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Stock Commentary

DITO CME Q1 net income plunge 322% y/y to P6.8 billion loss

Merkado Barkada
DITO CME Q1 net income plunge 322% y/y to P6.8 billion loss
Why does DITO seem like it’s still trying to talk as little as possible about the actual business of running a telecommunications company?
Merkado Barkada

DITO CME [DITO 4.66 2.42%] [link], the parent company of Dito Telecommunity (DITOTEL), posted a Q1 net loss of P6.8 billion, which was 322% worse than the P1.6 billion net loss it posted in Q1/21.

DITO attributed the worsening performance to “higher operating expenses and higher other charges” that have come from expanding the DITOTEL business since its start of commercial operations in March of 2021.

DITO noted a 32% reduction in current assets since the start of 2022, which it said was mostly a decrease in cash that was spent on “payments for various commercial operations and general and admin expenses”.

DITO’s current assets decreased by P2.4 billion to P5.1 billion just in Q1 alone. DITO reported a cash deficiency of P9.4 billion in Q1, up from a capital deficiency of just P2.5 billion on December 31, 2021.

DITO’s Q1 report did not include any updates on the number of subscribers for DITOTEL, though its Annual Report indicates that DITOTEL had 5 million subscribers at the end of 2021.

The Q1 report also did not include any information on DITOTEL’s churn rate (the rate at which customers drop the telco as a carrier), nor any standard telecommunications metrics related to average revenue per user (ARPU), nor a segmented analysis between voice, SMS, and data revenues.

In the “Other Information” section, DITO said that it has signed a term sheet for a P199 billion loan that is “expected to be closed within 2022”, and said that it still has access to a P5.1 billion bridge loan that it can use to “address operating expenses and maturing obligations”.

DITO also said that it plans to do “various fundraising activities in 2022”, such as a follow-on offering at the parent company level. 
 

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Why does DITO seem like it’s still trying to talk as little as possible about the actual business of running a telecommunications company?

I felt like DITO’s avoidance of mentioning key DITOTEL metrics was at least excusable on a technical basis back when the company was just a shell that didn’t actually own anything.

But now, Dito Telecommunity is a legitimate subsidiary of DITO, and DITOTEL’s financial results get incorporated into DITO’s financial statements.

So where’s the analysis?

No update on towers, roll-out, or subscribers.

No segmented analysis of changes in revenue between the bread-and-butter of telecommunications: voice, SMS, and data.

No dive into any strategy for growing DITOTEL’s marketshare, no discussion of the results of any tactics used by DITO to achieve DITOTEL’s strategic goals.

As investors, what are we even doing here with this? Do we actually care about the high-level performance of the DITO holding company, or do we care about the details of the actual business that matters, the one that was created to take on the big, bad oligopoly that controlled the Philippine telecommunications space?

It would be low-hanging fruit for me to dive into DITO’s stock price, the canceled stock-rights offering, or weave Dennis Uy’s troubles into this conversation.

I mean, it wouldn’t be irrelevant, but it would avoid what feels like the more fundamental problem here, which is a general lack of metrics that we can use to compare DITOTEL’s progress, as a telecommunications business, against the performance and progress of the other two major telecommunications businesses.

If we don’t get that info, and we don’t get it regularly and in a consistent format, what’s the point? Here’s a quick “CTRL-F”  test using the Q1 reports from DITO, Globe [GLO 2560.00 0.63%], and PLDT [TEL 1944.00 0.31%]: “churn” (DITO = zero, GLO = 10, TEL = 5), “arpu” (DITO = zero, GLO = 8, TEL = 4), and “subscriber” (DITO = 6, GLO = 113, and TEL = 100). Not the same ballpark. Not the same league. Barely even the same sport.

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

DITO TELECOMMUNITY CORP.

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