Dito auditor issues warning after losses widen to $461M

The auditor of embattled Philippines telco Dito Telecom has called into question the company's viability after it plunged further into the red in 2022.

Listed vehicle Dito CME Holdings posted a net loss of 25.6 billion Philippine pesos (US$461 million) for the full year, and PHP17.95 billion ($323 million) the previous year, it revealed last week.

Total revenue improved by more than threefold from PHP2.2 billion ($39.6 million) to PHP7.3 billion ($131.4 million), but expenses blew out to PHP20.6 billion ($370.8 million) from PHP12.9 billion ($232.2 million).

Figure 1: Dito's liabilities exceed assets by $3.5 billion.
(Source: Timon Schneider/Alamy Stock Photo)

On an EBITDA basis, the company narrowed its loss by a third to PHP3.8 billion ($68.4 million), but interest costs expanded 324% to PHP5.2 billion ($93.6 million).

The result was a capital deficiency of PHP27.9 billion ($502.2 million), with liabilities exceeding current assets by PHP196.6 billion ($3.5 billion).

Auditor Punongbayan & Araullo Grant Thornton said the numbers indicated "a material uncertainty that may cast significant doubt on the ability of the group to continue as a going concern."

In response, Dito listed a series of fundraising initiatives, including a 650 million Chinese yuan (US$94 million) shareholder loan from China Telecom, which owns 40% of Dito Telecom. The company said it had already drawn down CNY165 million ($23.8 million).

Commitments for $3.9 billion

It also had commitments from creditors for $3.9 billion in project financing, expected to be finalized later this year, and had negotiated extensions on payments for construction works.

Dito said it was also planning a follow-on offering to raise equity funds, while majority owner Udenna Corporation and minority shareholders were also committed to providing capital.

Udenna is owned by prominent businessmen Dennis Uy, a confidant of previous President Rodrigo Duterte, who awarded the mobile license in 2018. Uy has committed to investing $5 billion on rolling out a national 5G network and has said the company aims to become profitable by 2026.

"Despite the reported capital deficiency, management is confident that the group can continue as a going concern" because of its ability to generate sufficient cash flows to meet its obligations, the company said in a filing.

"The group continues to heighten its commercial operations through targeted subscriber acquisition and promotional activities aimed at increasing revenue. Also, the group will continue to efficiently implement its network roll-out plan and cost-saving measures to improve the results of operations."

Dito, the Philippines' third mobile operator, began offering 4G and 5G service in March 2021. The company claimed to have 15 million subscribers at end-December 2022.

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Market leaders Globe Telecom and PLDT/Smart reported 87 million and 66 million subscribers respectively last December.

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— Robert Clark, contributing editor, special to Light Reading