PLDT eyes gains from manpower reduction, asset sales but expects ‘steep climb’

Chris Schnabel
The telco is projecting savings of around P7 billion over several years from outsourcing its IT to IBM, and is still eyeing selling the rest of its stake in Meralco

TRANSITION. Members of PLDT's board, led by chairman Manuel V. Pangilinan, discuss the firm's digital transition during the stockholders' meeting on June 13, 2017. Photo by Chris Schnabel/Rappler

MANILA, Philippines – PLDT Incorporated is eyeing gains from lower manpower costs and divestment of some assets, as it aims to boost what has been deemed as another transition year for the telecommunications giant.

“[This year] is a reset of the recurring core profitability of the firm. The guidance [for net income] was P21.5 billion. Now, that number could rise in relation to any asset sales that could happen during the course of the year,” PLDT chairman, president, and chief executive officer Manuel V. Pangilinan said following the firm’s annual stockholders’ meeting on Tuesday, June 13.

PLDT has been trying in recent years to reduce its operating expenses – the main rationale behind its move to outsource its back-office IT to American multinational IBM.

“[The deal with IBM] is progressing reasonably well and we aim to sign the relevant agreement by the end of June,” Pangilinan said.

“Not all of the IT people will move to IBM, some will be retained. We have to retain the so-called brains of the IT organization,” he added.

The move, according to Pangilinan, is expected to give PLDT “substantial” savings of more than P7 billion “over a number of years.”

The savings will not just come from manpower costs but also from IT processes and applications which are expected to become less expensive, as well as other costs associated with the dynamic field.

“It’s not just people but the processes,” Pangilinan explained. “There’s also savings from travel expenses such as attending different forums and seminars, especially those abroad. That’s been cut along with non-essential entertainment.”

“We’ve also had a salary increase freeze for the past year or two so everybody is pitching in in terms of helping to cut expenses,” he added.

The firm is also getting leaner in terms of industries, having already exited from business process outsourcing (BPO) by selling its remaining 20% indirect stake in SPi Global Holdings last month.

Pangilinan also previously announced plans to sell PLDT’s remaining 25% stake in Beacon Electric Asset Holdings (Beacon), which holds a 35% stake in the Manila Electric Company (Meralco), to a still unspecified buyer.

Pangilinan said the sale of PLDT’s remaining stake in Beacon is expected sometime within the year. But he added: “It’s really up to the buyer at this stage. It’s beyond our hands.”

Last year, PLDT sold 25% of its stake in Beacon to another Pangilinan-controlled firm, Metro Pacific Investments Corporation (MPIC), for P26.2 billion.

Cautiously optimistic

PLDT is still in the midst of its digital transformation, which Pangilinan said accounted for its “horrible” 2016.

The firm started 2017 on a mixed note, with wireless revenues down 18%, leading to a decline in service revenues by 7% in the 1st quarter of the year.

This led to a consolidated core income of P5.3 billion, excluding the gain from asset sales and adjustments in earnings before interest, tax, depreciation, and amortization (EBITDA), which is 26% less than a year ago.

However, the firm noted that its consolidated EBITDA of P16.5 billion for the 1st quarter of 2017, while 1% less than the same period a year ago, is 7% higher than the 4th quarter of 2016. It also marked 3 straight quarters of improvement in EBITDA.

Pangilinan said he is expecting recovery starting in the 2nd quarter of 2017, but added that PLDT still faces a long road to improving its profitability.

“While we can probably take heart from these results, no one is popping open champagne bottles. One quarter does not a year make. Your management know very well that the road to recovery is long, and the climb will be steep,” he told stockholders at the meeting. – Rappler.com