grow more later. For now, the company is relying a lot on its App Store and third-party developers to spur revenue growth beyond hardware. That’s been going well lately, leaving the company on track to exceed $50 billion in annual Services revenue soon.
The App Store generated $32.8 billion in the first half of 2020 for developers, up more than 20% from a year earlier, according to Sensor Tower estimates. Paid subscriptions topped 515 million in the fiscal second quarter.
Apple takes a cut of 30% from all paid apps downloaded from the App Store as well as purchases made inside of apps. It also takes 30% from in-app subscriptions, or 15% after the first year. Apple requires billing to be done through its system, but it makes exemptions for apps offering music and videostreaming, books, and some cloud services where a user may have already bought a subscription from the developer directly.
Ride-sharing and food delivery apps also aren’t required to use Apple’s payment network. And some social media apps like Snapchat and Instagram make money from advertising, which prevents Apple from taking a cut.
When Apple App Store executives meet with high-profile developers, they sometimes encourage them to implement in-app purchases and subscriptions. The message is interpreted by some this way: Your app has enjoyed the benefits of the App Store without contributing to its financial success, according to a person familiar with the meetings.
That idea was echoed in June when an update to the e-mail app Hey was barred from the App Store because the developer refused to implement a way to sign up in the app, which would give Apple up to a 30% cut of revenue.
“We understand that Basecamp has developed a number of apps and many subsequent versions for the App Store for many years, and that the App Store has distributed millions of these apps to iOS users,” Apple told Hey’s developer. “These apps do not offer in-app purchase — and, consequently, have not contributed any revenue to the App Store over the last eight years.”
After the developer complained publicly, Apple said the app can stay as long as it follows the app review guidelines, regardless of implementing in-app purchases or subscriptions. — Bloomberg
AN AFFILIATE company of Ayala Corp.’s energy arm now owns a material interest in an Australian power firm, which it initially aims to fully take over.
UAC Energy Holdings said it received 20% shareholding interests in Infigen Energy Ltd. from the share purchases of its A$0.86-per-share bid, as of Wednesday.
The energy firm, which is 75% owned by AC Energy, Inc., seemingly conceded the full acquisition of Infigen to its rival bidder Iberdrola, S.A., which hiked its offer price to A$0.92 per share last week upon receiving more share tenders.
Still, the company is “pleased” to have met its objective of securing a material stake in Infigen.
“The offer was not predicated on control, and was therefore not subject to a minimum acceptance condition,” UAC Energy Chairman Anton Rohner said.
UAC Energy’s total investment in Infigen is valued at A$178 million, or about US$128 million, based on Iberdrola’s offer price.
The investment provides an “attractive” means of improving the company’s exposure to the Australian clean energy bloc, according to Jose Maria P. Zabaleta, AC Energy chief development officer and a director of UAC.
He added that AC Energy has a more strengthened outlook for its Infigen investment as Iberdrola is poised to become its largest shareholder.
Currently, the Spanish multinational utility owns a fourth of the renewables firm’s total securities. It has extended until Aug. 7 the acceptances for its bid.
To recall, UAC Energy and Iberdrola pounced on the renewable energy company after its share prices dropped with the fall in power prices in the country. Infigen owns and operates wind farms with a total of 670 megawatts in capacity, along with gas, battery and contracted assets.
Iberdrola is one of the biggest energy players in the world having over 55 gigawatts of installed capacity in Spain, the United Kingdom, South America, and the United States. It powers around 34 million consumers worldwide.
UPC\AC Renewables Australia, the joint-venture firm of the AC Energy and Hong Kong-based UPC Renewables Group, holds the remaining interest in UAC Energy.
In the first half of the year, AC Energy commenced the construction of some 700-megawatt renewables projects in the Philippines, Vietnam, India and Australia which have a combined cost of A$1.23 billion.
“We are committed to the Australian renewables sector, which will continue to form part of our core strategy,” said AC Energy Chief Executive Officer Eric T. Francia.
Shares in Ayala Corp. inched up 0.14% to close at P723 apiece on Wednesday. — Adam J. Ang
THE LOCKDOWN in the Philippines has caused an acceleration towards cloud data protection as small banks lag behind in technology adoption compared to their Southeast Asian peers.
Kamal Brar, vice-president and general manager for Asia-Pacific and Japan for cloud data management company Rubrik, said in an online interview earlier this month that the country is behind its Southeast Asian neighbors in terms of cloud data adoption.
“It’s usually the smaller-sized banks or smaller-sized organizations that are still lagging behind where we think would be acceptable compared to the ASEAN region,” he said.
He said financial technology companies and other startups have been ahead in terms of cloud adoption and some banks are “moving at a good pace,” but traditional organizations are still modernizing.
“The complexity for them is much higher. They don’t have the same nimble, agile approach as a startup. So I think they’re taking a more structured approach, but they do really see the need for it and they do wanna make some investments,” he said.
Mr. Brar said the pandemic has accelerated cloud adoption among those companies. Retail companies continue to modernize to ensure they are able to compete in e-commerce.
“With COVID (coronavirus disease 2019), what we’re seeing is customers are moving to the cloud. So when you have the emergence of cloud, very different type of application usage, where it’s social media or whether it’s IoT (Internet of Things), the type of data that’s being stored or being managed is very different from 20 years back.”
He said success in work-from-home operations would work best with employee training, in addition to data protection technology.
“I think (Philippine companies) can do better. We do have various facets of challenges they need to address. Firstly, there is a very strong following in the Philippines in open-source technologies… so I think leveraging the cloud is one really key to that. I think that’s an area that the Philippines continues to grow but it’s still an area that can do better,” he said.
“(The) Philippines still has very large complex enterprise systems in play…. Those companies are still early in the cloud motion or modernization so a lot of their systems are still not built to cater for some of the most sophisticated attacks that can exist in today’s environments.”
Worst-case scenarios for companies without data protection, he said, would create financial damage.
“If I’m a bank and I have a ransomware attack, and my ATMs are down, that’s a very severe impact from a financial standpoint. Consumers unable to access their money, and what would be worse is any type of data loss, you’d have a serious issue in terms of integrity of the data base or their core banking systems.”
The Philippines is experiencing a spike in data breaches. Data breach notifications received by the National Privacy Commission at universities and colleges alone reached 19 in the first six months of the year, exceeding the 18 notifications in full-year 2019. Student portals of Far Eastern University and Polytechnic University of the Philippines were hacked last month. — Jenina P. Ibañez
