Digital shift caps PLDT’s Q1 earnings

MANILA,  Philippines–Telecom giant Philippine Long Distance Telephone Co. posted P9.4 billion in net profit in the first three months, flat from the same period last year, as digital solutions gnawed at traditional SMS and voice businesses.

Taking out non-recurring items, consolidated core net income fell by 5 percent year-on-year to P9.3 billion, seen in line with the company’s core income guidance of P35 billion for full-year 2015.

Consolidated service revenues for the period declined by 2 percent to P40.5 billion, as the declines in SMS revenues as well as the international and national long distance streams offset increases in revenues from the data and broadband businesses.  Consolidated revenues were stable at P42.6 billion.

In a press briefing on Tuesday, PLDT chair Manuel V. Pangilinan said the traditional voice business was flat for the first quarter “but at least getting to some point of stability.”  He noted that the “most vulnerable” segments were the long distance and SMS business lines.

Consumers around the world are now turning to apps like Skype and Viber to save on voice calls especially for cross-country calls while the likes of Viber and WhatsApp are competing with telco providers’ SMS systems.

Pangilinan estimated the impact of such a digital shift on PLDT’s long distance and SMS businesses for the first quarter at around P1.7 billion, which he noted was a “significant chunk” of the business.

To date, the digital shift has passed the inflection point for PLDT’s fixed income segment where 56 percent of revenues are already data-driven.  The wireless segment, however, is still behind such evolution, Pangilinan said, adding that the game plan would thus be to accelerate the evolution.

“In the course of doing that, there will be much pain.  There will be bumpy road in the next few months, maybe [through] next year until we reach the critical mass,” Pangilinan pointed out.

“The day will come that we’ll turn the corner,” he said, adding that the network infrastructure would, however, have to be built out to conform to the requirements of the digital shift.

For the first three months, data revenues went up by 11 percent to P11.2 billion, with data and broadband now accounting for 27 percent of total group service revenues. Fixed broadband businesses generated P3.8 billion in revenues, up by 10 percent while wireless broadband revenues, exclusive of mobile Internet revenues, increased by 2 percent to P2.5 billion. Corporate data, inclusive of data center revenues, rose by 15 percent to P2.6 billion. Mobile Internet revenues increased by 19 percent to P2.2 billion.

The group’s combined broadband subscriber base was over 4.5 million at the end of the quarter. Smart Broadband, Smart’s wireless broadband service offered through its wholly-owned subsidiary Smart Broadband Inc., had a subscriber base of over 2.6 million at the end of the period, about 2.1 million of whom were on Smart Broadband’s prepaid service. In addition, Sun Cellular’s wireless broadband subscriber base stood at 778,000. Meanwhile, PLDT’s fixed broadband subscribers increased by 3 percent from end-2014, bringing the PLDT group’s total fixed broadband subscriber base to over 1.1 million for the first three months of 2015, and now representing 51 percent of the fixed line subscriber base.

“While our core revenue sources undergo this transition phase where the erosion of our high-margin legacy businesses still outpaces the growth of our newer initiatives for now, we are taking significant steps to ensure that we are ready and prepared for the digital future. This future will require looking at our customers from a different set of lenses, as both individuals and enterprises embrace a digital life,” Pangilinan said.