Philippine Stock Market Research

PLDT, Inc.:  From Core Holding to Recovery Play

March 20, 2017


TEL has been having an unpleasant time.  Its net income was in the PHP30 bn level before it dropped to the low PHP20 bn level in 2015 and 2016.  This was due to stiff competition from GLO which captured a chunk of their mobile subscriber base.  Retained earnings have been eroding in the last eight years until it briefly hit a deficit in 9M16.  TEL’s high cash dividend yield of 5+% likewise tumbled to almost 4% this year on low pay-out.

From a core-holding, TEL is now a recovery play.  Its cash dividend yield still shields investors against inflation.  This is important as this is TEL’s main shareholders’ return.  Share price appreciation though is possible especially with TEL’s new Digital Push and approach.  It acknowledges the fact that mobile telecom is saturated and is plagued by decreasing ARPU.

TEL now has a three-year plan is to bring LTE coverage of 70% of the population in 2017 and 95% of the cities and municipalities in 2018.  Fiber-to-the-home deployment already covers 2.8 mn homes in 2016.  This is targeted to grow to 4.4 mn homes in 2017 and 6 mn homes in 2020.

TEL still has the biggest overall subscriber base which includes mobile, fixed line and broadband subscribers.  It can easily benefit from the fruition of its plans.  TEL’s 2017 guidance and targets are conservative enough to be attainable, but what is important  for the stock is for it to benefit from its digital network as communications and inforamtion technology evolves.


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