050907: PLDT earnings flat at P8.6B in 1st quarter

By Mary Ann Ll. Reyes
The Philippine Star 05/09/2007

Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) reported net earnings of P8.6 billion in the first quarter of 2007, practically the same level as a year earlier, as the company paid more taxes and gained less from its foreign exchange transactions.

But core net income, a measure that strips out currency and derivative gains, rose 11 percent to P8.4 billion in the first three months, from P7.6 billion in the same period last year, the company said yesterday.

Officials said, the "flat" net income was attributed to increased provision for taxes of P2.1 billion due to a higher effective tax rate of 34 percent compared to a previous 22 percent; lower foreign exchange gains of P278 million in the first quarter of this year as against P1.6 billion in the same period last year; and non-recurrence of certain depreciation charges.

Group service revenues, which include contributions of wireless phone units Smart and Piltel, increased 10 percent to P33 billion, notwithstanding the five percent appreciation of the peso which negatively impacted on the group’s revenues that are dollar-linked.

PLDT chairman Manuel V. Pangilinan emphasized that the group’s core income of P8.4 billion in the first quarter bodes well for the rest of 2007, as he expects the company to meet the higher end of its full year core income target at P33 billion.

Pangilinan also noted that cash flow remains strong and that the company remains committed to its goal of an increased dividend payout of 70 percent, half of which is expected to be declared in August. He expects the first quarter performance to continue to the second quarter, as the wireless business performs ahead of expectations.

"We also expect some election-related spending elements to our performance in the second quarter. The picture will be similar to the first quarter although the second quarter will be slightly better than the first quarter. Profit numbers will be better in the second quarter on a core income basis," he explained.

"During the course of the year, we will continue to look at investment areas that can provide ways to expand growth. In the event such opportunities do not arise or when they do, prove unattractive, we will consider the option of returning additional cash to our shareholders in the most efficient manner possible," Pangilinan added.

Meanwhile, PLDT president and chief executive officer Napoleon Nazareno reported that consolidated earnings before interests, taxes, depreciation and amortization (EBITDA) during the first quarter of the year improved by three percent to P20.4 billion while EBITDA margin was at 62 percent.

Group capital expenditures (capex) for the first three months of 2007 totaled P5.9 billion and were primarily utilized on the continued roll out of next generation network (NGN) lines which now number 230,000, increasing cellular capacity, expanding the wireless broadband network and investing in international cable capacity.

Capex for the group is expected to range between P20 billion to P22 billion in 2007.

PLDT is investing a total of P100 million in international cable capacity as part of its capex estimates for 2007-2008 to support the company’s expansion of broadband and other net generation services. The company is also investing in the upgrade of APCN2 and for the build-out of the Japan-US cable system which is expected to carry commercial traffic by June 2007.

These cable systems are expected to provide a combined additional capacity by next year, five times more that PLDT’s existing international capacity.

As for new investments, Pangilinan for his part said around $100 million is being allocated for additional acquisitions on the business process outsourcing (BPO) scene.

PLDT is likewise looking at acquiring smaller telephone companies outside Metro Manila to expand the geographic coverage on the wireless broadband side. The company also expects to launch on a soft basis within the year its mobile TV business.

 

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