Telecommunication remains promising as telcos post higher core profit in the third quarter of the year brought by higher data consumption.
Online brokerage Colfinancial.com said nine-month core profit of telcos rose 9.5 percent to P37.3 billion, ahead of its forecast.
“We remain bullish on the telco sector given the upside risk that revenues should improve as consumers continue to increase their data consumption. Moreover, we believe that the incumbent telco operators will continue to act rationally given their success in data monetization,” Colfinancial.com said.
In the third quarter alone, the telecom sector’s recurring core profit grew 11.8 percent to P12 billion, largely driven by Globe Telecom Inc. which recorded a 20 percent increase to P5.8 billion as the telco’s service revenues increased 13.7 percent.
“Note that Globe’s third quarter total operating expenses fell by 1 percent to P18.5 billion. Likewise, PLDT Inc.’s third quarter core profits also rose 5.1 percent to P6.2 billion on the back of 9 percent increase in service revenues. In addition, TEL’s (PLDT) cash operating expense fell by 8.8 percent, largely driven by 21 percent decline in professional and other contracted fees, and the adoption of PFRS (Philippine Financial Recording Standards) 16,” Colfinancial.com said.
It noted an 11.3-percent increase in total service revenues in the telco business to P77.4 billion for the period. Globe posted service revenue growth of 13.7 percent while PLDT’s growth pace was 9.1 percent.
The growth in Globe’s service revenue was driven by its data revenues, which now account for 70 percent of total service revenues, compared to around 58 percent a year ago.
“Globe’s mobile data revenues continued to account for the lion’s share of service revenues at 47 percent, while home broadband and corporate data accounted for the remaining 14 percent and 9 percent, respectively,” Colfinancial.com said.
“Globe’s fixed line and home broadband revenues also managed to record an 11.9 percent increase to P8.7 billion, which more than offset the 11 percent decline in fixed line voice to P668 million,” it added.
PLDT’s service revenues meanwhile rose 9.1 percent to P39.6 billion, as the 22 percent growth in data and broadband revenues more than offset the 3 percent drop in domestic voice and 31 percent drop in text messaging revenues, Colfinancial.com said.
As of end-September, data and broadband revenues accounted for 66 percent of PLDT’s consolidated service revenues.
“Data revenue growth was evident in all segments with mobile data revenues growing the fastest at 47.7 percent to P12.5 billion, while fixed home broadband revenue growth was slower at 2 percent to P9.3 billion,” Colfinancial.com said.
The online brokerage also said Globe’s management reiterated the company’s full year 2019 guidance of high single-digit revenue growth, coupled with higher than 50 percent earnings before interest, taxes, depreciation and amortization (EBITDA) margin.
“We believe that management is on track to hit their guidance given the 12.0 percent service revenue growth and the 53 percent EBITDA margin recorded in 9M19 with the upside risk of exceeding revenue guidance,” Colfinancial.com said.
“While Globe reiterated their commitment to improve their network infrastructure, management noted that they will unlikely reach their capex goal of P63 billion in fiscal year 2019 as only P32 billion has been spent as of end September. Management believes that $900 million or P47 billion is more realistic, with the remaining budget expected to spill over in 2020,” it added.
PLDT likewise reaffirmed its full year telco core income guidance of P26.4 billion, which is 10 percent higher than its core telco profits in 2018, despite flattish nine-month core profit results.
PLDT also maintained its 2019 capital expenditure guidance of P78.4 billion, with P58 billion being core capex.
“PLDT managed to spend P53.4 billion or 68.1 percent of its allocated budget for 2019. Despite the higher capex, we believe that the company can maintain its dividend payout policy which is equivalent to 60 percent of past year’s profits given the company’s growing EBITDA,” Colfinancial.com said.