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Business

Competition seen hitting Philippine telco's 2015 earnings

MANILA -- Philippine Long Distance Telephone expects earnings to rise only modestly this year as it continues to defend market share and increase capital expenditure.

     Already, PLDT's efforts to counter rival Globe Telecom's bid to win subscribers has weighed on the dominant player's bottom-line.

     Net income fell 4% to 34.1 billion pesos ($773.48 million) for the year ended December 31 2014, while core earnings dropped 3% to 37.4 billion pesos, PLDT said in a statement on Tuesday. Company chairman Manuel Pangilinan projects that the company will make 35 billion pesos in net profit for 2015.

     Both firms in recent years have been rolling out aggressive promotional campaigns, from unlimited call and text to bundled services at cheaper rates in the tussle for market share.

     In September last year, PLDT upped the ante by offering free Internet to its 67 million cellular subscribers. In response, Globe revived its free Facebook access promotion for its 40 million mobile subscribers.

     Such competitive price challenges are expected to continue this year and PLDT is not backing off, President Napoleon Nazareno said at the press briefing.

     The company has, in fact, jacked up capital expenditure to a record 39 billion pesos to widen its 3G and 4G coverage. But including competitive pressures, this will likely take a toll on the company's earnings.

     "We project higher depreciation costs and financing charges which, along with ongoing efforts to defend our market share, will impact our bottom-line which we expect to be in the vicinity of 35 billion pesos for 2015," Chairman Pangilinan said.

     The company was forced to cut its profit guidance to 37 billion pesos from 39.5 billion pesos last year after reporting disappointing third-quarter earnings, partly due to increased competition.

     "The competition will remain intense but there are pockets of growth areas, which we are aggressively developing," Nazareno said when asked about his outlook for the industry.

     PLDT's cellular revenues fell 1% to 115 billion pesos last year while revenues from the fixed line segment grew 6% to 57 billion pesos. Its broadband and internet business fared much better, with revenues rising 20% to 31.9 billion pesos.

     Nazareno expects growth in the "legacy" business, such as calls and text, to cool further amid increasing popularity of Internet-based messaging apps. He also expects to see growth in the data segment.

     The changing landscape of the telecommunications industry has spurred PLDT to expand its assets and diversify into the multimedia space by teaming up with different content providers and buying assets such as TV stations and newspapers.

     Globe, which reported in February a 170% rise in full-year net income to 13.37 billion pesos, appears undaunted.

     "We remain confident that we will continue our growth trajectory this year," CEO Ernest Cu told the Nikkei Asian Review. "Our strategy of focusing on our customers has worked well for us these past years and we shall continue to push forward as the purveyor of the Filipino digital lifestyle."

     Pangilinan was also hopeful that his company's investments will bear fruit in the longer term. "Beyond 2015, we see brighter prospects for PLDT," the chairman said in the statement. 

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