Fitch upgrades PLDT after giving PH investment grade rating


Posted at Mar 29 2013 03:48 PM | Updated as of Mar 29 2013 11:48 PM

 MANILA -- Fitch Ratings has raised Philippine Long Distance Telephone Co.'s credit grade to 'BBB' from 'BBB-' with a stable outlook following assigning an investment-grade rating to the Philippines.

"PLDT's upgrade follows Fitch's upgrade of the Philippines' sovereign rating to ... 'BBB-' from 'BB+'," the debt watcher said.

The Philippines received its long-awaited first investment-grade rating on Wednesday, as Fitch lauded its strong economic growth and policy reforms put in place.

"The ratings reflect PLDT's dominant market shares with well over 60% in the wireless, fixed-line, and broadband segments at end-2012. The ratings also demonstrate the company's strong financial profile," Fitch continued.

Fitch warned that intense competition for subscribers in the Philippine telco industry is not expected to ease in the short to medium term, thus, resulting in thinning profit margins. 

Also, the credit rater said despite lower capital expenditures this year following the completion of network modernization efforts, the company's free cash flow is expected to remain low due to high dividend payout.

PLDT's rating may be hiked or downgraded following actions on the Philippines' credit rating, Fitch said. 

Moreover, the telco giant's credit rating may be downgraded if its funds flow from operations adjusted net leverage rises above 2.0x, Fitch added.