PLDT to sell Meralco stake as profits fall again

Metro Manila (CNN Philippines) — PLDT, Inc. will sell its stake in the Manila Electric Co. (Meralco), in hopes of shoring up additional cash as profits continue to fall this year.

The country's largest carrier is already in talks with several investors both here and abroad for the sale of its 8.7% stake in Meralco, PLDT Chairman Manny Pangilinan said in a press conference on Tuesday.

"It is our intention to divest of this residual interest in the next few months. The timetable for the disposal will most likely be completed in the first half of 2017," he said.

Pangilinan estimates the purchase price could be "north of ₱26 billion," a sum he noted was "sizeable." It would likely interest a single large buyer or a consortium of smaller ones, he said.

This injection of funds will be much-needed as PLDT continued its profit decline.

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Its net income stood at ₱6.2 billion in the second quarter, down 33% from the same period in 2015, disclosures showed. In the first quarter, its net income also fell by a third year-on-year.

Profits were pulled down by PLDT's investment in Rocket Internet. The German startup incubator has seen share prices fall steeply this year.

At the start of 2016, Rocket Internet's shares were worth about 28 euros each; PLDT's investment in the firm was valued at ₱14.6 billion. By the mid-year though, shares were about 17 euros apiece, and PLDT's stake was worth ₱9.2 billion.

Pangilinan said, though, that PLDT wouldn't let go of Rocket Internet just yet, calling the company a "long-term hold."

For now, PLDT is tightening its belt. It slashed its dividend payouts to just 60% of core income — and further cuts weren't ruled out.

It previously paid as much as 100% of core income to shareholders. In the first quarter, it paid 75%.

"Given the circumstances, the most prudent payout is 60%." Pangilinan admitted. "Of course things could change for the better or not for the better."

PLDT is still paying off its ₱35-billion buyout of San Miguel's telco business. It plans to spend another ₱48 billion this year for extensive upgrades in its network so it can tap the newly acquired spectrum frequencies.

The acquisition of San Miguel's telco assets were meant to help turnaround PLDT's fortunes. But amid efforts by the Philippine Competition Commission to review the deal, there are fears the move won't pay off.

"How dead will we be if the transaction does not proceed? I think the company will survive," Pangilinan said.

PLDT currently has a case pending before the Court of Appeals to stop the competition watchdog from investigating the acquisition.