PLDT Inc.

Thank you for joining us today to discuss the company's financial and operating results for the first half of 2022. 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. Kindly note that this briefing is being recorded. Podcasts of this event will be available on our website after the call. For today's presentation, we have with us Mr. Alpan Helio, President and CEO of PLDT and Smart Communications, Ms. Annabel Lim Chua, Chief Finance Officer and Chief Risk Officer, Mr. Orlando Bello, Founder and CEO of PayMaya Philippines, as well as other members of the PLDT Management Team. Our Chairman, Mr. Manuel Pangilinan, will join us.

Thank you Melissa and good afternoon to all and thank you for joining us today. Hopefully after this we can do face-to-face already next time we do a briefing. Again good afternoon to all and thank you for being here again. Happy to report our first half 2022 business performance and give you a glimpse of what is expected for the rest of 2022. So for the first half we closed Telco Core net income in the second quarter at 8.8 billion, which is 14% versus the same period last year of 7.7 billion. But if you add up our Telco Core for the first half, it's 17 billion, up 12%, versus last year's 15.2. In terms of revenues, all-time high in terms of quarter, ended the second quarter of 2022 at 47.9 billion. And First half service revenues of 94.3 billion, also an all-time high, which is 5% higher than last year's 89.9 billion. Next page, please. Having grown by 5%, next page, please. Having grown by 5%, in terms of expenses, we're able to manage our expenses by only increasing it by 1%, to 43.8 billion, due really to lower provisions, but again, just to This is something that we have to continue to take a look at as headwinds can actually come up to the business because of the current economic conditions that we're experiencing, not only the telco industry, but in fact, globally, this has affected all the businesses. I'm happy to report also that the first happy bid is at 50.5, which is also a full-time high, 8% higher than last year's 46.6 billion. And if you add up Thank you very much. Today, 79% of our business is really driven by data. And wireless, in terms of revenue terms, highest contributor at 35.7 billion pesos, growth of 2%, or in peso terms, growth of 700 billion from last year. The fastest growing, of course, for us is home, which is now at 24.6 billion, increase of 22%, for 4.4 billion in peso terms compared to last year. Corporate ended at 11.9 billion, or 11% increase, 1.2 billion increase in terms of revenue terms. And ICT has a healthy growth of 14%, or 300 million in peso terms. Again, focus on data revenues, and we will continue to support this in our CAPEX investments. And just talking about CAPEX, We are proud to say that we're still the largest integrated telco and we continue to expand our network. We have added 1.92 million ports compared to a year ago. We have at present 6.72 million ports available for service, which is compared to last year's only 4.8. We continue to roll out on our 5G base stations. We added 2,500 compared to last year. Ending the year, I mean, year-to-date of 7,289 compared to 4,776 of last year. And also, we continue to expand. Aside from our fiber ports, our fiber optic backbone, we are now at 837,000 kilometers of fiber. And we've already have 16.2 million homes passed in terms of our coverage in network. Next page, please. In the data center space, just to complete the picture on our ecosystem in terms of network, we've also added 612 racks in our data centers. Presently, we have 6,133 racks available for service. 74% of that is already utilized, and we'll continue to expand even more um borax into the system as we are making sure that we're ahead of the demand not only from enterprises but you know especially from hyperscalers a lot of the people that we talk to today and also looking forward to really a completion of the Santa Rosa hyperscaler data center by the year so everything is on track in terms of that project and again the first 1050 racks hopefully available by the fourth quarter next year. Next page. On top of the local backbone that I just talked about, expansion of the local backbone, we did announce last Friday the launch of a Jupiter cable system, which has tripled the international capacity of PLGT. So from 20 terabits now to 60 terabits. And from a total market share of Among all the DELCOs in the country, we have 65% market share in terms of international capacity that is going into the country. And we will continue to invest. We have two other submarine cable systems that we're investing in, ABC and Apricot, that should be in service in the next year or so. And again, expanding our capacity from international point of view. Next page, please. And I'm happy to report also that We're jump-starting our journey towards the greener fleet. What you see in the picture is the first e-vehicle that we will be using on service. We've ordered, actually, initially 10 of this. And today, we have up to 5,400 vehicles. And maybe it's an aspiration, short-term, for us to have at least 10% or 8% of our fleet that is EV. This is in partnership with Isakay of Nalanda. Lastly, next page please. Just wanted to report that we continue to transform the company. Three major driving force of this transformation are number one, really a solid plan in terms of a solid plan behind 2022 and the risking of 2022 especially in There are a lot of uncontrollable factors that are hitting the business, not only the business and not only the industry, but also the country. And we also want to set up ourselves for a stronger 2023 and 2024. We've also, it is an ongoing journey, enhancing the ways of working for PLDT, continue to break down silos, enabling teams to cross posts, and strengthening our execution muscles. Thank you very much. Pass it on to Annabel for the more detailed financials for the first half. Annabel, thank you.

Thank you, thank you, Al. So let me show you our first half results today. As we have said in our announcement earlier today, despite very tough market conditions out there, PLDT is quite pleased that we are able to record A record high in terms of our service revenues at 94.3 billion for the first six months of this year, up 5% versus a year ago. HOPE continues to lead the charge with a 28.1 billion revenue achievement in the first half, growing 24% year-on-year. And within the home business, the Fiber revenues now account for 23.2 billion Thank you very much. Thank you. does face certain challenges and is down 6% year-on-year, but I'll show you in more detail later how it is also tracking better. The international and carrier, which understandably continues to be on a decline because of the lack of roaming and other international termination voice business, that's down 17% year-on-year. Moving on to the next chart, I show here the breakdown between the first quarter and the second quarter revenues. And you see here that in the first quarter, we grew our revenues by 3%. In the second quarter, we doubled that to a 6% increase. The peso amount, that was a 1.5 billion increment in the first quarter, and it's almost doubled at 2.9 billion pesos, year-on-year increase for the second quarter. Breaking it down again by the major business segments. increased to $14.5 billion in the second quarter compared to $13.6 billion in the first quarter, so that's almost a billion higher in QQ, and it's up $2.7 billion in each of the quarters relative to last year. Enterprise has increased the growth momentum from 7% in the first quarter to 11% in the second quarter. And in the case of the individual mobile business, you'll see here that the second quarter results are better, by about half a billion over the first quarter, 20.4 to 20.9. And in terms of its comparison versus prior year, the decline is less at 4% compared to 8% that was happening in the first quarter. So moving on to the next chart, we just show here the same numbers over a longer trajectory of 10 quarters, and you see the 47.9 billion record high After five quarters of sequential improvements. Next chart. This next chart breaks the same numbers into data versus non-data revenues. And as indicated earlier, 79% of our revenues in the first half are from data. And in fact, it's already 80% in the second quarter, coming from about 70% at the start of 2022. and data having grown at 10% higher year-on-year compared to the overall growth of 5%. In terms of our subscriber base, we serve 77.3 million customers across our fixed, mobile and broadband categories. With the focus on the broadband number, there are over 4 million broadband customers across our fixed and fixed wireless platforms. Being the highest growth segment amongst all of this is 2.8 million customers having added 400,000 during the first six months of the year. In the next chart, I do show a more granular breakdown of how the 400,000 increase in fiber customers happened. We were able to connect over 90,000 in each of the first two quarters in terms of new All told, we added 550,000 new connects in the first half. and another 117,000 of migrations. But there was a bit of a higher churn, particularly in the second quarter as we run through the effect of the typhoon that which hit us in December 2021. We did restore service in some areas until March, April. And then after that, when services were normalized, we did see a higher churn from some of these customers. In terms of our P&L, as indicated earlier, we were able to manage our increase in OPEX to 1% helped by lower provisions EBITDA increased by 8% to 52% EBITDA margin It's also an all-time high for us in terms of our EBITDA. EBIT of 26.1 billion, 27% margin, that's up 15% year-on-year. And TelcoCorp, 17 billion, which is 12%, or 1.8 billion better than the same period last year. Breaking this down further into the next charts. So the EBITDA improvement was on the back of higher revenues and lower provisions, and then offset by higher cash effects. of notice that within the higher cash OPEX is the impact of having to spend about 1.1 billion more because of the requirements to restore service in the ODEP-impacted area. So had that not happened, our EBITDA would actually have been higher by 11% year-on-year to be about 51.5 billion. Telco core income was supported by the higher EBITDA set by higher depreciation and higher financing costs and the back of the increased investments we've made in our fixed assets network. Next chart, please. Yeah, so this shows the EBITDA over, again, a longer period. And as Al mentioned earlier, we've now surpassed the 100 billion mark in terms of our EBITDA for the last four quarters. So if you remember, that was our guidance for this year is that we will be able to across the $100 billion EBITDA this year, and we've already achieved that as of the end of June. Next chart, telco core income, 8.2 in the first quarter, followed by 8.8 in the second quarter. So when you look at the average, we've achieved $8.5 billion. That's the highest quarter average since 2014. And we are tracking well vis-a-vis our $33 billion guidance for 2022. Next chart, please. So today, the board did approve the declaration of interim cash dividends, totally 75 pesos per share. There are two parts to this. The regular 60% payout based on the TelcoCorp EPS in the first half, 79 pesos per share. Translates to a dividend of 47 pesos per share in terms of our regular payout. And then we did also declare a special dividend equivalent to 28 pesos per share that represents part of the proceeds from the tower sale. As you may remember, we had said that when we do the tower sale, 9 billion of the funds will be earmarked for a special dividend. On the back of having closed about two-thirds of the tower sale, We've declared a dividend equivalent of 6 billion pesos together with the interim payout. And then the balance of 3 billion will be paid at final closing together with the final regular dividend for the year. Next chart, please. So in terms of our other items that affect our P&L, We did pick up our share in the Voyager losses, equivalent to about 1.6 billion, offset by some gains and dilution of 0.5 billion. And then the other items, one-offs that we have in the first half included One, the gain from the sale and leaseback of our towers, 16.5 billion. The income from the prescription of the preferred shares redemption liability of 7.8, which we already reported in the first quarter. And then against that, we have accelerated depreciation of 16.5 billion, MRP cost of about 4.8 for the manpower early retirement program we have, and then some forex losses as a result of the depreciation of the peso to 54.97 by the end of June. So all told, our reported income is at 16.7 billion. It's a good 30% up versus the 12.9 billion in the prior year. Next chart, please. So just to recap on the tower sale and leaseback transaction, I think most of you are aware that we did sign an agreement to sell 5,907 towers for 77 billion. We managed already two closings, the first closing on the 1st of June and then the second closing just Monday, 1st of August. 39.2 billion for the first closing for 3,012 towers received and then 13.2 billion for the second batch of 1,013 towers. So we would hope to close out the remaining towers of a little less than 2,000 remaining over the next few months and finish that before the end of the year. So in terms of the proceeds that we have received, $7.1 billion is used to prepay debts, and then used to prepay another $9 billion of debts. And then a substantial portion is going towards the funding of our cash capex and other requirements, so that effectively represents an avoidance of additional borrowings for this year. and equivalent about 14.5 billion already, but will lead up to about 57.2 billion. And then special dividends, as I indicated earlier, earmarked 9 billion, of which 6 billion is already declared today. In terms of the gains we had on the tower sale, the next chart will show you that we effectively have sold the assets at a significant premium over the book values. and therefore a nominal gain of 26.6 billion, of which a substantial portion equivalent to 9.6 billion is being deferred as part of the leaseback arrangements under IFRS 16. So the net gain on sale and leaseback is about 16.5 billion pre-tax and then 12.6 billion net of tax. Then next chart. One of the things we did also as of the half year was to take stock of some of the assets we have in our books, and we've identified three sets of assets for early accelerated depreciation. So these ones are, one, 3G assets that we have, which we have already shortened the life to 2024, but given that the remaining usage of 3G is down to We also, as you know, have been migrating our DSL copper customers to fiber and that's practically finished. So now we are able to embark on the next round of upgrades from the VVDSL network to fiber. Again, about 5.9 billion of accelerated depreciation as a result of this decision to migrate earlier the BPDSL customers. There will be some additional add-on depreciation in the second half of this year, about a billion, and another 1.2 billion next year to finish the full migration of the BPDSL asset base. And then in terms of the third item, that's really relating our plans to move out of our Makati headquarters. So the assets and network equipment that were impacted by this decision, we've taken at 1.8 billion accelerated depreciation. So all of this as part of the reported income with respect to the one-offs that we had in the first half of the year. Moving on, yeah, from a balance sheet standpoint, Please note that with the proceeds that we have received from First OSE, we were able to bring down our net debt to about $3.9 billion U.S. and a net debt to EBITDA ratio of 2.16 times. Our maturities are pretty well spread out. In fact, when you look at the chart with respect to the 2022 and the 2023 debt mortizations, most of that will be covered. Thank you very much. So CAPEX, we spent about 46 billion in terms of our CAPEX in the first half of the year. 36 billion of that went towards our technology spend and our assets to support values of our business requirements, which I'll explain later. And then 6.3 billion are business CAPEX relating to the last mile install costs and CPEs with respect to the new connects in our home broadband. So CAPEX, as you know, is going towards supporting all our businesses for the growth of home broadband with the addition of more ports, 1.7 million new fiber ports to be built out this year, of which we've already built 950,000 as of the end of June, to support also the growth in mobile data traffic, which is increasing as well, and then the data center requirements. So we have the expansion of our Vitro-Mahati infrastructure Thank you very much. For the power sale, I think two-pronged effect. One is there are some accelerated capex spent to finish all the in-flight projects we have with respect to upgrading the power and other support facilities, the towers we sold. So we Thank you very much. We will be able to take advantage of the Build2Suit commitments with the new tower companies that we have. Both Edgepoint and 2.0 have undertook to build new towers as well as we also free to transact with all the other tower companies in the market with respect to new tower requirements. So next please. So some highlights in terms of our network. As I indicated earlier, we're expanding our ports to 6.7 million after having added 950,000. We now passed 16 million homes with our broadband network. Fiber footprint continues to increase and we're also growing our wireless network as well to support 97% coverage of the country 3G, 4G, and 5G. And then at the bottom you see here the distribution all the devices in use so predominantly really an LTE market at this point with 3G declining and 2G actually higher than 3G but also on the downtrend and then 5G emerging at three percent. So then lastly next chart will just show the growth in terms of the 5G device adoption, data traffic growth and of course Proud to note that we are networked for 5G ahead in terms of relative to competition. So at this point, I'll turn you over to Doy for a discussion on the Maya business.

Good afternoon. Let me start by saying that at Paymaya Philippines and Maya Bank, we are committed to delivering the most advanced financial services to Filipino consumers and enterprises. Consumers and businesses want the convenience of an all-in-one money app. So, last April, Paymaya rebranded Tumaya, a fintech super app with seamless e-wallet, crypto, savings, and credit services, and prospectively, investment, insurance, and other financial services. Just the other week, we relaunched Paymaya Enterprise in Tumaya Business. Maya Business is of course the largest merchant payment processor in the country in number of transactions. And the positive traction validates our all-in-one money app strategy. As of end June, Maya had 50 million registered users across its consumer platforms. We saw more than 650,000 customers opening a MayaSafe account in less than three months. making Maya Bank the fastest growing digital bank in the country. This is like fintech on steroids. We have done what others took more than six months or even years. On the enterprise side, we are, as mentioned, the largest fully integrated payment processor for businesses with over 760,000 registered merchant acceptance points. We also have over 65,000 agents, including Maya Centers, which were previously smart padala touchpoints. Next slide please. As we grow our trailblazing financial services ecosystem, we ensure a seamless, convenient, reliable experience for our customers. For Maya Business, we are leading the charge for QRPage, person to merchant payments. We have also started offering a business deposit service for our Maya business clients. We are extending MSME credit to our Maya Center agents via the Negosio app. Soon we will be offering other credit products to enterprise partners and their customers. On the consumer side, Maya is the top-rated local finance app in the market, both in Android and iOS. We introduced Thank you.

Okay, Chairman Chabut should be joining us, but let me just give you the guidance for 2022. I guess from a service revenue growth, we are maintaining our mid-single-digit growth guidance. Home broadband will continue to lead the growth. The revenue momentum expected to even accelerate even more. Enterprise to register a stronger performance under PIN rates, ICT, and data center revenues. Wireless, facing a challenging environment, should benefit from opening up of the economy, and we do have new programs that have been launched a couple of weeks ago. We expect that the trend for improvement in the second half should follow. To tell core income, We maintain the guidance of 33 billion as we expect a robust increase in our EBITDA, possible reduction in our financing costs resulting from the sale of our towers, but also balancing it out to the effects of the prolonged pandemic and the challenging market environment. that we see today that are really affecting the consumer wallet of our consumers and increasing our operating costs in CapEx in terms of 45% of our CapEx is actually U.S. denominated, so we might see some increases in terms of CapEx. For CapEx, guidance is still 85, but as I mentioned, maybe a weaker peso on the FX rate to impact this amount at the end of the year. and I think Annabel has indicated maybe 2 to 3 billion that might be due to the FX debt. And as we continue to aspire for really delivering positive free cash flow and aiming to deliver it back to two times and really improving our position of paying special dividends. So that's the guidance that we want to share with you. Thank you.

We're now ready to take your questions. You may type your questions in the Q&A box in the upper right side of the screen. You may also click the raise hand button and just wait for the moderator to call your name before you unmute your microphone. You may also send your questions via email to dldt underscore ir underscore center at I'll read out the first questions that were sent via email by Stephen Oliveros of China Bank. The first one is, can you shed some light on how mobile top-ups fare during the second quarter, first semester, and whether there are any trends you've been seeing during the early third quarter? It's the second question, but we'll deal with that question first.

We have Francis Flores here in the room who heads our partners business. Nice to meet you, Francis.

So quarter two of this year versus quarter one, we experienced a top-up of around 2%. But first half of the top-up of first half versus the top-up of first half of last year, we did experience around 3%. But in the coming months, we expect our top-ups, especially in quarter two, to go higher, especially with increased mobility. One factor would be the We're going back to school, back to school. And of course, also our plans for the balance of the year will increase our top-ups to continue to grow until quarter four.

The second question from Stephen is how does the entry of Starlink in the country, how will it affect PLDT?

We may can take that. Well, basically, I think it's complementary to The services that we offer today, and every day, I think it also depends on how much the services are. It's going to be compared to our broadband service, our wireless service, and how much a satellite service would cost. Obviously, areas where wireless and fixed are not there, and the option being only satellites, It is an option, but I guess it depends on the commerciality of the offer in the market and how the market can absorb the cost of the service. So it is complementary, and I think we are also, Mario is here also, Camayo Heads of Network, but we also talk to entities like Starlink and others in terms of how we can work together. I don't know, Mario, whether you want to add a few words.

Good afternoon. We'd just like to quickly share that we're also talking with Starlink and similar entities on enabling them to come into the Philippines.

So in a way, just adding to what ASV had mentioned, we view it as complementary and we're open to providing services to them as well.

Saini from UBS, you may unmute your mic, you have a hand raised.

Yeah, sure. Thanks, Melissa, and good afternoon, everyone. A couple of questions from me. First is, just want to understand your view on mobile side. So, obviously, the mobile growth has been relatively slow. Is it a factor of macroeconomy, or is it because of competition? And related question is, has the competition changed in the third quarter related to the first and second quarter? That's question number one. Second question is again linked to macro factors and it has been highlighted that that remains a bit of a challenge. So just want to understand that which business segment is more exposed to macro challenges. And the third question is on the fixed broadband churn levels, which has increased. So is it, means what percentage of it is linked to audit and what percentage it is linked to the general or the regular churn levels in the market? And finally, on the data center side, the third and fourth quarter of the Makati, Vitro Makati data center, how much capacity or percentage increase in capacity it will add to PLDT's data center? Thank you.

Yeah, I guess before that, our chairman has joined us, so if there are questions for the chairman, he's also here. Let me try to answer the first two questions, and I'll leave number three, just turn to Jeremiah in the data center. I guess on the powers, and really more Francis can also input, it is really a matter of nomination. We do go through a lot of analytics in terms of where we should put up powers and locations that we need to improve coverage. It is a nomination that's, of course, assessing also where competition is. So making sure that we address the market and continue to serve our market. So it is a lot of detailed discussions between business and network on where to roll out and a lot of analytics behind that. Across the businesses, what is most affected? As a general answer to that, I think everybody's affected in terms of the share of wallet. We are seeing some growth still in broadband. There's still a lot of demand coming in from broadband. And as Francis indicated, we're seeing progress also in terms of mobile as also the lockdowns have really been, you know, not only lightened, there are no more lockdowns according to the president. He will not be involved in the lockdown moving forward. So that is positive to the wireless business. Maybe Jeremiah can answer the churn?

Sure, sure. The question I believe was what percentage of the churn in fixed broadband can be directly attributed to a debt versus what you would normally see as churn in the marketplace? Sorry, was that correct?

Yes, yes, please.

Okay, so to answer this question, I'll speak specifically about ADET first to give you a better understanding of the timelines. ADET actually struck December 16th. I was actually referencing a little bit of a different date earlier on, but it's December 16th. And one of the things that we did in response to ADET, aside from just bringing into action to help communities and families as well as homes restore services, was we actually applied a different process for those customers and different treatment. We actually wanted to alleviate some of the concern and pressure that they may have on their household, and so we actually put them under special treatment over that period. So what you'll see in quarter one, we actually saw lower churn in totality in quarter one because we were actually not treating customers in the Odette Strip, Odette Strip areas, right? So we saw a slight decline in churn in quarter one. If you normalize that and you have a look at churn as a percentage of our base for quarter one and quarter two, What you will see is churn directly attributable to specific adept areas is actually 50,000 customers, right? So it's about 50,000 customers directly attributable to the adept areas. Does that answer your question?

Understood, thanks. So if you take net of the 50,000, then that suggests that the churn level is increasing in the market. Is that a right assessment?

There's a slight uptick in quarter two, but if you actually flatten it out over quarter one, quarter two, and look at the overall as a percentage, it's not a significant increase.

Understood. Thank you very much.

Here's the fourth question. Hi, Graf. Thank you for the question on the Peter Makati expansion. Happy to report we're on track. The expansion involves two floors. One is the fourth floor expansion and the other one is the fifth floor expansion. If you look at the fourth floor, that's going to add roughly 672 racks available for the fourth floor. And if you look at the fifth floor, that's an additional 896 racks. So all told, with the full expansion of the fourth and fifth floor of Vitro Makati, we'll have 1,568 new racks by the end of the year. Thank you.

Thank you very much. Just going back on the mobile question, I think that is not answered, is that how you would characterize the mobile competition and how has it changed relative to the first and second quarter going into the third quarter?

I think in terms of competition, Our competition are actually going for more value for money. And I think that's what we need to really consider as we move moving forward. And especially in the light of the recession, I think more consumers are even looking for more value for money. So that's number one. And number two, I think our competition is really expanding their coverage and also trying to improve their network. So I think that's something that we also have to consider moving forward.

Understood. Thank you very much. This is very clear. Thanks, everyone.

Thank you. Arthur of Citi, you may unmute your line. Ask your question.

Hi. Thanks for the opportunity. Several questions, please. You mentioned that there were headwinds mainly because of inflation issues. Are you already starting to see that in terms of monthly trends on consumption? I'm just wondering if you look at it, let's say, April to July, has there been any notable changes? Second question I had is with regard to the digital bank. You've mentioned 650,000 users within three months, which is quite impressive. I'm just wondering, are you monetizing on these users? Are you already deploying the capital for items like credit? Has that already started? Third question I had is with regard to the data centers. Obviously, this is a big focus area for you. Are there any moves actually taking any strategic investors, such as what your competitors locally and regionally have been doing? and maybe it's a housekeeping question on the accelerated depreciation. Can you talk about the impact of accelerated depreciation? What's the annual depreciation from bookings that you have on 3G, VVDSL and HQ network so that we can actually model it into the following years? Thank you.

Thank you. Thank you, Arthur. Nice to hear from you. Well, first of all, on the impact on the business, I think As I said earlier, I think all the businesses have been impacted. There's some softness on top-ups for July, but having said that, I think, as Francis indicated, the market is looking for value for money propositions, which actually Francis has just launched two weeks ago. So there are offers in the market that are... Basically answering the needs of the times, and these are the packages that are already out there in the market. And we're seeing some traction in that, and hopefully we can continue to see progress in the next few months. But yes, we are very wary of it, and it's also affecting some of the broadband customers. In terms of what Jeremiah indicated, some people churning out, the ability for them to afford a continuous service. So we are looking at other solutions. Basically, just to address also the affordability issue and really looking at, for example, that fixed wireless as a solution to certain segments of the demographics of the broadband market. And the second question, I think, I'll leave it to Toy.

Yes, to your question, Arthur. Yes, we are already deploying. The deposits that we're generating, particularly, as you pointed out, for lending. Having said that, credit just started as a business for us, but we are tracking a faster trajectory than our peers, just like in savings. So I think we can see a better view of that in the next three months as as the traction increases for both sides, lending and savings.

On your third question, Artur, on the data center, I think right now we are very busy on expanding our capacities. And as you might know, we broke ground on our 11 data center, which is the biggest data center we have, hyperscaler level at that, which should be completed sometime late next year. We have not really gone forward with the view of bringing in a strategic partner at this time. Maybe we will revisit that maybe sometime next year. But right now, we're just focused on making sure that we're able to address the demands that are being asked of us. That's why we're expanding our data center capacity as we were indicating earlier. And the fourth question, I guess I'll give it to Annabelle for depreciation. and for the accelerated depreciation.

So, Arthur, there are, as I indicated, three different asset categories with different remaining lives. But roughly, the impact of reduced depreciation for the half a year, remaining half a year, is pre-tax about 2 points. Thank you.

So if I could just sneak in one last question. Are you seeing any changes from the third operator? I mean, there's a lot of talk of them facing financial difficulties. Has that changed their investment intensity from what you've been seeing on the ground?

I think they're still building out, right? I think they have announced that they have over 5,500 sites.

I think they're continuing to roll out their base stations so far. So as far as that's concerned, they're continuing to roll out. Got it.

Thank you very much. Thank you, Arthur.

The next set of questions from Ranjan of JP Morgan. Ranjan. You can unmute your line now.

Hello, good evening and thank you for the presentation. Two questions from my side. Maybe we can take the one by one. Firstly, on this accelerated depreciation. Should we be penciling more to come in the coming quarters? I know Annabelle talked about like the savings that we'll see, but should we be expecting more accelerated depreciation in the next two, three quarters?

Ranjan will take stock at year-end, so that's typically when we do a review of the assets. But I guess if we have some one-off gains from the tower sales, it's always a good time to look at some of this sort of cleanup that we can do at year-end as well.

Okay, and the second question is on the financial services side. What's driving your rapid growth in financial services? Are you offering incentives? Are you offering higher deposit rates? If you can just share, what's driving that growth?

Well, first of all, as I mentioned, it's an all-in-one app. It's all-purpose. In one app, you can do everything. So our customers are crossing from one service to another seamlessly. And when they do that, I get attracted by offers as well on particular services. In the case of savings, we're offering 6% as an introductory rate up to August, September, as we announced, but we can extend that if we feel like based on results. So it's a mixture of both the attractiveness of the offers and the fact that They're already inside the app. Just like there are many savings customers that are coming in, same case with crypto. So they get to move around the app very seamlessly to test the services.

And what are the lending products that you have grown so far on the app?

It's like a personal credit line, 15,000 pesos for small ticket items, 30 days, 10 hours. And then the personal goals, you can establish accounts where you want to save for a particular goal, and we encourage you to do that, and as a result, we reward you for doing that.

So these are more consumer loans?

Consumer, but we're already starting to offer MSME loans as well. We just launched our AYA business last week and that's part of the suite of services.

Can I just ask one last question? So how will you do collections for these loans? The issue with giving out loans rapidly is that your credit quality can

Our collection experience is right now we're tracking 95% collection rate. So it's not a bad number. Maybe the question is, are we taking enough risk? So it's been a good performance on collections.

Okay, thank you.

Next in line, Rachel of Maybank. You can unmute your line and ask your question.

Hi, good afternoon. So on the fixed line, can you share your take on competition on the fixed line, especially as you have been quite aggressive in racing speeds? I think it's about 100 Mbps. So do you think this is also causing the churn, or are those using mobile data, shifting the mobile data from broadband?

Okay, so firstly, as I mentioned earlier on, the vast majority of the churn that actually we experience in COVID-2, the uplift in churn is predominantly and directly related to ODET. So when we saw that impact of Odette, these are customers actually in those areas, those barangays and those addresses that actually had a great impact. From a competitive pressure perspective, what we are seeing, what I can share with you is we have seen still very, very strong demand from the market for PLDT services. In fact, if you look at the number of gross additions that PLDT homes have to do in H1 of 2022 versus H1 of 2021, Both growths and migrations, we actually grew over the same period, right? So it's about an 80,000 increase over that same period in terms of new customers being acquired to our Fiverr network. We have seen an increase in competition, right? And I think that's natural, especially as you start to see that there is quite a large bailout market. There's been a lot of talk about that. What we've been focused on is actually making sure that we deliver the best possible service we can for our customer. and you're seeing that come through in terms of the awards that we've been able to secure as being the fastest fixed broadband network in the country. And we're also seeing that in terms of the number of applications that we still see coming in. Having said that, we'll always make sure that our customers receive value for money and we constantly scan the market to ensure that the plans that we do offer to our customers remain really good value for money and that there is still plenty of reason to actually join PLDT Home.

All right, thank you for that. Two more questions for me. First is on this space, Starlink, I mean. So isn't it the same product being offered by your Telesat partnership? And second one is Dito a threat now that has 11 million subscribers?

I missed the first question.

The one on Telesat. So I'll take that. So I think from the TELESAT partnership that we're looking at is more on B2B solutions on higher ARPU. So it doesn't directly compete with the Starlink offer. TELESAT will not be available in-country until about 2025 or 2026. So it is not impacting right now.

On the question on DITO, I saw that that announced 11 million. At the end of the day, I think the question should be asked, what kinds of revenues are they getting? There have been a lot of, it seems like we're giving away at the start, right? So I think maybe the question should not be asked of us, but what is the revenues that they're seeing? I don't know what Francis wants to add about flavor, about what the competition is doing, but Francis did say earlier that customers are looking for The next question is from Miguel Ong. Miguel unmute your line and ask your question. Thank you for the presentation.

My first question is, I understand that the home broadband business has been one of the key drivers for revenues for the past several quarters, and this might be most likely due to the underpenetrated nature of the market. I guess my question is, does the company have an internal expectation as to how long the robust growth will last, and considering that people are moving back to the offices and mobility is increasing as well?

Yeah, as Jeremiah indicated early on, I think the demand remains to be strong. I think that's how we see home broadband to be at this point. And I think next year will continue to be still, there will still be some demand, maybe not at the same level that we're experiencing this year, which is 23%. Maybe we're looking at the higher teens next year, but we still see some growth in this market. I think, just to put some context, I think In other countries, maybe Thailand and Vietnam, in other countries, their penetration to the broadband is at the 40% or 50% level. We're only at the 20-25% level in terms of fixed broadband penetration. So there's still a lot of opportunities to grow in this industry.

Thank you for that. And just another one. On the post-paid mobile ARPUs, could you give more color as to Why it's trending a bit lower sequentially?

I think one challenge we're seeing on post-pain, again, part of the recession, I think we're seeing also a decline in ARPA from our post-pain. What we also see is the pre-paid offers are also becoming more valuable for money, not just across all the different brands. And I think that really poses a challenge for most people. So those are the two factors. One, again, related to the economic factors and also because also the pre-paid offers have also become more attractive to the most people.

Yeah, are you okay?

Hi, yeah, thanks for those.

That's it for... Arthur, you have your hand raised. You have a follow-up before we go to the chat. Can you hear me?

Yes, we can hear you. Yeah, sorry, just had a follow-up. Just to better understand the guidance, so you kept it at $33 billion for the year for Cortel Co-Profit. You had $17 billion in the first half. and basically for the second half you mentioned that you'll see DNA savings of around 2.3 billion because of this accelerated depreciation. Why keep 33 billion? Should this be stronger?

Before MBP answers that question, just to clarify, it's 2 billion for six months.

Well, I think clearly we anticipate a stronger full-year number, in other words, higher than the $33 billion. So what we're concerned about really is what Al indicated to you, and I'm sure the rest of the team here, is that the corrosive effect of inflation on consumer spending, particularly the most vulnerable portion, would be the wine and spit, because that's where the individual profits are affected, right? I think the strongest segment of PLDD would be enterprise because they've got the resources to be able to weather better inflationary pressures. And plus, I think the effect on efficiency and savings on enterprises are getting to be more realized by corporates in terms of the deployment of technology. So the middle case is really the home The home business, which I think Jeremiah has told you, to some extent they're insulated by the fact that there's a hybrid environment. They're not totally mobile yet. And of course, there's still a big market out there in terms of the demand for home fiber. And I think the total fiber demand Thank you very much. Yes, I think we will indeed report a higher number than 233 billion.

Got it. Thank you very much.

Now, questions from the chat box. After the sale transaction of 5,907 towers, how many towers of PLD will remain? And of the 5,907 towers being sold, how many will be leased back by Smart and how many will be leased back by Digital? Are these towers originally built under smart and digital?

All the list back will be by smart. Overall, we have 11,000 towers, but those are of different types of towers. So that includes the macro, the micro, etc., So, I guess, yeah, we potentially could still have another power sale transaction after this 5907, but it will be of a slightly smaller magnitude. And then we look at it probably more likely next year than this year.

And then there's another question. Any color on the recent earthquake? Did it result to any damages to your infrastructure? It would bend. And will it have any material effect, repairs, and rebates on financials?

Very little. No impact on our network. There are just some outages when we lost power. Really no major damage in our infrastructure.

Any impact on financials, rebates?

No, no. Very minimal.

Since the chairman's here, might as well ask the question of a Bloomberg headline that just came out. Sir, you might as well clarify. So the Bloomberg headline reads that the Philippines ABS-CBN and EB-5 are near an investment deal, Pangilinan says.

Well, you know, we've been in discussion with A.B.S. for quite a number of months, in fact, more than a year. So it's fair to characterize where we are in relation to the final stages of creating the agreement in terms of the introspective commercial terms of an agreement with them. If it's not, we cannot Thank you very much. So that's the basic agreement. They will acquire a minority voting interest in TV5. I think I described that's around 35%. And the patrol will rest with the media question. Of course, there are many more items in that agreement, but that's the basic agreement. Those are basic types.

We have a response from Hussaini of UBS.

Hussaini. Hi. Just one housekeeping question. In the earlier presentation mentioned that 1.6 billion was booked as an operating expense linked to audit. I just want to check how much of it was booked in first quarter and how much of it is in second quarter and is that considered as one-off or as a part of regular OPEX?

Yeah, for ODET we booked about 600 million of OPEX principally repairs and maintenance in the first quarter and then close to 500 million in the second quarter, so about 1.1 billion combined. We didn't classify them as one-off, so they effectively are embedded inside the core numbers. So that's why it's indicated that our EBITDA of 50.5 billion would actually have been 1.1 billion higher had there been no ODET or EBITDA costs. and this is just the repair cost. This doesn't include, you know, the impact effectively on the, you know, the business side for particularly home.

Understood. Thank you. Thanks, Manuel. Thanks, Melissa. Thanks.

Any last questions? Final call? If there are none, we'll now turn the floor over back to Mr. Pangilinan for his closing remarks.

Thank you all. Thank you for joining us today in this conversation with you and we look forward to seeing you again sometime early November when we announce our third quarter results and perhaps give you an idea of what 2020 will look like to Art Pineda's question. Because the full impact, I forgot to add to it, the full impact of the gains on the tower sale was actually felt. Starting next year.

Thank you.