PLDT Inc (PHI) 2017 Q4 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 morning, and thank you for joining us today to discuss the company's financial and operating results for the full year of 2017. As mentioned in the conference call invitation, a copy of today's presentation is posted on the website. For those who have not been able to do so, you may download the presentation from www.pldt.com under the Investor Relations section.

For today's presentation, we have on stage members of the PLDT group management team, namely Mr. Manuel Pangilinan, Chairman and CEO; Ms. Anabelle Lim Chua, our Chief Finance Officer; 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. Anabelle Chua to start the presentation.

Good afternoon, everyone. Welcome to PLDT's full year results presentation. So I like to start by showing some of the highlights for our full year 2017 financial results.

In terms of our full year consolidated service revenues, it reached PHP 143.5 billion, which although it's 3% lower year-on-year, our service revenues are trending encouragingly. Notably, our fourth quarter revenues are actually 1% ahead of the same quarter prior year at PHP 36.2 billion and it's also ahead versus earlier quarter in 2017.

Now PLDT's Home and Enterprise business units continued to lead the way, posting double-digit revenue increases. Home service revenues grew 13% to PHP 33 billion, while Enterprise service revenues rose 11% to PHP 34.1 billion. The strong performance of our Home and Enterprise business units underpin the increase in our Fixed Line revenues by 11% year-on-year to hit PHP 70.2 billion.

Now our consolidated EBITDA in 2017 reached PHP 66.2 billion, 8% higher year-on-year. Considering that we booked PHP 1.6 billion in MRP or manpower reduction cost, our normalized EBITDA without the MRP expense would have been PHP 67.8 billion or 11% higher year-on-year and our EBITDA margin up at 45% versus 39% a year ago.

The significant uplift in our EBITDA was largely a result of our reduced spend levels for subsidies and provisions by PHP 12 billion compared to 2016. Now EBITDA for both Fixed and Wireless businesses are higher year-on-year. EBITDA for Wireless is up by 8% year-on-year, EBITDA for Fixed Line is up 15% ex MRP.

Our consolidated core income amounted to PHP 27.7 billion for 2017, just slightly below 2016. Both periods included gain on asset sales, particularly our shares in Beacon and Meralco, with the gain being higher in 2016. We also reflected the PHP 1.4 billion gains of our sale of SPi shares in 2017. Extracting all the asset sale gains and some other one-off, our recurring consolidated core income stood at PHP 22.3 billion, which is 11% higher than a year ago and actually PHP 0.3 billion ahead of our PHP 22 billion earnings guidance.

Now looking at the next slide, which shows our quarterly financial results. We're pleased to show that the top line has stabilized in 2017 and is starting to trend higher. So as you can see here, this quarter's consolidated service revenues in 2017 is higher than the prior quarter and fourth quarter 2017 in particular is now ahead of the same quarter in 2016 by PHP 0.4 billion. In fact if we exclude ILD and NLD, the fourth quarter showed a year-on-year increase of 4%. We attribute this to the continued strong growth posted by our Home and Enterprise businesses and the efforts of our Wireless Consumer group.

Now in terms of our consolidated EBITDA, there has been a consistent improvement in our quarterly EBITDA, rising from PHP 14.2 billion in the second quarter 2016 to PHP 17 billion in the fourth quarter. So all quarters in 2017 except Q1 registered year-on-year increases.

Recurring consolidated core income stood at PHP 5 billion in the fourth quarter, higher by PHP 1.3 billion over the same quarter in prior year and this allowed us to achieve a PHP 22.3 billion full year core income, exceeding our core income guidance.

Now we show you some additional slides of our result over the last 2 years. The Fixed Line business in this chart is particularly impressive, showing positive quarterly semestral trends over the period in a consistent manner. So Fixed Line revenues increased 11% over prior year. In second half, revenues were up by 12% year-on-year. Now second half revenues are also ahead by 5% over the first half revenues in 2017.

For full year, EBITDA for the Fixed Line is up 9% over 2016, with second half EBITDA up higher 11% year-on-year. And second half EBITDA is also up 8% compared to the first half EBITDA.

For our Wireless segment, we saw the revenue declines arrested, with the level of semestral decline significantly moderated. And notwithstanding challenges in our top line, our Wireless EBITDA improved over the period. So for full year 2017, EBITDA came in at 8% increase year-on-year and EBITDA in the first half is up 8% over second half '16 and the second half '17 is up 6% over first half '17 in terms of our EBITDA performance for wireless.

Next slide. With the double-digit growth of the revenues of the Home and Enterprise groups, their combined revenues account for 47% of our consolidated service revenue, higher than the 41% contribution of the Wireless Individual Consumer business of Smart, TNT and Sun. Data of course underpinned the revenue growth across all the business units and represents 63% of Home revenues, same, 63% of Enterprise revenues and 40% of the revenues of the Wireless Consumer businesses.

On a business unit basis, over the 8 quarters in 2016 to 2017, you'll see here that 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 relatively stable quarterly revenues in 2017. Q4 revenues in particular grew by 1% over Q3.

Revenue declines have also been moderating when we compare each quarter versus the same quarter for the 2 years. So whereas our first quarter decline was over PHP 4 billion year-on-year, our fourth quarter decline on a year-on-year basis was down to less than PHP 400 million.

Now looking at our revenues by service types, you can see here that data, broadband and digital platform revenues grew 11% year-on-year to PHP 67 billion and comprise now 47% or nearly half and the largest portion of our consolidated revenues. On a segment basis, data and broadband accounted for 63% of the Fixed business and 36% of the Wireless service revenues respectively.

Now some of the components that drove the growth in data revenues. Mobile Internet revenues grew 17% year-on-year to hit PHP 20 billion, Home Broadband revenues also rose 16% to PHP 20 billion as well, and corporate data and data center revenues increased 16% to PHP 19.6 billion or a shade under PHP 20 billion.

Now in the next chart, we show how we were able to improve consolidated EBITDA by PHP 6.6 billion or 11% higher to close 2017 with a PHP 67.8 billion EBITDA. So the improvement in EBITDA was largely due to more rigorous management of our spending for subsidies, OpEx and provision. For Q4 standalone, our EBITDA came in at PHP 17 billion, which is 10% over the Q4 EBITDA in 2016. Our consolidated EBITDA margin for 2017 stood at 45% ex MRP, higher than the 39% margin we saw in 2016.

Turning to our next slide, we show our core income on 2 basis. Our recurring consolidated core income for 2017 stood at PHP 22.3 billion, that's higher by PHP 2.1 billion or 11% year-on-year due to the higher EBITDA and higher equity earnings and also lower tax positions.

For our core income, which includes the benefit of the gain on our Beacon and SPi share sale net of non-recurring MRP costs and accelerated depreciation, that came in at PHP 27.7 billion. This represents a slight 1% decline over the same period last year principally because of lower gains from our Beacon sale in 2017 and higher accelerated depreciation.

Now we also released today reported net income, that is down by PHP 6.6 billion to PHP 13.4 billion. So the reason why the reported net income is lower is because it reflects certain one-off non-core items. The most significant of which are non-core network accelerated depreciation expense of PHP 12.4 billion in connection with our ongoing network transformation initiatives, which does include the swap out of our network equipment in NCR. So we had to accelerate the depreciation of the assets (inaudible). There was also a PHP 4.3 billion non-current asset impairment due impairment of some of our network equipments rendered obsolete due to technological advancements.

Now as today's results are still on an unaudited basis, we have not declared our final dividend. But we are happy to confirm that our intention is to declare a final regular dividend of PHP 0.28 during the latter part of the month, and this will bring the total dividend payout for the year to PHP 0.76, which represents 60% of the core earnings of PHP 27.7 billion. So at that -- at the more or less at closing share price at the end of 2017, our dividend yield stands at about 5%.

Now some metrics on the balance sheet side. As of the end of the year, our consolidated net debt stood at PHP 2.8 billion, while our net debt-to-EBITDA ratio improved to 2.1x. Gross debt reached PHP 3.5 billion, only 20% of which are denominated in U.S. dollars. But after taking into account our hedges and our cash, only 8% of the total debt is un-hedged, while 92% of our debt are fixed rate loans post interest rate swaps. So all this allow us to sleep better at night, even in the very volatile market situation that we see.

Now in terms of cash proceeds and cash flow movements through 2017, we did receive significant proceeds from the Beacon and SPi share sales that helped cover the final payment for the acquisition of VegaTel from San Miguel as well as our dividend payments and allowed us to manage our gearing and put that in check.

Now moving on to the next slide, we would like to note that our CapEx for 2017 amounted to PHP 40 billion or that's 26% of our consolidated service revenues. 67% of the CapEx book was under Wireless and 33% under Fixed Line. Now with respect to 2018, our estimated CapEx is now at PHP 58 billion, mainly to support the growth of data and broadband businesses.

The skew of the CapEx spending for 2018 is also very different from prior years. You'll see here that actually over 50% or PHP 30 billion of the PHP 58 billion CapEx program is intended for the Fixed Line business. So that's really to support the growth in terms of the roll-out of fiber homes passed, more ports, backhaul/transmission capacity, which actually shared even for the delivery of mobile data as well as customer-premises equipment or CPEs related to the fiber take-up.

Now when you look at it on a multi-year basis, we have communicated to the market that our 5-year CapEx program from 2016 to 2020 will amount to PHP 260 billion. So that implies that for 2018, 2019 and 2020, we are spending nearly PHP 60 billion of CapEx each year to support the growth in terms of our business.

So later I think our colleagues will also show that some of the spent is translating to improvements in network speed, latency and other metrics, supported by independent bodies such as OpenSignal.

Now just some key metrics from the network standpoint. We've basically been expanding both the reach of PLDT Home Broadband network as well as the coverage and capacities of our Wireless network. So in terms of PLDT homes passed by fiber, at the end of 2017 we have reached over 4 million fiber homes passed, of which 1.2 million were installed in 2017. And then in terms of ports that we can sell to our customers, we more than doubled that to reach more than a million ports at the end of 2017.

Now on the Wireless side, we have actively been using and deploying the radio frequencies and spectrum acquired from SMC. So we continue to roll-out both 3G and 4G LTE across the Philippines, in line with our commitment to the government to cover 90% of cities and municipalities. So we more than doubled the number of LTE base stations to over 8,700 in 2017 and then we have over 4,300 of our cell sites equipped now with LTE.

In terms of 3G, our number of base stations has increased to 9,850 and about 7,500 of our cell sites are equipped with 3G. We also have been actively installing more in-building solution and have higher targets for this even in 2018. Various new technologies along the line of LTE-advanced have likewise been deployed that includes 4CC aggregation as well as initial tests and 4x4 MIMO.

Now for 2018, we set out here some of our targets in order to improve our network quality and provide the costumers superior data experience. So on the Home side, from 4 million homes passed, we want to extend the reach to 5.1 billion homes passed by the end of 2018. In terms of our ports, from 1 million ports, we want to double that to over 2.2 million ports by the end of the year. So that will also include a portion of hybrid type.

In terms of our mobile network leadership, we want to double the number of LTE base stations to about 17,700. We're going to expand the number of 3G base stations to over 12,400. We're going to increase the number of LTE and 3G equipped cell sites as well.

And then in terms of our fiber networks, both domestic and international, we intend to add 35,000 kilometers of fiber cables to hit 210,000 of fiber kilometer by the end of 2018. And further into that, we want to install more in-building solutions.

So all these programs are part of what will account for the PHP 58 billion CapEx spending during the year. So this is the target to show some of the metrics I mentioned just on a comparative year-on-year basis for easy reference.

Now at this point, I think we'll -- I'll turn the presentation over to Eric Alberto and his team to discuss some of the business initiatives for the...

Thank you, Anabelle, and good afternoon to everyone. I'm here to provide some overview of our performance in some granularity and provide as well quarter-on-quarter or year-on-year color on the presentation that Anabelle has just given.

I'll start with the Q4 2017 highlights. In terms of service revenues, we have actually turned in PHP 35.9 billion in the fourth quarter of last year. If you net out International and Voyager revenues from the equation, as Anabelle alluded to, our contribution of Home and Enterprise, our fastest growing business segments, now comprise 64% of total revenues of the group, up from 52% from our last reporting.

The combined revenues of Home and Enterprise at PHP 17.5 billion further surpass our Individual Wireless business, which stood at PHP 14.7 billion in the fourth quarter. This reflects the very strong year-end 2017 growth performance of Home -- of our Home business, which finished at 13% growth or PHP 3.7 billion incremental revenue for the year, as well as our Enterprise business, which grew 11% at PHP 3.5 billion incremental revenue.

Over the recent years, we have seen the strong positive quarter-on-quarter gains in revenues of our Home and Enterprise businesses, only to be eroded by the negative momentum and disruption experienced in our most challenged Individual Wireless business, further exacerbated by the natural declines in our International Long Distance Voice business.

In 2017, however, we managed to arrest the negative momentum. As you can glean from the slide, we've managed to move the erosion in 2017 quarter-on-quarter from PHP 35.2 billion in the first quarter moving to PHP 35.2 billion, a flat performance, in the second quarter, up to PHP 35.7 billion in the third quarter, and finally settling at PHP 35.9 billion in the fourth quarter of the year.

With the improving customer experience for both our Fixed and Wireless networks, our growing capabilities and dependencies on data -- on big data and analytics and our granular cost effective and increasingly convergent go-to-market strategies and campaigning, particularly in our consumer business, we have managed to clearly steer and turnaround our overall group revenues towards a steady and sustainable path to growth quarter-on-quarter, ending our year-end quarter 4, 2017 with a positive PHP 500 million difference or a positive delta over the same period in 2016.

For quite a number of years Now we were deep in the forest in our most challenged Wireless business, and I'm pleased to say that having been out of play and out of bounds for many of those years, today we can confidently say that we are out of the woods, but not quite -- not out of being in a difficult trough.

But consistently over the last 4 quarters of the past year, we have made positive momentum and gained confidence to now declare that our Wireless Individual business -- at least we are seeing light that our wireless business ball is now very playable.

For our mission to be sustainable, we are serious and committed to transform our business from being a telephone service provider into this country's leading and most trusted enabler of life-enhancing digital services technologies and solutions for all our customers, whether consumers or enterprises.

At this juncture, I would like to call on my colleagues, Senior Vice President for Corporate, Jovy Hernandez, followed by Renren Reyes, Senior Vice President, for our Consumer Business, to put the detailed context to the performances of each of our businesses. Thank you.

Thank you, Sir Eric. A pleasant good afternoon to everybody. I'm here to present some salient points on the financial full year performance of Enterprise in 2017.

We are very pleased to note that the Enterprise group has delivered double-digit growth or PHP 3.5 billion incremental or 11% growth year-on-year. Enterprise actually delivered unprecedented growth across all business pillars. The red chart shows you the Fixed Line. While it has delivered 9% growth year-on-year, it is the first time last year that Fixed Line for Enterprise has delivered north of PHP 2 billion in terms of incremental revenue.

The green chart shows our Enterprise Wireless business, which grew 13% or PHP 600 million. And the blue chart is the ICT side of the business and that has delivered 26% growth versus same period last year. The orange chart represents Enterprise revenues that are coming from Enterprise customers outside of the Philippines, specifically the U.S. Hong Kong, Singapore and Australia, and that has actually increased by 45%.

Now if you take a look at the revenue split, a big chunk of our revenues are still on the Fixed Line, but I'd like to highlight that the blue portion of the pie chart is the ICT side of the business, that has grown -- increased by 2 percentage points. And this is going to be very critical in the coming years for the growth prospects of Enterprise as we see that the ICT side of the business is going to be the cornerstone of future growth for the Enterprise business.

Case in point, if you take a look at where we're growing, our data and ICT revenues are actually 63% of our revenues to-date, which is very healthy, because this is the portion of our business which is less susceptible to price disruption.

Now to put in contrast, a little bit of color. That business is about PHP 21.4 billion today, and if you compare that to our competition, the data and ICT revenues apples-to-apples comparison is only PHP 10 billion. So clearly we are 2x -- at least 2x the size of our nearest competitor.

And if you take a look at the growth performance in that sector, we are growing 11% or double-digit, while our competition has been growing only single-digit, 4%. That means in that portion of the business we are widening the gap and we have every intention to sustain that growth trajectory.

Now another area where we try to monitor the performance of our growth is to take a look at the measure of industry growth versus our own growth. And we are very pleased to note that in the active markets that we serve, our revenue growth has actually surpassed the industry growth. So banking, for example, grew as an industry average about 9%; our revenues in the banking sector actually grew 13%.

The BPO sector, which year-on-year has been delivering double-digit growth for the country, for the very first time last year actually only grew 9%, but nevertheless our revenues from this particular sector has actually grown 15%.

What does this mean? It just shows you that we have been able to corner a bigger percentage of the growth that the market is throwing out there.

From a revenue standpoint, our Fixed Line was at an all-time high. Broadband, domestic data and international data are growing double-digit at 14%, 11% and 17% respectively, which shows you that the Enterprise business has the pursuit of trying to be closer to their customers. Be it in brick and mortar stores or in e-commerce, they are going to require more Internet and network connectivity and that's what we actually serve.

On the Wireless side, we have been gaining on corporate subscriptions for Wireless. And the pleasant news for us is that our IoT business or our machine-to-machine discussions are actually growing at a healthy 57%. This is an area that we should look after -- take a look at. In fact all of the globe -- all of the telcos around the world are focusing on IoT and we are very pleased that we already have a portfolio today and that's growing very healthily.

Now case in point, as I mentioned, is that a critical component of this continuous success of Enterprise is our ICT business. You must recall that from an asset base, we are leading in terms of the data center space. We have now 10 data centers compared to our nearest competitor, who has only 3. And we have every intention to capitalize on that lead in terms of capacity and assets.

If you take a look at our data center services, a portion of the business has been growing double digit, 10%. Our cloud services have grown 49% and managed IT and security services have grown by as much as 60%. We are going to see a lot more of this growth in these areas moving forward.

That actually shows you the intention of the group, the Enterprise group. This is a very busy slide, but what it just says is that we plan to move from being a managed infrastructure provider just pushing boxes and solutions to actually being a managed service provider.

And I think the best example that we could show you this afternoon is that when you talk about security as a service, ePLDT is actually going to launch our security operations center early in the second quarter, and this is a testament where we are now providing consultancy services to the enterprise market in terms of security. And we see this as a very viable area of growth.

Some third-party studies say that the Philippines is actually the fifth in the rank of most attacked in terms of security threats or hackers, but the enterprise segment of the Philippines has been lagging behind in terms of the investments in terms of security.

And with the establishment of this practice, we are very hopeful that we will be able to serve our enterprise consumers moving forward. And this is an area where we are clearly ahead of competition and moving forward this is going to ensure that we sustain the undisputed leadership of the PLDT group in the enterprise space.

At this point, I'd like to call on Renren to discuss the Consumer side of the business.

Thank you, Jovy. So I'm here to present the Consumer performance for both Home and Wireless. Good afternoon to all.

So I am pleased to present that Home actually did its -- or performed its strongest year in 2017 for the past few years, delivering record growth of 13% year-on-year, with a delta of PHP 3.7 billion. So as you can see from 2016 from PHP 29.3 billion, we went up to PHP 33 billion. And we actually see that both voice and data businesses -- or services actually grew, voice growing at 6% and data growing at 17%.

Maybe just to put in context relative to our competitor, the size of our competitors is less than half of ours at 15.6 and their growth is a little over -- well, almost of half of ours, 7%.

Now aside from the growth in revenue, I'm happy to say that a big driver of this was the continued growth in subscribers, which really shows the demand for our service. We're showing 12% growth or roughly 431,000 new subscribers and reaching the 4 million subscriber mark, ending the year at 4.1 million subscribers.

Now apart from this, I think as Anabelle alluded earlier, a big part of the success is really the roll-out of our fiber-to-the-home business and we actually ended the year hitting our target 4 million homes passed.

Now this chart shows as well the quality of the results, where you actually look at really the nationwide roll-out or nature of our expansion. So you can actually see here per region, North Luzon, South Luzon, Visayas and Mindanao, then increase in number of municipalities covered now with FTTH facilities. And you can see how aggressive the expansion has been.

In North Luzon, it has been a plus 73%, South Luzon a plus 39%, Visayas is a plus 48%, and in Mindanao we have doubled the coverage of municipalities. And really all summing up and consistent to our intent of fibering the whole nation with PLDT home fiber. Now this actually also set us up very well for the future as we actually have more coverage, more facilities and ability to serve more of our countrymen.

Now of course out of the total market of roughly 21 million homes, what we actually see as addressable market with Fixed is roughly 10 million. Right now we're at 4 million homes passed. So there's roughly around 15 million homes that are still underserved with the home broadband solution and this is where our convergence between Fixed and Wireless really comes in.

So now in partnership with Smart, we're now targeting home broadband through our LTE Home WiFi solution and offering it at both postpaid and prepaid services so that a lot more consumers actually get to enjoy broadband in their home as we have much more LTE coverage than fixed line as fixed line takes a bit of time to roll-out. Having said this, this actually allows us to serve a bigger market now and actually it's again another pillar for growth moving forward.

Now in Q4, we also rolled out the first and most aggressive form of our convergence with the launch of our Christmas free bundles. So the Christmas free bundle is actually the combination of the #1 fiber broadband experience with PLDT Home plus the #1 LTE mobile experience with Smart and the #1 PayTV HD experience with Cignal.

Now the logic of the bundle is, if you get any 2 services, you will get a 10% discount on your whole bill; and if you get any 3, you get 15% discount on the whole bill. And if you actually look at this proposition, there's no one else in the country who can actually deliver this value to our consumers. And we're very happy to give this service to our subscribers.

Now beyond this, beyond the bundles, of course we have to continuously think about other usage cases in the home, and what we actually see with really everyone increasing the Smartphone usage and increasing data usage, it necessitates increased coverage within the home. And that's why we launched our whole Home WiFi service and there's been very good take-up and very good response in terms of the quality of experience in the broadband.

And also with this new service, we're able to deploy a mesh -- a WiFi mesh technology that actually ensures that you have very -- you have quality service in every single corner of your house or in the rooms that you desire to have.

So that wraps up our Consumer Home business. Now I'm moving on to Consumer Individual. So for Consumer Individual or the Wireless business, as Anabelle showed earlier, we actually accomplished something big in 2017 by arresting years of decline in Wireless. So if you actually look at the quarter-on-quarter results, it is now a much more stable business.

If you look at comparing the quantum, if you look at the first quarter of 2016, it was actually an PHP 18 billion business, but has come down significantly to end Q4 2016 at PHP 15.1 billion. Since then, we're actually able to stabilize at PHP 14.7 billion, PHP 14.9 billion, PHP 14.6 billion and PHP 14.7 billion per quarter. And really the up and down swings was really more reflective of the seasonality in the country. And if you actually look at the last quarter a little bit more, this is also encouraging that there is an uptick in the fourth quarter.

Now a big part of what's stabilizing the businesses is of course stabilizing our subscriber base. Now you will see here the first 2 bars actually have 2 color, a dark green color and a light green color. The dark green color represents what was previously declared a subs down based on 120-day subscriber account rule. In quarter 2 of 2017, we shifted to a 90-day recognition in accordance with the industry practice now. So the light green part in Q4 and Q1 is an apples-to-apples comparison that normalizes -- is of 90 days.

Now what does this particular chart show us? It shows that we're actually stabilizing our subscriber base as well. So we ended the year in 2016 at 59.2 and we're actually trending about 58.7 to 58.3 and 57.8 and then ended up with 57.9 million subscribers on our network.

Now in a way, this is a very big accomplishment compared to the previous years, where we lost roughly 4 million subs a year. So stabilizing it in this manner is a big driver to stabilizing the business in total. And I think again worthy to note that after years of decline, in the Q4 we've actually added subscribers to the tune of 100,000. So the Wireless business is also something that we're very happy about and should foretell the future.

Now apart from the subscriber base and the stable revenues, we have to also look at the quality of the business and the quality of the Wireless business that we have now. One thing that we've been able to do while maintaining the total is actually increase data revenues to the tune of 15% on the fourth quarter relative to the same quarter in 2016.

Now this actually shows that the data growth allows us to drive overall business stability as well and points us for the future as we know that the future really is in data. So we're able to change the mix of the business to be a healthier mix with a significant -- much more significant portion of the business in data revenues.

And to be specific, if you actually look at the quarter-on-quarter from Q4 2016 where data revenues comprised 35% of the business, we actually ended -- we see a quarter-on-quarter growth to end the year at the 42% data revenue contribution.

Now a big part of our -- the improvement in results has to do as well with the improvement of our network. Now I would like to show you the OpenSignal results from March 2017 to December 2017. And as you can see here, you have Smart and our competitor depicted and there are 3 different measures: download speed, latency and availability of LTE.

If you look at March, we actually see that Smart was already ahead in terms of download speed and latency. And we were somewhat -- quite a bit behind in terms of availability, with a quantum of roughly 16%, 17% relative to our competitor in terms availability in March.

But come December, you will see the big progress. Download speed has actually eclipsed that of our competitor, really pulling away. Latency as well; we're showing much better latency for Smart network. And shows the superiority, where we -- when deploy, we deploy very good quality network. Kudos to our network team.

And a big accomplishment as well is on availability, where we have significantly improved now from a coverage of 39% to roughly 59% and lowering the gap to just 7 points between us and our competitor.

And as you actually see here, the plan for the 2018 is to not just match, but hopefully overtake our competitor and to end roughly at 82% availability base on OpenSignal reports.

So I think one thing to mention, our executives actually met with the heads of OpenSignal and they were surprised and actually awarded 4 out of the 6 awards of OpenSignal that they gave out. We got the fastest LTE speeds; best network, the fastest network; the latency, best latency; and 3G and 4G. So that's 4 out of the 6. On one measure, we were tied with our competitor and so the competitor only got one actually.

So that shows you that when we roll-out -- our competitor only got the award for availability. So as soon as we roll-out, maybe that would -- well, the intent is for that to change as well by the end of the year.

Now one thing -- Now just to share a couple of examples. We want to kind of demonstrate that when we roll-out this network what happens to the business. So of course as we roll-out, it is very much time in tandem with analytics and network in business to make sure that there's a full on marketing activities happening as we open the new LTE network.

This is the first example, which is in Cainta, Rizal, where we improved the network in June 2017. So as you can see from these 3 results, 21% growth in prepaid subscriber base in this region versus a national of 0%; 72% growth in prepaid LTE devices versus a national of 47%; and a 56% growth in prepaid LTE SIMs versus a national of 32%. And this really is 6 months worth of data, which really is encouraging as we actually see us being able to get our consumers to use and utilize our superior network.

Now we have a more recent example, which is in Marikina, which was actually upgraded only in October of 2017. So this is only 3 months of data so far. But again very encouraging, 4% growth in prepaid subscriber base versus a national of 0.2%; 33% growth in prepaid data revenue versus a national of 5.9%; and a 20% growth in prepaid LTE SIMs versus a national of 16.3%.

So very encouraging results that we know how to monetize our network when we roll-out and more learnings and we actually want to do a faster pace as we do -- as we roll-out the plans in 2018.

Now my last chart. I think very important to share that as we pursue our growth in data, we actually strengthened our go-to-market with more digital analytics-driven and cost-effective campaigning. Because we can now be more targeted in the way we go-to-market. We don't have to spend as much. And in fact we were able to deliver those results despite our advertising and promotions going from PHP 4.1 billion down to PHP 2.7 billion and our product subsidy from PHP 8.1 billion down to PHP 1.9 billion.

I think one of the questions raised in the previous investor meetings was: Can this level of spending be sustained or this new type of spending be sustained and still deliver results? Well, in a way, this kind of demonstrates that we were able to do this for the full year.

So that is my last slide. Now I like to hand over to Duane Williams, the CFO of Voyager. Thank you very much.

Thank you, Renren. Good afternoon, everyone. So in 2017, we continued to build Voyager into what we believe will be a major driver of future economic growth in the Philippines by providing digital platforms to enable small businesses, entrepreneurs as well as government and other entities to delight their customers.

Our goal by 2020 is to bring 30 million Filipinos into the financial system via our payments, savings and loans platforms. As an example today and additional proof points, we are the largest lending footprint -- we have the largest lending footprint in the country with PHP 27 billion loans disbursed to-date.

We also have a number of leading innovations that we have brought to market such as PayMaya and Facebook Messenger, PayMaya QR, Lendr, crop and TxtMed loans, KasamaKA micro-saving, micro-insurance, Barangay Program, Credit Score Aggregation and CoopHub Services, as well as the ongoing engagement that we have with millions of digital Filipinos via freenet and hatch.

During the year, Voyager was engaged with over 300 mostly large enterprises and over 15,000 micro, small and medium enterprises. That concludes my presentation. Thank you.

Well, good afternoon to everybody. This is I guess the last part of our presentation to you this afternoon and my job is to look -- to give you the outlook for 2018 as best as I could.

I think in terms of our press release, we guided the core income -- the current core income to be up by about 10% from the PHP 22 billion we achieved in 2017, so up to PHP 24 billion. It's not a bit more in 2018. That will be driven mainly by the -- by what we anticipate to be a positive growth in the consolidated service revenues of PLDT.

I think both Jovy here and Ren, in terms of the growth in revenues of Enterprise and Consumer Home, will show similar double-digit growth in 2018. We estimate that to be around PHP 9 billion to PHP 10 billion growth of both Consumer Home And Enterprise.

So the next revenue stream refers to the Consumer Wireless, and there we're getting to be more optimistic about seeing a significant deceleration of the decline in Wireless revenues. Like the first quarter last year compared to 2016, the decline in Wireless revenue was 3.3% and then in the second quarter it's down to 2.5% and third quarter down to 1.2% and in the fourth quarter it's down to PHP 400 million, such that -- because of that, because of the decline being only PHP 400 million in the fourth quarter 2017, for the first time we are seeing PLDT's consolidated service revenues grow slightly by 1%, if I recall correctly, in the fourth quarter of 2017.

So what has been the behavior of the Wireless revenue, say, for the first 2 months? We have the numbers for January and the decline in January still some decline, albeit the picture is rather mixed. For the wireless prepaid, it was actually up by 7%. We had a slight decline in the postpaid. And the Smart Bro, which is the dongles business, I suspect that declined. And our job is to migrate successfully those who are using the dongles over to the smartphones, LTE devices.

So if we could achieve a very modest decline in Wireless for the first quarter, then it's likely that the first quarter numbers would look quite good from both a revenue, EBITDA and profit standpoint.

For the full year, if we're able to just maintain or make the Wireless revenues flat -- the goal is always to make it a positive goal even if it is modest -- then you will see an increase in revenues to the tune of 4% on a consolidated basis. If we minus expenses to increase our EBITDA by a certain number and of course the bottom line should see PHP 24 billion, if not better.

So I think the picture is going to be more optimistic as we proceed. Not to say that this will not be easy. I think there's a lot of work that will need to be done across the board.

On CapEx, we're guiding at PHP 58 billion for the year, which in many ways is a statement on CapEx. And I shall describe to you that it will be roughly, broadly speaking, 50% devoted to the Wireless, mainly on the build-out of the 4G, and 50% roughly or slightly more than 50% on the fiber-to-the-home and the pertinent Customer-premises equipment related to giving access to the homes and to enterprises.

We intend to fund this mainly out of our CapEx, but there will be sales intended in respect of Rocket Internet maybe for a portion of our portfolio there and we will have to discount some of the MPIC receivables to ensure that we are within the 2x net debt-to-EBITDA ratio for the year.

Dividend policy is nothing new, no change. We anticipate being able to maintain our 60% dividend payout out of the core income of the group.

That's about it. So thank you. And I think we're ready for your Q&A.

We're now ready to take questions. We'll take questions first from those who have joined us through the conference facility before we take questions from the floor. Operator?

(Operator Instructions) Our first question comes from Luis Hilado.

I had 3 questions. The first was the clarification on the service revenue growth guidance of 4%. Did I hear that correctly that it should mean that the Wireless Individual business will be just stable for the year, so if there's any growth in the year, that would be an upside? Second question is related to the Huawei and Amdocs contracts that you signed recently. Could you give us some color on what capabilities you'll be able to unlock with those contracts and any milestones and timetables related to those? And last question is regarding the bundled packages in December. Have you extended it into this quarter or come up with a similar promotion and what's the plan for that I guess for this year?

So Luis, on the revenue side, as I indicated, the sum of the growth in Home and Enterprise is likely to be in the range of PHP 9 billion to PHP 10 billion for 2018. Now the target for Consumer Wireless is at least neutral or flat to 2017, if not slightly positive. So even if it's flat, then we have -- we're ahead of 9 -- by 10 -- PHP 9 billion to PHP 10 billion for 2017. Now offsetting that would be the anticipated decline in international between PHP 3 billion to PHP 4 billion depending partly on the exchange rate for 2018. So we should see something like 4% or 5% net increase in revenues. I hope it is better if we could show even a modest increase on the Wireless revenue side. But that's how it stacks up. That's how the revenue seems stacked up. So we're quite confident that we will show for the year as a whole consolidated service revenues of at least 4%. That's coming off a minus 3% in 2017. Second part of your question is...

Just a very brief description of our Amdocs arrangement. We are about a month away from service commencement date by Amdocs, which means the date when they formally take over the IT functions that have been outsourced to them. And that will also mark the start of the transformation program, which involves a number of projects that will be delivered across 18 months. The first project is a very big project that will be completed in 4 months from service commencement date and that's the enterprise product catalog, which will be a very powerful tool that the business can now use in order to provide better products and services. And together with the artificial intelligence that will be built by Amdocs for us, that would work very well with our -- and enhance our data -- big data analytics capabilities. As for Huawei, that contract is slightly for our network intelligence, the -- one OCS charging system that will change the complexion of how we now are able to charge our customers and allow us a very agile charging system. And that will be accomplished over a 2-year period with very strict milestones for completion. So we are looking at basically between this year and towards the latter part of next year when we basically feel the changes and the enhancements and improvements that both these outsourcing projects will deliver to us.

I can answer that, yes. Obviously, with our pursuing a one Consumer convergent organization, we will play to our strength. As you know we are quite dominant and we are the leader in the home space and we'll certainly try to leverage as much of our product and service feed line. And we've started up on the well-received bundle offer of triple-play of voice, broadband, cable -- rather pay TV as well as Wireless services. As we go through the succeeding periods and enabled by our back office support from Amdocs and Huawei allowing us new capabilities coupled with the analytics, as Ren had mentioned earlier, you will see more and more of our bundling and convergent play, particularly in the Consumer space. No different from how we behaved and how we performed in the Enterprise space, where we had done clearly beyond access and we had looked at our customers in the enterprise space and had given them amply services beyond just connectivity in terms of managed services, data center, colocation hosting and now cybersecurity.

I know this is not visible to you, but just to say that at least in relation to the bundled services that -- Consumer Home particularly, we'll continue to offer. Just a word on Cignal. For the first 2 months, we have had a record-breaking sales, such that as of the end of February numbers of subscribers have risen to more than 1.9 million subs. And we believe that by the middle of the year, they should hit at least 2 million subs. And given the increasing scale of its business, they had record revenues and record EBITDA and profitability. And we would hope it will continue. Now I think there has been a significant satellite launched that will provide Cignal the ability to offer Internet via satellite. Now I know it's very expensive still, but we would hope that over time the price points of Internet over satellite will come down. So we should be able to service certain areas of the Philippines that may require Internet service.

Maybe just to directly answer the question as well. So yes, we actually have extended the Christmas free bundle up-to-date and we're about to launch the new form of it, which is an updated and even more attractive one with the latest offers of postpaid Smart, which will be called Best Buy bundle.

Our next question comes from Piyush Choudhary.

A couple of questions. Firstly, you are allocating a significantly large CapEx of PHP 30 billion through Fixed. Are there any practical challenges to achieve that spend in 1 year because this is like 2.5 times, almost 2.5 times of your annual spend on Fixed? Secondly, can I clarify on your comfort level in terms of net debt-to-EBITDA considering your high CapEx spends over the next 3 years? And lastly, just a clarification. Your guidance doesn't factor any entry of a third player. Just want to clarify that as well.

With regard to the first question, of course whenever we ramp-up a rollout, there are natural challenges. But just to remind you that last year we tripled our roll-out of fiber-to-the-home ports. So we are very -- (a), we understand how to do it, and (b), we are very confident that we will be able to achieve it because we changed the model how we work with our suppliers into a much more efficient way of working. And therefore, we are actually quite confident that we will be able to achieve that roll-out -- and then also in a timely fashion, so we can even monetize on it during the year.

The second question on the net debt-to-EBITDA. For 2018, notwithstanding the ramp-up in CapEx, we're quite cognizant of managing our debt levels to more or less where it is. We believe that the CapEx could be supported by some improvement in EBITDA and then we're also supplementing our cash flows with certain asset sales. So one of them is we sell down or discounting of the receivables that we have from MPIC. MPIC owes us quite a bit of receivables from the Beacon share sale that we did. So we have actually recently closed the transaction to raise about close to PHP 5 billion from the sell down of some receivables. And there are a few -- maybe one more tranche of that that will happen. And the other assets that we would consider selling down depending on market conditions is really part of our Rocket Internet share position. So Rocket is listed. It has done better in the last couple of weeks in terms of share price. So we are keeping a watch over the market and probably we'll try to time the transaction sometime during the year.

I think your last question on...

Can I clarify on this point that 2018 you have some amount of asset sales, but going into 2019 and '20 where you're looking to keep the CapEx levels at similar levels. So what's the kind of comfort level on net debt-to-EBITDA on a longer-term basis for the company?

I think the basic premise behind investing behind the network is that we will generate a return on that investment. So the pressure is on Eric and his team to deliver even higher revenue growth over time. And, Eric, that would allow us to pay for the CapEx.

Well, I think the numbers are quite obvious, isn't it? If we spend about PHP 30 billion on Fixed Line, you could see that the incremental revenue that it drives forward is anywhere between PHP 9 billion to PHP 10 billion a year. So you could see that that is something we ought to focus on in the next few years. Now as to the Wireless bit, it's really driven mainly by necessity. I think we should complete substantially the roll-out of our 4G, and if we could show even a modest increase in our revenues on Wireless, then I think it will be quite a good year for 2018. A tall order no doubt, but I think we -- the whole organization is geared to achieving that. As for your question about the impact of the third telco player here, while of course we do recognize that most likely there will be a third telco player based on the government pronouncements, they -- at least what I recall is that the bid date will be May 24th and it will take them about a month to evaluate the proposals, the bid proposals. And again, if I recall correctly, they should be able to announce who the third telco player is by the end of June. In which case, will they be operational in the second half of the year? We have our doubts if they become operational, because there's a local telco player which is their partner. I think at least for the first -- for the last 6 months of the year, I don't think it will have a significant impact on the industry per se. I think you're really looking at 2019, where they may or may not have some impact on the competitive dynamics or the revenue dynamics of the industry.

Our next question comes from Arthur Pineda.

Just 2 questions from me, please. Firstly, on the CapEx. What should we expect versus Fixed and Mobile split over the next 3 years? And it's kind of -- it's around 53% Fixed this year. Should that ratio go forward in the next few years? And what are the targets in terms of household and BTS coverage by 2020 on the spending program? To clarify as well, this is cash CapEx, right? Second question I had is more on housekeeping. On your accelerated depreciation, amortization, just to check, on Slide 57 it shows PHP 5.9 billion, but then on the MD&A it shows PHP 12.4 billion. Can you just clarify on this topic?

Well, the CapEx split in the next few years will probably be the same, because we clearly focus on Fixed because the opportunity is there and there are so many households not connected. We will probably achieve by 2020 about 9 million households, 8 to 9 million homes passed. And in terms of LTE roll-out, this year we want to cross 90% mobile broadband coverage, as promised also to the NTC, in 3G and 4G. And we will push this to 95% plus over the next years. The rest is very, very difficult to achieve and is a very, very difficult business case. So I'm not one to promise more. But we go more and more to the outskirts of the population. And our promise was that all the municipalities in the Philippines will get coverage. And that will lead to 95% plus population coverage within the next years? time.

Just to check on that. The 95% coverage also implies that the BTS will be -- will all be fiberized as well?

We expect about 80% fiberization. We're also making use of high-speed microwave. For example, certain islands we cannot connect with fiber, so we're using microwave, which caters for 1.6 gigabit per second currently. We are building 2 links at the moment, one to [Patayan]. And then there is an improvement of the microwave technology to be expected, so this capacity will further be increased. So that's actually not bad. And we are -- currently, when we put the fiber, we put about 1 gig, 1.6 gig. So with a microwave like that, we can probably connect a couple of base stations. So that's enough. So 80% fiber. If we can get more, we will. And as we do that, we do this in synergy with the fiber-to-the-home roll-out, so there's a lot of synergy. As we push the fiber-to-the-home roll-out, we will also get the fiberization of the base station.

Arthur, on your last question. Those are actually 2 different numbers. And the PHP 12.4 billion accelerated depreciation that we recognized in the end of the year, that refers to the impact of assets, particularly network equipment largely in NCR that we're swapping out from one vendor to another vendor. So the impact of that is basically shortening of the life of those assets and we're replacing it with new assets. So a significant portion of that was booked for the PHP 12.4 billion in 2017. But there's another PHP 4.6 billion of that that will be recognized in 2018 in line with the decommissioning timeline. Now to complete that story, though, in terms of what we're able to get from the new vendor, they have effectively on a commercial basis given us a like-for-like swap for free, so -- and then they -- on top of that, we have paid for additional capacity. So that implies that we would have essentially a swap out network equipment that will be carried at lower cost, but higher capacity going forward. So that should help us on a going forward basis. So that PHP 12.4 billion we considered that outside of our core income, but it our reported income and is regarded as a one-off special item. The other PHP 5.8 billion accelerated depreciation was part of our core income, because every year we do have items that we review for -- in terms of the proper useful life. And in a number cases there are certain equipments that because of the rate of technology changes and other factors, we do have to accelerate the depreciation. So that PHP 5.88 billion is the different item in our P&L.

Well, just to add. So the practical effect of the PHP 12.4 billion provision effectively and the replacement of such network equipment for practically free is an improvement in our depreciation expense. Of course offsetting that, may be not fully, is an increase in depreciation levels because of the high CapEx this year. So Bloomberg might have painted it rather dimly, but we chose to be conservative, because we could have chosen not to reflect because it's a like-for-like replacement and maintain the depreciation rate. But we thought it's best to just recognize the swap, lower the depreciation expense arising from the swap program and move on.

Our next question comes from Rama Maruvada.

Just 2 questions again from me please. Firstly, with regards to your dividend policy, could you please talk through in terms of how you're thinking about dividends more on a medium-term basis given the CapEx program? Would you still be looking to give the 60% payout going forward or what are the broad variables that you think when you're setting this dividend? The second one is with regards to your commentary for Jan, particularly with postpaid and Smart Bro being weak. Could you talk about why you think this is the reason? Is it because you're clawing back on marketing subsidies or is there something else going on?

So on the second question on the postpaid, I think there a number of factors here. I think number one is, if you actually look at postpaid, there is Smart and Sun. So I think it's on the [C axis] we roll-out the better network and roll-out better the LTE SIMs and the LTE forms for Sun. This should curb the churn and therefore curb the losses in postpaid. Also, for Smart, we also launched a new set of plans called the Giga X Plans just 3 weeks -- 2 weeks ago. And I think the reception is also quite good. We have studied the structure of this. We are offering free phones, but it's still at the very -- I think now modest subsidy, but actually it's quite attractive to the consumer. Also the structure of it was studied a lot with a lot of consumer research. And also in terms of postpaid, just to give color, yes, it was actually declining because there were some issues on the customer experience, which we're fixing. And with the new postpaid plan in Smart, that should actually bring us to positive levels very soon.

Then if I may (foreign language), the growing momentum of our prepaid, which is the larger portion of our individual Wireless revenues, growing at 7% coming out of the New Year. Our first 2 months figure indicate that the positive momentum continues and that our first few days of March amply indicate that that actually has begun becoming sustainable. On the question I think we missed, on the broadband. The broadband there's a natural substitution on broadband dongles. As the market begins to adapt more and more mobile data on LTE, there is less and less propensity for them to use and have any demand for the dongles as the experience on LTE over Smart devices are very, very excellent.

So basically the postpaid thing is a temporary issue? So it's not a shift in mix that's happening in the broader market, right? So that's your read on that?

Yes, that's correct.

Now on the question of dividends, I think let me make the first point, namely that, for example, in respect of 2017 income, as I believe in respect to 2016 income, we did payout 60% of the income that the -- first, through the exceptional income. For example, the gain on the sale of the Beacon shares, Beacon and Meralco shares, and the gain on the sale of SPi, the balance of our equity in SPi net of the exceptional expenses principally the MRP. So we did pay a dividend on the exceptional income in addition to -- or on top of the recurring core of PHP 32.3 billion. And I think that dividend policy should stay. And as a matter of policy or even desire, we would like to see indeed an increase in the dividend payout ratio. Now that I think mainly is a function of how this industry will develop. And the end of the day, who knows. My sense -- and I'm by no means a digital guru. My sense is that I think the Fixed Line business will probably drive the growth of the industry as a whole for the next 2 to 3 years, because there's such space available for the Fixed Line business to grow on data because the customer experience on fiber is so much better than on the Fixed Wireless solution. So there is that potential that can be taken advantage of. As to the Wireless side, I think 3G, 4G will be around for the next 2 to 3 years. And we would hope to continue -- we would hope to show a positive revenue. But I'm not sure whether it could match the kind of significant growth levels you're seeing on the Fixed Line side with 4G. In a way I would like to think that this is -- the 3G or even 4G is a rehearsal, it is a way of training the Filipinos how to use data in this digital world. And once both in terms of the number of people who use data and the adeptness at using data, the big dance will actually happen when 5G comes around. And that could be anywhere during 2020 or even 2022. When that happens, who knows. If you take an optimistic and rosy view of 5G Internet of Things, artificial intelligence, where it was and all sorts of wonderful things that has been described, the question has always been how can we monetize. Because if you're able to do that, then you might see a boom in wireless revenues driven by 5G, similar to what we saw when the texting phenomena happened in the year 2000. So it's a big question mark and I don't think anybody knows whether in indeed we can monetize 5G revenues given what it can do to customers, to consumers. But I think what will underlie the consistency of revenues and earnings of PLTD will be our Fixed, not to say that we will not push 5G when it does come around. So if that happens, then -- yes, if we are able to continue managing our costs, manage our CapEx better, then, yes, I'll be the first to volunteer the idea of increasing our dividend payout ratio.

Our next question comes from Varun Ahuja.

The first question I have is related to third operator. The government is trying to introduce -- I'm sure it's not a new thing, but introduce new competition into the market. One of the key things they've been talking about this tower sharing. I wanted to understand from the management is how open will the management be to share their existing tower, which, if you do, will facilitate the entry of the new operator into the market. So just wanted to hear your thoughts on the same, whether the government can force you to share tower -- your existing tower infrastructure. That's number one. Number two, clearly this year the number of provisions and subsidies have come off a lot. So do you think this level can be sustained or we should expect some increase because this may have kind of some impact on your Wireless growth also? So just wanted to hear the sustainable level of provision and subsidies. And number three, I'm sure not only you, your competitor is also talking about Fixed Line growth and opportunity. So do you see what happened in Wireless in terms of price competition can be played out in Fixed Line over the next 2 to 3 years?

On the tower sharing policy, our current towers are not capable of sharing, because these towers are specifically designed and engineered to support our network equipment based on our unique network program. With respect to future towers to the extent that a legitimate tower company or companies comes about and provide tower capacities, then we are obviously interested in leasing tower capacities in those areas where we need to provide coverage and service. But as we have stressed to government, the existing towers today whether they be land-based towers or roof-top towers are really designed uniquely and specifically to our own equipment and based on our own network design. So they are -- they cannot be shared with any other provider. And I think that's the same for our competitor.

Well, I'll take the second and third question on -- the second question was on subsidies. And the third, I understand, the Fixed Line disruption, can the disruption in Wireless happen in the Fixed Line. On the subsidies, I think we've seen much disruption and much heavy price competition in the market over the last 4 or 5 years that you've seen margins come down such that -- and the pricing -- or the future of the business is not only in unlimited talk and text, but spilling over to low pricing of -- the future of the business on pure access via the Giga Plans, seeing it to be the one of the lowest pricing in the world will not allow for a sustainable and viable business model for heavy subsidies. In that sense, an environment of heavy subsidies I believe is not sustainable. Then there's like a difference between the higher ARPU and postpaid lines, where we have to continue to subsidize our postpaid market with their preferred phones, particularly that there are new models that are coming out now that are aptly placed to optimal levels to the new LTE network that we're rolling out. On the question of Fixed Line disruption, is it possible for the disruption in Wireless to spillover to the Fixed Line? That is decisively the competitive threat that we would like to avoid. To cite at least in point, we do have -- we are particularly cognizant of the fact that this will play only in the pipe space. The level of play is such that it will be focused on price erosion. The service that we go-to-market will be commodity and currently will be vulnerable to price erosions, no different from what has happened in the Wireless space. Which is why we are putting a lot of convergences, a lot of -- really part of our business transformation is to move ourselves from just being a pipe player as a telco, but moving to digital -- rich digital and technology enabler for our markets both enterprise and consumer by playing to our strength, by bundling, by doing conversion services. In the enterprise space, you will see that we no longer just engage our customers in terms of connectivity, but in terms of enterprise solutions, in the data center hosting, colocation, data recovery, business continuity, cyber security, cloud solutions, SaaS, PaaS, SaaS and the like, and industry-specific solutions. In the consumer space, we are pursuing conversions. As Ren pointed out earlier, the convergence bundling play that we are doing is just a first step of playing to that digital aspiration. More and more we will take in partners that will allow us to play into the future of the business, which is data, that will allow us to bundle content, rich content in terms of entertainment, information, knowledge, games. And then moving on to what our chairman alluded to, as the network gets better, early days of explosion of Internet of Things, when people no longer just connect to other people, but people connecting things to other things. And such is the aspiration that we like to play to.

Our next question comes from Gopakumar.

A few questions. Firstly, is it possible to talk about the EBITDA or EBITDA margin targets for 2018? Are you expecting further margin improvement this year given your reference to the fact that subsidies cannot be sustainable at a very high level? So is a margin expansion expected? Number two is on the D&A. I'm sorry I missed the comments. Did you quantify the accelerated D&A that you're expecting for 2018 to 2020? Lastly, a generic question. You mentioned that if there's a third player launch, and it could be in 2019 -- so given that, are you or aren't you concerned about the ongoing market share loss in Mobile? Do you think that you should focus on market share in Mobile in the near-term versus, say, EBITDA before you see the launch of a third telco?

Well, the expectation in terms of the underpinning the guidance is an improvement in the EBITDA and an improvement in the margin for 2018 driven by the 3% -- or 4%, sorry, revenue growth that the Chairman mentioned. Now in terms of the accelerated depreciation, what we had mentioned is that in terms of the impact from the swap out of our network asset/equipment, there's still about PHP 4.5 billion, PHP 4.6 billion accelerated depreciation in 2018 first half.

On the third question, which is on market share loss, I think first point there is, well, we need to stabilize the business first, which is actually what we did in 2017, and then focus on regaining market share -- but more than market share gain, it's actually growth gain. So it's a game of -- it's actually ensuring that we grow our number of subscribers by satisfying them with the best LTE and data service along with the beyond access service. That's number one. And number two, ensuring that as we pursue this better here, then we actually get word of mouth. That should actually help stabilize and help bring us back to growth. So it's not going to be the previous practice of price war to get market share, so that's not our policy. The policy there for us is to grow quality subscribers and ensure that when they come in they stay with us through the best service possible.

Our next question comes from Ranjan Sharma.

Just 2 questions from my side. Firstly, if I understand your CapEx guidance, this includes customer-premises equipment that you are giving along with the fiber connections? Is that correct? And how are you looking to recover this cost? Do you have like any installation revenues to recover this cost? Secondly, on your stake in Rocket Internet, I understand that this will be sold out to support the CapEx. Are you looking to sell this down completely this year or this could phased -- [sold] out? I'll stop here for now.

I guess on the second question with respect to our Rocket Internet shares, we own approximately 10 million shares in Rocket, which represents 6% in shares. So we have the option of -- so the flexibility to do what we want in the sense that there's no lock-up or just no particular contractual provision that ties us down. So for us, I guess our thinking is to sell part of it and keep some part of it. But we obviously will be flexible depending on how market conditions pan out.

On the first question, if I understand it right, on the fixed line when we sell fiber-to-the-home is there any subsidy to the Fixed Line equipment. This is an accepted practice in the telecom world that we bundled the most -- the highest CapEx for the fiber connection to the home, is what you call the ONU or the optical network unit, that actually is the modem that connects the fiber on to the home. And that's factored in the business model.

Our next question comes from Arthur Pineda.

Just a follow-up (technical difficulty). Sorry. Just 2 follow-up questions from me please. Firstly, do you see any impairments related to the CURE spectrum return as well as the receivable discounting activity for 2018? Then the second question I had was with regard to the bundling activity. I'm just wondering, what stopped you from aggressively bundling on triple-play in the past? Was there an IT issue which limited this and that can be solved with the Amdocs upgrade?

On CURE, there's no value in our books with respect to CURE, so there should be no impact financially speaking from the waiver of our claims over any benefit that the government may receive from auction or sales -- allocation of the frequencies of CURE. And the discounting of the MPIC receivables, these receivables were booked at on a discounted basis given the long-term nature of the collection and they will be accretive income over time. So the discount rate at which we're selling down the receivables more or less approximate the discount rate we used when we first booked these receivables. So not very marginal P&L impact on the (inaudible).

On the second question, Arthur, first -- we actually had triple-play services and even quad-play services that we offered in the past. I think now we can be able to do it more aggressively because we've also restructured consumers now under one leadership and that takes out any barriers between Fixed Line and Wireless. And we work very well with Cignal as well -- so having come from there as well, so that actually helps a lot. So now that it's under one leadership, it allows us to pursue this in a more aggressive manner and we actually see the business from a total consumer perspective by doing so. And this will continue as part of our offer.

Can you do things like singular billing for multiple services or is that still something which you're looking to do over time?

The intent is to get into singular billing for multiple services. I think PLDT -- now that that's already happening in PLDT, the functionality will soon also be available in Smart and Cignal.

Operator, any more questions on the queue?

We don't have any more questions on queue.

We have a chance to get questions from people here. There are microphones at the center.

My question relates to the income guidance of up to like PHP 24 billion -- PHP 23 billion to PHP 24 billion this year. How much of that do you attribute to the revenue improvement and how much of -- how much more cost cutting would there be as a driver of earnings this year? And then my second question would be on the -- you seem to be gaining momentum in terms of recovery. Do you expect the third-player to be a disruptive force already as early as 2019 to your recovery should you gain momentum? And on the home base, where -- in what areas would be -- if there should be efficiency initiatives, in what areas will this be implemented, like Fixed Line, Wireless?

With respect of our guidance for 2018 of PHP 24 billion, that will be driven mainly by the anticipated increase in revenue across the board actually. In expenses terms, I think actually we should see a modest increase in our cash OpEx, because, for example, the Amdocs situation should see some reduction in headcount costs and personnel cost. But as we build our network, I think more and more expenses for rental and maintenance will rise -- what else? -- depreciation will increase. So we just have to make sure that they are under control. And we -- as Anabelle indicated, we want to continue an improvement -- to continue seeing an improvement in our EBITDA both in terms of the level and the margin in the coming years. So I think it is illegal to suppress the OpEx simply because the business is getting to be much bigger than before.

On momentum?

I would like to take the second question. I understand the second question is the disruption of -- any potential third player on our momentum of recovery. I think the Chairman alluded to certain realities of the entry of a third player. I don't think they can immediately start operation and make a dent in terms of the competitive environment. But having said that, in the coming period assuming a third player comes in, we -- when we were in Barcelona, there were several discussions in the Mobile World Congress on how a third player will come in by using price and not value proposition. Because pricing in this country has really come down to a level where our [Hero] product for mobile data, for instance, is a PHP 50 giga product, which translates to really a $1 basically for every giga for 3 days. The wholesale pricing -- by the way, international wholesale pricing for a giga is about $40 per month. And that's accepted in that area -- pricing for a giga at PHP 50 to the one that's PHP 2,000, divided by 10, if was 3 days, that implies it's PHP 200 per giga. So you're basically looking at the market scenario where we're really some of the lowest price in terms of mobile data pricing. Comparatively, China is a benchmark. For instance, I understand the ARPU in China is about $10 and here we're barely recovering from a -- just a little north of $2. Given the discussion that we got around this room around the challenge of CapEx, third player or no third player, given the demands of fiber-to-the-home market as well as connectivity for moving up, which is demanded by the market, of 2G, 3G into LTE, a price play actually may be short-term, but currently we don't see how it can be competitively sustainable over a medium and long-term. So that's our view.

Let me just add to what Eric said. It's difficult to speculate because we don't know who it is, who the foreign player is. Who asked the question? Okay. Who the foreign player will be and who the local partner or partners could be in that respect. So in many respects, it's best to wait. And once it's announced middle of the year or thereabouts, then we can plan as to what we think they're going to be doing or if they announce what they intend to do. So I think it's best to wait until the thing happens. Our own sense is that it will happen in some shape or form. Now then the question is, all that said -- then you should ask the question: which part of the industry will it enter first? If it's mobile, well, we have 18,000 base stations, how many do they have? Probably little or nothing. So they have to build base stations if they want to get in the mobile space. And the mobile space is very low priced, crowded and you need full infrastructures. Not that's the question of building the base stations or the towers, but there's all sorts of things needed to operate an honest to goodness cellular system. Will they go into the fixed broadband? Well, you have to lay the fiber down and that takes time. So fixed wireless that is pinpointed or shotgunned -- sorry, rifle shot at enterprises in the metropolitan centers of the country, that might be possible, because it's easy enough to install, put fixed wireless solutions here in Makati and Ortigas, et cetera, et cetera. That might be possible. So that's our initial sense. Of course they might have different plans. We don't know.

Maybe just to add. Just some reality check. In the case of San Miguel, which would have been the third player really, where we've actually acquired these assets, they have more than 2,500 sites actually consisting of both land-based and roof-based sites. But when it boils down to determining how many sites that are operating, meaning to say they have towers and antenna and our own air, there are only over 250 of these sites. And San Miguel has been there trying to build and put together an effort for almost 4 years. So on the -- after the fourth year, the most that they could have by way of operating sites was only around 250. So that is a reality check I guess for a third player. And the other reality check is access to site. I mean, site access is increasingly very difficult. Land owners are no longer as easy to convince to allow towers to be built on their properties even if they are idle given that the best use for these sites probably are not for leasing to telcos. Roof-based sites are even more difficult today given that the changing architecture of buildings in the NCR or Metro Manila in particular. So the roof-tops of the new buildings are no longer hospitable, and so for us -- roof-based cell sites are concerned. So there are more difficult challenges today compared to 4 years ago when San Miguel was trying to put together a network in partnership with Qatar and then eventually trying to see whether they could do a partnership with Telstra. So those are just real realities on the ground that a third player will have to consider before it enters the market.

Any additional questions on the floor?

I just have a follow-up question. Can you please also comment on the pricing environment, if it has improved and how much of that accounts for the revenue improvement? Is it more of improved prices or subscribers -- recovery of some market share gain?

In the consumer space, the pricing has established because it has actually been disrupted to start with over the number of years. And the -- it's a combination of both. Also, consumers adopting more mobile data, consuming more videos over their smartphones has actually driven slightly the ARPU higher. On the Fixed space, actually the propensity for broadband in the home and driving higher bandwidth -- because the broadband in the home is a shared appliance amongst members of the family and as the home becomes more digitally adept, people who used to be happy with just one net connection in the house are now getting five net connection. And the more affluent homes actually can live with us -- and you can relate to this -- 8 meg. And some homes can live with even 20 meg depending on how many members are actually sharing the Internet in the house. In the Enterprise space, it's really an up-sell and cross-sell proposition, where we've actually challenged enterprises to really take a look at the cost of technology and vis-a-vis our ability to be -- for us to be able to provide them such technology on managed services basis, bundled basis from the network architecture to the data center hosting, to the cloud solutions, to the hardware and software portions and management, and very recently, as Jovy alluded to earlier, even the security solutions. And this drives our engagements with the enterprises with higher value engagements and higher ARPU. So it's a combination of all these things.

Any more questions? If there are none, we will have the operator repeat the dial-in replay numbers.

Thank you. We wish to advise you that the instant replay of today's call will be available starting today through March 15, 2018. The instant replay details are contained in the conference call invitation. And we now turn the floor back to Mr. Pangilinan for his closing remarks.

Well, thank you to all of those who joined us today in this room and on the conference call. Thank you for joining us. And we announce our first quarter results in May, but I do look forward -- I must say that I do look forward to a brighter year for PLDT in 2018. (foreign language) Thank you.

On that happy note, thank you. There's refreshments. Please join us.

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