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August 6, 2008

Philippine telecoms firms feel the pinch
Philippine Long Distance Telephone Co (PLDT) warned on Tuesday it still focus on meeting this year’s targets, while quarterly earnings at smaller rival Globe Telecoms slid on weaker consumer spending.

Revenues at telecom firms are expected to come under further pressure in the Philippines in the second half as consumers, feeling the pinch from higher fuel and food costs, cut mobile phone spending.

PLDT, the country’s dominant phone company and largest listed group, retained its outlook for a 5 percent increase in core earnings, which strip out currency and derivative gains, to 37 billion pesos ($839 million) this year. But slowing consumer demand made it less bullish.

“Already, we are seeing parts of our cash operating expenses rising and third quarter demand softening slightly -- albeit the third quarter being a seasonally low period,” Manuel Pangilinan, PLDT chairman said.

“Our sense is the full impact of accelerating inflation will be felt in the third quarter.”

PLDT, owned by Hong Kong’s First Pacific Co Ltd and Japan’s NTT and NTT DoCoMo, reported a 6 percent rise in second quarter core earnings to 9.36 billion pesos. PLD has a market value of $10.8 billion.

Rival Globe Telecom’s net profit fell 27 percent in the same period to 2.8 billion pesos.

“The impact of strong subscriber growth was offset by reduced usage and activity levels due to intensifying competition, increasing multi-SIM usage, and weaker consumer purchasing power with inflation,” Globe said in a statement.

The Philippines’ No.2 telecoms group said its weak first half results were also partly due to a high base last year when election-related spending boosted revenues and profits.

Ahead of the results, analysts had estimated PLDT’s 2008 full-year profit to rise 5.3 percent to 37.9 billion pesos and Globe’s profit to edge up 3 percent to 14 billion pesos, according to Reuters Estimates.

PLDT’s service revenues climbed 5 percent to 70.3 billion pesos in the first half. Nearly two-thirds of the revenues came from the wireless phone business.

PLDT announced an interim dividend of 70 pesos per common share, on track for a minimum dividend payment of about 70 percent of core earnings this year.
Globe announced a special cash dividend of 50 pesos per common share on top of its second semi-annual cash dividend of 37.50 pesos.

PLDT’s board of directors also approved a second share buyback programme of up to two million shares, equivalent to about 1.1 percent of its outstanding common shares.
PLDT’s stock lost 15 percent in the second quarter and Globe fell 22 percent versus an 18 percent drop in the main index.

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