Relationship between government and SPH newsrooms not expected to be affected: minister

 

THE new company limited by guarantee (CLG) that holds the media businesses of Singapore Press Holdings (SPH) will operate as a revenue-seeking business, subject to the usual commercial disciplines, said Minister for Communications and Information S Iswaran in Parliament on Monday.

 

The new media company must have a " long-term sustainable business model with different revenue sources" , Mr Iswaran said. This includes advertising revenue, circulation or subscription revenue, and other sources of funding, even as government funding is expected to be a component of the funding matrix.

 

" This concept of a CLG run with commercial discipline is not new for us. There are several examples, including our universities, The Esplanade and Gardens by the Bay," Mr Iswaran said in a ministerial statement.

 

Last Thursday, SPH, which publishes The Business Times, proposed a restructuring that involves a transfer of the media business to a CLG. This structure will allow any future profits from the media business to be reinvested into the media operations rather than be distributed to shareholders.

 

Mr Iswaran noted that the CLG would still have to find new sources of funding to meet the expected financial shortfalls in the news business, with the government willing to help in areas such as digital innovation and capability development.

 

Leader of the Opposition, Pritam Singh, sought clarification on the size of funding the government has set aside to support the CLG, and whether this would be capped.

 

Mr Iswaran said the quantum can only be decided after shareholders have approved the restructuring, and the CLG has come forward with a plan.

 

He said the new CLG would need to formulate its plans and " put on the table what it sees as its strategic business direction going forward, and in that matrix, the different sources of revenues that it expects or anticipates, and what role will the government funding... play in that matrix" .

 

" Although the business and financing model will change, the government does not intend nor expect this to affect the relationship between (the Ministry of Communications and Information) and the SPH newsroom," Mr Iswaran said.

 

He added that the government is " mindful that our local news media must remain credible institutions that are trusted by Singaporeans, and that it remains the responsibility of the editors and journalists in SPH Media to report news and diverse opinions objectively, and from a Singaporean point of view" .

 

Mr Iswaran noted that there is already a similar financing model with Mediacorp, which has been working well.

 

He said that Singapore can ill afford " convulsions and closures" that lead to a loss of diversity and choice in local media.

 

The local news media is now facing structural changes in the media and advertising industries caused by technological advances and the Internet. These have severely disrupted the business model that relied on print advertising revenue.

 

Mr Iswaran highlighted that these were global challenges, with most publications worldwide - including in the United States, United Kingdom and South-east Asia - now running deficits, and many newsrooms downsizing and closing.

 

Even so, Mr Iswaran observed that SPH' s overall reach and readership has never been higher, with total circulation of SPH papers rising 5 per cent from 2017 to 2020. " Their challenge today stems from an inability to monetise their gains in attracting and retaining readers on digital platforms."

 

He observed that under SPH' s current structure, there was a " serious risk" that SPH' s media capabilities would be hollowed out.

 

" Without a responsible and high-quality local media, the quality of our public debate and discourse will be compromised, and we will slowly but inexorably become less cohesive as a society," Mr Iswaran said. " Given what is at stake, the government must take a long-term view, and adopt measures to secure the sustainability of our local media."

 

Under the proposed restructuring, SPH will also capitalise the media business with a cash injection of S$80 million, S$30 million worth of SPH shares and SPH Reit units, as well as SPH' s stakes in four of its digital media investments.

 

Mr Singh had also asked if the Ministry of Communications and Information viewed the SPH contribution as reasonable.

 

Mr Iswaran emphasised that this was a matter to be put to the shareholders. " I do not want to pre-empt any case that the management and the board will make, but I can say that the government' s focus has been very clearly on the news media business, and its viability going forward," he said.

 

Member of Parliament Liang Eng Hwa also asked if the government had considered other options, such as privatising SPH or providing the company with direct government support such as annual grants.

 

Mr Iswaran said it was debatable whether providing grants to a listed company was a good model.

 

" If we channel a certain amount of funding to the listed company, and the listed company then makes profits, and then it distributes dividends to its shareholders, the question that then can be asked is: Is this a case of taxpayers subsidising returns to shareholders?"

 

Mr Iswaran also clarified that the government' s support for the deal was from the perspective of whether the deal is able to support the goals of preserving the media business.

 

" We' re supporting it, not because of the shareholder value proposition. That is for SPH and its management, and its directors and independent financial adviser and independent directors, to explain to their shareholders," he said.

 

" Our lens is purely from the point of view of how do we ensure a quality professional trusted news media continues to succeed in Singapore, and that' s the basis on which we have expressed our approval for the restructuring."

 

Under the Newspaper and Printing Presses Act (NPPA), newspaper companies such as SPH are required to issue two classes of shares: ordinary shares and management shares.

 

Management shareholders have special voting rights relating to the appointment of directors and staff of the newspaper company.

 

All the existing management shareholders of SPH have agreed to form the CLG and be its founding members, Mr Iswaran said. These include the three local banks, Singtel and several local universities.

 

" This will ensure that our local news media will remain in the hands of trusted institutions with a long-term stake in Singapore," Mr Iswaran said. " In due course, the membership will be expanded to include newer and more diverse institutions as stakeholders of the CLG."

 

Mr Iswaran also discussed the appointment of the chairman of the CLG' s board with the management shareholders of SPH.

 

" They have all agreed that, given the national importance of this undertaking and the scale of the challenge, the chairman should be Mr Khaw Boon Wan," Mr Iswaran said.

 

Mr Khaw, who served as the coordinating minister for infrastructure and the transport minister from 2015 to 2020, retired from politics last year.

 

In a statement on Monday, Mr Khaw said: " It is a heavy responsibility. I accept it with some anxiety as I have no digital media experience. I will see how we can adapt relevant experiences from successful transformation elsewhere. I agree with Minister Iswaran on the local media' s critical role and will do my best to ensure we succeed in this national project."

SHARES of Singapore Press Holdings (SPH) rebounded as much as 5.6 per cent on Monday. This came after falling last Friday on news of the group' s proposed restructuring.

 

The media and property group, which publishes The Business Times, hit an intraday high of S$1.605 as at 10.10am on Monday, up 5.6 per cent or 8.5 Singapore cents. It later closed at S$1.57, up 3.3 per cent or S$0.05, with 38.1 million shares changing hands amid active trading.

 

Last Friday, SPH shares closed 15.1 per cent or S$0.27 lower at S$1.52. The company' s media deal, which is subject to shareholders' approval, will involve a transfer of the business to a company limited by guarantee (CLG).

 

SPH said it will make an upfront capitalisation of S$110 million to the new entity, in the form of a cash injection of S$80 million, and S$30 million worth of SPH shares and SPH Reit units.

 

In a research note on Monday, UOB Kay Hian (UOBKH) reiterated " buy" on SPH with a sum-of-the-parts-based target price of S$1.85. This represents an upside of about 17.8 per cent from Monday' s closing price.

 

The research team said the valuation has already taken a conservative stance, without accounting for any valuation in the media segment.

 

UOBKH said that any adjustments post-restructuring would lower its target price slightly to S$1.79, given a change in SPH Reit' s holdings, cash and a higher share base from SPH shares given to the CLG.

 

" While the initial outlay for the restructuring may not be ideal, total consideration of S$252 million accounts for four to six years of losses for the media segment by our estimates and removes a key overhang for the counter," UOBKH said, with a longer-term outlook in mind.

 

Assuming the restructuring occurs by the second half of FY2022, UOBKH estimates FY2022 and FY2023 core earnings to be lifted by 26 per cent and 36 per cent respectively.

 

" If the Newspaper and Printing Presses Act is lifted for SPH, this would also provide shareholding flexibility for the group," the research team said.