PLDT expects recurring core profit to hit P24 billion in 2018

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A logo of Philippine Long Distance Telephone Company (PLDT) is seen in front of their building in Makati city, metro Manila, Philippines May 30, 2016. -- REUTERS

By Krista A. M. Montealegre,
National Correspondent

PLDT, Inc. expects a better year after earnings took a hit in 2017 from accelerated depreciation costs, with the dominant telco mulling the sale of its stake in German start-up Rocket Internet AG to finance its record capital expenditure (capex) program.

In a briefing in Makati City on Thursday, PLDT Chairman Manuel V. Pangilinan said recurring core income will grow to as much as P24 billion this year from the P22.3 billion registered last year, slightly ahead of its P22-billion target for the entire 2017.

The profit guidance is supported by an anticipated 4% growth in service revenues that will reverse the 3% drop seen in 2017, Mr. Pangilinan said, anchored on the double-digit expansion of the home and enterprise segments and the “flattish if not slight improvement” in the wireless business.

Shares in PLDT added P35 or 2.3% to end at P1,560 apiece on Thursday, bucking the 0.27% slide in the Philippine Stock Exchange index.

PLDT Chief Revenue Officer Ernesto R. Alberto said the telco has arrested the decline in service revenues through 2017, posting three quarters of modest sequential increases starting in the second quarter.

“Things are beginning to look up for the group. I am not saying we are completely out of the woods, but we are getting there,” Mr. Pangilinan said.

PLDT has enjoyed favorable financial performance in the first quarter of 2018. January revenues rose 3% and profits were up “quite well, while February sales were “quite good” and March sales came in “better than February,” Mr. Pangilinan said.

PLDT is embarking on a historic capex program this year to support its network transformation program amid mounting criticism on slow Internet speed, with the 2017 budget expected to hit a record P58 billion this year — up from the P40 billion spent last year, Chief Financial Officer Anabelle L. Chua said.

Aside from using its operating cashflow and proceeds from the sale of receivables arising from the sale of its stake in Beacon Electric Asset Holdings, Inc. to Metro Pacific Investment Corp., PLDT may sell its position in German start-up Rocket Internet AG to fund the capex commitment, Mr. Pangilinan said.

Unloading shares in Rocket Internet is subject to certain parameters and market conditions, Ms. Chua said.

For the first time, the fixed network business will get the lion’s share of the capex allocation at 53%, reflecting the telco’s more aggressive roll-out of its fiber broadband service, which also supports the stepped-up deployment of its mobile network.

The capex for 2019-2020 will mirror spending levels in 2018, bringing the total five-year program since 2016 — when the telco kicked off its network transformation program — to nearly P260 billion.

“It is, in may respects, a statement capex. We just want to demonstrate that we are very serious in the rapid and effective build-out of both our fixed and wireless networks,“ Mr. Pangilinan said.

Consolidated core income — the basis for divided declaration — fell 1% to P27.7 billion last year from P27.9 billion a year ago after taking into account the gain from asset sales, manpower reduction program expenses, accelerated depreciation, and earnings before interest, taxes, depreciation and amortization adjustments.

Subject to the finalization the 2017 audited financial statement later this month, PLDT will declare 60% of the earnings as regular dividends.

Reported net income fell by a third to P13.4 billion last year from P20 billion in 2016 due to non-core capex-related expenses of P16.7 billion as a result of its aggressive network upgrade.

PLDT swung to a net loss of P8.5 billion in the October to December period, from the net income of P4.1 billion a year ago, after booking an accelerated depreciation of P12.4 billion in connection with the swap put of network equipment in the National Capital Region and the non-current asset impairment of Smart and Digitel assets of P4.3 billion.

Consolidated service revenues slid 3% year-on-year to P143.5 billion last year after the wireless business fell 11% to P58.9 billion though the decline leveled off and stabilized as the year progressed.

The home and enterprise segments grew 13% and 11%, respectively. Their combined service revenues accounted for 47% of total consolidated revenues, surpassing the 41% contribution of the wireless consumer group.

On the search for the company’s next chief executive officer, Mr. Pangilinan said he’s “ready to go” once the telco sustains its growth momentum.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.