MOBILE services operator Smart Communications Inc. will spend roughly P17 billion in capital investments next year to further expand and modernize its network.
Smart President and CEO Napoleon L. Nazareno told the BusinessMirror the amount will be mostly spent on projects to further increase the firm’s network capacity in terms of broadband and data.
“We are still finalizing our figures for the budget. But I think it’s about the same range as this year. It will be mostly spent on mobile data and broadband,” he said in a chance interview.
The wireless subsidiary of Philippine Long Distance Telephone Co. (PLDT) is spending roughly P17 billion this year in boosting its coverage, leveraging the capabilities of its newly modernized network and expanding its transmission network.
The amount is also being spent to increase international bandwidth capacity and expand its third generation (3G) and wireless broadband networks to enhance its data-transmission capabilities. Next year’s budget forms part of the P36-billion capital outlays that PLDT is planning to earmark to bankroll the group’s capacity expansion projects.
The local telco arm of Hong Kong-based First Pacific Co. will be spending 12.5 percent more in 2015 to “transition more into the digital space.”
However, global debt watcher Fitch Ratings advised PLDT and its competitor last week to brace themselves for lower margins next year, should they decide to increase their capital spending.
The credit-rating agency said the telco industry revenue will rise by a mid-single-digit rate next year, driven by fast-growing data services, which will more than offset stagnating voice and declining text and international revenue.
But profitability will also deteriorate as a lower-margin data service replaces higher-margin legacy services, including voice, text and international traffic.
It also warned the two firms that a higher budget could have a negative effect on the companies’ cash flow.
Fitch added that operating earnings before interest, taxes, depreciation, amortization and restructuring of the two listed companies are likely to narrow by 100 basis points to 150 basis points in 2015 to 47 percent and 44 percent, respectively, amid unlimited tariff offerings, cheaper data plans and higher handset subsidies.
The Pangilinan-led firm reported a core net profit of P28.6 billion, 1 percent lower than the P28.8 billion recorded in the same period in 2013 due mainly to the rise in cash operating expenses, particularly rent and maintenance costs, an increase in product subsidies and a higher provision for income tax.
In the same comparative periods, net income declined by 3 percent, to P28 billion, from P29 billion due to the dip in core net income, and the absence of the contribution from discontinued operations recorded in the said period.
PLDT is targeting to fully serve 100 percent of the population with its 3G network by the end of the year. It also aims to expand its LTE network to cover 50 percent of the country by year-end.