, May 5 , 2004
By Mary Ann Ll. Reyes  -  Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) posted a consolidated net income of P5.24 billion for the first quarter, 111 percent higher than the P2.48 billion reported in the same period last year, driven largely by higher earnings of wireless subsidiary Smart Communications Inc. and increasing contributions from the PLDT fixed line business.

Despite the encouraging first quarter numbers, however, PLDT chairman Manuel Pangilinan reiterated they would like to maintain their P17 to P18 billion net income target for the whole of 2004.

PLDT president and CEO Napoleon Nazareno said that as a result of the outstanding first quarter 2004 performance, PLDT is on track to restoring dividends to common shareholders by the first half of 2005.

Revenues for the PLDT group also increased by 19 percent to 27.1 billion while consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) improved to P16.3 billion as a result of higher revenues and lower cash operating expenses.

Consolidated free cash flow grew from P6.4 billion in the first quarter of 2003 to P9.3 billion in the same period this year. As a result, consolidated cash balances as of end of March 2004 reached P24 billion, positioning the group to address maturing obligations of around $200 million in the second quarter of the year alone.

Specifically, PLDTís fixed line business expects a net reduction in debt level of about $250 million this year and in the case of Smart, around $80 million. By the end of 2006, company officials expect fixed line debts to total $1.5 billion, and Smart, less than $100 million (without taking in account the proposed acquisition of Piltel debts).

Smartís net income nearly doubled to P5.2 billion, up 86 percent from P2.8 billion last year while revenues during the first three months of 2004 hit P14.7 billion, 37 percent higher than the P10.7 billion realized in the same period last year.

Smartís EBITDA surged by 59 percent to P9.7 billion from P6.1 billion as revenues grew at a higher rate than expenses. EBITDA margin improved to 66 percent in the first quarter of 2004 from 57 percent last year.

Officials attributed the strong growth in revenues, officials emphasized, is mainly due exceptional subscriber expansion. Smart added over 1.1 million subscribers in the first threee months of the year. Ending the period with nearly 12 million subscribers. Talk íN Text added over 300,000 subscribers, bringing the PLDT groupís total cellular subscribers to 14.4 million.

Compared to the first quarter of 2003, net subscriber additions increased by 83 percent from 769,000 in the first quarter of 2003 to over 1.4 million during the same period this year. Cellular penetration rates continued to exceed expectations, reaching around 30 percent as of end March this year.

For the next three years, Nazareno said a 35 to 40 percent penetration rate is not impossible.

Smartís capex reached P3.5 billion during the first three months of 2004. Nazareno, who is concurrently Smart chief executive, said capex remains scalable and is expected to reach P15 billion for the whole of 2004.

Smartís free cash flow remained strong in the first quarter of 2004 at P4.2 billion, enabling the former to pay down debts by $25 million and to pay PLDT dividends of P11.3 billion representing 70 percent of Smartís net income in 2003, before the end of May 2004.

Nazareno said Smart was able to secure approval from its creditors to pay dividends to PLDT. Smart is a wholly owned subsidiary of PLDT.

Meanwhile, PLDTís fixed line business boosted revenues by three percent, from P11.3 billion in the first three months of 2003 to P11.6 billion this year. Capex reached P800 million for the first quarter and is pegged at P6 to P7 billion for 2004.

In the first three months of 2004, PLDT fixed line reduced debt by $40 million. Officials said PLDT fixedā strong cash flow and expected cash dividends from Smart should enable the wireline business to pay down debts of around $160 million in the second quarter of 2004.

Total debt principal paydown for the year is expected to reach $250 million. By the end of the year, PLDT fixed lineís debt balance will go down to $2.2 billion. Officials said they are targeting a debt balance of below $1.5 billion for fixed line by the end of 2006.

Nazareno said the priority for the fixed line business is to develop new revenue streams like broadband, DSL and other data services.

Reported by: Sol Jose Vanzi

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