PLDT revises profit expectation

MANILA, Philippines - Dominant carrier Philippine Long Distance Telephone Co. (PLDT) slashed its profit guidance this year amid the intense competition as well as the changing revenue-mix in the telecommunications industry.

PLDT chairman Manuel V. Pangilinan said in a press conference that the telco revised downwards by four percent its full-year profit guidance to P37 billion from P39.5 billion as competition is expected to “remain keen in the fourth quarter of the year, and possibly beyond 2014 as well.”

The revised profit guidance this year would be four percent lower compared to the P37-billion core net income booked in 2013.

PLDT president and chief executive officer Napoleon Nazareno reported that the company’s core net income slipped one percent to P28.6 million in the first nine months of the year from P28.8 billion in the same period last year.

Nazareno traced the decline to the P4.4-billion increase in cash operating expenses for repairs and maintenance as well as selling and promotions expenses and rent, the P2.1 billion higher provision for income tax, and the P300 million rise in subsidies to support initiatives to grow the data business and the postpaid subscribers.

These factors, he said, offset the P1.3 billion rise in service revenues, P1.3 billion reduction in financing costs, P700 million reduction in non-cash operating expenses, the P300 million higher equity share in earnings of subsidiaries, and the P2.7 billion increase in miscellaneous income.

He pointed out that the company’s reported net income likewise declined by three percent to P28 billion from P29 billion due to the P200 million decline in core net income, the P2.1 billion revenues from the discontinued operations of its business process outsourcing (BPO) business, the P400 million decline in foreign exchange and derivative losses as well as the P200 million impairment of transport network assets affected by network upgrade.

On the other hand, PLDT’s consolidated service revenues inched up by one percent to P122.9 billion from January to September this year compared to P121.6 billion in the same period last year.

Revenues from mobile internet, wireless broadband, and fixed broadband jumped 19 percent to P30.8 billion from P25.9 billion while revenues from fixed line voice, domestic cellular voice and short messaging system (SMS) dropped three percent to P73.7 billion from P75.8 billion.

Likewise, revenues form national long distance fixed line and international cellular business fell seven percent to P18.4 billion from P19.9 billion.

“The ongoing structural change in PLDT’s revenue mix continues to subdue consolidated service revenue growth rates,” Nazareno said.

Pangilinan said the shift in revenue mix in favor of mobile internet as well as wireless and fixed broadband is not unique to the Philippines but is also happening in other countries.

“The shift that is happening in the telco business model not only happening here but the rest of the world,” he said.

Likewise, the PLDT group is increasing its capital expenditures budget to P34.5 billion instead of P32 billion this year to enhance its 3G coverage in all cities and 92 percent of all municipalities; widen fiber optic cable network to 90,000 kilometers; fortify the northern and southern Luzon aerial fiber optic cable; expand its 4G network footprint; expand its fixed and mobile broadband packet core network; and roll-out fiber-to-the-home infrastructure.

“We expect higher capex levels for 2014, to be carried over into 2015 in light of the market’s continued appetite for data services. While we have already modernized and expanded our networks, we are accelerating our data capacity build-out due to the free internet promo as well as our TD-LTE build-out to meet increasing fixed wireless data demand,” Nazareno said.

The PLDT Group had a subscriber base of 75 million as of end-September comprising of 69 million wireless subscribers as well as 3.7 million broadband subscribers and 2.2 million fixed line subscribers.

Wireless giant Smart Communications Inc. had 25.7 million subscribers as of end-September while Talk ‘N Text had 27.8 million, and Sun Cellular with 15.5 million.