Monday, 5 April 2010

Smart allots P16.4 billion for capex

Lenie Lectura
Business Mirror

SMART Communications Inc. has programmed P16.4 billion for capital expenditures (capex) this year, 3.8-percent higher than last year’s P15.8 billion.  

The cellular firm said capital spending this year will be focused on expanding and upgrading the company’s transmission network facilities to meet increased demand for cellular and broadband services.

Smart’s capex forms part of its parent firm’s P28.6-billion allotment for spending this year. The budget of the Philippine Long Distance Telephone Co. (PLDT) for consolidated capex requirements is approximately P28.6 billion. Of this amount, approximately P16.4 billion is allocated to Smart, about P10.8 billion to PLDT and the remaining amount is for the phone giant’s other subsidiaries.

Smart reported that due to its access to PLDT’s network assets, the cellular firm has been able to achieve significant capex than its current competitors. This, it said, translates to an improved ability to price competitively and target the mass market subscriber base, while retaining profitability. Based on existing equipment purchase contracts, Smart expects incremental capex per net additional subscriber to amount to less than $50.

“For 2010, we expect that cash from operations should enable us to increase the level of our capex for the continued expansion and upgrade of our network infrastructure. We expect to make additional investments in our core facilities to maximize existing technologies and increase capacity to accommodate expected continued increases in call volumes as a result of unlimited voice offerings and other promotions,” PLDT said.  

The phone giant said capital spending may be adjusted depending on “future strategic initiatives.

“We may be required to finance a portion of our future capital expenditures from external financing sources, which have not yet been fully arranged. There can be no assurance that financing for new projects will be available on terms acceptable to us or at all. If we cannot complete our development programs and other capital projects, our growth, results of operations and financial condition could be materially and adversely affected,” PLDT reported.

The cellular business faces challenges given the high market penetration, the increasing preference for unlimited offers and multiple SIM ownership, as well as competition from social networking and broadband.

The PLDT Group’s total cellular subscriber base for 2009 grew to 41.3 million subscribers, a 17-percent growth year-on-year. Smart added 6.1 million subscribers, compared with 5.2 million in 2008. Smart Buddy recorded net additions of over 1.6 million subscribers in the fourth quarter of 2009 to end the year with 24.2 million subscribers while Talk ‘N Text added approximately 500,000 subscribers to end 2009 with 17.1 million subscribers.

A large part of the PLDT Group’s total revenues is currently derived from cellular services. Wireless service revenues rose to P95.8 billion in 2009, 2-percent higher than the P93.6 billion reported in 2008.

The cellular penetration rate is estimated to have reached about 83 percent, counting multiple SIM card ownership.

“The growth of the cellular communications market depends on many factors beyond our control, including the continued introduction of new and enhanced cellular devices, the price levels of cellular handsets, consumer preferences and amount of disposable income of existing and potential subscribers. Any economic, technological or other developments resulting in a reduction in demand for cellular services may harm our business,” PLDT said.  

Smart continues to invest in its cellular and multi-platform broadband networks while upgrading its existing transmission, core and access facilities.

Smart’s 3G (third generation) mobile services and high-speed packet access networks now cover 50 and 44 percent of the country’s population, respectively.

The 3G network revolutionizes mobile technology by providing more capacity, faster data rates and richer data and video applications. Smart has been deploying its 3G network in urban areas where there is a demand for mobile broadband applications and where 3G mobile units are more likely to be available. Spectrum constraints, said the cellular firm, will not affect Smart’s expansion plans for GSM (global system for mobile communications) in the future.

Smart was awarded a 3G license by the NTC in 2005 and received the largest radio frequency allocation of 15 megahertz (MHz). Smart chose the 1920-1935 MHz and 2110-2125 MHz spectrum, the range that would best enable it to rapidly deploy its 3G network nationwide and at the same time offer the highest quality of 3G service.

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