FITCH Ratings Inc. expects competition in the Philippine telecommunications industry to intensify in the coming years as both PLDT and Globe Telecom embark on aggressive expansion plans and further increase their capital expenditures.
“We believe domestic competition will further intensify in the next year due to PLDT’s aggressive strategy to acquire market share,” said Fitch as it affirmed Globe’s long-term foreign and local-currency issuer default ratings at BBB-.
Fitch expects Globe’s robust expansion into the long-term evolution (LTE) network to keep its capex/revenue ratio elevated at 27 percent-28 percent in 2016-2018.
It also noted that PLDT’s aggressive promotional campaigns and handset subsidies, which are meant to drive data usage levels in the long term, are also likely to weigh on earnings before interest, tax, depreciation and amortization.
Under a three-year network deployment plan, both telcos aim to accelerate network expansion, broadband infrastructure, and internet access coverage to cover over 90 percent percent of the country’s cities and municipalities by 2018.
BPI Trade CEO Mike Oyson also said in an interview that investors can now focus on Globe’s fundamentals after the Court of Appeals stopped the Philippine Competition Commission (PCC) from investigating its purchase of San Miguel Corp.’s telecommunications assets with rival PLDT.
Oyson expects a rebound in telco stocks since they can now move forward with their planned capex to improve service. He added that the CA decision lifts the ‘overhang or pall of uncertainty’ over the telco sector. “As better service starts to be felt by the consumer, it will be very difficult to reverse the decision. At the end of the day, what is in the mind of the President is the impact to the consumer.”
