Moody’s Investors Service said that Philippine Long Distance Telephone Co.’s (PLDT) results for first half of 2013 were in line with expectations, and continue to support its “Baa2” rating and stable outlook.
In a statement, Yoshio Takahashi, a Moody’s assistant vice president and analyst, said that “PLDT’s reported consolidated service revenue grew by 2 percent year-on-year, supported by the growth in its data and Internet business. Its reported consolidated Ebitda in first half also improved by 2 percent year-on-year, while its reported consolidated Ebitda margin for service revenues remained at 49 percent.”
Ebitda stands for earnings before interest, taxes, depreciation and amortization.
“We expect PLDT to maintain its stable earnings, given its dominant positions in fixed line, broadband and wireless,” said Takahashi, also Moody’s lead analyst for PLDT.
Moody’s expects PLDT’s Ebitda to continue to improve in the second half of 2013 and in 2014.
Level of improvement
However, the level of PLDT’s improvement will be marginal, as a changing revenue mix—from voice to broadband—will continue to pressure margins, although from a high level.
PLDT’s ability to generate free cash flow will also continue to improve, given the substantial completion of its accelerated capital expenditure program to boost network quality and coverage in 2012.
Moody’s expects PLDT’s capital expenditure (capex) to decline from P35 billion in 2012 to approximately P30 billion in 2013, but the telecommunication firm to maintain a similar level of capex in 2014.
However, despite the improved cash flow, PLDT’s adjusted debt to Ebitda will likely remain in the 1.5 times to two times range in the next 12 to 18 months, as Moody’s anticipates that the company will maintain an effective 100-percent dividend payout, comprising a 70-percent regular dividend and 30-percent special dividend.
In addition, PLDT is likely to continue with investments in media-related businesses,
although the size is not expected to be so large in the near term.
Moody’s estimates that PLDT’s adjusted debt/Ebitda for the last 12 months ended June 2013 remained at approximately 1.7 times.
PLDT’s liquidity position will remain strong. Debt maturing in the next 12 months was about P30 billion as of June 2013, which is well covered by its cash and cash equivalents of P40 billion.
Rosalie C. Periabras