FITCH Ratings expects the two major telecommunications companies in the Philippines to book medium to high single digit revenue growth for the entire year 2019 amid a stabilizing competition between the two players.
In a statement, Fitch projected continued growth in revenue for Globe Telecom, Inc. and PLDT, Inc., although the free cash flow may remain negative due to their capital expenditures in the second half.
The credit rating agency sees Philippine telcos spend P141 billion in capital expenditure in 2019, up 56% year on year as companies expand their mobile data capabilities and equip their fixed broadband network.
However, the rollout of the 5G network is seen as limited as it is still in the early stages of global adoption and implementation, especially in a country like the Philippines, which is still dominated by the prepaid market.
Fitch cited how Globe's 8% revenue growth in the first half was better than PLDT's, which rose 5%. This led to an uptick of 0.4% in the first share of telecommunications revenue over six months.
"Nonetheless, the return to growth for PLDT's wireless revenue (up 6% year-over-year) highlights a stronger recovery in progress for the country's largest telecommunications operator," Fitch said.
It appears that PLDT is benefiting from an acceleration of subscriber inclusion in its fiber broadband services, which has been impacted by a statutory provision on outsourcing services since mid-2018. The agency said this has slowed PLDT & # 39; s broadband subscription at home in the fourth quarter of 2018, but has since returned to growth.
Meanwhile, Fitch said Globe's service revenue is likely to grow at a high single-digit pace due to its "larger postpaid subscriber base and continued mobile market share gains."
PLDT & # 39; s service revenue is seen to grow at a slower pace with mid-single digits.
In the midst of the two companies' expansion, the entrance to the third telco Dito Telecommunity is seen to intensify competition going forward.
"Competition in the mobile sector is greater than in the fixed network, which is why we believe that diversification into fiber broadband is advantageous for fixed mobile convergence and to capture the long-term demand for fiber equipment."
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., holds the majority of the shares in businessworld through the Philippine star group that it controls. – Arra B. Francia