Fitch Ratings: PLDT's, Globe's Leverage Converging Amid Pandemic

(The following statement was released by the rating agency)
Fitch Ratings-Singapore-08 June 2020: The leverage profiles of Philippine
telecom operators Globe Telecom, Inc. (BBB-/Stable) and PLDT Inc. (BBB/Stable)
are likely to converge, as operating cash flow continues to lag behind
investment amid the coronavirus pandemic, says Fitch Ratings. We forecast
leverage - measured by funds flow from operations (FFO) net leverage - to
increase towards 2.8x for the next three years for both operators. Fitch
expects strategic execution to take centre stage amidst the pandemic
challenges, as incumbent operators strive to boost revenues. Our projections
envisage PLDT's revenue growing by a low- to mid-single-digit percentage in
2020 (2019: 3%), slightly ahead of Globe's low-single-digit rate decline
(2019: 10% growth). We consider PLDT's broader service diversification and
entrenched fixed-line position to be advantageous in mitigating revenue
pressure in its wireless business, compared with Globe. However, the
investments needed to support PLDT's expansion in mobile revenue and broadband
installations are likely to moderate EBITDA growth and delay deleveraging.
Continued restrictions imposed by the government to curb the spread of the
pandemic will delay infrastructure network rollout, including new competition
from third mobile network operator, Dito Telecommunity. Domestic telecoms
capex accounts for above 40% of total revenue, amongst the highest within
Fitch's Asia-Pacific telecoms portfolio. Telecoms capex in the Philippines has
grown rapidly at a CAGR of 33% between 2017 and 2019, against a slower revenue
pace of 7%. The report, "Spotlight: Globe Versus PLDT", is available on
www.fitchratings.com or by clicking on the link in this media release.
Contact: Janice Chong Director +65 6796 7241 Fitch Ratings Singapore Pte Ltd.
One Raffles Quay South Tower #22-11 Singapore 048583

Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email:
peter.hoflich@thefitchgroup.com
Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com

Additional information is available on www.fitchratings.com


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