Feb. 27--In its Asia-Pacific Telecoms Credit Outlook 2009, Fitch said revenues of Philippine Long Distance Telephone Co. (PLDT) are likely to remain stable at 4 percent this year. The ratings firm said this is based on the assumption that the economy, as measured by gross domestic product (GDP), would expand by only 2 percent.

The Philippine economic managers expect GDP to grow between 3.7 percent and 4.4 percent this year.

For 2008, Fitch expects PLDT to report a 4-percent increase in revenues compared with 2007.

Partly owned by Hong Kong's First Pacific Co. Ltd. and Japan's NTT group, PLDT expects revenues would have grown 5 percent to P142 billion last year. The company earlier reported a nine-month net income of P26.18 billion, up by 2 percent from the same period in 2007.

PLDT will report its 2008 financial performance on Tuesday next week.

For Globe, the Fitch estimated a 1.9-percent growth in revenues this year and a 1.1-percent contraction in 2008.

Last year, the Ayala-led telco reported a consolidated service revenues of P63.2 billion, lower by 0.51 percent year-on-year.

The company's net income was down by 15 percent to P11.3 billion last year from P13.3 billion in the previous year.

"The global nature of the current economic downturn suggests that slower corporate activity and rising unemployment will have a negative impact on usage levels and subscriber numbers, particularly for businesses, households and individuals," Fitch said. The credit rating agency warned that the impact of the current downturn is likely to be very different compared with previous recessions.

"In previous economic downturns, telecom operators proved to be relatively resilient, with growth and usage levels falling significantly slower than each country's economy, as measured by GDP growth," it added.

Fitch, however, said that PLDT and Globe are well positioned to weather the ongoing downturn, noting their dominant market positions and robust balance sheets.

"Both companies generate positive FCF [free cash flow], supported by moderate capital intensity, and consequently have limited external funding requirements," Fitch said.

PLDT and Globe are beneficiaries of a relatively inactive regulatory regime, which effectively favors the leading operators since it facilitates little change to the existing industry structure, it added.

With cellular growth becoming moderate, Fitch said telcos are exploring ways to improve their revenues such as offering consumer broadband.

For its part, PLDT has diversified into call center operations and business process outsourcing, which represents a significant shift from its core telecom operations.

"Broadband services are growing strongly off a small base and both PLDT and Globe are allocating a substantial portion of capex [capital expenditure] to widening broadband coverage," Fitch said.

The credit ratings agency added that both telcos are focusing more on wireless broadband rather than wired, given comparatively lower rollout costs and ease of deployment, particularly in outlying areas.

At end-September 2008, about 44 percent of PLDT's customers and 87 percent of Globe's customers were on digital subscribers line (DSL) while the balance are wireless subscribers.

Fitch expects PLDT to sustain spending at similar levels to 2008 or about $600 million while Globe announced that it would spend between $350 million and $400 million for capex this year.

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