PLDT’s Piltel writedown surprises analysts

25 Mar 2003

Manila-based national PTO Philippine Long Distance Telephone (PLDT) has reported net income of PHP3.1 billion (USD57 million) for 2002, just half of the figure expected by the market, after writing down the value of its mobile unit, Pilipino Telephone (Piltel). In a move which took many analysts by surprise, PLDT announced that it had wiped PHP4.1 billion from its investment in the country’s third largest mobile operator. Only last month PLDT president Manuel Pangilinan roused the market by confidently predicting that the group’s profit for 2002 would be the highest since 1997, adding that earnings would be at ‘the higher end’ of analysts’ estimates. No mention was made of a possible writedown for the wireless unit, even though it has been underperforming for several years. Piltel posted a full-year loss of PHP22 billion in 2002 following a similar performance in 2001, which seemingly prompted the parent to write down its investment to ensure that its own earnings would not be affected by future losses at the operator. Following the initial shock, analysts broadly welcomed the move saying that PLDT was probably wise to remove the possibility of any adverse impact from Piltel in the future. PLDT is forecasting that net income for 2003 – excluding Piltel – will rise by 25% on 2002 levels. It said that its profits for 2002 were buoyed by a 14% rise in sales to PHP80.2 billion. PLDT’s other mobile division Smart Communications – the nation’s largest operator – reported a massive 74% hike in profits to PHP6.2 billion as sales rose by 51% to PHP33 billion. The two mobile subsidiaries added 2.6 million new subscribers in 2002. At the end of 2001 Piltel claimed 1.474 million AMPS and GSM users, while Smart had around 4.89 million signed up to its analogue and digital networks.