Income and Profit of PLDT Philippines

The Philippine Long Distance Telephone Co. (PLDT) said its net income fell by 4 percent to P30.62 billion in the first nine months of the year from P31.99 billion in the same period last year.

Partly owned by Hong Kong’s First Pacific Co. Ltd. and Japan’s NTT group, PLDT said consolidated net income fell by 10 percent to P9.32 billion in July to September from P10.31 billion in the same period last year.

Its core profit, which excludes foreign exchange gains or losses and other non-recurring income, also fell by 6 percent to P9.58 billion in the third quarter from P10.19 billion in the same period last year.

The January to September core net income also was down by 3 percent to P30.60 billion.

The country’s leading telecommunications company said consolidated service revenues went down by 2 percent to P34.24 billion in July to September from P35.07 billion in the same period last year.

In the first nine months, PLDT’s consolidated service revenues amounted to P105.03 billion from P108.27 billion last year.

Napoleon L. Nazareno, PLDT president and chief executive blamed the decline in net profit to the strong peso and the popularity of social networking sites that cut yields of text and voice call messaging.

At end-September, the peso average at 43.26 to the dollar, up 5 percent compared to the 45.60 in the same period last year.

Had the peso remained stable, PLDT’s core net income would have been higher by P700 million, or P31.3 billion, substantially similar with that of last year.

Cellular data/text, which account for 44 percent of total wireless service revenues fell 4 percent to P29.7 billion, with text volumes declining 6 percent.

Cellular voice revenues also declined 7 percent to P29.3 billion, resulting from continuing intense competition and unlimited voice packages even as voice traffic increased by 50 percent.

The average revenue per user (ARPU) of Smart prepaid subscribers fell to P148 in the third quarter from P163 in the same period last year.

While ARPU of Smart postpaid subscribers stood at P1,100 from P1,229 in the same period last year. Talk ‘N Text ARUP also fell to P97 from P112.

At end-September, PLDT group’s total cellular subscriber base was 47.7 million subscribers, 2.1 million up from the same period last year.

Of the total, Smart has 26.6 million subscribers; Talk ‘N Text, 19.5 million subscribers and Red Mobile had about 1.6 million subscribers.

Despite the drop in service revenues, Nazareno said PLDT will continue to manage the long tail of the company’s traditional telco business, cognizant that revenues will continue to be pressured by declining yields brought about by the unlimited services.

Given declining cellular phone margins and stiff competition from other telcos and social networking sites, Manuel V. Pangilinan, PLDT chairman said the company anticipated core net income to be P39 billion this year, lower than the previous guidance of P40.5 billion.

In 2010, the company’s core net income was P42 billion.

Panglinan expects service revenues to decline by 4 percent this year from P42.2 billion last year.

“In the meantime, we still have to contend with the bearish outlook of the industry as consumer behavior and technology continue to transform our business at a pace much faster than anticipated, intense competition expected to continue. Revenues from the legacy businesses of voice and text are now yielding to revenues from data and broadband services. This transformation process will take some time before a 1-for-1 revenue substitution process can be achieved, and mean higher margins being replaced by lower ones, at least in the short-term,” Pangilinan said.

“We are therefore faced with the sobering prospect that revenues are likely to continue declining for the foreseeable future, and costs rising in the near term — as we need to follow through with improving and upgrading our networks, including Digitel’s, and seeding the market with internet-based enabled devices,” he added.

Pangilinan, however, said that the company is confident that it can return to more profitable times as soon as practicable.

He said that PLDT expects “modest growth” in profit in the short term with the recent acquisition of third-ranked Digitel.

The National Telecommunications Commission earlier approved the PLDT acquisition of a 51.55 percent stake in Digital Telecommunications Philippines Inc. from JG Summit Holdings Inc. for P69.2 billion.

“We expect Digitel to make profit in 2012,” Pangilinan said, adding that the company will be delisted early next year.

PLDT plans to undertake a mandatory tender offer to Digitel minority shareholders this month and would take for 20 days.

Digitel holder can opt to be paid in cash at P1.6033 per share or swap for PLDT shares at a ratio of 1.555 Digitel shares for every one PLDT share.

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