Moody’s keeps PLDT’s Baa2 rating; outlook stable

GLOBAL debt watcher Moody’s Investors Service on Thursday kept its Baa2 issuer rating with a stable outlook for PLDT, Inc., citing the company’s “dominant” position in the country’s telecommunications market, with a 49% share of mobile subscribers and more than 50% share of market revenues last year.

“The affirmation of PLDT’s rating reflects its leading market position and healthy margins, which, coupled with the management’s financial discipline, will keep the company’s leverage at around 2.6x-2.8x over the next 12-18 months,” Moody’s Senior Vice President and the Lead Analyst for PLDT Annalisa Di Chiara said in an e-mailed statement.

But she noted that a commitment to shareholder returns and high capital expenditure (capex) levels “will continue to strain” PLDT’s free cash flow over the “next one to two years.”

Moody’s said it expects the competitive telco environment to intensify due to the presence of DITO Telecommunity Corp., but it will not have a significant disruption to PLDT’s operations “over the next 12-18 months.”

“This is because it will still take some time for DITO to build a comprehensive mobile coverage, expand its network and acquire a meaningful subscriber base,” it added.

PLDT is expecting to spend between P88 billion and P92 billion this year to meet the requirements of its mobile and fixed-line customers.

“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,” Moody’s noted.

The debt watcher described PLDT’s liquidity as “good.”

“As of 31 December 2020, PLDT reported cash and cash equivalents of P40.2 billion, which, combined with projected cash flow from operations of P75 billion to P80 billion over the next 12 months, and available committed credit facilities, will be sufficient to cover current debt maturities, estimated capital spending and dividends over the same period,” it explained.

PLDT saw its total revenues grow 7% to P181 billion last year, with service revenues increasing 8% to P173.63 billion.

The company’s telco core income went up 4% to P28.09 billion.

It booked an EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of 51%.

PLDT, through PLDT Enterprise and Smart Communications, introduced on Thursday a new product called “Smart Bro 5G Plans.”

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

PLDT shares closed 1.75% lower at P1,290 apiece on Thursday. — Arjay L. Balinbin