Moody’s keeps PLDT credit ratings

Credit rating firm Moody’s investors Service has maintained its investment grade rating for telecom giant Pldt inc. as well as its stable outlook for the company.

in a statement, the ratings firm said Pldt had a rating of Baa2, or a medium investment grade, with some speculative elements and moderate credit risk.

“the affirmation of Pldt’s rating reflects its leading market position and healthy margins, which, coupled with the management’s financial discipline, will keep the company’s leverage at around 2.6 times to 2.8 times over the next 12 to 18 months,” Annalisa di Chiara, Moody’s senior vice president and lead analyst for Pldt, said. “However, a commitment to shareholder returns and high capex levels will continue to strain the company’s free cash flow over the next one to two years.”

Pldt’s capital expenditures will remain elevated and said it will spend between P88 billion to P92 billion in 2021. this represents around 46 percent of Moody’s projected revenues, as the company continues to invest in expanding mobile capacity and coverage, fiberization of its network and the last mile rollout of home broadband services.

“As a result, Moody’s expects Pldt’s free cash flow will remain negative over the next 12 to 18 months, and the company will use debt to fund both capex and dividends, keeping its leverage in the 2.6 times to 2.8 times range. Still, this leverage level is appropriate for its Baa2 rating, given its defendable and leading market position as well as strong margins,” Moody’s said.

Pldt’s liquidity is good, the ratings firm said. As of end-2020, Pldt reported cash and cash equivalents of P40.2 billion, which, combined with projected cash flow from operations of P75 billion to P80 billion over the next 12 months, and available committed credit facilities, will be sufficient to cover current debt maturities, estimated capital spending and dividends over the same period.

Moody’s said it expects the company to remain proactive and prudent in managing its balance sheet and any upcoming maturities, particularly given its excellent access to the local bank and international bond markets. Pldt has a 49-percent share of mobile subscribers and over 50 percent share of market revenues at the end of 2020.

“While its competitive environment will intensify given the presence of another large player Globe telecom inc. and the entrance of a third mobile operator dito telecommunity, Moody’s does not expect a significant disruption to Pldt’s operations from dito’s entrance over the next 12-18 months,” it said.

“this is because it will still take some time for dito to build a comprehensive mobile coverage, expand its network and acquire a meaningful subscriber base.”