PLDT sees higher first quarter profit

MANILA, Philippines - Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) said it expects its first quarter 2010 numbers to be better compared to last year, driven largely by the growth in broadband and data services.

PLDT chairman Manuel V. Pangilinan said the wireline and wireless businesses posted stable numbers, which were flat compared to the same period last year.

In terms of subscriber numbers, he revealed that the take-up is ahead of last year. The company is scheduled to reveal its first quarter 2010 financial and operational results on May 13.

Meanwhile, data submitted to the Philippine Stock Exchange (PSE) show that as of March 31, 2010, JP Morgan Asset Holdings Ltd. of Hong Kong (for First Pacific Corp.) is the single biggest shareholder in PLDT at 24.14 percent, followed by Philippine Telecommunications Investment Corp. (PTIC) with 13.94 percent, NTT DoCoMo of Japan at 9.76 percent, NTT Communications Corp. of Japan at 6.76 percent and the Social Security System (SSS) with 2.69 percent. Pangilinan directly owns 0.12 percent of PLDT.

Pangilinan earlier said for 2010, they expect core net income to be slightly higher than P41 billion, due to projected higher net financing charges by P3 billion. This, he said, is on account of higher debt levels and lower cash balances.

Meanwhile, service revenues for 2010 is forecast to reach P150 billion, a three percent growth over 2009.

“Growth is expected to come from broadband, fixed line revenues from the corporate and SME markets, and improvements in the BPO business. The cellular business faces challenges given high market penetration, the market’s increasing preference for unlimited offers and multiple SIM ownership, as well as competition from social networking and broadband,” he pointed out.

At present, the PLDT group’s combined subscriber market share in broadband (both fixed and wireless) is at 70 percent, with total subscribers of around 1.6 million. PLDT expects total broadband subscriber base to double this year.

He also revealed that they expect earnings before interests, taxes, depreciation and amortization (EBITDA) to grow to P88 billion, with EBITDA margin slightly lower than 59 percent with the increased contribution from the broadband business, where margins are lower than PLDT’s traditional businesses due to marketing subsidies and the added cost of international bandwidth. “Increased subsidies planned to further seed and grow the broadband business will result in increased operating expenses this year,” he said.

He added that as part of capital management initiatives, PLDT will continue to buy back its own shares on an opportunistic basis. Of the five million shares earlier approved for buyback, around 2.7 million shares have been acquired to date.

PLDT’s top executive emphasized that they see 2010 as another year fraught with challenges, with competition showing no signs of abating, consumer wallets tightening, elections notwithstanding, and alternative means of communications such as social networking being real threats to their mainstream businesses.

Pangilinan explained that they view 2010 with guarded optimism. “This is a time for us to regroup, refocus, and redirect our efforts. The business dynamics are changing. The unlimited pricing packages for mobile is a significant dampening factor on revenue growth. There has been a shift from texting to voice and social networking. The industry is clearly changing. The revenue mix is changing. While Smart accounted for 94 percent of the industry’s cellular net subscriber adds, our wireless service revenues were only up two percent. (Smart’s net adds grew 17 percent last year). The yield on texting is also down,” he added.

Pangilinan also pointed out that 2010 is somewhat of a bridge year for the PLDT group. “We will be investing heavily, P28.6 billion in capital expenditure, in further expanding and improving our infrastructure, both operationally and strategically; and undertaking subsidies to seed broadband take-up and growth. With the expected softness in revenues, we are looking to control cash operating expenses in order to maintain profit growth. Our guidance numbers (on revenues, EBITDA, and core profit) reflect this guarded optimism,” he added.

Of the P28.6 billion capex for 2010, around P16.3 billion will be spent for the wireless business and P11 to P12 billion for the fixed line business. The balance will be for the information and communications technology business. A substantial portion of the P16.3 billion will be for the broadband business.