Fitch upgrades PLDT's credit rating

MANILA, Philippines - Credit watcher Fitch Ratings has upgraded Philippine Long Distance Telephone’s long-term foreign currency (LTFC) issuer default rating (IDR) to ‘BBB-’ from ‘BB+’ and its long-term local currency (LTLC) IDR to ‘BBB+’ from ‘BBB’.

The outlook on PLDT’s LTFC IDR is stable while the LTLC IDR remains on Rating Watch Positive (RWP). The action follow Fitch’s upgrade of the Philippines’ sovereign ratings to LTFC IDR ‘BB+’ from ‘BB’ with a newly assigned stable outlook, and its LTLC IDR and country ceiling to ‘BBB-’ from ‘BB+’.

Fitch said PLDT’s LTFC IDR continues to be constrained by the Philippines’ Country Ceiling of ‘BBB-’, reflecting the country’s foreign currency transfer and convertibility risk. Any future movement in the country ceiling will lead to a corresponding change in PLDT’s LTFC IDR, it said.

PLDT’s LTLC IDR is currently two notches above the sovereign LTLC IDR. The RWP reflects the potential benefits of PLDT’s proposed acquisition of a controlling interest in the Philippines’ third-largest telco – Digital Telecommunications Philippines Inc. (Digitel) – through an all-equity deal.

The acquisition, if successful, would make the combined entity the country’s undisputed market leader by a significant margin, with around 70 percent of wireless subscribers and 66 percent of wireless revenues (compared with 53 percent and 56 percent currently) while maintaining PLDT’s existing financial profile.

The acquisition was approved by PLDT’s shareholders earlier this month and is now subject to regulatory/anti-competitive authority’s approval, expected by end-July. The resolution of the RWP will be predicated on the final funding mix for the payout to minority shareholders, terms and conditions of the payout debt (for minority shareholder payment), receipt of all necessary approvals and Fitch’s view on the financial strength of the combined entity and its future business plans.