PLDT to spend bulk of P27-billion budget for wireless business

MANILA, Philippines - Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) will spend bulk of its estimated P27-billion budget next year for its wireless business, including the expansion of its broadband network.

This as PLDT subsidiary Smart Communications is expected to end 2009 with around 40 million subscribers from more than 39 million to date. The third quarter of the year is projected to add roughly 600,000 more subscribers.

Also, PLDT and Smart president and CEO Napoleon Nazareno told The STAR that the company has not made up its mind on whether or not to delist its subsidiary Pilipino Telephone Inc. (Piltel) from the local stock exchange. At present, Smart owns more than 98 percent of Piltel, following a successful tender offer made to minority shareholders of Piltel to acquire their shares. Prior to the offer, Smart owned 92.8 percent of Piltel.

Earlier, PLDT group chairman Manuel Pangilinan said “if the majority tenders, what’s the point of keeping it listed.”

Smart has also acquired for P11.5 billion the assets, brand and subscribers. “We are just awaiting certain regulatory approvals to complete the acquisition. Of the P11.5 billion, P8 billion is for the acquisition of the Piltel trademark while P1.2 billion was for the transfer of Piltel’s subscriber base to Smart and P2.3 billion for the sale of its GSM fixed assets,” Nazareno said.

Following the sale to Smart, Piltel is now a holding company for a 20 percent stake in power distributor Manila Electric Co. (Meralco).

Next year’s capital expenditure budget will be roughly the same as the amount allocated for this year.

Of the total P27 billion, Nazareno said P10 billion would be spent for the fixed line business which includes the migration to the next generation network (NGN), P16 billion for wireless and P1 billion for the information communication tecnology (ICT) business.

The P10-billion capex for fixed line will largely finance international gateway and bandwith expansion as well as the migration of its legacy landline to NGN.

Nazareno explained that the migration to NGN will open up a lot of possibilities, including the delivery of data and video.

He said the company has already migrated 30 percent of its 1.8 million landline subscriber base nationwide to NGN. A full migration of its network to NGN is expected in two to three years time.

Last year, the company secured approval from the National Telecommunications Commission (NTC) to build a NGN in 198 municipalities and cities nationwide covered by its new franchise.

The company plans to spend P4.37 billion for the NGN rollout, including on NGN core, IP backbone, transmission, broadband remote access server, access gateway, among others Of this amount, P3.9 billion is an incremental investment for over five years. Its existing investment in the proposed areas is estimated at P464.01 million.

Pangilinan earlier said the company expects higher profits for the third quarter of this year.

Company officials revealed that while there was growth during the third quarter, it was still below expectations.

Following a strong first half performance, PLDT adjusted its core profit guidance for the year from P40 billion to P41 billion, which still does not take into account the second half performance of Meralco.

Nazareno said he anticipates continued growth in the cellular business for the rest of the year although not as large as the first half growth. The projected increase is also due to an expected growth in the broadband business as well as the reduction in the tax rate. 

Pangilinan added that assuming a stable exchange rate, PLDT’s net income in 2009 may exceed the P34.5 billion posted last year.

Group service revenues is projected to reach P148 billion for the entire year, or four percent higher than last year, while earnings before interests, taxes, depreciation and amortization (EBITDA) is expected to grow three percent to P90 billion.