FITCH RATINGS on Wednesday said it revised the outlook on PLDT, Inc.’s Long-Term Local-Currency Issuer Default Rating (LC IDR) to stable from negative.
In a statement, Fitch said the revised outlook reflects its expectation that the telecommunications company can keep funds flow from operations (FFO)-adjusted net leverage at under or around 2.5 times, lower than the 2.6 times last year. If the figure goes above this, Fitch said it would consider negative rating action.
Fitch also affirmed PLDT’s LC IDR at “BBB+,” its Long-Term Foreign-Currency Issuer Default Rating (FC IDR) at “BBB,” and its National Long-Term Rating at “AAA(phl).”
The ratings agency maintained its stable outlook on the FC IDR and National Long-Term Rating.
Fitch said the “BBB” rating for FC IDR continues to be capped at the country ceiling for the Philippines of “BBB,” indicating the additional risks associated with transfer and convertibility of foreign currency in the country.
Fitch cited several drivers for PLDT’s rating, such as its sale of non-core assets, a return to profitable growth, increased capital expenditure, and its leading market position in the Philippines.
PLDT sold its 25% stake in Beacon Electric Asset Holdings for P21.8 billion in June. The telecommunications company is also selling its 18.3% economic interest in business process outsourcing company SPi Global.
“PLDT’s strategy change to focus more on profitability rather than market share should stabilize price competition and ease EBITDA (earnings before interest, tax, depreciation and amortization) margin pressure. Fitch anticipates progressive EBITDA improvements in the medium term,” the ratings agency said.
PLDT earlier said it aims to hit P70 billion in EBITDA this year.
Fitch also noted PLDT lowered its capex guidance by P6 billion to P38 billion for 2017, as network completion is pushed back to early 2018.
“However, we expect annual capex to stay elevated at around P46 billion for the next two years,” it said.
At the same time, Fitch said PLDT’s ratings show the telecommunications giant still dominates the Philippine market, with 70% subscriber market share for fixed-line and 48% revenue market share for mobile.
Fitch said that it does not foresee any upgrade to PLDT’s Long-Term LC IDR rating given the company’s business profile and investment needs, but the foreign-currency IDR could be upgraded if there is positive rating action on the Philippines’ country ceiling.
On the other hand, Fitch said PLDT’s LC IDR rating could be lowered if FFO adjusted net leverage goes above 2.5 times “for a sustained period.” It added that negative rating action on the Philippines’ country ceiling will also affect PLDT’s Foreign-Currency IDR. — PPCM