PLDT sees ‘rough’ year ahead as margins thin

Dominant carrier Philippine Long Distance Telephone Co. (PLDT) expects 2012 to be a “rough” year for the telecommunication sector as companies ramp up their spending while profit margins thin.

PLDT chairman Manuel V. Pangilinan said the phone firm was expected to meet its revenue and profit goals for 2011, but the coming year would be a different matter.

“It’s going to be a tough year for PLDT next year,” he told reporters in a recent interview.

Last month, Pangilinan said the company has revised its core net income target to P39 billion for the year, below its previous forecast of P40.5 billion.

This was also lower than the P42 billion in core profit, which stripped out the effects of foreign exchange movements and other paper gains or losses, that PLDT attained at the end of 2010.

PLDT’s core net income from January to September 2011 was 4 percent lower at P30.6 billion than the P32 billion recorded in the same period last year. PLDT expects profits to start growing again by 2013.

The company has experienced declining revenues from its traditional call and text messaging services. Although usage levels have gone to put additional strain on network infrastructure, revenues have shrunk due to “bucket” and “unlimited” type offers.

Pangilinan said PLDT would also have to set as provision a substantial amount of profit to make up for the costs of integrating its operations with recently acquired mobile brand Sun Cellular, operated by Digitel Telecommunications Philippines Inc.

Sun Cellular is the third-biggest mobile network in the country with more than 15 million subscribers. “We’re still waiting for the final outcome for Digitel. We are provisioning for that,” he said, in anticipation of accounting and other non-cash charges.

In a recent report, global debt watcher Fitch Ratings said the Digitel acquisition solidified PLDT’s market dominance. As a result of the merger, PLDT now controls 70 percent of the market in terms of user count and revenue.

Fitch rates PLDT at minimum investment grade, one notch above the Philippines’ own sovereign credit rating.