PLDT sale of BPO business credit positive – Moody’s

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By Mayvelin U. Caraballo Reporter

Moody’s Investors Service on Thursday said that the sale of the business process outsourcing (BPO) unit of Philippine Long Distance Telephone Co. (PLDT) is credit positive.

In its latest credit outlook, Moody’s mentioned that PLDT announced the sale of its BPO operation to Asia Outsourcing Gamma Limited (AOGL), a company controlled by CVC Capital Partners. As part of the deal, PLDT will take a 19.7-percent stake in AOGL.

“This transaction is credit positive for PLDT because it will improve the company’s liquidity and provide a funding source for its investments in media assets. The sale of the BPO business is in line with PLDT’s rebalancing of its business portfolio as it pursues strategic investments in media and content,” it added.


Moody’s also stated that PLDT said that the net cash proceeds from the transaction exceeded $300 million (more than P12.3 billion), or at least 33.2 percent of PLDT’s cash and 10.6 percent of its reported debt.

As of the end of 2012, PLDT had P37.1 billion of cash and cash equivalents. It also had P115.8 billion in total debt outstanding, of which P13 billion is short-term debt.

Moody’s also expects PLDT to use at least part of the cash proceeds to reduce debt and invest in domestic media assets, including further developing its pay-TV business.

Furthermore, Moody’s said that the sale of the BPO business should also help improve PLDT’s overall margins.

The company’s latest financial statements show its reported earnings before interest, taxes, depreciation and amortization (Ebitda) margin was 46 percent in 2012, based on its service revenues, including the BPO business. The BPO unit’s Ebitda margin was relatively low at about 21 percent, it noted.

Moody’s also estimated that the sale of the BPO business will help PLDT improve its reported consolidated Ebitda margin by about two percentage points.

As PLDT said that it intended to invest P5.55 billion in the pay-TV business and in print assets in 2013, Moody’s said that it estimates that the revenue from the TV business equaled to 2 percent to 3 percent of PLDT’s revenue in 2012.

“Furthermore, the development of pay-TV will enhance the provision of content across various platforms. In this context, strengthening PLDT’s media business is a positive move, although it will remain an insignificant contributor to PLDT’s profitability over the next two to three years,” Moody’s added.

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