MANILA, Philippines – Philippine Long Distance Telephone Company (PLDT) has reset its core earnings at P28 billion ($589.08 million) for 2016, its lowest in 11 years, as it pursues growth in the digital sector.
“We plan to transform from being legacy-driven in revenues to digital. The next three years will be challenging for PLDT,” its Chairman and CEO Manuel V. Pangilinan said in the company’s year-end financial reports press conference on Monday, February 29.
It was in 2003 when PLDT last posted core earnings of P28 billion ($597.83 million), Reuters noted.
The P7 billion ($147.42 million) decline in core earnings was from an expected single-digit revenue growth and continuous changes in revenue mix, following the significant strategic changes in the company and management leadership.
In 2015, the company laid off an estimate of 450 employees to realign its workforce for digitalization. Pangilinan also assumed the role of CEO.
“The propensity of the new management is to clean up on what might have been forgotten sectors of the group, with the impairments in some fixed assets. It gives the space the company needs to pivot into the digital space,” Pangilinan said.
The CEO also added the company’s capital expenditure of P43 billion ($905.16 million) have also placed pressure for the company to deliver financial results.
PLDT’s reported net income slumped significantly at 35%, from P34.1 billion ($717.81 million) in 2014 to P22.1 billion in 2015 ($465.21 million), with consolidated service revenues down by 1%.
The continuous downward trends in international and national long distance (ILD/NLD) segments showed a 20% decline. The P8.4 billion ($176.84 million) higher expenditure for its data expansion and manpower reduction expenses have also hurt the company.
Smart Telecom, the company’s most profitable sector, has also been sustaining losses, which Pangilinan considers the “epicenter of their service revenue hole.” In prepaid subscriptions, its market share in the sector has decreased from 60% to 55%, while Globe increased its share from 40% to 45% for the same period.
Smart, Talk N’ Text and Sun Cellular have posted 24.1 million, 28.1 million and 12.8 million subscribers respectively by end-2015.
“I think Globe went digital three to five years earlier than us, and they’ve done a good job in transforming the network. As for us, we’ve made significant progress in terms of the network side, and there’s a big drive to improve the digital experience for subscribers,” Pangilinan told the press on the sidelines.
On the brighter side, PLDT remains the top performer in data and broadband provision, continuing its strong revenue growth at 16% with P48.5 billion ($1.02 billion) in 2015. The segment has accounted for 30% of the company’s total revenues in 2015, with mobile Internet usage surging at 106%.
The company expects the sector to account for 40% of its total revenues in the next three years, and has upgraded its 2G (9%), 3G (53%), and 4G coverage (16%) sites nationwide, while improving its data plans for subscribers.
“We expect the competition to be intense, and with working assumptions that there would be a third player in the market, sometime this year,” MVP added. San Miguel Corporation is reportedly partnering with Australian telco Telstra for a 4G mobile broadband service in the country.
Three months at the helm, Pangilinan does not expect a new PLDT head would be appointed soon as he is only starting to learn the company’s in and outs himself.
“I would want to have a better basis myself when I recommend a new CEO for the company. But for sure, he (or she) has to be a digital native, and certainly not as old as I am,” Pangilinan said. The search may start on the second half of the year, or early next year, he added.
The CEO said he is more focused on making the company’s foundation for its digital future, with the hopes it would be a state the new leader can improve on.