PLDT Inc (PHI) 2010 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to the conference call to discuss the Company's first half 2010 financial and operating results. 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 Ms. Melissa Vergel de Dios, Head of the Investor Relations for PLDT for the introductions. Please go ahead. Thank you.

Good afternoon. And thank you for joining us today to discuss the Company's financial and operating results for the first half of 2010. As mentioned in the conference call invitation, today's presentation is posted on our website. For those who have not been able to do so, you may download the presentation from www.pldt.com.ph under the Investor Relations section.

For today's presentation we have with us members of the PLDT Group management team, namely our Chairman Manuel Pangilinan; Mr. Poly Nazareno, President and Chief Executive Officer for PLDT and Smart; Mr. Christopher Young, Chief Financial Advisor of PLDT; Ms. Anabelle Lim Chua, SVP and Treasurer of PLDT and Chief Financial Officer of Smart; and Attorney Ray Espinosa. At this point let me turn the floor over to Mr. Poly Nazareno for the presentation.

Good afternoon and thank you for joining us today. Allow me to share with you PLDT's financial and operating results for the first half of 2010.

Our first half 2010 results largely mirrored the results of the first quarter, with the May elections having a muted impact relative to previous elections. Service revenues for the first half of 2010 decreased by 1% to PHP72.2b compared with PHP72.9b in the first half of '09. EBITDA for the first half declined by 2% year on year to PHP43.3b, with EBITDA margin steady at 60%.

Reported net income for the first six months of 2010 grew by 10% year on year to PHP21.7b. Core net income increased by 2% to PHP21.2b from PHP20.8b in the first half of '09. This translates to earnings per share of PHP112.43 for the first half of 2010 compared with PHP110.2 last year.

Let me cite some details of our second-quarter performance. Consolidated service revenues for the second quarter were stable quarter on quarter at PHP36.2b, with wireless revenues having grown 2%, while fixed line revenues were 4% lower due to the impact of peso's appreciation. Compared with the second quarter last year, consolidated service revenue declined by 1%, as wireless revenue were stable and fixed line revenues were lower by 2%.

Consolidated EBITDA was 4% higher quarter on quarter, at PHP22.1b, with wireless and fixed line EBITDA having increased 6% and 1% respectively. In comparison with second quarter '09, consolidated EBITDA declined by 1%, with a 5% reduction in fixed line EBITDA, offset the 1% growth in EBITDA for the wireless business.

EBITDA margin for the second quarter stood at 61%, flat year on year and higher than the 59% in the first quarter.

Reported net income of PHP10.3b was higher year on year, but was 10% lower than that of the first quarter because of ForEx losses in the second quarter due to the peso having weakened. Core income for the second quarter was PHP10.7b, reflecting a 2% increase quarter on quarter and a 1% increase year on year.

Core net income for the first half of 2010 increased by PHP400m or 2% to PHP21.2b, compared with PHP20.8b for the same period last year. The improvement resulted from the positive impact of our investment in Meralco, the decrease in minority interest in PCEV, formerly known as Piltel, and in the cost of sales. These were attenuated by lower service revenues, higher net financing costs and lower other income.

Our reported income for the first six months of the year was higher by 10% year on year, at PHP21.7b. Net ForEx and derivative gains of PHP800m were booked in the first half of 2010 compared with PHP1.1b net loss in the same period last year.

PLDT's consolidated service revenues declined by 1% year on year to PHP72.2b in the first half 2010 as a result of a 3% growth in voice revenues, principally in cellular, resulting from the recent introduction of new unlimited voice offers and growth in inbound international call volumes, a 5% decrease in data and ICT revenues, which includes a 13% decline in cellular data revenues, principally due to the lower text revenues. This was partly mitigated by the sustained strong broadband and Internet revenue growth of 21% and a 10% improvement in corporate data revenues.

Approximately 28% of our total service revenues are directly or indirectly linked to the US dollar, against which the peso appreciated 4% year on year. Had the peso remained stable, our service revenues for the first half would have been flat compared to last year.

Cash OpEx in the first half of 2010 remained stable year on year due to a strong focus on cost reduction.

EBITDA margin for the first half stood at 60%, similar to that for the same period last year and an improvement over the 59% for the full year 2009. Our wireless margin stood at 62%, fixed line at 50% and ICT at 14%.

Consolidated EBITDA as at June 2010 declined by 2% compared to the same period last year. EBITDA for the second quarter is 4% higher quarter on quarter and is 1% lower year on year.

We estimate CapEx for 2010 to be PHP28.6b or approximately 19% of projected 2010 service revenues. CapEx for the first half of 2010 amounted to PHP9.7b compared to PHP10.7b last year. Of that amount, PHP5b was spent on wireless business, PHP4.5b for the fixed and about PHP200m for our ICT business.

In addition, the investments in network expansion and improvement to support broadband and voice usage, PLDT has started to identify initiatives that aim to reduce network costs over the medium term. These include re-architecturing of the network, modernization of our core and access networks to deploy HSPA+, WiMAX, as well as network offloading strategies to reduce capacities required for base stations and international bandwidth.

Our free cash flow of PHP19.4b for the first half of 2010 was lower than the PHP23.7b in the same period last year. The reduction of PHP4.3b was due to the combined effect of the PHP2.5b decline in the cash from operations and the higher net interest by PHP500m, offset by a PHP1b decrease in CapEx.

PLDT had gross debt of $2.1b at the end of the first half of 2010. The Group's net debt stood at $1.5b at the end of June 2010, with net debt to EBITDA of 0.8. 49% of our total debt is in US dollars. Taking into account our hedges, peso loans and dollar cash holdings, only 23% of our debt remains unhedged. 71% of our debt are fixed-rate loans.

PLDT's debt profile remains healthy, with maturities well spread out. PLDT and Smart recently raised PHP5b in fixed rate notes. These notes fetched a credit spread of 30 basis points over the five-year benchmark rate, the lowest priced peso corporate issue in recent history. Despite this additional debt raised, we expect net debt to be about $1.5b at the end of 2010 and net debt to EBITDA to remain below 1 times.

Consistent with the committed 70% dividend payout ratio, the PLDT Board today declared an interim cash dividend of PHP78 pesos per share to stockholders on record as of August 19 and payable on September 21. Also, as part of our dividend policy, we will assess the possibility of declaring special dividends at the end of the year. Under the approved share buyback program, PLDT may still acquire up to 2.3m of its shares from the market.

And now for more detail on the different businesses. The momentum in broadband continues. At mid year, PLDT Group's combined broadband subscriber base grew to 1.96m, a 21% growth from the end of 2009, or net additions of about 340,000 subscribers. Of this around 285,000 were wireless broadband subscribers.

Total wireless broadband subscribers stood at over 1.3m, while total DSL subscribers numbered more than 600,000. Of our wireless broadband subscribers, about two-thirds, or around 867,000 are prepaid, Plug-It subscribers, while the balance are Canopy subscribers.

Total revenues from broadband in the first half of 2010 grew by 21% year on year to PHP8b, or 11% of total service revenues, up from 9% at the end of '09. Wireless broadband revenues increased by 26% while DSL revenues grew by 22%.

Second-quarter broadband revenues improved by 21% year on year to PHP4b. For this period, broadband wireless revenues grew by 29% year on year and DSL by 20%.

To maximize returns from broadband, we have introduced new promos that would stimulate the use of mobile Internet. We are also pursuing the use of content as a differentiator to further spur demand and for retention.

Our cellular subscriber base stood at 45.3m at the end of the first half of 2010, an 18% growth year on year. Of the 4m net adds in the first six months of the year, 2m were Buddy subscribers, about 1.1m were Red Mobile subscribers and 900,000 were TNT or Talk 'N Text subscribers, about 1.1m were Red Mobile subscribers and 900,000 were TNT or Talk 'N Text subscribers. The net adds for the first half were 22% more than the 3.3m in the first half of 2009.

The market continues to look for the best value for money as manifested by subscriber preference for bucket and unlimited offers, and the continued practice of multiple SIM ownerships as a popular means of maximizing various on-net promos.

Net blended ARPU declined by 16% year on year, to PHP164. Subscriber acquisition costs continued to decline and remained relatively small as a percentage of ARPU.

Red Mobile Unlimited, our offering to capture subscriber spend on a second SIM, saw a sharp increase in subscribers in the second half. Red subscribers are now allowed to make unlimited calls to Smart subscribers.

Text volumes increased by 27%, while voice minutes grew by 279% year on year. However, yields have declined to PHP0.12 per text and PHP1.25 per minute of voice on higher traffic volumes.

Wireless service revenues for the first half of 2010 were stable year on year at PHP47.9b. Excluding satellite operations, revenues were PHP200m higher than the same period last year. The change in the revenue mix of our wireless business continues, with a strong year-on-year growth of 27% and 15% recorded in wireless broadband and cellular voice respectively.

Voice revenues of PHP21.8b now constitute half of our total cellular service revenues, compared with 43% in the previous year. Wireless broadband revenues of PHP3.2b now contribute about 7% to total wireless service revenues compared with 5% last year. In contrast, text revenues for the first half of 2010 registered a 14% decline year on year, to PHP20.9b, as the lower yields from bucket plans and unlimited offerings offset the 27% increase in text volumes.

EBITDA for the first half decreased by 2% to PHP29.7b, compared with PHP30.2b in the first half last year, largely due a 3% increase in cash operating expenses.

Margin remained stable at 62% compared to the full year '09, but is down from the 63% in first half '09 as a result of the growing contribution of the lower-margin wireless broadband business.

Learning from other markets where the growth in voice required the provisioning of a significant increase in network capacity, we believe that an underlying network strategy is key to the successful foray into voice. Smart's recent lower-cost and unlimited voice offers were launched with a network strategy carefully crafted to minimize CapEx requirements and to avoid the deterioration of quality of service for our regular subscribers.

We have put in place a second network to contain the anticipated increase in voice traffic. This network can be likened to a bus lane, where traffic can be light or heavy depending on the time of day. The bus lane traffic is kept away from the regular lanes, allowing cars to traverse freely. This segmented network strategy has allowed us to offer Red Mobile unlimited services, which has now been expanded to allow calls and texts to Smart subscribers on unlimited basis.

Some of our other recent offers are the TGIF, or Thank God It's Free-Day, promotion. Mobile Internet will be offered for free on Fridays for a limited run in order to stimulate usage. Initial feedback shows a very good response from the market.

In collaboration with TV5 we introduced Tutok Sabay Txt, or TST, which allows Smart subscribers to text in their answers to questions on TV5 shows, from which they could win cash prizes, up to PHP5m a week, as well as minor prizes that include [loads]. This innovative tie-up should result in, among other things, increased viewership for TV5 and a more cost-effective means of advertising for Smart.

Fixed line service revenues declined by 1% to PHP25.2b at the end of the first half of 2010, resulting from the combined effect of the growth in corporate data and DSL revenues and declines in LEC, ILD, international long distance, and national long distance revenues.

Although the number of postpaid billed lines increased, our LEC revenues were lower in first half 2010 as a result of bundled voice and data services. A decline in call volumes resulted in lower NLD revenues, while the peso appreciation versus the US dollar, as well as the lower average settlement rate for inbound international calls, negatively impacted our ILD business.

Corporate data and DSL revenues continued to grow, with domestic revenues higher as a result of continued demand from the local offshoring and outsourcing industry. In addition, international data service revenues have grown due to the higher i-Gate revenues from Smart's higher usage and recurring monthly charges. Revenues from the corporate data and DSL now account for 46% of total fixed line service revenues compared to only 41% last year.

EBITDA for the first half of 2010 stood at PHP12.7b, a 5% decline year on year, principally as a result of lower revenues and slightly higher cash operating costs, particularly professional and other service fees, and maintenance expenses.

EBITDA margin of 50% was higher than 49% for the full year of '09, albeit lower than the 52% for the first half '09.

Second-quarter service revenues were 4% lower quarter on quarter, but EBITDA was 1% higher as result of a 9% reduction in cash operating expenses.

Our strategy for the fixed line business involves identifying new revenue streams and new markets to offset the declines in the traditional businesses. In order to find new ways to serve, we are finely segmenting our markets and creating products and services that cater to the varying connectivity requirements.

Our ICT businesses registered significant improvements in the first half of 2010. Service revenues for the first half of 2010 increased by 1% year on year, to PHP5.3b, and contributing about 7% of total PLDT Group service revenues.

The data center business sustained its strong performance, with a 52% increase in service revenues compared with last year, largely as a result of the increase in contracts for co-location and server hosting, disaster recovery and business continuity services.

Service revenues for both our BPO and call center businesses declined year on year, principally due to the negative impact of the peso's appreciation on the predominantly dollar-denominated revenues. Had the peso remained stable, service revenues for the period would have increased by 4% year on year.

ePLDT's EBITDA for the first half, of PHP756m, improved by 48% year on year. EBITDA margin likewise improved to 14% for the period, compared with 10% in the first half '09 and 12% for the full year 2009. This was on account of the increase in service revenues, coupled with a 9% decrease in cash operating expenses, largely due to lower compensation and benefit expenses resulting from a headcount reduction.

The reorganization of ePLDT is underway and has resulted in two separate business groups. SPi Global Holdings, our combined BPO and call center businesses, has started to build up its pipeline of new contracts by tapping new markets and creating end-to-end BPO solutions for clients. ePLDT, where our data center, Internet and online gaming operations remain, is working on expansion of our data center operations and exploring new ICT growth areas.

At this point I would like to cite a few highlights on Meralco. Our first-half financial results reflect the equity accounting of our share in Meralco's earnings held directly by PLDT Communications and Energy Ventures, formerly Piltel, and indirectly through PCEB's 50% ownership in Beacon Electric.

Meralco's consolidated service revenues for the first half of 2010 grew by 35% to PHP124.4b, driven by a 14% increase in energy sales and increase in its customer base, higher average pass-through generation transmission charges and the upward adjustments to the distribution rate.

First-half costs were up 34% year on year, resulting from the higher cost of purchased power. And Meralco's system loss hit an all-time low of 7.93% compared with the new system loss cap of 8.5% stipulated by our regulators.

EBITDA of PHP11.2b increased 34% year on year. Meralco registered core and reported income of first half 2010 of PHP5.8b and PHP4.8b, representing a year-on-year growth of 82% and 51% respectively. These increases largely reflect the impact of the various tariff increases granted to Meralco under the performance-based rate-setting scheme, or PBR, also applied on a higher volume of energy sales.

Following its recently approved dividend policy, Meralco declared an interim dividend of PHP2.50 per share, payable in September. This dividend is equivalent to 50% of first-half core earnings per share. We are confident that the improvements in Meralco's performance will be sustained.

PLDT and Meralco continue to work together in pursuit of mutually beneficial initiatives.

At this point, let me turn over the floor to our Chairman, Mr. Manny Pangilinan, for the outlook of the rest of the year and beyond. Thank you.

Thank you, Poly. And good afternoon to all of you. The first half results for PLDT were slightly better than we had expected. And accordingly that's driving slightly improved prospects for the full-year core profitability for the Group. Our guidance for 2010 means that core profitability is likely to be in excess or ahead of the PHP41b core profitability recorded in the year 2009.

With respect to the other key financial metrics, EBITDA margin is stable at anywhere between 59% to 60% of service revenue for the year. And, as Poly indicated, our guidance for CapEx will stay at about PHP28.6b, about PHP500m ahead of last year's CapEx spend.

And finally, we remain committed to our dividend payout of 70% of core earnings, with a look back towards the end of the year, early next year, as to whether a special dividend is merited.

This ends our presentation today. And we're now ready to take your questions.

The floor is now open for your questions. We will first take questions from the conference facility before we take questions on the floor. If you have a question, please press star 1 slowly on your telephone keypad, and should you wish to cancel your question, you may press star 2. Operator, do we have any questions?

Our first question will come from Credit Suisse, Chate Bencha, go ahead please.

Hi. Good afternoon. Thank you very much for the call. I have four questions. The first question is related to your recent Red Mobile promotion that allows you to call onto the Smart network as well. I do understand about the segmentation of the network if it's within the Red Network. But now that you can call into the Smart network, would that hold as well? Wouldn't this cause any trouble on Smart's regular network site? And also, wouldn't you think that this would speed up and cannibalize of your regular subscribers more towards this cheap Red Mobile?

The second question is related to the DSL broadband subscribers. I noticed that the net additions over the past two quarters for your DSL service has been very slow, and any comment on that?

The third question is on your CapEx. I see the CapEx in the first half was at least 35% of your guidance. So would you expect any -- what's the particular acceleration in CapEx do you see into the second half? And also would there be a room for further CapEx spending into the second half?

The third -- the last question, the fourth question is on the remark within the press release. You mentioned that given the slowdown in telecom growth, you will be looking at a strategic platform or infrastructure investment. I'm not too sure what does it mean. What's the implication for PLDT? That's all my questions. Thank you.

With regard to the question on the second network, as far as the Red subscribers are concerned, being able to call to the rest of the Smart and Talk 'N Text subscribers, that has been programmed and the effect is actually minimal because it's towards the second end of the chain or the process flow of the call. So that is already programmed because Red, by itself and its SIMs, are already registered on the second network. So we feel that there would be no problem in terms of capacity and service quality for the existing subscribers.

Besides, the subscribers on the primary network can roam with priority on the second network actually. So that makes it even more easy for the subscribers and the quality of the service more assured.

As far as the DSL subscribers are concerned, the launch of our WatchPad has been quite successful actually. And I think about half of our subscriber base are already registered in WatchPad and have -- and most of them have upgraded to higher speeds and at higher plans and therefore has increased our revenues, so to speak. We are currently looking at how we can accelerate the NGN migration so that our DSL subscription can even grow faster as you might want it to grow.

The third is the CapEx which Chris will --.

I think if you just look at the guidance, we're retaining the CapEx number at PHP28.6b. So really we're looking more at a timing issue between the first and the second half of the year. So, as indicated, we'd still expect a slightly higher number for 2010 compared to 2009.

And I'm not sure, did we get the fourth question?

Yes, sir. The fourth question is regarding the remark made within your press release earlier. And I think it's a closing remark from Mr. Pangilinan that now that the telecom business is maturing, you are looking to invest into the horizontal perspective, with a strategic platform and infrastructure investment or something like that. I'm not too sure what does it mean in terms of PLDT. Would you be involved in the acquisition of something like Meralco again or any kind of M&A activity?

Well, when the first draft was given to me, I also didn't understand the statement. So, on reflection, let me tell you what it isn't.

It does not mean that we are going to invest in non-telco activities or investments as such, what we mean actually would be continue to invest in areas that are related to the telco business and are earnings-accretive or business-accretive.

Certain of the slide that Poly presented to you, like, for example, the Tutok Sabay Txt, which is really a project between Channel 5 and Smart, demonstrates the partnership that could happen between a telco and a broadcast. And we would like to obviously look at the broader ability to exploit the synergies, to use that word, between a telco and a broadcast company.

There are also plans, rather serious plans, to really propagate and push Internet on mobile. Once -- I hope you understand, that's a fairly sensitive competitive information. I can't be more detailed at this point in time. But that's something that we feel would order the potential to change the nature of the industry as we see, because increasing the -- if you may, the verticality of the existing business, increasing legacy model where it is stacked up as voice, video, and data, and so we're looking at more of the horizontal aspects of what can be done.

The reference to utilities is made because there are areas where we think, the area, for example, of power, electricity, important even from a Meralco perspective that we're able to install smart meters, in not only offices, but more particularly in homes, because the smart meter should be able to transmit the consumption data of, let's say, a particular household over to the head office so that we're able to monitor consumption on a per-unit basis, as well as allow the households to know, at a larger prepaid load on the cell phone, how much a particular household has consumed, [at a zone] or in a particular market.

So a housewife knows that, on average, she consumes, say, 1,000 kilowatt hours in a month, then she is able to budget for the balance of the month. A [truck roll] on smart meters obviates the need, for example, of people, feet on the scene, with respect meter readers. So there will be significant cost savings. And the smart meter telemetry signals would ride on the wireless platform of Smart.

I think it's examples like those that we would like to see, rather than investing in a non-telco-related business that was only made purely because it's available.

Thank you.

Thank you. Our next question will come from HSBC, Luis Hilado. Go ahead, please.

Hi. Good afternoon. Thanks for the call, and congratulations on the results. I also have three questions. The first one is just a follow-up on the question on Red Mobile. Can you remind us what sort of structural impediments there are for cannibalization between Smart Buddy and TNT towards Red, aside from the bus lane, congested bus lane that could happen with Red, and that you have to be a 3G subscriber to be on Red?

The second question is in terms of longer-term CapEx. Given that the strength in voice as well as the push for wireless broadband, when you look at 2011 and onwards, CapEx to sales or absolute CapEx should be re-penciling higher numbers.

And the last question is more on the free cash flow. Given that the second-quarter free cash flow is just a result of -- seems to be working capital, should we expect a strong recovery in the third and -- third quarter at least versus the second quarter?

Maybe I can try on the free cash flow and let Poly come back on the Red Mobile.

Yes. I think your observation on the free cash flow is correct. There are some working capital adjustments which affect things quarter to quarter. So we see some recovery as we go into the third and fourth quarter. There's nothing other than just the timing difference -- some timing differences over the year end -- over the quarter end.

On the CapEx, our sense of it, even though we're a little bit away from more detailed projections for next year and 2012, is actually the CapEx will not increase from here. Actually we think it may come off a little bit, certainly in absolute terms and in percentage terms. We are getting now towards the later parts of the upgrade to the NGN, and quite a bit of the expenditure which has been necessary for that is now complete. So, again, we don't have any specific numbers as yet. But the initial outlook for 2011 and 2012 is probably lower in absolute amount, shall we say, and would then translate to slightly lower in percentage terms as well.

Thanks, Chris.

With regards to the --.

Must be the dividends. I think Poly's voice has gone. I don't know, you may have to pitch in on the cannibalization.

With reference to your question on the Red Mobile, one is we'd like to make the observation that all three brands continue to increase in subscriber base, if you look at the first-half numbers. I think there are also -- what I see are offerings on each of the brands which would allow them to effectively coexist and rather than cannibalize each other.

And I guess the idea of the Red Mobile SIM has always been that effectively, with a recognition or acknowledgement that since the market already has a proliferation of second or third SIMs, and that is an acknowledged strategy that's best geared towards becoming a second SIM, even if it's a second SIM to ourselves.

Okay. Thanks.

(Operator Instructions).

There are no questions on the conference call facility at this time. We'll take questions from the floor.

We have one question from Nomura, Neeraja Natarajan. Go ahead please.

Hi. This is Neeraja Natarajan. I just have a follow-up question on the Red Mobile and Smart offer. I guess my question is more really is this a competitive offense? I mean we've been getting the sense that competition as coming down a bit. But now that you have offered unlimited to Smart, is this a sort of an offensive strategy that you guys are taking?

My second question is also on the revenue guidance. If I just see the first-half run rate, it is slightly short of the guidance for the full year. So I would like to understand where do you expect to see the strength in the second half? Will it be more from wireless or fixed line, and if you can give some color on that?

And also my last question is on wireless broadband net adds which have come off quite a bit. Is this because of the lower subsidies that were offered this quarter? Any kind of outlook you can give or what you expect for the back half of the year? Thanks.

Sorry. We're trying to confirm the last question. Were you referring to wireless broadband net additions or --?

Net adds, yes. Yes.

Well, we have effectively, under offering for the Plug-It devices, have seen some readjustments to the price to the consumer in the second quarter. So that may have tempered the take-up on in terms of net adds for the fourth quarter.

Was that what you were asking about or something else?

Yes, that -- yes. So do you expect a similar sort of trend for the rest of the year or some color on that, please?

I think as a sort of general matter, without being very specific about it, is that we continue to be quite bullish in terms of take-up for broadband in general. And we have multiple offerings, be it on the fixed side to DSL, fixed wireless. We have embarked on a WiMAX offering now, and also, the pre-paid Plug-It devices as well as mobile Internet. But there's a variety of, I guess, options that are being made available to the market. And we believe that with those sort of diverse offerings, we should be able to continue to see the upsurge in broadband take-up.

Your second question, Neeraja, had to do with revenue guidance?

I think your observation is correct, given the first half results. I think, to some extent, that really depends what happens with the exchange rate. So 2% may be a little optimistic.

But I guess where the growth is coming from, as Anabelle indicated, we remain quite bullish on broadband growth. We think it's going to continue on the wireless side. There was an observation earlier that it had been a little slow on DSL on the fixed. But I think we see that, as we've gone into July in the balance of the year, that there's going to be a pick-up there on the fixed side. So we remain bullish there overall.

Corporate business is doing quite well also on the fixed. The outsourcing industry here in the Philippines continues to grow quite well and our businesses are reflecting that. And, in addition, we're expecting the ePLDT businesses or the data center to continue to grow quite strongly and our own outsourcing businesses under SPI to grow quite strongly during the balance of the year.

So I think there is reason to be optimistic that we can get towards that 2% number. Though, to some extent, it may be tempered if the peso continues to appreciate.

On your first question with respect to Red Mobile again, it's also part of an overall strategy with respect to maybe a different Philippine market, where voice take-up has, I guess, trailed vis-a-vis the SMS or data take-up, unlike -- very different from other markets. So what we're seeing is a bit of emphasis on the voice side with all of these offerings to effectively grow the voice potential in this market which is, I guess, under-tapped in prior years. So that's kind of part of the logic of why we're doing Red and a lot of these other voice offerings that we have.

Thanks so much.

Any further questions, operator, from the conference call facility?

No further questions, ma'am.

Are there any questions on the floor?

Back to the conference facility, before we close the session. Operator, if there are no more questions, we will turn the floor over to you for the replay information.

Thank you, ma'am. That concludes the question-and-answer portion. Before I turn the conference over to Mr. Pangilinan, I would like to give everyone the instant replay information of today's call. This conference will be available as a 24-hour instant replay starting today, daily on through August 18, 2010. Replay information is the 3pm call, international calling number 852-3018-4125; US Toll Free, 1-866-371055, passcode 2161. Conference leader is Ms. Vergel de Dios, Ms. Melissa. I will now turn the conference back to Mr. Pangilinan for any additional or closing remarks.

Well, I simply would like to say thank you to everybody. And we look forward to seeing all of you again with respect to our third quarter results early November.

By that time, I think it would be a probably a more firm idea of how the 2010 core profitability would look like for the year. Thank you so much.

And that concludes today's conference. Thank you for your participation. You may disconnect your line.