Analysts see mixed outlook for PHL ICT, telco firms

By Ashley Erika O. Jose, Reporter

PHILIPPINE telecommunications and information and communications technology (ICT) companies are expected to face challenges in the second half of the year due to increased competition and ongoing technological investments, but sustained demand for data services, lower borrowing costs, and the growth of adjacent services could help mitigate these challenges, according to analysts.

The growing digital landscape will continue to drive the demand for data and telco services, favoring companies in the telco and ICT industry, Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message to BusinessWorld on Tuesday.

“We expect the sector to generally do well and post better earnings for the second half on sustained demand for data, lower borrowing costs, and the growth of adjacent services like data centers and fintech services,” Chinabank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

However, the growing competition in the sector, followed by ongoing technological investments amid a challenging economic environment can limit companies’ earnings growth, Mr. Arce said.

“An expected pickup in business activity and consumption on the back of lower inflation, dovish monetary policy are broad tailwinds for the major telco and ICT companies,” Mr. Colet said.

Inflation rate slowed in August due to a moderate rise in food and a dropped in transport costs, the Philippine Statistics Authority (PSA) said.

Philippine inflation cooled to 3.3% in August from 4.4% in July, data from the PSA showed.

Most of the listed telco and ICT companies posted flat profits for the second quarter and the first half.

For instance, telco giant PLDT Inc. saw a 9% decrease in its attributable net income for the second quarter, dropping to P8.59 billion from last year’s P9.44 billion due to higher expenses for the period.

For the first half, PLDT registered an attributable net income of P18.41 billion, lower by 0.21% from P18.45 billion previously despite posting higher revenues for the first six months of the year.

Globe Telecom, Inc., on the other hand, managed to post an attributable net income of P7.74 billion for the second quarter, representing a 9.5% increase from the same period last year.

The Ayala-led telco company reported earnings of P14.55 billion for the first half, a slight increase of 1.6% from last year’s P14.32 billion.

Meanwhile, Converge ICT Solutions, Inc. registered an attributable net income of P2.74 billion, up 29.8% from P2.11 billion in the same period last year, its financial statement showed.

Despite posting increased gross expenses for the April-to-June period at P6.18 billion, 15.1% higher than P5.37 billion previously, the company managed to register higher earnings on elevated revenues.

For the first semester, Converge’s attributable net income climbed to P5.29 billion, marking an increase of 23.6% from P4.28 billion in the same period last year.

DITO CME Holdings, Inc. (DITO), the operator of  DITO Telecommunity Corp., widened its attributable net loss for the second quarter to P7.94 billion from last year’s P1.1 billion on higher expenses for the period.

“Overall, while there could be steady growth, earnings may not rise as dramatically as expected given the balancing act between operational costs and market demands,” Globalinks Securities’ Mr. Arce said.

He said the ongoing digital expansion of listed telco and ICT companies will offer revenue opportunities through broadband, mobile services, and ICT infrastructure development.

For its part, Converge has revised its revenue growth forecast for 2024 to between 12% and 14%, up from the earlier estimate of 7-8%, driven by market optimism after delivering stronger earnings in the second quarter.

Further, market watchers said previously that the plan of PLDT to sell at least 49% of its data center business is expected to improve the company’s data center operations and its financial position.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.