PLDT cut its dividend to fund the data pivot and earned its way past crisis profits

PLDT entered 2016 as the Philippines' dominant telecom but with its cash engine leaking: Facebook, Viber and cheap text bundles were dismantling the SMS and voice duopoly economics, and Globe Telecom was competing hard on data. Consolidated net income fell from Php34.1bn in 2014 to Php22.1bn in 2015 and Php20.2bn in 2016. In the fixed-line business alone, voice revenue slid from Php32.4bn in 2014 to Php29.6bn in 2016 while data rose to 55% of segment revenue — the mix had flipped, and the old profit pool was not coming back.

On August 2, 2016 the board amended the dividend policy, cutting the regular payout to 60% of core EPS from 75%, explicitly because of elevated capex for the data-network build-out and lower Adjusted EBITDA — in effect asking shareholders to fund the pivot. The company poured capex into 4G, an all-IP fixed network and FTTH, and pruned non-core assets such as the SPi CRM sale. The transition cost showed in 2017: net income bottomed at Php13.5bn after Php3.9bn of asset impairments and Php2.6bn of investment write-downs.

The rebuild then compounded: net income recovered to Php19.0bn in 2018 and Php22.8bn in 2019 — above the 2016 level — on data-centric revenues, while the dividend cut permanently funded the fiber-and-4G build that kept PLDT competitive with Globe.

Net income bottomed at Php13.5bn in 2017, then recovered to Php22.8bn by 2019 — above the pre-crisis 2016 level of Php20.2bn.

The revenue mix had irreversibly flipped to data — fixed-line data was already 55% of segment revenue — so defending legacy voice margins would have financed a shrinking pool.

Cutting the payout to 60% of core EPS moved the funding burden to shareholders instead of new debt, protecting the balance sheet during peak capex.

Management accepted a visible profit trough (2017) rather than smoothing earnings through under-investment, which preserved the network’s competitiveness.

Divesting non-core units such as SPi CRM concentrated scarce capex on the data network instead of peripheral businesses.

When the core cash engine is being unbundled by technology, shareholders must fund the pivot: PLDT traded a quarter of its payout ratio for network capex and re-earned the profit later.

PLDT’s data network became the platform for its next decade: the 2017 trough proved to be the last year of falling profit, and by 2019 net income had passed its pre-pivot level. The dividend policy set in 2016 remained the framework through the pandemic, and the tower portfolio built for the pivot was later monetized in the 2021–22 sale-and-leaseback of 5,907 towers — a liquidity move that only made sense once the network was already rebuilt.