THE PHILIPPINE LONG DISTANCE

TELEPHONE COMPANY
CASE STUDY:
RICHARD ABALOS & BRIAN RAGUCOS
SWOT ANALYSIS
 FACTS S W O T
The Philippine Long Distance Telephone
Company was the largest of some 62 entitles *
providing telephone services in the Philippines.

732, 542 telephone s in service through out its

entire system, which represents approximately 92 *
percent of all telephones in the country
 FACTS S W O T
The company was the principal supplier of long
distance telephone service in the Philippines, with
a modern nationwide microwave radio toll network
*
interconnecting 50 exchanges owned and
operated by other private operator

PLDT acquired the assets and assumed the liabilities

of Republic Telephone Company(RETELCO) in line * *
with the government's policy of integration of
telecommunications facilities in the county
 FACTS S W O T
X-4 program placed a financial strain on the
company brought about by the rising cost of
borrowings, increasing operation expenses, * *
deterioration of the peso vis-à-vis the US dollar.
This delayed the program by one and a half to
two years.

X-5 expansion program would increase the

number of company- owned telephones from
projected level of 700,000 upon completion of
*
the X-4 program in 1985 to about 1,000,000 in
1990
 FACTS S W O T

X-5 was a modest target considering the present

economic situation, the financial position of the *
company and cautious attitude of foreign
creditors towards Philippine Government

X-4 program is scheduled for completion in early

1985 and X-5 during 1985 to 1990. This is the
project resulted to an increase of company
*
owned telephone representing 92% of all
telephones.
 FACTS S W O T
Issuance of preferred stocks would put more
strain on the company’s existing fixed charges
* *
and future income may further affected.

More than half of the total current assets are * *

Accounts Receivable
I. TIMEFRAME
OCTOBER 1983 TO END OF THE YEAR 1983
II. VIEWPOINT

MR. ELIAS A. MENDOZA

CHAIRMAN OF THE FINANCE COMMITTEE
 III. STATEMENT OF THE PROBLEM
What course of action can the company take to ensure the
availability of adequate funds for the completion of the
current expansion project X-4, the nearing X-5 expansion
project and other beneficial endeavors to be taken by the
company in the near future?
 IV. STATEMENTS OF
OBJECTIVES
• To achieve optimal service improvements through wise
economic decisions
• To work towards the improvement of the company’s
financial stability
• To mitigate financial risks involved with financing of
expansion projects
• To increase the supply of service
 V. AREAS OF
CONSIDERATION
• In October 1983, the Philippines Long Distance Telephone Company was on the
third year of its ambitious expansion program called X-4 , at that time the company
was also near the conclusion of the technical planning for its next program X-5
• PLDT acquired the assets and assumed the liabilities of Republic Telephone
Company (RETELCO) in line with the government's policy of integration of
telecommunications facilities in the county
• X-4 program placed a financial strain on the company brought about by the rising
cost of borrowings, increasing operation expenses, deterioration of the peso vis-à-vis
the US dollar. This delayed the program by one and a half to two years.
• X-5 expansion program would increase the number of company- owned telephones
from projected level of 700,000 upon completion of the X-4 program in 1985 to
about 1,000,000 in 1990
 VI. ALTERNATIVE
COURSES OF ACTION
• Improve collection process of receivables
• Adjust the timeline of X-5 expansion project
• Increase service and toll fees
• Implement X-5 through acquisitions of smaller
telecommunication companies instead of buying individual
units
EVALUATION OF
ALTERNATIVES
 ALTERNATIVES
Improve collection process of
receivables
Adjust the timeline of X-5
expansion project
Increase service and toll fees
Implement X-5 through
acquisitions of smaller
telecommunication
companies instead of buying
individual units
ADVANTAGES
 Will give rise to adequate
cash base for operation
and expansion
 Cash flow improvement
 Heightens the ability of
company to pay current
liabilities
• Enhanced strategic focus
• Be ready in the next project
• Makes room for the
improvement of the current
program (X-4) that might
affect in the future projects
 Easy way of accumulating
capital
 May result to capital surplus
• Elimination of competition
• Economies of scale
• Less risky than funding the
expansion through debt
DISADVANTAGES
• May result to too much idle
cash
• Relies on many
uncontrollable variables
• Intrinsic value of the
improvement
• Demand will be met at a
slower pace
• Customers and officials
dissatisfaction
• Dissatisfaction of customers
• Potential loss of customers
• NTC interventions
 Lower asset value due to
depreciation
 May fail because of
changes in legislation