P20B worth of PLDT value wiped out in a day

this story was taken from www.inq7money.net URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=02&dd=09&file=1   P20B worth of PLDT value wiped out in a day Posted: 1:44 AM | Feb. 09, 2006 Daxim L. Lucas and Clarissa S. Batino Inquirer CLOSE TO P20 billion worth of shareholder value in Philippine Long Distance Telephone Co. (PLDT) was wiped out in the stock market Wednesday as the company reeled from a downgrade by US-based investment bank Morgan Stanley. The share price of the country's biggest publicly listed company plummeted 6.1 percent in frenetic trading on the Philippine Stock Exchange, ending at P1,680 apiece from Tuesday's close of P1,790 -- a drop of P110 per share. The fall reduced PLDT's market value to P303.9 billion from P323.8 billion in a single day. PLDT chairman Manuel Pangilinan said he did not know of anything "now or prospectively" that could have triggered Wednesday's huge drop. He said PLDT's revenues in January were better than a year earlier and profit in 2005 was more than P30 billion, another record high. "With all these positive developments, the market is behaving irrationally," Pangilinan said. Inquirer sources in the stock market said the sharp drop might have been aggravated by a massive sell-off by creditors of PLDT subsidiary Pilipino Telephone Corp., many of which had begun converting PLDT preferred shares into common shares as early as three weeks ago. On Tuesday, Morgan Stanley issued a research note downgrading PLDT to "equal-weight" from "overweight," saying the stock now had limited upside potential "after a strong rally in the shares [over] the past two years." "The conversion of preferred shares into common equity will dilute PLDT's earnings per share by four to five percent in 2006 to 2007, especially as the common shares have crossed the P1,700 conversion price," Morgan Stanley said. It also said that PLDT was beginning to face significant hurdles mainly due to the "changing dynamics of the changing telecommunications market landscape." "Although fundamentals remain good, we see room for limited positive surprises given slowing mobile [phone] growth, risks to voice over Internet protocol (VoIP) substitution, and reasonable valuations," it said. A stock market analyst noted that Morgan Stanley did not recommend a "sell" on the stock, but merely opined that its upside was limited. The analyst said the sell-off might have been prompted by profit-taking by holders of PLDT preferred shares, having since converted their holdings into common stock. "We're talking about an extra 7.9 million shares flooding the market," he said, declining to be named. "That's a significant overhang." Wednesday's drop in the PLDT stock price came after three successive days of declines that saw the price drop by a cumulative 11.1 percent. The price has tumbled from its high of P1,895 a share. The PLDT price fall triggered a sell-off in the stock exchange. The composite index dropped 36.46 points or 1.7 percent Wednesday to 2,060.92 on P1.7 billion worth of transactions. Of this amount, P778.5 million worth of trades were attributed to PLDT, representing 45.33 percent of all market activity for the day. The market was also talking about the feared impact of a new access charge regime proposed by PLDT's rival, Globe Telecom Inc., on PLDT earnings. Access charges or termination rates are paid by the phone company that receives the call. Since PLDT is the biggest player, bulk of the local traffic ends on its network. In terms of traffic coming from the United States, the Philippines is getting the fourth largest volume. Locally, 25-35 percent of PLDT revenue comes from calls from other networks. The remainder is generated within its pool of more than 20 million mobile phone subscribers and 2.1 million landline customers. Second-rank Globe wants to slash access charges or the fees that phone companies pay one another to complete calls by 62.5 percent to P1.50 a minute from P4.00 for domestic calls from landline to mobile and from mobile to mobile, and by 83 percent to P0.50 a minute for mobile-to-landline and landline-to-landline calls from the present P3.00. Globe has also recommended a 75-percent cut in termination fees on overseas calls to landlines at three US cents a minute from the present 12 cents and 56.25 percent in fees on overseas calls to mobile phones to seven cents a minute from the present 16 cents. PLDT has rejected the Globe recommendation. Its president, Napoleon Nazareno, said Globe's proposal "was just a letter." "Investors should not worry because access rates are determined bilaterally," he said. With INQ7.net Copyright 2006 Inquirer, INQ7.net. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. copyright ©2006 INQ7money.net all rights reserved