PLDT holds on to declining Rocket Internet

MANILA, Philippines – PLDT Incorporated chief Manuel Pangilinan said the telco has “no choice” but to “hold on to” its stake in the declining Rocket Internet SE, a German investor in technology start-ups.

“No choice, right? Except to hold on to it,” said the PLDT chairman, president, and chief executive officer in reaction to Rocket Internet’s €741.5 million ($807.961 million) in losses for 2016. 

It was in August 2014 when PLDT invested €333 million ($362 million) for a 10% stake in the German firm – the Philippine telco’s biggest overseas investment to date.

Rocket Internet invests in existing internet companies and builds some of its own.

In October 2014, it went public, which effectively diluted PLDT’s stake to the current 6.1%.

The German tech firm reported a loss of €197.8 million ($215.538 million) in 2015, as losses kept mounting at its food delivery and online general merchandise start-ups.

From January 2015 up to now, Rocket Internet shares have been sliding as investors question the company’s strategy, Business Insider reported.

Rocket Internet CEO Oliver Samwer had promised “2016 will be a good year.” But last week, the company reported that its losses in 2016 were nearly 4 times higher than what was reported in 2015. Its losses in 2016 were at €741 million ($807.441 million).

Impairment losses?

Asked if this would mean impairment losses for PLDT this year, Pangilinan replied: “We don’t know yet. We don’t know whether we need to provision further. We might have to – depends on how their share price behaves. If it continues to behave at these rather low levels, then we may need to.”

PLDT’s net income dipped by 33% in the first half of 2016, after it booked P5.4 billion in impairment charges during the period due to an investment in Rocket Internet.

Pangilinan had earlier said that he expects a better 2017 for PLDT.

For 2017, PLDT expects its earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow by P8.8 billion, or to P70 billion from P61.2 billion in 2016.

The telco also aims to close 2017 with a higher recurring core income of P21.5 billion, from P20.16 billion in 2016, mainly due to the anticipated gain from asset sales in Beacon Electric Asset Holdings Incorporated by the first half of the year. – Rappler.com