Moody’s raises PLDT credit rating to Baa2
Credit watcher Moody’s Investor Service has raised its rating for Philippine Long Distance Telephone Co. (PLDT) to a notch above the basic investment grade, recognizing the phone firm’s position as the country’s biggest telecommunications firm.
In a statement, Moody’s said it upgraded PLDT’s local currency issuer and foreign currency bond rating to Baa2, a notch up from the previous Baa3. This followed the upgrade this week of the Philippine government’s sovereign credit rating to one notch below investment grade—the country’s highest ever score.
“Despite its strong fundamental credit quality, PLDT’s ratings were previously constrained at the Baa3 level by the two-notch differential with the sovereign rating of Ba2,” Moody’s assistant vice president and analyst Yoshio Takahashi said. PLDT’s credit rating outlook was “stable.”
“The upgrade of the sovereign rating to Ba1 therefore allows Moody’s to upgrade PLDT’s ratings to Baa2,” he said.
Moody’s said PLDT’s dominant market position, strong financial metrics, with substantially all of its revenues coming from, and assets based in, the Philippines, its fundamental creditworthiness closely reflected the potential risks that it shared with the sovereign.
The debt watcher said it was confident that PLDT would aggressively pursue its current business plan to return to profitability, without investing further in non-core businesses such as its current position in Manila Electric Co. (Meralco).
PLDT expects to end the year with a net income of P37 billion, lower than P39 billion last year. The company expects to post a growth in profit in 2013. By 2014, PLDT is forecast to net P42 billion, matching its 2010 record.
“In particular, Moody’s expects PLDT to deliver its network modernization objectives such that the 2013 financial year starts to show some of the benefits of its accelerated capex program,” Takahashi said.
Moody’s said it would grant another upgrade for PLDT if the company could maintain adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) margins over 45 percent and reduce adjusted debt-to-Ebitda ratio to below 1.5 percent.
At the end of June 2012, PLDT enjoyed a market share of 63 percent in mobile phones, 65 percent for fixed-line services and 63 percent for broadband Internet.
