PLDT profit surges 25% to P8.43B in Q2

Philippine Long Distance Telephone Co. (PLDT), the country’s largest telecommunications company, reported a 25-percent surge in net profit to P8.43 billion in the second quarter of 2007, as increased mobile phone usage, particularly during the recent national elections, drove revenue growth.

PLDT, partly owned by Hong Kong’s First Pacific Co. Ltd. and Japan’s NTT, is aiming for growth from its broadband and Internet services as the Philippine mobile market, which it dominates with a 57-percent share, matures.

In the first six months of the year, PLDT registered a consolidated net income of P17 billion, up 11 percent from P15.3 billion in the same period in 2006, on account of foreign exchange transactions and derivative gains, lower depreciation charges and higher provision for income tax.

Filipinos, who are among the world’s biggest users of text messaging at an average of 500 million a day, were bombarded by texts from political parties and advertisers during the elections.

PLDT group chairman Manuel V. Pangilinan said they are pleasantly pleased by the better-than-expected results for the first half of the year. “While our performance has been assisted in part by election-related activities, core numbers manifest improving fundamentals.”

He said this has given management the confidence to revise upwards for the second time this year core earnings forecast to a level higher than the earlier estimate of P33 billion.

Core profit, which excludes foreign exchange factors and derivative gains, rose 14 percent to P8.76 billion in the second quarter and 13 percent to P17.2 billion in the first half of the year.

“Management has been asked and tasked to push innovation further and I can assure you every conceivable and viable opportunity in the broader telco space is being considered, analyzed, and exploited. We look forward to delivering to our shareholders another year of improved results – in profits, in cash, and is a much stronger company,” Pangilinan added.

“In the second half we won’t see any more election spending but I don’t want to discount the strength of the economy,” said Ed Bancod, head of research at ATR-Kim eng Securities.

“The indications we are seeing, not just from telecom firms but also consumer companies, is that economic growth is broadening. This suggests that growth in PLDT is driven not just by election spending, and this could spill over to non-election years,” he added.

Pangilinan said they have completed the triple-play convergence strategy of voice, data and video through Smartlink, BOW and myTV (mobile TV service), respectively.

“There is a fourth space that needs to be developed – money and its flows, both domestically and internationally. I am confident that in the near term, we will be able to bring to the market a workable application in this exciting sector in the form of Smart Remit. Indeed, this will expand the ambit of our convergence approach into quadruple play,” Pangilinan stressed.

Mobile phone unit Smart Communications earlier agreed to acquire for $15.9 million, through its wholly-owned subsidiary Smart-Connect Holdings PTE Ltd., a 30 percent equity interest in Blue Ocean Wireless (BOW), a Dublin-based company delivering GSM communication capability for the merchant marine sector. 

BOW provides the world’s first GSM network on the seas through Altobridge, allowing seamen onboard vessels at sea to talk and text anywhere in the world. It is estimated that there are one million seafarers on about 46,000 vessels, 40 percent of whom are Filipinos. Smart said it sees BOW as an important complementary service to its prepaid wireless satellite phone service Smartlink.

Meanwhile, PLDT’s consolidated earnings before interests, taxes, depreciation and amortization (EBITDA) went up to P41.81 billion, four percent higher than last year’s P40.1 billion while EBITDA margin was at 62 percent of service revenues.

Service revenues increased 11 percent to P67 billion despite a nine percent appreciation of the peso which negatively impacted revenue growth by almost four percent, as 38 percent of PLDT’s consolidated revenues were linked to the US dollar. 

Consolidated wireless service revenues rose to P43 billion, 11 percent higher than the P38.6 billion realized in the same period last year as Smart Communications and Pilipino Telephone Inc. exceeded their stellar performance.

ePLDT, the group’s information and communications technology arm, reported a 165 percent increased in service revenues to P4.8 billion. 

Consolidated free cash flow was at P24.4 billion after incurring capital expenditure of P10 billion. Company officials said the capex is expected to increase to P27 billion this year due to higher than expected take up of cellular and wireless broadband subscribers and the continued rollout of the next generation network (NGN).

The PLDT board also declared an interim dividend of P60 per share and a special dividend of P40 per share, bringing total dividend payout of 2006 net earnings to 85 percent.  Around P18.8 billion in dividends will be paid in September.

Pangilinan said the declaration of the special dividend of P40 per share demonstrates the group’s solid operating and cash flow performance and fulfills the company’s commitment to improve shareholder returns as the firm seeks to new growth opportunities.