PLDT says fraud not to blame for its capex overrun

Philippines incumbent telco PLDT says it has cleared itself of wrongdoing in relation to its recent budget overrun after an internal investigation found found “no evidence of fraud, intentional concealment, or bad faith conduct” by anyone in the company.

According to a statement issued to the Philippine Stock Exchange and the Securities & Exchange Commission on Thursday, PLDT said its investigation – which covered activities from 2019 to 2022 – is “substantially complete”. It also said that there would be no need to restate PLDT’s historical financial results.

The statement follows revelations in December 2022 that PLDT – the Philippines’ largest phone company by market value – had overrun its capex budget by PHP 48 billion (almost $884 million). PLDT suspended four executives over the matter, pending the outcome of its investigation. They included the heads of finance, procurement and networks, and a fourth official responsible for directing the company toward certain equipment suppliers and vendors.

At the end of December, PLDT completed discussions with many of its vendors, representing 80% of the outstanding commitment as of 2022.

PLDT slashes overrun impact

In its statement announcing the investigation results, PLDT announced it had signed Settlement and Mutual Release Agreements with its major vendors earlier this month based on those December discussions. The agreements reduced the overrun to PHP 33 billion ($608 million).

According to a Bloomberg report, PLDT Chairman Manuel Pangilinan said that profit would have been “north of PHP 50 billion” without the depreciation cost, which is part of PLDT’s “overall cleanup.” Its telco core income, which excludes asset sales, rose 10% to PHP 33.1 billion. Pangilinan said he expects this year’s number to be higher than 2022.

However, the telco also saw its individual wireless segment lose 5%, as it reported a yearly decline in revenues from this segment to close at PHP 82 billion. PLDT credited that to inflation woes and competition from its rivals, especially in the last quarter of 2022.

Pending lawsuits?

While the capex budget overrun issue may be settled from the viewpoint of PLDT and its major vendors, its legal issues may not be over just yet. In a recent newsletter, Inquirer mentioned multiple class action suits against PLDT in the US by investors seeking compensation for their losses. The telco said that it is aware of the cases but has yet to be served with legal papers.

Meanwhile, PLDT corporate secretary Marilyn Victorio-Aquino said the telco has introduced reforms to prevent a recurrence of the overrun. According to her, these include improvements in budgeting and approval processes, project management systems, monitoring capital spending, and vendor process management.

PLDT President and CEO Alfredo Panlilio said, “We still have one of the highest EBITDA margins in the region – a good indicator of how well the core telco business is performing.”