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PLDT: Cracks in the Armor, but Green Shoots Sprout

 



PLDT’s third-quarter filing paints a picture of resilience under pressure—a company holding its ground in a shifting telecom landscape, yet not without fault lines that investors should watch closely.

The Cracks:
First, the erosion of profitability is hard to ignore. Net income slid 11% year-on-year to ₱25.1 billion, weighed down by higher financing costs, a swing to foreign exchange losses, and thinner derivative gains. These non-operating headwinds shaved earnings despite steady service revenue growth. Telco core income—a key metric for dividend policy—fell 5%, signaling that payout sustainability could tighten if interest rates stay elevated.

Wireless, once PLDT’s crown jewel, is showing strain. Revenues dipped 3%, dragged by double-digit declines in voice (-10%) and SMS (-7%), as consumers flock to OTT apps. Even mobile broadband plunged 31%, underscoring the fading appeal of pocket WiFi. Subscriber churn is creeping up, and prepaid ARPU softened. These trends hint at structural challenges in monetizing legacy services.

Leverage is another sore spot. Net debt-to-equity ticked up to 2.40×, while interest coverage slipped to 3.37× from 3.96×. With capex still heavy at ₱52 billion, PLDT is walking a tightrope between network investment and balance sheet discipline.

The Green Shoots:
Yet, amid the cracks, growth shoots are visible. Fixed Line revenues climbed 5%, powered by Home broadband (+4%) and a stellar ICT surge (+21%)—a testament to PLDT’s pivot toward data centers, cybersecurity, and AI solutions. These high-margin businesses could become the company’s hedge against wireless stagnation.

EBITDA rose 3% to ₱82.8 billion, with margins steady at 52%, proving that operational efficiency is cushioning the blow from top-line softness. Operating cash flow jumped 11%, giving PLDT breathing room to fund expansion and dividends.

Strategic bets in digital platforms—Kayana and Maya Innovations—may not move the needle today, but they signal PLDT’s intent to play in fintech and enterprise tech ecosystems. If executed well, these could unlock new revenue streams beyond connectivity.

Do the Shoots Offset the Cracks?
Not yet. The green shoots are promising, but they remain seedlings compared to the deep roots of PLDT’s legacy business. Wireless erosion and rising finance costs are structural, not cyclical. For now, ICT growth and broadband gains are cushioning the fall, not reversing it. The next 12 months will test whether PLDT can accelerate its digital pivot fast enough to outrun the decline in traditional telco revenues.

Investors should monitor two metrics: ICT's contribution to EBITDA and the net debt trajectory. If ICT scales and leverage stabilize, PLDT’s story could shift from defensive to transformative. Until then, the cracks deserve as much attention as the sprouts.

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