S&P GLOBAL Ratings affirmed the “BBB+” long-term issuer credit rating of PLDT, Inc. as it anticipates the telco giant to “remain largely unchanged” in the near-term despite the threat of a new major telecommunications player.

In a report Monday, S&P Global said the positive rating of PLDT is backed by an expectation that it will keep its dominance in the country’s fixed-line telecommunications segment and maintain a substantial market share in the wireless segment.

“In our view, PLDT’s leverage will increase and reduce headroom but remain commensurate with the rating. This is despite the company’s likely higher capital spending to improve its network,” it said.

S&P Global noted while the impending entry of new player Dito Telecommunity Corp. (formerly Mislatel consortium) next year will challenge PLDT’s mobile business, this will be balanced by the strong performance of its fixed line and enterprise segments.

“Some loss of mobile subscribers for PLDT is inevitable… About 40% of PLDT’s revenue will be exposed to this competition, as the third player will compete in the individual mobile space,” it said.

But the company’s bundling of its quad-play services is seen to drive user retention in PLDT, hence it may still keep a “meaningful proportion” of wireless network subscribers.

“Overall, we…expect PLDT’s growth in fixed-line broadband and enterprise business to offset the effect of competition in its wireless segment, as well as continued decline in traditional voice and SMS services,” S&P Global said.

The credit rater noted PLDT’s capital spending of P78.4 billion this year will secure its lead in the fixed line home broadband business, as its assets meet the growing demand for home broadband services.

“We believe PLDT’s improving fixed-line network puts it in good stead to benefit from growing home broadband demand. The ability of PLDT’s fiber offering to support market demand for heavy bandwidth use will bolster uptake,” it said.

In wireless segment where PLDT remains second to Globe Telecom, Inc., S&P Global noted the company has been recording a continuous rise in mobile revenues in recent quarters driven by higher mobile data consumption among users.

“PLDT’s financial headroom will reduce over the next 12-24 months as its leverage increases to fund capital spending. We forecast the company’s ratio of funds from operations (FFO) to debt will rise to 2.3x in 2019 and 2.4x in 2020,” it said.

“Capital spending will remain high during this time as PLDT improves network quality amid heightened competition… [W]e expect leverage to remain within our rating threshold over the next 24 months,” it added.

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. — D.A.Valdez

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