The Philippines’ largest operator PLDT (owner of mobile operator Smart) suffered a sharp drop in profit for Q3, due largely to equity losses from a major acquisition in May, and saw its market share fall to 50 per cent as it continued to lose subscribers.

The company’s net profit plunged 49 per cent to PHP3.4 billion ($71.3 million) in the quarter, due to costs related to the purchase of San Miguel Corp’s (SMC) telecoms assets as well as increases in financing costs and depreciation due to higher capex. It is required to make a second payment of PHP6.6 billion in December, and said the financing is in place, with the final payment of PHP6.6 billion due next May.

Manuel Pangilinan, PLDT chairman and CEO, said: “This year has been a particularly challenging period for PLDT, as we grappled with both intense price competition and the continuing shift from voice/SMS services to data demand impacting adversely our wireless revenues; as well as internal adjustments in our senior ranks.”

Pangilinan, however, noted that its digital transformation remains on track. “We remain focused on the critical initiatives that will definitively shape our businesses to the new direction where growth is driven by data and digital innovation.”

Smart’s problems echo those of rival Globe (at least from a financial perspective). Earlier this month the Philippines’ second largest mobile operator also reported a 50 per cent drop in profit in Q3 due to one-off charges related to the SMC acquisition, while mobile revenue fell slightly as competition intensified.

Mobile takes a hit
PLDT’s Q3 revenue fell 6 per cent to PHP40.1 billion, with service revenue also down 6 per cent to PHP38.3 billion. Fixed revenue rose for the third straight quarter, up 6 per cent to PHP14.4 billion in Q3, while wireless turnover decreased 12.4 per cent to PHP23.9 billion. Both cellular and wireless broadband revenue were down at least 10 per cent.

Service revenue for the first nine months of the year was down 3 per cent to PHP119 billion, with cellular services falling 8 per cent to PHP66.6 billion.

The operator, whose market share has fallen from 57 per cent to 50 per cent over the past year, shed more than five million mobile subscribers since Q3 2015, with the losses split evenly between prepaid and postpaid.

Its blended ARPU also dropped 11 per cent to PHP105 ($2.20) from a year ago.

The company said the price of data (per megabyte) has dropped 93 per cent since Q1 2015 due to rising competition, but the price has stabilised since the beginning of the year.

Revised full year guidance
Pangilinan said, based on the results for the first nine months, it adjusted its projected full year EBITDA to PHP60 billion, lower by PHP4 billion from the previous guidance. “We are making this adjustment, anticipating that while data and broadband will keep posting steady growth, toll, cellular voice and SMS revenues will, however, continue to wane.”

Its outlook for the full year forecasts low single-digit growth in consolidated service revenues. The company increased its capex budget by PHP5 billion from the original capex guidance of PHP43 billion, with the additional capex related to the roll out of network using the newly acquired frequencies from SMC.