MANILA, AUGUST 4, 2010 (STAR) By Mary Ann LL. Reyes - Despite a slight drop in consolidated service revenues, telecommunications leader Philippine Long Distance Telephone Co. (PLDT) still managed to post a 10-percent growth in its net income during the first half of 2010 to P21.7 billion, from P19.7 billion in the same period last year.

Meanwhile, core net income, net of exceptional items, rose two percent to P21.2 billion from P20.8 billion in the same period in 2009.

This developed as PLDT Group chairman Manuel V. Pangilinan pointed out that with the encouraging first half results, their core profit guidance for 2010 remains in excess of P41 billion and capital investments at P28.6 billion. This year’s capex will be part of the company’s continuing investment in the network to support take-up of broadband, and higher voice usage, on top of maintenance capex.

Also yesterday, PLDT’s board of directors declared an interim dividend of P78 per share, payable to holders of PLDT common stock as of Aug. 19, 2010, with payment due on Sept. 21, 2010.

“While we believe that there is still room for growth in the broadband space, we do recognize that our core markets are maturing. We are therefore looking to move beyond the verticality of the traditional telco business model as we lay the groundwork for a more ‘horizontal’ perspective via our strategic platform and infrastructure investments,” he said.

This means looking at related businesses that would capitalize on PLDT’s existing platform as well as synergies with other businesses, even those belonging to sister company Metro Pacific Investments Corp. (MPIC), he said.

“Apart from the media aspect (i.e. Tutok Sabay Text promo of Smart and ABC 5 which is owned by PLDT unit Mediaquest, and combination of relevant content and access via Internet-enabled phone), we would like to see the day when we have prepaid electricity and water. We can even have contact-less payment system for our tollway business. There may be some synergies with our hospital business,” Pangilinan revealed.

Core net income for 2010, he said, is expected to be slightly higher than the P41.4 billion posted in 2009, resulting from an increase in service revenues, contribution from the PLDT Group’s investment in Manila Electric Co. (Meralco), and lower income tax provision, partly offset by higher financing charges.

Pangilinan added that they expect service revenues for the whole of 2010 to grow two percent to P148 billion from P145.6 billion last year as a result of strong growth in fixed and wireless broadband, corporate and small and medium enterprise business for the fixed line, and improvements in the business process outsourcing (BPO) business.

Earnings before interests, taxes, depreciation and amortization (EBITDA) this year is forecast to rise by a percent to P87 billion from P86.2 billion in 2009 due to greater contribution from broadband where margin is relatively lower than PLDT’s traditional high-margin services like cellular data and international long distance.

The PLDT Group has a combined broadband subscriber base (DSL, SmartBro, and WeRoam) of 1.96 million, with second quarter 2010 broadband revenues up 21 percent. To maximize returns from broadband, the company plans to introduce more promos to stimulate use of mobile Internet and pursue initiatives to use content as a differentiator to spur demand and for retention.

Pangilinan noted that cellular growth will continue to be challenged by the 80 percent market penetration and multiple-SIM phenomenon, increasing subscriber preference for unlimited offers and bucket plans, and competition from social networking/broadband,

“The average price per text is now 12 centavos, with the lowest bucket price down to four centavos. It is near the incremental cost per text sent. If we could go back to the days when texting was the predominant revenue stream, that would be ideal margin-wise. But market dynamics have changed. The complexion of the cellular business has changed. Unless the industry works itself out to have a more productive pricing scheme,” he said.

While text and voice minutes as of the first half were 27 percent and 279 percent higher year-on-year, yields have declined to 12 centavos per text and P1.25 per minute of voice on higher traffic volumes due mainly to the unlimited/bucket pricing cellular promos.

He added that other factors that will affect this year’s revenues are the minimal boost from the recent elections, impact of the peso appreciation, and lower revenues from their satellite business due to the disposal of their Mabuhay satellite transponders.

He likewise said that regular dividend payout ratio remains at 70 percent of core earnings per share together with their ‘lookback’ approach with respect to any supplementary special dividends.

Meanwhile, company officials said this year’s results reflect higher recurring net income and a net gain from foreign exchange revaluation of the company’s financial assets and liabilities and derivatives compared to a net loss last year.

Group service revenues for the first half of 2010 decreased by a percent to P72.2 billion, the five percent decline in data and ICT revenues partially offset the three percent growth and 21 percent increase in voice revenues, and broadband/Internet and corporate data revenues, respectively.

The decline in data and ICT revenues was largely a result of the 13 percent decrease in cellular data/text messaging (SMS) revenues.

Officials explained that since about 28 percent of consolidated service revenues, the latter would have stayed at last year’s levels had the peso remained stable.

Chief News Editor: Sol Jose Vanzi

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