Fitch sees declining telco earnings

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A credit-rating agency said on Tuesday that most Southeast Asian telecommunication companies might experience a decline in revenues from traditional voice and text services next year that will lead to a lower margins.

In a special report, Fitch Ratings said that competition and declining use of traditional voice and text services will lead to lower margins for most Southeast Asian telecommunication firms in 2014.

Fitch also said, however, that data demand growth will generally outpace margin decline, so cash generated and credit metrics will be broadly stable or slightly improve, except in Thailand where large investments will increase leverage.

In the Philippines, operating earnings before interest, taxes, depreciation, and amortization (Ebitda) margins will continue to deteriorate due to unlimited/bucket tariff offerings, larger handset subsidies, and substitution of data for voice/text services.


It added that, nevertheless, more data adoption should lead to revenue rising by the mid-single-digits, and lower capital expenditure (capex) should ensure positive free cash flow (FCF) and stable credit profiles for both the main operators such as the Philippine Long Distance Telephone Co. (PLDT), which has a “BBB/Stable” rating, and Globe Telecom Inc. which enjoys a “BBB-/Stable” rating.

PLDT, Globe results
The net income PLDT for the first nine months of the year stood at P29 billion, up by 2 percent from the P28.4 billion recorded during the same period last year.

The company’s capital expenditure this year is still expected to reach P29 billion.

The PLDT Group’s total cellular subscriber base as of September 2013 was 72.5 million subscribers.

Meanwhile, Globe booked a core net profit of P8.7 billion in the first nine months of 2012.

Globe’s earnings before interest, taxes, depreciation and amortization, or Ebitda, increased from last year’s level by over P1.1 billion to close the first nine months of the year at P28.3 billion against the prior year’s P27.2 billion.

Globe reported a core net income of P9.5 billion for the first nine months of the year, or an increase of 9 percent from last year’s P8.8 billion.

The increase in core net profit was driven by stronger revenues, totaling P67.3 billion for the nine-month period, or an increase of 10 percent from the P61.3 billion a year ago.

The Globe subscriber base reached 36.5 million as of end-September, up 14 percent versus the same period in 2012.

Globe has programmed $450-million to $500-million capital expenditure for this year from $600 million in 2012.

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