PLDT Inc (PHI) 2008 Q1 法說會逐字稿

Good afternoon, everyone, and welcome to PLDT's conference call to discuss the Company's first quarter 2008 financial and operating result. This conference call is being recorded. Replay information will be provided at the end of the call. At this point, I would like to turn you over to Miss Melissa Vergel de Dios for the introduction. Please go ahead. Thank you.

Good afternoon. Thank you for joining us today to discuss PLDT's first quarter 2008 financial and operating results. As mentioned in the conference call invitation, today's presentation is posted at our website. For those who have not been able to (technical difficulty), you may download the presentation from www.pldt.com.ph under the investor relations section.

For today's presentation, we have with us members of PLDT's management team. Joining us today are Mr. Napoleon Nazareno, President and Chief Executive Officer for PLDT and Smart, Mr. Christopher Young, Chief Financial Advisor for PLDT, Mr. Doy Vea, Chief Wireless Advisor for Smart, Miss Anabelle Lim-Chua, Treasurer of PLDT and Chief Financial Officer of Smart, Mr. Ramon Isberto, Head of Corporate Affairs for Smart and PLDT, and Miss Debbie Tan, Investor Relations for Smart. At this point, let me turn the floor over to Mr. Napoleon Nazareno [to discuss results].

Good afternoon. Thank you for joining us.

(OPERATOR INSTRUCTIONS). Please go ahead. Sorry for the interruption. Please go ahead.

Good afternoon. Thank you for joining us. 2008 started out strongly for the PLDT Group, as you will see from our first quarter results. Service revenues are up PHP1.8b or 6% to PHP34.9b. EBITDA increased by 7% to PHP21.8b, with our EBITDA margin improving to 63% from 62% in the same quarter last year and from 61% for the full year in '07. Income before tax grew to PHP16.2b, representing a 21% growth year on year. Reported net income also grew 21% to PHP10.4b, from PHP8.6b last year.

Provision for income tax grew by PHP1b from PHP4.6b for the first -- in the first quarter of '07 to PHP5.6b this quarter. Core net income rose 11% to PHP9.3b. This translates to an earnings per share of PHP48.87, compared to PHP44.13 for the first quarter last year. The period ended with the peso appreciating by 13%, to PHP41.756 against the U.S. dollar, compared to PHP48.217 last year. Using these exchange rates, our first quarter reported and core income show increases over last year of 40% and 28% respectively.

Let me now take you through a more extensive discussion of our performance. PLDT's core income grew by 11%, or close to PHP1b, to PHP9.3b in the first quarter of 2008. Increases in revenues and EBITDA of 6% and 7%, respectively, as well as a 32% decrease in financing costs, account for the improvement in core income. In U.S. dollar terms, our income for first quarter '08 stood at $224m, up 28% from $175m last year. Reported net income for the first quarter '08 amounted to PHP10.4b, a 21% increase over last year. In U.S. dollar terms, PLDT's reported net income grew 40% to $250m compared with the same quarter last year.

In order to align our accounts under Philippine Financial Reporting Standards, or PFRS, and International Financial Reporting Standards, or IFRS, starting January 2008, changes in the mark-to-market valuations of certain derivatives related to the Company's 2009, 2012 and 2017 bonds which had previously been designated as hedges would be reflected in the P&L.

The higher reported net income mainly resulted from a PHP1.5b net gain on ForEx revaluation and derivative transactions composed of a one-time gain of PHP700m resulting from the de-designation of the PO swaps and option contracts as hedges, a PHP1.1b net gain in mark-to-market valuation of all our derivative instruments and a PHP300m ForEx revaluation loss on our financial assets and liabilities.

In the first quarter of '08 -- this is the page four. In the first quarter of '08, consolidated service revenues grew by PHP1.8b or 6% to PHP34.9b. Contributing to this increase was the 14% growth in data and ICT revenues, which now account for 53% of total service revenues. Offsetting part of this growth was a 2% decline in voice revenues, largely due to the peso appreciation year on year, partly offsetting increases in cellular inbound and outbound traffic. Service revenues of PHP34.9b for the first quarter is slightly higher than PHP34.8b in the fourth quarter of last year, which had the benefit of holiday spending for the Christmas season.

Approximately 36% of total service revenues are U.S. dollar linked. Of this, 28% is directly affected by changes in the peso movement, while the other 8% is impacted by the annual foreign currency adjustment in our local exchange rate. Had the peso remained stable, our revenues would have grown another PHP1.8b or 5% for a total 11% growth year on year.

EBITDA grew by 7% to PHP21.8b, with EBITDA margin showing an improvement to 63% compared to 62% for first quarter '07 and 61% for the full year '07. The margin for wireless remains strong at 64%, fixed line steady at 56%, while ICT is at 14%.

On the next slide, CapEx for first quarter '08 stood at PHP3.1b, with PHP1.8b spent by the wireless business, PHP1.2b with the fixed line and PHP800 -- PHP100m -- sorry, PHP100m for ICT. Our CapEx guidance for 2008 is PHP25.4b, with PHP15.2b earmarked for wireless, PHP8.8b for the fixed line and PHP1.4b for ICT business. Major capital expenditure items include capacity in support for growth in wireless and broadband subscribers, transmission and outside plant upgrades, as well as additional international bandwidth capacity. Should cellular and broadband subscriber take-up continue at these strong levels, CapEx spend for the year could be higher.

We generated PHP17.3b of free cash flow in the first quarter of '08, roughly the same level as the first quarter of '07. Netting out the cash for the common dividend payout in April of approximately PHP23.4b, net debt for the first quarter stood at $900m. Net debt to EBITDA and net debt to equity continued to be well under one times, at 0.48 and 0.41 respectively, again net of the cash for dividend payout.

On the capital management side, a total of 346,260 shares have been purchased as of April 18, 2008, after which we observed our pre-earnings announcement blackout period. Total acquisition cost for the shares amounted to PHP942m or an average of PHP2,720 per share. These shares will be held as treasury shares.

Our cellular subscriber base, on the next slide, grew to 31.6m as at end March 2008, reflecting a 24% growth year on year and a 5% growth from the end of '07. The 1.5m net additions in the first quarter of '08 were 17% higher than the 1.3m added in the same period last year. As of end April, our subscriber base passed 32m. Growth in net adds during the first quarter '08 came principally from Talk 'N Text, which added 1.25m subscribers, nearly three times the net adds in the same period in '07. This strong take-up of TNT or Talk 'N Text is consistent with its target market segment, which has the highest potential for subscriber growth.

Net blended ARPU declined by 15% year on year to PHP221, but margins remained above 60% as subscriber acquisition costs have continued to be well controlled, with subscriber acquisition cost now only at 20% of one month's ARPU.

Service revenues for the wireless business are up 8% to PHP22.5b year on year, and approximate the service revenue of PHP22.4b for the fourth quarter '07. Growth was driven by an 11% increase in data revenues and a 122% rise in wireless broadband revenues. Data services contributed 55% of total cellular service revenues in the first quarter '08. EBITDA improved by 8% year on year to PHP14.5b. EBITDA margin would have remained at 65% if not for a one-time charge in the satellite business, which resulted in a slight reduction of EBITDA to 64% from 65% last year. We estimate that Smart continues to hold 55% subscriber market share and 59% revenue market share for mobile.

On the next page, Smart's continued growth was supported by above-the-line campaigns and a major prepaid service launch with SmartBro Prepaid Plug-It. SmartBro Prepaid Plug-It makes the Internet available to a broader segment of the population with affordable sachet pricing, nationwide coverage and easy loading. For only PHP10, SmartBro Prepaid subscribers can access the Internet for 30 minutes, using a small USB device called SmartBro Plug-It that can be hooked into a desktop PC or laptop. Even as we continue to provide great value in basic voice and SMS services, we will make broadband as pervasive, bringing new technologies and compelling content to the market.

We also continue to build our Financial Services roster. We have partnered with NCB, or National Commercial Bank, in the kingdom of Saudi Arabia for QuickPay, with Landbank for the Landbank OFW Card, and we have expanded our Bank Alliance Card -- Cash Card to include Landbank, China Bank and RCBC in addition to Banco de Oro. Services to be offered include remittances, payroll, as well as lending and disbursements.

We are also enabling social business enterprise by supporting the Hapinoy project. Hapinoy's goal is to alleviate poverty one sari-sari store at a time. Smart Money provides the robust platform needed for MFIs to extend micro-financing to the D&E market, thus providing them with a sustainable means of livelihood. These stores, currently 2,500 of them, also act as Smart retailers and loading centers.

Finally, our 3G usage continues to grow and our recent acquisition of CURE fits into our plan of expanding and enhancing our 3G services, including higher-speed broadband services. As you know, CURE is one of the four operators granted a 3G license and we are looking to use CURE as a platform to launch differentiated 3G initiatives for target markets.

On the next slide, it is notable that the fixed line business, which has shown decline in the past, registered modest growth this quarter. Service revenues are up 4% to PHP12.4b in the first quarter '08. Had the peso remained stable, the fixed line would have reflected additional revenues of PHP500m or another 4% in additional growth. Corporate data, DSL, LEC and NLD revenues all showed increases compared to the same quarter last year. Only ILD, the international long distance, declined, due to the impact of the 16% peso appreciation, as well as lower call volumes.

The contribution of data services to total fixed line revenue continues to grow and is now at 35% compared to only 30% last year. EBITDA increased by 5% to PHP6.9b due to higher revenues and lower cash OpEx.

Just a brief update on the NGN. Over 619,000 ports have been rolled out and there are now close to 117,000 voice subscribers on NGN and over 53,000 DSL subscribers.

We are excited, on the next page, about two new fixed line offerings, namely PLDT Landline Plus, or PLP, and PLDT TalkPad. Representative of the convergent offerings which we will see more of moving forward, we launched PLP, a fixed-wireless telephone service that uses a fixed wireless platform in the delivery of voice and data services. Our plan is to launch PLP in areas with limited or non-existent PLDT outside plant facilities.

A postpaid version has been in the market since March '07 and a prepaid offering was introduced in March this year. Demand and take-up have been very strong, given the service value proposition. As of the end of March, we had nearly 75,000 subscribers. We expect to increase this by more than 50% within the current quarter.

With the growing availability of broadband, we also introduced TalkPad, an Internet-based service that allows the completion of a VoIP call at domestic long-distance rates. We are aware of the impact this would have on ILD and NLD revenues, but we would like to capture the VoIP market also. Take-up of the service has been encouraging.

On the next slide, momentum in broadband growth carried through the first quarter of '08, with total broadband subscribers now at 661,000, up 82,000 or 14% from 579,000 at the end of '07. SmartBro added over 46,000 subscribers, while DSL added 35,000. As mentioned earlier, we recently introduced a prepaid broadband offering called SmartBro Plug-It Prepaid. Take-up of the prepaid service has been very encouraging and we expect this to help boost subscriber growth even more. Total service revenues from broadband grew 51% to PHP2.5b and now represent 7% of total service revenues.

With our wide range of broadband offerings, PLDT's reach covers households, small and medium enterprises, or SMEs, as well as corporates. The PLDT Group's estimated market share of the total broadband market is about 70%. Based on market research undertaken in November 2007, PC penetration is estimated at approximately 9%, or about 1.6m households out of the 17m or 18m households or so. PC ownership continues to grow, with laptop prices continuing to soften.

Service revenues of ePLDT, on the next page, our ICT business, increased by 6% to PHP2.6b, contributing 7% to the total PLDT Group business. The growth in ePLDT's service revenues can be attributed to an 11% increase in revenues from the customer interaction services, or Ventus, as well as a 4% increase in revenues from SPi, or the knowledge process solutions business.

Of the total ePLDT revenues, 85% are accounted for by Ventus and SPi. Contribution from the different verticals are as follows - call centers 40%, publishing 19%, medical billing 16%, legal 15% and medical transcription 10%. 80% of ePLDT's service revenues are dollar-linked, which has in particular negatively impacted the CIS and KPS businesses. Service revenues for Ventus grew 21% in dollar terms, but only 7% in equivalent pesos.

ePLDT EBITDA margin of 14% was lower than 17% in the first quarter '07, but higher than the 11% reported for the full year '07. This was largely due to the negative impact of the peso appreciation on the largely dollar-denominated revenue base, higher compensation costs resulting from the integration of Springfield in April '07, as well as the expansion of the CIS business, and higher selling and promotions expenses consistent with initiatives to step up marketing efforts in the United States. Core income for the period stood at PHP59m.

On the next slide, let me now discuss the operating information on ePLDT's various businesses. The combined number of employees for Ventus and SPi grew to nearly 14,000 at the first quarter '08. KPS operates in 15 sites, while CIS has seven. In terms of prospects, Ventus has a pipeline of potential new contracts as well as expansion of existing contracts, so energy is focused on signing up these leads. At first quarter '08, Ventus had close to 6,500 seats.

On the other hand, the outlook of SPi's verticals varies. The publishing and medical billing businesses continue to be strong and profitable. Legal is breaking even and its focus is on stepping up sales efforts to generate greater revenues, in order to maximize the fixed overhead in place. The medical transcription business is the one that faces the most challenge. In trying to maximize off-shoring potentials, the business faces quality and productivity improvement issues which need to be hurdled in order to gain more U.S. clients.

Two of ePLDT's other businesses, namely Vitro, its Internet data center, and Level Up!, its Internet gaming industry -- subsidiary, are doing well. Vitro continues to sign up new server hosting and co-location clients. Service revenues for the first quarter '08 are up 4% to PHP143m and EBITDA margin is at 49%. Level Up! remains the leader in the Internet gaming industry, with active players stable at around 700,000 monthly. Service revenues are up 27% to PHP77m and EBITDA margin at 8%.

ePLDT is determined to surmount the challenges posed by its different businesses and is targeting to contribute up to 10% of the total PLDT Group service revenues in the medium term.

On the next page, while we had good operating results in the first quarter of '08, we continue to monitor key metrics that may impact our operations for the rest of the year. At the end of March '08, inflation in the Philippines had risen to 2006 levels and certain quarters predict higher inflation rates. Although inflation will certainly affect the public's purchasing power, tightening of spend will likely focus first on reducing the bigger ticket budget items, such as funds for amortization of second homes or electricity costs. In terms of telco spend, the cost of entry at PHP30 per SIM as well as top-ups of PHP10 per day may be low enough such that the effect may be limited. This insulation appears to have carried through, as we had a healthy level of net additions and top-ups in April.

Another key metric is the peso/dollar exchange rate, given that 36% of our service revenues are dollar-linked. Whereas the general view was the peso would continue to appreciate versus the U.S. dollar, recent developments seem to indicate that the peso may settle at around PHP42 to the U.S. dollar. Incidentally, our guidance for this year assumes this exchange rate. Nonetheless, we continue to manage our foreign exchange exposures on balance sheet and in the P&L.

OFW remittances will continue to provide funds that find their way to telco expenditure. Although the purchasing power of each OFW may be affected by inflation, global recession and the peso movement, in aggregate, the number of OFWs is expected to continue growing. With this, we expect that the multiplier effect of remittances will reach more households who would want, among others, a mobile phone and broadband connectivity to stay in touch.

On the next page, finally, I would just like to affirm the guidance for '08 which we announced in March this year. We have provided guidance of 7% to 8% growth in service revenues, or PHP145b to PHP146b, and 6% (sic - see presentation) growth in core net income or about PHP37b.

We seem to have deflected, for the meantime, the economic downturn that is affecting much of the world. Our sustained growth in the first quarter indicates that inflation and rising prices have yet to affect our businesses. Nonetheless, we realize that a global slowdown will undoubtedly take its toll on all businesses eventually and that the peso/dollar exchange rate will continue to impact our financials. However, we have put in place measures that are intended precisely to mitigate these adverse developments, which we will continue to monitor very closely in the remaining nine months of the year. Though cautious and vigilant, we are confident still that the year 2008 will be a better one.

Thank you and we are now ready to take your questions.

We are now opening the floor to your questions.

The floor is now open for your questions. (OPERATOR INSTRUCTIONS). First, we have Karen Ang from Citigroup. Please go ahead.

(Technical difficulty) expectations are for margins in the three main segments of the business, i.e. wireless, fixed and ICT, for 2008.

And the second question is related to that, but specific to the fixed line. What are your NGN rollout targets for the year and maybe if you have -- if you can share the targets for the next couple of years? And what sort of EBITDA margin improvements or cost savings are you expecting from the NGN rollout over the next 12 to 24 months?

And the third question is on the share buyback, if you can tell us what your target buyback amount is for this year, will you buy back the entire 2m allotted, and if there are any plans to cancel the treasury shares. Thank you.

Karen, could you repeat the first question? We didn't catch it.

Yes. The first question had to do with the EBITDA guidance. I noticed that the margin assumption there is for relatively flat to slightly down at 60%. I'm just trying to understand what the assumptions are, going into each of the three main business lines in terms of margins, whether they're stable to down across the board or there's more movement from one to the other.

Well, maybe I can try that one [fully]. I think in the presentation itself we've given a breakdown of the margin across the three lines of business. I think it's on page four. So the wireless margin was about 64% in the first quarter, which was just a shade below where we were last year. And in fact, to some extent, that was influenced by a one-off issue. So we really would expect the margin to stay broadly in the mid-60s. And I guess there's nothing on the immediate horizon that we would see any significant change there.

On the fixed, it was a bit higher in the first quarter than we've seen recently and I guess our expectation is that, as the -- as you indicated, as the NGN builds out, that to some extent results in cost savings. Against that, and again as we've discussed, the inbound international business continues to be pressured. So we would see the EBITDA margins on fixed being, in the medium term, above 50%. I think it will vary from quarter to quarter, depending on the revenue mix and to some extent what happens on the cost side.

The one which really is -- probably takes more explaining is really on the ICT side. Whereas ICT, which is principally driven by outsourcing, is actually lower than the first quarter of 2007, it's actually 3 percentage points higher than the margin for the full year. So our expectation would be, I think, that the ICT and ePLDT margins actually stayed above the 14% level and probably trended up, we would hope, maybe not so much in the first half, but as we move into the second half of the year.

With regards to the NGN, we have -- the system has been relatively stabilized already and we're encountering less problems nowadays. And we have put in place some 619,000 ports already, with roughly 117,000 voice subscribers and 53,000 broadband subscribers or DSL subscribers. Moving forward, our rollout plan is to fill out first the 619,000 ports, where they are currently installed, and over the next two to three years roll out completely and maybe migrate the 2m subscribers that we have for the fixed line.

As far as the savings are concerned, there is really not much savings you can look forward to because -- in the first 12 months because, for example, the maintenance costs will still be maintaining both systems, the Legacy and the NGN as we roll out. It is when we completely cut off the Legacy that we are able to save on maintenance, maybe on certain space and some people that will be progressively realized as we migrate subscribers to NGN over the next two to three years.

The last question was related to the share buyback, what the target was for the year and when we plan to cancel the shares.

As we previously disclosed, the approval that the PLDT Board gave us was for a buyback program of up to 2m shares for the buyback and we have bought back around 246,000 shares. So we would, I guess, continue the program until that 2m is [exhausted]. There are no plans at the moment to cancel the Treasury shares, given the amounts involved are relatively small.

But is there a plan, once, let's say, the 2m shares are exhausted, to consider cancellation of shares or you will keep that as Treasury shares?

I think the intention is to keep the 2m as Treasury shares, because the cancellation of shares would require a special shareholders' approval and so the administrative burden and the cost and expense for that exercise is not, I guess, commensurate at the 2m share level.

Okay, thank you. And if I can have one follow-up question on the comment of cost savings from the NGN upgrade, when do you expect to cut off or to stop maintaining the Legacy system?

We will stop maintaining the Legacy system once, on a per-area basis, the migration is completed. And essentially, that will happen more towards -- that is really back-ended in the rollout program.

Thank you.

Thank you. Next we have Rama Maruvada, Macquarie. Please go ahead.

Hi, good afternoon. Congratulations on a good set of numbers. I have three questions, firstly with regard to the operating metrics for value-added services. I'm basically looking at the amount of text volumes for either the Financial Services or the value-added services. That seems to be decreasing on a year-on-year basis. I'm just wondering what's driving it, in the sense that this is coming off a small base, so I'm thinking you should probably be expecting some growth there.

My second question is with regard to ARPU on the postpaid segment. I noticed that on a sequential quarter basis your growth ARPUs are actually going down for postpaid Smart, but your net ARPU is actually increasing. Is this just a one-off or is there more to it in terms of how you're managing the traffic between on-net and off-net?

And my third question is actually related to your CapEx. I see that you have reiterated your CapEx guidance for the full year. But given the broader concerns over inflation that you have just talked about, is there a particular point in time when you will have to revisit this in terms of how much CapEx you want to put on the wireless broadband side?

In terms of the CapEx on the broadband side, if this strong growth continues we are likely to review the CapEx plan for this year in the middle of this year and we will look at how much we have to put in more than what we have planned for, given that the trend for the first four months of this year has been quite favorable for the broadband wireless take-up.

The first question was on value-added services. It has been down, really, because at one point in time in the past there was a certain amount of freedom that was granted on the service providers and we had problems of what we call the decreasing balances of our clients which were not [desired], actually. And this has been corrected by centralizing the process with our own platform and now we are really reflecting the true volumes of value-added service rather than before. We do have some programs to increase the volumes of our value-added services, but at this point in time we are reflecting the true level, really, of value-added services.

And the second question is --

The postpaid ARPU.

There's nothing that is unusual about the postpaid (inaudible).

Okay. So it's not an indication of some shift in the classic patterns, right, given --?

No, not really. It's oscillating at -- probably that it's oscillating at a certain band and it's right now within that band.

Okay. Thanks a lot.

Thank you. Next, we have Luis Hilado from JP Morgan. Please go ahead.

Hi, good afternoon. Thanks for the call and congratulations on the results. I have three questions. Just offhand, there's a theory out there that with this current environment of installation on agriculture and commodities, I'm just wondering, are you seeing that your rural based or non-natural Manila subscribers are generating more revenues in the current environment?

The second question is with regard to you mentioned in the MD&A that you've had success in doing bucket SMS promotions. Do you plan to also be aggressive in terms of bucket voice plans?

And the last question is with regard to the SmartBro Plug-It. Now that you've got a very affordable service out there, are you doing something also on the access device side to promote the broadband penetration even further?

Thank you, Luis, for the questions. The first question was on, what was it? The rural has been -- well, largely the take-up is coming from the Talk 'N Text brand, which is doing extremely well. And right now this is coming really from outside natural Manila, but not necessarily all of them rural. So we're seeing that this is the growth area because we are mining the lower end of the market, as you know, and that is providing the growth for us right now. Doy, you might want to --

Yes. Well, on the plat -- on the terminal -- on the devices, we're walking with both EP manufacturers independently and under the auspices of the GSMA Association, as well as with the manufacturers of the Plug-It device itself, the modem itself, to bring down the cost of the terminals so that we can develop a critical mass for this service. As you probably know, the GSMA -- the GSM Association itself has a program to develop low-cost terminals, so that the 3G service could get more traction. So we are actively participating in that program.

And on the bucket SMS, any plans to do any more aggressive bucket voice plans or promotions?

Well, that is an ongoing program for us, Luis, that's part of our program of slicing and dicing the market, and normally that is done what we call below the line. But above the line, we're still holding on to our current packages, which is the All Text 20 and the -- and Text 15, I think, and the PHP10 for one day Talk 'N Text package. These are the three stronger packages and we're pushing that. And we have, I guess, a few more buckets to be launched towards the end of the year that would hopefully boost the top-ups for the rest of the year.

Sorry, one follow-up question on PLDT TalkPad. Could you remind us what's the average settlement rate you receive now for incoming international on non-TalkPad?

On the non-TalkPad -- international settlement rate for the fixed line is about -- between $0.10 to $0.11, and for the mobile it's, I think, around between $0.11 to $0.13 per minute.

Okay, great. Thanks.

Thank you. (OPERATOR INSTRUCTIONS). And next, we have Kathy Chen from Goldman Sachs. Please go ahead.

Hi. Thanks for the call. I have three questions. Firstly, could you share with us, in the 2008 service revenue guidance of PHP145b to PHP146b, what level of mobile ARPU decline are you assuming? In other words, is the blended ARPU decline of 15% year on year in the first quarter in line with your expectations or steeper than expected?

The second question is could I check with you again on the year-end broadband targets for wireless and fixed, and if you could share any expected level of ARPUs?

And the last question is on the recent acquisition of CURE. Could you just give us a bit more color on what the planned strategy will be and how it will be positioned versus the Smart 3G services?

I guess, Kathy, in terms of the guidance for the full year revenues, we do assume that the service revenues for the wireless part of the business will grow at around the high single-digit level, without really, I guess, pinning down the exact ARPU versus subscriber. At the end of the day, we're looking more at the total revenue growth for that business.

For the broadband, I guess, subscriber target by year end, we're looking at 900,000 to 1m broadband subscribers combined (inaudible).

Is there any level of ARPU guidance related to that, or revenue guidance?

For the full year guidance, we're still holding it, basically, at about the 900 level, although now we do see the prepaid subscriber take-up of the Plug-It service coming up, but we'll have to settle the user behavior on that [group]. I guess it's still early days, so we'll allow that to stabilize before we can really pin that down.

Well, regarding the strategy for CURE, we intend to keep CURE as the -- as an independent operating unit and allowing to target specific segments of the market in the same manner that we have successfully done with Talk 'N Text. In fact, for the launch, which is scheduled later this month, we will be introducing a wholly different service than what the market sees now, at this time. So it will very clearly demonstrate to the market the value of a new player with a creative way of introducing 3G services. We are not at liberty to discuss yet what this service is, but that should come in the next two weeks or so.

And moving forward, we intend to use CURE as a -- to compete with other disruptive players in the market and to go (inaudible) with the competitive and disruptive strategies of these players.

Okay. Thank you.

Thank you. Our next question from [Ken Doo], GIC. Please go ahead.

Hi. Good afternoon, everyone. I've got three questions. The first question is just on subscriber growth. Both on your postpaid fixed line and also on the mobile side, those were stronger than I expected. I guess your competitor on mobile hasn't reported yet, but I think it's probably likely that you've taken market share in the first quarter. So what's going on there, then?

Ken, could you speak up a bit?

Sorry, we couldn't hear.

Hang on a minute. Is that better? Is that better?

Yes, yes, it's better.

Right. Sorry, I was using a headset. I've got three questions. The first question is just on subscriber growth. On the mobile side, I think you've probably taken market share in the first quarter. I know your competitor has not reported yet, but it looks as if your mobile growth has been a lot stronger in the first quarter than theirs has been. So what are you doing, do you think, better than they are currently doing, especially in the rural markets?

The second question is back to Karen Ang's question on the NGN. You said that over the next two to three years you would hope to migrate all of your subscribers over to the NGN. Are you thinking of any kind of asset write-offs of the Legacy network when that does happen, when you do migrate everybody over, or do you think the Legacy network will be fully written down by then?

And then the third question is just on Luis' question on low-cost terminals. Low-cost terminals for broadband, what kind of price point are you looking to get something out into the market at? Thank you.

As far as the first question, Ken, I don't -- I guess we will have to wait as to what the results are of our competitor. And all I can say is that we are executing and following the strategy that we have laid out so far and it's proving to deliver the results that we have wanted. And we will continue to pursue this strategy and execute them as best as we can in the ensuing months, given the environment of higher inflation and maybe lower purchasing power for our mass market.

I don't think we're anticipating any other write-downs in the network. I think you may recall we took about a PHP16b write-down over 2005/2006 and I guess we were maybe a little bit early in identifying that. But we did go through a process of identifying the network elements which would be most affected by the NGN rollout and they have already been dealt with in the '05/'06 year.

Well, right now, we believe that the mobile broadband service will be more directed at the modem because of the price point. The modem now costs PHP4,500 or about $82, that's the lowest cost of a plug-in device, while the handset is still at over $100. So the initial growth of the prepaid broadband, wireless broadband will be through the plug-in devices. Moreover, that serves a market that is largely [absorbed], and I'm referring to the Internet access market that needs first a wireless connection and second prepaid packages. Eventually, as the handset drops in price, then we'll see more of mobile Internet access coming into play.

Okay. Thank you.

Thank you. Next, we have one last follow-up question from Luis Hilado. Please go ahead.

Thank you. Just two follow-up questions. On ePLDT, I'm just wondering what the driver was for the quarter-on-quarter recovery in the margin that you've talked about. Is it costs coming under control or is it more of a revenue push?

And secondly, regarding the question on Treasury shares, I'm just wondering would you consider in the future reissuing the shares?

On the ePLDT margin, the margin's improved largely because -- well, actually, what is largely reflected in the report is our special revenues on the (inaudible) increased that by 33%. We do have costs. We do have special revenues derived from call center operations from (inaudible) based assets like Smart. We've also managed to bring down our overall expenses and the margins of the data centers have actually increased to 49%. So it's a combination of all of these factors, really.

Great.

And your second question, Luis, there are no plans to reissue the shares, as we indicated earlier. The non-cancellation is seen more as a pragmatic issue more than anything else. It's not that we intend to reissue. That's why we're not canceling. It's actually more the cost of actually undertaking the exercise. So the answer is no, there's no plan to reissue the Treasury shares.

Thank you. That concludes the question and answer section. Before I turn the conference back over to Mr. Nazareno, I want to give everyone the instant replay information of today's call. This conference will be available on a 24-hour instant replay starting today, daily all through May 21, 2008. Replay information, 3pm call, international caller number 852 2802 5151. Once again, international caller number 852 2802 5151. U.S. toll free, 1 800 477 4854. Once again, U.S. toll free, 1 800 477 4854. Pass code 753300. Once again, pass code 753300. Conference leader is Melissa Vergel de Dios.

I shall now hand the conference back to Mr. Nazareno for any additional or closing remarks.

On behalf of my colleagues, I wish to thank you all for joining us this afternoon and we look forward to talking to you when we announce our mid-year results some time early August. Thank you.

Thank you. That concludes today's conference call. Thank you all for your participation. You may disconnect your lines in your own time.