PLDT opens 2015 with flat net profit, organizational shakeup

MANILA, Philippines (UPDATED) – Philippine Long Distance Telephone Company (PLDT) opened 2015 with a flat net profit of P9.4 billion ($211 million) in the first quarter, with both total revenues and expenses steady.

PLDT, the second most valuable listed company in the Philippines, reported a first-quarter core net profit of P9.3 billion ($208.57 million) – down 5% year-on-year but “on track” with the company’s guidance of P35 billion ($785.02 million) for 2015, PLDT Chairman Manuel V. Pangilinan said in a media briefing Tuesday, May 5.

On Tuesday, shares of PLDT went up by P48 or 1.69% to P2,888 ($64.79) apiece.

“While our core revenue sources undergo this transition phase where the erosion of our high-margin legacy businesses still outpaces the growth of our newer initiatives for now, we are taking significant steps to ensure that we are ready and prepared for the digital future,” Pangilinan said.

Its total revenues inched down to P42.55 billion ($954.56 million) in the first quarter from P42.56 billion ($954.64 million) in the same period last year.

PLDT’s expenses in the previous quarter slightly went up to P30.43 billion ($682.56 million), from P30.33 billion ($680.31 million) in the same period last year.

“First quarter results were slightly ahead of our expectations. Free cash flow continues to be strong for PLDT, as it was even up [by] 36%, helped by dividend coming from the sale of Beacon [Electric],” Pangilinan said in the briefing.

Consolidated free cash flow for the first quarter grew by 36% to P14.6 billion ($327.52 million). This is mainly due to the P5.1 billion ($114.41 million) in dividends from Beacon in connection with the sale of the 5% Meralco stake in June 2014.

For the first 3 months of the year, the PLDT Group’s total fixed broadband subscriber base closed at over 1.1 million, while its combined subscriber base was at over 4.5 million.

P39B CAPEX to ‘lie north’

Pangilinan added that PLDT’s P39-billion ($874.61 million) capital expenditures (capex) for 2015 will likely “lie north, as we accelerate the build-up of 3G and 4G as well as expand our transmission backbone.”

For the first quarter of the year, its capex amounted to P3 billion ($67.28 billion), P700 million ($15.70 million) higher than its spending in the same period in 2014.

Its P3-billion capital spending in the previous quarter was used for expanding 3G and 4G access networks, increasing fiber reach and capacity, increasing data center capacity, and unifying Smart-Sun network project for operational efficiency, PLDT said in a statement.

This was in line with London-based Fitch Ratings’ forecast  in November, stating that PLDT and Globe Telecom, Incorporated are expected to incur higher capex and lower profit margins this year due to higher marketing expenses and data-to-voice or text substitution.

Fitch also noted in its November 2014 report that Philippine telecommunications companies’ 2015 revenues are likely to “grow by mid-single-digits due to growing data usage arising from the greater availability of cheaper smartphones and generally affordable data tariffs.”

The debt watcher even highlighted that Philippine telcos are “most exposed to margin declines as their most profitable text revenue is replaced by data services given that text’s revenue contribution is highest at 30% than peers.”

Organizational shakeup 

PLDT also announced major changes in management as it undergoes a transition phase wherein the growth of new businesses continues to outgrow the pace of its legacy segment.

“To prepare for the digital future … we also need to refresh our leadership team and, accordingly, we have just announced a major reorganization of some of our senior executives,” Pangilinan said.

PLDT welcomed two new senior executives:  Joachim Horn as its new chief technology and integration advisor, and Winston Damarillo as its new chief strategy officer.

Silicon Valley veteran Damarillo, as the immediate chief strategy officer, will be instrumental in developing, communicating, executing and sustaining strategic initiatives of PLDT Group. He is also the president and chief executive officer of Talas, PLDT’s Big Data Unit.

Chief technology and integration advisor Horn will lead and manage PLDT’s entire network and information technology domains. He has over 30 years of experience in telecommunications, having worked at Siemens, T-Mobile, and Bharti Airtel, PLDT said.

According to a disclosure to the Philippine Stock Exchange, PLDT’s board of directors also approved the following key changes in its organization, effective May 18:

• Charles Lim, current executive vice-president and head for Individual Wireless Business, will head the Wireless Strategic Investments and Acquisition Group. Lim was responsible for growing the Individual Postpaid, Broadband and Mobile Internet businesses
• Isaias Fermin, current executive vice-president and head for PLDT Home, will expand his role by leading the entire Consumer Business

“These changes will enable the various business units of PLDT and its subsidiaries to be more customer-focused as well as to more effectively harness the resources of the entire Group to develop and deliver relevant, innovative services to its customers,” Pangilinan said. – Rappler.com