The Philippines’ largest mobile operator PLDT reported that its consolidated EBITDA for Q2 declined 13 per cent year-on-year, although excluding a PHP1.4 billion ($30.7 million) headcount reduction cost booked in the quarter, the decline would have narrowed to 5 per cent.
The company’s consolidated EBITDA margin fell 1.6 points to 43.4 per cent in Q2, excluding its “manpower rightsizing” costs.
Moody’s expects PLDT’s EBITDA margin to remain under pressure over the next 12-18 months as domestic competition remains intense and its high-margin toll revenues decline. In addition, the operator will need to continue its network and service investments, notably in digital businesses.
PLDT’s service revenue was down 2 per cent year-over-year in H1 to PHP40.6 billion. Declines in toll revenues (international long distance and national long distance) put pressure on revenue growth, as increasing internet data usage has caused adverse substitution of voice and texting usage. Excluding long distance revenues, consolidated service revenue was up 1 per cent year-over-year.
Revenue from the wireless segment declined 5 per cent year-on-year to PHP27.3 billion and accounted for 67 per cent of PLDT’s consolidated service revenue in Q2. Within this segment, data/broadband and digital revenues rose 12 per cent year-on-year. That was not enough, however, to offset declines in cellular voice (down 10 per cent) and SMS (down 5 per cent), both of which were hurt by the availability of OTT options.
Revenue from the fixed-line segment increased by 5 per cent year-on-year to PHP13.3 billion, and accounted for 33 per cent of PLDT’s consolidated service revenue in Q2. Data and broadband (including fixed broadband, corporate data and data centres) again drove growth, up 12 per cent year-on-year.
PLDT has increased its capex estimates by PHP4 billion to PHP43 billion for 2015, compared to the PHP35 billion in 2014. It now also expects capex to remain elevated in 2016, as the operator is carrying out investments to improve its network quality. Moody’s expects this capex to be funded from internally generated cashflows and debt.
Moody’s reported that the operator’s increasing capex and continued weak operating performance in 2Q are credit negative.
“Although PLDT is progressively re-pivoting its digital initiatives, growth in data and broadband failed to offset continued weakness in its voice and texting segments,” said Gloria Tsuen, a Moody’s VP and senior analyst. “In addition, the decline in PLDT’s toll revenues, which accounted for 13 per cent of consolidated service revenues, will continue to weigh heavily on revenue growth for a few more years.”