PLDT shifts business model to ‘digital telco of everything’

By Thomas Noda for Deal Street Asia

From fixed line to digital mobile service provider, PLDT Inc now aims to become the “digital telco” in the Philippines. PLDT chairman and CEO Manuel V Pangilinan, who also heads the company’s wireless arm Smart Communications, made the disclosure in Makati City on Tuesday, during the firm’s announcement of its net income and financial results for the first quarter of 2016 with targeted consolidated core net income set at $597 million (P28 billion) for the year.

“By combining the strengths of our fixed and mobile networks, and the resources of our Consumer and Enterprise Groups, PLDT is uniquely positioned to deliver B2B2C (business-to-business-to-consumer) services, and thus become the truly digital telco of everything – not just a digital mobile service provider,” Pangilinan said.

He said PLDT’s plan in making the digital pivot include investing heavily in its network, promoting the usage of smartphones and web-connected devices, tapping internal innovation, and forging partnerships with global tech leaders to deliver compelling digital services. Telco tower lease negotiation is essential for establishing a strong and reliable network infrastructure to provide excellent connectivity to users.

Pangilinan bared the first leg of PLDT’s digital pivot is to strengthen its fixed and mobile networks, followed by the propagation of more digital devices, while the latest one is comprised of the highly differentiated services and platform running on devices in PLDT’s fixed and mobile networks.

“Our significantly higher capex in the first quarter of 2016 underscores the seriousness of our efforts to strengthen our fixed and mobile networks as the first leg, indeed, the foundation of our digital pivot. Our subscribers will progressively feel the impact of this network transformation over the next several quarters. But this early, various network improvements are already enabling us to grow our data revenues more rapidly, and to position PLDT as the communications company uniquely positioned to give customers the total digital experience,” Pangilinan said.

PLDT’s consolidated capital expenditures for the first quarter amounted to P14.6 billion, more than four times the capex for the same period in 2015. Capex in this quarter was used to further increase the coverage, speed, capacity and reliability of PLDT’s fiber and DSL and Smart’s mobile networks.

“Our results for the first quarter confirm our view that the digital pivot will be a difficult and complicated process,” Pangilinan said, noting PLDT has posted strong gains in data, broadband and digital services, compensating in large part for the continued declines in long distance and SMS revenues.

“But competition remains intense and the shift to lower-margin revenues continues. We are thus maintaining our guidance for Full Year Core Earnings at P28 billion,” he said. “Our experience in the fixed line business shows how growth can be restored by progressively building up our data and broadband revenues to critical mass. We aim to achieve that same critical mass in the wireless business by accelerating data adoption and usage, even at the price of renewed deceleration of our legacy revenues.”

The company’s consolidated core net income in the first quarter, before exceptional items, was at P7.2 billion, which was P2.1 billion lower than the amount recorded for the same period in 2015. The reduction from prior year was due largely to lower EBITDA reflecting higher product subsidies, higher depreciation, and higher financing costs.

“Reported net income, after including exceptional transactions for the period, declined 34 per cent to Php6.2 billion – the result of a reduction in Core Income and a rise in impairment charges related to the investment in Rocket Internet, offset in part by a rise in net foreign exchange gains,” PLDT said in its statement. The total subscriber count of the PLDT Group amounted to 72.1 million, with cellular and wireless broadband subscribers accounting for 68.4 million, down by only 0.6 per cent from year-end 2015.

Fixed line subscribers grew by 2 per cent from year-end 2015 to 2.3 million, inclusive of fixed broadband  subscribers of 1.3 million. PLDT’s total data and broadband revenues hit P13.7 billion, up 22 per cent, while mobile internet revenues rose 38 per cent. PLDT last traded at P1,727 which was up 2.19 per cent or P37 since Monday. The company’s board of directors last April approved the removal of the words “Long Distance” in its PLDT abbreviation, and preferred the name simply of PLDT Inc.

First appeared at DSA