PLDT faces securities probe after $866M 'budget overrun'

Shares in PLDT, the largest Philippines telco, dived 19% Monday after the company acknowledged a 48 billion Philippine pesos (US$866 million) capex "overrun" it could not account for.

It also faces an investigation into possible insider trading after a week of stock sell-offs ahead of the disclosure at the end of trading Friday.

The operator, formerly known as Philippine Long Distance Telephone Company, revealed that its "best estimate" was the missing funds represented 12.7% of PHP379 billion ($6.8 billion) in capital spending over the past four years.

Figure 1: Stock in Philippines biggest telco dumped after disclosing undocumented capex spending over four years.
(Source: Phil Harvey/Alamy Stock Photo)

Several senior executives have been suspended over the unreported spending, chairman Manny Pangilinan told a local newspaper without elaborating.

The company announced on December 15 that it had appointed a new group controller a month earlier. It will have a new CTO and senior vice president starting on January 1.

PLDT's stock on the Philippines exchange plunged 19.35% on Monday in the wake of the disclosure. As of 10:50 AM ET on the NYSE, PLDT's stock was down $5.54 (20.66%) to $21.27.

But the stock had already contracted nearly 15% in the previous five days, catching the attention of the local Securities Exchange Commission (SEC).

The SEC said it had begun an inquiry into the reported budget overruns as well as the selloff in shares prior to the official disclosure. These were "areas of concern," it said.

Unexplained spending

It has called for a report from the stock exchange's independent audit arm on PLDT stock trades that had "resulted in the sudden and sharp decline" in the share price before the overruns disclosure.

Pangilinan said PLDT initially had uncovered PHP130 billion ($2.3 billion) in undocumented purchases but had reduced that to PHP48 billion ($866 million) following discussions with its main vendors and through "ongoing internal forensics."

PLDT is one of the Philippines' largest companies and the parent of mobile operator Smart Communications, one of the Philippines two big mobile players. It counts the NTT Group and Hong Kong-listed First Pacific among its main shareholders.

It said in its filing that it had not uncovered any fraud or procurement anomalies in its capex program.

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The budget overrun would not impact its 2022 full-year result, with ebitda guidance remaining at PHP100 billion ($1.8 billion) and core income at PHP32-PHP33 billion ($577-$595 million), it said.

"Capex for 2023 will continue to be elevated as the capex overruns enter the financial statements this year and next," it said, adding that these would be cushioned by its gains from PHP77 billion ($1.4 billion) in tower sales earlier this year.

The company said it was reorganizing its management and carrying out improvements in processes and systems to "address weakness that allowed such budget overruns to occur."

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— Robert Clark, contributing editor, special to Light Reading