S&P Global affirms PLDT ‘BBB’ rating, cites controlled capex

S&P GLOBAL RATINGS has affirmed PLDT Inc.’s “BBB” credit rating with a stable outlook, citing the company’s sustained and moderating capital intensity, which is expected to keep its operating and financial performance aligned with investment-grade standards.

“We affirmed our long-term issuer credit rating on PLDT at ‘BBB’ and our issue rating on the company’s senior unsecured notes at ‘BBB,’” S&P Global said in a report dated Dec. 2. A “BBB” rating indicates that PLDT has adequate capacity to meet its financial commitments but remains more subject to adverse economic conditions.

According to S&P Global, improvements in PLDT’s internal controls, particularly over capital expenditure (capex), have allowed the company to maintain spending in line with its budgets and under control. It added that the company’s capex is expected to continue declining over the next 24 months.

“We believe PLDT has adequately addressed material deficiencies in internal controls,” S&P Global said, noting that it is revising its assessment of the company’s management and governance score to neutral from moderately negative.

The previous assessment factored in cost-monitoring shortcomings, which led to a capex overrun in 2022 covering expenditures from 2019 to 2022. The overrun prompted PLDT to implement operational enhancements to its capex management policies, procedures, and controls.

“We believe these remedial measures are effective, as indicated by PLDT’s actual capex aligning with its budget over the past three years. The company also successfully delivered on its planned capex reduction over the same period,” S&P Global added. For 2025, PLDT reduced its capex to about P60 billion from the P70 billion target range, and it plans to lower the capex budget further next year.

For the third quarter, PLDT posted an attributable net income of P6.93 billion, down 28.26% from P9.66 billion in the same period last year, as higher expenses offset revenue growth. Revenues rose slightly to P53.71 billion from P53.36 billion, while expenses increased to P42.36 billion from P39.62 billion.

“PLDT’s sustained earnings growth and reducing capital intensity will keep its operating and financial performance commensurate with the ‘BBB’ rating. Earnings will rise mainly due to the fixed-line segment, especially in fixed broadband and enterprise revenues,” S&P Global said.

The ratings agency expects PLDT’s annual earnings in the fixed-line segment to expand between 5% and 7% through 2027, citing the company’s position to benefit from the country’s rapid fixed broadband adoption.

“While there could be potential revenue streams from network wholesale and increased flexibility in network expansion, such revenues may not fully offset the effect of more intense competition,” S&P Global noted.

It also flagged uncertainties from the Konektadong Pinoy Act, which aims to promote competition in data transmission and remove barriers to new entrants. 

“We may lower the rating if we believe PLDT’s competitiveness has deteriorated, leading to a decline in operating performance. We may also lower the rating if we believe the company will operate with a higher leverage tolerance over a sustained period,” S&P Global said.

At the local bourse on Wednesday, PLDT shares closed at P1,277 apiece, up P3 or 0.23%.

Hastings Holdings Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings Inc., holds a majority stake in BusinessWorld through the Philippine Star Group. — Ashley Erika O. Jose