FITCH Ratings expects the two major telco companies in the Philippines to book mid to high single-digit revenue growth for full year 2019, amid stabilizing competition between the two players.

In a statement, Fitch projected continued revenue growth for Globe Telecom, Inc. and PLDT, Inc., although free cash flow may remain negative due to their capital spending in the second half.

The credit ratings agency sees the Philippine telcos spending P141 billion in capital expenditures in 2019, 56% higher year on year, as the companies expand their mobile data capacity and roll out their fixed-broadband network.

The roll out of the 5G network, however, is seen to be limited given it is still in the early stages of global adoption and deployment, especially in a country like the Philippines which is still dominated by the prepaid market.

Fitch cited how Globe’s 8% revenue growth in the first half outperformed that of PLDT’s, which rose 5%. This led to a 0.4% uptick in the former’s share in telecom-service revenue over the six-month period.

“Nevertheless, the return to growth for PLDT’s wireless revenue (up 6% year on year for the first half) underscores that a firmer recovery is underway for the country’s largest telecom operator,” Fitch said.

PLDT is seen to benefit from an acceleration of subscriber take-up in its fiber-broadband services, which has been affected by a regulatory ruling on outsourced services since mid-2018. The agency said this has stalled PLDT’s home-broadband subscribers in the fourth quarter of 2018, but has since returned to growth.

Meanwhile, Fitch said Globe’s service revenues will likely grow at a high single-digit pace because of its “larger post-paid subscriber base and continued market-share gains in mobile.”

PLDT’s service revenues are seen to grow at a slower pace at mid-single digits.

Amid the two companies’ expansion, the entry of the third telco Dito Telecommunity is seen to intensify competition moving forward.

“Competition in the mobile sector is greater than in fixed-line, and therefore, we believe diversification into fiber broadband is advantageous for fixed-mobile convergence and in capturing the long-term demand for fiber backhaul.”

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

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