Philippines Digital Expansion And 5G Adoption Will Unlock Value

Key Takeaways

• Strong growth in fiber broadband, 5G, and digital offerings positions PLDT for expanding revenues, especially among younger, tech-savvy customers.
  
• Strategic focus on enterprise solutions, fintech, and cost management diversifies earnings and improves profitability through enhanced cash flow and margin expansion.
  
• Regulatory risks, intense competition, high investment needs, legacy decline, and disruptive new entrants threaten PLDT's margins, revenue growth, and long-term financial stability.

Catalysts

About PLDT

Provides telecommunications and digital services in the Philippines.

What are the underlying business or industry changes driving this perspective?

• Continued rapid growth in fiber broadband adoption and 5G mobile data usage-supported by strong net fiber additions, increased 5G traffic (up 84% YoY), and new product innovations targeting younger and price-sensitive users-are expected to drive top-line revenue growth as digitalization and internet penetration accelerate in the Philippines.
  
• Resilient demand from a growing and increasingly tech-savvy young population, coupled with new targeted digital offerings (e.g., app-based mobile plans like KiQ and hyper-personalized bundles), positions PLDT to gradually expand its subscriber base and maintain/improve ARPU, supporting stable or rising revenues and improved customer retention.
  
• Ongoing expansion of PLDT's data center and advanced enterprise ICT solutions (especially AI, cloud, cybersecurity, and SD-WAN) directly taps into robust growth in digital financial services and rising enterprise demand for secure, high-quality connectivity-likely boosting enterprise revenues and margins over the medium-to-long term.
  
• Maya's recent and accelerating shift to profitability, with marked growth in deposits and lending (loans up 147% YoY), suggests that PLDT's fintech and digital financial services arm could become a material driver of earnings growth and margin expansion, diversifying revenue streams beyond traditional telco services.
  
• The company's asset monetization initiatives (legacy infrastructure, copper, 3G equipment), disciplined cost management (OpEx down 3% YoY), and strategic investments in AI-ready infrastructure are expected to further enhance free cash flow and net margins, leading to a strengthened balance sheet and better returns for shareholders.

PLDT Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming PLDT's revenue will grow by 3.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.6% today to 17.0% in 3 years time.
• Analysts expect earnings to reach ₱40.9 billion (and earnings per share of ₱180.39) by about August 2028, up from ₱32.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.7x on those 2028 earnings, up from 8.9x today. This future PE is greater than the current PE for the US Wireless Telecom industry at 10.4x.
• Analysts expect the number of shares outstanding to grow by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.93%, as per the Simply Wall St company report.

PLDT Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

• Heightened regulatory risk surrounds the pending Konektadong Pinoy Bill, which-if passed-could mandate open access to PLDT's existing network infrastructure, potentially without fair compensation or negotiation rights; this could deter future infrastructure investment and erode long-term revenue and net margin, especially if challengers free-ride on PLDT's capex.
  
• Intensifying price competition in both mobile and fiber segments is evident as ARPU (average revenue per user) remained flat or slightly down, and mobile individual segment revenue declined 1% despite innovations; prolonged pricing pressure or customer churn could compress EBITDA margins and depress overall earnings growth.
  
• Ongoing declines in legacy business lines (traditional voice, SMS, copper) continue to drag on enterprise and individual segment revenues, demonstrating difficulty in fully offsetting these trends via digital or fiber growth and risking longer-term stagnation or decline in topline revenue.
  
• Persistent high capex needs, including for 5G, fiber rollouts, AI data centers, and sustainability upgrades, are pressuring free cash flow (with net debt at ₱282.6 billion and a >2.5x net debt/EBITDA ratio), making PLDT vulnerable to rising interest rates, cost of capital, or unforeseen investment needs, which could negatively affect net income and dividend sustainability.
  
• Disruptive threats from new entrants and disruptive technology-particularly satellite providers possibly granted spectrum without local franchise obligations, and fintech upstarts bypassing telco banking rails-could erode PLDT's user base, lower ARPU, and reduce long-term earnings and market share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of ₱1709.583 for PLDT based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₱2070.0, and the most bearish reporting a price target of just ₱1400.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₱240.1 billion, earnings will come to ₱40.9 billion, and it would be trading on a PE ratio of 12.7x, assuming you use a discount rate of 11.9%.
  
• Given the current share price of ₱1310.0, the analyst price target of ₱1709.58 is 23.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.