S&P sees more financial flexibility, modest rating headroom for PLDT after tower sale

By Arjay L. Balinbin, Senior Reporter

PLDT, Inc.’s sale of its telecom towers could result in increased financial flexibility and modest rating headroom, S&P Global Ratings said on Thursday.

“The company will likely gain financial flexibility and modest rating headroom. That’s because the P77 billion in sales proceeds will more than offset PLDT’s estimated incremental lease liability of P27.5 billion, as well as special dividends of up to P9 billion that it intends to pay following the transaction,” S&P said in an e-mailed statement.

Regina Capital Development Corp. Equity Analyst Anna Corenne M. Agravio said this means that with the increased liquidity from the sale, PLDT will have “more room to take on debt without compromising their gearing ratios.”

“There is no need for additional cash flows,” she said in a phone message.

At the same time, S&P said PLDT’s sale of its 5,907 telecom towers to the subsidiaries of international telecommunications infrastructure services companies edotco Group and EdgePoint “will not materially hurt its competitive advantage.”

“PLDT considers the towers being sold as nonstrategic, and they account for about half of the towers that the company owns. We expect service level agreements made with the experienced tower buyers to preserve PLDT’s network quality,” it added.

The debt watcher noted that PLDT retained the ownership of active infrastructure as the transaction only covers passive infrastructure.

Of the nearly 6,000 towers, 2,973 will be acquired by ISOC edotco Towers, Inc., a subsidiary of edotco Group, and 2,934 towers by Comworks Infratech Corp., a subsidiary of EdgePoint.

“Based on the company’s estimate of the incremental lease liability, we now project PLDT’s debt-to-EBITDA ratio will improve to 2.0x-2.3x over the next 24 months,” S&P said.

“We had previously expected the ratio would remain close to the company’s downside rating trigger of 2.5x over the same period. This improvement should help PLDT better tolerate downside risk of competitive pressure and high capex necessary to enhance its network quality and connectivity, at the current rating level,” it added.

S&P added that this tower sale may not be the last of its kind in the country.

“In our view, the trend is mainly borne out of the need for an impending capex wave to roll out 5G networks.”

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.