PLDT acquires fixed-line business of Piltel

Pilipino Telephone Inc. (Piltel) has sold its fixed-line business to Philippine Long Distance Telephone Co. (PLDT) subject to the execution of a definitive agreement and fulfillment of certain closing conditions, including the procurement of the requisite regulatory approvals.  

Officials said the sale will allow Piltel to concentrate its resources on its wireless business and, at the same time, bring together the PLDT Group’s local exchange carrier (LEC) businesses to derive operating efficiencies.

Piltel president and chief executive officer Napoleon Nazareno said the sale of the fixed line business will transform Piltel into a pure wireless operator and enable management to concentrate all its resources into making the company even more profitable, focused, with strong cash flows being generated. 

Officials added that Piltel’s 40,415 fixed line subscribers will benefit because of the upgrades being undertaken by PLDT on its own fixed line infrastructure.

PLDT has been managing Piltel’s fixed line business since July 2001 under a facilities management agreement. Piltel is owned by Smart Communications which in turn is a wholly owned subsidiary of PLDT.  Piltel reported a  net income of P5.7 billion during the first nine months of 2007, 33 percent lower than the P8.46 billion reported in the same period last year, due to a higher provision for income tax this year and the additional depreciation relating to the company’s fixed line assets. 

However, core net income, before exceptional items, was up 25 percent to P6.35 billion in the January to September 2007 period, from P5.08 billion recorded for the same period in 2006.  

Pre-tax earnings more than doubled to P8.6 billion for the first nine months of the year. The company’s stockholders’ equity was a positive P17.5 billion as of Sept. 30. 

Piltel’s board of directors has also approved the redemption of the company’s series J preferred shares held by PLDT. These shares were issued at P1,000 per share over the period 2000 to 2003 in relation to a letter of support executed by PLDT under the terms of Piltel’s original debt restructuring. They carry an effective dividend rate of nine percent per annum. The shares will be redeemed at the original issue price for a total payment of P4.93 billion plus P195.9 million in accrued dividends up to the redemption date of Dec. 5. 

Meanwhile, company officials reported that Piltel’s total service and non-service revenues in the first nine months of 2007 grew 22 percent to P10.95 billion, compared with P8.98 billion for the same period in 2006, as a result of the continued growth in revenue contribution from the Talk ‘N Text subscriber base. Piltel is the country’s ‘ third largest cellular operator with over 8.3 million subscribers. Talk ‘N Text recorded approximately 1.37 million net subscriber additions in the first nine months. 

GSM net service revenues increased by 25 percent to P10 billion, from P8 billion in 2006.

GSM service revenues make up 96 percent of Piltel’s net service revenues with fixed line service revenues of P445 million accounting for the balance. 

SMS or text messaging continues to be the main driver of the company’s revenues. Data revenues increased by 25 percent, from P5.1 billion in the first nine months of 2006 to P6.3 billion in 2007. Data revenues make up 63 percent of GSM service revenues.  Earnings before tax for the period doubled to P8.6 billion compared with P4.3 billion for 2006.

However, for the first nine months of 2007, Piltel recorded a provision for income tax of P2.9 billion compared with an income tax benefit of P4.19 billion in 2006 when Piltel then possessed certain deferred tax benefits. The company’s effective tax rate of 34 percent now approximates the statutory corporate income tax rate of 35 percent. 

Nazareno said Piltel continues to pursue measures to strengthen its core business. “The redemption of the series J preferred shares demonstrates the extent of Piltel’s turnaround — in addition to paying off all our debt, we are now able to return the letter of support-related funds infused by PLDT during our debt restructuring period. This also effectively allows us to move into the next stage of Piltel’s transformation which would be dividend payments to common shareholders which we expect to effect sometime next year,” he said.