• PLDT may spend up to P20B for M&As until next year – S&P


    PHILIPPINE Long Distance Telephone Co. (PLDT), the country’s leading telecommunications service provider, could spend up to P20 billion on mergers and acquisitions until next year, Standard & Poor’s Ratings Services said.

    “We forecast that the company could spend up to P10 billion annually on mergers and acquisitions in 2015 and 2016,” S&P said.

    S&P said it affirmed its ‘BBB+’ long-term corporate credit rating on PLDT with a stable outlook.

    “At the same time, we affirmed our ‘axA+’ long-term ASEAN regional scale rating on the
    Philippine-based telecom services provider,” it said.

    “We affirmed the ratings because we believe that PLDT’s strong balance sheet can accommodate the company’s sizable capital spending over the next two years,” S&P credit analyst Bertrand Jabouley said.

    PLDT plans to become an internet and digital player, leveraging its technical expertise as a telecommunication services provider and its vast customer base.

    “The company’s leverage could increase as a consequence and exceed our base-case assumption. We revised our assessment of PLDT’s liquidity to ‘adequate’ from ‘strong’ because we expect the company to have negative discretionary cash flows over the next 12-24 months. We continue to assess the company’s business risk profile as ‘strong’ and its financial risk profile as ‘modest,’

    “We expect PLDT’s spending to remain elevated in 2015 and 2016 at least. The company has invested about P30 billion annually over the past 10 years to enhance its network.

    PLDT is contemplating further investments as part of its ongoing digital evolution and transformation,” S&P said.

    “The stable outlook on PLDT for the next 12 months reflects our view that the growth in the company’s broadband and data businesses would continue to offset gradually eroding revenue from traditional voice and SMS operations,” Jabouley said.

    “The outlook also factors in our expectation that PLDT will continue to generate free operating cash flows over the next two years in spite of heavy capital expenditure, and that the company’s acquisitions appetite will moderate compared to 2014,” S&P said.

    The rating on PLDT is capped by the ‘BBB+’ transfer and convertibility (T&C) assessment for the Philippines. A positive rating action on the sovereign is a prerequisite for an upgrade of PLDT.



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