PLDT hikes capex to P39B for 2015

Rappler.com
The dominant carrier also plans to secure $500M in loans from two Japanese banks, as it braces for intense competition
INTENSE. PLDT also expects intense competition to further cut its earnings this year amid intense competition. File photo by Agence France-Presse

MANILA, Philippines – Dominant carrier Philippine Long Distance Telephone Company (PLDT) has raised its budget for capital expenditures (capex) this year by 12%.

The company is spending P39 billion ($884.45 million) for its capex in 2015 or 23% of revenues this year, PLDT president Napoleon Nazareno said in a press conference on Tuesday, March 3.

PLDT’s actual capex in 2014 rose to P34.8 billion ($789.17 million) or 21%of service revenues to enhance data and broadband businesses.

This year, the dominant carrier is also anticipating an exponential growth in network traffic from increasing smartphone ownership and from PLDT’s own initiative stimulating data usage, Nazareno said.

Bulk of the capex would be used to activate more 3G base stations and at the same time expand its Time Division-Long Term Evolution (TD-LTE) and Frequency Division- LTE (FD-LTE).

Loan agreements

The PLDT group of Smart, Sun Celllular, and Talk N’ Text’s long-term debt grew 25% to P130.12 billion ($2.35-billion) as of end-2014, from P104.1 billion ($2.36-billion) end-2013.

To date, PLDT is also finalizing loan agreements amounting to  $500 million with Bank of Tokyo-Mitsubishi UFJ Limited, as well as Mizuho Bank Limited, said PLDT Chief Financial Officer Anabelle Chua.

PLDT signed a $200-million term loan facility with The Bank of Tokyo Mitsubishi on February 26 to finance capex requirements for network expansion and improvement. It would also be used to refinance existing indebtedness proceeds utilized for service improvement and network expansion.

The company is also looking at signing a loan agreement worth from $200 million to $300 million with Mizuho Bank within the first quarter of the year, Chua said.

The PLDT Group also signed a P2-billion ($45.37-million) term loan facility with Bank of the Philippine Islands (BPI) to finance its capex and refinance its existing loan obligations.

The BPI loan proceeds were spent for service improvements and expansion programs. Payable over 10 years, the loan has an annual amortization rate of 1% on the first year up to the ninth year from the initial drawdown date and the balance payable upon maturity.

Intense competition

PLDT also expects intense competition to further cut its earnings this year.

Thus, the PLDT group is accelerating its shift into a converged digital communications provider.

PLDT Chairman Manuel V. Pangilinan said the company sees a 6.4% decline in core net income to P35 billion ($793.74 million) this year from P37.4 billion ($848.17 million) in 2014.

The company’s reported net income declined 4% to P34.1 billion ($773.34 million) from P35.4 billion ($802.81 million) due to:

  • The P1.3-billion ($29.48 million) decline in core net income
  • The contribution from the discontinued business process outsourcing (BPO) operations that contributed P2.1 billion ($47.62 million) in 2013
  • Higher impairment of transport assets due to upgrade worth P1.7 billion ($38.55 million)

“Our 2014 performance reflects the combined effect of the intense domestic competitive situation and the changing global landscape,” Pangilinan stressed.

Over-the-top content (OTT) players are disintermediating the traditional telecommunications provider while data services and social media are overtaking legacy services.

Pangilinan pointed out that PLDT recognizes the need to complement its present business by participating in the digital world beyond providing access and connectivity.

“This transition is expected to carry on for the near-term and will likely involve an investment phase in both capital expenditures and corporate assets,” Pangilinan added.

The company would continue to face intense competitive pressure, continued influence from OTT players, and higher capex for 3G and 4G networks.

Such is expected to impact the company’s bottom line, which is aimed at P35 billion ($793.97 million) for 2015, Pangilinan said.

“Beyond 2015, we see brighter prospects for PLDT,” Pangilinan shared.

Convergence

As such, the company is accelerating efforts to “reshape the PLDT Group into a converged digital communication business from a telco-access business,” Nazareno said.

For instance, PLDT’s Smart Communications Incorporated is boosting its “Internet for all” campaign while PLDT HOME, PLDT Alpha Enterprise, and PLDT SME Nation continued to address the concerns of companies and enterprises.

PLDT is also expanding its footprint in digital space through Smart Money, as well as new business units and spin-offs or investments in Philippine Internet Goldings and MePay Global.

PLDT also has investments in Rocket Internet of Germany. – Rappler.com


US$1 = P44.06