MANILA, Philippines—Profits of Philippine Long Distance Telephone Co. (PLDT) fell in 2011 due mainly to the one-time charge linked to the decommissioning of network equipment that were replaced in line with the company’s modernization program.
The country’s top telco on Tuesday said earnings would likely continue falling in 2012 during the company’s “transition” period for replacing its bread-and-butter call and text services with its broadband Internet business.
“Core net income for 2012 will be lower due mainly to pressures emanating from the revenue mix of the group shifting away from texting. Margins on broadband are lower than our old business,” PLDT chairman Manuel V. Pangilinan said.
“Competition will also continue to be tight. We are also providing higher subsidies (for handsets) to respond to competition and to see the market with more Internet capable devices,” he said.
The company reported a 21-percent drop in profits for 2011 to P31.7 billion. This came following the impairment of P8.5 billion-worth of network equipment that were replaced in ongoing network upgrades.
Core profits, which strip out these accounting losses, settled at P39 billion, 7 percent lower year-on-year. This came as revenues slipped 1 percent to P154 billion, despite the inclusion of P3.8 billion in revenues from Digitel Telecommunications Philippines, which PLDT acquired in October of 2011.
This year, core profits are expected to fall further to around P37 billion as the company grows its broadband business. Pangilinan said broadband revenues would contribute more to the company’s top line, shrinking profit margins.
As of the end of 2011, broadband revenues, made up of both wireless and fixed services, accounted for 12 to 13 percent of overall revenues.
“It’s difficult to speculate on how much broadband will contribute in the next few years. But it will be a major source of business for the group as a whole,” Pangilinan said.
Pangilinan said PLDT’s earnings could reach the levels seen in 2010—the company’s most profitable year on record—by around 2014 after the completion of all its network upgrades.
PLDT ended the year with a mobile phone subscriber base of 63.7 million, including the 14.7 million under Digitel’s Sun Cellular brand. Its nearest rival, Globe Telecom, had about 30 million users at the end of December.
PLDT shares fell 2.8 on Tuesday as the company released its earnings report. PLDT, the country’s most heavily traded firm, helped drag down the main index that fell 1.26 percent.