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Strong peso trims PLDT net income

November 6, 2007 10:43pm

PHILIPPINE Long Distance Telephone Co. (PLDT), the country’s biggest telecommunications company, on Tuesday reported a 3% increase in net income for the nine-month period ending September.

In a briefing, PLDT officials said the firm posted a net income of P26.5 billion for the period, up from P25.7 billion in the same nine-month span in 2006.

Consolidated revenues increased to P103.5 billion from P95.4 billion, with service revenues contributing P100.5 billion.

Along with the increased revenues for the period, PLDT was also able to contain expenses this year to P63.5 billion from last year’s P65.9 billion.

Company officials, however, said the firm could have posted a higher income if not for the continuous strengthening of the peso, given that 38% of its consolidated revenues are linked to the dollar.

"Our dollar-linked revenues arising from the local exchange and ILD (international long distance) businesses continue to be adversely impacted by the appreciation of the dollar/peso exchange rate," PLDT President and Chief Executive Officer Napoleon L. Nazareno told a press conference.

He noted that consolidated service revenues, which account for most of the firm’s earnings, increased 9% but could have gone up by 13% if not for the peso’s appreciation.

PLDT Chairman Manuel V. Pangilinan said the strengthening peso was a reality firms should accept and prepare for.

"The strengthening peso is going to happen for the next few years. The businesses sector should recognize this reality. We just have to manage it we don’t want to top what is a good thing," he said.

He added that the peso impact was somewhat "mitigated" in terms of debt payments.

For the nine-month period, the group paid back almost $206 million in debts, reducing its consolidated gross debt balance to $1.5 billion. After reflecting cash balances, net debt stood at $1.1 billion in 2007 compared with $1.4 billion last year.

Nevertheless, Mr. Pangilinan called on the Bangko Sentral ng Pilipinas to manage the foreign exchange rate to ease its impact on companies dependent on the dollar.

"They could make it more predictable and manageable if they can for the business sector, then we can plan," he said.

First Metro Securities research analyst Jan Michael Acebo said the financial results reported by PLDT showed that it made the right move in investing in the business process outsourcing (BPO) and other IT-related businesses.

"As reflected by its fixed line growth, PLDT is moving to other sources of income," he said.

Fixed line revenues decreased by 1% to P35.7 billion in 2007 from P35.9 billion in 2006.

Mr. Acebo said growth in the fixed line business was not as dynamic as with wireless, though it was more stable as users are charged a certain base amount on top of additional usage.

Because the firm is looking at other alternative sources of revenue and is capitalizing on the growing information communication and technology market, he sees the strong financials to continue in the fourth quarter.

"PLDT is expected to allocate more capital on other growth prospects particularly in BPO, which will boost its earnings aside from the traditional bread and butter ... that is fixed line."
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