PLDT to cut spending, sell assets to prune debts, boost profitability

PLDT Inc. is set to raise over P50 billion from the sale of cell tower assets while signaling a shift away from an era of record spending to boost cash flow and profitability.

PLDT chair Manuel V. Pangilinan said on Thursday they would “throttle down” capital spending from P89 billion in 2021 to below P80 billion in 2022.

Instead, the company would pursue a “deliberate” and rationalized approach after massive network investments were deployed in recent years amid fierce competition from existing and new players.

Pangilinan said PLDT wanted to restore a positive free cash flow in 2022, increase margins and incrementally lower debts in the coming years.

The telco giant reported an 8-percent core profit increase to P30.2 billion in 2021 while service revenues rose 6 percent to a record high of P182.2 billion.

By controlling costs and unwinding borrowings, Pangilinan said PLDT would eventually reach its record-high profit of above P40 billion—last seen more than a decade ago when text messaging was the company’s main cash cow.

“We believe a continued level of negative free cash flow for any company is not sustainable in the long run,” Pangilinan said.

Tower asset sale

To reduce debts, PLDT is moving to sell part of its nationwide tower assets, for a total of 6,000 cell towers, to an independent operator by June this year.

Pangilinan said they received final bids above P50 billion for the deal, which would be a sale and leaseback arrangement. This means PLDT would sell then rent the cell sites from the tower company.

Proceeds would be used to pay down debts and also pave the way for a special dividend to stockholders, he said.

The company is realigning its capital spending plans given the changing revenue structure as mobile revenues stay flat while home and enterprise fuel growth.

“We did spend a lot of money last year so we cannot keep on spending a lot of money,” Annabelle Chua, PLDT chief financial officer, said on Thursday.

Chua said PLDT would prioritize spending on home internet, which showed “room for penetration to grow,” and for expanding the fiber and data center segments.

Last year, PLDT’s home revenues surged 24 percent to an all-time high of P47.8 billion while enterprise rose 4 percent to P42.2 billion.

Flat mobile business

The mobile segment under Smart Communications was relatively flat at P86.2 billion as the business suffered from pandemic mobility restrictions and a 2-percent drop in the number of subscribers to 71.22 million.

“We recognize that the Philippine mobile market is likely at saturation point but we are confident that as full mobility resumes and economic activity increases, and combined with the increasing adoption of 5G, we will see an uptick in individual wireless revenues,” PLDT president Alfredo Panlilio said on Thursday.

Pangilinan also said the mobile business continued to be “challenged” in the first two months of 2022, adding that revenues would pick up with the more relaxed pandemic alert level.

Still, he expected full-year core profits to hit P32 billion to P33 billion while service revenues would grow by “mid-single digit.”