Further improvement in PLDT earnings projected next year

MANILA, Philippines - International credit rating agency Moody’s Investors Service sees earnings of multimedia giant Philippine Long Distance Telephone Co. improving further next year after making its biggest investments overseas with the acquisition of a stake in a German firm for close to P20 billion.

Yoshio Takahashi, vice president and analyst at Moody’s, said earning of PLDT would slightly improve next year amid lower costs as well as higher revenues from broadband and mobile Internet businesses with the acquisition of Rocket Internet AG of Germany.

 “PLDT’s recorded should slightly improve in 2015, given that it will no longer have to deal with the aftermath of Typhoon Yolanda, and considering the company’s plan to reduce costs, as well as the continued growth in revenue from its broadband, corporate data, and mobile internet businesses,” he said.

PLDT recorded a two percent growth in core income to P19.83 billion in the first half of the year from P19.39 billion in the same period last year as revenues climbed two percent P82.5 billion from P81 billion.

The PLDT Group is sticking to its core income target of P39.5 billion this year or two percent higher compared P38.7 billion last year.

 “The company’s financial results for the first half 2014 were slightly below Moody’s expectations,” he said.

The analyst pointed out that PLDT’s consolidated earnings before income tax, depreciation, and amortization (EBITDA) declined by four percent in the first half due to an increase in handset subsidies, cash expenses related to the operation of its expanded network, and residual post-Typhoon Yolanda restoration costs.

“Given PLDT’s first half results, Moody’s expects the company’s reported consolidated EBITDA to fall moderately in 2014,” he said.

The credit rating agency expects PLDT to continue to seek investment opportunities in the Internet and multimedia sectors to strengthen its ability to deliver multimedia content through its broadband and mobile networks, and to grow its e-commerce business.

Moody’s added that PLDT’s investment in Rocket could be accommodated within its Baa2 ratings and stable outlook.

The rating company estimates that PLDT would be able to finance the majority of the investment from its excess cash as its cash on hand stood at P43 billion as of end-June.

“While the partnership with Rocket should help PLDT strengthen its mobile and online payment services, generating stable returns from investments in the fast-changing and competitive internet industry is challenging,” it said.