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MANILA, Philippines – A day after Moody’s Investor Service revised its outlook for the Philippines, the international debt watcher announced that it is also revising its rating outlook for the country’s largest telecommunications firm.
Putting it at par with the sovereign ratings, Moody’s revised its outlook for Philippine Long Distance Telephone Co.’s (PLDT) local and foreign currency ratings to “positive” from “stable,” citing continued improvement in the country’s fiscal position.
“The change in outlook follows Moody’s decision to change the outlook for the Ba2 long-term foreign-currency rating and Baa3 foreign-currency country ceiling of the Republic of the Philippines to positive from stable,” it said in a statement.
Moody’s said that it is unlikely that PLDT will experience any upward rating pressure unless the sovereign rating of the country is upgraded. Consequently, any downward rating action at the sovereign level would result in negative actions for PLDT, as Moody’s, it said, would seek to maintain the current notching gap in the absence of any further credit deterioration.
PLDT is predominantly a domestic entity with most of its revenues coming from, and assets based in, the Philippines. Moody’s, however, said that PLDT would need to generate a substantial greater revenue share from outside of the Philippines.
The phone giant’s outlook could revert to stable if its adjusted EBITDA margins fall below 45% and/or its adjusted EBITDA exceeds 2x as a result of weak operating performance or event risk.
“On a fundamental level, PLDT would also need to continue exhibiting strong investment-grade characteristics. In particular, it will need to maintain its existing sound financial and operating profile on a sustainable basis,” said Yoshio Takahashi, Moody’s assistant vice president and analyst.
PLDT is maintaining its core income target of P37 billion this year and is expected to return to growth and increased profitability at a higher level of P39 billion starting 2013. By 2014, PLDT would be able to realize P42 billion in core net income.
To meet the P37 billion core profit this year, PLDT must make over P9 billion for the 2nd, 3rd and 4th quarters, after it reported a P10.1 billion net income in the first 3 months.
The PLDT group’s total cellular subscriber base stood at 67 million as of end-April. – Rappler.com
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