Fitch upgrades PLDT outlook amid improved finances
MANILA, Philippines – PLDT Incorporated bagged an outlook upgrade from credit rating agency Fitch Ratings, lifted by its divestment from Beacon Electric Asset Holdings Incorporated, focus on profitability, leading market position, and high capital spending budget.
The telecommunications giant's long-term local-currency issuer default rating (LC IDR) outlook was raised to stable from negative, Fitch said in a statement late on Wednesday, August 30. This signals continued improvement in its financial performance.
Fitch affirmed PLDT's LC IDR at "BBB+," indicating expectations of default risk are low. (READ: PLDT still no.1 among mobile subscribers)
"PLDT has been divesting non-core assets in its commitment towards deleveraging. The rating action also incorporates Fitch's expectation of a gradual recovery in EBITDA (earnings before interest, tax, depreciation, and amortization), reflecting the company's strategic focus on profitable growth and expanding fixed-line revenue. However, rating headroom for the LC IDR remains limited," the credit rating agency's latest report read.
Last June, PLDT sold its remaining 25% stake in Beacon to Metro Pacific Investments Corporation (MPIC) for P21.8 billion, of which it has received P12 billion to date.
The remaining proceeds will be paid over annual installments from June 2018 to June 2021. (READ: PLDT sells remaining stake in Beacon to MPIC)
The Beacon divestment, along with PLDT's manpower reduction program, lifted its core income for the 2nd quarter of 2017 to P12.1 billion, from P10.5 billion in the same period last year.
"PLDT's strategy change to focus more on profitability rather than market share should stabilize price competition and ease EBITDA margin pressure. Fitch anticipates progressive EBITDA improvements in the medium term," the credit rating agency said.
PLDT has set its EBITDA target for 2017 to P70 billion, from P61.2 billion in 2016.
Fitch added that it expects "continued double-digit growth in home and enterprise revenue to drive EBITDA, although this is likely to be offset by falls in SMS, international, and mobile voice revenue."
Fixed-line accounted for 45% of PLDT's EBITDA in the 1st half of 2017, while the remaining 55% was from the wireless segment.
PLDT also lowered its capital spending budget to P38 billion in 2017, from the original P46 billion.
With improved quarterly results, PLDT chairman Manuel Pangilinan said the telco maintains core profit guidance, including exceptionals, of "around P28 billion" for 2017.
"The aggressive rollout of the long-term evolution (LTE) network and fiber expansion to drive PLDT's digital pivot strategy is likely to maintain capex/revenue ratio at 25%-27% in 2017-2018, from 26% in 2016," Fitch said.
Fitch also said PLDT's ratings reflect its leading position in the Philippines, with 70% subscriber market share in fixed-line and 48% revenue market share in mobile. – Rappler.com