PLDT seen to top P41.5-B core income goal

MANILA, Philippines - Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) is likely to exceed its core income target of P41.5 billion this year, even as the company revealed plans to accelerate spending next year primarily for broadband network expansion and the reinvention of its fixed-line business.

PLDT chairman Manuel V. Pangilinan also said the company’s capital expenditure budget next year may surpass P30 billion. This year, PLDT’s capex reached P28.6 billion.

He said the funds would be spent more on expanding its broadband network to meet rising consumer demand.

He also revealed that PLDT wireless subsidiary Smart Communications Inc. may hit more than 45 million subscribers this year from 44.1 million subscribers at end-September.

He, however, said that next year would be a challenging year, especially for the mobile telecommunications business due to a maturing cellular market.

Research firm Frost & Sullivan said the mobile penetration rate in the Philippines is already at about 80 percent at the beginning of the year and should be at 96 percent by the end of the year. By 2015, the country’s mobile penetration rate is expected to hit 126 percent.

For the first nine months of 2010, PLDT’s net income increased seven percent to P32 billion from P30 billion in the same period last year, while core net income, net of exceptional items, rose two percent to P31.4 billion from P31 billion last year.

PLDT’s operating results also showed the ongoing transition of revenue streams, with the lower traditional sources being replaced by the growth of new revenue streams.

Consolidated service revenues decreased one percent to P106.7 billion, reflecting the combined effect of a 20 percent increased in fixed and wireless broadband revenue, a 12 percent growth in cellular voice revenues which includes a 24 percent increase in domestic voice revenues, an 18 percent rise in revenues from fixed data and other network services to third parties, a 13 percent reduction in cellular text revenues, a 34 percent decline in national long distance revenues, and a 16 percent decrease in international long distance revenues.

“Our 2010 performance to date underscores our earlier statements that 2010-2012 would be a critical period in the group’s transformation, as it is being undertaken at a time when the operating environment is becoming increasingly price-competitive and market-share sensitive. This transition is accelerating the decline of traditional revenue sources but also fuelling the growth of new revenue streams,”Pangilinan said.

For the whole of 2010, Pangilinan projects service revenues to be down two percent to P143.4 billion from last year’s P145.6 billion, EBITDA to be two percent lower to P85 billion from P86 billion, and core net income to be up one percent to P41.5 billion from P41 billion. “But we would strive to be better than P41.5 billion,” he added.

Pangilinan explained that market conditions are changing. “From 800 to 900 million text messages outbound every day, this has gone up to 1.2 billion. However, yields have declined from 18 centavos per text to 13 centavos,” he noted. Cellular data/text revenues fell 13 percent to P31 billion, despite a 25 percent increase in text volumes, as they remain under pressure from the proliferation of lower yield offerings, multiple-SIM ownership, and regulator-mandated load validity extensions.

The EBITDA margin of 60 percent, officials added, reflects the changing service revenue mix – greater contribution from voice and broadband which are lower margin services.

He said that it is imperative that moving forward, the company should focus on broadband, cellular voice, data and other network services, especially as consumers communicate more over the Internet and as traditional revenue sources such as texting and wireline voice continue to decline.

“Right now, broadband accounts for 12 percent of service revenues. In the future, we would wish to see new businesses contributing 50 percent of consolidated revenues,” Pangilinan added.

PLDT is also looking at new businesses that have synergies with other companies under the Pangilinan Group, such as the Manila Electric Co. (Meralco), the hospital group of Metro Pacific Investments Corp. (MPIC), Maynilad, among others.

“From being a traditional telco, we are transforming into a multimedia communications company, offering the full range of communications requirements of the home, individual, corporation and institutions. This include both traditional and non-traditional as well as providing more devices and access points,” Pangilinan said.

Wireless service revenues dipped one percent to P70.4 billion during the first nine months of the year. Total cellular subscriber base reached 44.1 million as of end-September, with Smart Buddy accounting for 25.2 million, Talk ‘N Text 18.1 million and Red Mobile, 381,000.