The country’s phone firms are seen posting higher profits in 2013 despite slowing revenue growth as spending for expansion slows down due to the completion of large scale upgrades.
Debt watcher Fitch Ratings in a report said margin pressures would continue to hound Asia Pacific telecommunications firms, but profit margins would remain at healthy levels.
“Demand growth is likely to match or outpace the decline in margins and growth in investment and credit metrics will generally be stable or slightly improved,” said Steve Durose, head of Fitch’s Telecommunications, Media and Technology team in Asia-Pacific.
“In the cases where credit metrics will decline, Fitch expects few rating downgrades as these operators generally have significant headroom at their current rating level,” Durose said.
In the Philippines, he said price competition would remain despite the duopoly enjoyed by Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom.
“Volume growth is likely to be insufficient to offset margin decline, and therefore Fitch expects the telcos’ cash flow from operations to be weaker,” Durose said.
“However, leverage will improve as free-cash flow is likely to turn positive due to lower capital expenditures, with the completion of major network investments in 2012,” Fitch said.
PLDT, led by the Manuel V. Pangilinan group, completed in the second quarter of 2012 its two-year, P67 billion network modernization program that involved the expansion of its fiber-optic backbone and introduction of new technologies such as LTE (long-term evolution).
PLDT is so far the only company offering LTE-grade mobile services, which are significantly faster and more reliable than existing third-generation or 3G technologies, to mobile subscribers.
For its part, Globe Telecom expects to complete at least 80 percent of its own $790-million network modernization program. The company aims to replace its entire “legacy” network with brand new “future proof” infrastructure.
PLDT is the dominant player in the local telecom sector with a 68-percent share of the cellular phone market, 64 percent of broadband Internet and 65 percent of fixed-line business.