Connect with us

Hi, what are you looking for?


Reading the telco results for clues on the digital shift

By Arjay L. Balinbin, Senior Reporter

PLDT, INC. and Globe Telecom, Inc. reported mixed earnings in the first nine months of the year, but the telecommunications incumbents are expected to outperform the broader economy going forward as the pandemic hastens the adoption of digital processes and work practices.

Globe’s attributable net income for the nine months to September came in at P15.87 billion, down 10.25% from a year earlier. On an EBITDA basis (earnings before interest, taxes, depreciation, and amortization), earnings declined 2.8% to P56.25 billion, amid pressure on revenue during the pandemic.

Globe’s service revenue for the first nine months was P109.1 billion, down 1% from a year earlier, after a weaker performance by its mobile, corporate data and fixed-line voice business segments.

On the other hand, PLDT’s nine-month attributable net income grew 23.1% to P19.68 billion. Revenue increased 7% to P133.22 billion, while EBITDA improved 13.7% to P65.86 billion.

PLDT noted that it saw strong performances across the board for the nine months, as customer demand spiked for digital services during the pandemic.

In an e-mail replying to queries from BusinessWorld, Fitch Ratings analyst Janice Chong said PLDT’s continued outperformance was “driven by its robust fixed-line position and stronger mobile network capacity to accommodate competitive data offers.”

“Its heavy capital expenditure (capex) investments over the past few years and the recent reallocation of 2G spectrum to 4G have improved network quality and coverage,” she noted.

PLDT’s capex amounted to nearly P260 billion over the past five years.

The pandemic, however, forced a slight rethink of capex plans, with PLDT lowering its guidance for the year to P70 billion from P83 billion while Globe guided capex lower to P50.3 billion from P63 billion. 

Kerwin Chan, equity research analyst at COL Financial Group, Inc., said in an e-mail interview that the two companies experienced delays in their network rollout plans due to the lockdown restrictions. 

“Moving forward, we expect both telcos to ramp up their rollout plans and expand capacity as data demand grows in the post-pandemic world,” he added.

COL Financial Group considers both telcos to have “performed well and mitigated the impact of the pandemic,” Mr. Chan said.

In a phone interview, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said the telecommunications sector is riding out the pandemic in strong position to capitalize on the digital shift.

“This is because of growing opportunities as the economy shifts to the digital space where we are seeing a lot of activity happening online. You have  work-from-home setups, online business transactions, and online classes.  Given these, we are expecting growth in demand for data services,” he said.

Asked how the industry will deal with the greater reliance on home broadband during the public health emergency, Mr. Tantiangco said: “We are seeing a boost in fixed line, in the home broadband segment, but that doesn’t mean to say the mobile data segment is going to be left behind. We are still expecting strength from the mobile segment. We are seeing a shift from the traditional text messages and calls to the mobile data segment, so that’s where we are seeing the growth.”

Fitch Ratings’ Ms. Chong said the limited fixed-line infrastructure in the Philippines means that telcos would need to meet growing demand for home broadband through wireless connectivity.

“Despite the lockdown restrictions and people staying at home, both telcos were still able to book flattish to slight growth in their mobile data segment. Moving forward, we expect mobile data revenue to grow as mobility increases and channels for mobile top-ups become more accessible,” COL Financial’s Mr. Chan said.

Nomura Global Markets Research expects the economy to contract by 9.8% this year, with the Philippines dealt further setbacks by late-year natural disasters.

The economy remained in a recession in the third quarter as GDP contracted by 11.5% after the record 16.9% plunge in the second quarter, according to the Philippine Statistics Authority. GDP grew by 6.3% in the same period last year.

Ms. Chong said the incumbent telcos are expected to outperform GDP given the essential nature of their services.

“Our forecast assumes flat to low single-digit growth for 2020, despite a stronger-than-expected 1H20 (first half) increase of 3%. However, downside risks that could delay sector recovery in 2H20 (second half) include continuing restrictions on mobility and prolonged relief measures extended by telcos,” she added.

Ms. Chong said Fitch also expects telcos “to continue to take a more lenient approach on payment collection through the year in light of the recession, and to start to tighten consumer credit in 2021.”

Mr. Chan of COL Financial noted that both Globe and PLDT have briefed analysts that they expect “flattish growth” for this year.

“They emphasized possible downside risks to their forecast for the year due to possible worsening of economic conditions,” Mr. Chan said.

Still, COL Financial believes that the telcos “can stand firm” despite the negative economic conditions, he added, noting that higher data usage is expected as users embrace the digital transformation in the new normal, although the spending habits of the lower-income segments have likely changed due to the economic slowdown.

Globe and Smart Communications, Inc., the wireless arm of PLDT, introduced 5G technology in 2019 and 2020, respectively. They are currently expanding the coverage of their commercial 5G services nationwide.

Mr. Chan expects that budgets for the 5G rollout will only make up a small percentage of both telcos’ capex for next year, due to the dearth of 5G-compatible devices in the Philippines.

Fitch Ratings’ Ms. Chong said the Philippines is likely to depend heavily on the standing 4G network to meet robust demand for data “in the next few years.”

She said the momentum of 5G rollouts will depend on the affordability of 5G devices, particularly in a prepaid market “that currently yields a monthly average revenue per user (ARPU) of $2 for mobile services and $20 for home broadband.”

“Globally, 5G has so far offered limited success in consumer segments, due to the lack of differentiation from existing 4G services and, therefore, the ability to charge premium pricing. We expect operating cash flow to lag significantly behind investment, keeping free cash flow constrained over the next three years,” Ms. Chong said.

There will be “tighter competition” among telcos next year because of the expected commercial rollout of Dito Telecommunity Corp., Philstocks Financial’s Mr. Tantiangco said.

“If Dito Telecommunity matches the services of Globe and PLDT-Smart, of course it’s going to capture a bigger market share, and this could lead to slower revenue growth for the incumbents,” he said.

Ms. Chong said aside from regulatory pressures, competition will be a major factor for future investment, “driving net leverage — measured as funds flow from operations (FFO) net leverage — higher at around 2.6x-2.8x over the next two to three years.”

She said network expansion is likely to accelerate over the next few quarters, following the capex delays due to the pandemic restrictions.

Who will dominate the industry next year? “We believe PLDT’s broader service diversification and entrenched fixed-line position will mitigate revenue pressure in its wireless business, compared with Globe. An under-served fiber broadband market offers long-term revenue opportunities for fixed-mobile convergence over the next few years,” Ms. Chong said.

Mr. Tantiangco expects new entrants aside from DITO. “If an industry is booming or if an industry is going to be profitable, it’s going to entice more players so they can take advantage of the opportunities as well,” he said.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



TikTok is expected to ride out the advertising slowdown, as the Chinese-owned social media titan becomes an outlier to the wider industry slowdown. According...


The average start-up loan has fallen over 138 percent in the past year to just over £142k, from £339k in 2021. Thats according to...


The government risks “sleepwalking” into a food supply crisis unless it provides crucial support for British farmers struggling with the soaring cost of fuel,...


Britain’s retailers benefited from a November sales boost fuelled by Black Friday discounts and colder weather as consumers bought winter coats, hot water bottles...


The biggest sector of the economy remained in a downturn last month as new orders continued to fall owing to the cost of living...


1 of 2 AFTER all their hard work in topping a difficult group and matching the Croatians for 120 minutes, Japan crumbled in the...

You May Also Like


The minute that any question pops into your head, you can simply ask Google. No longer do we have to pour over books and...


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


Browsing history makes referring to sites and pages you’ve visited in the past seamless. It’ll help you recall what page you checked out on...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.