Fitch Ratings Inc. said Wednesday it downgraded PLDT Inc.’s long-term currency outlook after the country’s largest telecom company acquired half of San Miguel Corp.’s telecom business.
Fitch Ratings said it revised the outlook of PLDT’s long-term local currency issuer default rating (LC IDR) to negative from stable. The telco’s LC IDR was affirmed at ‘BBB+’.
Fitch cited PLDT’s higher capital expenditure of P48 billion this year from P43.5 billion to deploy network using frequencies acquired from San Miguel.
PLDT and rival Globe Telecom signed separate co-use agreements in May 2016 with SMC’s telecom businesses, covering the frequencies gained from their joint-acquisition of SMC’s telecom assets.
Under a three-year network deployment plan, PLDT aims to accelerate long term evolution expansion to cover 95 percent of the country’s cities and municipalities by 2018.
PLDT’s aggressive promotional campaigns and handset subsidies to drive data usage levels in the long term, are likely to weigh on earnings before interest, tax, depreciation and amortization, according to Fitch.
“ Our forecasts assume revenue growth in the low single-digits,” Fitch said.
Fitch said the joint acquisition of SMC’s telecom assets by PLDT and Globe would remove new competition in the sector.
Meanwhile, Fitch affirmed Globe Telecom Inc’s long-term foreign and local-currency issuer default ratings at ‘BBB-.
The agency also affirmed its senior unsecured rating at ‘BBB-’ and national long-term rating at ‘AAA(phl)’. The outlook is stable.
Fitch said it expected Globe’s aggressive expansion into the long-term evolution network to keep its capex/revenue ratio elevated at 27 percent to 28 percent in 2016 to 2018 from 26.8 percent in 2015.