Fitch Ratings-Singapore-08 June 2020: The leverage profiles of Philippine telecom operators Globe Telecom, Inc. (BBB-/Stable) and PLDT Inc. (BBB/Stable) are likely to converge, as operating cash flow continues to lag behind investment amid the coronavirus pandemic, says Fitch Ratings. We forecast leverage - measured by funds flow from operations (FFO) net leverage - to increase towards 2.8x for the next three years for both operators.

Fitch expects strategic execution to take centre stage amidst the pandemic challenges, as incumbent operators strive to boost revenues. Our projections envisage PLDT's revenue growing by a low- to mid-single-digit percentage in 2020 (2019: 3%), slightly ahead of Globe's low-single-digit rate decline (2019: 10% growth). We consider PLDT's broader service diversification and entrenched fixed-line position to be advantageous in mitigating revenue pressure in its wireless business, compared with Globe. However, the investments needed to support PLDT's expansion in mobile revenue and broadband installations are likely to moderate EBITDA growth and delay deleveraging.

Continued restrictions imposed by the government to curb the spread of the pandemic will delay infrastructure network rollout, including new competition from third mobile network operator, Dito Telecommunity. Domestic telecoms capex accounts for above 40% of total revenue, amongst the highest within Fitch's Asia-Pacific telecoms portfolio. Telecoms capex in the Philippines has grown rapidly at a CAGR of 33% between 2017 and 2019, against a slower revenue pace of 7%.

The report, "Spotlight: Globe Versus PLDT", is available on www.fitchratings.com or by clicking on the link in this media release.

Link to Fitch Ratings' Report(s): Spotlight: Globe Versus PLDT http://cdn.roxhillmedia.com/production/email/attachment/810001_820000/Fitch%20Ratings%20-%20Spotlight_%20Globe%20Versus%20PLDT%20-%2009%20June%202020.pdf

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Additional information is available on www.fitchratings.com

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