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Philippines' biggest telco's profit falls amid digital struggles

Philippine Long Distance Telephone Tuesday reported lower quarterly net profit and revenue as more subscribers abandoned texting and traditional phones in favour of smartphones with a wider range of online services.

April-June net profit fell five percent from a year earlier to 18.9 billion pesos ($414.2 million), as the country's largest telecommunications firm spent more on Internet infrastructure to replace an older system that now brings in less money.

"The rapid decline in our toll revenues continues to bear down heavily on our medium-term revenue growth, with the onslaught of the Internet causing adverse substitution," chairman Manuel Pangilinan told reporters.

The company is keeping its 35-billion-peso net profit target for the year, lower than the 37-billion-peso profit it posted last year.

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However, Pangilinan said full-year revenue could drop by as much as five billion pesos as the "legacy" fixed line business shrinks further.

April-June revenue dropped two percent to 81.2 billion pesos amid the continued decline in its fixed-line long distance service, the company said.

The digital shift will be a "soft spot" for the company in the next two years, Pangilinan warned.

"It will be tough as we transition, we have no choice but to hasten that transition," Pangilinan added.

While total data revenue rose 13 percent to 23 billion pesos, this growth was "not enough" to offset the decline in its old revenue sources, company president Napoleon Nazareno said.

The company will increase capital spending this year to a record 43 billion pesos, up four billion pesos from last year, to expand its 3G, 4G, and fibre Internet networks, he added.

Filipinos are among the world's most active Internet users, with a steady stream of social media posts and messages sent through data-powered chat applications, displacing traditional SMS and voice calling.

The company said it has 68.9 million mobile phone subscribers -- including 35 percent with smartphones that can access the Internet.

The share of smartphones in the mix is "moving up rapidly", Nazareno said.