MANILA, Philippines -- Philippine Long Distance Telephone Co (PLDT), the country's dominant telecoms firm, said Tuesday second-quarter net profit grew 4.0 percent but slowing demand has made it cautious about achieving its 2008 target.

PLDT's revenues are expected to come under pressure in the second half due to a weaker peso and as consumers, feeling the pinch from higher fuel and food costs, cut mobile phone spending.

"Already, we are seeing parts of our cash operating expenses rising and third quarter demand softening slightly -- albeit the third quarter being a seasonally low period," Manuel Pangilinan, PLDT chairman said in a statement.

"We remain cautious and vigilant, yet confident still, that we will achieve our targets for 2008," he said.

PLDT maintained earlier guidance that it was on track to deliver a 5.0-percent increase in core earnings, which strip out currency and derivative gains, of P37 billion ($839 million) this year.

The company -- owned by Hong Kong's First Pacific Co. Ltd. and Japan's NTT Communications and NTT DoCoMo -- said core earnings rose 6.0 percent to P9.36 billion in the second quarter.

Analysts do not provide quarterly forecasts for PLDT, but estimate its full-year profit will rise 5.3 percent to P37.9 billion.

PLDT said its first half net income reflected foreign exchange and derivative gains as well as a one-time gain of P700 million after the company reclassified some derivatives related to its 2009, 2012 and 2017 bonds as non-hedges.

The results came after the market closed. Shares of PLDT dipped 0.2 percent to P2,525, broadly in line with the main index, which ended flat.

SHARE BUYBACK

The group's service revenues climbed 5.0 percent to P70.3 billion in the first half. Nearly two-thirds of the revenues came from the wireless phone business, which had service revenues of P45.8 billion, up 7.0 percent from a year earlier.

PLDT added over 1.6 million mobile phone subscribers in the second quarter, ahead of a 1.5-million goal, bringing the group's mobile subscriber base to over 33 million at the end of June.

It expects the national mobile penetration rate to rise to 80 percent in the next two to three years from about 60 percent now with the spread of second-hand phones and cheap SIM cards, making going mobile affordable.

Thailand has a mobile penetration rate of 75 percent, Malaysia 84 percent, and Indonesia about 35 percent.

PLDT said it declared an interim dividend of P70 per common share, on track for a minimum dividend payment of about 70 percent of core earnings this year.

The company's board of directors also approved a second share buyback program of up to two million shares, equivalent to about 1.1 percent of its outstanding common shares.

Its first buyback program with a similar share volume was launched in January, with a total of 1.74 million common shares so far purchased at an average price of P2,532 a share, slightly higher than Tuesday's closing price.

PLDT's stock lost 15 percent in the second quarter and 25 percent in the first half, compared to an 18-percent drop in the main index in the second quarter and a 32-percent fall in the first half.

($1 = P44.12)

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