Fitch affirms PHL telcos’ ratings

FITCH Ratings on Wednesday affirmed the long-term foreign- and local-currency issuer default ratings (IDR) of PLDT Inc. at “BBB,” and of Globe Telecom, Inc. at “BBB-.”

In a statement, Fitch said it also affirmed the national long-term ratings of PLDT and Globe at “AAA(phl),” although this was withdrawn for “commercial reasons.” The outlook for both telecommunications giants was maintained at stable.

“PLDT’s credit profile reflects its robust position in both fixed and wireless markets in the Philippines, strengthening its status as an integrated telco. However, the rating headroom is likely to be limited over the next three years, as capex increases and ongoing dividend commitments will weigh on PLDT’s balance sheet,” Fitch said.

Fitch cited several key rating drivers for PLDT, such as the rising capital expenditures (capex), aggressive fiber rollout, gradual 5G deployment, delay in entry of the third telco, and strong market position.

“PLDT is rated higher than its closest peer, Globe Telecom (BBB-/Stable), due to its robust position in both fixed and wireless markets. Globe has gained revenue share in the mobile segment over the last few years at the expense of PLDT. Globe’s mobile revenue share increased to 56% in 2018 (2017: 54%), but it still trails behind PLDT at 47% of total telecom revenue share. PLDT’s fiber-broadband strategy offers long-term growth and bundling opportunities, against the new mobile entrant,” the credit ratings agency said.

Meanwhile, Fitch said Globe’s ratings reflect its position as the second-largest telco in the country. It cited Globe’s ramp-up in capex, fixed-wireless strategy and strong momentum as key ratings drivers, among others.

“Globe’s ratings are underpinned by its established position as the second-largest telecom operator in the Philippines’ duopoly market and its moderate net leverage of around 3.0x. However, domestic peer PLDT has better service diversification, supported by a stronger fixed-line offering, providing it with a firmer cushion against pricing pressure from mobile services, particularly with the threat of a new telecom operator,” Fitch said.

Fitch said it expects competition in the Philippine telco industry to “remain stable” in the next 12 to 18 months, as third telco Mislatel consortium is likely to launch commercial operations by early 2021.

“The third telco, Mislatel, formally received its telco license in May 2019, following a six-month delay in obtaining necessary approvals from the local regulator. The new entrant is likely to take time to build a comprehensive mobile coverage and customer base in the initial period,” the ratings agency noted.

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.