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PLDT Q2 profit rebounds after Rocket Internet shares stabilize

Core telecom business remains weak, digital switch on track

Manuel Pangilinan, chairman and chief executive of PLDT, told reporters that while the telecom’s digital shift is on track, challenges remain.

MANILA -- PLDT, the largest telecom in the Philippines, said on Thursday that net income nearly doubled in the second quarter as it recovers from losses last year resulting from its 6.1% stake in Germany's Rocket Internet.

PLDT's net profit for April-June was up 85.12% to 11.57 billion pesos ($228 million) from last year, when it had to book 3.8 billion pesos in impairment losses because of Rocket's weak share price.

Chairman and Chief Executive Manuel Pangilinan told reporters that PLDT will retain its Rocket interest for now, but he did not rule out an eventual divestment. He said PLDT has gained "very little" since investing in 2014.

The second-quarter result brought first half profits to 16.52 billion pesos, up 32.58% year on year. Rival Globe Telecom, a joint venture between Ayala Corp. and Singapore Telecommunications, logged net income of 8.09 billion pesos, a drop of 10% because of higher interest payments despite a 5% rise in revenues to a record 62.90 billion pesos.

PLDT has guided investors to focus on its recurring core income, which excludes impairment losses and the gains from divesting power assets to purchase San Miguel's telecom assets. Recurring core income in the first half was up 1% at 11.9 billion pesos, and in line with the 21.7 billion peso full-year target.

PLDT's official earnings guidance is the lowest in over a decade. The company has struggled to compete with Globe Telecom as it "resets" itself as a digital player, Pangilinan said earlier. On Thursday, the company said its digital shift is on track with 46% of service revenues derived from data and digital services - a 39% year-on-year increase.

Pangilinan said he was satisfied but the challenge to monetize growing data traffic remains. "There are still many tasks ahead of us, particularly on the wireless side of the business," he said. "The growth in revenues did not match the growth in data traffic."

PLDT's service revenues dropped 6% to 71.2 billion pesos as traditional calls and text messaging continued to decline. Individual wireless revenues fell 16% to 29.6 billion pesos, while international and carrier revenues dropped 23% to 8.3 billion pesos as more subscribers turned to internet-based messaging services like Viber and Whatsapp.

Home internet revenues rose 12% to 15.8 billion pesos, while Enterprise business solutions were up 11% to 16.8 billion pesos following strong promotions and wider high-speed internet coverage.

Shares of PLDT were up 4.71% to 1,712 pesos on Thursday, while the Manila benchmark dropped 0.25% in the same period.

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