PLDT: Pandemic, competition among factors behind budget overrun

PLDT Inc. on Thursday revealed several factors which led the company to incur an estimated P48 billion in capital expenditure (capex) overspending for a period of four years, citing government pressure to improve services, emerging competitions, and the COVID-19 lockdowns.

In a filing to the Philippine Stock Exchange, PLDT disclosed what transpired during its special briefing on December 21, where the company’s top management discussed with fund managers, investment analysts, and bankers the context behind the budget overspend issue.

In particular, the telco said its president and CEO Alfredo Panlilio told the attendees that “confluence of factors occurred,” within which the overspend was made.

The factors, according to Panlilio, include the following:

• PLDT having to regain network leadership following years of underinvestment in capex
• the threat from former President Rodrigo Duterte for telcos to shape up
• intense competition in the telco sector with the then anticipated entry of DITO funded by China Tel, as well as the emergence of a competitor in the fiber space, Converge

In July 2020, then-President Duterte called on public services providers, particularly telecommunications companies PLDT’s Smart Communications Inc. and Globe Telecom Inc., to improve their services before the end of that year or else have their properties expropriated. 

In March last year, new major player DITO - a consortium led by Dennis Uy’s Udenna Group and China Telecom - launched its commercial services. 

Likewise, in 2020, fiber internet and broadband services provider Converge ICT Solutions Inc. announced plans to expand its nationwide fiber backbone to boost services in Luzon, Visayas, and Mindanao. 

PLDT also cited “the occurrence of the COVID-19 pandemic and the resultant lockdowns and quarantines, which required the installation of speedy fiber connections in millions of households for work and school, pushed network teams to fast-track rollouts” as among the factors for the capex overspend.

“However, to the extent of the capex ordered, we plan to reduce fresh capex starting in 2023. Thereafter, we expect Capex to reduce steadily. 2023 will be a year of consolidation as we continue to strengthen and grow the business. We strive to be better,” said Panlilio.

For her part, PLDT chief legal counsel Atty. Marilyn Victorio-Aquino added that the negotiations with vendors are ongoing, while simultaneous reviews of network project monitoring and process flows are being undertaken with a view to improving them.

“Rest assured that we will provide additional disclosures in due course. What we want to avoid is premature disclosure, that could harm the public shareholders,” she said.

Last Friday, PLDT announced it was investigating an estimated P48-billion worth of capital expenditure overrun or unexpected incurred budget costs over the period of four years, which triggered a management reorganization within the company. 

PLDT said that from 2019 to 2022, it poured P379 billion in capital investments to meet its goals, particularly in improving customer service.

However, the telco said its capital spending “came at a price” as it incurred an estimated budget overrun of P48 billion, representing 12.7% of the total CAPEX spent over the four years.

The telco, nonetheless, said that its investigation has, so far, not uncovered any fraudulent transactions, procurement anomalies, or loss of assets arising from the capex overspend.  — RSJ, GMA Integrated News