Fitch: Slow revenue growth, low cash flow for Philippine telcos

MANILA, Philippines — Fitch Ratings expects the coronavirus disease 2019 or COVID-19 pandemic to slow revenue growth and reduce the near-term cash flow visibility of the country’s telecommunications operators.

Fitch said industry revenue may remain relatively flat this year amid the pandemic compared to a seven percent increase last year.

This year’s revenue forecast is below the rating agency’s previous estimate of mid-to-high single digits.

“We expect leverage metrics to be stretched over the next 18 months as operational cash flows lag behind investment outlays,” Fitch said.

In the first quarter, Fitch said telco revenue rose at a slower pace of five percent compared to a nine percent growth in the fourth quarter last year.

PLDT posted a new high in its quarterly revenues during the January to March period as it expanded by nine percent year-on-year to P41 billion, while Globe posted a two percent improvement in its consolidated service revenues to P36.9 billion.

“PLDT expects a softer momentum in the second quarter. Meanwhile, Globe has a more pessimistic outlook of a low double-digit sequential quarterly decline, with the shift of mobile traffic to home broadband services and weak economic conditions affecting mobile spending,” Fitch said.

PLDT and Globe have refrained from providing full-year guidance, citing limited visibility on their operations and network rollouts in light of the social distancing restrictions.

Fitch said these two telco operators are likely to temporarily scale back capital expenditures by as much as 25 percent this year in light of supply chain disruption and manpower restrictions.

PLDT said last week that its original capex guidance of P83 billion for 2020 would probably be pared down by up to 25 percent.

Globe, meanwhile, said capex guidance for the second quarter would likely be lower by at least P2 billion from the first quarter capex spending.

According to Fitch, the two telcos’ measures to offer credit payment extensions to post-paid customers, including enterprise segments, are likely to increase cash-collection cycles.

Fitch said PLDT benefits from wider service diversification and a more entrenched fixed-line position than Globe, which the debt-watcher regards as advantageous for fixed-mobile convergence and in mitigating revenue pressure in mobile services.