PLDT Inc (PHI) 2017 Q2 法說會逐字稿

Good afternoon and welcome to the PLDT conference call. Please be advised that this call is being recorded. At this point I would like to turn you over to Melissa Vergel de Dios, Head of Investor Relations 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 2017. As mentioned in the conference call invitation, a copy of today's presentation is posted on our website. For those who've not been able to do so, you may download the presentation from pldt.com under the Investor Relations section. Podcast of this briefing will be available at our website after the call. For today's presentation, we have on stage members of PLDT group management team namely Mr. Manuel Pangilinan, Chairman and CEO; Ms. Anabelle L. Chua, our CFO; Mr. Eric Alberto, Chief Revenue Officer; and Attorney Ray Espinosa, our Chief Corporate Services Officer. At this point, let me turn the floor over to Ms. Chua for the presentation.

Good afternoon everyone. Welcome to PLDT's first half results call. For the first half of 2017, our consolidated service revenues stood at PHP 71.2 billion. PLDT's Home and Enterprise business units lead the way in the first half of 2017 posting double-digit revenue increases year-on-year. Home service revenues reached PHP 15.8 billion, up 12% year-on-year, while the Enterprise service revenues rose to PHP 16.8 billion, climbing 11% versus last year. The strong performance of our Home and Enterprise business units underpin the increase in our fixed line service revenues by 11% year-on-year to PHP 34.2 billion. So overall service revenues is 6% less than that of last year, likely because our Wireless Consumer revenues still trail the revenues from prior year. We nonetheless see encouraging trends on a quarterly basis. Notably in our second quarter, service revenues equal those of the first quarter at PHP 35.6 billion arresting the previous negative momentum. Consolidated EBITDA in the first half amounted to PHP 32 billion, 4% higher than the first half 2016. We managed down the spend levels for subsidies, provisions and cash OpEx compared to last year. In 2Q, we booked approximately PHP 1.5 billion in manpower reduction or MRP costs. If we normalize our EBITDA to exclude this, our EBITDA of PHP 33.5 billion in the first half was actually 9% higher than the same period in 2016 and our EBITDA margins are up at 44% versus 38% a year ago. EBITDA for both Fixed and Wireless businesses are higher year-on-year. Consolidated core income amounted to PHP 17.4 billion in first half, 2% lower than last year's figure. Both periods included gains and asset sales particularly our shares in Beacon and Meralco with the gain being higher last year than this year. Recurring consolidated core income excluding the impact of the asset sales and the MRP costs reached PHP 11.9 billion, 1% higher than last year. Moving on to the next slide, we compare the second quarter and the first quarter performance. We saw service revenues steady quarter-on-quarter at PHP 35.6 billion, reflecting the results of our focus since the latter part of 2016 to stabilize the overall business. This involves stemming the decline of revenues in the Wireless Consumer segment while sustaining the upward momentum in the Home and Enterprise businesses. Fixed service revenues increased by 2% with the Home segment up 3% quarter-on-quarter. The reason why Enterprise revenues is down slightly quarter-on-quarter is because of our high first quarter number. Nonetheless, the average revenues of PHP 8.4 billion per quarter for Enterprise is actually 10% higher than the average of last year's quarterly numbers. While the Wireless revenue still declined 1% Q-on-Q, we saw an upturn in the Wireless Consumer business without the wholesale revenues, reversing the decline thread in previous period. Our 2Q EBITDA ex MRP was higher by 4% quarter-on-quarter with Wireless EBITDA up 5% and Fixed EBITDA up 1%. Our 2Q core income reached PHP 12.1 billion higher by almost PHP 7 billion relative to first quarter. Excluding the one-time items, the 2Q underlying core income is still higher than 1Q by PHP 1.3 billion or up 23%.The next slide shows the quarterly trend over the last 6 quarters and we're pleased to report good trends across the various metrics. For consolidated service revenues, we have been able to stem the negative momentum in our top line as evident by the stable service revenues in the 2 quarters of 2017. We attribute this to the continued strong growth posted by Home and Enterprise and the efforts of our Wireless Consumer Group. In terms of our consolidated EBITDA, there has been a sequential improvement in our quarterly EBITDA rising from PHP 14.2 billion in 2Q 2016 to PHP 17.1 billion in 2Q '17, taking out the MRP. Recurring consolidated core income of PHP 6.6 billion in Q2 is higher than the levels posted in the 4 previous quarters. And our 2Q core income of PHP 12.1 billion is the highest core income for the 6 quarters shown here. We show you some additional slides of the results over the last 6 quarters. This one used the results on a Fixed and Wireless segment where you can see the same positive quarterly trends, i.e. strong upward momentum in Fixed and both in revenues and EBITDA results, and for Wireless there is declines arrested in the top line and the Wireless EBITDA actually improving over the quarters due primarily to lower provisions and lower subsidies that compensated for the lower revenues. On a business unit basis, the next slide, over same 6 quarters our Home and Enterprise business units posted revenue increases quarter-on-quarter leading to a year-on-year double-digit revenue growth. For the Wireless Consumer business, we saw an upturn in the quarter's revenues over 1Q after 4 quarters of attenuating the revenue decline. With the double-digit growth of the revenues of Home and Enterprise groups, their combined revenues now make up 46% of consolidated service revenue, higher than the 41% contribution of the Wireless Consumer business of Smart, TNT and Sun. Data has clearly underpinned the revenue growth across all the major business units. Data represents 62% of Home revenues, 65% of Enterprise revenues and 38% of the revenues of the Wireless Consumer Group. In the first half of 2017, Data, Broadband and Digital platform revenues overall grew 11% year-on-year to PHP 32.6 billion and comprised 46% or the largest portion now of our consolidated revenues. On a segment basis, data accounted for 63% of Fixed service revenues and 34% of the Wireless. Mobile internet revenues grew 18% year-on-year, corporate data and data center revenues increased 15%, home broadband revenues also rose 15%.Moving on in this slide where we show how we were able to improve consolidated EBITDA for the first half to PHP 32 billion, which is 4% higher than the first half 2016 and 5% higher than second half 2016 notwithstanding the extra PHP 1.5 billion MRP cost. The sequential improvement in EBITDA was largely due to more rigorous management of our spend for subsidies, OpEx and provisions. From the PHP 33.5 billion EBITDA ex MRP in first half, we anticipate an improved EBITDA in the second half to meet our EBITDA guidance for the year. Turning on to the next slide, our consolidated core income for the first half on a recurring basis stood at PHP 11.9 billion higher by 1% year-on-year and by 41% from second half 2016. On a Q-on-Q basis, our 2Q recurring core income was higher by 23% of PHP 6.6 billion compared to PHP 5.3 billion in 1Q due to the higher EBITDA and higher equity earnings. With the benefit of the gain in our Beacon share sale net of the MRP cost in 2Q, our 2Q core income came in at PHP 12.1 billion resulting in a first half consolidated core income of PHP 17.4 billion. The core income of PHP 17.4 billion is the basis for interim dividend declaration. The Board of Directors of PLDT today declared an interim dividend of PHP 48 per share based on the 60% payout of the PHP 17.4 billion core income. Record date August 25 and payment date September 8. This dividend payout is consistent with our current dividend policy. Now underpinning our revenue growth in our strategy to provide customers with a superior data experience is the extensive rollout of both the wired and wireless efforts. Our CapEx for the first 6 months came in at PHP 5.7 billion while we expect a significant ramp-up in the amount of CapEx to be booked in the second half. Of the CapEx projects, we have we expect approximately PHP 38 billion to be completed and booked in 2017 with significant amount of CapEx commitments and purchase orders to be completed and booked in 2018. We continue to step up the expansion of the reach of our fiber-to-the-home broadband network as well as the coverage and capacity of our LTE and 3G networks to better serve the rising demand for data services. The benefits to our customers through better LTE and 3G network speeds and coverage have been cited by external parties including the JP Morgan/Open Signal Report. Looking at our balance sheet for end June 2017, consolidated net debt stood at $2.6 billion while net debt to EBITDA ratio improved to 2.1x. Gross debt was at $3.5 billion, only 23% of which are denominated in U.S. dollars and taking into account the available cash and hedges only 9% of our total debt is unhedged while 91% of our debts are fixed-rate loans post the swaps. The receipt of 14 billion proceeds from the Beacon share sale helped cover the final payment to San Miguel for the VegaTel acquisition as well as to choose our net debt. At this point, I'll turn over the presentation to Eric Alberto and his team to discuss more in-depth the revenue performance in the first half.

Thank you, Annabelle. Good afternoon, ladies and gentlemen. Just to put order in the structure of our presentation. We're here to present the revenue performance of the PLDT Group across Enterprise, Home and the Wireless, Individual segments. I would ask my colleagues, the heads of each of the business to do the detailed presentation of each and I'd like to do a summary at the end and some takeaway insights. So to start the presentation let me ask Jovy Hernandez of Enterprise to do the first presentation followed by Marco Borlongan to do the Home bit. He's our Head of Home and Marketing Operations. And finally, Ren Reyes would do the Wireless bit. Ren is as you know our co-head of Consumer business pillar of both Home and the Wireless individual. So without further adieu, may I ask Jovy to do the first bit?

Thank you so much, Eric. A pleasant good afternoon everyone. I'm pleased to present the first half performance of our Enterprise group and I'm very pleased to tell everybody that for the first half of the year, the Enterprise grew its business by 11% or PHP 1.7 billion. We'd like to term this as growing like never before because when we look back 4 years ago, the same particular growth figure was actually achieved for one full year and it is worth noting as we're doing this in the first half alone. More importantly, if you take a look at where the growth is coming from in Enterprise, it is worthy to note that for corporate data and ICT we are growing by 18% or PHP 1.67 billion. A couple of days ago, the disclosure of our competitor says that from apples to apples comparison theirs actually grew by 30% which just proves the point that for the growth that the market is growing out there for corporate data, we're actually getting a bigger share of the growth. For voice and SMS, we've kept it at bay at a modest PHP 20 million increase or flattish, but again more importantly is that 65% of the revenues of the Enterprise (inaudible) on corporate data which only means one thing, our revenues are less susceptible to price disruptions moving forward. Quickly, just looking at the business lines in terms of growth drivers, our fixed line grew by 12% year-on-year or PHP 1.36 billion, our Enterprise Wireless business also grew double-digit and our ICT business has grown near double-digit or 9%. Let me just take note that for the ICT side of the business, the revenues are latent, meaning the closures that we have done for the first half are expected to be built starting Q2, Q3 and Q4. It is worth noting that the closures that we have had particularly for our core location business in our data center, we have actually gotten mandates of a certain number of graph which already exceeded the full year production last year. So we are very confident that in second half it will show very high double-digit numbers. And what we have done on the right side of the chart is that we have tried to benchmark our growth rates on the industry growth for the key verticals that is pushing the Philippines economy forward. So for the banking industry, it is a growing average of about 6% to 8% and we have managed to increase our revenues for this sector by 12%. The outsourcing industry remains to be a starter and Sunshine industry in the Philippines is growing at 9% to 10%, and we are pleased to note that we are delivering 14% growth out of that portfolio. The IT and gaming industry is a very young industry and a very robust one. It is growing still double-digit and we are growing 23% from this particular sector. Government at GDP of an average of about 6% to 7%, but we are growing at 18% which is a good indication that a lot of our young leaders especially for the local government are actually have a higher propensity to adopt technology. This is particularly shown as we implement 911 nationwide and also our disaster response solutions for each and every local government unit. And last but not the least, our small and medium enterprise continued its double-digit growth. So as my last slide, I think what's most important is how do we ensure that we maintain to be the undisputed leader in the Enterprise market and we'd like to focus on our 4 key pillar strategy on how we're going to do this. #1, we have every result to maintain our undisputed leadership in enabling infrastructure. The bedrock of any digital transformation that all companies of all sizes, whether you're a large enterprise or a small business, is hinged on having a bedrock of a digital infrastructure and that is both the network where we are clearly a leader of, and if you augment that with a data center network of ePLDT we are clearly a leader in that space, and we have every intention to leverage on those assets. From a data center perspective, we are 3x larger than any competitor that's in the data center business. Second, we have been delivering value Beyond Access. Enterprise conversations have long evolved from just peddling bundling of solutions to really taking a look at what we call [challenger selling] where we work with customers on their [ping] points and what they want to deliver for their business. And so in other words we become consultants and advisors to their business as well. And we are able to do that by delivering value Beyond Access. And if you will see at the global brands that we have on the right, our clear leadership in the network and the data center space has allowed us to partner with global class companies to be able to deliver cloud solutions and digital solutions to the Enterprise market.#3, is pervasive customer engagement both domestically and internationally. It is easy to get lost in the elegance of technology, as Eric always mentions. And if you take a look at the speed and velocity of the way technology changes, one thing that we have kept constant in our view is being with the customer and understanding their business. So if you take a look at the way we're organized, we have organized ourselves by industry verticals, and interestingly now for this year, our organic people in new geographies through PLDT Global in the U.S. in the U.K., Hong Kong, Singapore and Australia, have allowed us to be closer to decision makers for global companies, multinationals and those that are residing out of Singapore. And last but not least which is quite important for the future success of Enterprise, is we're building practices and not just peddling products. We have a gem in our subsidiary ePLDT, and soon enough you will see that we are actually building IT practices that will establish ourselves as the clear leader in those areas. An example today would be cybersecurity. So it's more than just offering technology in boxes, it's actually making sure that our people are up-skilled. We have the processes in place and we have the standards and the ecosystem to build it. Through these 4 pillars, we are confident that we are going to maintain the undisputed leadership in the Enterprise market. Thank you.

Good afternoon. The Home business continues to deliver growth like never before, with a total of PHP 15.8 billion for the first half of 2017, representing an unrivaled growth of 12% for the same period last year. This is fueled by broadband, growing by 15% to PHP 9.7 billion for the first half of 2017. This unprecedented growth is stimulated by successes in 3 strategic initiatives. First, our all-time high activations delivering a subscriber expansion of 364,000, representing a 10% increase from the same period last year. Next is the acceleration in the momentum of fiber in the nation. Our rollout of the Home Fibr City program enables all areas around the country to experience the most powerful broadband which is fiber. We have fiber in areas such as Toledo & Bogo City in Cebu, the Legazpi City in Albay, the Province of Cavite, the communities of BGC, Rockwell, BF Homes and Merville, and the list goes on and on. We are now covering 3.1 million homes and well on our way to approximately 4 million homes by the end of 2017. Comparatively, through our competitor's disclosure, their fiber home's past aspiration is only 10% of ours by the end of the year. Lastly, while we realize significant growth in home broadband, our continuous pursuit of Beyond Access solutions through digital content and Smart Home services are geared to stimulate data penetration and usage. This year, we have launched Roku-powered TVolution, delivering rich content and entertainment at your fingertips, and a whole home Wi-Fi mesh system which aims to fully maximize the benefits of fiber throughout all corners of your home. We add this to our menu of value-added service solutions such as the TelPad, Fam Cam, Fam Zone, Fibr TV powered by Cignal. All these provide us a launchpad to further propel us to heightened growth for the second half of 2017. Thank you.

Good afternoon. I'm pleased to share with you the highlights of the Wireless Individual business for the first half of 2017 where we see much progress since we started our journey to bring Wireless back to growth. Over the past 2 years, we have seen successive quarters of decline. The Wireless Individual business finally posts about PHP 200 million increase for the second quarter versus the first, a clear manifestation of bringing the negative trend and signaling that our turnaround plan is starting to take root. There are 3 main shifts in our business model that comprise the crux of this plan. First, at the center of this turnaround plan is our unwavering focus to pivot the business to data. In the second quarter, we doubled our quarter-on-quarter growth to about 8% or over PHP 400 million, resulting in data contribution to the Consumer Wireless business, breaching 40% for the first time. This growth was driven by quarter-on-quarter increase in both data subs and ARPU up 5% and 7% respectively. Second, through deep consumer insighting, we rebuilt the brand constitution of Smart, TNT and Sun, launched relevant new data products and developed highly intimate campaigns that leverages Smart's superior LTE network. Bringing these to the market struck a chord with our consumers and they rewarded us with their patronage. And third, we also use data and deep consumer analytics to shift our go-to-market business model and become much more targeted and thus not only be more effective in our campaigning to our sub consumers but also to become more efficient in doing so. As seen in these charts, while we are able to deliver growth we are much more efficient in our support levels as we decrease A&P and subsidy expenses. Taking all these 3 things together, these shifts are shaping a much healthier Wireless business; one suited to meet the needs of the digital consumer. And as we look to the second half, we aim to further build on this equation by going all out in our efforts to shepherd and migrate more consumers and subscribers into LTE where Smart has a clear superiority as validated by a third-party vendor OpenSignal in their reports. In so doing, customers will experience the fastest speeds on LTE and be able to enjoy data like never before. We also recently launched new Beyond Access content packages on gaming with Smart's Prime Play, iWant TV, iflix and Fox+ packages with data with Video Prime Play and good value open access data with TNT GaanSurf. These products will stimulate further data usage and provide new platforms for further accelerating data growth and continue to turn around the Wireless business. Thank you very much.

Thank you, Ren. I'd like to do a short summary of what my colleagues presented and then maybe leave you with some critical takeaways as I summarize the whole presentation on our revenue performance. As Jovy, Ren, and Marco had reported earlier, our contribution of Home and Enterprise, our fastest double-digit growth segments, comprise 52% now of our revenue should you take up our International business, with Home at PHP 15.8 billion, Enterprise PHP 16.8 billion or a total of PHP 32.6 billion, against the backdrop of our Individual half year performance of PHP 29.6 billion. On our International business, we are working hard to manage the long-tail of that business. As you know majority of that revenues are disrupted as they are in the form of IDD inbound traffic, and we are managing and slowing down the decline by actively promoting international data services by way of Surf Abroad 550 and Chat Abroad 150 that some of you may be familiar with. Amid the cluster of the many information you've heard this afternoon and perhaps the info overload, I will attempt to just leave you with a few key takeaways of our performance. Starting with a fixed line of Enterprise and Home business, our double-digit growth, we have continued to demonstrate double-digit growth in 2 quarters and are clearly pulling away in fixed line market share leadership. Jovy had alluded to the 11% growth year-on-year on the Enterprise space, which is really faster than any of the active industries that the Enterprise market serves, and this is driven basically by corporate data and ICT, which is up by PHP 1.7 billion or 18% in the first half. Most of you there were probably present in our competitor's disclosure a few days ago. The growth rate of our competitor in the corporate data and ICT space is at 30%. In the Home business pillar, Marco presented a 12% year-on-year growth driven by our pervasive nationwide rollout, an aggressive rollout of fiber and broadband in the home. Home broadband up by PHP 1.3 billion or up 15%. Again, competitive comparison, the home broadband growth of our competitor at 8%. I think it's critical to note at this point as we discuss the fixed line space that our combined Enterprise and Home business, whether combined, taken separately or in aggregate, actually at over PHP 32.6 billion is more than double that of Globe's first half reported disclosure of less than PHP 15 billion, I recall that number to be about PHP 14.7 billion. Moving on to the more challenged Wireless business. Definitely, if you look at year-on-year comparison, we still will have to report massive declines in the number of performance. However, green shoots of progress particularly in that holding the line in the first quarter is now showing much stronger form and confidence that we are on our way to end the (inaudible) modest one. Consider the following, in net service revenue our net service revenue as reported by Ren has to be moved by about 200 million from PHP 14.7 billion to PHP 14.9 billion. It is really encouraging news as this is the first time in over 2 years or about 7 or 8 quarters of consistent decline. So a clear manifestation that while we held the line in the first quarter, this is a positive sign that we have actually reversed the curve and the trend and hopefully we're on our way to really making this sustainable. Even more perhaps encouraging if you look at the data revenue of the total revenue, our individual data revenue growth quarter-on-quarter has grown by PHP 433 million. It is a significant improvement and as we all realize that data is the future as particularly in contrast to the competitive report that quarter-on-quarter that the competitor has only grown, per their report, at only PHP 300 million. We realize that the recovery is not just very, very imminent, but we look at our recovery very, very seriously, and our journey -- yes, we look at it as a journey of a game of interest. We watch fervently and with detail our day-to-day, week-to-week, month-to-month, quarter-on-quarter performance not only in terms of our revenue throughput, but as well as our cost management. And the management team are all committed to the recovery effort. You may ask what's in store for the second half of the year, to ensure that our medium term sustainability of our robust growth in the fixed line particularly for Enterprise and Home as well as to strengthen the initial signs of momentum in turning around our Wireless business. We are committed to build on top of our first half strategies and programs well into the second half of 2017 by focusing on 3 major areas and these are: first, we will leverage more and more into analytics; analytics that will allow us granular insights in the way we look at our business, make us more efficient as we go to market, go to regional, more below the line campaigns and above the line campaigning to the market. Allow us personal campaigning as we all aspire to have an intimate and personal relationship and propositioning to all our customers and subscribers. Second, Jovy alluded to the fact that as early as 5 years ago the Enterprise had started on its business transformation to grow Beyond Access through our business transformation to be a technology provider rather than just being a dumb site. And we are seriously and vigorously pursuing the same strategy in the consumer space of Home and Wireless individual by providing and bundling over our data access services such as digi content relevant to each particular market, different market through page content that they will find affinity to; games, social media, sports and other relevant consumer services. By doing so, we actively ambition to stimulate more and more data usage, drive relationships stickiness with our subscribers and increase the customer value and consequently our revenue yield. Last but not the least, we are all committed to continue improving our network and our platforms as we believe that network customer experience are at the very core of customer or client experience now. And we will do so by doing pervasive fiber rollout in the PLDT SmartCities as Marco said. And we're growing in many more areas. Aggressive rollout of our superior LTE network, I say superior because third-party reports OpenSignal indicate that when we rollout our LTE, it throws up much better bandwidth throughput than the competition. And lastly, fortifying our ICT platforms and infrastructure particularly in managed services along data centers, cloud applications, business enabling solutions, and very recently a very significant new revenue opportunity in cybersecurity among others. Given the above undertakings, we desire to fulfill our group's strategic intent and mission and that is to deliver consistent excellent customer experiences across all our customer segments, whether consumer or corporate. Thank you. At this point, I would like to hand over the floor to our Chairman for his guidance and closing summary messages. Thank you very much.

Thank you, Eric, and good afternoon to all of you. In terms of guidance for the full year 2017, starting with our EBITDA for the full year, we're maintaining our guidance number of PHP 70 billion. As you know, for the first 6 months core EBITDA was PHP 33.5 billion and we're assuming that to achieve the PHP 70 billion, we would assume that the Enterprise and the Home segments of fixed will continue to show double-digit growth in revenues for the balance year and for the Wireless individual that there would be some slight increase in revenues for the next 6 months. As well on the cost side, we do not anticipate any repetition of the approximately PHP 5 billion or to be more precise PHP 4.6 billion in subsidies and provisions that happen in 2016, and we're assuming as well that we will continue to keep a tight lid on cash OpEx for balance year. So the combination of these 2 should propel the EBITDA number for the full year to PHP 70 billion on a core basis. Consequently, we're maintaining our guidance for recurring core at PHP 21.5 billion because for the first half our recurring core was already at PHP 11.9 billion and so this assumes that we can make around PHP 10 billion for the next 6 months or on average PHP 5 billion every quarter. The core profitability for the first quarter was PHP 5.3 billion and PHP 6.6 billion. So I think we're quite comfortable in maintaining these recurring core at PHP 21.5 billion if not slightly better for the full year. Now in terms of reported core it will probably be broadly similar to the reported core last year of about PHP 27.8 billion because for the first half we're already reporting PHP 17.4 billion of reported core. So I think we should be able to achieve the PHP 28 billion or approximately PHP 28 billion of reported core for the full year. Dividend payout, as Anabelle indicated, we're maintaining our guidance of 60% of the reported core, so I think it'll be 60% of the PHP 28 billion that we anticipate for the full year. CapEx number is quite different from what you've seen of the PHP 46 billion that we indicated at the start of the year. This is an updated, if you may, interpretation of what CapEx represents for the PLDT group. This actually represents the total [POs] that have been issued and will be issued in the course of 2017 for the full year in relation to CapEx that will be implemented this year. There will be POs expanding by the end of 2017 that are in addition to the PHP 38 billion that has been guided to you and that is about PHP 7.3 billion. So from that perspective, the total POs we anticipate to be issued within the full year by December 31st, 2017 will be in the order of PHP 45.3 billion, which is from one perspective, not dissimilar to the PHP 46 billion we guided at the start of the year. So we don't want to give the impression that there'll be a let up in terms of our desire or goal to continue quite aggressively on a network build-out across the board, across fixed and in the wireless infrastructure. So I think that finishes our guidance. Let me turn to Melissa.

We're now ready to take your questions. We'll take questions from the conference facility before we take questions from people who joined us here. Operator?

(Operator Instructions). Our first question comes from [Louis Helado].

I had 3 questions. The first was on the wireless business, especially given that you've maintained your EBITDA guidance, I just wanted to verify that you're currently satisfied with the stabilization of the Wireless revenues and you don't intend to be more aggressive in terms of regaining some of the lost share on the Wireless side? The second question is regarding Enterprise. How quickly or realistically is it for any competitor or I guess what are the barriers to entry for your competitor to try to catch up in that space? Is it only amount of CapEx or are there other barriers to consider? And the last question is since now the Wireless business is challenged while the Enterprise is growing, just wondering if there's any way you can bundle the services together so that you can win back share in Wireless?

You have 3 questions, let me start with the first one. Lost share is market share. I guess the state of the business today, it's no longer more of a focus on subscriber count build, but rather the quality of engagement and the yield from each of the subscribers. As the business moves towards data and the market is fully penetrated, I think it is imperative that our play aptly is focused now on yield enhancement and delivering great customer experience on beyond data and Beyond Access platforms by giving them relevant services, they wish they would use our services. So while the subscriber count is still important because it defines your [bid], the yield would certainly be an ARPU and the amount of relevance that we have with each of the subscriber would have to be more a defining criteria to success moving forward. Just as a point of notice that the ARPU has actually gone very, very low in spite of the fact over the years. Per analytics, our highest ARPU level about some 7 or 8 years ago was about PHP 220. It has now dropped to about PHP 110 or anticipation by half. Despite the fact that there are more digital services around, it is our intent to provide the best. The phenomena, really, is as a result of principally heavy competitive pricing across the mainstream services of [top space] and then even spilling over to the future of business, which is data. And moving forward, I reiterate that this defining strategy moving forward would be to deliver really relevant consumer services over the telco access platforms that we have and that should be good for us to improve our relevance and thus consequently our yields in revenue. On the second question on barrier to entry of Enterprise, we're proud to say that the barriers to entry are quite high. The transformational journey of Enterprise did not start overnight, it started 5, 6 years ago by a number of factors, some of which I can't disclose with much detail because it entails our strategy. But it does involve a combination of people and platform and infrastructure resources from our relationship management upscaling our people to be able to deliver, manage end-to-end services and rather than just telco services of connectivity, all the way to our platform support in ePLDT in terms of hosting services, in terms of cloud business enabling applications and solutions, in terms of cybersecurity solutions, in terms of being able to be a trusted expert partner which enterprises really are looking to, as they offload more of their ICT requirements to an expert partner. So the barriers to entry, I would imagine, are still quite pretty high because it involves a combination not only of hardware infrastructure and investments which are quite hefty, but also of people skills. On the last point of bundling services together; absolutely. To the extent that we will leverage our leadership in the Home and in the Enterprise and our customer touch points and our billing relationship, our suite of offerings, we certainly would like to see and exploit as much as possible or optimize (inaudible) really tie up and bundle some of our Wireless services on to the fixed relationships where we have a clear commanding lead over competition.

Louis, can I just add to what Eric…

Okay.

What Eric said particularly in relation to the second question you had which was what are the barriers for Globe to try to replicate the -- I think that's the question, right, the fixed line…

Yes.

Yes, I don't see any particularly except of course the physical aspects of simply laying down the wires. So more or less that approximates the fixed line network of PLDT. If they want to do it, certainly the barriers will not come from us. So it's just the physical aspects of doing it. So in the meantime we're not standing still, we're pushing the expansion in terms of quality and the coverage of our fixed line principally focusing on the Home and in billing solutions on the Enterprise side. And as -- who did the presentation on broadband, Marco, we now have about 3 million homes passed and by year end 2017, we will have 4 million homes passed, and we will push that number further up in 2018, 2019 and beyond until we hit around 10 million homes passed. So we feel that PLDT should own the Home and in that respect, you're talking about bundling, we should bundle with Meralco, shouldn't we, at least in their franchise areas, we should bundle with mainly that as well because they have postpaid subs in those areas. So I guess it's a question who can move faster and where is your starting game. What was the third question?

Bundling.

Bundling, well, I already spoke about that. I think there should be bundling as well on CignalTV, which now has more or less 1.8 million subs as we speak plus the idea of content of (inaudible) as we were reviewing our numbers for the board presentation that we have content that is unique to us, for example what the Cignal has produced, what TV5 has produced, and in fact the sports properties that we quote on, for example the Gilas game last night, which I hope you saw, Gilas versus China, is something we should push across all platforms. So it's just -- yes, because the AMR number of TV5 last night was significantly high and you could sense the whole, maybe almost the whole country watching the game, particularly as Gilas started to lead. And the first question was about…

Market share, being…

Market share, well we've lost market share year-on-year, right? So from about 52%, about 46-plus percent in terms of revenues. There our subscribers were roughly 50-50 on the Wireless front, but the challenge to the war a little bit is that we know that the threat comes from both the ILD where we have a significant revenue stream still and on the SMS where still it's a significant revenue stream for Smart or TNT and Sun. So those twin areas we have to watch out for. On the Voice side, the second quarter appears to have held its own, whether that will continue or not is another question, but we clearly intend to hopefully maintain our Voice revenues. So the battleground is really -- and you know this, is really data and there our ability to monetize the data because our traffic has grown significantly for the industry. But our ability to monetize is still challenges. They are going to lag in terms -- our revenue is going to lag in terms of data traffic maybe, particularly in our case, so…

Our next question comes from Piyush Choudhary of HSBC.

A couple of questions. Firstly, on your EBITDA margins considering the strong performance in 1H, just wanted to understand are there any headwinds as we move into second half, and if you can update us on the efforts of your outsourced IT operations, any timelines over there? And is there any other MRP cost expected in the second half? That's the first. Secondly, on the competitive intensity in the Home broadband segment, could you update us on the outlook and particularly on the Wireless side where your competitor is pushing a lot on the wireless broadband and if you can comment on the success of your switching offer?

What was the question, EBIT again, whether we can maintain it.

Any headwinds.

The outsourcing. Well, I don't think it will have an impact for balance year because the discussions with IBM has sort of stopped rather indefinitely. So we're looking at option B and take a few months I think to put it to bed, in respect of probably 2 or 3 vendors that we're talking to now. So we don't see any significant impact on the cost side, consequent to the IT outsourcing. We don't anticipate any MRPs for balance year again because actually the headcount has been declining partly because of natural attrition and on the fixed side. And on the Wireless this was natural attrition and people being attracted to employment as well, both here and abroad. So that's something we have to be quite careful about. The percentage of churn if you may on our headcount on the Wireless side has been higher than we would want to see. But taken in the round, I think it will be a reduced headcount as we see it without having to incur MRP for balance year. So I think there's no cause to be concerned about. A blip in our cash OpEx for balance year, for the non-cash OpEx principally provisions and subsidies, we don't anticipate those -- we're seeing a similar magnitude for 2017 as it was in 2016, and I think Globe took note of that in their own briefing. So I think the vulnerability is actually the Wireless and if you drill down to the Wireless, how do we cope with the anticipated decline on the SMS and the ILD side of the business versus data and that whether we can hold our own on the voice revenues for balance of the year and indeed moving forward. So that's the real challenge. Our data traffic has also grown quite significantly, but the growth in revenues has not much, not even approached the growth in data traffic. But it appears to be an industry phenomenon.

There was a question about broadband and I'd like to take that on. The first portion of the question is the outlook. The outlook is very robust and encouraging; 100 million Filipinos, 20 million households. Of those, our studies indicate that 10 million of those households are ready, willing, able and capable to get broadband connection in the house, in their homes. As we speak, about (inaudible) of 4 million homes are just being served. So there's an upside of over 6 million that is waiting to be served. On the wireless broadband, we understand that the competitors have actually taken on this technical approach because of its unique advantages. The advantage is the fast rollout leveraging on the existing wireless infrastructure. But there are limitations to wireless broadband. Wireless is a shared network and if there are more users over a particular sell-site, the broadband throughput actually degrades over time and that is inversely proportional to the availability of content that's being driven over data lines which is just growing in terms of bandwidth. Having said that, the true and more flexible and more adaptive technology that can deliver better cost of experience is fiber and that's where we're focusing on. Contrary to that, when you look at the switching offers, I think when we roll out given our superiority in the homes passed and in the ports on those homes passed, are switching offers that are definitely very, very compelling against the backdrop of existing subscribers on wireless broadband. Do you want to comment, Marco?

Maybe just to add a little bit on the second question. I know competition has flagged us as our promotions that we're offering are obviously eroding the margins, but it's just a point of fact the (inaudible) give you an example one of the highly attractive offers of our competitor, they're offering for 1599 10 Mbps for a Global home. For that similar price point, we're offering 1699 as 5 Mbps. So on a per Mbps pricing, they're at is 159 per Mbps and we're at 339.8 per Mbps. Now, in some cases, we actually do have aggressive switch offers, but it is very targeted in certain areas only. And even if we put as much as 50% off, we will be at 169.9 which is still at a premium versus our competitor. So if you actually ask who's driving down the price, I think it's obvious with regard to their national pricing relative to how PLDT is doing it, which also reflects our confidence in the technology that we have because consumers still patronize fiber when we roll it out.

But maybe just one final point to close out this particular subject matter on the approach to home broadband. We've taken the view, principally because PLDT has got very extensive fiber on the ground already and building more fiber as we speak, that the best and the most robust solution to the delivery of broadband to buildings, to enterprises and to the home is a fixed line solution, it's a fiber. And we have obviously as well a very extensive legacy fiber network and I think if I recall correctly, we still have about 1.2 million subs on copper and I'm glad that we have found this G5 solution, which raises the speed of copper to fiber like speeds, and we're going to implement that. I think if my own sense of the few customers of PLDT under broadband side is that there's a very strong brand equity of PLDT because I mean historically it's been a fixed line provider; everybody knows that. And the quality of our fiber network is the best. Some people might contest it, but it's what people like to have because I've known some friends who were on other people's networks and they would prefer to have ideally the fiber rather than somebody else. I'm not trying to generalize, but that's been my own experience. I suppose the other side would have to do it via XYZ solution because that's the most expedient way to reach the home. But if you're on Cignal over fiber, you just have to toggle on one remote. If I have a different solution for my whatever, for my Internet and then I want to watch Netflix or iflix on my television, you have to look at several devices to access that. That's not true for say for our fiber. So that's why we have less emphasis on the fixed wireless solution. We do use it for areas where we don't have any fiber, but basically our solution is fiber, right.

Our next question comes from Gopakumar.

Quick question. Sorry, I missed the early part of the presentation, so apologies if this question has been answered. In the mobile segment, I'm looking at some sequential stability in Wireless Voice revenues. So can you please help me understand what was this due to in this quarter? Any specific tariff plans that you had or was it more of a revenue recognition with certain flat Voice revenues? And secondly, sorry I missed the comments on CapEx. Can you please remind me the reduction in the CapEx guidance for this year which appears quite steep despite your focus on enterprise and home broadband expansion?

First one is comment on the stability of Voice in the result and the second is the recap of the CapEx explanation.

Okay. On the first question I believe the question was whether we're seeing some stability in the second quarter relative to the first on the Voice revenues and if we'll continue to see that in the second half moving forward. Very hard to say. I think one thing that we do see in consumer behavior is that while there is an increase in data consumption, voice consumption still actually continues to be very pervasive which is very different when it comes to SMS consumption because with data, the prevalence of the [chat option OTT] is the one disrupting SMS whereas on Voice I think there's still a need for that particular service. I think what specifically was affecting the Voice revenues with regards to OTT is ILD. So it's the international calls which is actually disrupting the voice side, but on the domestic side we do see that there's a need. So hopefully unless another OTT comes in to disrupt that, then hopefully we start seeing stability especially as we stabilize our subscriber base.

Just to add to Ren, I think the truth of the matter is as more and more of the market adopts data, and they adopt also over-the-top applications that allows the messaging even voice over that, that voice business is going to be disrupted. Having said that, however, we are resorting to innovative bundling and vigorous campaigning over our plans allocating more voice, what do you call it, the voice component over the bundled packages as they allow us to manage the long-tail of that voice. Having said that, we are fortunate that we've been able to flatten out that revenue in the first half. As to the second half, obviously we will resort to the same innovative ways by which we slow that down, but admittedly that would be a challenge as well, maybe not as quite as steep as SMS that can easily be replaced by over-the-top messaging platforms. But one thing is unique as we do our analytics of the market particularly as you go out of the city in the regional areas where we have multilingual dialects, when push comes to shove, actually voice is still a preferred manner by which they communicate particularly if you push out voice to be at reasonable price points.

To recap on the CapEx guidance in terms of what we had actually booked in the first half above PHP 5.7 billion and then we're looking at the full year CapEx booking of approximately PHP 38 billion. If you recall, our previous guidance was for PHP 46 billion. Now the PHP 38 billion does not represent the amount of projects awarded or being implemented. It's actually a much higher number if you look at that definition. So there's at least PHP 45 billion if not more in terms of awarded contract and other items being done. But in terms of what we anticipate will actually be recognized as CapEx bookings which are tied to the delivery and the completion, that'll be about PHP 38 billion. So quite an amount would be carried over into the early part of next year.

Just a follow-up question on the data side, you talked about actual return on data revenue growth. Can you talk a little bit on how you plan to achieve this if you have to push the growth further? Is there room to push more attractive data promotions in the near term in the market?

Is that for wireless or for the fixed?

On the mobile, sorry.

On the mobile side.

On the mobile side?

So with regards to sustaining data growth, I think there's still a lot of potential here. Let's start first with the current subscriber base. If we look at the current subscriber base, a good portion of over 40% of our subscribers are still in smartphones. So they're still in LTE, they're still in feature phones, right. And a big part of our strategy is to move them to smartphones and have them consume LTE, so this is one of the growth drivers for data. And another growth driver is there are people who actually have smartphones but are still using it primarily for voice and SMS. And really what we saw is once we get them into data, then they start actually consuming more and more and they start getting -- they start seeing the benefits of this new experience relative to the old services. So part of also the plan is to actually give them specific offers and packages, and we have a few rolling out in the second half which builds on the first half offers that we have that actually encourage people to try data for the first time. So that's something that we will see. Our third portion is for them to consume more data and therefore in consuming more data, more of their lifestyle, which is non-data, get into the data space. For example, video viewing which started as free-to-air on TV went into PayTV, is now moving into video on data, video on mobile. And a big part of that, as the Chairman first alluded, but we actually have a lot of data on content that we actually own within the group and we're actually in discussions with Cignal and TV5 to actually leverage on that for mobile and for fixed home as well. Now beyond this, we actually have a lot of strong partners on the video space as well, so iWant TV Netflix, iflix and the like. So these are the things we just launched new packages that will actually -- that includes both the subscription and the data locations that they need to consume that that will actually take out the fear that they will overuse their data and therefore this will actually encourage them to consume this new service via mobile. Now I think as a last point, I think there are other services like gaming, video calls and even I think that we were like -- things like IOT that would be coming and I see these as new potential revenue streams with regards to data. So still a lot of opportunities with regards to monetizing that space.

Just as a last point, you're seeing a lot of data adoption and traffic, but no degradation to revenue. And the reason for that is the heavy price competition has brought our market from one of the highest mobile data providers in the world 3 years ago to one of the cheapest at the end of last year as a result of really heavy competition. (inaudible) for instance, which is the GIGA50, PHP 50 for 3 days. The average consumer, I won't give you the details, but are not consuming their entire available 1.3 gig that's on the passage over that 3 days, and it takes a while by which they will consume that. We're nearing that point, quite places to go. But as soon as they finish that, there will be a propensity for them to load and buy new load before the 3-day expires. And the key to that is exactly what Ren had said, it is imperative for us to get people to ubiquitously and fearlessly use data given its low price points by delivering other things on top of the data like contest and content and use data from basic Facebook, YouTube through our own delivered content that should link to PLDT group as the Chairman and Ren alluded to. Our sports content which is unique, our Cignal content, our partnerships with iflix, Netflix, Fox+ and iWant TV among others.

Our next question comes from Arthur Pineda.

Several questions from me, please. Firstly, with regard to other equity income. This seems to have jumped a lot from just around PHP 20 million in 1Q to PHP 600 million or so in 2Q. What's driving this and how should we see this going forward? Second question I had is with regard to your thoughts on competition. Fixed and Enterprise has clearly been outperforming and it seems that network spending for your competitor has significantly increased in the first half, turning to PHP 8 billion versus your PHP 6 billion. I'm just wondering what your thoughts are on how competition in this side will evolve in the next 6 to 12 months? Third question I had is with regard to your IT and (inaudible) upgrades. You mentioned that the discussions with IBM have stalled and you're looking to implement plan B. Any timetable for this?

On your first question, Arthur, on the equity earnings, the 2 principal contributors to the equity earnings in the first half are Beacon and SPi. Now as you know, we have sold Beacon, and we are in the process of disposal of SPi which we anticipate should be completed in August or September. So the equity earnings picture for the second half will be quite different versus the first half because you would no longer have the contributions that came from these 2 significant invested companies. So that's part of why, I think, in terms of the guidance earlier for the core income. The core income in the second half would naturally be a bit lower than the first half because of that difference. SPi, in particular, we had a bit of a catch-up in terms of booking in the second quarter because they completed their financial statements and its late for last year. So there was a bit of a catch-up adjustment for what was actually their earnings for last year. So that was the one that resulted in a bit of a blip in the second quarter's equity earnings.

Well, on the CapEx side, it's a little, stay with me, okay, because we had a frankly, a re-interpretation of what this CapEx really means. As I understand it, the PHP 5.7 billion that you saw is the cash that we expended for the first half. But the total outstanding POs that, as of June 30, was about PHP 18 billion. So, if you look at the commitment of the group in terms of actual cash expended and the outstanding POs that we are committed to spend for balance year, we have committed in total more than PHP 23 billion, which is not too far from what Globe. Then, of course, I don't know what they mean by PHP 27 billion, whether it's actual cash spend or committed, I've no idea, of course. So from a management perspective, we need to know what are the total commitments we are making from time-to-time on CapEx and that is on the basis of the POs that we have issued. Whether that's going to be realized in the course of a particular period this year, for example, or it spills over for the next few years. Because when you reach the PO, if an order is for equipment, so it creates a risk weighted liability. So we need to know what that commitment level is. And as well we need for planning purposes, particularly cash, we need to understand of your total POs issued. How much of the cash would be expended for a particular period? Now, for example, the total POs issued and to be issued for 2017 on a global basis will be approximately PHP 45.3 billion. But of that number, PHP 38 billion refers to the CapEx relating to 2017. So the question is, will that be a cash item or does it include certain non-cash in the course of the year. Quite likely, there'll be an element of non-cash that will not be spent out of the PHP 38 billion. But that is we estimate anywhere between PHP 30 billion or more than PHP 30 billion in terms of actual cash expended. So in a way, you have to ask what that number really means, I think, no, because obviously the cash expenditure is relevant for cash flow purposes and for debt purposes. But total commitments is something that you need to understand as well at any time outstanding because you have to service eventually that commitment, the commitments that are to be realized in the course of 2017 and commitments to be realized in 2018 or even 2019. So these are our own interpretation particularly from a management perspective how we see. Because the number of total commitments or POs issued and to be issued, is something that's important to us because it's a leading indicator of what your CapEx expenditures are likely to be in the next 2 to 3 years. Right? Because then we need to understand whether the CapEx level is rising or not rising. So that POs or the commitment levels are important to us because it will mean funding at some point. Did I confuse, Arthur?

No, it's very clear. Sorry, just on the IT and BSS upgrades?

We had a discussion with our board today on some of the options with respect to what we internally call our plan B is. I think, it will go on for a few months in terms of actually exploring, discovering and actually effecting it. So more likely than not the plan B will take effect already mostly likely next year rather than this year.

Before we leave that, I just like to add to the Chairman's messages on the CapEx. As we had articulated earlier, we're far ahead in terms of CapEx investment on the face by way of landing stations, international cable systems -- new one -- domestic fiber optics that are redundant and diverse, data centers and ICT platforms of cloud and security for the Enterprise. In the Home, we have articulated our Home/Fibr which is actually over 3 million going to 4 million this year and of course, the ports that actually connect to those Home. Having said that, we are not resting on that model. The question was what's your outlook of 6 to 12 months. Certainly, we would like to preserve and ensure that we keep our lead in terms of the fixed line businesses of Home and Enterprise, and that we actually preserve the nature of our position of the market that is not price driven, but value driven services to these markets of Home and Enterprise.

Our next question comes from Varun Ahuja.

Just a few questions from me. First on subsidies. If you look the subsidies for this quarter is around PHP 363 million, but clearly it has come off a lot. Even if you look at the normal quarter, it was around 1.3 or 1.2 and it's pretty less than even your competitors. So how sustainable are these levels, and going into future especially with the launch of iPhone should we expect this to increase? What's the normal run rate that you think is sustainable given that will not have impact on the revenues also? That's number 1. Number 2, can you provide a little bit more clarity on the bundling part of it? When you say bundling, are you just looking at pure billing, combination of billing, combining billings or when you refer it in future you may look at bundling as in more discounting, suppose given 20% discount on the combined basis, stuff like that? So what's your thought on that part of the bundling, is it just billing or is it just more discounting part that you want to do as a strategy? Thirdly, the Department of Labor ordered 9,000 employees to be made permanent. Any update on that? Why has department asked for the regularization of those employees and if you have to do it, what will be the cost impact on your financials?

I'd like to start on the first and second question. First question on subsidy, agreed this has been a significant drop in the first half. I think the competitors also dropped but not at the same level. Yes, it's reflected of the state of the market post heavy competition that we have seen in the last 2.5 years. We find sustainability in that that the margins of the -- and the price points as I discussed earlier of -- it's not only of mainstream talk and text, have really gone (inaudible). But it's spilled over even to the future of the business on pure naked spike business of data, and hopefully there's rationality in the way we offer and look at devices when we go out to the market as far as our subsidy policies are concerned. In terms of bundling, I would say both, in areas where we could and we've done this in the Enterprise as we do converged services on fixed and wireless for enterprises on common bidding when necessary. And we do it by inter-company marketing arrangement. But it does -- will come in the form and we will exploit and optimize any opportunity for bundling that will allow us billing simplicity in terms of customer experience, as well as discounting under the principle that the more you buy from us the more services you're buying from us across a host and variety of products and services, obviously there should be a loyalty and discounting proposition to the equation.

Maybe just a housekeeping item with respect to your question on subsidies for the second quarter, a bit of this -- it's probably unusually low in the sense that some of this where we took already a provision for obsolescence last year were the ones that went out during the period. So you don't see it anymore in the subsidy number because it was previously provided for. So a rough estimate of that is about PHP 500 million of items that were already previously provided.

The DOLE order that you referred to was actually an order issued by the regional office of the DOLE, and that order is expressly subject to appeal. And we have appealed the decision aptly to the DOLE. We believe in consultation with our external lawyers that we have a very strong case against the hiring of the employees referred to by the DOLE order simply because the DOLE order failed to take into account the details about the employment or the engagement of this contractors that they have declared as legitimate. Most if not all of the contractors that we are using for purposes of outsourcing are actually legitimate contractors, based on whether they use the old DOLE circular or the new DOLE circular. Legitimate contractors are recognized by the labor laws and by the DOLE and for as long as they remain so, outsourcing is valid. So we have taken a very robust view that the employment or the use of outsourcing services are valid. And we have presented in our appeal a more detailed perspective about each contractor establish their legitimacy and why the outsourcing services are valid. So at this stage, we are unable to yet determine what the full impact of any adverse order will be, principally because we do happen to believe, and it's supported by our external counsel, that we have a strong case against the DOLE order.

Just a follow up, so why have DOLE singled you out as in your competitor, was it not mentioned anywhere? So just wanted to check what is in (inaudible) framework that the way the contractors are designed or your agreements are designed that led DOLE to…

I absolutely don't know why we were singled out, maybe because we're the bigger company. In terms of breadth and scale, we are much bigger given our fixed line. So that makes us a much bigger target than others but as far as we know there are other companies actually that have been served DOLE orders and many of them have appealed as well. So this is going to be a long, hard road for many of these companies because the impact of hiring all of these outsourced employees actually is to kill a large segment of the outsourcing industry. And as I said, particularly for PLDT, we can actually state that we really used legitimate contractors and legitimate contractors have DOLE certifications that they are legitimate contractors otherwise we would not have used them for the purposes for which they have engaged us.

One more. On subsidies, do you think next quarter it should be around [530-550] whatever, so that should come back to the normal levels or are there any other EBIT pre-booked provisions that you have done last that will continue to impact in second half? And lastly on IT outsourcing, any color that you can give? Because you have been pretty much firm on IT outsourcing. What led to this stalemate? Is it pricing? Anything that you can share? And what specifically are you looking at that did lead to the deal closing?

On the subsidy, I reiterate that we welcome some level of rationality that we don't go overboard in giving away values only to correct them at some point and we welcome that. But having said that, I think we said it time and again, we will face competitive step accordingly when it does present itself. Hopefully, we don't have to go around and do that over again because it's truly disruptive. But having said that, there's a lot more rationality and we look at the business model as far as the subsidy policies are concerned. On the next question on outsourcing, maybe Ren…

On the IT outsourcing, actually IT outsourcing is much clear today. But of course, there was a lot of publicity on the DOLE circular. But since the DOLE circular was issued, a new supplementing circular was issued by the DOLE that clarified very clearly that IT outsourcing specifically are not covered by the DOLE circular, the first one that came out. So that, I suppose, gives comfort to the BPO, call center and the entire IT outsourcing industry in the Philippines that they are not covered by this anti-contractualization policy of the government.

Operator, any more questions on the queue?

As of this time, we don't have any questions on queue.

Okay. We can open the floor here for questions. There are microphones available. Anyone before -- okay, if there are no more questions on the queue or from the floor, we invite you to refreshments. And for those who have joined us through the conference call facility, thank you. We'll turn the floor back to Mr. Pangilinan for his last remarks.

Thank you for joining us this afternoon both of you here in this hall and of course those who joined us on the phone, and we look forward to having another conference call with you probably some time in November when we announce our third quarter results, hopefully more cheerful news. Thank you, thank you so much.

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