PLDT profit falls as shift to digital proves difficult
Telecommunications giant Philippine Long Distance Telephone Co., Inc. (PLDT) reported a 34-percent decline in its net income to P6.2 billion in the first quarter of 2016, proving that the transition to digital multimedia communications is difficult.
“Our results for the first quarter confirm our view that the digital pivot will be a difficult and complicated process,” Manuel V. Pangilinan, chairman and CEO of PLDT and its subsidiary Smart Communications, said in a statement issued to the Philippine Stock Exchange yesterday.
“That said, PLDT has posted strong gains in data, broadband and digital services, compensating in large part for the continued declines in long distance and SMS revenues. But competition remains intense and the shift to lower-margin revenues continues. We are thus maintaining our guidance for full year core earnings at P28 billion,” he added.
The company released yesterday its unaudited financial and operating results for the first three months of this year.
Broadband, corporate data and data center revenues rose by P2.5 billion or 22 percent while revenues from legacy businesses – cellular domestic voice, SMS, and international and national long distance (ILD/NLD) – dropped by P2.5 billion, negating the gains in data revenues.
Consolidated revenues for the period were up by 1 percent at P42.8 billion while consolidated service revenues were stable at P40.6 billion.
“This revenue mix reflects the changing nature of PLDT as it shifts from legacy to digital,” the statement added.
Pangilinan said the company is hoping to achieve critical mass in its wireless business by accelerating data adoption and usage, “even at the price of renewed deceleration of our legacy revenues.”
“To that end, we are investing heavily in our network to deliver the best quality service. We are working to make it much easier for our customers to use our services. We are propagating smartphones and web-connected devices for the Home. We are tapping internal innovation and forging partnerships with global tech leaders to deliver compelling digital services,” he said.
“Finally, by combining the strengths of our fixed and mobile networks, and the resources of our Consumer and Enterprise Groups, PLDT is uniquely positioned to deliver B2B2C services, and thus become the truly digital telco of everything – not just a digital mobile service provider,” Pangilinan added.
The company spent P14.6 billion in the first quarter to further increase the coverage, speed, capacity and reliability of PLDT’s fiber and DSL and Smart’s mobile networks. This was more than four times the capex for the same period in 2015.
“Our significantly higher capex in the first quarter of 2016 underscores the seriousness of our efforts to strengthen our fixed and mobile networks as the first leg, indeed, the foundation of our digital pivot,” Pangilinan said.
Among its activities were: continued expansion of 3G and 4G access networks; integration of Smart and Sun mobile networks; further deployment of fiber-to-the-home service and enhancement of DSL service; increased reach and capacity of the group’s fiber backbone network; strengthened network resiliency and redundancy; and increased capacity of international fiber cable links and enlarged local caching of popular international Internet content to improve customer experience.
In April 2016, Smart introduced LTE-Advanced (LTE-A) which offers peak data speeds of over 200 Mbps. LTE-A, also known as 4.5G, is expected to raise the level of Internet service in the country.
“Our subscribers will progressively feel the impact of this network transformation over the next several quarters. But this early, various network improvements are already enabling us to grow our data revenues more rapidly, and to position PLDT as the communications company uniquely positioned to give customers the total digital experience,” Pangilinan said.
The second leg of PLDT’s digital pivot involves the propagation of more digital devices while the third leg is comprised of the highly differentiated services and platforms running on devices in PLDT’s fixed and mobile networks.
Ariel P. Fermin, PLDT executive vice president and head of the Consumer Group, said the transition to digital for the wireless business “is likely to be more rapid because of the fast-growing digital ecosystem in the mobile space where more and more compelling services such as social media, digital messaging, entertainment, news and information, payments and financial services are being accessed via mobile devices.”
“We are accelerating that transition by assembling best-in-class digital services through partnerships and internal innovation, promoting the adoption of smart phones, and combining the reach and power of fixed line and mobile services to deliver the best and most complete digital experience,” he added.
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