MANILA, Philippines - Debt rater Moody’s Investors Service has changed its outlook for Philippine Long Distance Telephone Co. (PLDT) to positive from stable following its upgraded outlook on the Philippines.
“The change in outlook follows Moody’s decision to change the outlook for the Ba2 long-term foreign-currency rating and Baa3 foreign-currency country ceiling of the Republic of Philippines to positive from stable,” the debt rater said in a statement issued late Tuesday.
Moody’s said PLDT, a predominantly domestic entity which generates all revenues from the Philippines, must closely reflect the potential risks shared with the country.
Moody’s upgraded its credit rating outlook for the Philippines to positive from stable as the country continues to reduce its fiscal deficit and public debt.
The debt rater said that for PLDT to be rated significantly above the country, it “needs to be fundamentally stronger than the sovereign from a credit perspective, as well as demonstrate a degree of insulation from domestic macroeconomic and financial disruption, which generally accompanies a sovereign default.”
It said PLDT, alternatively, would need to generate greater revenues from outside of the Philippines to be rated significantly above the country.
“On a fundamental level, PLDT would also need to continue exhibiting strong investment-grade characteristics. In particular, it will need to maintain its existing sound financial and operating profile on a sustainable basis,”Yoshio Takahashi, Moody’s assistant vice president and analyst said.
Last month, Moody’s downgraded the local currency rating for PLDT to Baa3 from Baa2 to align the rating with that of the host country’s.
The telecommunications giant saw its consolidated net income drop by six percent to P10.1 billion in the first quarter of the year from the P10.7 billion a year ago due to higher expenses.
Its core net income meanwhile, was down 12 percent to P9.3 billion compared to the same period last year.
But while PLDT saw declines in its first quarter results, it said earlier it is keeping its 2012 core net profit guidance of P37 billion.
The 2012 core net profit guidance of P37 billion is five percent lower than last year’s.