HONG KONG—Hong Kong-based First Pacific Co. Ltd. expects core earnings growth for its flagship domestic unit Philippine Long Distance Telephone Co. (PLDT) to recover in two years as strategies are being set in place to ensure profitability even as the company reshapes its media strategy moving forward.
Manuel V. Pangilinan, First Pacific chief executive officer and PLDT chairman, said core profits for the country’s biggest telecommunications company could return to P42 billion by 2014, matching its record earnings in 2010.
Core profit growth would kick in by 2013, when it is forecast to hit P39 billion, stemming declining profitability through 2012, when it expects to end with P37 billion in core net income.
“If you break down the business units of PLDT, fixed-line is doing very well. The BPO [business-process outsourcing] is doing well,” Pangilinan said in response to a query during the Earth’s Resources Conference organized by Standard Chartered Bank in Hong Kong.
He added that what continue to lag are wireless or mobile revenues, led by voice and SMS, due to the popularity of so-called unlimited offers started by Digital Telecommunications Inc. (Digitel) early in the previous decade.
PLDT acquired Digitel from the Gokongwei family in a massive P70-billion share-swap deal last year, giving it about 70 percent of the mobile market and leaving Ayala-led Globe Telecom with the remaining 30 percent.
PLDT media strategy
PLDT is also in the midst of negotiations with the families that own GMA Network Inc., one of the two largest broadcast networks in the Philippines. A deal could be completed within the year, Pangilinan said earlier.
The GMA acquisition would be PLDT’s second in the broadcast segment after buying the company that operates third-ranked broadcast firm TV5. It also owns stakes in two of the country’s biggest broadsheets and a radio station.
“Video content is quite important for a telco [telecommunication company]. So that decision has been made and we are very serious to enter into the media space [with] GMA 7,” Pangilinan said.
But more than boosting revenues, he added, expansion into media would help PLDT compete as the media telecommunications industry undergoes dynamic changes.
“The strategic choice was to stay at the telco level and become a full delivery system—a pure highway. But that’s not the long-term future of the telco business. It has got to get into other areas that will enhance the value of the telco other than the highway,” Pangilinan said.
He added that PLDT is moving into the so-called over the top space, noting that large technology companies like search engine operator Google and social-network web site Facebook will eventually acquire telecommunication firms.
“This will make a full-distribution utility obsolete,” Pangilinan said. He added that the strategy is yet to be completed but that it would involve closer relations with Silicon Valley in California, where many of the world’s biggest technology firms are located.
First Pacific expansion
Apart from PLDT, First Pacific owns significant or controlling stakes in some of the Philippines’s biggest companies or assets such as Manila Electric Co., North Luzon Expressway, Maynilad Water Services Inc. and hospitals such as Makati Medical Center and Asian Hospital through unit Metro Pacific Investments Corp.
In mining, it effectively controls Philex Mining Corp.
While 70 percent of its assets are in the Philippines (the remaining 30 percent are in Indonesia), Pangilinan said First Pacific continues to evaluate other acquisitions in the region.
According to him, possible investments could see First Pacific return to Thailand, where it used to own manufacturing firm Berli Jucker Public Co. Ltd. before its sale in 2001, as well as Vietnam and Myanmar.
“Personally, I’d like to go back to Thailand in some shape or form. Invest in something similar or even the telco space,” he said. “Vietnam is a country of opportunity. We bid for a bulk water system there and lost to [the Zobel family that owns Ayala Corp.].”
For Myanmar, Pangilinan said, the company has sent business teams to explore telecom, power and water-supply investments.
“It’s a new frontier. We are ready to go even in mining. But the legal framework, regulatory and even financial system has got to be set up in way to make it more amendable for foreigners to come in,” he added.