Fitch downgrades PLDT credit rating outlook, affirms Globe’s

Debt watcher Fitch Ratings has downgraded the credit rating outlook on PLDT Inc., citing a decline in earnings before interest taxes, depreciation, and amortization (EBITDA) as well as higher business risks.

“Fitch Ratings has revised the Outlook on PLDT Inc.'s Long-Term Local-Currency Issuer Default Rating (LC IDR) to Negative from Stable,” it said in an emailed statement on Wednesday.

The credit rating agency is forecasting PLDT’s EBITDA to fall to P64 to P65 billion in 2016 and 2017, compared with P76.6 billion in 2015 due to the company’s ongoing shift to digital.

“PLDT's aggressive promotional campaigns and handset subsidies to drive data usage levels in the long-term, are likely to weigh on EBITDA. Our forecasts assume revenue growth in the low single-digits,” it said.

The telco saw its bottom line fall by 33 percent in the second quarter of the year, weighed by an impaired investment in Berlin-based Rocket Internet.

On the other hand, Fitch affirmed PLDT’s LC IDR at “BBB+” or “good credit quality.”

This means that default risks are currently low, and that capacity for payment of financial commitments is adequate, but adverse business or economic conditions are “more likely” to impair this capacity.

“PLDT's ratings also reflect its leading position in the Philippines with 57-percent revenue market share in mobile and broadband, and a 70-percent subscriber market share in fixed-line,” Fitch noted.

“In addition, Fitch believes the joint acquisition of SMC's [San Miguel Corp.] telecom assets by PLDT and Globe [Telecom Inc.] will remove new competition in the sector.”

PLDT and Globe announced plans to buy out SMC from its telecom business.

In a separate advisory, Fitch maintained its “BBB-" Long-Term Foreign- and Local-Currency Issuer Default Ratings on Globe with a stable outlook.

The “BBB-" rating indicates that expectations of default risk are currently low.

“Fitch forecasts revenue growth of mid-single-digit percentages in 2016-2018, which is higher than our forecast of flat-to low-single-digit growth for PLDT,” it said.

This is lower compared with the 16.2-percent revenue growth the telco registered in 2015.

“We believe Globe's higher average revenue per user post-paid subscribers should translate into stronger data monetization and market share gains,” Fitch said. — Jon Viktor Cabuenas/VDS, GMA News