In a statement, S&P said it is maintaining PLDT's foreign currency rating of BB+ with a stable outlook because of steep competition in the domestic market with slowing cellular subscriber growth and the macroeconomic and transfer and convertibility risk of the Philippines.
S&P, however, said that PLDT's leading position in the domestic market, diversified services and solid cash flow temper these weaknesses.
The debt watcher said subscriber growth in the Philippine cellular market has slowed, with cellular penetration, including multiple subscriber identity module (SIM) ownership, of more than 90 percent.
"We expect that future growth will continue to come from the mass-market segments, particularly from the outskirts of Metro Manila, which have lower average revenue per user," the credit rating firm said.
"We therefore believe that the three main players--PLDT, Globe Telecom and Digital Telecommunications Philippines Inc. --will continue to pursue aggressive pricing and promotions to build market share," S&P said.
It said PLDT's plan to acquire Digitel at an estimated $2.3 billion in enterprise value might somewhat ease competition.
Under its agreement with JG Summit Holdings Inc., PLDT will purchase the former's 51.55-percent stake in Digitel for P69.2 billion through a swap of shares and other assets.
PLDT would also undertake a tender offer for the remaining Digitel common shares held by the public at P1.60 apiece.
"We expect the acquisition of Digitel to further strengthen PLDT's competitive position and broadband growth opportunities," S&P said.
"We also do not expect the proposed acquisition to have a significant negative impact on the company's financial metrics because the acquisition is largely equity funded," it said.
PLDT's operating performance deteriorated marginally last year with 2.4 percent decline in revenue because of the increasing use of unlimited offers and fixed-rate plans, intense price-based competition, multiple SIM card ownership, appreciation of the Philippine peso, and greater use of social networking websites for communications.
"We expect these market attributes to continue to dampen operating performance. But the effects will be offset by our projections of a moderate Philippine economic growth of 5-percent to 5.5-percent annually over the next three years and increasing demand for broadband," S&P said.
Moody's Investor Service on Wednesday upgraded the foreign currency bond rating of PLDT to Baa3 from Ba1.
At the same time the local currency issuer rating has been affirmed at Baa2. The outlook on both ratings is stable.
PLDT shares fell to P2,260 apiece on Thursday from P2,348 on Wednesday.
