Dito's entry may hurt 40% of PLDT revenues, credit rater says

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Metro Manila (CNN Philippines, July 15) — The expected entry of Dito Telecommunity as a new mobile service provider could have a huge impact on PLDT Inc., with a global credit rater saying as much as 40 percent of brand revenues could be at risk by next year.

S&P Global Ratings said the new telecommunications service provider could shake up the mobile network scene, and will surely snatch customers away from the current giants.

"We expect the third licensed player Dito Telecommunity (formerly Mislatel) to compete on price on its slated market entry in the second quarter of 2020. Some loss of mobile subscribers for PLDT is inevitable, especially in the context of the Philippines' price-sensitive market," the debt watcher said in a statement on Monday.

"About 40 percent of PLDT's revenue will be exposed to this competition, as the third player will compete in the individual mobile space."

PLDT's consolidated service revenues totaled ₱39.6 billion in the first quarter, up five percent from a year ago largely from wireless network services. Net income settled at ₱6.7 billion during the first three months, down three percent year-on-year.

Last week, President Rodrigo Duterte awarded a Certificate of Public Convenience and Necessity to the Mindanao Islamic Telephone Co. consortium, now called Dito Telecommunity Corp. It is the last official permit they need to roll out mobile services in the Philippines. As he handed the certificate to businessman and campaign donor Dennis Uy, Duterte challenged the third player to break the existing duopoly of Smart Communications and Globe Telecom — one of the President's many promises in his previous State of the Nation Address.

READ: Duterte prefers 3rd telco to provide best service, reasonable price

S&P kept PLDT's credit score at "BBB+" — matching the recently-upgraded rating of the Philippine government — with the view that its business will remain buoyant over the next two years.

The international debt watcher said PLDT is set to keep its dominance over the fixed-line segment such as telephone and broadband lines, but will likely have to spend more and incur bigger debts to upgrade its services, particularly for converting to the fiber network. S&P added that a rating upgrade is unlikely, given the firm's elevated capital spending and as it faces increased competition.

In the wireless space, S&P sees PLDT remaining second to Globe but is enjoying a big boost from mobile revenues, with more smartphone users tapping their subsidiary Smart for data connection. The credit rater thinks bundling their network services will "provide continued value" to subscribers, which would preserve a "substantial" wireless market share for PLDT.

READ: PLDT-Smart, Globe welcome entry of 3rd telco player

From a target rollout this September, Dito Spokesperson Adel Tamano said commercial operations have been pushed back to the second quarter of 2020 as they fine-tune their offerings.

Dito has paid a ₱25.7 billion performance bond as it committed to provide internet service with a speed of 27 megabits per second (Mbps) to 37 percent of the population on its first year of operation. The Philippines has an average mobile internet download speed of 7 Mbps and an average upload speed of 2.2 Mbps, international analytics company Opensignal said in a report last May.