PLDT rating stable as capex overruns tamed

PLDT rating stable as capex overruns tamed | Daily Tribune

PLDT Inc. has successfully curtailed the impact of past capital expenditure (capex) overruns, which boosted its financial position and reinforced its long-term “BBB” credit rating with a stable outlook.

In a report released Tuesday, S&P Global Ratings said the company has resolved earlier internal control deficiencies.

“We believe PLDT has adequately addressed material deficiencies in internal controls,” the ratings firm said, revising the company’s management and governance score to neutral from moderately negative.

Vendor obligations fell sharply

Notably, remaining vendor obligations fell sharply to P3.4 billion as of the end of September, down from P33 billion in March 2023, while related US class action claims were settled for $3 million on 17 September 2024.

“In response to the event, PLDT has implemented operational enhancements to its capex management policies, procedures, and controls,” S&P said.

These measures have helped the company align actual capex with its budget over the past three years, reducing spending to around P63 billion to P66 billion this year from P94 billion in 2022.

The improved capex discipline underpins PLDT’s earnings growth, particularly in its fixed-line segment.

“Earnings will rise mainly due to the fixed-line segment, especially in fixed broadband and enterprise revenues,” S&P said, projecting 5 percent–7 percent annual growth in fixed-line earnings through 2027,” said S&P.

“This growth, combined with lower capital intensity, is expected to strengthen discretionary cash flow, which S&P forecasts will turn positive in 2027 — the first time since 2018,” added the global ratings firm.

Leverage remains elevated

Despite these improvements, leverage remains elevated at about 3.0x debt-to-EBITDA in 2025 and 2026.

S&P noted that planned asset sales, including partial stakes in data centers and legacy copper assets, could accelerate deleveraging, though timing and structure remain uncertain.

Potential Konektadong

Pinoy Act challenges

PLDT also faces potential challenges from the Konektadong Pinoy Act, which promotes competition and infrastructure sharing in the Philippine telecom market.

“While there could be potential revenue streams from network wholesale and increased flexibility in network expansion, such revenues may not fully offset the effect of more intense competition,” S&P said.

The stable outlook reflects S&P’s view that rising earnings, along with improved governance and capex management, give PLDT a solid foundation to manage debt, though ratings could change if leverage or competitiveness shift significantly.