The Philippines’ largest operator PLDT (owner of Smart) suffered another weak quarter with its profit down sharply, revenue mostly flat and its subscriber base continuing to shrink.

Its net income in Q1 fell 34 per cent to PHP6.2 billion ($134 million), which it attributed to an impairment loss from its stake in Rocket Internet. EBITDA increased 14 per cent to PHP16.6 billion.

Consolidated revenue edged up just 1 per cent to PHP42.8 billion, while service revenue was flat at PHP40.6 billion. Wireless revenue was down 4 per cent to PHP26.7 billion due to higher handset subsidies, it said.

PLDT CEO Manuel Pangilinan said the results for the first quarter confirm that its “digital pivot will be a difficult and complicated process”.

In March the operator outlined a three-year recovery plan after reporting a 35 per cent drop in its net profit for 2015 and cutting its profit guidance this year by 20 per cent. The operator said it aims to transform to a primarily digital business from a heavily legacy one. The three-year effort will require higher capex and the halt to special dividends.

The company said the shift is a work-in-progress, with some early signs of improvement, and its earnings will be “reset to a new level in 2016”.

More customer losses
Its mobile unit, Smart, saw mobile subscribers drop seven per cent to 64.4 million from a year ago. Over that time its market share has fallen from 60 per cent to 53 per cent, according to GSMA Intelligence. Its prepaid user base declined eight per cent to 61.5 million, while postpaid customers increased two per cent to three million.

While SMS, cellular domestic voice and other wireless revenues dropped 8 per cent to PHP18.2 billion, revenues of mobile data, broadband and digital services increased 23 per cent to PHP6.2 billion. Data, broadband and digital services accounted for 23 per cent of wireless revenues, up from 18 per cent a year earlier.

Its broadband user base expanded 17 per cent year-on-year to 5.3 million and fixed-line connections rose 5 per cent. Fixed-line revenue grew 8 per cent to PHP15.4 billion, while its smart home services, which covers entertainment and home monitoring, expanded 66 per cent.

Capex during the quarter was up fourfold year-on-year to PHP14.6 billion, but its PHP42 billion guidance for the year is at the same level as 2015. Two-thirds of that is allocated to expanding wireless coverage and capacity.

Pangilinan said competition remains intense and the shift to lower-margin revenues continues. It is maintaining its guidance for full year core earnings at PHP28 billion — up from PHP22.1 billion last year but down 20 per cent from previous 2016 forecasts.