052907: Digitel to invest P12B for 2007 expansion

COMPANY TO USE INTERNAL CASH AND BORROWINGS TO FUND CAPEX

By Lenie Lectura

Reporter

GOKONGWEI-OWNED Digital Telecommunications Philippines Inc. has committed to invest $240 million, roughly P12 billion, this year to expand its wireless and wireline infrastructures. Of the amount, $40 million will go to fixedline and data businesses while Sun Cellular, the mobile brand of Digital Telecommunications, also known as Digitel, will eat up $200 million of the programmed capital expenditure (capex) this year. The company will use internal funds and borrowings to finance the expansion program this year. “There are ongoing talks for borrowing,” said Digitel senior vice president Tess Castillo. During yesterday’s annual general meeting, Digitel president Lance Gokongwei said Sun Cellular allocates P11 billion for additional network infrastructure every year. This will allow Sun Cellular to accommodate up to 10 million subscribers and increase the number of its cellular sites nationwide to 2,400 by the end of 2007. Sun Cellular chief executive officer Charles Lim said the phone firm has now signed up three million mobile phone subscribers from a little less than two million at end-2006. The company is targeting to hit more than four million subscribers by yearend but does not see a swing to profit until 2008 or 2009. “We are growing significantly now in both postpaid and prepaid segments. We now have three million cellular subscribers. We expect that our subscribers this year will grow to at least more than double from last year,” said Lim. Last year’s network expansion, Lim said has helped enhance the company’s capacity to handle more calls, text messaging, as well as data and multimedia services. “Last year, we did a lot of network improvement which we believe is what drives growth now for the company. We realize that a lot of our subscribers are into unlimited services. As a result Digitel changed its integrated network system, the core of its prepaid service. It also continued the rollout and expansion of its capacity so that by 2007, the company would be able to deliver uninterrupted service, Lim said. Sun Cellular handles up to 80 million text messages a day. Lim said the network could handle 7,500 messages per second. According to Lim, Sun Cellular is now ‘technically 3G capable.’ More than a year after Digitel’s cellular arm, Digitel Mobile Philippines Inc., was awarded a 3G (third generation) license in December 2005, the firm is now ready to offer 3G services. “Our 3G service is technically available now. We can actually do a soft launch in the second half of this year,” Lim said. Digitel is waiting for 3G-handset prices to go down to a level affordable to the mass market. A 3G handset now sells for at least P12,000. Digitel’s 3G investment is included in this year’s capex allotted for wireless network expansion. “We utilize it as necessary,” Lim said. “We expect to be Ebitda positive in the last quarter of the year,” said Lim. Originally, Sun Cellular wanted to break-even on Ebitda last year and to start registering profits by 2007. Parent Digitel suffered a net loss of P440 million in the first quarter of the year. The company was in the red from January to March mainly due to a stronger peso and an increase in expenses. Also, the higher use of cellular phones over landlines has hurt the company’s fixed-line business. “The decline is partly attributable to the impact of the continued appreciation of the peso, which affected revenues from international tolls and monthly recurring charges and accounts for about a quarter of the decline over last year’s revenues,” according to Digitel’s first quarter report. Also, the typhoons that hit the country in the last quarter of 2006, particularly in the Bicol region, continue to adversely impact monthly recurring and toll revenues. Digitel wireline head Policarpio Pau said the company will spend $40 million for its fixedline and data services. “The capex will go to our backbone transmission to extend our fiber optic reach. We are also spending for our wireless project,” he said.

 

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