Network leader Philippine Long Distance Telephone Co. (PLDT) is sticking to its profit forecast for the year despite losing market share to rival Globe Telecom and incurring additional costs from its integration with Sun Cellular.
PLDT chair Manuel V. Pangilinan said the company would hit the bottom of its profit downtrend this year with core earnings expected to slump to P37 billion—lower than last year’s P39 billion.
“We’re sticking to that target and it looks like it’s going to happen,” Pangilinan told reporters last Thursday.
At the sidelines of the company’s shareholders’ meeting, Pangilinan said the company would likely end the second quarter with around P9.2 billion in core profit, which strips out non-recurring gains or losses.
Pangilinan reiterated the need for the company to transform from a mere utility company that provides phone and Internet access to a multimedia conglomerate that delivers connectivity and rich content across several platforms—from television to mobile phones.
He said telcos that do not evolve would continue to see thinner margins due to competition from Internet messaging services on sites like Facebook.com and Skype.com.
“How to blend the telco utility aspect with the creative part of social media is a big challenge. Nobody has been successful yet,” Pangilinan said. “Traditional telcos are becoming obsolete.”
The official said the integration of Sun Cellular’s operations into PLDT’s has started to contribute positively to the company’s revenue stream—albeit not as substantially as the company first thought.
Sun Cellular is the mobile brand of Digitel Telecommunications Philippines, which PLDT acquired from the Gokongwei family last October.
“I admit, the integration is taking more time than we thought it would initially,” Pangilinan said. “But it’s moving toward the positive side already,” he said.
Despite the strain on PLDT’s earnings, Pangilinan said subscribers of Sun Cellular have started to feel the benefits of being part of a bigger network.
“They have more extensive coverage now and their service is improving,” Pangilinan said.
By next year, he said PLDT’s profit would start growing again and by 2014, earnings would be back at its peak level of P42 billion. PLDT’s profits reached P42 billion in 2010—the highest in the company’s history.