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8/20/2019 TEL: Fitch Ratings commentary
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"PLOT~,
October 2,2015
Philippine Stock Exchange
3/F Philippine Stock Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City
Attention: Ms. Janet A. Encarnacion
Head. Disclosure Department
Gentlemen:
We submit herewith a copy of our letter dated October 2, 2015 to the Philippine Dealing and
Exchange Corp. in response to their letter dated October 2,2015 requesting for clarification and/or
confirmation of the news article entitled "PLOT loses A rating" published in the October 1, 2015
issue of Manila Standard Today.
Very truly yours,
f-1t~(MA. LOURD~SC. RAUSA-CHAN
Corporate Secretary Y
General Office P.O. Box 2148 Makali City, Philippines
PLD
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Attention: Mr. Vicente Graciano P. Felizmenio, Jr.
Director - Markets and Securities Regulation Dept.
SECURITIES & EXCHANGE COMMISSION
SEC Building, EDSA
Mandaluyong City
October 2,2015
Gentlemen:
Respectfully yours,
~~(MA. LOURDES C. RAUSA-CHAN
Corporate Secretary
General Office P.O. Box 2148 Makati City. Philippines
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COVER SHEET
S E C R e g i s tr a ti on N u m b e r
C o m p an y N a m e
Pr inc ipal Of f i ce (No. lSt reet lBarangay/C i ty lTown/Prov ince)
For m Type Depar tm ent r equ ir ing the r eport
[!ErE ~C O M P A N Y I NF O R M A TI O N
C o m p a n y' s E m a i l A d dr e ss C o m p a n y' s T e le p h o ne N u m b e r/ s
I I 816-8553
I I
Annua l M eet i ng
No. o f S tockho lder s MonthlDay
11,831 Every 2nd Tuesday
As of August 31, 2015 of June
S e c o n da r y L ic e n se T y p e, I f
Appl icable
rnJJ
M o b il e N u m b e r
F i sca l Year
M onth /Day
December 31
C O N T A CT P E R S O N I N F O R M AT IO N
T h e d e s ig n a te d c o n ta c t p e rs o n MUST be an O f f ice r o f t he Cor por a ti on
N a m e o f C o nt a ct P e r so n Em ai l Addr ess Te l ephone
Num ber / s
M ob i le Num ber
Atty. Ma. Lourdes C. Rausa-Chan I ~1__ lr_c_ha_n_@_p_ld_t_.c_o_m_._p_h_1~1__ 8_1_6-_8_5_5_3 __ 1 I ~ _
Contact Person's Address
9/F MGO Building, Legaspi cor. Dela Rosa Streets, Makati City
Note: In case of death, resignat ion or cessat ion of of fi ce of the off icer designated as contact p erson, such incident shal l be repor ted to the Comm ission wi thin
thi r ty (30) calendar days f rom the occurrence thereof wi th infonmat ion and complete contact detai ls of the new contact person designated.
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SECURITIES AND EXCHANGE COMMISSION
CURRENT REPORT UNDER SECTION 17OF THE SECURITIES REGULATION CODE
AND SRC RULE 17.1
1. October 2, 2015
Date of Report (Date of earliest event reported)
2. SEC Identification Number PW-55
3. BIR Tax Identification No. 000-488-793
4. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
Exact name of issuer as specified in its charter
5. PHILIPPINES
Province, country or other jurisdiction
of Incorporation
6. (SEC Use Only)
Industry Classification Code
7. Ramon Cojuangco Building, Makati Avenue, Makati City
Address of principal office
1200
Postal Code
8. (632) 816-8553
Issuer's telephone number, including area code
9. Not ApplicableFormer name or former address, if changed since last report
10. Securities registered pursuant to Sections 8 and 12 of the Securities Regulation Code and
Sections 4 and 8 of the Revised Securities Act
Title of Each Class Number of Shares of Common Stock
Outstanding and Amount of Debt Outstanding
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11. Item 9 (Other Events)
Attached hereto is a copy of our letter to the Philippine Dealing and Exchange Corp. in responseto their letter dated October 2, 2015 requesting for clarification and/or confirmation of the news
article entitled "PLOT loses A rating" published in the October 1, 2015 issue of Manila Standard
Today.
Pursuant to the requirements of the Securities Regulations Code, PLOT has duly caused this
Report to be signed on its behalf by the undersigned hereunto duly authorized.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
By:
H~(MA. LOURDES C. RAUSA-CHAN
Corporate Secretary
October 2, 2015
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Attention: Ms. Vina Vanessa S. Salonga
Head - Issuer Compliance and Disclosure Department
Philippine Dealing and Exchange Corp.
37/F Tower 1, The Enterprise Center
6766 Ayala Avenue corner Paseo de Roxas
Makati City
October 2,2015
Gentlemen:
General Office P.O. Box 2148 Makati City, Philippines
Respectfully yours,
We refer to your letter dated October 2, 2015 requesting for,,-confirmationof the/veracity of the
news article entitled "PLDT loses A rating" PUbl.ished.>tt{ ..e oC7ober ( 201B'issue' of 'Mahila
Standard Today. The article reported in partthat: / _ / / / /
"Fitch Ratings has downgraded the crecjWfiitings o f P9Wppi!}e Lon!?,;Dista'}.ceTelephone
Co. after the telecom firm allocated pi!gher caPi~eX/ditu/foL15. /
PLOT's long-term local currency default rating was Ieau/to B B B ", fr/~" Attached is a copy of the Ratings ActioJ COlmmentary.Jlom~"FitChl~Ch we received ana posted
on PLOT's webs;te yesterday. : .
. _1_ 1~
~~
MA. LOURDES C. R~U~.CHAN
Corporate secretaryy
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Corporates
RACTemplate FitchRatings
Fitch Downgrades PLDT's LC IDR To 'BBB+'; Affirms FC at 'BBB'
Fitch Ratings, Singapore, 0 I October 2015: Fitch Ratings has downgraded Philippine Long
Distance Telephone Company's (PLDT) Long-Term Local-Currency Issuer Default Rating
(IDR) (LC IDR) to 'BBB+' from 'A-'. The agency has simultaneously affirmed PLDT's Long-
term Foreign-Currency IDR (FC IDR) and its foreign-currency senior unsecured rating at
'BBB'. Fitch has also affirmed the National Rating at AAA(phl). The Outlook on the issuer
ratings is Stable.
A full list of rating actions is at the end of this Rating Action Commentary.
The downgrade on the LC IDR reflects our expeqtation of a further deterioration in PLDT'sfunds flow from operation (FFO)-adjusted net leverage to 2.5x in 2015-2017 (2014: 1.9x) due
to significant capex expansion. However, the FC IDR remained at 'BBB' and it continues to be
capped at the Philippines' Country Ceiling, reflecting the additional risks associated with
transfer and convertibility of foreign currency.
KEY RATING DRIVERS
Increased Investment: PLDT's expansion in 3G/4G is likely to push the capex/revenue ratio to
25% in 2015-2016, from 20% in 2014. However, we expect capex to normalise to 20% of
revenue after 2016. In addition, PLDT has earmarked USDIOOm for digital acquisitions in
2015; of which USD20m hasalready been invested in internet TV service provider iflix and
online payment solution company Paywhere.' ':l"
I;,
Earnings Under Pressure: Fitch forecasts operating EBITDAR to weaken to about PHP77bn
(2014: PHP80bn) in 2015 due to flat revenue and continued pressure on margins. Furthermore,
the changing revenue mix and the build-out of the digital business are likely to erode operating
EBITDAR margin to 44%-45% (2014: 46.6%). Our forecast assumes losses in the digital
business over the next three years.
FC:;FDeficit: Fitch believes the company's free cash flow (FCF) will stay negative in the next
two years due to large capex. This is despite management plans to reduce special dividends to
conserve cash flows. Our forecasts assume dividend payment of around 80%-85% of core
profits; the company's stated dividend policy is to payout at least 75% of its core profit.
Continued Market Leadership: We expect PLDT to sustain its leading position in the
Philippine telecommunications market, although Telstra Corporation Limited's (A/Stable)
impending entry with San Miguel Corporation will ,iltensify competition over the longer term.
Large cash burn for the new entrant is likely in the initial period as it faces significant capital
investment to build its network in the absence of infrastructure sharing.
LIQUIDITYStrong Liquidity: PLDT's liquidity remains 'solid, with cash balance' of PHP3 7.2bn at end-June
2015 sufficient to cover its PHPI6.7bn short-term obligations maturing over the next 12
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Corporates
RACTemplate FitchRatings
months. Its debt maturities are well spread out with over 60% of total debt due after 2017. In
addition, we believe PLDT has strong access to local banks and the retail bond market, givenits solid financial and leading market position in the Philippines.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for PLDT include:
- Flat revenue in 2015, and to grow by low single-digit percentages thereafter
- Operating EBITDAR margin of 44%-45% in 2015-2017
_ Capex/revenue ratio of 25% in 2015-2016, and to decline to 20%-21% in 2017
- USD 100m earmarked for new acquisitions
- Dividend payout ratio of 80%-85% of core profit.
RATING SENSITIVITIESPositive: Future developments that may, individually or collectively, lead to positive rating
action include: _ PLDT's Long-Term Local-Currency !DR (LT LC !DR) could be upgraded if FFO-adjusted
net leverage falls below 2.0x and FCF are positive on a sustained basis.
_ PLDT's Long-Term Foreign-Currency lOR (LT FC !DR) could be upgraded if there is a
positive rating action on the Philippines' Country Ceiling.
Negative: Future developments that may, individually or collectively, lead to negative rating
action include:~ PLDT's LT LC IDR could be lowered if FFO-adjusted net leverage rises above 3.0x on a
sustained basis. _ A negative rating action on the Philippines' Country Ceiling will result in a corresponding
action on PLDT's LT FC !DR.
FULL LIST OF RATING ACTIONS
Philippine Long Distance Telephone Company
Long-Term Foreign-Currency lOR affirmed at 'BBB'; Outlook Stable
Long-Term Local-Currency IDR downgraded to 'BBB+' from 'A-'; Outlook Stable
Foreign-currency senior unsecured rating affirmed at 'BBB'
Long-Term National Rating affirmed at 'AAA(phl)'; Outlook Stable "
Contact:
Primary Analyst
Janice Chong
Director
+65 6796 7241
Fitch Ratings Singapore Pte. Ltd.
6 Temasek Boulevard
#35-03/04/05 Suntec Tower Four
Singapore 038986
Secondary Analyst
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Corporates
RAC Temp late FitchRatings
Nitin Soni
Director +6567967235
Committee Chairperson
.Steve Durose
Managing Director
+61 2 8256 0307
Additional information is available on www.fitchratings.com.
Note to editors: Fitch's National ratings provide i t relative measure of creditworthiness for rated
entities in countries with relatively low international sovereign ratings and where .there is
demand for such ratings. The best risk within a country is rated 'AAA' and other credits are
rated only relative to this risk. National ratings are designed for use mainly by local investors
in local markets and are signified by the addition of an identifier for the country concerned,
such as 'AAA(phl)' for National ratings in the Philippines. Specific letter grades are not
therefore internationally comparable.
http://www.fitchratings.com./http://www.fitchratings.com./