Moody’s Investors Service, a bond credit rating business, announced last Thursday that it would be keeping its Baa2 issuer rating with a stable outlook for PLDT, Inc.,.
Moody’s cited that PLDT is still in a dominant position in the Philippines’ telco market with a 49% share of mobile users and more than 50% of market revenues last 2020.
As per Annalisa Di Chiara, lead analyst at Moody’s, keeping the same rating reflects PLDT’s leading market position and healthy margins. She added that the company’s financial discipline would keep its leverage at around “2.6x-2.8x over the next 12-18 months”.
Albeit, PLDT’s free cash flow will continue to take a hit due for the next one to two years due its high capital expenditure (CAPEX) and commitment to shareholder returns
As for DITO Telecommunity‘s emergence, Moody’s expects that it will help intensify the competition in the local telco market. Albeit, it won’t disrupt PLDT operations for the next 12 to 18 months.
The analyst explained that DITO will still have to build a more robust mobile coverage and network expansion to acquire more subscribers. As of writing, DITO’s mobile services are only available in select areas in Visayas and Mindanao. The company also revealed that it plans to introduce fixed broadband services in two years.
Moreover, PLDT may have to spend Php88 billion to Php92 billion this 2021 to meet its fixed broadband and mobile users’ requirements.
Moody’s added that “PLDT’s free cash flow will remain negative over the next 12-18 months, and the company will use debt to fund both capex and dividends, keeping its leverage in the 2.6x-2.8x range. Still, this leverage level is appropriate for its Baa2 rating, given its defendable and leading market position as well as strong margins,”
In simpler terms, Moody’s noted that PLDT’s liquidity is “good” as it was able to acquire Php40.2 billion of cash and cash equivalents, which added to the projected cash flow from operations of Php75 billion to Php80 billion over the 12 months and the available committed credit facilities, shall be enough to cover its current debt maturities, dividends over the same period, and estimated capital spending.
PLDT grew its revenues by 7% (Php181 billion) in 2020, service revenues increased by 8% (Php173.63 billion), and core income up 4% (Php28.09 billion). PLDT has an EBITDA margin of 51%.
Recently, PLDT’s mobile arm, Smart Communications, launched the new Smart Bro 5G Rocket WiFi, after the former’s Home WiFi service was merged with the latter’s. This will allow users to enjoy GIGA promos, apart from the existing Famload promos.