(Bloomberg) -- Philippine Long Distance Telephone Co. will keep capital spending at a record level next year as the nation’s biggest carrier tries to fend off an aggressive domestic rival and prepares for the potential entry of Telstra Corp.
PLDT will allocate 43 billion pesos ($915 million) to expand and improve its network after allotting that amount this year, Chairman Manuel Pangilinan said in an interview in Manila. PLDT, heading for a third year of declining profit, may announce more changes in coming weeks after losing almost 3 million mobile-phone subscribers this year.
The company may appoint a chief executive for its digital operations and is reviewing whether to eliminate one of three mobile brands. PLDT started an overhaul in May, adding a chief strategy officer and chief technology adviser, after revenue fell for the first time in 13 quarters.
“To some degree, we fell into that trap of complacency because we were the incumbent,” Pangilinan said in the Nov. 18 interview. “So it’s a lesson for us.”
Pangilinan blamed himself for PLDT’s slow response to apps that allow free calls over the Internet. “I don’t pretend to be a digital native,” he said.
Globe Telecom Inc., a venture of Singapore Telecommunications Ltd. and Ayala Corp., was quicker to exploit that shift by bundling traditional services with free Facebook access in October 2013. It took more than a year for PLDT to counter with free mobile Internet access.
Adding to PLDT’s woes is Telstra, which is in talks with San Miguel Corp. for a Philippine venture, Telstra Chief Executive Officer Andy Penn said last month. Pangilinan said the recent challenges were his toughest since a 1998 takeover of the nation’s biggest phone company.
“The nature of the industry is changing and as we shift to digital from legacy, the margins are lower and the cost is higher,” Pangilinan said. “It’s a more complicated landscape.”
PLDT’s nine-month profit fell about 9 percent from a year earlier, while Globe’s jumped 34 percent. PLDT’s mobile-phone users as of Sept. 30 fell by 2 million from a year earlier to 67 million. Globe added 7.3 million in the same period for 50.1 million total.
PLDT wants to add more apps, including in finance and personal loans, while boosting content through products like iFlix, a video-streaming service.
PLDT handles about a third of the estimated 300 billion- peso domestic remittance business and is the largest enabler of the government’s 16 billion-peso conditional cash transfers to the poor, Pangilinan said. Its mobile-lending venture has extended 6 billion pesos in loans.
The carrier plans to trim expenses, contain debt at current levels and refinance part of its maturing obligations, Pangilinan said. PLDT has almost 60 billion pesos of debt due from 2016 through 2018, according to data compiled by Bloomberg. Its dividend payment, which in 2014 dropped to 90 percent of profit from 100 percent in 2007 to 2013, may further decline amid the challenges, he said.
“Sometimes it’s better to be the underdog, better to be the barbarians knocking at the gate, rather than being the gatekeepers themselves,” Pangilinan said.
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