Over the past four years (2019-2022), PLDT Inc and its subsidiary, Smart Communications Inc, embarked on a massive network transformation program and launched large multi-year Capex projects—which included lte and 5G rollout, ftth rollout, transport network transformation, fiber rebuild and fiber to the bts, submarine cable expansion, core network transformation and towers upgrade, amongst others. These multi-year investments were designed to regain and sustain network and technology leadership as well as provide the best customer experience.
We have successfully attained these goals as shown by:
- Smart’s network superiority over the last four years as validated by global benchmarking firms, ookla and opensignal
- Our fiber footprint of over 1,000,000 kilometers (including international fiber cable systems) and 16.78 million homes passed (as of 3q2022) is the widest and most extensive
- Smart has recovered 4% revenue market share—from 44% in 2019 to 48% at the start of 2022
- Home broadband revenues have risen from php 26.6 billion in 2018 to an estimated php47.78
- For the first 9 months of 2022, total telco industry revenues grew by php 17.4 billion, of which 46% were gained by PLDT. And in recent years, PLDThas gained a significant share of growth in total industry revenue despite the entry of new players.
- In the face of the pandemic, and especially at its height, PLDT and Smart continued its Capex spend, resulting in enhanced connectivity for our people, and better customer experience
While these substantial Capex investments were key to meeting PLDT’s goals, they came at a price—Capex investments for these four years aggregated php 379 billion, including an estimated budget overrun of no more than php 48 billion. We must stress that the maximum php 48 billion Capex budget overrun represents about 12.7% of total Capex spend over the period. This best estimate is subject to: (a) ongoing internal forensics mandated by the board and its audit committee and (b) discussions with principal vendors with a view to reconciliation of accounts and reduction of such budget overruns.
The investigation has, so far, not uncovered any fraudulent transactions, procurement anomalies, or loss of assets arising from the Capex Spend.
Our vendors continue to be committed to their partnership with PLDT and have expressed flexibility to work with our commercial requests involving reduction of outstanding work.
Insofar as the business is concerned, we emphasize that all three major revenue streams of PLDT—wireless, home, and enterprise— remain healthy and robust, with home and enterprise maintaining their respective market leadership. These 3 business units are unaffected by the Capex overrun referred to above. Ebitda for the full year 2022 is within guidance levels of php 100.0 billion, as is core income at between php 32.0 – 33.0 billion.
The first phase of towers sale of php 77.0 billion earlier this year has provided significant exceptional gains for PLDT. A further sale of towers are contemplated next year at similar pricing as the first sale, and will contribute additional exceptional gains to PLDT’s core income in 2023, these gains will also reduce the incremental depreciation expenses in PLDT’s financial accounts arising from the Capex overrun.
Capex for 2023 will continue to be elevated as the Capex overruns enter the financial statements this year and next, cushioned however by significant gains on tower sales. Capex levels are expected to be lower 2024 onwards.
PLDT is undertaking a management reorganization process and has initiated improvements on its processes and systems to address weaknesses that allowed such budget overruns to occur. A separate announcement will be made once the reorganization is implemented.