PLDT expects lower 2011 profit

Telecom giant Philippine Long Distance Telephone Co. (PLDT) is expected to post lower profits at end of this year compared with last year’s level, chairman Manuel V. Pangilinan said. PLDT recorded a core net profit of P42 billion and P40.2-billion net income in 2010. It had revised its target core profit for 2011 to P39 billion from P40.5 billion. The anticipated decline in profits is on account of incremental depreciation and interest expense. Pangilinan said the PLDT group is confident it would meet the target core income of P39 billion. “We are sticking to the P39-billion core profit but reported income will be down. We suspect we might have to do some provisioning regarding the books of Digitel [Digital Telecommunications Philippines Inc.]. These are exceptional one-time, non-cash accounting charges,” said Pangilinan. PLDT acquired Digitel, the third-ranked phone firm in the country with over 16 million subscribers. He said the conduct of due diligence on Digitel’s books is ongoing. “We are still waiting for the final outcome of the due diligence on Digitel. Our sense is that we probably have to make provisions to protect the balance sheet. I hope the public understands,” said Pangilinan. PLDT’s acquisition of Digitel gives the former 70 percent of the domestic mobile market, leaving Ayala-led Globe Telecom Inc. with the remaining 30 percent. “I think competition is still there. Globe is competing very well. They’ve announced a significant investment in network so they will be a viable competitor in the future,” said the official. Despite cornering a large chunk of the market, PLDT sees a “tough year ahead” but expects to return to its growth path in profitability starting 2013 and onwards. “On the cellular side it will be tough. I think the outsourcing or call center via SPI[Global Holdings] will be better next year. It’s already doing better this year compared [with] 2010; and I think 2012 will be better than 2011. There might be a modest growth for fixed line as we see a continued deceleration of our [national direct dialing] and [international direct dialing] businesses,” he said. PLDT hopes that Digitel, which is strong in some areas where PLDT is not present, could help uplift its fixed-line business. “There are areas where we are not present but Digitel is. Like in Bicol, Digitel is there. But since there are areas wherein we are connecting them to our network then they can offer broadband service there,” Pangilinan said. The PLDT chief explained that the group is undergoing a transformation process in which revenues from the legacy business of voice and text are now yielding to revenues from data and broadband services. “This transformation process will take some time before a 1-for-1 revenue substitution process can be achieved, and mean higher margins being replaced by lower ones, at least in the short-term,” he said.  PLDT wireless subscribers stood at 47.7 million at end September. The country’s cellular penetration rate currently stands at over 90 percent. The remaining 10 percent translates to about 11 million Filipinos that do not own cellular phones yet. “There is room left for subscriber numbers to be tapped in the next year or two. But in terms of extracting juice out from it, that is where it gets difficult. That is why there should be multi-deployment of applications amid popularity of bucket-pricing schemes,” added Pangilinan.