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 2021. 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.dlt.com under the investor relations section. Also, a podcast of this briefing will be available on our website after the call. For today's presentation, we have with us our chairman, Mr. Manuel Pangilinan, Al Pantelio, our president and CEO of PLDT and Smart, Ms. Annabelle Limchua, chief finance officer and chief risk officer, as well as other members of the PLDT management team. At this point, let me turn the floor over to Mr. Pantelio to begin the presentation.

Thank you, Melissa, and good afternoon, Chairman MVP and colleagues in PLDT and to the and the panelists in the room, thank you for joining us this afternoon. I'm here to report the first half of 2021 financial creating reports. I have just a few slides and I will move it to Annabel. Again, as you know, we continue to face big challenges, but we remain steadfast in our commitment to deliver the needs of our customers and happy to report that the first half of 2021 We ended the half at $15.2 billion telco core income, which is 10% higher than the same period last year, or $1.3 billion in investment terms. Our net service revenues for the first half is also an all-time high at $89.9 billion, increase of $7 billion, or 8.5% versus last year. $45 billion was our second quarter, which again is an all-time high for the previous part. Our expenses also grew by 9% at $3.6 billion, and our EBITDA is at a very healthy 46.6 billion, 3.5 billion increase or 8%, which is a 51% margin. Next page please. So just some key highlights, key performance drivers for the first half. I mean, despite the fact that the pandemic is still around and we're about to get into another lockdown starting tomorrow and the behavior of customers really shifting towards For our Fiber Net Ads, which is our home, our home will be the star of the year. We have actually installed 478,000 new fiber installs in migration in the first half of 2021. And we have also grown our migration in the first half, an average of 182%, as we continue to shift over and migrate our ABSL customers to fiber. And for our enterprise, despite the challenges that they face, continue to face with MSMEs, we continue to grow our data center revenue, co-location net service revenues up 22%. And as a whole, as a company, our data revenues now is at 76% of our total revenue. Next page, please. Having said that, we continue to elevate our CX and continue to invest on our network, making it the strongest and most extensive digital infrastructure. We have doubled our 5G coverage in 2021, but at the same time strengthening our LTE sites. We have fast-tracked even more our fiber optic rollout to address the market demand. We have now close to 524,000 kilometers of fiber nationwide, and homes passed 11.3 million. Annabel will show the details of our network improvement this year. As I said, we continue to increase our data center capacity. We have actually 9,100 racks that are available. 61% of that is already occupied, and we are increasing the number of racks till the end of the year to another 800 racks that will end the year at 69% of the 9,100 racks that's available. And for our global infrastructure expansion, we continue to be the biggest capacity player in the country with 16 terabytes per second capacity from our 15 international systems. And looking at expanding that with three more and doubling the 16.9 terabytes to about 32, 33 terabytes by the end of 2021. So we continue to monitor our network and this has been, as we see the OPLA third-party results, SMART has sustained for the first three periods fastest mobile network recognition and the fastest 5G network in the Philippines for the first half of 2021. For the second half, and this will be four fulcrums that will be the focus of of PODP Smart. One is business, as we continue to drive our individual business segments. Individual, despite the hyper-competition, will unleash innovative products while enabling impactful campaigns that will be very relevant and embolden the passion and purpose of our customers. As I said, home will continue to ramp up its installations in migration, and we'll also continue to revamp its branding to make sure that we have more brand affinity for our customers and also driving content into the service. And Enterprise, as I said, will continue to grow its data center ecosystem, leveraging on the best fiber optic network to start winning strategic deals that is very important to the business. Second fulcrum is digital. This journey has started We will continue this as we transform, not only the way we do work, but in terms of how we engage with our customers and hopefully also improve overall CX as we speak. CX, third fold room, we will continue to transform and hopefully continue to operate excellently, improve the way we do business and really identify it's a culture transformation initiative for us where every PLC smart employee is an ambassador The fulcrum for us is sustainability, something I believe should be very close to our core business, ESG, environmental, social, and governance. And we have several programs that we have embarked on, like carbon footprint reduction programs, solid and hazardous waste management. We're also, our fleet, we are embarking on green flipping our fleet, and we will introduce electric vehicles for our fleet. And, you know, these four fulcrums should only be successful or we'll only be able to deliver our promise if our, again, transformation of people and culture is pointed. All four fulcrums, hopefully, will be moving forward with measurements in place. We are currently baselining digital CX and sustainability. And on a moving forward basis, we would want to be measured. And doing all that, we're also very focused on our CSR initiatives, education, disaster resilience, social economic initiatives, and pandemic response. For example, we've actually offered 100,000 asses sending out vaccines for certain health use. We've also offered vaccines to our partners, our sales partners, our outsourced partners, so that they're able to serve our customers in a safe manner. And as you know, the NAB Group has kicked off its own employee vaccination program, July 2 in Meralco and in VLDB Santa Ana. We started our vaccination program July 5. We've actually administered 10,146 jobs. 44% of our employee population has been vaccinated as of July 24. We will continue to vaccinate more employees. That's it for me, and I will pass on the mic for the presentation.

Hi, good afternoon everyone. Thank you for joining us this afternoon. So let me run you through the details of our financial results for the first half of the year. On the back of having increased revenues by 8% in the first quarter, we saw our second quarter revenues also rise by 9%, to $45 billion, and all totaled $89.9 billion for the first six months of the year. Thank you very much. Home registered a 27% increase in the second quarter, and combined with the first quarter, a 23% increase equivalent to $4.2 billion to hit $22.7 billion. Enterprise, notwithstanding all the challenges out there, continues to show a healthy 2% increase year-on-year. International, of course, which makes up the balance of our revenues, is down 8% because of the lack of travel and growth. Moving forward to the next slide, with the 8.5% increase in revenues, we saw our EBITDA grow by 8% to $46.6 billion, equivalent to an EBITDA margin of 51%. On a Delta Core Income basis, our Delta Core Income for the first half of the year was at $15.2 billion, a good 10% higher than the same period last year. Next chart, please. So looking at the revenue trajectory over the last 10 quarters, we started 2019 with about 38 billion of revenues in the first quarter of 2019. Today, we have hit 45 billion for the second quarter of the year, which is a record high for PLDT in terms of quarterly revenue performance. Combined with the first quarter, the semester is also at a record high. Moving on to the next chart, we also show the revenue split down by data versus non-data revenues. And clearly, it's been data that has driven the growth of our revenues over the past two and a half years. Data grew by 16% in the first half of the year compared to the overall 8.5% increase that we registered. Next chart, please. Where did the growth from data come from? So across the businesses, we're seeing data is already 76% of total revenues. Higher in home, 82%. Individual has 79% data component and enterprise, 72%. By way of the major drivers for this, mobile data is $35 billion of the $68.3 billion. That's up 12% driven by smartphone and data usage. Home broadband has risen by 32% to hit 20.3 billion in the first half of the year, and corporate data is at 10.7 billion and ICT 2.3 billion. Next chart, please. So just drilling down a bit into some of the customer segments, this is the performance of our individual business, which has continued to show growth in the middle of the pandemic. Of course, work from home has impacted The usage on mobile, because of the lack of mobility, this kind of shift has happened, and the consumer wallets are also tighter to the general situation that we have with the pandemic. But notwithstanding all of these challenges, our first half revenues for individuals rose 7% year-on-year. Mobile data traffic continues to grow, 17% higher than last year. We continue to push our Giga Life app, and now Giga Life app comes with a Giga Pay feature that is in partnership with Paymaya. Next chart. This one now shows the home revenues over the six quarters, so you see here the kind of quarterly growth that home has been experiencing. We also further break down the revenues of home into what is the red bit, which represents the fiber Thank you very much. Thank you. Thank you very much. and we continue to roll out our ports and our fiber coverage to support this increasing adoption of fiber. Next chart, please. Enterprise, as noted, there are challenges in the economy, but there are also opportunities that we see in the enterprise space. Of note is that we are Now, we have won several deals that we expect to register in the second half of the year, including the supply of some SIMS to DepEd requirements, as well as SD-1 deals for major enterprise customers. Next chart, please. This is the international revenue. We do have a bit of... Pressure here, downward pressure because of the lack of travel and roaming. But there are certain bright spots within international, which includes international data and A2A2 business segments. Sub-base, the group has 78.4 million total subscribers for the PLDT Smart Business. There's another 3.6 million signal pay TV subscribers are not counted in this number. So within this, mobile is 71.7 million. The broadband is close to 3.5 million. It's 2.5 million on the fixed broadband and another 900,000 on fixed wireless. Just to also highlight for the fixed broadband, you'll see from the metrics on the right side that during the first quarter of the year, we were averaging about 80,000 new connects per month to hit 241,000 per quarter. By 2Q, we had ramped that up to about 90,000 per month, so that's 270,000 for the second quarter. As we speak, in July, we already are almost at 100,000 new connects for our broadband, and we expect to cross 100,000 in the next few months. Now, these numbers that we show here, the 265,000, is a combined number of fiber-only net adds of actually 478,000, which includes the migration out of copper, and that's why there is a bit of a dip in the copper number to result in the 265. So to recap again, our higher service revenues of $7 billion, offset by some increases in cash effects and subsidies, allowed Our EBITDA to rise by 8% to 46.6 billion. Delta Core Income is of course boosted by the higher EBITDA, although we have higher depreciation and financing costs as a function of the investments we have been making behind the network. The lower corporate income tax rate passed under the CREATE tax law has also helped support the increase in our Delta Core Income in the first half of the year. Next chart, please. So EBITDA over the six quarters, so 23.3 billion as noted, our all-time highs in terms of the quarterly performance this year, as well as the first semester EBITDA of 46.6 billion. We have maintained our EBITDA margins the first two quarters at 51% EBITDA margin. Next chart, in terms of our telco core income from an average of about 7 billion per quarter last year, We're at 7.5 billion in Q1 and at 7.7 billion in the second quarter of this year. Next chart. Just quickly, after the telco core income, we do have other items, including our share in the Voyager performance. So if you count Voyager in, our core income with Voyager will be at 15 billion, so still up 2 billion from a year ago. and then considering all other one-off items which we've listed in this chart, our reported income was 12.9 billion, up 5% versus the reported income last year. Next chart. This shows our debt profile as of the end of June, gross debt of about 4.87 billion U.S., net debt about 4.32 billion U.S., net debt EBITDA ratio of 2.28 times. We continue to manage the liquidity situation because our debt maturities are fairly well spread out as we show here, and then we have already lined up the external borrowing requirements for the year. with various local banks. Our average cost of debt continues to be good at 4.41% and PLDT remains investment grade as rated by S&P. Next chart, CAPEX. So for the first semester, CAPEX came in at 41.3 billion. So we do expect CAPEX to come around our guidance number. Probably around 89 to 90 billion by the time the year is over. In the first half, 31 billion of the CAPEX spend went to the network to support the increasing data traffic requirements. And then another close to 8 billion pesos was really to support the growth in the business side. In particular, the last mile installed in CP requirements on a growing home broadband takeover. So other metrics to note from a payload perspective, the data traffic recurring overall and fixed is up 64% year-on-year, and mobile internet is up 13%. Other field metrics that we want to highlight, for 5G, we were able to complete more than 4,200 base stations for six months. 4G, more than 4,500 ports, in particular, 730,000. Newports out of our goal of 1.7 million for the year, so we should be able to achieve the 1.7 even before the year is over. And then from fiber kilometers, we added 95,000 kilometers, again, ahead of the prorata requirement for the build-out this year. We also want to highlight the amount of capacity our network can support from a domestic backbone basis. We can carry 55 terabits per second nationwide. That's up from 30 as of year end 2020. And our goal is to hit a capacity of 92 terabits per second by year end of this year. For international, across 15 major international cable systems that we are part of, we have 16 terabits per second. And then when Jupiter cable system comes on stream, our capacity will be up to 60 terabits per second. We show these numbers just to show that this is clearly unmatched by any other operator in the country, and it forms the basis of how we are able to support the growing data traffic usage of all of our customers in the Philippines. Next chart, please. More on the network side. From a fixed network perspective, we already passed 11.3 million homes in the country. with 4.8 million equipped fiber ports, which includes those that have been sold and available for sale. From the fiber footprint, as mentioned, we have 524,000 fiber kilometers of 95,000 from year-end level. Wireless side, our count for base stations, close to 35,000 for LTE, another close to 17,000 for 3G and then 5G is on the rise with 4,800. Just by way of some usage behaviors, the devices that we're seeing predominantly still at LTE, 78%, but 2G and 3G is now down to about 21%, the base, and then 5G, as noted, is still small, but it's accounting for about 1% and should continue to rise as the handset sets become more affordable. Zooming in a bit more on 5G in particular, so we are proud to note that Smart 5G is rated ahead of competition by Bukla, as we show here. And then in terms of the usage that we're supporting, there are roughly about 520,000 unique 5G devices that we see on a monthly basis, and that's going to continue to rise, and then data traffic, as you can see, is also more than double, just quarter and quarter. Next chart. So more on the network. These are the HUCLA speed test results speak for themselves in terms of mobile download speeds. SMART is a clear leader at about 50 Mbps. So the Philippines ranks 75th out of 137 countries. But when you consider SMART on a standalone basis, in fact,