PLDT expected to deliver another strong performance

MANILA, Philippines - New York-based Standard and Poor’s (S&P) believes dominant carrier Philippine Long Distance Telephone Co. (PLDT) is on its way to deliver a strong operating performance this year, further cementing its leadership in the country’s telecommunications industry.

In a report, S&P said PLDT is likely to retain its position as the leading integrated telecommunications service provider in the Philippines in terms of subscribers and revenue. 

“We anticipate that PLDT’s operating performance will be in line with our expectations for full-year 2012,” the international rating agency stated.

In the first nine months of the year, PLDT’s income slipped six percent to P28.7 billion from P30.6 billion a year ago due to a stiffer competition and manpower reduction.

On the other hand, total revenues surged 13 percent to P128.56 billion from January to September compared to P114.05 billion in the same period last year.

“This is because of the decline in voice and messaging revenues despite increased volume, stemming from the popularity of unlimited data and bucket plans,” S&P said.

S&P said PLDT’s revenue would grow by about 12 percent this year primarily on account of full-year Digitel consolidation but would fall to one percent next year and in 2014 as the continued growth in subscribers would be largely offset by a fall in average revenue per user (ARPU) due to competitive pressure.

Latest data showed that PLDT Group’s cellular subscriber base reached 68.6 million as of end-September. Subscribers of wireless arm Smart Communications Inc. stood at 25.6 million followed by Talk ‘N Text with 26.5 million, and Sun Cellular of Digital Telecommunications of the Philippines Inc. (Digitel) with 16 million.

 “Together with Digitel’s subscribers, PLDT has a subscriber market share of about 65 percent across all segments. We believe the Digitel acquisition further strengthens PLDT’s competitive position in the cellular segment and its growth opportunities in broadband services.

PLDT spent P69.2 billion to buy out the shares of taipan John Gokongwei in late 2011.

S&P pointed out that PLDT’s EBITDA margins declined almost 600 basis points to 49.3 percent because of weaker margins at Digitel, intense competition, and higher marketing expenses, including subsidies.

“Margins were also undermined by a shifting revenue mix from the higher-margin SMS and international voice to the relatively lower-margin revenue streams of broadband and business process outsourcing,” it added.

After increasing by 21 percent of revenues this year, the rating agency said capital expenditures of PLDT would slow down to 20 percent of revenue starting 2013.

“Our view considers PLDT’s higher cash capital expenditure of P31 billion in 2011 and plans to increase it to P38.1 billion in 2012. The spending is part of the two-year network modernization program the company started in 2011,” S&P said.

It added that the P6-billion investments of PLDT in the media business (TV content production and direct-to-home business) would only have a marginal negative impact on the company’s operating and financial metrics. 

“In our view, the investments in TV5 and Cignal TV through MediaQuest Holdings Inc. will complement PLDT’s existing broadband business,” it added. 

PLDT is the only Philippine company that has been given investment credit ratings by three of the leading credit rating agencies - New York-based Moody’s Investors Service and Standard & Poor’s as well as London-based Fitch Ratings.

Last July 5, S&P raised the long-term foreign currency credit rating of PLDT to BBB- or one notch below investment grade with a stable outlook from BB+ or one notch below investment grade with a positive outlook.