PLDT, Globe Telecom post lower Q2 profits

Telecommunications industry profits continued to fall in the second quarter as the country’s top companies accelerated modernization efforts while struggling against competition from each other and from Internet communication applications like Skype and Facebook.

In a statement released Tuesday, dominant carrier Philippine Long Distance Telephone Co. (PLDT) reported a net income of P19.5 billion, down 8 percent year on year.

“These results reflect the consolidation of the operating performance of Digital Telecommunications Philippines Inc. [Digitel] from its acquisition, which closed last October,” PLDT said.

Stripping out one-time gains, PLDT’s core profits fell 11 percent to P18.7 billion. PLDT said higher service revenues were offset by an increase in expenses due to manpower reduction programs at PLDT and Digitel.

The company also spent more on selling and promotions initiatives, the statement added. “Core net income was also affected by the recognition of a P2-billion deferred gain relating to the transfer of shares of Manila Electric Co. (Meralco) from PLDT Communications and Energy Ventures to Beacon Asset Holdings.

Beacon Asset is the Manuel V. Pangilinan group’s holding company for its controlling stake in Meralco, the country’s biggest power distributor.

“It is noteworthy that, despite the earnings pressure from the competitive state of the local industry and continuing pressure on our margins, our free cash flows remain strong, thus enabling us to sustain our customary dividend levels,” said Pangilinan, PLDT’s chairman.

PLDT’s earnings before income tax, depreciation and amortization (Ebitda) margin for the January-to-June period remained at a healthy 46 percent, although this was lower than the 55-percent level recorded a year earlier.

Consolidated free cash flow reached P24.4 billion, an increase of 1 percent over last year. PLDT, which controls mobile carriers Smart Communications and Sun Cellular, ended the period with 67.4 million subscribers, or two thirds of the industry.

This helped prop up consolidated service revenues by 12 percent year on year to P84.7 billion.

Meanwhile, Globe Telecom reported a similar earnings drop, with its net income settling at P5 billion for the six-month period. This was down 10 percent from the same time last year.

Despite the lower profit, the company remained optimistic, saying “the mobile business thrived against the challenges posted by competition, notwithstanding peaking penetration levels driven in part by multi-SIM usage and subscribers’ preference for services offering the best value for their money.”

The company said total service revenues reached P40.8 billion, up 6 percent from the same period last year.

Excluding foreign exchange and mark-to-market gains and losses as well as nonrecurring items, however, core net income was up 2 percent year on year from P5.6 billion to P5.7 billion, Globe said.

“We are very satisfied with our performance this period, allowing us to further extend our growth momentum for another quarter. This was achieved despite the challenges posed by competition that is beginning to leverage its scale advantages of having a bigger combined subscriber base and network,” Globe president and CEO Ernest Cu said.

The company ended the first semester with 31.7 million subscribers, up 12 percent year on year. “We hope to build further on this momentum as we head into the second half of the year,” Cu said.