Smart sees P5B to P5.8B income in H1

Leading mobile phone service provider Smart Communications Inc. is expected to post a net income of between P5 to P5.8 billion for the first half of 2003, once again contributing strongly to the performance of parent firm Philippine Long Distance Telephone Co. (PLDT).

STAR sources disclosed that Smart’s net earnings for the second quarter of 2003 will reach between P2.2 to P3 billion. Added to the first quarter income of P2.769 billion, the PLDT wireless subsidiary will post a net income of anywhere between P5 to P5.8 billion for the first six months of the year.

To date, Smart has more than 10 million subscribers, including those of Talk ’N‚ Text. "Smart performed very well in the second quarter," according to PLDT president and chief executive officer Manuel V. Pangilinan, who hinted that Smart may post second quarter earnings of around P2.5 billion.

During the first quarter of 2003, Smart reduced its debts by $31 million. For the whole year, the wireless company is working on paying down around $115 million worth of debts, utilizing internal cash flows.

Smart officials said they are hoping to maintain capital expenditure levels within the target of P9 billion.

Meanwhile, company officials told The STAR that parent PLDT will once again post a strong first half 2003 performance, with consolidated net income of between P5 to P6 billion on the back of a sterling performance.

Second quarter 2003 consolidated earnings for PLDT are expected to hit at least P2.5 billion to as high as P3.5 billion. During the January to March period, PLDT posted a net income of P2.48 billion.

Pangilinan has said that the company’s consolidated net income for the January to June 2003 period will definitely exceed P5 billion. Company officials said it could reach as high as P6 billion.

Pangilinan had said in an earlier interview that they wouldn’t be doing their jobs "if PLDT does not attain a P10 billion net income for the full year of 2003." The company posted a P7.2 billion net income last year.

Expectations are high that PLDT will report a consolidated net income of at least P5 billion, but company officials said the possibility of exceeding expectations is not remote and a net income of P6 billion or even more may be announced.

However, foreign analysts have cautioned that PLDT’s strong performance may give it reason to start provisioning and writing-down some of its assets as the company aligns itself with international accounting standards. The Philippines is expected to adopt the US Generally Accepted Accounting Principles (GAAP) by 2005.

ING Barings in its latest report also sees the possibility of PLDT writing down some of its assets such as Home Cable, and Aces Philippines, both of which have not been making money.

Company sources, however, told The STAR that any write-down will be principally non-cash in nature and, therefore, will in no way affect PLDT’s strong cash flows and its ability to pay down debt.

PLDT has also reduced headcount by over 1,600 employees this year to bring down its fixed line employees to around 10,500. The company is targeting a ratio of 200 fixed lines per employee.