PLDT cuts ’14 profit outlook, hikes capex

MANILA, Philippines–Philippine Long Distance Telephone Co. (PLDT) cut its profit outlook for the full-year 2014 while announcing an increase in capital spending—steps it said were aimed at addressing intensifying competition and the shifting telco landscape.

Challenges facing the company and industry prompted the Philippines’s biggest telecommunications provider to cut its 2014 profit target by P2.5 billion to P37 billion, PLDT chair Manuel V. Pangilinan said in a media briefing Tuesday. The company also announced that capital spending in 2014 will go up by P2.5 billion to P34.5 billion, or an increase of almost 8 percent.

The announcement comes as the country’s biggest telecommunications firm said core net income in the nine months through September slipped 1 percent to P28.6 billion while reported net income, which includes non-recurring items, went down by 3 percent to P28 billion.

Service revenues increased 1 percent P122.9 billion, propped up by gains from its data and broadband businesses.

Increasing competition on the cellular business, however, meant PLDT had to respond by lowering price points, it said, hurting revenues already threatened by popular internet-based messaging applications like Whatsapp and social networking websites like Facebook.

“The transition from the legacy business to data and Internet broadband has markedly happened in the year 2014 and will likely accelerate starting 2015, which could again impact revenues and revenue mix of the company,” Pangilinan said during the briefing.

PLDT said the increase in its spending budget was partly due to the need to hike data capacity after it announced last September a “free” Internet promo that will run through January 5, 2015. That effort was aimed at increasing market share while enticing more of its subscribers to avail of data services.

PLDT president Napoleon Nazareno noted that capital spending would remain elevated through 2015 and would support growing demand for Internet services.

“Competition has been escalating on all fronts and we have responded to protect market share,” he said.

“We also saw an increase in cash operating expenses, mainly from higher than expected rent and utility costs and higher cellular product subsidies, which taken with the lower wireless revenues, resulted in reduced Ebitda and profits for the quarter,” Pangilinan said in a separate statement.