PLDT Inc.

Good afternoon and thank you for joining us today to discuss the company's financial and operating results for the full year of 2022. This is our first face-to-face briefing after almost two years, so we welcome those who joined us today at the venue and the 58 people who joined online. So a copy of today's presentation is posted on our website, and for those who have not been able to do so, you may download the presentation from www.pldt.com under the Investor Relations section. Kindly note that this briefing is being recorded. A podcast of this event will be available on our website after the call. QR codes for the presentation, the MD&A, the FS, and the podcast are on screen later and in the confirmation notices emailed to you. For today's presentation, we have with us our Chairman, Mr. Manny Pangilinan, Mr. Alpan Lillo, President and CEO of PLDT and Smart, Mr. Danny Yu, Group Controller, Mr. Shailesh Baidwan, President of Voyager, and Attorney Marilyn Aquino, who is our CORSEC and Chief Legal Counsel, as well as other members of the PLDT Management Team in the back. At this point, let me turn the floor over to Mr. Panlilio to begin the presentation.

Thank you Melissa and again welcome to this analyst briefing and nice to see all of you face to face. I guess the sequence of the presentation will be I have just a few slides to summarize what happened in 2022. Danny will come in to dig deeper into the financial highlights of the performance and Shaylesh will come in for My updates before we pass it on to MVP for the guidance for 2023. So I guess to start with, I think it's an understatement to say that 2022 wasn't a challenging year. It is challenging for PLDT and actually most of the companies had the same experience. But we started the year, as you recall, with recovery from Typhoon Odette, which really affected our operations significantly. In the first quarter, plus the war in Ukraine also affected a lot of the, as you know, all costs also went up during that time and the issues that we shared with you towards the latter part of last year. But despite that, I think 2022 was a great year for us in terms of performance and marked the start of our multi-year transformation. And I've been talking about it most of the year. We've made progress. Gains across each of the five key strategic pillars that we focused on, elevating customer experience, improving our standing as the Philippine premier workplace, establishing industry-leading operational excellence, growing profits and core business, and we're also looking at new businesses and capabilities that will also be attractive for us moving forward, and making PODT Group the region's leading ESG telco. So just to summarize the performance last year, I'm sure you've seen the disclosures already this morning, but let me just summarize. Telco Core grew by 10% to $33.1 billion. Our net service revenues was at an all-time high at $190.1 billion with both home and enterprise delivering all-time high also in terms of the revenues year-on-year. First time we breached EBITDA at 100.5 billion, which is an increase of 4% from the previous year. We've kept a healthy margin of 51% on EBITDA in 2022. Next page. So, again, I just wanted to delve down in some of the initiatives that we've been doing. Cosmic Spirits has always been our North Star, so we invested heavily, obviously, on the network. and really trying to deliver the best network experience both in fixed and mobile and this has been acknowledged by third-party entities in terms of both our fixed and mobile. Ability Home is the country's fastest fixed network based on the UCLA reports and same with Smart having the best mobile network in the country, the fastest mobile network, the best mobile coverage for the year 2022. Next is we obviously continue to support not only the requirements of our customers, but also supporting the president's initiative on really digitizing the Philippines. So part of nation building on our part, and PLDT has been involved in nation building for the longest time, but really supporting the agenda of the government in terms of digitization. One, and we've announced this early part of last year, Really build out of the 11 data center in Santa Rosa, which is expected to be completed end of 2023. And we would expect hyperscalers and customers to start enterprise customers to start using the data center first quarter of next year. So if you recall, we have 10 right now and we're expanding Makati and Paranaque to its full capacity. In fact, we'll be running out of racks sometime next year. So we're also trying to expand even Clark a little more. But all those combined, the 10 existing data centers combined, is smaller than the Vitro Santa Rosa data center that we're building that, again, should be completed by end year. So it doesn't only support the requirements of the hyperscalers and local market, but really we are positioning the Philippines as a transit hub to the region and making sure that we're able to, you know, we're quite in a very lucky position that there is an issue, a geopolitical issue in Hong Kong. And that's why everybody's going out of Hong Kong. And there's a moratorium of build out in Singapore due to its power limits in terms of carbon emission also for Singapore. So this becomes a very great opportunity for PLDT to become a regional transit hub. Obviously, in line with government's common power policy, we have signed four contracts on sale and leaseback. Last two were with Unity of the avoidance group, partnered with Partners Group, and Frontier, which is owned by KKR. So if you add those two contracts, plus the two contracts we completed last year, We have sold 7,500 of our sites and the total amount of that sale is 98 billion in total. Again, it's our strategy of asset light and trying to bring down cost to serve and really help the country narrow the digital divide. Obviously, with the towers and data center, it would be useless if we don't also invest in international cable systems, which we continue to do so. In fact, we've invested in three new cable systems, Jupiter, which went on live June of last year, AsiaDirect and Apricot cable systems, which will really meet the rising data capacity demands of our customers and the expected entry of hyperscalers into the country. Next page, please. So transformation doesn't only mean processes and platforms. Obviously, the most important one is infrastructure. We have re-articulated our purpose, vision, mission, values, and more importantly, signature behaviors that we want to espouse across the company. and we've launched our cultural aspirations that will enable us to deliver our transformation goals that will help serve us for long term. Next page. I'm proud to say that we are forging ahead towards becoming region's leading ESG telco in all matrices. We have improved our measurements, our performance, and at least locally, I think we lead The other telcos in the country, but our aspiration is really benchmarking ourselves against leading ESG leaders. And in this case, if you look at the chart on the right, both AIS and TRUE are high operators. And we'd like to bring about our rating of 59 to even high 80s, if not close to 90, maybe in the next couple of years. We will continue to do that and really progress in ESG. So for moving forward for 2020 and beyond, as you know, transformation is a journey. So we will continue strengthening the pillars that I mentioned earlier, customer centricity, making sure that we're able to consistently serve the right quality of service to our customers and continue to improve that. We will continue to take a look at how we can operate more efficiently. Excellent in operations, more stringent controls, especially with the learnings that we had last year in governance. Our best place to work, streamlining efficiencies across the org, putting the right automation, changing the way of working, more collaboration, more openness, and really working together as a company. We also will continue to push Growing our core business. Our core business remains to be very strong. The three business remains to be strong. The numbers continue to remain strong. And we hope to see that also in the succeeding years. And looking into new areas of growth for PLDT and SMART. What is the future state of PLDT? And that's something that we're starting to define now. And as I said, still continuing to focus on ESG, doing this responsibly. Our efforts and we do have initiatives to bring down emissions by 40% by year 2030. Lastly, I think before I pass to Danny, we will stay the course, continue the transformation, providing the best for our customers. Each pillar will focus on strengthening their own capabilities, offerings, and service from home. Wireless, individual wireless, and enterprise. For home, obviously looking at other products and services that they can offer, even beyond connectivity to our home customers, affordable connectivity, packages that cut across the social economic class of our customer base, and to continue to deliver good quality of service. For wireless, obviously, looking at how we can have rewarding and dynamic digital experiences. You know, you do everything on your phone, so extending it beyond just the mobile experience. We are working with home, hospitals. We have M-Well, for example, from MPEG, and really pushing digital transactions into your phone. And the promise is to bring, deliver epic experiences for all our mobile customers. And lastly, for enterprise, a lot of our customers, if not most of them, if not all of them, are looking into digital transformation. And we want to be the trusted partner for growth, a partner of choice by continually addressing their needs. And I think most of them and the aspiration also for enterprise together with EPLDT is to participate in a big way in the cloud space. Building the capabilities in cloud to be able to serve all requirements in the country, if not regionally, maybe in the future. And really refocus APLDT into pillars, data center and cloud in cybersecurity. So at this point, I'd like to transfer the mic to Danny for a more detailed presentation.

Good afternoon.

Please allow me to present PLDT's financial and operating highlights for the year 2022. PLDT reported all-time high service revenues of $190.1 billion in 2022, higher by 4% from last year. EBITDA also grew 4% to $100.5 billion, marking the first time the company crossed the $100 billion mark. EBITDA margin remains strong at 51%. Telco core income, excluding the impact of asset sales and Voyager results, rose by 10% to 33.1 billion from 30.2 billion in 2021. Next, please. Looking at the segment performance, our home business continued to lead the charge, growing 20% to $57.4 billion in 2022, a historic high. Fiber-only revenues increased by 45% to $48.5 billion. Our enterprise business also registered an all-time high of $47.5 billion, or 8% higher from last year. Faced with industry challenges, our individual business recorded revenues of 82 billion or lower by 5% from last year. On a quarterly basis, you'll see that all segments showing positive quarterly trends amidst a challenging backdrop. Let us now discuss the segments in greater detail. The outperformance of our home business can be attributed to PLDT's superior network quality and extensive cable footprint, strong brand equity, improved installation capabilities, as well as having a fixed and wireless portfolio which allows us to offer varied technologies and price points to address market affordability considerations. Fiber home revenues accounted for 84% of the total home revenues, up from 70% in 2021. Home ARPU grew to 7% year-on-year, while net ads for the year totaled to 514,000, accounting for 60% of the total net ads for the industry. Growth in the enterprise business was driven by revenues from data and ICT solutions, as well as resurgence in the business activity with the easing of COVID lockdowns. In the data center space, PLDT is well poised to harness the potential from hyperscalers with the completion of our 11th data center at the end of the fourth quarter this year. PLDT's unparalleled network infrastructure supports the enterprise customers' requirements for capacity, resiliency, and reliability. While the individual wireless business declined by 5% year-on-year to $82 billion, there are positive underlying trends demonstrated in 2022. Smart prepaid drove the prepaid segment's growth momentum, while smart broke pocket Wi-Fi revenues more than doubled with new offers, capitalizing on increased mobility as more people returned to work and traveled. TNT Prepaid, being a value brand that caters to the mass market, was more impacted by rising inflation and tightening wallets during the second half of the year. SmartPostPaid ended 2022 with 6% full-year growth. Data usage per sub rose by 26% year-on-year to 9.2 gigabytes while data traffic rose 32% to 4,393 petabytes from 2021. In terms of service, 80% of revenues are from data and broadband, which rose 9% to $152.5 billion in 2022. Mobile data grew 2% year on year, while home broadband rose 19% to $51 billion. Corporate data increased by 12% to $24.2 billion. ICT grew 5.4% or 12%. Although nascent, it's worth noting that our data center revenues were higher by 15% year-on-year. Consolidated EBITDA crossed the $100 billion mark in 2022 as EBITDA grew by 4% to $100.5 billion on the back of higher service revenues of $8.1 billion, which fully absorbed higher cash OPEX, Provisions and Subsidies. Telco Core Net Income for 2022 of 33.1 billion with guidance for the year of 33 billion mainly due to higher EBITDA and lower depreciation which fully offset higher financing costs and higher income tax for the year. On reported basis, PLDT income stood at 10.5 billion from 26.4 billion in 2021, mainly due to the combined effect of the following.

Next page, please.

You have gain on sale of... from tower sales of about 24.6 billion. You have income from prescription of preferred redemption liability of 7.8 billion. These two were fully upset by the accelerated depreciation of about 51.2 as well as incremental MRP costs of 5 billion. Next, please. As a result of our aggressive network Upgrade. PLDT book accelerated depreciation of about $51.2 billion in 2022, which includes shortening of the estimated useful lives of the following assets. PLDT and smart transport assets affected by modernization program, migration of DVDSL network to fiber, Initiative to Sunset 3G Technology, Replacement of Existing Aerial Cables with Underground, and the Write-down of Legacy Network Equipment at the Mecati Headquarters. Today, the Board of Directors declared the payment of the final regular dividend of P45 per share and on top of that, final special dividend of 14 pesos per share for a total of 59 pesos per share. In addition to the interim regular dividend of 47 pesos per share and interim special dividend of 28 paid in September of 2022, total dividends for 2022 amount to 134 pesos. This represents a payout of 88% and a yield of about 10% computed on yesterday's closing price of 1,381. PLDT's balance sheet continues to be strong with net debt to EBITDA at 2.25, an improvement from last year's 2.38. Gross debt amounted to $251.9 billion, of which 17% are dollar denominated and 5% unhedged. Interest cost for 2022 is 4%, while the average life of debt is about 6.73 years. Next, please. Total CAPEX for 2022 amounted to 96.8 billion, consisting of IT and network of 76.9 and business CAPEX of around 12.2 billion. Included in the CAPEX spend are investment to support the home broadband business, capacity to support the rise in network traffic, the build-out of our 11 data center, and three international cable systems. This page just shows the usual network highlights. On the fixed network, we passed 17.2 million homes and cover 17,700 barangays, representing 42% of all barangays in the country. For 2022, we built 1.5 million fiber ports, bringing the total to 6.1 million. Utilization of these ports remain high at 50 to 60 percent level and we intend to further improve the utilization. PLET's total fiber footprint remains unmatched with a total of over 1.1 million kilometers. Insofar as our wireless network is concerned, Our population coverage stands at 97% with a total of 76,500 base stations. We have about 38,800 LTE base stations and about 82% of the total handsets on the network are LTE based.

Next page.

A few of our 5G statistics are found on this page. You'll note that the number of unique 5G devices and 5G data traffic continue to rise. Our 5G speeds remain faster than competition based on Okla speed test. So I now turn you over to SB for the Maya presentation.

Thank you, Danny. Good afternoon, everyone. For Maya, 2022 was a year of growth across all our business and also a significant transformation of our fintech ecosystem. On the enterprise side, where we provide payment services, we are the payment gateway from some of the largest online and face-to-face companies across the Philippines. And in this business, we strengthened our market share position as the market leader even further as we process more and more transactions, added QRPH, and other payment sources. So we are the number one processor for transactions across Visa, MasterCard, Banknet, QR in the Philippines. On the consumer side of the house, this was a year where we transformed the erstwhile Paymaya into Maya. We added a number of new services, completely changed the customer interface. And this was brought about with the launch of Maya Bank, which happened in the middle of 2022. And with the Maya Bank coming at the heart of our ecosystem, and us unifying Maya Bank in the same consumer app as we had our erstwhile wallet, we were able to significantly change the number and add the number of products and services that we offered and more importantly, provide customers with a very strong unified customer experience. And we saw the benefits of that, if you go to the next slide, please, in terms of the take up. So we saw by the time we exited 2022, we had more than 1.5 million bank customers who had deposited with the bank close to 15 billion peso. And we had also disbursed over 3 billion pesos of loan to customers to help them with their financial needs. We continue to see this momentum. If you go to the next slide, please. So through the course of 2023, we are expanding the number of services and products. So on the consumer side of the house, we continue to add new saving methods, allowing people to create personal goals to help them to enable and inculcate savings behavior. At the same time, launching newer and more products on the lending side or the borrowing side to help them tide over any financial needs. What we have seen is as we provide a unified customer interface, the customers are transacting with us two to three times of what they would normally do if it was a wallet only. So we are seeing deep engagement from the customers because this is now their primary account. On the other side of the house, we continue to expand our footprint on the SME and the MSME part. These are segments which are hugely underserved, and by helping them to digitize their payments, by providing them access to all kinds of payment acceptance from QR wallets, bank wallets, or bank applications, we are now expanding to provide them facilities to be able to deposit their cash and also be able to provide them with short-term working capital. So through the course of 2023, we'll be expanding with focus on both these segments with the addition of a number of new products and services that will keep rolling out through the course of the year. With that, I will hand it back to Al.

Yeah, thank you, SB. Before I pass it on to our chairman for the guidance, just wanted to really just share with you transactions that we announced in the first quarter of this year. The sailing lease block of 1,012 towers for Frontier. Power Associates Philippines Inc. Expected gross sales proceeds amounting to $12.1 billion. The values of the Tower Mirror are covered by the sale and leaseback transaction announced in April and December 2022. These are the three transactions that we closed before, the DOTCO, Edgepoint, and Unity of Abaitis. And the leaseback terms, including tender and lease rates, are similar. to those transactions also. So despite the different financial conditions with higher interest rates, we're able to maintain the same values per tower and the same terms and conditions from the previous transaction. So this brings total towers monetized to over 7,500 of our towers for a total consideration of 98 billion pesos. The other transaction that we just announced recently is a purchase of Sky Cable Corporation broadband business. This is valued at 6.75 billion pesos, or 100% of total issued and outstanding stock. Obviously, this will not be completed. It is subject to closing conditions, including obtaining government and regulatory approvals that we should expect in the next few months. So we will continue to disclose and announce as those provas hopefully come to bear. So I'd like to move the MVP for the 2023 outlook and guidance.

Thank you. Thank you, Al. And good afternoon to all of you, both here and online. In terms of service revenue growth guidance for This year, 2023, we expect growth in revenue line to be mid-single digit. The home revenues, home broadband will continue to grow mid-teens. The momentum for enterprise revenues will continue underpinned by data centers and IT solutions. And in mobile, we expect the environment to be challenging. Partly because of the SIM registration, which will affect revenues in the short run, of course, inflation and continuing competition. EBITDA, mid-single-digit growth for 2023, partly because of some growth in top line and aggressive cost containment in the course of 2023. CAPEX will be lower from the peak CAPEX you've seen. In 2022, we're guiding at between 80 to 85 billion. That number of 80 to 85 includes principally the fresh capex of 63 billion, and there's about 20 or 22 billion of carryover capex from the previous year. Then free cash flows, principally dividends. I believe we should be able to maintain regular dividends of 60% of our core income for the year 2023. Telco core tentatively being put at an improvement over the telco core of 33.1 billion for 2022. I think we need time to be able to recast our numbers particularly the telco core income for 2023 since the universal settlement agreements were just signed a few days ago the last one been yesterday or two days ago yeah so we need to really look at our numbers again to see how we could perform better in 2023 and 24 and 25. so that finishes our guidance portion

So we're now ready to take your questions. For those online, 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 wait for me to call your name before you unmute your microphone. You may also send your questions via email to PLDT underscore IR underscore center at PLDT.com.ph. Please indicate your name and company name so we can get back to you for any additional information you may need. So allow me now to take questions from the floor. There are microphones. Raise your hand so we can bring the mic to you. First question.

Anyone? If there are none, we'll get a warm-up from Ranjan. Ranjan, you may unmute your mic.

Ranjan?

Okay, before... There you go, Ranjan.

Hi, you can hear me now?

Yes, we can hear you.

Okay, thank you. Thank you, management team, for the presentation and the opportunity. I have a couple of questions. First is on the accelerated depreciation, if you can go back to the number. I believe it's 51 billion pesos. It's a huge number. Considering the issue that we had last year of CapEx overruns over four years, and now even the CapEx that's been spent and deployed, it seems to have a much shorter life of assets. Is that something that the management is looking at as well, like a billion dollars of accelerated depreciation in a single year? I mean, it sounds quite a large number. What is the source of that? How is the Company looking at ensuring that the capital that they deploy generates a return on capital rather than the asset being impaired. That's the first question. The second is on the Maya business. If you can talk a bit more about the profitability of the business, how the bottom line trends of that business. Thank you.

It's basically technological in-demand changes, Ranjan.

To answer your first question, that's the only underlying reason. There's no other.

Okay, it seems like a big number, right? Like a billion dollars of impairment.

Yeah, because if you look at the breakdown, you've got... PLDT and smart transport assets affected by the modernization program, that's already 19.2 billion. We also migrated our VVDSL to fiber, that's 9.7 billion. We initiated this 3G technology mainly because there are only about 4% of the total devices that's latched on our network. Then you have a replacement of existing aerial cables with underground, that's 3.2 billion, plus the write-down of legacy network equipment at the PLET headquarters in Makati, that's around 1.8 billion. We don't expect a similar level for 2023, of course.

And these are all existing assets?

Yeah, these are all existing assets.

Is that okay, Ranjan? We'll do the second question on Maya. Thank you.

Thank you for the question, Ranjan. So as I mentioned, we have the enterprise business. The enterprise business will be segmented a bit positive in 2023, around the third quarter of this year itself. And then we've got Maya Bank, which we are working towards profitability in the third quarter of 2024. So in about two years from launch, we expect and hope to make the bank profitable. And because of these two businesses, the overall company should be profitable by the fourth quarter of 2024.

That okay Ranjan?

Yeah, thank you.

Thank you. Second question online from Katie of Sun Life. Katie, you can unmute your mic.

Katie?

While we're waiting for Katie, we'll read the question that was sent through email. This is from Marvin Obordo of FYAP Securities. Could you provide color on the accelerated depreciation? I guess Danny answered that. Does this already include the assets related to the $45 billion budget overrun and could you provide some breakdown on how much is related on it or related to it?

They're not interrelated at all.

What was accelerated or provided for our assets already in the books, the 45 and now 33 billion, we've disclosed that, right? Because the extent of what we disclosed last year in December was an estimate of about 48 billion of outstanding POs, right? because of the negotiations with the vendors and the universal settlement agreements reached with the major vendors, about four of them, that has been brought down to 33 billion. So that's the new one. Those represent POs whose products need to be delivered or put into service as well as services to be rendered in the next year or two. So this accelerated depreciation really refers to existing assets. As Danny indicated, the transport network, the 3G network, because it's only about 4% of total devices we have in respect of our subscribers on 3G. And VVDSL has been overtaken by the technology of fiber. So it was just a few years ago that we put up the VVDSL service to replace the copper infrastructure. But now we're finding out that it's really better to have fiber rather than VVDSL. So these are the package of assets that we deem on the basis of prudence to write down, to simply write off. In a way, part of it is a cleaning up process of the balance sheet, both the settlement to the major vendors, and now these assets that may be either obsolescent or under threat of obsolescence, right? So in some respects, it is quite punitive, but better to clean up house at this stage, while we have the exceptional gains as well, no?

Okay, a follow-up question from Marvin and also a question from Manuel Castro of Regina Corp. Basically, the dividend outlook, I think MVP already answered that earlier, but the follow-up question is, will there be another special dividend later out of the proceeds of the additional towers that will be sold?

Well,

You know, that's a difficult question to answer as we speak.

How do I answer this?

Well, last night I spoke to, well, you know, Chris Young, right? First specific. So we were looking at the overall financial health of PLDT and I said that, look, come 2024 I think we have the ability to be free cash flowing after dividends the regular dividends and certainly in 2025 in a free cash flow to enable PLDT to start reducing our debts and certainly in 2026 where's Leo okay is that correct so and I told him that you know we we still have We have sold 1,000 towers, approximately of the 1,600 of the second package of the towers. So we have about 600 towers to close for the balance of the year. And in respect of package one of the towers, the balance to be sold is about 800 towers. So we still have 1,400 towers to go. Once all of these towers, assuming all these towers are sold and completed, The total proceeds will be about 98 billion of cash flowing to PLDT. Now, I think in the media briefing, I think Al was asked whether we intend or there are plans or there are discussions ongoing with respect to a sell-down of our data center. And the answer is that nothing on the table, nothing serious. But If we do, I think it will give rise, most likely, to some gain, depending, of course, on the valuation and the extent of the sell-down. 10%, 20%, 40%, right? That could produce a gain. So I think we just have to wait for for events to come to fruition in the course of 2023. And then I guess if the towers are indeed completed within the year and Al in his wisdom decides to sell say 40%, 30% of data centers, we may produce actually excess cash to the requirements. And so I guess the answer would be let's look back If we're able to do all of these things, the significant gains from us, it says, then are we open-minded about our special dividend? Yeah, why not, right? At the moment, since the share price has slid today, we're probably back to 10% yield, based on the regular special dividend we declared out of the 2022 income. Okay, and then to wrap up... Is that clear enough? Or... Anyway...

Okay, to wrap up the questions from Marvin, his last question is, is there any update on the pending suit filed in the US?

Well, so far, there has been no developments in that case. We have not been served any summons or any pleadings in respect of that suit. So, We will await further development, but at the moment, no development.

Okay, next question we'll take from online. Louis Helado, you can unmute your mic.

Hi, good afternoon and thank you for hosting the call. Just two questions from me. In terms of the outlook for depreciation and amortization this year, given you've taken that hefty accelerated depreciation, does that mean that It should be relatively flattish outlook this year, even with your capex. Second question is regarding the broad guidance that telco core income will be higher this year. Just wondering on the Voyager side, will this be a year of still more investments, so we should expect higher costs for Voyager this year versus last year?

On the depreciation, if you look at our capex last year, our other total PPE, it was around 302 billion. This year, it's just going to be 292. I mean, the end of 2022. So to answer your question, hopefully it's going to be slightly lower.

I hope.

On the Voyager side of the house, 2022 was a year of high investment because we launched a digital bank and transformed the business. So in 2023, as I said, we see the enterprise business becoming EBITDA positive. So our requirements in terms of our EBITDA losses will definitely be much lower than 2022.

And one last question online before we give a chance to people. Louis, you had to follow up.

Yeah, thanks a lot.

Alright, so the last hand raised is from Heather Lim. Heather, you can unmute your mic.

Hello, yes, can you hear me? Okay, great, thanks. Thanks for the presentation, management. Yeah, Heather from Sumitomo Mitsui Asset Management here. I just have one question. On the 33 billion capex budget overrun, so some of it already recognized in FY22 capex and then some of it is in the 23 capex. And other than that, so what is happening is that The products for the $33 billion will be delivered this year, next year, in the next one or two years, as you mentioned. And just to confirm, there was no debt taken to pay any of the vendors.

Most of these CAPEX items will only be delivered over the next two or three years.

Okay. Okay, and so that $33 billion is just purely in the $80 to $85 billion guide or it will be in FY24 also?

I didn't get it, sorry.

Will it only be in the 23 guidance or will it spill over?

It's going to be spread out over the next two or three years.

Okay, I understand, right? And no debt was taken needed to pay vendors this year, right?

Thank you for your time.

Hi, good afternoon. Sir, just a question on the 33 billion. It mentioned that it's on the larger suppliers, but is there a possibility of it rising or if you don't get the same terms from the smaller suppliers or is that the maximum? The 33 billion, how do you negotiate? That's the maximum?

That's the agreed amount to them. So it's unlikely to rise beyond that level.

All right. Just another question. Could you give us an update regarding the management reorganization that you announced before?

Which company? We would be here all night. Okay. No, I mean, kidding. You mean in PLDT?

Yes.

I leave it to our CEO here. Yeah.

We've started also doing a refresh on key positions. I think reorganization is an ongoing thing as the business also So there are changes, even without this issue, there are changes that are happening across the board in the Transformation Office of Noel. Also in network, there are changes happening there. Also in the wireless group, something is happening also there. So it's a continuous review of what is the right organization structure. Never going to be perfect. And as the business demands change, we have to continue to adapt, right? But specifically to this one, I think we're able to refresh certain positions, certain leaders in certain groups in the company.

I just want to ask, did you implement new systems in relation to this so that the issue won't recur in the future?

Yeah, that's been... heavily discussed also during the board this morning. A lot of data is also coming from audit, a lot of data is coming from the final report of Milbank together with PwC. We have already started adapting and implementing a number of improvements in the end-to-end capex process, just to name a few. We are implementing controls and enhancements in policies, procedures, budget planning, approvals, and monitoring, including investments in better tracking tools. So it's a bit of automation is also needed. Improvements on project management systems, data systems, make sure the company is equipped to efficiently monitor and optimize CAPEX spending. Even our procurement process has been We need to simplify our processes, especially in purchase order processing. That has been a very complex process and that's something we need to improve on. We obviously need to improve our vendor management processes also at the same time. At the end of the day also, this will be implemented by people. and I think we do have to enhance training for employees who were involved in the CAPEX process and that's something that we're also working on. So it's a much longer list than this. This is just a summary of the major initiatives, but we have started and we will continue to really improve. It's also being highlighted at the board level where we are also, I guess, reporting in more detail in terms of the CAPEX Thank you. Any other questions from the floor?

Hi, good afternoon, everyone. So a few questions on the operations side. First, notice that the fixed broadband gross ads remain steady at the 50K range per quarter. Churn gradually grew quarter and quarter. What's the reason for this? And any plans to offer lower price plans for the fixed broadband side?

I'll give it to Jeremiah, who heads home business, and explain both churn and products as you're looking into it, Jeremiah.

Thanks, Al. The first question on churn actually gradually increasing. If you recall last year, we experienced quite a large calamity with Odette. We did share with you that it had taken us some time to restore full services back to all the debt-affected areas. That wasn't done until about the later part of April, May. So by the time we started processing and actually billing our customers in those areas, you didn't start seeing that take effect with our churn until about the third quarter. We actually extended quite extensively financial services for our customers, extended their payment plans and really tried to give them as much opportunity to be able to stay with us. Unfortunately, some of those customers were not able to recover and actually have opted not to renew their services with us. So you would have seen an uptick in our churn in quarter three and quarter four. The biggest chunk of that was actually attributed to the delayed impact of a debt that came through from earlier part in the year. We have seen, obviously with rising competition, there is going to be naturally more opportunities and more options for customers. So we have seen a slight uptick with regards to churn, but that's something that we continue to work with our customers closely to make sure that we actually provide them with the best services possible so that we don't give them opportunities or reasons to leave us. I think on the second part of your question really was around other services, other products that we'll be looking to make available to our customers. So PLDT has always provided a range of products for our customers. If you look at our broadband services, our fiber services, they actually start from as low as 999 pesos and can range all the way up when we have services like our 10 gigabit per second plan. We make all of these products available and ultimately we want to serve all the different segments of the market and we give them those options. Now for other segments of the market where it may actually be a little bit more difficult to be able to get to, we are very fortunate that we are a fully integrated telco and that we also have a mobile network, which actually is one of the strongest mobile networks in the country. So we're able to offer other segments of the market with a fixed wireless solution. Our fixed wireless solution is available all the way down from sachet based prepaid pricing on a per day or seven day or one month basis and enables them to actually use it as much or as little as they want, depending on their individual circumstance. So we're looking to actually use a full array, a full spectrum of plans for our fiber, as well as our fixed wireless offerings to ensure that we serve all segments of the market.

All right, thanks for that. I have another question on the Sky Cable purchase. It seems to be cheap. How will this improve BLDP's existing subscriber base?

would you like me to so you know one of our commitments is to grow connectivity you know as we mentioned I think actually earlier on today both Manny and Al talked about one of the big drive from government to connect as many homes and as many people as we possibly can this is one way that we can actually do that Sky has an extensive network and this will actually be augmented within a PLDT network so it allows us to expand our reach and also expand the number of customers that we can serve

In terms of numbers, Sky actually has two businesses, one much bigger than the other. Approximately 5.5 billion of revenues are attributable to their fixed broadband, and the EBITDA flowing from that The smaller bit, which is quite surprising because the origin Thank you very much.

About 250,000 pay TV subscribers, of which about 150,000 are in Metro Manila.

So we will migrate first the 150,000 over to Signal, which really doesn't show up in our accounts. And then we'd probably migrate a portion of the balance in the provinces over to Signal, maybe not the entire 100,000. So it will have a modest impact on the P&L and cash flow of Thank you very much. If you add about 320,000 subs, that's about a little over 10%. You have about, last year, 2.9 million, no? 2.9 million Fiber customers. Fiber customers. So it will be more than 10%, maybe 12% addition.

Derek, anything else?

Thanks for that. I have one last question regarding Maya. So until when will the high interest rates last for deposits? And it seems like the cost of funds will be impacting the profitability of the bank in the next year or so.

Yeah, Derek. At this stage, we are offering that we're finding that the customers to earn that high interest rate need to do a number of transactions and spend with us. And each of those use cases, of course, earns a margin for the company when you do those transactions. So what we are seeing is that that engagement creates a very rich data set for us, which then goes into a credit scoring model because the customers that we are attracting are customers who in certain months have excess cash, Thank you for joining us. Park, the excess liquidity, and with BSP, we earn overnight fairly strong interest rates on the overnight placements or the short-term placements that we are doing. As the world changes, interest rate changes, we will, of course, be looking at balancing our cost of fund and our spreads over there. But really for us at this stage, the focus is to expand the credit aspect and lending more and more. So how we design products to ensure we get more and more data on our customers, whether it is SMEs or whether it's consumers, using their banking behavior in terms of transactions and then translating that into our lending models.

All right. Thank you. Thank you so much.

Any more questions on the floor? We have a few emailed, but Aaron.

Hi, good afternoon. Can you give an update on Starlink and what's the possible impact on your business? Thank you.

Is Mitch here?

But Mitch, maybe you can talk about, we're also talking to Starlink in terms of some of the services that they want to acquire from PLDT. I see Starlink as complementary to our service. I think there are areas where we're not there and the satellite is obviously available, but you also have to look at the commerciality of the service. I think first, I think you have to buy the dish, which... As far as I know, it's about 30,000 pesos one time, and the monthly service fees I think that they charge is about $100, so that's about 5,200. So it's quite steep. If you look at the ARPUs that Danny showed for home, it's about one-three, and you're already having difficulties of people turning on because they can't pay the monthly service. It's complementary to our service, obviously, but I think it depends whether the market can bear the cost. Maybe Mitch can add to More of a relationship with Starlink.

Yes, so our international enterprise team handles the Starlink and SpaceX relationship. So we were actually the one that powered them up in the Philippines. It started with Pagbilao here in Luzon. It's the only one live right now, and they're planning to expand in Visayas and Mindanao. We are also in discussions on a possible go-to-market partnership, but as ASP or boss I'll mention again it's a question of affordability from the retail side but from an enterprise side whether you're a mining company or a resort on a specific island that's dependent on microwave it's a good alternative for that so it complements basically but from a service perspective it's it's soon to be seen or we'll see how When the consumer market actually adopts it, we'll see how the performance will be soon.

Any follow-ups? My next question would be on the individual segment. We noticed that it has shown the declines versus the previous year. Can you... Enlighten us on what will be your strategy for 2023 to lower the declines or possibly return to growth.

Thank you. I think to answer your final question on what we're doing for 2023, it's important for us to understand what drove the decline in 2022. I just have three key points. The first one, actually, 43% of the decline or a total decline of 4.13 billion actually came from because we sunsetted Sun. So 43% of that, around 1.8 billion, we lost because of Sun prepaid and Sun postpaid. Unfortunately, the subscribers even migrate to Smart or TNT. That's why you will see actually our mobile data revenue grew up, but we have a significant decline on our SMS and voice because that's where most of the legacy offers of Saturn are. Second point, if you look at the trends quarter on quarter, 42% of the decline actually happened in quarter one, and that's around 1.7 billion, and 1.3 billion of that is actually smart prepaid. Now, what we've done in quarter two, when we look at the business of TotalSmart, it's fixing the fundamentals, strengthening the brand proposition, reinforcing our network superiority, and we came up with more relevant and competitive offers like the PowerAll that we launched in the second half. So from a $1.3 billion decline, we were able to manage to bring it down to $80 million in quarter four, and we will continue to do that in quarter three. The third point, In the second half, when the inflation hit us hard, you know, we have another brand, TNT. And we saw that the inflation hit the subscribers of TNT, being a mass brand, much harder. So there was like around a 650 million decline coming from our TNT business. So having said that, to answer your question, I think moving forward, I think what we've seen also in quarter one, of course, one key thing happening this year is SIM registration. It's very important for us, in order for us not just to reverse the decline or remove the decline, but to further grow, is to be ahead in SIM registration. And I'm happy to say that as of today, we're 5 million ahead of our competitor. We've also noticed that those who have SIM registered, there's a 5% increase in our book. So that's one key thing we're going to do. Second, we're going to continue to strengthen the fundamentals of our businesses for prepaid and postpaid. So going back to what Al said, at the end of the day, it's providing the best experience for network, providing the best offers, and exciting them with new products and innovation. So we're going to stick to those two strategies or three strategies for 2023. Thank you.

That's all for me.

Any other questions from the floor?

There's a question.

Katie sent her questions. She wasn't able to ask them online. Basically, she's asking about the status of the Makati operating permit and unpaid taxes.

Well, that's been resolved that same week.

We were able to have a settlement with the city of Makati. And by that Friday, I think they've taken out the closure notice on the building. Actually, they just put the sign. They didn't really padlock or prevent our employees from entering and exiting. But the same day, that was on Monday, same day, we were in touch with the office of the mayor. There was a settlement already done the next couple of days after that. So by Friday that week, the sign was taken out. So that's been resolved.

Okay, and also from Katie on the CAPEX question, together with that of Germán de la Paz, any upside to the 33 billion CAPEX overrun? I think that's similar to the question that Rachel asked. Is it my understanding that 33 billion CAPEX overrun will be for the next two years?

Actually, depending on when the delivery of the hardware and the services come in, but we expect maybe the next two, three years for the delivery of the 33 billion.

And then finally from Herman, how does management plan to utilize the 12 billion tower sales proceeds?

Pay for sky. That's what the chairman said, but Danny?

Well, I mean, the balance would be for general working capital purposes.

Partly Sky.

Partly Sky. Partly Sky. Yeah. But that won't happen. I think, I don't know, maybe the Philippine Competition Commission will need to approve the home broadband side of it. So it might take them three months or so. We don't know.

I think just one last comment on SkyK, but I think what's, aside from the additional 300 plus thousand that we're looking at. I think they have 1,800 multi-dwelling unit or MDUs that gives us an opportunity to upgrade those services in those MDUs. Some of them are hotels, some of them are condominiums. And I think eventually fiber becomes a better option in those areas. So it's really improving customer offerings, customer experience as far as broadband is concerned. And a lot of those are high-end also, Jeremiah.

Yes.

There's a hand raised.

Hussaini, you can unmute your mic.

Hussaini?

You're not able to speak. You can email your questions to us. Any last questions from the floor?

Hussaini?

You're coming in choppy.

Yeah, we will try my best. So just two questions from me. One is on SIM registration. Just wanted to understand that is sim registration having any competitive implications? I mean, in other markets where sim registration took place, we had seen some competition creeping up. So just wanted to understand how it is progressing and is there any impact on competition? And the second question, again, is competition more related to macroeconomic situation in Philippines? Is that having We can hear you, yeah. Yeah, so the last question is linked to inflation, high inflation, and relatively weaker macroeconomic situation. Is that having any impact on consumer spending and which in turn is leading to competition, competition in the sense more value for money kind of packages or more, say, packages from in the market?

Hi, I can answer those two questions. On the first one, on SIM registration, definitely it will have an impact on how a brand or a business will be more competitive. Like I said a while ago, I think this is the window of opportunity for you to actually get primacy. There's a lot of dual SIMers in the Philippines, and normally when a subscriber would register his SIM, There's already a commitment to stick to it and therefore lesser churn. So definitely, I think the brand or the business that will do a better job in SIM registration will have a bigger competitive advantage this year. And that's why we're investing a lot of resources and effort to make sure that we are ahead of our competition when it comes to SIM registration. On your second question, definitely inflation since it hit us hard at the start of the second semester of last year. What we have seen is, I think not just for us, if you look at the numbers of our competitors, it definitely affected, number one, the lower income consumers even more than the middle to upper income. And then in our case, those are mostly the TNT subscribers and in our competition, that's TM. You will see that both brands are more affected in terms of business because what happened is those consumers actually have lessened their income. Thank you very much. But we've learned a lot on how to counter that. We made sure all our offers are more competitive and we put more value for money in all our promo offers, especially for prepaid.

So a follow-up on that from Ken Gutianzi. Oh, sorry, Huseini, did you have a follow-up?

Yeah, that's it from me. Thank you very much. Very helpful.

Thanks, Hussaini. So there's a question from Ken Gotianze. Looking at mobile, it appears that you lost some revenue market share in the fourth quarter from being flat year-on-year in the nine months. Could you elaborate on the weakness being seen in the mobile segment relative to competition?

Okay. I think in quarter four, what we saw was, again, because compared to our competition, we have a bigger contribution in our business for the value brand like TNT. Thank you very much. In terms of spending-wise, amongst the middle to upper class. So I think that's one. That's why they managed to grow the ARP even higher.

This next set of questions were course through Leo, so obviously from the banks. Let me read them. Does PLDT expect any write-offs in 2022 or in 2023 arising from the CAPEX overspend? I think that's been answered earlier. Why was the CAPEX overspend an issue and why did it take so long to discover this? How was the CAPEX overspend reflected in PLDT's books? What are the exact causes of the overspend from the perspective of market dynamics, procurement process, and reporting? and then what measures and policies are going to be put in place. I think that question has been answered as well. And please disclose the results of the forensic investigation conducted.

We've already disclosed the result of the forensic investigation in our Disclosure today, which is that there is no evidence of fraud, intentional concealment or bad faith conduct on the part of any employee of the company. So, and the other question, the question is whether, when will it be reflected? Yes.

Was it reflected in the books?

Oh, when it will be disclosed. That's privileged information.

Okay. Yes, the investigation, the report will not be disclosed. It's an attorney-client privilege. So what we have disclosed is the result of the investigation. But the other question is, when will it be reflected, the 33 billion, the CAPEX carryover? The note in the 2022 audited financials included a note on the Universal Settlement and the 33 billion and the fact that there will be continued engagement on the 20% non-major vendors and the outcome of the Universal Settlement for all the vendors will be an item or will be reflected in the 2023 audited financial statements.

Yeah, I think there was a question on what was the main reason for the overrun. I think it's really the multi-year contracts that was the main reason that there were overruns. It was not an overorder, but really just the monitoring of the CAPEX. We were not able to include the multi-year contracts.

And just to clarify, when we talk about overrun, we interchangeably use overrun and carryover. It's actually really a carryover. The CAPEX that will be continued in the next few years after their commitment.

There's a follow-up from Katie regarding the tax issue. Understand that the matter was settled in a short span and the office was not locked. Nonetheless, there are still some outstanding tax issues and it was also reported that there was no permit issued since 2019. Can the company confirm that the proper operating permit has since been issued and provide an update on the unpaid tax matter?

For the charges against both SMART and DMPI for the business permits has been issued. They're just negotiating with Makati City to cancel the surcharges, interest and penalties. Thank you very much.

One last round of questions from the floor before we deal with the one sent by email. Last chance. The last one from Ken Gotianze was on Maya. There's a sizable gap between deposits and loan disbursements. Could you talk more about your approach on asset and liability management?

Sorry, sorry. Sorry, in relation to what has been explained earlier, the issue on surcharges and penalties is something that we are convincing Makati not to charge us because from the beginning when this issue was pending and pending in court, we... We consigned the amount for the payment of the business permit. So in our view, we should not be liable for penalties or surcharges in this case. And that is the ongoing discussion.

Because there is a pending tax issue, which is a bigger tax issue in relation to the franchise tax. Right? So... Since that was pending for a number of years, and PLDT was trying to pay for the business operating permits as and when they fell due in any of the relevant years, they refused to accept it. So you can't do anything, right? That's why they didn't issue a business permit.

Katie, what the chairman said is we wanted to pay the permits, but they didn't want to accept them, so we can't do anything. That's why Attorney Mava said we can sign the amounts with the courts due to the pending tax issue. So if we can move on to the last question, if there are more questions from the floor, that one was from Maya, about Maya. There's a sizable gap between the...

I know you know, we're also, of course, there was clearly a difference of opinion as to the quantum of taxes due on flowing from the franchise tax, no? So that's, I don't want to get into the details of that because that might... Anyway, we were willing to pay at least what we think was due. and then maybe the differential we could argue a bit later so at least we settled that point because ang lumalabas particularly sa daily inquirer is that we were unwilling to pay the franchise tax that was due to Makati City we were except for the calculation so kung pagkapin nila yung aming calculation, bibigay namin yun eh until finally it was settled by way of Anyway, there was a compromise number, so tapos na. Well, for the meantime.

The final question on Maya, there's a sizable gap between deposits and loan disbursements. Could you talk more about your approach on asset and liability management?

Sure. As we said, we're very pleased that the customers have reacted so positively to the launch of Maya Bank. People have found it extremely easy for us to be used and have transferred their funds over. And we are seeing a lot of usage overall, not just depositing with us, but like I said, the whole model is based for them doing transactions with us. So first of all, that helps us create Thank you very much. Thank you very much. as they learn about the customer behavior. But we are seeing, like I said, a rapid ramp up. So what we disbursed in the first few months of 2022 towards the end, about 3 billion peso. In the last couple of months, we are disbursing close to that number and now in a quarter. So we are seeing a big, steep buildup. And on top of that, we are launching new products. So SME, for example, for segment, even for consumer, there are new products coming out. Thank you very much. With different line sizes, we will start seeing the asset liability beginning to match, getting closer in terms of disbursement of loan versus deposits.

Hussaini, you still have your hand raised. Did you have a follow-up question?

No, no, sorry. I forgot to lower it down. I will do it again. Thank you.

Thank you. All right. If there are no other questions on the floor and none from the participants online, last chance. Okay. So if there are no further questions, we'll now turn the floor back to Mr. Pangilinan for his closing remarks.

Well, let me just reiterate, I think our collective thanks for your attendance today, physically and online. I think it's actually To all those present in this hall, it's good to see you after a three-year absence, right? And we plan to give you a better idea of the telco core income guidance for 2023 when we announce our first quarter results sometime in May this year. So hopefully we could see some of you, all of you, and more of you. Cam May. I'd like you to know that we feel the disappointment that you guys must feel as well that we fail in our governance in relation to this CAPEX issue. And so for the past five or six months, a great deal of attention has been paid by management in rectifying That particular issue, and of course, the relevant controls that have to be imposed, including personnel, I think to your question, Rachel. So we are mindful of that, and we are mindful as well that we have taken a severe knock on our reputation. So we know we have a big job ahead in trying to prove that the governance principles which we have adhered since the time that First Pacific invested in PLDT sometime in 98 is continuing to be upheld. And in mitigation, whilst we cannot publish in full the report of Milbank and the other accounting and Legal advisors that they have engaged in the course of their forensic investigation, we have disclosed the main conclusions flowing from that report. And Mava told the board that she will retain a copy of the full report in our offices and anybody, any director or advisor of the board is free. Welcome to come to the office and read the full report. Maybe I guess as a U.S. Secrecy Act, at some point after 50 years, we might be able to release the report to you. But I think some of you are young enough perhaps to survive the 50 years, right? So we know we have a big job to do. But through it all, what we Endeavor to do this afternoon to you and to media is based on the 2022 numbers. You've seen the numbers. It is as strong as can ever be. It is certainly much stronger than the numbers you've seen with respect to the other telcos who have all reported the results for you. And we will certainly endeavor to improve on our 2022 results and make it better in 2023 and beyond. and because we do want to prove that despite these difficulties that we have encountered the last five or six months, we will recover. A stronger company than it was before because as I told media, somebody said, let's not waste this crisis. Let's use it as an important event for us to remedy what's wrong and move on. It's important as well This is my reminder to all that we get back on the saddle, that we should return to business as usual as quickly as we can and do certain things that will improve both the processes, the controls, the operations and the profits of this company. So thank you again and we wish you all a happy Easter. This is our Good Friday, actually. We were flagellating ourselves the whole day. So, thank you.

And that concludes our briefing. Thank you for joining us today. Have a good Easter. Join us for refreshments outside. Good evening.