The profits of the country’s major phone carriers slipped in the first quarter of 2012 amid aggressive spending programs and muted market demand.
Dominant carrier Philippine Long Distance Telephone Co. (PLDT) on Tuesday said its ongoing network modernization and the gradual integration of its operations with recently acquired Digitel Telecommunications Philippines had and would continue to affect profitability in the near term.
Pangilinan said PLDT would likely end the year with P37 billion in profit, significantly lower than the company’s record P42-billion net income booked in 2010.
For the first quarter of 2012, core profit, which excluded exceptional gains, slipped to P9.3 billion from the P10.6 billion recorded a year earlier.
Its reported net income, including the integration of Digitel’s operations, reached P10.1 billion in the three-month period. This was lower than the P10.7 billion booked in the same period last year.
PLDT’s consolidated earnings before income tax, depreciation and amortization (Ebitda) slipped by 2 percent to P20.5 billion in the quarter, mainly due to the integration of Digitel’s lower-margin operations into PLDT’s books.
In a separate statement, PLDT rival Globe Telecom said its net income slipped by 10 percent to P2.7 billion in January to March. Core profit, excluding mark-to-market movements, fell 7 percent, also to P2.7 billion.
“This period’s results reflect continued investments in Globe’s network infrastructure, including charges related to Globe’s massive network modernization and IT transformation programs,” Globe said.
Ebitda was down by 5 percent year-on-year from P9.1 billion to P8.7 billion in the first quarter.
Globe said service revenue rose by 6 percent year-on-year to P20.2 billion in the first quarter. Its mobile revenue rose by 6 percent year-on-year from P15.6 billion to about P16.6 billion in January to March this year despite intense competition and continued price pressures. Broadband revenue was also up 13 percent year-on-year from P1.8 billion to P2.0 billion in the first quarter.
“We are pleased with our results this period, and the way we have built on and sustained the momentum of the last six quarters. Despite intense competition, we continue to make gains in our mobile and broadband businesses,” Globe president Ernest Cu said.
Meanwhile, PLDT said one of its main focuses for the coming months would be the integration of its operations with Digitel, which operates the Sun Cellular brand. A key part of this integration was the reduction of Digitel’s workforce.
About 850 Digitel employees recently availed themselves of an early retirement program offered by the company earlier this year. A similar number of PLDT workers are expected to take early retirement packages this year, which would entail a one-time cost of about P1.4 billion.
PLDT said it was optimistic that the broadband Internet technology would help drive growth in the telecommunications market, helping the company improve profitability moving forward.
The company said its mobile subscriber base breached the 66-million mark at the end of the first quarter, with the addition of about 300,000 users since the start of the year.
PLDT’s bread-and-butter, wireless business, operated by subsidiary Smart Communications, grew by 15 percent year-on-year to P28.9 billion, given the availability of more affordable smart phones, driving wireless Internet data usage.
In the meantime, the PLDT board approved on Tuesday a plan for the company to invest P6 billion in MediaQuest Holdings, its media investment arm, through the purchase of its Philippine Depository Receipts (PDR).
MediaQuest, a subsidiary of the PLDT employee Beneficial Trust Fund, owns TV5 operator Associated Broadcasting Corp. and Cignal TV.
At the end of 2011, TV5’s market share was 15.6 percent nationwide, from 2.7 percent in 2007. Cignal TV, for its part, is the country’s largest direct-to-home satellite pay-TV provider with more than 250,000 subscribers.
“To sustain this growth momentum, however, MediaQuest requires additional funding,” PLDT said.