Fitch hikes PLDT rating 2 notches above invest grade

MANILA, Philippines - London-based Fitch Ratings upgraded the local currency issuer rating and foreign currency bond rating of dominant carrier Philippine Long Distance Telephone Co. (PLDT) to two notches above the minimum investment grade on the back of a stable outlook.

Fitch upgraded PLDT’s credit rating after it awarded the Philippines its first ever investment grade rating last week on the back of the country’s sustained economic growth.

The rating agency upgraded PLDT’s Long-Term Foreign-Currency (LT FC) Issuer Default Rating (IDR) and senior unsecured rating to ‘BBB’ from ‘BBB’ while its Long-Term Local-Currency (LT LC) IDR and National Long-Term Rating were affirmed at ‘A-’ and ‘AAA(phl)’ respectively.

Fitch viewed PLDT’s credit outlook as stable.

The rating agency cited PLDT’s dominant market shares with well over 60 percent in the wireless, fixed-line, and broadband segments at end-2012 as well as the company’s strong financial profile.

PLDT’s net income jumped 12 percent to P35.5 billion last year from P31.7 billion in 2011 while consolidated revenues rose 10 percent to P169.33 billion from P153.96 billion.

The PLDT Group’s total cellular subscriber base stood at 69.9 million subscribers with 28.4 million from Talk ‘N Text, 25.5 million from Smart, and 15.7 million from Digitel’s Sun Cellular.

Fitch said the intense competition for subscribers particularly from rival Ayala controlled Globe Telecom Inc. would not ease over the short to medium term.

“This will result in a gradual margin decline. The operator’s aggressive marketing policies for wireless subscribers, including bucket tariff offerings and subsidies rather than differentiated services, will remain the basis of competition. Fixed-line revenue growth will remain weak as the contribution from long-distance calls continues to be replaced by low-margin data services,” it explained.

PLDT is spending about P29 billion for its capital expenditures this year or 20 percent lower than the P36.4 billion in 2012. The company has completed its two-year P67.1 billion network modernization project last year.

For one, PLDT  is pouring in P2.5 billion this year to extend its fiber optic cable facilities by rolling out another 5,000 kilometers extending the total reach of the company’s fiber network to almost 60,000 kilometers.

 PLDT’s fiber expansion program for 2013 would cover the domestic fiber optic network (DFON)used for long haul applications, fiber-to-the home (FTTH), fiber-in the-loop (FITL) and other inter-office fibering projects.