Philippine Long Distance Telephone: Telecommunications

THE COMPANY: Philippine Long Distance and Telephone (PLDT) was founded in 1928, and currently stands as the leading telecommunications provider in the Philippines. Through its three principal business groups – fixed line, wireless, and information and communications technology (ICT), PLDT offers the largest and most diversified range of telecommunications services across the country’s most extensive fibre optic backbone and fixed-line, cellular and satellite networks.

PLDT is listed on the Philippine Stock Exchange and its American depository shares are listed on the New York Stock Exchange. Indeed, PLDT has one of the largest market capitalisations among Philippine-listed companies. As of June 30, 2013, PLDT had 73.4m cellular subscribers, 2m fixed-line subscribers and 3.2m broadband subscribers. The industry incumbent accounted for 67% of total mobile subscribers.

1H 2013: PLDT’s consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA), inclusive of discontinued operations, went up by 2% to P40bn ($964m) in the first half of 2013 due to the combined effects of higher consolidated revenues and lower operating expenses. The company’s higher revenues came mainly from data and other networks, miscellaneous services from the fixed-line segment, and higher cellular and broadband revenues. Meanwhile, the EBITDA margin for the period remained generally unchanged, at 49%.

Consolidated core income amounted to P19.7bn ($474.7m) during the first half of 2013, higher by 2.2% compared with the same period last year. This was brought about by higher revenues and lower provisions for income tax. The company’s wireless segment accounted for 71% and 72% of total revenues and core net income, respectively.

GROWTH DRIVERS: Value-driven offers and the prevalence of multi-SIM (Subscriber Identity Module) usage have pushed the mobile penetration rate to almost 100% in the country. As such, revenues from voice calls and text messaging are expected to remain stagnant in the years to come. A bigger portion of PLDT’s revenue growth going forward is expected to come from the mobile browsing and broadband segments (both wireless and fixed-line). Indeed, the relatively low internet penetration rate of 32.4% (as of June 2012) in the Philippines leaves operators with a large market to capture and provides them with plenty of expansion opportunities.

RISING PENETRATION: Factors that are widely expected to boost demand for internet connectivity include the following: the availability and affordability of smartphones and tablets; increased demand for mobile content and apps (higher data consumption); an internet-savvy population; and the robust growth of the ICT and business process outsourcing industries, which are major users of both fixed-line and broadband services. As average smartphone unit prices have gone down to as low as P2500 ($60.25), the smartphone penetration rate in the Philippines is expected to reach 50% by 2015. Asia's mobile data traffic is estimated to increase by 77% per year in the next four years, outpacing that of developed regions, according to a recent study by ICT and telecommunications provider, Cisco.

PLDT continues to invest in its infrastructures to provide its subscribers with good network quality and reliability. The company completed its P67bn ($1.6bn) network transformation programme in 2012, with consolidated capital expenditures in 2012 totalling P36.4bn ($877.2m), an increase of 17% year-on-year, but lower than the P38bn ($915.8m) in the 2012 budget. For 2013, PLDT plans to spend a lower amount of P28.6bn ($689.3m), or 17% of projected service revenues. The company’s investments include the build-out of the cellular division’s coverage, improvements to the transmission network, an increase in international bandwidth capacity and the expansion of the 3G and wireless broadband networks to enhance data and mobile services.