PLDT hikes 2010 profit but suffers slowdown in Jan 2011

MANILA, Philippines - Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) posted significant increases in both its reported and core net income in 2010 but so far, 2011 performance has not been as bullish, its top official said yesterday.

PLDT chairman Manuel V. Pangilinan said in an interview that there has been a slowdown in January this year, mainly due to a similar slowdown in the economy.

He explained that the growth rate of January 2011 compared to January 2010, as against that of the same month for 2010 compared to 2009, is lower. PLDT will be officially releasing its 2010 financial results today.

For the whole of 2010, Pangilinan earlier said service revenues will likely be down two percent to P143.4 billion from the prior year’s P145.6 billion. Earnings before interests, taxes, depreciation and amortization (EBITDA) was two percent lower to P85 billion from P86 billion, and core net income up one percent to P41.5 billion from P41 billion. “But we would strive to be better than P41.5 billion,” he added.

But other firms within the Pangilinan Group seem to be experiencing the same.

Pangilinan revealed that while the tollways (Metro Pacific Tollways Corp., a wholly-owned subsidiary of PLDT sister-company Metro Pacific Investments Corp.) business grew during the first two months of 2011, it was at a slower rate compared to the growth of January-February 2010 over the same months in 2009.

But he emphasized that the group’s capital expenditure budget will be “huge” this year.

For the first nine months of 2010, PLDT’s reported 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.

Service revenues were also affected by the strengthening of the peso during the period, and the sale of PLDT’s satellite business.

Group EBITDA for the first three quarters was lower at P63.8 billion while EBITDA margin was at 60 percent.

“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 earlier said.

For the third quarter of 2010, core net income was up one percent to P10.19 billion from P10.11 billion in the same period last year while reported net income was stable at P10.3 billion. Service revenues during the period dropped two percent to P34.56 billion.

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.