Philippine telcos are among the last in the region to divest passive tower portfolios, according to the Moody’s report released Tuesday, July 25. The report titled: “Telecommunications – South and Southeast Asia: Reorganization boosts business efficiency but could create accounting complexities” only specifically covered PLDT Inc. (Baa2 stable) although it also rated Singtel, which owns a little over 22 percent of Globe Telecom Inc. Nevertheless, the Moody's report noted that since April 2022, PLDT has monetized its tower assets by entering into sale and leaseback transactions for 7,569 towers, raising P98.3 billion. As of May 2023, PLDT closed around 70 percent of its total announced tower sales and received P69.5 billion in cash consideration. "We expect the remaining tower sales transactions to be completed in tranches by the end of 2023," according to Moody's. Following the completion of its announced tower sales, PLDT would still have around 37 percent of its tower portfolio (4,430 towers) remaining, which can be monetized in the near future. Based on average valuations for precedent transactions, PLDT's towers could fetch about P58 billion, which is a substantial source of funding for the company. "We do not rule out that PLDT may classify some of the remaining towers as strategic and not available for sale," the report stated. Overall, telcos across South and Southeast Asia are reorganizing through intragroup transfer of businesses or structural separation of infrastructure and digital businesses, Moody's pointed out. The changes should boost valuations and improve efficiency of capital and infrastructure, while also enhancing the customer experience. Although the changes can bring operational benefits and boost asset values, they also introduce financial complexities, Moody's cautioned. Each transaction, in particular use of proceeds, needs case-by-case analysis to assess the credit implications. Notably, mobile and voice revenues remain dominant for eight of Moody's nine rated telcos in South and Southeast Asia, including PLDT. "Most telcos in the region, except PLDT Inc. (Baa2 stable), have already sold the vast majority of their tower assets, and companies," Moody's noted. But telcos in the region have adopted different approaches to tower sales, the report acknowledged. Indosat Tbk (P.T.) (Baa3 stable) and XL Axiata Tbk (P.T.) (Baa3 stable) opted to sell to independent tower operators. Last year, PLDT entered into sale and leaseback transactions for over 63 percent of its tower assets and will look at selling down the rest of its tower portfolio in due course. Meanwhile, operators that have former captive tower companies are retaining towers in the wider group. Such companies are usually the larger telcos with enough scale in operating a tower company, such as Bharti Airtel Ltd. (Baa3 stable) and Telekomunikasi Indonesia (P.T.) (Telkom Indonesia, Baa1 stable), through Indus Towers Limited and PT Dayamitra Telekomunikasi (Mitratel), respectively. Axiata Group Berhad (Baa2 stable) currently owns 63 percent of its regional tower company, edotco Group Sdn Bhd, but is evaluating its options for edotco as discussed later in the report. Some large telcos are also putting their infrastructure assets into a separate operating company, with a view to selling or listing them in future. "We believe these are only initial steps taken by the telcos and this is a space to watch for more potential changes," the report stated.