PLDT expects strong 1st half results

MANILA, Philippines - Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) said it expects strong financial results in the first half of 2010, driven mainly by its broadband and mobile phone businesses.

“The first half should be up compared to last year. Our subscriber base is also up,” PLDT chairman Manuel Pangilinan told reporters on the sidelines of yesterday’s Manila Electric Co. (Meralco) briefing.

PLDT is scheduled to report next week on its financial and operational highlights for the first half of 2010.

Earlier, Pangilinan said PLDT is looking at a much better second quarter compared with the first quarter of this year, partly due to an improvement in the economy.

“Take-up has also been quite active. Revenues are higher so that is a good sign. The economy is doing well recently so that must be part of the reason,” he explained.

When asked whether the second quarter will end up better than the first quarter, PLDT’s top executive said it will probably be higher, revenue-wise.

During the first quarter of 2010, PLDT reported a net income of P11.4 billion, 19 percent higher than the P9.6 billion posted during the same period last year. Core net income, net of exceptional items, rose three percent to P10.5 billion, from P10.2 billion.

For the whole of 2010, Pangilinan said they expect core net income to be slightly higher than the P41.1 billion generated in 2009 due to the increase

in revenues, contribution from the group’s investment in Meralco, and lower income tax provision.

Service revenues this year is expected to grow two percent to P148 billion from P145.6 billion last year while earnings before interests, taxes, depreciation and amortization (EBITDA) is seen to increase one percent to P87 billion due to greater contribution from broadband where margins are relatively lower than the company’s traditional high-margin services like cellular data and international long distance, higher subsidies to further grow the broadband, business, and close management of costs to supplement revenue growth.

Pangilinan noted that the growth in the cellular business is challenged by the 80 percent market penetration and multiple-SIM phenomenon, increasing subscriber preference for unlimited offers and bucket plans, competition from social networking/broadband, and minimal boost from elections, the impact of the peso appreciation, as well as the lower revenues from the satellite business due to the disposal of PLDT’s Mabuhay satellite transponders.

He added that while the growth rates may decline and attenuate in the next two to three years, they expect their investments to pay off after this period. “2010 would be somewhat of a bridge year for the group. Capital investments would remain on the high side at P28.6 billion as we further expand and improve our infrastructure and platforms, both operationally and strategically.”

For his part, PLDT president and CEO Napoleon Nazareno said while text volumes and voice minutes are increasing significantly, declining yields and alternative means of communication have combined to put pressure on revenues and margins. “We recognize the challenges that we face in the cellular industry, and we also know that we can meet these challenges head on,” he emphasized. (With a report from Donnabelle Gatdula)