Notes on PLDT’s budget overrun

The P48-billion budget overrun reported by telco giant PLDT marks another chapter in its long, colorful and winding history – 94 years and counting.

It’s a major development for the country’s oldest and largest telecommunications giant and even PLDT chairman Manuel V. “MVP” Pangilinan’s arowana knows it.

MVP shared on Twitterverse on Monday that his arowana died, a death which feng shui believers consider a “noble sacrifice.”

Indeed, many believe that when an arowana dies, it is often a noble sacrifice that takes away the bad luck or misfortune that has befallen a household or perhaps a business.

“Probably absorbed all the angst of PLDT on our behalf,” MVP said.

Often called the “dragon fish” because its metallic coin-like scales undulate like the paper dragons we see during Chinese New Year, the arowana has spawned the belief that the fish brings good luck and prosperity. It’s no surprise it’s a favorite among Asian elite.

True or not, one thing is clear. Investors are waiting with bated breath for the result of PLDT’s internal investigation on the budget overrun.

Impairment

As I write this, PLDT is set to talk to investors and analysts. Reporters covering the beat are staking out. By the time this column comes out, PLDT may have already clarified the issues. It said last week that it has not uncovered fraudulent transactions or procurement anomalies.

Even MVP’s business rival Ramon “RSA” Ang, who knows the nature of a telco business, believes it was unlikely that the overrun was due to fraud.

It was not ‘mathematically possible’ to defraud a company of P48 billion, Ang said.

Instead, it may have been more of an impairment issue arising from some – and expensive – telco network equipment that may have been acquired but was not used as intended or did not deliver on its intended use. This might have been largely due to tech factors such as becoming obsolete or being no longer applicable in certain areas by the time the different types of equipment were delivered.

RSA noted that in the telco business, this can happen because there are many moving parts and technology changes in the wink of an eye. Thus, what may be applicable or needed today may no longer be useful tomorrow.

Another source said the P48 billion refers to equipment already in use that was not yet officially accepted. Thus it is not yet recorded in the books of PLDT. This means they aren’t depreciated yet in accounting terms.

The source said that “if you use the average life of ten years,” depreciation would have reduced the operating income by P4.8 billion a year and about P3.6 billion after tax.

^{Ambulance chasers}

Ambulance chasers have already smelled blood. News from the US showed that US law firms are urging affected investors to file a complaint against the telco giant.

We will now have to wait and see what happens next, including the results of the inquiry of the Securities and Exchange Commission (SEC). Everyone is waiting with bated breath.

What is clear for now is that this development will certainly mark a major chapter in PLDT’s long, corporate history.

Philippine Airlines sees milestone profit year

Over at another company, Philippine Airlines, the country’s flag carrier, is reaping the benefits of the travel industry’s recovery.

PAL expects to record a milestone profit year for 2022, thanks to revenge travel.

In a recent chat, PAL president and COO Capt. Stanley Ng  said almost all routes are back to pre-pandemic levels except China, which only just started to ease COVID-19 related curbs.

For the third quarter of the year, PAL registered an operating income of P4.9 billion and comprehensive income of P4.2 billion.

This brought nine-month income to P11.5 billion and the comprehensive income to P8.3 billion, signifying the continuing resurgence of the Philippines’ only full-service network airline amid the ongoing recovery of air travel and tourism.

But Capt. Stanley said there’s still a lot of work to be done to sustain growth.

These include further improving PAL’s customer service, adding more flights and opening new routes.

PAL just opened a new route between Cebu and Baguio City last Dec. 16, marking PAL’s comeback to Baguio, the very first destination it served nearly 82 years ago.

“So we are happy to be flying back to where it all started,” Capt. Stanley said.

PAL to Europe

PAL may also return to Europe by 2025, “an aspirational target,” he said during our chat, just days after he arrived from Brussels where he joined President Marcos in a meeting with Brussels Airport CEO Arnaud Feist.

This happened at the Association of Southeast Asian Nations-European Union (ASEAN-EU) Commemorative Summit last week.

Last mile

PAL wingwoman Cielo Villaluna also shared with me that PAL will soon have a last mile shipping service, which will be a game changer for the cargo industry and would be beneficial to Filipinos, especially in this age of speedy deliveries.

Things indeed are looking up for PAL but as Capt. Stanley said, the flag carrier still has a lot of room for improvement.

I’ve been on a few PAL flights recently and I have no issues. I even raved about the excellent in-flight food from Manila to New York but I continue to hear a lot of horror stories from other passengers – from lost baggage to delayed flights to the long wait for their bags at the conveyor belt.

May all these problems be resolved sooner than later so that Filipinos and visitors alike can truly enjoy traveling, whether for business or pleasure.

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Email: [email protected]. Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.