PLDT Inc.

Good afternoon and thank you for joining us today to discuss the company's financial and operating results for the first quarter of 2020. A copy of today's presentation is posted on our website. For those who have not been able to do so, you may download a copy of the presentation from www.dlt.com under the investor relations section. For today's presentation, we have with us Mr. Manny Pangilinan, Chairman and CEO, Mr. Alpan Lillo, Chief Revenue Officer, Ms. Annabel Lim-Chuatz, Chief Finance Officer, Denny Ray Espinosa, Special Assistant to the CEO, as well as members of the PLDP Management Team. Before we start the presentation, we'd just like to remind everyone that later in the Q&A session, you will have to type in your questions, which we will read out loud. At this point, let me turn the presentation over to Ms. Annabel Chua to start the presentation. Good afternoon, everyone.

Welcome today to PLDT's first quarter 2020 results briefing via Microsoft Teams. I hope everybody can see the slides that are being flashed on screen. Let me start by saying that we saw the continued growth momentum from 2019 in the first quarter of 2020, with limited impact from the Enhanced Community Quarantine or ECQ, which took effect only towards the tail end of the first quarter. Our service revenues rose by 9% to 41.5 billion pesos in the first quarter, a new high in quarterly revenues. This increase was primarily driven by data and broadband services. The consumer individual business group once more set the pace for growth, posting 20.2 billion in revenues, 20% up from the first quarter of 2019. PLDT Enterprise generated $10.1 billion in revenues, 3% higher than the previous year, while PLDT Home increases revenues by 5% to $9.6 billion. The consumer and enterprise business groups combined grew by 11% to generate 39.9 billion of service revenues, 96% of the total. To make up the balance, the international and carrier business group posted 1.6 billion of service revenues, which are 25% lower than prior year. Next slide. With a 9% increase in our service revenues, our EBITDA increased 8% to $21.6 billion in Q1 2020, as the increase in our revenues more than compensated for the increases in our operating expenses. EBITDA margin remained at a healthy 52%. Our first quarter telco core income is 6.9 billion pesos, lower by 5% year-on-year as the rise in EBITDA was offset by higher depreciation and financing costs resulting from higher capital expenditures, the offshoot of the PLDT Group's sustained network rollout program. Next slide. Viewed from the vantage point of the last three years, we've seen our service revenues climb each year and at an accelerated rate of growth. Notwithstanding the onset of COVID-19 and the government's imposition of the ECQ starting the second half of March, the first quarter 2020 service revenues surpassed our fourth quarter revenues and represented a historic high for the company. Next slide, please. The achievement of such record high of 41.5 billion service revenues in the first quarter was underpinned mainly by the rise in data revenues, which now account for 71% of our revenues versus a 45% contribution back in first quarter of 2017. Moving on to the next slide, please. The 9% revenue growth in the first quarter of 2020 reflects the continued importance of data revenues, which have become the key driver of top-line growth, offsetting the impact of declining legacy revenues from voice and SMS. In Q1, data services maintained its upward momentum with a year-on-year growth of 19%. The share of data revenues out of total revenues has risen to 71%. In particular, mobile internet revenues jumped nearly 40% versus the level a year ago. Mobile data usage continued to be driven by customer demand for video services, social media, mobile games, and other services delivered to subscribers through our various giga load packages. About 71% of the handsets being used by mobile phone customers today are smartphones. Home broadband posted a 9% increase in revenues with improved installations of fixed and fixed wireless broadband connections. Corporate data is up 2% and data service center revenues are up by 6%. Moving on to the next slide, we show how our EBITDA and telco core income has changed from prior year. Our EBITDA increased 8% or 1.6 billion pesos from 20.1 billion in 2019 to 21.6 billion in the first quarter of 2020, as the increase in our service revenues of 3.5 billion pesos fully absorbed the rise in cash OPEX and subsidies of about 2 billion pesos. EBITDA margin remained at 52%. Looking at the bottom half of the chart, our first quarter telco core income is lowered by 0.3 billion year-on-year because higher depreciation and financing costs resulting from higher CAPEX offset the 1.6 billion increase in EBITDA. Next slide, please. When viewed against the quarterly EBITDA results over the last two years, our 21.6 billion EBITDA Ebitda in the first quarter is the highest for a quarter other than the EBITDA in the fourth quarter of last year. It's also higher than the average quarterly EBITDA of 20.8 billion pesos registered last year. Next slide, please. Our telco core income of 6.9 billion, while lower than last year's first quarter earnings, is still ahead of the average quarterly telco core income of 6.8 billion last year. In light of uncertainty surrounding the impact of COVID-19, we have not provided earnings guidance for the year. Next slide. Next slide shows our statutory reported income results. Reported income was 5.9 billion pesos, 12% lower than last year. After taking into account our equity share in the results of Voyager Innovations, and the Riva losses on our investment in Rocket Internet Shares. We're also pleased to note that Voyager has received strong support from its current shareholders to the tune of $120 million in new investments that will meet their funding requirements. Current shareholders continue to believe in the prospects of Voyager, particularly with the good traction that's been seen during this period for digital financial services. Now, moving on to the next slide, we show some balance sheet metrics. PLDT's net debt as of the end of March amounted to about US dollar 3.4 billion US dollars, while net debt to EBITDA stood at 2.03 times. The gross debt of the company was 4.05 billion US, with maturities well spread out and only 6.7% of which were unhedged. Fixed rate loans accounted for 84% of our total debt, and our average interest cost of debt is 4.8%. Of our 46 billion pesos planned borrowings for the year, 30 billion has been signed, and we are currently in final documentation stage for another 10 billion pesos of local bank long-term loan facilities. We availed of 4 billion of short-term loans in March, as during the lockdown period, we have allowed an extension of payment periods of the monthly bills of our post-paid subscribers. Unpaid subscriber balances are being amortized over a six-month period. Next slide, please. Our capex in first quarter came in at 19.6 billion. While PLDT's original CAPEX guidance for 2020 was 83 billion pesos, we now anticipate that 20 to 25 percent of our CAPEX budget will be deferred due to the impact of the ECQ restrictions on movement and on supply chain. Our network rollout activities have been constrained by the reduced mobility of our network teams since the ECQ was imposed. While the lifting of the restrictions is expected to be a prolonged process, we also expect that the pace for the restarting of our network rollout activities to be drawn out. So we do continue to prioritize projects that uphold our service quality in order to support our customers and the public for their business and social activities under these new conditions. The imposition of ECQ also compelled people at home to turn to internet and online collaboration tools in order to work and study from home. Our network has held up pretty well with a surge in data traffic of about 20% and a shift of data traffic from offices to homes with a rapid move to work from home. In April 2020, we reallocated 2G-assigned frequencies in 1800 MHz from 2G to 4G, thus further increasing the mobile data capacity of SMART's network. Now the next slide, we show here some selected highlights of our network. So in the first quarter of 2020, PLDT and SMART continued their efforts to expand and modernize our fixed and mobile networks. As of the end of March, PLDT increased the coverage of our fixed network to past 7.5 million homes, 4% more than what we had at the end of 2019. We have a built capacity of 3.6 million fixed broadband ports available to serve those working or studying at home. In the same period, the total footprint of PLDT's fiber optic network expanded by 5% to about 338,500 kilometers of fiber cables. We also are pleased to note that PLDT has undertaken An upgrade and modernization of our transport network and we had just completed the first phase of that transformation program in time to serve the increased requirements of data traffic during this period. For SMART, we further enhance our mobile data coverage by adding about 1,400 new 4G-powered base stations, raising the total to about 26,000. We also added about 700 base stations to get to about 14,400 3G base stations. So together, we are able to serve more than 94% of our country's population with mobile. Next slide, please. We saw SMART's mobile data traffic explode compared to previous periods. Our mobile data payload rose to 634 petabytes in the first quarter of 2020, double the traffic in the first quarter of 2019, and 25% higher than the traffic at the end of last year. Thank you very much. As traffic grows, our network has remained resilient. The superiority of our network was validated by the latest mobile network experience report released in April by OpenSignal, which found that SMART remained ahead of competition in terms of video experience, upload and download speed experience, voice app experience, games experience, and 4G availability. Now at this point, I turn over the presentation to Alpan Lelio, our Chief Revenue Officer.

Hi, good afternoon. Thank you for being here today and I hope everybody is keeping safe. Again, just to highlight what Annabel said, I think we had a very strong performance for the first quarter. There was a weakness in the last two weeks of March, but I think we ended the first quarter even higher than our highest quarter last year. So that's pretty good news for us. Again, we're delivering this to show that the company is very resilient, a lot of collaboration done internally to be able to continue to serve our customers. and that has been our our focus now so if i may go to the next page please so during the the first quarter uh we continued with our programs creating meaningful connections and i go deep into this in the next few charts but really making sure that we push on our wireless business uh being uh again Annabel said 77 percent of our business there on data home we continue to also provide the connectivity obviously through fiber and Fixed Wireless and really the focus and both here in the room with us focused on enhancing the customer experience by making sure that we're able to install quicker and repair quickly also. Enterprise has been a focus area also for us, pushing fixed line broadband and data. and also Wireless Broadband, which has been a requirement, tail end of the first quarter and into April when the lockdown was in place. And again, enterprise offering solutions that are already becoming the next normal, the BCP, Business Continuity Programs, and I think this will be part of every business' way of working now. Work from home component together with office environments. and we deliver this to automation, obviously. Second quarter, we continue to push this. We push dependable connectivity when it really matters most to all our customers. We're individual wireless, engaging our subscribers, making sure that we're able to address their needs, focus again more on data services, allowing our people to work from home, and solutions, as I said earlier, that is serving workers who are working from home. For home, initially our main focus was for safety of our employees, of our customers, so we papered off in our connections early part of the lockdown and really focused just on repairs. Thank you very much. Enterprise, being a part of our business, we've launched a hashtag one with you campaign, making sure that we address all your requirements, providing a new roster of offerings depending on the business that you're in, and obviously enabling virtual sessions like this for our customers as companies continue to operate through virtual means. Next page, please. so I won't go into detail here but these are the programs that we had during the COVID as you are aware we had our payments extended now up to May 31 and our billing that will come out in June is really your current and a balance of payment that will be divided into six equal months so that we don't have a bill shock as far as customers are concerned We offer free speed boost, free data boost, discounted products and services, free access to certain government websites, news and hotlines, DOH, DPWH, even Red Cross, and also DepEd. And again, as I said earlier, enhancing and continuing to improve our installation repair, especially now that our field personnel are well-equipped to to take care of themselves. And also free course that we offer to our OFWs via free app that's being offered by PLDT Global. Next page, please. So just to run through again, these are the programs updating and engaging customers through data with our smart LTE fast network, which is a network that has been considered by third parties as a passive mobile network in the Philippines. We have a program to upgrade the LTE systems and devices so that more customers will be able to use data and our major push on Giga and Giga storage specifically during this period. Part 2, please, forward. Next page, please. And these are the things we are doing in the second quarter for wireless individual. Productivity made possible through digital solutions. Online has been a platform that we're focused on in this next new normal. This will be a driver of our business and we are focused on delivering a good platform online. Pushing for smart giga work and giga work plus. Again, work from home. Talk & Text is offering a cashback reward for its Talk & Text 20th anniversary at TNT Big Bente. And lastly, again, a lot of demand now. So we are relaunching SmartPro LTE and LTE Advanced Pocket Wi-Fi, again, to address the connectivity requirements of our customers. For next page please, for home, this has been, we started the year right, we're pushing hard on fixed wireless. Of course, our competitive advantage is fiber. We still have a lot of fiber capacity that we can offer our customers, so that will be a main priority, but we'll be able to offer also fixed wireless. And as I said, smart grow or pocket Wi-Fi as we drive the market depending on the customer segment that needs our service. Next page, please. Quarter two, continue to enable everyone from home, wireless shifting online selling and servicing to our online platforms. We have a stay-home campaign where we have fiber speed boost, free paid Wi-Fi, double data installment payment programs, and we will continue to still enhance our ops operations for the increased demand, and we are trying to fulfill the demands of our customers. Next page, please. For enterprise, we're trying to make sure that businesses are able to work simply. So a productivity made simple. We're offering packages and new products in terms of, I guess, collaborative suites, telecommunication using Meraki and fiber-based with Meraki. As I said, we ignited a campaign for SMEs, hashtag one with you, and making sure that they're able to help them grow, especially in this time of pandemic, and the use of support of O365 launch that we had in the first quarter. Next page, please. And we will continue to push this, equipping businesses for the new normal, and we are partnering with large, medium, and small enterprises across to be able to address their needs and requirements and to help them recover during this pandemic after the lockdown will be lifted or relaxed in the next few weeks. So that's it.