PLDT Inc. has so far reduced its P48-billion budget overrun by a third, after executing a settlement and mutual release program that cuts its outstanding purchase orders from vendors.
With the execution of the said program, PLDT was able to taper its capital expenditures (capex) overspend to P33 billion.
Marilyn Victorio Aquino, the company’s chief legal counsel, said the telco titan has completed the discussion with its major vendors, which represent 80 percent of the outstanding capex commitments as of end-December.
“That effort resulted in the company’s entry into Settlement and Mutual Release Agreements with its major vendors in March 2023. Those agreements have the effect of reducing the company’s outstanding commitments to these vendors for the acquisition of property and equipment post-2022 to approximately P33 billion, net of advances paid to these vendors,” she said.
Aquino noted that the company plans to engage in similar discussions with non-major vendors to achieve similar results.
“We have the entire 2023 to finish discussion with other vendors. The outcome will be reflected in the financials of 2023,” she said.
To recall, the company announced in the fourth quarter of 2022 that it incurred P48 billion in “budget overrun.” It has since conducted a forensics review of the transactions in question.
The review has been “substantially” completed.
“The review, which was conducted by external counsel with the assistance of accounting and audit consultants, focused on the period 2019-2022 and identified no evidence of fraud, intentional concealment, or bad faith conduct on the part of any employee of the company and no basis to restate the company’s historical financial statements,” she said.
The budget overrun was primarily driven by multiyear projects since 2019, Aquino said.
“It’s roughly because of the huge multiyear projects that we embarked into during that period 2019 to 2022,” she said.
As a result of the incident, PLDT officers that were in question had to take an indefinite leave of absence to give way to the forensics exam.
When asked when officers on leave will be asked to report back to their offices, PLDT Chairman Manuel V. Pangilinan said the company will announce their status “tomorrow (March 24).”
“We have been, for the past five or so months, trying to solve this issue of this capex. The persons in question are still on leave, I think tomorrow we will try to address the question of the status. Now that we put 80 percent of this issue, we will address those issues,” he said.
Financial results
The budget overrun had a huge effect on the company’s financial results. PLDT saw its profits plunging by 60 percent to P10.49 billion in 2022 from P26.37 billion the year prior, no thanks to the “accelerated depreciation” that it booked last year, referring to the capex issue.
Its telco core income, meanwhile, was 10 percent higher to P33.12 billion from P30.23 billion the year prior, as the company recorded a 6-percent rise in total revenues to P205.25 billion from P193.26 billion.
Individual service revenues accounted for the lion’s share of the revenue pie at P82 billion, which is 5 percent lower than the P86.2 billion.
The company’s home business, meanwhile, was its best performing segment at 20 percent revenue growth to P57.4 billion, followed by the enterprise vertical, which booked P47.5 billion in revenues.
International and carrier business remains the least performing of all the verticals, booking a 23-percent drop in revenues to P3.1 billion from P4.1 billion.
The telco group’s expenses ballooned by 38 percent to P210.75 billion from P152.50 billion, mainly driven by higher depreciation costs.
Pangilinan said he expects the capex overspend to continue to have an effect for the 2023 full year results of PLDT, but said this will have a smaller effect versus the year prior.
“There’s likely to be [an effect], but not at the same quantum that we saw in 2022. The level of outstanding commitments that we reduced from P48 billion to P33 billion. This is part of an overall clean up. These are writing down or writing off existing assets that are either obsolete or no longer in use,” he said.
These clean ups, Pangilinan noted, unveils “that the purchase orders we have now are those that PLDT really needs.”
For 2023, Pangilinan said the company expects service revenues to grow “in the mid single digit range.”
“We anticipate that we’ll have better guidance numbers by the time we announce first quarter results. It is likely to be better than the P33 billion reported, that is our sense. How much higher we can’t say with some level of precision,” he said.
The company also reduced its capex range for 2023 to P80 billion-P85 billion from P96 billion in 2022, as it starts to focus on freeing its cash flow.
It plans to raise as much has P19 billion in local financing to bankroll the capex, complemented by the gains that it will post from the sale of its tower assets.
Now that the dust has seemingly settled and the company has resolved 80 percent of its capex spend mess, Pangilinan said he feels relieved and is determined to show investors and the public that PLDT will remain to be healthy.
“We’re relieved that that is the case and it’s now incumbent upon the board and management to be back on the saddle and move forward and demonstrate that despite this big hump on the road, the financial and operating conditions of the company remain strong and robust. And I think we demonstrated that in 2022 numbers and incumbent upon us to sustain that performance.”
Pangilinan added that it is now his task to “recover whatever reputation we have lost as a consequence of this issue.”
