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Philippines' PLDT still 'outperform' after upbeat Q3 - Credit Suisse

MANILA (Thomson Financial) - Credit Suisse on Wednesday maintained its 'outperform' rating on Philippine Long Distance Telephone Co (PLDT) after it reported better-than-expected earnings for the third quarter.

PLDT, the country's biggest company by market value, is controlled by Hong Kong-listed conglomerate First Pacific Co Ltd and is also partly owned by NTT DoCoMo, Japan's largest mobile phone company.

"This confirms our view that PLDT should sustain good growth prospects, buoyed by the continued growth in the wireless business and the emergence of broadband as its next source of growth," said Edser Trinidad, analyst at Credit Suisse.

PLDT reported Tuesday a 13 percent increase in core profit to 9.1 billion pesos for the third quarter from a year earlier, reflecting gains in its cellphone business.

PLDT upgraded its full-year guidance to 34.5-35 billion pesos from 32 billion pesos previously.

"The growth on its wireless business continue to beat market expectations as PLDT has been able to generate healthy subscriber additions despite a historically weak quarter in terms of signing up new subscribers and the industry is also coming from a strong second quarter, which was boosted by election spending," said Trinidad.

He also cited the growing strength of PLDT's broadband business.

"The company has now achieved 92 percent of our full-year forecast of 545,000 new subscribers (with 501,000 subscribers as of end-September). Revenue from this business segment is now becoming material as it now accounts for 5.3 percent of total service revenue." In contrast, PLDT's fixed line business declined 1 percent, affected by a reduction in the basic monthly dues to the appreciation of the peso, said Trinidad.

Credit Suisse also cited PLDT's efforts to improve its flexibility in utilizing excess cash as it proposed on Tuesday to change some of its bond covenants to lift restrictions on the payment of dividends.

"This is a welcome move as this raises the possibility of higher dividend payouts in the future," it said. With PLDT's move, international credit rating agencies such as Standard & Poor's Rating Services, Fitch Ratings and Moody's Investors affirmed the company's foreign currency ratings with a stable outlook.

PLDT shares ended up 15 pesos or 0.5 percent at 3,045 pesos.

(1 US dollar = 43.39 pesos) rocel.felix@thomson.com rf/ms COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved.

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