Weak 5G demand aggravated P48-B capex overspend, says PLDT
The rollout of 5G not taking off as expected despite the investments already poured in—as shown by its low market penetration—partially contributed to the P48-billion budget overrun of PLDT Inc., which has been spending on this new technology to address the rising demand for connectivity.
The Pangilinan-led telecommunications company, in a disclosure on Friday, said its multi-year capital expenditure program included high speed network assets and port installations, among others.
But the listed telco clarified it had to slow down the deployment of this expensive technology due to the lower-than-expected demand.
PLDT wireless unit Smart Communications said it saw 2.51 million devices linked to its 5G services as of end-September, more than triple the 759,000 devices it recorded in the same period last year. The latest figure only covers about 4 percent of the telco’s nearly 68 million subscribers.
In comparison, its close rival Globe Telecom Inc. logged more than 3 million devices in its 5G network for the period, representing about 3 percent of its 87.9 million subscribers.
“The deferment of the 5G rollout was in relation to the tepid market adoption of 5G handsets given that these are still not affordable for most of the Philippine prepaid market,” the telco giant said.
A PLDT official previously said the pricing for 5G-enabled mobile phones, ranging from P13,000 to P15,000 for entry model, is deemed expensive for the majority of the public. The ideal price is below P10,000, according to the official.
Regina Capital Development Corp. head of sales Luis Limlingan told the Inquirer that “it did not help that it was the pandemic and the market also was slow to adapt to the 5G handsets given people were cutting down on spending as well.”
The 5G assets are currently stored in the warehouses, PLDT said, noting these will not be written off.
“Those 5G assets could either be repurposed for 4G/LTE or deployed when 5G adoption in the market picks up,” the telco player added.
The company, according to its latest report, has 77,200 base stations, including 7,300 5G base stations and nearly 40,000 5G/LTE base stations across the country. Its network covers 97 percent of the population.
PLDT also has a collaboration with Washington-based Omnispace to enable space-based 5G services backed by low earth orbit satellites in the country.
It recently reported that its 5G roaming services were available in 62 countries through partnerships with 115 telcos across the globe.
Last week, PLDT disclosed that it had accumulated P48 billion in budget overruns in the past four years, which was only recently uncovered. Inquirer previously reported the figure was as much as P130 billion but was brought down after some negotiations with the suppliers.
The telco giant intends to seek payment deferral from vendors and to cut capital expenditure (capex) in the next couple of years to cushion the impact of the overspending.
Depreciation costs are expected to be elevated in the coming years with an additional of P4.8 billion annually.
To fund its capex, dividends and general corporate matters, PLDT confirmed its plan to borrow about P35 to P45 billion in the next two years. It is set to pay the balance of the regular dividend of P45 per share and the remaining special dividend of P42 apiece this year.
Earnings before interest, taxes, depreciation and amortization is on track to reach P100 billion this year.
