MANILA, Philippines—The profit of Philippine Long Distance Telephone Co. (PLDT) fell in 2011 due mainly to a 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 telecom company on Tuesday said earnings were expected to continue falling in 2012 as the company enters a “transition” period as it shifts focus from call and text services to 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 text messaging. Margins on broadband are lower than our old business,” PLDT chairman Manuel V. Pangilinan said.
“Competition will also continue to be tight. We are providing higher subsidies (for handsets) to respond to competition,” he added.
The company reported a 21-percent drop in profit 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 profit, which stripped out accounting losses, hit P39 billion, 7 percent lower year on year. This came as revenue slipped by 1 percent to P154 billion, despite the inclusion of P3.8 billion in revenue from Digital Telecommunications Philippines (Digitel), which PLDT acquired in October 2011.
This year, core profit is expected to fall further to about P37 billion as the company grows its broadband business.
Pangilinan said broadband revenues were seen contributing more to the company’s top line, shrinking profit margins.
As of the end of last year, broadband revenues, made up of both wireless and fixed services, accounted for 12-13 percent of total revenue.
“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,” Pangilinan said.
PLDT earnings are expected to reach the levels seen in 2010—the company’s most profitable year on record—by 2014, after its upgrading program is completed.