PLDT uncovers P48-B ‘budget overrun’, revamps management

Telecommunications giant PLDT Inc. is reorganizing its management structure and tightening internal controls after uncovering a P48-billion “budget overrun” on its capital expenditure spending in the last four years.

On Thursday, PLDT appointed Emmanuel C. Lorenzana, the former head of flagship wireless unit Smart Communications, as chief transformation and customer officer. Lorenzana had served as an advisor since 2019.

PLDT also appointed Danny Yu as group controller and Joseph Gendrano as chief technology officer.

The announcement follows weeks of rumors of an internal probe at the country’s biggest integrated telecommunications provider over supposed financial anomalies.

Complaints were also raised by some of the company’s suppliers during the probe, sources told the Inquirer.

PLDT stressed in the disclosure that it had so far found no fraudulent transactions, procurement anomalies, or loss of assets arising from the capital spending overruns.

It was also in negotiations with suppliers and vendors to cut the unexpected spending increase.

“Our vendors continue to be committed to their partnership with PLDT and have expressed flexibility with our commercial requests involving reduction of outstanding work,” PLDT said.

The overruns covered capital spending (capex) over four years from 2019 through 2022, the telco giant said.

“In the face of the pandemic, and especially at its height,

PLDT and Smart continued its capex spend, resulting in enhanced connectivity for our people, and better customer experience,” it said.

“While these substantial capex investments were key to meeting PLDT’s goals, they came at a price—capex investments for these four years aggregated to P379 billion, including an estimated budget overrun of no more than P48 billion,” PLDT said.

PLDT said the estimate was based on an ongoing internal forensics mandated by the board and its audit committee and discussions with principal vendors.

In a disclosure on Friday, the telco giant led by Manuel V. Pangilinan said the excess amount represented 12.7 percent of the total P379-billion capex spending for the period.

“PLDT is undertaking a management reorganization process and has initiated improvements on its processes and systems to address weaknesses that allowed such budget overruns to occur,” the listed company said.

The capex was allocated to multi-year projects including LTE and 5G rollout, Fiber-to-the-home investments, fiber, submarine cable expansion and tower upgrades, PLDT noted.

The major telecommunications player said its major revenue streams have remained “healthy and robust” despite the billions-worth of additional expenses.

The wireless, home and enterprise businesses were shielded from the capex overrun, PLDT assured.

It added the earnings before income tax, depreciation and amortization was still within the guidance level of P100 billion while core income projection remained between P32 billion to P33 billion.

The budget overrun was expected to be mitigated by the gains from its P77-billion tower sale and lease back agreement back in April. It has received P57.7 billion so far from the transaction.

PLDT announced another deal amounting to P9.2 billion on Friday.

“A further sale of towers are contemplated next year at similar pricing as the first sale and will contribute additional exceptional gains to PLDT’s core income in 2023,” PLDT said, noting these “gains will also reduce the incremental depreciation expenses in PLDT’s financial accounts arising from the capex overrun.”

As such, PLDT said its capex next year would remain “elevated,” with the only intention of slowing down by 2024 onwards. It allocated P85 billion in capex this year.

PLDT said it would disclose more information once it completes the reorganization.