Fitch revises PLDT outlook to stable from negative

London-based Fitch Ratings raised its outlook for telecom giant Philippine Long Distance Telephone Co.’s (PLDT) long term local currency default rating to stable from negative after Manila Electric Co. buy in.

The rating agency also affirmed its long-term foreign currency issuer default rating (IDR) and outstanding global bonds and senior notes at “BB+" as PLDT remains constrained by the Philippines' country ceiling.

The agency also affirmed the company's national long-term rating at “AAA(phl)," which indicates its relative credit strength among all Philippine companies.

“Under the aegis of new major shareholders, PLDT and San Miguel Corp., Meralco's operating prospects appear to have improved somewhat. Notably, the company has been able to raise distribution charges under performance-based regulation in second quarter in 2009," Fitch said.

Priya Gupta, director in Fitch's Asia-Pacific telecommunications, media and technology group, said the rating “factors in a slight weakening in credit protection measures" for 2009 due to additional 20 percent stake in Meralco.

"While this increase in leverage can be accommodated at PLDT's current local currency rating of 'BBB', there is virtually no headroom for further debt-funded acquisitions of material size," she said.

Fitch cited the ratings signal PLDT’s position as the country’s incumbent operator with “diversified and integrated" telecommunications operations as well as growing operations in call centers and business process outsourcing.

It holds a leading share of fixed-line subscribers around 60 percent and a dominant share of approximately 67 percent of the nascent broadband market.

“Fitch expects fixed-line services to remain a core contributor to earnings and cash flow over the medium term, with strong demand for fixed-data, offsetting substitution pressures on traditional voice services," the statement read.

As PLDT’s cellular business accounts 61 percent of its revenue, Fitch said the market heavyweight’s medium-term growth prospects are “modest" since penetration of subscriber identification modules are now at a high of approximately 82 percent.

“The ratings also take into account rising industry risks, with potential for increased competition from new entrant, San Miguel, over the medium-term, as well as heightened regulatory risks in light of recent directives on prepaid-cellular load extension and on the change in the unit of billing for cellular services," it added.

PLDT acquires medical outsourcing firm

The Philippine Long Distance Telephone Co. has expanded its business process outsourcing business with the acquisition of Laguna Medical Systems Inc. (LMS) for $8.25 million (about P400 million).

In a disclosure to the Philippine Stock Exchange on Wednesday, PLDT said the acquisition was made by SPi Global Solutions, a leading BPO company which is a unit of its wholly owned information and communications technology company ePLDT Inc.

LMS has over 50 consultants across the region who assist more than 200 hospitals attain coding and billing compliance as well as optimize entitled reimbursements for patient services.

This 22-year-old company also offers recovery audit contractor (RAC) defense and recovery services to help healthcare providers manage and defend RAC audits.

"As a result of the significant focus on healthcare reform in the US, we have been actively tracking companies in the coding compliance space with the goal of finding one to acquire whose corporate culture and values match our own," SPi president Peter Maquera said.

"LMS fits the bill. Their capabilities nicely complement our existing medical transcription, billing and revenue cycle management services and provide an excellent new entry point for us into this rapidly growing $25 billion industry," he added.

The inclusion of LMS' product offering, he noted, would strengthen SPi's relationship with more than 400 hospitals, multi-specialty clinics and physician practices.

"And it increases our healthcare-specific employee base to more than 2,000 worldwide," he said.

The US healthcare industry accounts for 16 percent of US gross domestic product and is the largest segment in the US economy.

With the US government now requiring healthcare workers to achieve a 95 percent or greater accuracy rate on medical coding, inexperienced healthcare providers with limited resources are seen struggling to meet this requirement.

This in turn is seen to provide growth opportunities for well-funded and -managed service providers in the coding compliance consulting market.

"SPi's acquisition of LMS is an excellent example of how we are executing on our strategic plan to accelerate growth and strengthen our position in the BPO arena," said ePLDT president Ray Espinosa.

Asia-America submarine cable network up by August, says PLDT

PHILIPPINE Long Distance Telephone Co. (PLDT) on Wednesday said the Asia-America Gateway submarine cable network in Northern Luzon would be operational in August this year to serve the rising demand for broadband bandwidth.

PLDT said the consortium has ensured that the quality of engineering and installation work of the 20,000 kilometers AAG submarine cable is not compromised despite challenges like bad weather.

The country’s biggest telecommunications firm said the construction of the Philippine Terminal Station in La Union, as well as the other terminal stations comprising the AAG cable project, has been completed.

The company’s first international submarine cable landing station is located in Nasugbu, Batangas.

The other terminal stations are located in Malaysia, Singapore, Thailand, Brunei, Vietnam, Hong Kong, Guam, Hawaii and US Mainland.

“All land cable installation works have been installed and majority of the submarine cable portion have been laid. [The] remaining submarine cable installation work is expected to be completed this month. Network testing is expected to begin immediately after the completion of the remaining submarine installation works,” PLDT said.

The project costs about $553.63 million, with PLDT committing $50 million for a 9.03-percent share in the venture. Including the Philippine cable landing station, PLDT’s total investment amounted to $62 million, which is financed through internally generated funds,”

The company’s investment in AAG was approved by the National Telecommunications Commission last year.

PLDT will be the new cable network’s landing party in the Philippines and this system will connect Malaysia, Singapore, Thailand, Brunei Darussalam, Vietnam, Hong Kong, the Philippines, Guam, Hawaii and California.

Fernando Sobierra 3rd, PLDT legal counsel, said the project is expected to meet the forecasted explosive growth in the bandwidth requirements of the country for new and revolutionary broadband applications such as Internet protocol, video, data and other multimedia services. It will also provide resiliency and diversity to the existing submarine cable systems.

Eric Alberto, PLDT’s customer sales and marketing group head, said that the AAG project will boost the company’s Internet and business-process outsourcing ventures.

“We expect in two years of at least one million subscribers,” he said.

2M broadband subscribers by yearend

The number of broadband users in the country is expected to reach the two-million mark by the end of the year, Catanduanes Representative Joseph Santiago said in a statement Sunday.

As of June 30, 2009, Philippine Long Distance Telephone Co. (PLDT) and subsidiary Smart Communications Inc. reported 1.2 million in combined broadband subscribers, while rival Globe Telecom Inc. reported 379,309 broadband users, said the chairman of the House committee on information and communications technology.

Santiago thus urged broadband service providers "to truthfully declare the true speeds of their Internet access services" and to avoid misleading advertisements in their bid to seize market share.

He cautioned service providers against "exaggerating" the speeds of their broadband offerings.

"They should be able to deliver minimum Internet connectivity at par with, if not superior to their advertised speeds," said Santiago, also former chief of the National Telecommunications Commission (NTC).

"It would be totally unfair, even highly deceptive, for them to aggressively promote their services by assuring this or that Internet access speed, only to fall short of their promise," Santiago said.

He said the NTC should see to it that consumers, including small businesses, are not being shortchanged by service providers, who should be able to guarantee a minimum Internet access speed all the time, regardless of the technology used.

Internet access speed is measured in data transfer rate, expressed in bits of data per second, or bps, from the web to a computer. Thus, Mbps stands for millions of bits per second or megabits per second.

At present, broadband service providers offer Internet access speeds of 1Mbps to 2Mbps (one million to two million bits per second) to individual subscribers, with others vowing faster speeds in return for more pricey monthly plans, particularly for corporate users or small shops.

As the name implies, broadband offers greater bandwidth (faster data transfer rate) over a telecommunications medium compared to a dial-up Internet connection.

In general, a high bandwidth Internet connection is one that is able to carry enough information to sustain the succession of images in a video presentation.

In other countries, Santiago said regulators have gone to the extent of establishing a minimum broadband standard, equal to a constant data transfer rate of at least 2Mbps. "So only those able to deliver the minimum access speed may call their service broadband," he pointed out.

Besides PLDT, Smart, and Globe, the other service providers actively enlisting broadband subscribers are Bayan Telecommunications Inc. and Digital Telecommunications Philippines Inc.

PLDT posts P20.8 billion profit in 6 months

Telecommunications giant Philippine Long Distance Telephone Company (PLDT) posted a consolidated core net income of P20.8 billion ($433 million), up 11 percent on year, in the first six months 2009, on back of increased revenues, company officials said today.

PLDT's consolidated net income grew 2 percent to P19.7 billion (about $410 million) in the first half of 2009.

PLDT officials reported that consolidated service revenues rose 4 percent on year to P72.9 billion (about $1.5 billion).

Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) are stable at P44.1 billion (about $920 million) while consolidated EBITDA margin is at 60 percent of service revenues. Consolidated free cash flow improves to P31.6 billion (about $660 million) for the first half of 2009.

The strong performance of the wireless service unit bolstered PLDT's revenues in the first half. Wireless service revenues increased five percent to P48.1 billion (about $1 billion) thanks to an expanding customer base.

PLDT's cellular subsidiaries, Smart Communications, Inc. (Smart) and Pilipino Telephone Corporation (Piltel) continue to dominate the market, thanks to aggressive marketing, continuous system improvement and offering of more affordable rates to its subscribers. The subscriber base for the first half of 2009 expanded by 16 percent to P38.5 million.

"We are very conscious of the need to adapt our service offerings to the needs of our subscribers and the economic conditions. We offer the best value at the lowest price," Napoleon Nazareno, President and CEO of PLDT and Smart, said in a statement.

SmartBro, the Smart's wireless broadband service -- through its wholly-owned subsidiary Smart Broadband, Inc. -- continued to expand as its wireless broadband subscriber base grew 26 percent to 689,000.

Wireless broadband revenues grew 30 percent to P2.6 billion (about $54 million) in the first half of 2009.

Fixed-line service revenues increased by 3 percent to P25.4 billion (about $530 million) on significant gains in data revenues, both from corporate data and residential services. E-PLDT, the group's information and communications technology arm, reported service revenues of P5.2 billion (about $108 million) in the first half of 2009, up 5 percent on year.

"While our first half performance remained robust, we are slightly concerned about what the second semester may bring the third quarter is traditionally the slowest one in the year and we worry that the adverse effects of the global economic crisis may have a lagged effect on our economy," PLDT Chairman Manuel V. Pangilinan said in a statement.

Despite these concerns, Pangilinan is optimistic that PLDT will continue to perform strongly for the rest of the year. He expects PLDT to post a core profit of P41 billion (about $854 million) for 2009.

"We are seeing some signs that consumers generally may be wary about spending or committing to spend. Nonetheless, I remain confident that we are up to the challenge. We have faced tough times before and come out a stronger and better company," he said.