Friday, February 03, 2006

PLDT projects record profit of over P32B in 2005

By Mary Ann Ll. Reyes
The Philippine Star 02/03/2006


Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) expects to hit over P32 billion in its net income for 2005, a record high for the company.

Highly placed sources told The STAR that PLDT could easily exceed P32 billion in net profits in 2005, given the stellar performance of its perennial cash cow and wholly owned wireless subsidiary Smart Communications Inc. Core earnings are projected to surpass the P30 billion mark.

PLDT group chairman Manuel V. Pangilinan himself has confirmed that estimated profits for PLDT for the full year 2005 are "north of P30 billion."

He said the appreciation of the peso versus the US dollar resulted in foreign exchange gains for the company which contributed to the improvement in PLDT’s profit.

Pangilinan also noted that PLDT’s profits have been made possible by the substantial investments the company has made, aggregating $2.7 billion (approximately P140 billion) over the past seven years, to expand and improve the firm’s telecommunications facilities in the country.

The PLDT chief executive also revealed that the company paid a total of about P85 billion in taxes over the past seven years, including approximately P18 billion paid in 2005 to the National Government by way of income taxes, value-added tax, overseas communications tax and all other applicable taxes.

PLDT’s 2005 final financial results are currently undergoing a review by its external auditors and an announcement of its audited financial results for the full year 2005 will be made on Feb. 27.

During the first nine months of 2005, PLDT generated a consolidated reported net income of P25 billion, 13 percent higher than the P22.2 billion posted in the same period last year.

Core earnings before gains from foreign exchange, the Piltel debt exchange, and derivative transactions, rose to P23.2 billion over the adjusted and restated net income of P20.4 billion in the January to September 2004 period.

Pangilinan earlier said that the company will be able to hit a P31 to P32 billion reported net income for the entire year and core earnings of P30 billion. "Assuming that there are no adverse movements in foreign exchange levels and that the September levels will be maintained until December, we can expect the reported net income to be closer to P32 billion," he said.

He expects leverage ratio (total debt/EBITDA) to be below 1.5 times by 2006 compared to 1.6x as of end-September.

Consolidated profits for the third quarter of the year reached P8.5 billion compared to P9.75 last year while core earnings improved to P8.2 billion from P6.8 billion last year. Group service revenues went up four percent year-on-year to P89.7 billion mainly driven by an eight percent increase in wireless service revenues.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) hit P57 million during the first nine months of the year from P53.8 billion last year while margins improved to 64 percent. Consolidated free cash flow grew by 51 percent to P41.6 billion as capex spending declined by 41 percent to P9.6 billion.

By yearend, free cash flow is expected to reach P50 billion or around $900 million, of which $700 million is for debt reduction and around $200 million for dividend payments for the year.

The PLDT group, likewise, reduced debts by $552 million during the first nine months of the year, with total debt reduction for the whole year expected to hit $700 million compared to an earlier target of $600 million.

The increased debt reduction target resulted from PLDT’s acceptance of cash tender offers on its 2007 notes amounting to $50.9 million, which amount was settled yesterday. PLDT has also obtained the necessary consents from holders of its 2007 and 2012 notes to amend its restricted payments capacity while tightening its leverage ratio test.

PLDT president Napoleon Nazareno said these amendments will give PLDT greater flexibility to make restricted payments, including the payment of dividends to common shareholders.

Wireless service revenues increased to P55 billion during the first nine months or eight percent higher. Service revenues for the third quarter were, however, lower by one percent to P18.5 billion compared to the second quarter due to a more difficult macro-economic situation and various promotional activities, but were four percent higher than the first quarter revenues, Nazareno pointed out.

Consolidated wireless EBITDA improved by seven percent to P36.2 billion. Quarter-on-quarter EBITDA remained stable at P12.3 billion mainly due to lower marketing expenses while EBITDA margin in the third quarter was 66 percent higher than the second quarter.

Capex spending for the wireless group for the January to September 2005 period was P4.9 billion and is expected to reach P7.5 to P8 billion by yearend. Free cash flow surged to P29.6 billion as cash flow from operations improved despite increased tax payments, and as capex spending declined.

Nazareno said he expects cellular penetration rates will likely go down by one to two percent industrywide, but he remains optimistic that there will still be room for growth, with an addressable market of 25 million that remains to be tapped. 

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