Fitch Ratings Inc. (Fitch) has predicted intense competition in the country’s telecommunication (telco) industry as Philippine Long Distance Telephone (PLDT) and Globe Telecommunications Inc. (Globe) are set to pursue aggressive expansion programs and increase their capital expenditures (capex).
“We believe domestic competition will further intensify in the next year due to PLDT’s aggressive strategy to acquire market share as it affirmed Globe’s long-term foreign and local-currency issuer default ratings at BBB,” Fitch said.
Fitch said Globe’s robust expansion into long-term evolution (LTE) will keep its capex/revenue ratio elevated at 27 percent to 28 percent in 2016-2018.
On the other hand, Fitch also viewed PLDT’s aggressive promotional campaigns and handset subsidies, which are meant to drive data usage levels in the long-term, as likely to weigh on earnings before interest, tax, depreciation and amortization.
Under a three-year network deployment plan, both telcos aim to accelerate network expansion, broadband infrastructure, and internet access coverage to cover over 90 percent of the country’s cities and municipalities by 2018.
BPI Trade chief executive officer Mike Oyson also projected intense competition in the telco industry will spur a positive business climate, sending signals to investors to focus on Globe’s fundamentals after the Court of Appeals stopped the Philippine Competition Commission from investigating its purchase of San Miguel Corp.’s assets with rival PLDT.
Oyson expects a rebound in the telcos’ stocks since they can now move forward with their planned capex to improve service.
The CA decision lifts the “overhang or pall of uncertainty” over the telco sector, he added.
“As better service starts to be felt by the consumer, it will be very difficult to reverse the decision. At the end of the day, what is in the mind of the President is the impact to the consumer,” he said.