PLDT Inc.

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. Al Pandillo, Chief Revenue Officer, Ms. Annabel Limchua, Chief Finance Officer, Mr. Joachim Horn, Next Generation Technology Solutions Advisor of Smart Communications, as well as other members of the PLDT Management Team. At this point, let me turn the floor over to Mr. Pandillo to begin the presentation.

Thank you. Thank you, Melissa. Good afternoon to all. Just wanted to really, you know, happy to report our unaudited financial results for the year 2020. It is a stellar performance that we were able to achieve in quite a difficult period. But we were only able to do that really by working together to achieve our goals. We were passionate about the work we do. We knew our purpose is to serve our customers and the malasakit of our employees. We work together to really empower Filipino lives. It really started with the hard work of our chairman, MVP, who was here every day at work during the lockdown. So it just embodies our commitment for our customers. So if I may go to the next slide. These, I feel, are the six success pillars we had for 2020. First, really about people. We were not only customer-centric and focused all our programs to address the requirements of our customers, but we were also employee-centric. We wanted to make sure our employees were safe in serving our customers. We had a big effort on PPEs, vitamins, and medicines to make sure that our employees were taken care of. We even went to work from home. But end of mind was to be able to also serve our customers safely. Second, our ways of working during this pandemic was different. We were able to really hyper-collaborate. We used technology to make it happen. We were able to decide quicker. We were more agile. We made decisions. And because of that, I think that also resulted to the success that we had in 2020. Third, brand love. I think we were very active in terms of our campaigns, really showing that we wanted our brand to be top of mind to our customers. all the programs we have embarked on we wanted to be relevant to our customers and in doing so hopefully we've been able to increase the brand level of our companies both PLDT and Smart. Network and technology despite the initial hiccups during the lockdown in late March to April we were able to still recover on our plans for the year and we spent almost the same level of capex to 2019. Great job, our network and technology group, by really finding ways to be able to deliver the service, continue the service, and making sure that we are ahead in terms of competition, in terms of our capabilities and cost of experience, which is really the fifth bucket, a focus on cost of experience, making sure that we are the benchmark of the industry and we have benchmarked ourselves against and other countries in the region. And I think that's the cost of experience we feel is deserving of every Philippine. Transformation started off in 2015 by MVP and will continue to be a pillar moving forward, but maybe underappreciated the past few years, but it has been a very significant progress in our transformation capabilities, not only in our technology platforms, but also in our processes. And we will continue to do this. We're not done in this space for sure. So that led us to a very strong year in 2020. with net service revenues of 171.5 billion, which is the highest full-year revenue in history of the company. So our revenue growth in terms of pesos is 13.8 billion pesos and 9% growth versus 2019 amidst the pandemic and the limitation of our work during the lockdown. And 70% of this rate are treatable to data. And if I go to each of the segments, wireless led the way, having grown by $10.6 billion, ending 2020 at $82.7 billion, which is a 15% growth compared to 2019. You see there the programs that we focused in. We launched the Giga Live. We talked about the passion for our customers, Giga Pro, Giga Video, Giga Games. and we were also very strong in TNT. We are now the number one brand in prepaid. We are very strong also in sports content and we will continue to develop content that is relevant to our customers and our push on Smart 5G. We were the first to launch Smart 5G and that is again going to be an ongoing initiative for us moving forward. For home, which is really a breakthrough year for home, ended up at 41.4 billion or 4.3 billion pesos growth or double-digit growth of 11%. And really the home being a new battleground in the industry where people really work and study at home and not just entertainment. And we are also doing a lot of initiatives to continue to improve Thank you very much. from small to big recover during this pandemic. And we have actually launched certain products also during the lockdown. Beyond Fiber was launched sometime in June. The biggest study packages, the e-health packages. We have even hosted a Philippine Digital Pump convention virtually during this time. And again, the focus of closing accounts at Google and Alibaba that focused also on a lot of activities for our data center. And for international, again, having a long tail in this business with our relationship with Orange, we're able to mitigate the decline. But there are also growth areas in international A2P and even Freebie, which is an app that's offered to all Ws abroad. In fact, it's not for the hit and roaming because travel was not possible. We would have ended the year almost flat against 2019 if not the decline for roaming. Hold on.

For 2020, a solid 9% increase or 13.8 billion year-on-year. With that top-line growth, our EBITDA increased by 7% to 88.8 billion pesos for 2020 at a 51% EBITDA margin. We saw a bit of increases in the cash OPEX, inclusive of the provisions. Without the provisions, our cash OPEX would have been up by 8% instead of 11%. Depreciation in financing costs rose as a function of the increased investments we've been making behind our network. With all of that, our telco core income came in at 28.1 billion, which is a billion pesos or 4% ahead of 2019. Reported net income was at 24.3 billion, a 1.8 billion increase year-on-year. Just showing the revenues on a quarterly basis, Over the last three years, other than a dip in the second quarter during the early days of the ECQ, we've seen an acceleration in our quarterly momentum with respect to top line growth. So we ended the year with a 44.9 billion revenues in the fourth quarter, which was 8% ahead of the same quarter in 2019 and 3% ahead of third quarter. So that was the highest quarter for PLDT with respect to our revenues. Likewise, in terms of our full-year revenues, we did reach an all-time high, 171.5 billion after a 9% year-on-year increase. So data clearly led the growth for the PLDT group, with data growing 18% across our mobile, internet, home broadband, corporate data, and ICT businesses. That data now accounts for 73% of our total revenues. Domestic voice, SMS, and international voice have been under decline, but things like SMS and international voice now have accounted now for a smaller percent of our total revenues of 4% and 2% respectively. This again shows the revenues and how they have grown over time, and you see here that data revenues have clearly led the way. with data revenues in 2020 being over four times the level in 2012. So from a voice SMS business, our business has truly become a data-driven one. Just to recap again, our EBITDA grew by 7% on the back of the higher revenues offset by higher cash OPEX and slightly higher provisions, so 88.8 billion for the year and 51% margin. With the higher EBITDA and some other higher income, We saw an increase in our core income, notwithstanding the increase in depreciation and financing expenses. So with respect to our EBITDA, the $88.8 billion is also an all-time high. We show here the development over the last three years from $68 billion to $83 billion to now an $88.8 billion for 2020 at a quarterly average of about $22.2 billion a quarter. With respect to our telco core income, that came in at about $7 billion per quarter, so aggregated to $28.1 billion for the year, higher from 2019 by 4% or 1%. So a bit of explanation in terms of how the telco core income and reported income relate to each other. We do have quite a number of One of non-recurring items that were booked in 2020. So we show here some of the key ones. We had a gain on the plus side and gain on the sale of our smart headquarters. On the minus side, we did have another round of manpower rightsizing with a One-time MRP charge of 2.6 billion and we did recognize accelerated depreciation for the remaining copper facilities we have given our plans to fully migrate copper to fiber as well as we took a view on shortening the life of our TG assets. So today, the PLDT board also declared a final dividend equivalent to 40 pesos per share, which adds up to 78 pesos per share when you count the interim dividend of 38 pesos. So that's a 60% payout based on the core earnings of 28.1 billion or a core EPS of 130 pesos per share. On the balance sheet side, we please report that our net debt to EBITDA ratio was at 2.05 times at the end of the year, quite a healthy gearing level, notwithstanding the higher cash capex requirements. Even when you pro forma the cash dividend payout for the final dividend declaration, the net debt to EBITDA ratio would be roughly 2.14 times. Debt maturities fairly well spread out. In terms of FX exposure, only 6% of our debts remain unhedged, and then 15% are floating rate. Average interest costs, 4.66%. Also please to note that our $600 million U.S. bond issue that we did in June 2020 was named by IFR as the Philippine Capital Deal of the Year. So on the CAPEX front, initially we had guided that the CAPEX may be lower because of the restrictions that we faced during the lockdown period, but we're pleased to note at the end of it all, we were able to come in very close to the 2019 CAPEX accomplishments. So 71.9 billion, largely focused on the technology side of 56.6 billion, but also about 10.5 billion directly related to business requirements particularly on the install side. For the 2021, our guidance is an 88 to 92 billion CAPEX investment for the year with the key targets that we spell out here 5G rollouts of over 3,800 base stations, 4G to introduce 4G to over 4,000 base stations, Additional ports for fiber of 1.7 million, additional 125,000 kilometers of fiber. We also continue to invest behind our data center capacity to serve the growing hyperscalers demand. So some of the key highlights from a network standpoint, you see here that we've been able to roll out and grow our network across various metrics notwithstanding pandemic. 9 million homes passed at the end of the year with over 4 million ports available for home broadband and enterprise broadband. Fiber footprint of 429,000, unmatched by any competition in the country, and we're adding another 125,000 kilometers to this number this year. We continue the rollout for 4G as well as 5G. The 5G now, we are hitting over 1,400 5G-based stations as of the end of Feb, and that's a growing number as we speak today. In terms of coverage, we cover 96% of the population of the Philippines, with our wireless networks and 48% of cities and municipalities for our fiber broadband network devices. We're seeing that increasingly people are shifting to LTE 4G, so 74% of the base are using 4G now, and that is a number that continues to increase. And you'll see that the dependency on 2G and 3G is diminishing. So at this point, let me turn you over to Mr. Pangilinan for the latest news for 2021.

Thank you, Annabel, and good afternoon to all of you. Starting with our revenue expectations for 2021, overall service revenue will go by high single digit for the year, broken down roughly as follows. For the wireless revenues, we expect high single digit growth. For 2021, for home revenues, we expect high double-digit growth in revenues. It's just the fixed broadband side of our business. And for the enterprise revenues, high single-digit growth for the year. The decline in revenue for international revenues, will be modest starting 2021 and will likely continue to be modest in the coming years. If not positive, assuming travel resumes, then we can gain back our growth in our roaming revenues. CapEx, around 90 billion, 88 to 92, so roughly 90 billion for the year, higher than the 72 billion we spent in 2020. DelcoCore between 20 to 30 billion, more like 30 billion as a target set really for management. And the good news is that we are prepared to increase our dividend payout by 5% to 65% of our DelcoCore as we use and compute our dividend payout basis. So that summarizes our presentation. Prognosis for 2021. I think we're ready for your Q&A.

We're now ready to take your questions. You may type in your questions by clicking on the Q&A panel on the upper right side of your screen. Kindly indicate your name and company. We will read out your questions. We'll now allow you time to type your questions. The first set of questions came from Carlos Angelo Temporal of APS. First one, given the recent news of Converge reportedly in talks with SpaceX Starlink satellite broadband, is PLDT looking into tapping this technology of low-orbit satellite broadband as well?

Yeah, good afternoon. We are talking to various of these companies which are currently popping up in the industry. Not only since this year, we actually talked since one and a half years with various companies. Low Earth Orbit is an interesting technology, although I personally believe it's a little bit blown out of proportion in terms of what they really can do. It's a fantastic technology for covering those areas we cannot cover with our terrestrial technologies. And in fact, PLDT has been for the longest time a satellite capacity provider with our visa services we give to various industries, also to maritime businesses. So I think we We understand that business very well and we are looking into it as we speak. The key question will be the financial viability given the limited ability to spend here in the Philippines.

Next question. Globe subscribers continue to decrease, particularly TM subscribers, while TMT appears to be absorbing most of the increase in subscriber count. With that, are there particular areas where the boom in SIM take up for TNT or even SMART are significant?

Jane. Are you there, Jane?

First of all, sir, can you hear?

Yes, go ahead. Did you hear the question?

Yes, sir. Yes, sir, I did. For the value-bound TNT, we've actually seen the growth for the brand across all areas. Except for the key cities in the zone in NCR, but the significant growth is observed in Visayas and Mindanao. And in terms of the business, in terms of revenues, the growth is coming from the adoption of data among this particular segment.

The next question, what's the level of DE or net debt to EBITDA that management is comfortable with?

We ended the year a little over two times so we've always indicated that we're comfortable with the two times to a little above two times net debt to EBITDA ratio. That remains to be the management policy.

And the last question from Mr. Temporal, for comparability reasons, what is the current measure of TELS fiber footprint excluding the last mile of fiber deployments?

So at a total fiber length of about 424, which was by end of last year the case, the last mile fiber footprint is about 250,000 kilometers. The next set of questions comes from Bernice of Atram. Could you share with us a trend in gross subscriber installations for wired home broadband? In fourth quarter,

The number of 75,500 average in September to December and the 100,000 target in 2021 mentioned in the disclosure, does it include wireless as well or only wired?

Only wired. That's only wired. And you have to consider that November and December there were a number of typhoons. It could have been better.

And Christmas. And Christmas. Quarter days, yeah.

And then the next question is, what was the monthly installation rate for wired home broadband in January and February of 2021?

Much better than the fourth quarter. Obviously, improving every month.

The next set of questions come from Miguel Cevidal of BPI Securities. IPLDT team, thank you for the briefing and congratulations on the results. Would you be able to provide color on what you saw in terms of consumer behavior in the fourth quarter, particularly in terms of basket size?

Gene, basket size.

Okay, so the average basket size of the prepaid customer base has actually increased quarter on quarter in the full year of 2020. So we saw the biggest basket size obviously in December because of the pent-up demand surge for loads. So it's pretty steady. Comparing it, in fact, to where we are now, it still remains to be steady.

Next question, should we expect PLDT to continue with the higher data allocations for mobile this year, or are we going to see a gradual wind down of the additional allocations?

Jane, you can answer, but I think we will continue to push for data.

Okay, are you going to push? Sir, if the question pertains to the data packs that we have, We actually enhanced the data packs, our data offerings, beginning January of this year. This is obviously because the needs of our customer for data solution is becoming even bigger. So at the start of the year, we launched the free stories. where we double the data allocation every day for all the packs under the digital media platform, digital storage platform, etc., etc. So we will be coming up with more free promo implementations in succeeding months in response to the needs of the market.

Next question from Miguel is regarding the common tower policy. Could we get a sense on what we're seeing for the common tower policy on the PLDT side? How many tower providers is PLDT looking to tap this year and how much of the new cell site builds for 2021 will come from common or leased towers?

Yeah, so we have currently six tower companies under contract and we are talking to a few more so we may Add two or three to them. It depends on their capability. And we are looking into actually doing most of our new towers, which we have planned for this year and the years to come, with those tower companies, of course, if they are able to do that. And at the moment, we talk about this year 1,500 new towers we want to build. And at the moment, we're talking to those tower companies to do all of them. Now, if they cannot do all of them, we will do some of them. But the target is really 90%, 95% with the tower companies.

The next set of questions are updates on the network rollout progress of the third operator. How ready is it and when is it expected to launch?

I mean, the launch date has been publicly communicated. We should not talk about this because we can't, but it's next week. And what we heard is that they have 1,600 sites and apparently they met the 37% population coverage. Far away from the number of sites other operators have, we have 10,000 as also Globe has. And the public opinion was this is not enough. So I think you can relate the number of towers D2 has to the other towers we have and derive your own opinion about it. As far as we can see, they are far behind. Any area where they are intending to launch, they are far behind the coverage we provide at least. So at the beginning, this will be an uphill battle for them, but they will get better over time. So we are not underestimating them, but I think we should always look at this with a pinch of salt and reality. I think this year they will struggle to get the network stable and to get a reasonable service in place. So I think this year the impact will be quite limited.

Another DETO question. How does PLDT plan to counter the plan of DETO to start rolling out in Mindanao and Visayas? Can you share more about current trends of internet in Visayas and Mindanao markets?

As a matter of fact, at least as far as we know about DETO's rollout in those areas, I think they are at about 25% to one-third of the number of sites we have there. So I think at the moment they probably have chosen areas which are easier to roll out. and that's the reason why they went more rural. But sooner or later, they have to face the challenging rollout task, for example, in Metro Manila, where it's much more difficult to get sites. But sooner or later, they will have to get there. So they will. I'm sure about that.

But I think I agree with Jorn that DETA will get better, but PLDT itself is not standing still. We will get better, we will get bigger, and So we are actually not afraid of DETO, to be honest. So that's why, in many ways, the concerns of analysts, I think, are quite misplaced.

Another DETO question. What aspect of the business do you think has biggest impact due to Dito's start of commercial operations and how will this affect the bottom line?

Our biggest concern is your concern. Yeah, frankly, right? Yes. I mean, our capex this year will be 90 billion at least, right? So where are they? So how could you imagine to catch up, even just on the network side?

The next question, any partnerships, acquisitions, or other investments planned for this year?

I think really on the horizon, we have been approached by foreign investors and operators on the data center side because we were aware that that's one of the hot investment items nowadays on investors' radar screens. We've taken the view that clearly it's a It's an area that offers significant potential for PLDT, particularly with respect to our ability to attract hyperscalers and the shift that's happening on the enterprise side from pure connectivity to solutions. Building solutions layer on top of their ability to connect enterprises, both large and small. But we prefer, if we're going to do it, we're going to allow a foreign investor to come into our data center, which I think will offer also significant gain on either dilution or divestment. We would prefer not a private equity investor because they offer basically money, but somebody who's in that space who could provide added value to the business, whether it be in terms of attracting hyperscalers that are already approaching EPLDT or helping us with the business, enabling us to create a regional presence that were attractive to us or bringing a new business into EPLDT. Apart from that, I don't think we're looking at any venture outside of what we have.

The next question, what caused the jump in depreciation as well as asset impairment in the fourth quarter?

As part of the year-end review process, we of course looked at some of the Thank you very much. Thank you very much. Shortening the Life of That, so 2G assets, only one year left to it. 3G, we took the view of a shortened life, not until 2024. Then we looked at certain other items in the network that will be part of our modernization program, so that included things like batteries, antennas, microwave stations, some of our core assets, etc. So a number of items that would be part of our The other item when you talk about the one of last year was really the higher commissions for bad debts. As we all Thank you very much. Thank you very much. because of the negative GDP growth, the more negative macroeconomic factors that also factored into the assessment of expected credit losses and resulted in higher provisions for 2020. But as the economy recovers, as the economic indicators improve, I guess there will be a reassessment of those provisions.

The next question comes from Kervin Cisayan of Manulife. Want to clarify a question earlier. Is it correct that we are looking to provide more free promos and higher data allocation going forward to address the growing demand? Are we looking to increase pricing or keeping it stable?

Jane, I think we'll keep prices stable, but I think Jane has offered free soy for all again, which we did last year. But Jane, you might want to add to that.

So right now, we've actually already enhanced our data packs. We've doubled the passion allocations with the free stories for all pack. We are preparing for further enhancements in the months, but I can't reveal the details of that, sir. So we will launch if we need to.

There's a follow-up question from Bernice of Atram. Thank you for the earlier answers. I want to clarify again on the fixed-wired broadband subscriber growth. In the fourth quarter, net ad subscribers versus the third quarter were around 79,000. Given that the monthly installs were an average of 75.5 thousand, may we ask what's causing the churn and if PLDT has been seeing improvement in the churn rates going into 2021?

Butcher Jeremiah, do you want to pick a question?

Sorry, Al, this is Jeremiah. Just to answer the question, we did hold off, we did have some special treatment for our customers given that the impact of the pandemic and making sure we kept as many of our customers as connected for as long as possible. Some of that treatment we actually concluded in quarter four, which actually saw a slight increase in our churn as we started to look at a different way of managing those customers. In terms of overall churn, we are seeing churn. We do have different technologies within our base. Within our fiber customers, we are actually seeing a very good profile for churn. Obviously, as we migrate our customers from copper to fiber, which we announced in August last year, a very large program of ours, we are seeing churn improve across the base.

Finally, from Bernice. Her last question, may I ask about the capex associated with migrating subscribers from copper to fiber and how many subscribers are left to migrate?

I think the number of subscribers left is around 400,000. The capex, I just don't know.

That's actually embedded in our whole fiber rollout. So for most areas...

We already have built the... And it's a very synergetic because we use the fiber build also for new customers, so it's very difficult to isolate the migration itself.

There's another question on DITO. Can you share your expectations on ARPU with the entry of DITO? DITO's ARPU?

Yes.

They didn't announce the data package.

Yeah, well, DITO's ARPU will be $1.99 for 30 days.

Again, I don't think we can answer that question. I guess what we have to continue to do is what can we do and offer the market. Obviously, we'll be watchful of all the packages in the market, not only DITO.

I think one disadvantage DITO has is they are not launching 5G according to their own statements while we are a full blast on 5G rollout.

Next question is from Taquani Morales. Hi and thank you very much for the presentation and congratulations on the results. You mentioned that you would be replacing all copper into fiber. When can we expect 100% of customers on fiber?

So the ADSL customers, which is the slow copper, we want to basically migrate during this year. That's the target by end of this year. All ADSL slow copper is on fiber. Besides that, we have a relatively modern BVDSL technology, which will take another two years, depending on how far we are with our fiber overlay rollout, so that in the fast copper we will replace in up to 2023. But they are already enjoying 30, 40 MVPS, so a reasonably good speed. Comparatively.

And the last question we have in the queue, can you confirm your core income for full year 20?

2020?

2020. Yeah, full year 2020. 2020.

Apparently there is a misunderstanding, right?

Yeah, there's a different figure on slide 37, so maybe I will just point to slide 19 for the reconciliation of... DelcoCore Inc. comes down to report. You may type your questions if you have any. Otherwise, we don't have anything else on the queue. So we'll give you a few minutes if there are any other questions. Otherwise, we'll give the floor back to Mr. Pangilinan for his final words. There are no other questions.

Thank you very much for joining us in this briefing. And thank you for your questions. And I guess we will speak with you again when we announce the first quarter results on May 8th. Let me just say that the first quarter The first month of this year has been good. We are on budget in respect of the results, revenues, and bottom line. February looks also quite good. And the first few days of March also are looking good. So we hope to bring you better news in the first quarter. Thank you very much. Stay safe. Thank you.