Fitch raises PLDT credit rating

MANILA, Philippines - Debt watcher Fitch Ratings has upgraded the outlook on PLDT Inc.’s long-term local currency issuer default rating to stable from negative due to the telco giant’s leading market share, high capital expenditures, divestment of non-core assets and  focus on profitability.

Fitch likewise affirmed PLDT’s long-term foreign currency IDR at ‘BBB,’ and its National Long-Term Rating at ‘AAA (phl).’ Among the key drivers for the upgrade is PLDT’s move to sell the remaining 25 percent stake in Beacon Electric Asset Holdings Inc. for P21.8 billion last June.

PLDT has so far received P12 billion from the transaction, while the remaining proceeds will be paid over annual installments from June next year until June 2021, along with another P9.2 billion from an earlier sale of Beacon shares in May last year.

“PLDT’s strategy change to focus more on profitability rather than market share should stabilize price competition and ease EBITDA (earnings before interest, tax, depreciation and amortization) margin pressure. Fitch anticipates progressive EBITDA improvements in the medium term,” it said.

The company has set an EBITDA guidance of P70 billion this year.

It also expects continued double-digit growth in home and enterprise revenue to drive EBITDA.

As of the first-half, PLDT’s EBITDA reached P32 billion, up four percent year-on-year.

Fixed-line accounted for 45 percent of the first semester EBITDA, while the bulk or 55 percent came from the wireless segment.

While PLDT expects to complete projects amounting to only P38 billion of the programmed P46 billion capital expenditures this year, Fitch expects the telco’s capex budget to remain elevated in the next two years.

PLDT is investing to make Long Term Evolution service available in 95 percent of the country’s cities and municipalities by the end of next year.

It likewise aims to expand its fiber reach to cover four million homes by the end of this year and six million by 2020.

Fitch said PLDT’s ratings reflect its leading position in the Philippines, with a 70 percent subscriber market share in fixed-line and 48 percent revenue market share in mobile.

“PLDT competes against the second-largest telecom operator, Globe Telecom (BBB-/Stable), and benefits from its fully integrated fixed and mobile services, which enable convergence. In addition, the joint acquisition of San Miguel Corp.’s telecom assets by PLDT and Globe should remove the threat of new competition in the medium term,” Fitch said.