IHS Global Insight Perspective | |
Significance | PLDT's 2010 results have demonstrated the transition of revenue streams for the group. |
Implications | The group's mobile business is battling for growth, while broadband and data services are the key growth engines. |
Outlook | The group will increase investment in the next two years to enhance service quality and develop services in new areas. |
Philippine Long Distance Telephone Company (PLDT), the largest telecom company in the Philippines, has announced that its consolidated service revenues for 2010 decreased by 2% year-on-year (y/y) to 142.2 billion Philippine pesos (USD3.27 billion). Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) were 3% lower y/y at PHP83.7 billion, representing an EBITDA margin of 59%. Net income for the year increased by 1% y/y to PHP40.2 billion. The core net profit, which excludes currency and derivatives-related items, climbed by 2% to PHP42.0 billion in 2010. The company also reported a mobile subscriber base of 45.6 million at end-2010, after adding 4.3 million subscribers during the year. It added that the total broadband subscriber number had exceeded 2 million by end-2010, compared with 1.6 million a year earlier. Commenting on the 2010 results, the group said in a statement: "At about this time last year, we had indicated that 2010-2012 would be a critical period in the PLDT Group's transformation, as it was being undertaken at a time when the operating environment was becoming increasingly price-competitive and market-share sensitive."
Outlook and Implications
•Shift in Revenue Mix: PLDT's latest results have shown the transition of revenue streams for the company. The company noted that while income from long distance calls on basic telephones and text messages via mobile phones declined by double-digits in 2010, its revenue from broadband, internet and data services were increasing by double-digits. With intense competition and a high penetration rate in the mobile segment, the company's efforts to cut service fees and increase spending on marketing has weighed down the profits. The company's wireless service revenues dipped by 2% y/y in 2010, while wireless EBITDA declined by 1% y/y. In response to the new market environment, Smart Communications, PLDT's mobile unit, last month introduced "Netphone", a smartphone especially designed for emerging market users in order to spur mobile internet browsing. Such a move demonstrates the company's desire to deploy new mobile applications and services to generate new growth engines.
•Increased Network Investment: To strengthen its market leadership, PLDT plans to step up capital spending and invest a total of PHP67 billion this year and next, compared with a combined capital expenditure of PHP56 billion for 2009 and 2010. The investments would include enhancing the quality of its wireless network and the expansion of its broadband infrastructure, including building additional international cable systems. PLDT hopes such initiative would enable it to roll out an expanded suite of services in new areas as well as achieve operating and cost efficiencies. The company intends to finance its higher capital expenditure with new debt. PLDT Treasurer Annabel Chu has said the company this year plans to borrow the peso-equivalent of between USD400 million and USD600 million to finance capital expenditure and refinance maturing debt. She said the company plans to primarily borrow in pesos and will take several financing instruments instead of taking just one big loan to reduce currency exchange risk.