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THE following is the reply of PLDT to my Dec. 28
column on PLDT losing its wireless focus:
Dear Tony,
I write with reference to your
column, “PLDT losing its wireless focus” (Manila Times, Dec. 28,
2007), because a number of the conclusions you drew in that column
were, in my view, the result of comparing apples with oranges. This
letter is therefore meant to clarify the relevant comparative
metrics.
To begin with, PLDT and Smart’s
ad spend (to September last year) has not increased at a faster rate
than Globe’s. We understand that the Globe numbers you quoted are
consolidated—i.e., they include ad and promo spend for both their
fixed and mobile businesses. If we were to do an apples to apples
comparison, then we must relate the consolidated figures for both
PLDT/Smart with those of Globe. On that basis, PLDT/Smart spent P3.9
billion in the first nine months of 2007 v. P3.6 billion in
2006—an increase of only 8.3 percent. In contrast, as you pointed
out, Globe increased its ad and promo spending from P2.4 billion to
P3.1 billion in the same period, an increase of 30.5 percent—or
3.7 times our own increase.
Furthermore, the more meaningful
ratio to look at—from the point of view of efficiency—would be
the percentage of advertising and promo expenses to service
revenues. For PLDT/Smart, that would be 3.8 percent for the first
nine months for both 2006 and 2007 v. 5.6 percent and 6.5 percent
for Globe during the same period for those years, respectively. We
are thus spending less on ads and promotions in relation to our
total revenues.
With respect to subscriber
growth, you pointed out that Globe’s net additions in the first
nine months of 2007 amounted to 3.6 million, exceeding the whole
year 2006 total of 3.3 million. To balance the picture, we must
point out that Smart’s net adds for the same period in 2007
reached 4.1 million v. the whole year 2006 total of 3.8 million.
Moreover, again from the standpoint of efficiency, Smart spent P693
in ads and promo for every net addition while Globe spent P933.
These numbers reflect PLDT/Smart
management’s effort at pursuing growth in a cost-effective manner,
to enhance both service revenues and profitability. On a
wireless–to-wireless (i.e., apples-to-apples) comparison, the
wireless group’s consolidated income before tax (the more
comparable metric since it factors out differences in tax status
between the two companies) in the first nine months of 2007 was
P34.1 billion, an 18.4 percent increase over the P28.8 billion
registered in the same period of 2006. Globe’s wireless income
before tax for the same period in 2007 was P15.1 billion, a
7.9-percent increase over the first nine months of 2006.
While the wireless group’s
reported net income after tax for the nine months of 2007 did indeed
decline by 10.9 percent as you pointed out, this was primarily a
result of the deferred tax assets of P4.1 billion recognized in the
first nine months of 2006. On a core basis (or net income after tax
before the impact of foreign exchange translation, derivative and
other one-time transactions), net income for the wireless business
increased by 15.2 percent, from P18.7 billion to P21.5 billion.
Given Smart’s excellent
financial performance in 2007 (and indeed, in years past), the
recent reorganization undertaken in PLDT and Smart was clearly not
the result of “disappointing nine-month results” in the wireless
business. Rather, it represents a major effort of the PLDT Group to
accelerate the transformation of PLDT’s fixed line business from a
legacy system to an all-IP next generation network offering advanced
voice and data services. As well, it is a push to further
invigorate, and maintain our leadership in, the cellular business.
It has always been our steadfast conviction that transformation is a
vital and necessary condition for the Group to maintain its
leadership through innovative services, based on cutting-edge,
future proof technologies.
The PLDT Group remains focused on
its mission of harnessing the power of convergence for Filipinos
here at home and everywhere else in the planet. We are, and intend
to remain, our country’s most profitable company—a track record
all of us are quite proud of.
Mon Isberto
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