PLDT reports 6% dip in Q1 profits; announces cost-cutting measures

8 May 2012

Telecoms heavyweight Philippine Long Distance Telephone Company (PLDT) has reported a 6% fall in net income for the three months ended 31 March 2012 on the back of a sharp rise in expenses, but says that the integration of recently acquired telco Digital Telecommunications Inc (Digitel) and cost-cutting will help boost future earnings. In a press briefing today, PLDT reported that it booked net income of PHP10 billion (USD236.7 million) for 1Q12, including PHP700 million in profit from Digitel. Consolidated core net income, which excludes currency and derivatives-related items, fell 12% year-on-year to PHP9.3 billion, including a contribution of PHP200 million from the newly purchased unit. In a filing to the stock exchange, PLDT reported: ‘Core net income declined as a result of higher expenses that reduced service revenue gains, a lower equity share in the earnings of the Manila Electric Company or Beacon Electric Asset Holdings and higher provision for income taxes … Reported net income was impacted primarily by the decline in core net income and higher net foreign exchange and derivative gains.’

The Filipino carrier is facing the prospect of saturation in its domestic mobile market. However, it hopes the integration of Digitel – the unit was fully consolidated in the first quarter – will help it to increase its share of the wireless segment to shore up its bottom line. The enlarged entity claimed 66.1 million mobile subscribers at the end of March 2012, including 15.6 million Digitel customers, up from 63.7 million at the start of the year.

Commenting on the integration process, PLDT president Napoleon Nazareno noted that his firm is ‘ beginning to see early signs of stability as we follow through on the integration’, adding that going forward, the group expects to realise a ‘gradual improvement in product yields and overall profitability from the ongoing rationalisation on both services and brands.’ PLDT is maintaining its FY2012 core net profit guidance of PHP37 billion, down 5% from the previous year, despite the first-quarter results. 1Q12 service revenues climbed 13% year-on-year to PHP42.8 billion, aided by a 15% increase in wireless service revenues, it said. Group wireless revenue would have fallen 4% without the contribution of Digitel, the company added.