Philippines telecoms operator PLDT reported another drop in annual profit and revenue in 2016, as increased competition and higher capex weighed on its bottom-line, but the company forecasts growth in core profit for the first time in three years during 2017.

The operator’s 2016 net profit dropped 9 per cent year-on-year to PHP20 billion ($397 million), which it attributed to higher capex associated with the ongoing expansion of the fixed and mobile networks of PLDT and its mobile subsidiary Smart. EBITDA declined 13 per cent to PHP61.2 billion, which the company said was mainly due to lower wireless service revenues and higher provisions.

Service revenue fell 4 per cent to PHP157 billion, with revenue in its wireless consumer business decreasing 9 per cent to PHP66.4 billion due to declines in SMS and domestic voice revenues.

“We faced very tough tests in the past year as competition intensified and the shift to digital services accelerated,” said PLDT chairman and CEO Manuel Pangilinan. “Our results reflect the impact of these challenges, but also point to us the way forward. The year 2016 has been a period for resetting of the many dials. Profitability has been reset to a lower level, reflecting the impact of the changes in the business, our customer base and our organisation. This has provided us a new baseline from which we can build upon and grow.”

The company set a target of 6 per cent growth in recurring core income for 2017 (PHP21.5 billion), the first increase in three years. It expects low single-digit growth in service revenue and double-digit growth in data and broadband revenue, with continued declines in mobile voice and SMS revenue.

Data growth
Mobile data revenue increased 20 per cent and accounted for 34 per cent of total wireless service revenue in 2016, ahead of SMS and domestic voice revenues with shares of 33 per cent each.

Its total subscriber base declined 8.5 per cent year-on-year to 62.76 million at the end 2016, with a loss of more than five million prepaid users. Postpaid ARPU rose 1.6 per cent year-on-year to PHP970, while prepaid ARPU fell 10 per cent to PHP104.

PLDT’s home and enterprise businesses, which together account for 47 per cent of consolidated service revenue, grew 10 per cent to PHP29.3 billion and 9 per cent to PHP30.6 billion, respectively. Data and broadband have been the key growth drivers for both business units, the operator said.

Pangilinan said underpinning its digital pivot announced a year ago is “its drive to build superior fixed and mobile networks through a comprehensive network modernisation and expansion programme”. Of the PHP48 billion allocated for capex in 2016, PHP42.8 billion was spent. Capex for 2017 is budgeted at PHP46 billion inclusive of carry-overs from 2016.

Smart deployed base station equipment using frequencies acquired from San Miquel Corp in more than 2,000 sites across the country. This is part of Smart’s three-year plan to bring LTE coverage to 70 per cent of the population by end-2017 and 95 per cent of the country’s cities and municipalities by 2018.