Stiff competition to further cut PLDT earnings

MANILA, Philippines - Dominant carrier Philippine Long Distance Telephone Co. (PLDT) expects intense competition to further cut its earnings this year prompting the PLDT Group to accelerate its shift into a converged digital communications provider.

PLDT chairman Manuel V. Pangilinan said the company sees a 6.4 percent decline in core net income to P35 billion this year from P37.4 billion last year amid the combined effects of the intense domestic competition and changing global landscape.

The company’s core net income slipped three percent to P37.4 billion last year from P38.7 billion in 2013 due mainly to the rise in cash operating expenses, increase in product subsidies, and a higher provision for income tax.

The PLDT Group’s consolidated service revenues inched up by one percent to P165.1 billion from P164.1 billion with revenues from its wireless business declining by one percent to P115 billion while its fixed line business booked a five percent increase to P65.2 billion.

As a result, the company’s reported net income declined four percent to P34.1 billion from P35.4 billion due to the P1.3 billion decline in core net income, the contribution from the discontinued business process outsourcing (BPO) operations that contributed P2.1 billion in 2013, and higher impairment of transport assets due to upgrade worth P1.7 billion.

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

According to Pangilinan, over-the-top content (OTT) players are disintermediating the traditional telecommunications provider while data services and social media are overtaking legacy services.

He 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.

For 2015, the PLDT chief said the company would continue to face intense competitive pressure, continued influence from OTT players, and higher capital expenditures for the build up of its 3G and 4G networks.

“As a result, we project higher depreciation costs and financing charges which, along with ongoing efforts to defend our market share, will impact our bottom line which we expect to be in the vicinity of P35 billion for 2015,” he added.

The PLDT Group, Pangilinan said, sees improved business prospects starting 2016.

“Beyond 2015, we see brighter prospects for PLDT,” he said.

PLDT president Napoleon Nazareno said the company is accelerating efforts to “reshape the PLDT Group into a converged digital communication business from a telco-access business.

Nazareno said the five pillars of the PLDT Group’s converged digital communications business include individual, home, enterprise or international, multimedia, and digital.

He pointed out that PLDT’s Smart Communications Inc. 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.

“And now we are reshaping PLDT once again into a converged, digital communications business, one that not only encompasses our current Individual, Home, Enterprise and Multimedia pillars but welcomes the new kid on the block – Digital,” Nazareno said.