An infrastructure-oriented thinktank said that telecommunications companies can well absorb the impact of non-expiring prepaid load as envisioned in Senate Bill No. 365, or the proposed “Prepaid Load Forever Act.”
“We have reviewed the 2019 financials of the country’s leading telcos: They can absorb the impact of non-expiring prepaid loads, while maintaining the existing setup with customers. Kaya wag kayong mag-inarte dyan.”
This was the statement of Terry Ridon, Infrawatch PH convenor, in reaction to the opposition of Globe and Smart to legislation proposed by Senator Sherwin Gatchalian.
Substantiate carrying costs
Ridon, who was a member of the House ICT committee, said that before objecting to the bill, telcos should first show whether their carrying costs directly relate to the practice of expiring pre-paid load.
“Telcos are incorrect when they raise the issue of carrying costs in seeking a different treatment from gift certificate providers. Both have carrying costs, as retail stores maintain warehouses while telcos maintain equipment. But retail stores have been compelled to honor gift certificates without expiry dates while telcos have been granted a one-year expiry period for prepaid load. How can they now make a case based on carrying costs?”
Ridon said without substantiation, there is no real reason for telcos to oppose the non-expiry of prepaid load.
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Massive financials can absorb non-expiring prepaid load
“More importantly, telcos have massive year-to-year free cash flow and EBITDA (Earnings before interest, taxes + depreciation and amortization) to absorb the impact of this legislative measure. These are financial indicators which show the performance of companies and useful to determine whether telco concerns on carrying costs are real or imagined.”
For 2019, Globe had a net margin of 15% out of net sales of PHP 149-Billion. It had an EBITDA of PHP 76-Billion, which constitutes 51% of net sales. Its free cash flow stood at PHP 23-Billion.
On the other hand, PLDT had a 2019 net margin of 13.3% out of net sales of PHP 169.19-Billion. It had an EBITDA of PHP 79.8-Billion, which constitutes 47.1% of net sales.
“Telcos should show whether their carrying costs constitute even a sliver of either its net margin, EBITDA or even free cash flow. If not, how can they even shamelessly object to this measure?”
Ridon, who studied finance at Harvard Business School, said that the bill’s financial impact is more symbolic than real, yet demonstrates the commitment of telcos to the public interest.