PLDT Inc.

Good afternoon and thank you for joining us today to discuss the company's financial and operating results for the first half 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 the presentation from www.pldt.com under the Investor Relations section. For today's presentation, we have with us Mr. Manny Pangilinan, Chairman and CEO, Mr. Alpan Liga, Chief Revenue Officer, Annabel Lim-Chuo, Chief Finance Officer, Attorney Ray Espinosa, Special Advisor, Senior Advisor to the President, and other members of the PLDT Management Team. In terms of sequence, we'll start off with Al Pandillo, followed by Annabel Chua for the Financials, and a wrap-up and guidance from our Chairman. I now hand over the floor to Mr. Pandillo for the presentation.

Thank you, Melissa. Yes, you can go to the next page, please. Again, first of all, thank you for being here today and joining us in this call. You know, it's really a privilege to be in an industry where we can help people adjust to the new normal by keeping them connected all throughout. So during this year has been very challenging, as you know. Even at the start of the year, even before the pandemic, the Taal volcano erupted and affected also our operations, especially in Batangas, Cavite, and And then, of course, the pandemic happened in late March to the month of April. But our commitment, next page please, is that we will keep everybody connected. That was the commitment that we gave to our countrymen, especially during the COVID-19 pandemic that broke out in the Philippines. And not only in the Philippines, but also globally. So, next page. I guess, you know, we are in a position, and I think we have proven that the PLDP Smart is the Philippines' only integrated telco, able to deliver relevant services to our people during this pandemic, sustaining them by keeping them connected, whether they're at home, either working or studying, doing their groceries online, doing errands via their mobile phone, or paying bills and taxes online. Especially now that data You know, increasing usage of data is significant. So we continue to be relevant to our customers and offering a whole suite of services. Next page, please. This is what I mean by being indicative telco. We're able to serve all segments of the country, obviously from our mobile internet, where we have about 69 million individuals in our business. Aspiration there is to connect every Filipino mobile internet that runs on our LTE and 5G networks. Mobile broadband, which is really your pocket Wi-Fi, is also running on the LTE. 5G is a brand that we have had a long time, but now picking up because of the demand for mobile connectivity, especially for students and teachers in this new normal. So we have about 1.1 individuals in this space. We have offered also fixed wireless, which also runs on the mobile network, LTE 5G for home. But really, this is a complement only to our fiber offering, which is our superior product and flagship product for the home and also for our enterprise customers. So the fastest and unlimited, we can offer unlimited plants with fiber. So PLDD smartly leads the way in technology integration by offering all types of broadband technologies to really cater to all the segments of the market. And we want to continue to, you know, pour out, pour in significant resources in our integrated fixed and wireless network expansions. So the next page, please. For the first, I mean, for the second quarter, our performance on revenue, our 2020 revenue performance, we ended the quarter at 41.3 billion. We still delivered a strong performance, sustained momentum despite the pandemic. If you recall, we ended first quarter, which is all-time high for us at 41.5. So a bit of a decline, but not as much as we expected. But comparing it to the same period last year, we still grew at 7% or in test amount, 2.6 billion compared to same period last year. And this was really driven by... Next page, please. By the three segments, individual, which is your wireless business, grew by 12%, or in absolute terms, 2.1 billion to 19.6 billion. Home grew 8%, or 800 million, to 10 billion. And enterprises, despite the challenges that they faced, since a lot of their customers were also affected by the lockdown and a lot of them closed their operations, still grew at 7% clip or 600 million for the period. So our first half number ending first half is 82.8 billion. That is an 8% increase year on year or 6.2 billion pesos. So we definitely ended the first half very strong. and we will continue to push in the second half. The first half performance broken down into the three segments again. Next please, sorry. Individual grew by 16% to 39.8 billion or 5.4 billion increase from same period last year. HOME ended at 19.6 billion or 7% increase and they grew by 1.2 billion in revenues. The 1.2 billion is significant for HOME because if you recall the growth of HOME in 2019 over 2018 was 1.2 billion in revenue terms. So HOME was able to deliver the 1.2 billion in six months. For enterprise, again, having been challenged by the pandemic because of its customers, still ended with a 5% growth of 20.3 billion or 900 million pesos in peso terms. So it is very challenging times, but we continue to push and we continue to serve our customers and we want to make sure that we're relevant to the requirements of the customers. Next page, please. You have seen this, and we are proud of this. We have been judged by third-party mobile data analytics companies or agencies who claim OpenSignal that PLDT is smart as the fastest mobile and fixed network. And whether it's download speed, output speed, video experience, latency, we are ahead vis-a-vis any other competition in the Philippines. Next page, please. So you might have heard, we also launched our 5G last Thursday, July 30, in very limited areas, high-key areas. As we continue to look into this technology, we will continue to roll out in more areas later. Thank you very much. like Realme and Vivo products that will be 5G capable. Again, we remain steadfast in maintaining our network's priority. So our priority is to continue expanding the network, both on fixed and mobile networks to really support, as I mentioned, the customer's growing data habits. And we also want to increase the number of LTE smartphone users in our sub-case. Smart has increased the number of 4G LTE stations during this period, rounding up to about 27,000. And our population coverage now is at the 95% level. So PLDT, as you know, has the widest fiber infrastructure in the country, close to about 360 kilometers of fiber nationwide. 11% versus 2019. So we will continue to level up our network as we know that this is our competitive advantage against any competitor here in the Philippines. Next page, please. We've also embarked on improving customer experience for our customers. So starting this month, we have embarked on national fiber migration of our ABSL customers to fiber. This is an 18-month nationwide fiber migration program, and we will push this to make sure that we're able to not only improve experience but improve coverage for our customers. Next page. For our enterprise business, they did launch an offering a few weeks ago called Beyond Fiber. So beyond connectivity, we offer curated digital solutions from collaboration tools to productivity tools to even e-commerce, online e-payments solutions. So again, we want to make sure that we're able to help the businesses recover from the lockdown and the pandemic. An example are the BPO companies where they needed work-from-home solutions during the pandemic to make sure that they were able to continue their business. So we will continue to push for created digital solutions for our customers. Next page, please. And of course, we are not only beyond fiber, but really beyond connectivity as we also, you know, banking from a very strong network, we endeavor to provide our customers with exclusive content localized to the Filipino market. So in line with this, we have actually forged a lot of relevant partnerships for our customers. Next page, please. This is a list of... Next page. This is a list of the partnerships that we have already... We already have or are working on. YouTube, obviously, we've had a partnership for a long time. Same with Facebook, Netflix. We're working on Vue, which should come out in the next two months. HBO Go. We do have local content on iOne and GMA. And just recently, in fact, last week, When the NBA came back, I mean when they restarted the NBA, there's an exclusive deal with the group, with TV5, Signal, and Smart to cover the NBA games. In particular to Smart, we own the digital assets of the NBA content and any prepaid customer of Smart who buys or Talk & Text who buys Giga Video will be able to live stream NBA for free. and same with both subscribers on Smart Signature, Smart Infinity, they can live stream NBA for free. Next page, I think we've mentioned this in the past, in this new normal, there are also new opportunities and we know that we need to expand our vertical solutions to transform industries from e-working to online shopping to e-learning to e-health and cybersecurity. PLDT Smart is playing a catalytic role in the massive digital transformation of the Philippines. So for us, this is not just a business opportunity, but really a civic duty to provide the solutions and connectivity to all the people of the country in order for them to survive or succeed in the new normal. Next page. So our CAPEX, for the past five years, our strategy to really invest in the network has really... We have spent $260 billion the past five years. Initially, 2020, we were planning to spend $83 billion, but during the last briefing and because of the lockdown, we did say that that might drop to $63 billion. But now that we are able to Go back to some of the network activities that needed to happen during the lockdown. We're able to go out now, except in some locations where it's still an ECQ. We have raised our CapEx projections for 2020 to $70 billion. So that is still CapEx revenue ratio of about 40%. So we are investing to really continue improving our network and improving customer experience. For the second half, we will focus on three areas. Just to summarize, improving network quality, strengthening our digital content and platforms, and our North Star is really championing customer experience. A very important, next page, a very important, a big story this year, and also close our hearts as a group, is really making sure that we're able to help the country develop the Thank you very much. and maybe even Signal and Radio Based Learning so that we can really address the 32 million students that need to go back to school and the 1.2 million teachers that need to work with the students. So this is a very important initiative for us and we are helping DepEd hopefully develop our e-learning ecosystem. And as you know, during the pandemic, the MPB Group had a big response to the COVID-19 to our tolong kapatid, helping government. We provide connectivity to LGUs, hospitals, quarantine facilities, and COVID front line housing facilities. We also give free access The government websites and free calls to government hotlines. In cooperation with other companies of the MPB Group, namely Maynilad, Meralco, and Lex, as always, we partner with the Philippine Arena to volunteer the biggest We Heal Us One center in the country, in Bulacan. So we will continue to support government, obviously, during this time, and All our initiatives are focused on helping our fellow Filipinos. So lastly, my last page really, again, we grow our business by helping our customers rebuild their lives. We want to remain relevant to them. And that will be our main focus in the second half. But we will also remain laser-focused on delivering performance, but also reinventing ourselves to become more customer-centric and really become a digitally-powered organization. Thank you very much.

Thank you, Al. So welcome everyone to our first half 2020 results briefing. So let me start off by saying that despite the severe and unexpected disruptions caused by the COVID-19 pandemic, PLDT maintained our growth momentum from 2019 to the first half of 2020. And as a result, we saw quite healthy financial results during the period. As Al had already highlighted, Our service revenues rose 8% to 82.8 billion in the first half, and this is a new high in terms of semester revenues. Now, the 2Q revenues were better than initially expected, coming in at 41.3 billion, which, while lower than the first quarter, was not as low as we had indicated earlier, and it represented a 7% increase from prior year. Consumer individual business, which felt the most impact of the quarantine restrictions, with 2Q being lower than first quarter, but nonetheless, it saw continued strong growth of wireless data usage, which resulted in our 2Q revenues for the individual segment coming in higher by 7% year-on-year. Sorry, by 12% year-on-year. For enterprise and home businesses, Two Q revenues for both of these customer groups increased from the first quarter levels despite the challenges from the pandemic. So when you look at it combined, the consumer and enterprise business groups combined grew by 10% year-on-year in the first half of the year to 79.6 billion. and on the other hand, our international carrier business posted 3.1 billion of revenues which are 30% lower than prior year but this included the impact of the removal of mobile interconnect revenues starting January of this year. So without this, international revenues are down but at a lower rate of 10% and this is really due to the drop of international roaming revenues. Next slide, please. With the 8% increase in service revenues, equivalent to 6.2 billion pesos, we were able to cover the increase in our OPEX of 2.9 billion, resulting in our EBITDA growing by 8% to 43.2 billion in the first half. Our EBITDA margin remained at a healthy 52%. Our depreciation expense and financing costs were higher year-on-year as a result of the investments we have made in our network rollout and expansion programs. We're also pleased to highlight that under these unusual times, we achieved a $13.9 billion first-half telco core income, which is higher by 5% year-on-year. Our statutory reported net income grew slightly by 1% to $12.3 billion. Moving on to the next slide. So when you look at our service revenues over the last three and a half years, you see that The revenues continue to climb quarter-in-quarter, and notwithstanding the impact of COVID-19 and the government's imposition of the community quarantine, our first quarter and second quarter service revenues this year still represent historic highs for the company. So Q1 revenues were up 9% year-on-year, while Q2 was up 7% ahead of the same period. Next slide, please. Showing the same numbers, but broken between data and non-data revenues, you'll see clearly that data was the main driver of our top-line growth over the years, outpacing the downward movements in our legacy revenues from SMS International Voice. Now, for this semester, data revenues grew 18% or 9 billion pesos. Next slide, please. When you look at the 8% revenue growth in the first half, This really reflected the growing importance of data, particularly during a period where data access has become critical for customers staying and working from home. The first half, our data revenues of 59 billion accounted for 71% of our total revenues and up 18% year-on-year. Mobile internet revenues moved up 34% versus a year ago to 29.3 billion. Data usage continues to be strong, driven by demand for mobile video services, social media, mobile games delivered to our customers through various legal load packages. Our mobile traffic usage was 1.4 exabytes, which are more than double from the traffic in prior year. Home broadband also posted an 11% increase in revenues with the demand for home connectivity bolstered by the lockdown. So while we had challenges in installs during March and April, we were able to steadily ramp up our installations of fiber and fixed wireless broadband connections in May and June to even higher than the pre-ECQ levels now. Corporate data and data center revenues were higher by 3% of the combined 12.5 billion of revenues. And we see emerging opportunities to serve the enterprise market in the new normal. Now, moving on to the next slide, please. We show here how our EBITDA and our telco core income has changed from prior year. Our EBITDA increased 8% or 3.3 billion from 40 billion to 43.2 billion in the first half. As the increase in our service revenues of $6.2 billion fully absorbed the rising cash OPEX and subsidies of about $2 billion and an increase in provisions of about $900 billion, the margin was a healthy 56%. Our first half Delco core income at 13.9 billion is 700 billion or 5% ahead from last year, driven by higher EBITDA, partly offset by higher depreciation and financing costs resulting from the higher CAPEX. Next slide, please. Here we show our quarterly EBITDA numbers, and you see here that our 2Q EBITDA was stable versus first Q, notwithstanding the dip in revenues Q and Q. So viewed against the quarterly results over the last two years, our 21.6 billion EBITDA in the first quarter and the second quarter are the highest for a quarter. other than the quarter in fourth quarter 2019. So the 21.6 billion average is also higher than the average quarterly EBITDA of 20.8 billion registered last year. Next slide, please. This is on telco core income. So our telco core income of 7 billion in 2Q is about 0.1 billion higher than 1Q. The average quarterly result is also ahead of our 2019 quarterly average telco core income of 6.8 billion. In light of the uncertainty surrounding the impact of COVID-19, we had not provided earnings guidance for the year, but we are certainly aiming for 2020 telco to be stable versus 2019 at approximately 27. Next slide. This morning, the PLDT Board declared an interim dividend of 38 pesos per share for payment on September 4. The dividend is in line with our policy to pay out 60% of our telco core earnings. If you calculate it based on the end June share price of PLDT, the dividend yield for PLDT holders is about 6%. Next slide shows our statutory reported income results. Reported income was 12.3 billion. Thank you very much. All the shareholders of Voyager signed up to commit $120 million of new funding for Voyager with $65 million of this commitment infused in May. So we continue to look positively at the prospects of Voyager, particularly with the traction seen during this period for digital financial services. Moving on to some balance sheet metrics, PLDT's net debt as of end June 2021 amounted to US dollar 3.8 billion while net debt to EBITDA ratios to the 2.19 times. The gross debt amounted to 4.75 U.S., which included the $600 million new bond issue of PLDP, which was consistent of a $300 million long 10-year issue, that 2.5% coupon, and another $300 million U.S. 30-year issue, 3.45%. Now, with these tenors, we were able to extend our debt maturities so that 50% of our debts now mature beyond 2025. While we have increased the mix of our dollar debts approximately 19%, our unhedged debts as of end June was limited to 4.4%, given our dollar cash position. Going forward, as we refinance our peso debts from the dollar bond proceeds, we'll continue to manage our FX exposure with hedges, and we will aim to keep the unhedged portion at somewhere between 10% to 15%. Fixed rate loans accounted for 85% of our total and our average interest cost was at 4.78%. Moving on to the next slide, our capex in the first six months came in at 31.4 billion. So as Al indicated earlier, while our original capex guidance was 83 billion, we now expect our spend for the year will be up to 70 billion, which is almost at the same level as our 2019 capex level spend. Despite the challenges and restrictions during the quarantine period, we made adjustments in the months following the lockdown and gradually scaled up our CapEx bill. We do continue to prioritize projects that uphold our service quality in order to support our customers and the public for their businesses and social activities under these new conditions. I must say that our network held up pretty well with a surge in data traffic about 25% during this time. The shift of data traffic from the offices to the homes with a rapid move to work from home. In April 2020, we reallocated 2G-assigned frequencies at 1800 MHz from 2G to 4G LTE, which allowed us to increase the mobile data capacity of smarts network. We also expanded our international links to support the higher demand for Internet Connectivity. Next slide please. Here we show that PLDT and SMART continued our efforts to expand and modernize our fixed and mobile networks despite the pandemic conditions. So some select highlights from our network. As of the end of June, PLDT increased the coverage of our fixed network to past 7.8 million hosts. So that's 8% more than the level at the end of 2019. We have built capacity of 3.7 million fixed broadband ports available to serve those working or studying at home. The same period, the total footprint of PLDT's fiber optic network expanded by 11% to about 358,700 kilometers of fiber key. For the wireless side, SMART further enhanced our mobile data coverage by adding 2,500 new 4G LTE base stations, raising the total to about 27,100. and then for 3G, there's another 1,200 added to get to 15,000 3G-based stations of the energy. So when you combine our 4G and 3G, we are able to serve more than 95% of the country's population with mobile. And if you add 2G in the mix, we actually serve 96% of the country's population. Next slide, please. We saw mobile traffic explode compared to previous periods. As indicated, our mobile data payload rose to 1,368 petabytes in the first half of 2020, which is double the traffic of first half 2019. In Tokyo alone, the mobile traffic was 25% higher than the traffic in first quarter. So we expect the demand for data services to remain high with the growing dependence on online and the expected more extensive adoption of digital solutions by our customers under the new normal. As traffic grows, our network has remained resilient. The superiority of our network was validated by third-party reports released by OpenSignal and Bookla. So based on the report of OpenSignal, SMART remained ahead of competition in terms of video experience, upload-download speeds, voice app experience, and 4G availability. Bookla also scored PLD with the top download and upload speeds for fixed and SMART for wireless in this country. In this part, let me turn this over to Mr. Pangilinan for the latest outlook for 2020.