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PLDT tower sale to boost financial flexibility – S&P

Richmond Mercurio - The Philippine Star
PLDT tower sale to boost financial flexibility � S&P
PLDT’s financial flexibility should improve with cash proceeds from the recent sale of about half of its tower assets, according to S&P.
BusinessWorld / File

MANILA, Philippines — S&P Global Ratings said leverage pressure on PLDT Inc. which it previously anticipated would subside following the telco giant’s recent sale of its towers.

PLDT’s financial flexibility should improve with cash proceeds from the recent sale of about half of its tower assets, according to S&P.

“The company will likely gain financial flexibility and modest rating headroom. That’s because the P77 billion in sales proceeds will more than offset PLDT’s estimated incremental lease liability of P27.5 billion, as well as special dividends of up to P9 billion that it intends to pay following the transaction,” it said.

S&P said that based on the company’s estimate of the incremental lease liability, it now projects PLDT’s debt-to-EBITDA ratio to improve to 2.0x to 2.3x over the next 24 months.

“We had previously expected the ratio would remain close to the company’s downside rating trigger of 2.5x over the same period,” S&P said.

“This improvement should help PLDT better tolerate downside risk of competitive pressure and high capex necessary to enhance its network quality and connectivity, at the current rating level,” it said.

PLDT subsidiaries last Tuesday signed sale and purchase agreements with ISOC edotco Towers Inc. and Comworks Infratech Corp. involving 5,907 telecom towers and related passive telecom infrastructure.

S&P expects that the tower sale will not be the last of such deals in the country. The transaction is in line with a push for more passive infrastructure sharing by the Department of Information and Communications Technology in a bid to address the country’s growing connectivity needs.

S&P said the sale and leaseback transaction also echoes recent actions of other rated telecom operators in the region to monetize passive tower assets.

“In our view, the trend is mainly borne out of the need for an impending capex wave to roll out 5G networks,” it said.

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