Virus-disrupted expansion seen to hurt telco earnings — Fitch
MANILA, Philippines — Despite high demand for mobile network from people working from home, earnings of the telco duopoly are seen to end the year “relatively flat” as expansion plans to cover more subscibrers grind to halt due to quarantine restrictions, Fitch Ratings said Tuesday.
“Industry growth is likely to be relatively flat in 2020 as slower economic activity curbs consumer and enterprise spending,” the debt watcher said in a report on Tuesday.
Broken down by company, Fitch said PLDT’s revenue will likely grow by “a low- to mid-single-digit percentage” while Globe is expected to book “low-single-digit rate decline.” As of the first quarter, PLDT revenues rose 9% year-on-year, while that of Globe inched up 2%, financial statements showed.
“Fitch considers PLDT’s broader service diversification and entrenched fixed-line position to be advantageous in mitigating revenue pressure in its wireless business, compared with Globe,” the credit rating agency said.
“However, the investments needed to support PLDT’s expansion in mobile revenue and broadband installations are likely to moderate EBITDA growth and delay deleveraging,” the debt watcher added.
According to Fitch, Globe's revenue “will be hit harder” if lockdown measures are prolonged as slower subscriber growth and restricted access to cell sites put a strain on mobile revenues, which accounted for 75% of revenues last year. That said, PLDT’s wireless unit, Smart Communications Inc., could also take a heavy beating from strict quarantine measures.
“Fitch expects strategic execution to take (center) stage amidst the pandemic challenges, as incumbent operators strive to boost revenues,” the debt watcher said.
Telco firms are heavily capex-driven so projects such building cell sites were heavily disrupted by stringent restrictions under an enhanced community quarantine in Luzon from March 17 to May 31. Restrictions started to ease last June 1 when some construction activities were allowed to restart.
That said, telco firms are still bracing for a tough year ahead, slashing down record-high capital investments for 2020. For PLDT, capex plans were cut by P20 billion, while Globe said the company would “re-evaluate” its spending plans, including a P63-billion capex, for the year.
Investments were slashed with cash flows getting tight, partly also as a result of mandated bills payment extensions and installment programs offered by telco companies during the quarantine, Fitch said.
“These are temporary relief measures, but we expect telcos to continue to take a more lenient approach on payment collection through the year in light of the recession, and to start to tighten consumer credit in 2021,” Fitch said.
Editor's Note: A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs Philstar.com. This article was independently produced following editorial guidelines.
- Latest
- Trending
