Think tank: Globe, PLDT to secure modest gains despite large capex

Given their substantial capital expenditures, the credit position and free cash flows of Globe Telecom and PLDT Inc. might be tested but “modest” revenue growth was still expected for this year amid strong consumer demand, a Fitch Group unit said in a recent report.

“Globe and PLDT incur significant capex due to ongoing cell site rollouts and fiber deployments, leading to additional debt incurrence and strained credit metrics,” CreditSights said.

This year, Globe and PLDT planned to spend P89 billion and P85 billion, respectively, for their expansion plans.

The credit research provider said that Globe’s debt metrics might “worsen from its high capex, amid the absence of fresh near-term equity funding.”

“Yet we feel the company remains fundamentally sound; it has little near-term refinancing needs, maintains strong banking relationships, and that it foresees capex to have peaked and should dwindle past 2021,” it added.

As of end-March, Globe has a debt to equity ratio of 1.75:1, which is within the 3:1 limit based on its debt covenants.

CreditSights, meanwhile, expects a “modest improvement” in the debt metrics of PLDT following its P77-billion tower sale and leaseback arrangement.

The said deal is seen providing “greater financial buffer for deleveraging and capex funding needs” for the Pangilinan-led firm.

Its debt to equity ratio, meanwhile, stood at 1.85:1 as of the first quarter.

As for revenue growth this year, CreditSights said that mid single-digits were expected, which was in line with the top line figure guidance for both telcos.

“Looking ahead, we believe increasing data penetration, persisting strong data and broadband demand, and steady pandemic recoveries should drive modest but steady full-year 2022 year-on-year earnings growth,” it explained.

“Both telcos stood resilient in the face of the COVID-19 pandemic owing to robust data and broadband demand that drove resilient segmental revenue growth,” it added.

In the first quarter, PLDT saw its net income grow by 56 percent to P9.08 billion while Globe’s bottom line rose 86 percent to P13.66 billion.