PLDT profits dip in Q2 but see rebound in 2013

MANILA, Philippines — Profits of the Philippine Long Distance Telephone Co. (PLDT) slid in the second quarter of the year on the back of declining call and text messaging revenues amid a maturing market and increasing competition.

PLDT chairman Manuel V. Pangilinan on Tuesday said the drop in earnings was largely expected, noting that as the company’s financial position remained strong, allowing for continued dividend pay outs for shareholders.

The company posted a core net income of P10.75 billion in the April to June period of the year, down 3 percent year-on-year. Striping the effects of foreign exchange, PLDT’s reported net income was 3 percent up at P10.56 billion.

On a year-to-date basis, core profit was down 1 percent to P21.02 billion, while reported profit was down 2 percent at P21.3 billion.

This came as first-half consolidate service revenues fell 3 percent to P69.6 billion. The company said the 5-percent growth in wireless broadband Internet revenues failed to offset the 2-percent decline in text messaging and 8-percent fall in mobile voice earnings.  Wireless call and text revenues will make up about 68 percent of total earnings.

The company declared a dividend of P78 per share, in line with the firm’s policy of distributing 70 percent of its total core earnings to shareholders.

“While we anticipated the softening of our income position from a year-on-year perspective, the improvement of our first half results we see when compared with those of the second half of 2010 is encouraging,” he said in a statement.

Investment grade

PLDT announced that its obligations were recently upgraded to “investment grade” by rating firms’ Moody’s Investor Service and Fitch Ratings—a reflection of the company’s financial health, officials said.

At “investment grade,” PLDT’s debt notes are rated one notch higher than foreign-denominated securities issued by the Philippine government.

“PLDT is the only Philippine corporate with an investment grade rating,” PLDT president and CEO Napoleon Nazareno said.

Pangilinan said PLDT was the first Philippine entity to earn an “investment grade” rating. In the past, companies have never been allowed to be rated above their respective home countries. “But I think that policy has been lifted recently,” he said.

The company said the rating upgrades were a “validation of PLDT’s financial strength,” despite reporting lower profits so far this year.

Pangilinan said the company expected its profits to be boosted by its acquisition of rival operator Digitel Telecommunications Philippines Inc. to be completed by the second half of this year.

Awaiting approval

The P74.1-billion acquisition is currently awaiting the approvals of the National Telecommunications Commission (NTC), the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange.

The company ended June with a total mobile phone user base of 47.8 million people, up 5 percent from last year, solidifying its position as the country’s largest telecom service provider.

Officials said PLDT earnings would likely continue to drop until 2012, but it would likely grow again by 2013 driven by new revenue streams, mainly broadband Internet services. “Broadband remains our top priority as we believe there is much room to expand on this front,” PLDT chief wireless adviser Orlando B. Vea said.