Moody’s retains PLDT credit ratings

MANILA, Philippines - Moody’s Investor Service maintained the Baa2 credit rating of the country’s dominant telecommunications provider Philippine Long Distance Telephone Co. (PLDT).

Obligations rated Baa2 are subject to moderate credit risk.  They are considered medium grade with some speculative elements and moderate credit risk.

Moodys’s ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default.

In a statement, Moody’s said it was also retaining the stable rating outlook for the telco firm.

“Despite increasing capex and ongoing competitive pressures, PLDT’s margins and credit metrics continue to solidly the position of  the company in the Baa2 rating category,” Gloria Tsuen, Moody’s vice president and senior analyst said.

She said the move to affirm the ratings is reflective of the company’s dominant market position in the Philippine telecommunications market, strong margins compared to global telecommunication peers in the Baa rating category, solid credit profile, and excellent liquidity position.

As such, Moody’s expects PLDT to continue to dominate its major segments.

As of end of June this year, the company accounted for 59 percent of the cellular telephony, 67 percent of fixed-line voice services and 58 percent of the broadband market.

With domestic competition seen to remain intense and high-margin toll revenues expected to continue to decline, the debt watcher expects PLDT’s EBITDA (earnings before interest, taxes, depreciation and amortization) margin to erode slightly over the next 12 to 18 months.

The company however, should be able to maintain an adjusted consolidated EBITDA margin of over 50 percent which is still considered strong for its rating level and compared to similarly rated industry peers with 30 to 40 percent EBITDA margins.

Following PLDT’s recent announcement of a higher capital expenditure estimate of P43 billion for the year from only P35 billion last year, Moody’s expects the company’s spending to remain elevated until next year to improve network quality and better serve customers.