MVP confident PLDT can meet income target

MANILA, Philippines - Philippine Long Distance Telephone Co. (PLDT) chairman Manuel V. Pangilinan expressed confidence yesterday that the company can achieve a higher core income goal of P41 billion this year amidst a more difficult industry environment.

Pangilinan told the company’s stockholders at their annual meeting that the slowing growth rates of the telecommunications industry, emphasizes the need to innovate, to explore new avenues for growth, and transform their people, processes and organization.

“This perspective underscores the importance of our investment in (power distributor) Meralco, and the potentially significant synergies between PLDT and the water distribution, tollways and hospitals of Metro Pacific Investments Corp. — not to mention the various media properties of Mediaquest Holdings — particularly TV5 and Cignal — our direct broadcast satellite television service,” he said.

Describing the broader contest under which PLDT’s business will operate in the coming years, Pangilinan pointed out that this is where telecoms becomes a provider of rich, multi-media services, and also serves as a powerful enabler of vital infrastructure networks – through such future innovations as prepaid electricity, prepaid water, payment of tollway fees with cellphones, telemedicine, and broadband-over-power lines.

He noted that since first investing in PLDT in 1998, their portfolio of companies has grown and their role and presence have correspondingly increased in size and diversity. “Taken together, we may be regarded as the biggest business group today in terms of the profits we make, the cash flows we generate, and the market value of our companies in the stock exchange which investors have accorded,” he added.

Pangilinan also stressed that looking ahead, the market penetration at 85 percent on the cellular business can limit future growth, competitive bucket pricing is pushing usage higher but without improvement in revenue, regulations have gotten tougher, and the new services — especially broadband — are driving revenues higher but at the penalty of lower margins.

“Our task as manager is precisely to understand these new challenges, shape the response, and move forward decisively into a new world, with new paradigms,” he said.

PLDT’s top executive stressed that for the first time in a long while, growing their revenue line has been really challenging. “Yet despite the obstacles, we produced strong financial results that have set another record profitability. We managed to increase our cellular and broadband subscribers. We expanded and strengthened our networks. We asserted our market leadership, and we continue to lay the foundation for our future, with significant capital expenditures on new, more advanced networks,” Pangilinan emphasized.

He pointed out that they “were able to shatter again that highest glass ceiling last year with over 40 billion cracks in it” — with P41 billion in net profit and 41 million cellular and broadband users. “And the light is shining through those cracks, illuminating the way forward, and filling us all with hope for our future,” he said.

He told stockholders that PLDT’s core profit grew at a compounded rate of eight percent per year, from P28 billion in 2004 to P41.1 billion last year, adding that PLDT was and still remains the country’s most profitable company.

Meanwhile, PLDT president and CEO Napoleon Nazareno emphasized that 2010 would be a challenging year for the business given industry developments. “Our first quarter results show the impact of these anticipated changes in market dynamics as well as the strengthening peso,” he said.

Among these developments are:

• Remittances which are expected to remain robust although consumer spend is expected to be impacted by the strengthening peso;

• The severe drought brought by El Niño which has lowered farm output and caused power shortages;

• A positive business outlook, with the elections giving the new president a clear mandate and an expected peaceful transition of power;

• Business recovery appearing to be underway, with first quarter GDP exceeding expectation at seven percent;

• The sustained growth in multi-SIM ownership to access the best on-net promotions, and the preference for bucket and unlimited plans (although the number of SMS sent continues to grow, yields are declining);

• More people using broadband access, and broadband’s full potential remaining largely untapped.

For 2010, Nazareno said PLDT must continue to strike a fine balance between protecting its traditional businesses where market dynamics are changing, while strengthening its leadership in the emerging area of broadband.