PLDT Inc (PHI) 2018 Q3 法說會逐字稿

Good afternoon, and welcome to the PLDT conference call. This conference call is being recorded.

At this point, I would like to turn you over to Melissa Vergel de Dios, Head of Investor Relations of PLDT, for the introductions. Please go ahead. Thank you.

Good afternoon, and thank you for joining us today to discuss the company's financial and operating results for the first 9 months of 2018. As mentioned in the conference call invitation, a copy of today's presentation is posted on our website. For those who have not yet been able to do so, you may download the presentation from www.pldt.com under the Investor Relations section. A podcast of this briefing will be available on our website after the call.

For today's presentation, we have with us Ms. Anabelle Lim Chua, Chief Finance Officer; Eric Alberto; Chief Revenue Officer; Attorney Ray Espinosa; as well as other members of the PLDT management team.

At this point, let me turn the floor over to Ms. Anabelle Chua to begin the presentation.

Good afternoon, everyone, and thank you for joining the call today. For our 9 months financial highlights presentation, we show our result under PFRS 15 accounting standards that was adopted earlier this year as well as on the pro forma PAS 18 basis in order to make comparable the year-on-year financial information.

With that said, when we look at our telco core income for the period, excluding Voyager, it amounted to PHP 19.1 billion, 5% or PHP 1 billion higher year-on-year. This was on the back of a 4% increase in service revenues, PHP 111 billion, and a 4% year-on-year rise in EBITDA to PHP 52.1 billion on a pro forma PAS 18 basis. EBITDA margin improved to 45% from 44% the previous year.

Voyager, on the other hand, reported a negative contribution of PHP 1.8 billion for the 9 month period. Voyager continues to enable consumers and enterprises bring relevant digital platforms in the areas of financial services, digital payments and marketing technologies. The ramp-up has resulted in more significant cash flow for Voyager this year than in prior year.

Now combining the telco and Voyager results, our pro forma consolidated service revenues reached PHP 111.9 billion, up 4% or PHP 4.6 billion higher year-on-year. If we exclude our declining ILD revenues, service revenues were actually higher by 7% year-on-year. On a PFRS 15 basis, our consolidated service revenues amounted to PHP 109 billion, which represents a 2% increase from prior year.

With the new accounting standard, there is a PHP 2.9 billion downward adjustment in our service revenues to PHP 109 billion, offset by a positive PHP 2.3 billion upward adjustment in non-service revenues, resulting in a PHP 600 million change in the EBITDA number. Consolidated EBITDA came in at PHP 50.3 billion, a 2% increase from 2017.

Now our core income from telco operations was PHP 19.1 billion, as mentioned; with Voyager, came down to PHP 17.3 billion, which is flattish to prior year. Now for the 9 month results, some of the key items to highlight are: there was a PHP 1.8 billion gain from the sale of our Rocket Internet shares that we realized; another PHP 1.1 billion gain on revaluation of the remaining Rocket shares we hold, is approximately equivalent to a 1.7% ownership interest in Rocket; and a PHP 4.5 billion accelerated depreciation arising from the shortened estimated useful life of some of our network assets which underwent a transformation which began last year.

On a statutory reporting basis, our reported net income stood at PHP 16.5 billion, which is 25% less than the prior year, as we had a higher gain from asset sales last year.

Now moving on to the next slide. When you look at the quarterly revenue results, we are pleased to report that from our top line stabilizing in the first half of 2017, the quarterly revenues have been trending higher every quarter for the last 6 quarters. So with that, the upward trajectory has been sustained and even proved to be stronger in the 3 quarters of 2018.

Revenues in the third quarter of 2018 in particular at PHP 37.5 billion is the highest level obtained in a quarterly basis since 2Q 2016. Our third quarter revenues are higher by 4% versus same quarter last year or by 7% if we exclude ILD.

Now comparing the number against the first quarter of 2017, our 3Q revenues of PHP 37.5 billion is actually about 5% or PHP 1.9 billion higher than that of the first quarter '17 of PHP 35.6 billion. For the 9 month period, from a 4% year-on-year growth, growth is higher at 7% ex the declining ILD legacy numbers.

Now looking at the next slide. When we focus on the contributions of the major business segments, the 3 main business units that account for 90% of our total revenues grew 8% year-on-year. Combined service revenues from these 3 segments amounted to PHP 101.2 billion. The improvement of PHP 7.2 billion in the 9 month period follows a decline of PHP 1.8 billion in the comparable period a year ago.

Home and Enterprise business units continued to lead the way. Home service revenues grew 12% to PHP 27.3 billion, underpinned by strong demand for our fiber powered broadband service. Enterprise service revenues, on the other hand, raised its growth rate to 10% to hit PHP 28.4 billion. Growth continued to be driven by increasing corporate data, mobile, cloud and other ITT services.

Our wireless consumer business of Smart, TNT and Sun posted revenues of PHP 45.5 billion, which represented a sharp turnaround from -- to a positive 4% rise year-on-year compared to prior year double-digit declines that we posted. So this driven chiefly by growing mobile data revenues resulting from higher smartphone ownership and greater data adoption.

As to our International/Carrier business, revenues from this segment are lower by 21% year-on-year in the 9 months. This includes the impact of lower interconnect rates implemented in September, which added to the decline in our traditional ILD business.

Overall, data and broadband remain the growth drivers across all the business units and it now represents 75% of Home revenues, 64% of Enterprise revenues and 59% of Wireless Individual business.

Now looking at our consolidated service revenues by service for the 9 month period, data, broadband and digital platform revenues at PHP 66.9 billion now comprise a 60% or the largest portion of our consolidated revenues. With respect to fixed-line, data revenues share is about 71% and for wireless about 49%.

Now effective 2018, we updated our revenue allocation for both fixed and wireless to reflect the current consumption trends of bundle packages based on network usage review. Now this change in revenue allocation resulted in us reporting an increase in data revenues by 35%. To just make it apples-to-apples, we note that the increase in data revenues would still have been an impressive 15% based on the previous revenue allocation method.

To drill down further, mobile data revenues were higher by 52% to hit PHP 29.2 billion. Again, without the change, growth would still have been a high 20%. Fixed home broadband revenues jumped 55% to PHP 20.2 billion on the basis of the revised allocation. On the prior basis or previous basis, growth would have been 28%. Corporate data and datacenter revenues increased 14% to PHP 16.6 billion.

Now to more clearly demonstrate or illustrate the impact of such revised revenue allocation, which the objective is to better reflect the underlying usage we're now observing amongst our consumers, we show in the next slide the mobile revenues for the 3 quarters in 2018 on both basis, that is based on the previous allocation and based on the new allocation.

In wireless, the revenue split among mobile data, voice and SMS was revised, which resulted in a higher contribution by wireless data revenues and this is consistent with the current usage trend, where mobile data traffic has registered significant volume increases. Contribution of data rises to about 59% for mobile data. Voice revenue contribution also increases a bit, while SMS contribution drops.

The next slide for fixed, we also show the changes from the way we previously split our revenues to the current revenue allocation reporting method. With the bundled voice and home broadband plans, what we did was to peg a fixed amount off of the monthly tariffs for voice as the incremental revenues arising from availment of higher plans can really be attributed to data.

Moving on to the next slide. This is consolidated EBITDA. We show how we were able to improve EBITDA by PHP 2.2 billion or 4% year-on-year to reach PHP 52.1 billion. The improvement in top line revenues coupled with continuing rigorous management of our OpEx drove the improvement in EBITDA. Our consolidated EBITDA margin for 2018 stood at a higher 45% versus 44% in the same period in 2017.

As to the impact from Voyager on our EBITDA results, there is a decrease of PHP 1.7 billion in our EBITDA considering the cost of building up the Voyager business pillars. For the third quarter, EBITDA came in at PHP 17.5 billion, which is up 2% quarter-on-quarter.

Turning to the next slide, we show our consolidated core income on several basis. First, as mentioned, core income for the telco business amounted to PHP 19.1 billion, which is higher by 5% year-on-year. With Voyager, our core income stood at PHP 17.3 billion in 9 months.

In addition to this, we booked a gain of PHP 1.8 billion from the sale of PHP 7.5 million Rocket Internet shares. So this gain offset the Voyager losses to-date, bringing us back to a PHP 19.1 billion income level. Of course last year the gains from our asset sales were significantly higher.

Then with respect to our reported net income of PHP 16.5 billion, this reflects prior significant noncore items, so first the revaluation gain on our Rocket Internet investment amounting to PHP 1.1 billion and the remaining PHP 2.6 million Rocket shares we hold. The other significant item, as mentioned earlier, was a noncore network accelerated depreciation expense of PHP 4.5 billion. This is in connection with our swap-up of our network equipment in NCR and other areas.

Now as to our consolidated net debt at the end of September, the amount stood at USD 2.4 billion and our net debt-to-EBITDA improved 1.94x. Our gross debt of PHP 3.3 billion, the makeup of which only 8% of which is un-hedged, and 89% of our debts are fixed rate, which augurs well in a rising interest rate environment. Our average cost of debt stood at PHP 4.5% per annum.

In the 9 month period, our cash flows have been supplemented by PHP 7 billion proceeds from discounting our MPIC receivables arising from the sale of Beacon, and approximately another PHP 11.4 billion from the sale of Rocket shares.

Moving on. PLDT and Smart have accelerated the rollout of the group's fixed and mobile networks, which underpins the strong lift for revenue growth. Our CapEx for the 9 months came in at PHP 35.6 billion out of our expected CapEx investment of PHP 58 billion for the year. Of the PHP 35.6 billion, PHP 25.2 billion was spent on the network, PHP 4.6 billion for IT platforms, and another PHP 3.4 billion for business sales related CapEx.

We continue to step up expansion of the reach of our fiber optic cable network, as well as fiber-to-the-home broadband network and the coverage and capacity of our LTE and 3G networks to better serve the rising demand for data and video services. Data usage is growing as a result of our network infrastructure build-up and massive market adoption of LTE.

With respect to the coverage of our fixed broadband network, we now cover 5.75 million homes passed, and we have already exceeded our target for the year and are on our way to achieve our 2020 target of 6 million homes passed.

In mobile, Smart installed over 5,700 new LTE base stations, boosting total count by 45%. So the step up rollout of LTE will enable Smart to meet its commitments to the government to provide high-speed wireless data services in over 90% of the country's cities and municipalities earlier than end 2018.

Not only are we improving coverage in more areas of the country, we're able to activate LTE-Advanced, which also offers even higher data speeds. The LTE and LTE-Advanced network capacity expansion has supported the greater adoption of mobile video and data usage as evidenced by the doubling this year of data payload carried on our mobile network. We've seen huge increases in traffic driven by our successful YouTube net promo. And amid a surge in traffic volumes, our superior network quality vis-à-vis competition was sustained and we continue to be recognized by third-party surveys like OpenSignal and others with respect to a better network quality.

Now just to give an update on the Voyager transaction which we announced early October, we are on track with respect to achieving the various conditions required for closing. We also are in discussions for the investor that will come in for the upsize, and so our expectation is that we should be able to close the deal within the fourth quarter and hopefully before the end of the month. So the expectation is that at closing, PLDT's ownership in Voyager will go below 50%, though we will remain the largest shareholder in Voyager.

Now with that, I'll turn over the presentation to Eric and his team to talk about the various initiatives by the business units.

Thank you, Anabelle. Good afternoon, and thank you all for joining this conference call. We are pleased to share with you the third quarter business revenue performance. I'd like to start by providing a macro summary of our performance to further provide a general context following Anabelle's presentation, before I call on my colleagues to give you the details and dynamics of each of the businesses.

Viewing the third quarter results from the lens of our growing business segments, the complete turnaround and our sustainable revenue growth in the Consumer Individual Wireless business combined with the robust double-digit growth in both our Enterprise and Consumer Home business have enabled the PLDT group to carry out the strong performance of PHP 34.6 billion for the third quarter of 2018, which is the highest quarter performance registered over a 3 year historical period.

The previous year's comparable performance was a growth of only PHP 700 million or 2% increase against this year's quarter-on-quarter cumulative performance of PHP 2.9 billion incremental revenue or 9%, an over 4 times improvement.

If you can go to the next slide, please. Factoring in our expected decline in the International business segment, we see that the group delivered PHP 37.4 billion in the third quarter, again, the highest quarter-on-quarter performance over a historical period of nearly 10 consecutive quarters, with a year-on-year growth of PHP 1.7 billion or 5% as against the negative PHP 100 million performance or 0.2% decline versus the year ago comparable figure.

Note that the decline in the International business segment, albeit expected, was exacerbated by another round of NTC imposed regulatory interconnect rate reduction in both voice and SMS from PHP 2.50 to PHP 0.50 and from PHP 0.15 to PHP 0.05 respectively. This NTC mandate took effect September 1, 2018.

Next slide, please. From another cut, looking at it from a cumulative year-to-date 9-month performance, we can see that the group's growing business in the third quarter of 2018 aggregated to PHP 101.2 billion, which is a PHP 7.3 billion growth or 8% over the comparable cumulative period a year ago.

Next slide. Inclusive of the group's International business, from which we expect our legacy inbound International voice revenues to decline coupled with the aforementioned NTC interconnect rate deduction, that growth is tempered PHP 4.7 billion or 4%.

Next slide. Looking through each of the business segments, starting with our Enterprise business. Our Enterprise business for the first 3 quarters of the year delivered a strong double-digit 10% growth or PHP 2.6 billion incremental revenues over the 3 quarters of 2018, finishing at PHP 28.4 billion.

Attributable to the sterling performance are: the strong growth of our Enterprise wireless business, which is growing at 22%; the strong Enterprise corporate data services growth at 14%; and our continued leadership in providing differentiated services to Enterprises with ITT-managed services and solutions, a business which is encouragingly growing also at 14%.

Over to Consumer Home. Our Consumer Home business registered 12% growth in the third quarter, albeit a lower growth vis-à-vis the first half of the year, which was posted at 14%, due to the fact that our third quarter performance was adversely affected by the DOLE 174-17 ruling. But still an incremental PHP 3 billion revenues in the Home business for the 3 quarters of 2018 at PHP 27.3 billion.

Contributing to Homes' double-digit performance are: our strong broadband service revenues, which grew by 15%; and our ability to bundle beyond the access services in the home, such as our branded high-quality whole home Wi-Fi solution out of our partnership with Google, our exciting home entertainment and content bundles by our partnerships with Cignal, Netflix, iflix, Fox+, iWant TV, and NBA, e-Games among many others and our PLDT home security bundle solution by our new Fam Cam IP security cameras.

Over to our Consumer Wireless Individual business. We have not only stabilized, but now on a clear and steady state of growth trajectory driven by mobile data. Our mobile data business is growing at a new record high of 21% on the back of an outstandingly successful 3 1-hour YouTube promotion per day that we launched in April of 2018. This allowed us to post PHP 1.7 billion increase in our 3 quarters performance or 4% growth to PHP 45.5 billion, clearly a manifestation of a more confident revenue growth momentum moving forward.

The subtotal of all our growing businesses grew 8% or PHP 7.3 billion incremental revenue for the 3 quarters of 2018, reaching revenue levels of PHP 101.2 billion. Once again, factoring in our declining International business, which is exacerbated beginning September by the aforementioned NTC imposed interconnect rate reduction, the International business segment posted a dismal PHP 2.6 billion revenue contribution -- or rather revenue reduction, a 21% decline, which brings this business to PHP 9.7 billion revenues in the third quarter of 2018.

Taken as a whole, the group business grew 4% or PHP 4.7 billion growth at PHP 110.9 billion at the end of the third quarter of 2018, a performance which is markedly better than what we used to report in recent history and augurs well with our overriding strategic intent to delivering the best digital experiences to all our customers.

At this juncture, I would like to turn over the floor to discuss each of the major businesses of Enterprise and Consumer first to Jovy Hernandez and then to Renren Reyes to discuss our Home and our Consumer Wireless business.

Thank you, and a pleasant good afternoon to everybody. I'm pleased to present the third quarter business results for the Enterprise business.

If you go on the first slide, you will see that Enterprise delivered PHP 28.4 billion of revenues as of September of 2018, registering double-digit growth of 10% or an incremental growth of PHP 2.5 billion versus the same period last year. Our fixed-line business continued to grow, delivering incremental growth of PHP 1.3 billion or 7%. And this has been fueled by the continued demand for data. Our broadband revenues grew at an all time high of 19% as enterprises continued to leverage on the internet for their operations.

Private data networking services also continued to grow at double digit or 10% as connectivity requirements between enterprise branches continued to grow not only because more branches are being rolled out, but more importantly because the bandwidth required by enterprises in between these branches continued to expand. The growth in data revenues clearly outstripped the decline in our corporate voice revenues of negative 3%.

For wireless business, our Enterprise Wireless business is growing like never before at 22% growth versus the same period last year or an incremental growth of PHP 900 million. We note that the absolute pesos value growth that we have delivered as of the third quarter of this year is already bigger than the full year incremental growth that we have delivered in 2017. This was attributed to the fact that our postpaid business has grown 25%, with net new subs of 36,000.

Our wireless broadband business also grew 15% as more enterprises leveraged on our stronger LTE network. And as more and more devices are being connected to the internet and more connections are established between people to people, people to machines and machine to machines, our IoT and solutions category has grown 20% year-on-year, with net new connections of 28,000.

Last but definitely not the least, our ICT business continued to grow faster than industry growth at 14%, contributing PHP 300 million incremental growth versus the same period last year.

Our datacenter business grew 17% and our cloud services business grew 23% as more and more enterprises see the value of offloading their IT to our datacenter assets and the cloud so that they can focus on their core business.

Lastly, as more and more enterprises get online and leverage on the power of the cloud, cybersecurity has become a primary agenda to every CIO in any organization and we are very pleased to report that our cybersecurity portfolio has grown by 60%.

Next slide, please. Looking at our revenues using a different lens, specifically categorizing revenues into just data and voice, we are very pleased to highlight that the Enterprise is growing where it matters. Data and ICT revenues grew by PHP 1.9 billion or 12% and now contribute 64% of our revenues. Voice and SMS, on the other hand, contributes 36% and is growing at 7% or PHP 600 million.

Next slide, please. Now to put our performance in context versus competition, corporate data revenues has been the traditional revenue item that we compare as it is the item that we can compare like-for-like. And in this regard, we're pleased to note the following. First, in terms of absolute peso revenue terms, our corporate data revenue is 2 times bigger than that of competition. Second, despite being 2 times larger, we have been able to grow faster at 14%. We grew our corporate data business by PHP 2.2 billion, while competition grew by PHP 800 million. This is a clear indication that we've successfully gained market share, further improving our leadership position in the Enterprise space.

Next slide, please. Our leadership in the Enterprise space has been built over activities that we have done in the market. First, we have always tried to be at the forefront of industry innovations and we have been partnering with global companies such as PCCW in terms of delivering new services to the Enterprise market.

We have also been a partner of the ngena partnership, which is a global SD-WAN consortium of different telcos around the globe that is developing the SD-WAN solutions specifically for us here in the Philippine market.

Last but not the least, we have been working very closely with our partners in NTT in terms of up-scaling our people in terms of our security portfolio.

Next slide, please. We have also been very pervasive in terms of industry thought leadership and we have been very active in activities for the active markets that we serve. The BPO segment remains to be a very vibrant sector in the Enterprise markets here in the country as well as retailing and the banking sector. And also we have been part of the IoT summit in terms of new IoT solutions and also discussions on data privacy and the cloud services.

Next slide, please. Thirdly, we have been espousing and inspiring Filipino entrepreneurship, actively pursuing more entrepreneurs in the country and we have been espousing more businesses so that we'll able to actually enable them with digital solutions for them to succeed in their ventures.

Next, we have also delivered in the market first -- one of the most significant ones is that we have announced that we will be the first in 5G and we have chosen Clark to be the city that is going to be the very first Smart 5G city. 5G is going to be very critical for the Enterprise market, so globally it has been discussed as the first used cases for 5G. It's definitely going to be in the B2B space.

In the end, the Enterprise business is still a business of trust and the activities that we have done locally and globally we feel is allowing us to really be the leader in the enterprise market, allowing us to deliver the best services at the best possible cost for the enterprise cost.

That's it for the Enterprise business. I now turn you over to Renren to discuss the Home business and Consumer business.

Good afternoon, everyone. I'll be sharing our third quarter 2018 performance for the Consumer businesses of Home and Wireless.

If you go to the next slide, please. I'm pleased to share with you that the PLDT Home Broadband business now stands at PHP 20.5 billion and is growing at 36% Q3 2018, underpinned by robust growth in new broadband subscribers, up-sell to higher bandwidth plans and subscriber adoption of beyond access services. We are also leading the industry and ushering the next generation data experiences to the Philippines.

In the third quarter, we introduced a groundbreaking partnership with Google with their home Wi-Fi solution. We upgraded our existing loyal subscribers to fiber upscale and upgraded their speeds for better CX. And we launched our entry into prepaid fixed wireless market with PLDT home Wi-Fi.

If you go to the next slide, please. Our Home Broadband subscriber base rose to all time high of 1.94 million subs, a growth of plus 8% on total, of which our high-speed fixed wired broadband subs base is growing faster at plus 13% to 1.75 million.

Next slide, please. Driving this growth is our continued expansion of fiber in our pursuit of making the Philippines a fiber nation. PLDT Home has more than double its fiber fast broadband ports this year to 2.2 million, spread across all regions. This brings our fiber homes passed from 4 million last year to 5.7 million as of Q3. Our total fiber footprint now stands at 221,000 kilometers, having added 56,000 kilometers since the end of 2017.

Apart from the rollout of new ports, if you go to the next slide, our teams have also delivered strong progress in our copper monetization effort, where we migrate our existing subs into fiber technologies. Since the start of the year, we have grown our modernized subs by 6.1 times, and in tandem with our fiber upgrade efforts, we look to up-sell our subs to higher value plans and higher speed plans. We have made significant progress here too. Since year-end 2017, we have grown our upgraded base by 2.2 times despite being held back by some DOLE issues for our telemarketing teams.

Next slide, please. Further to this facility modernization efforts, we also have to modernize the broadband plans of our subs to meet the new minimum speed requirements in the home. To continue to have good CX on a shared use and with growing video usage, 2 Mbps and 3 Mbps simply are not good enough anymore. As such, we have upgraded our base plans of 1299, 1699 and 1899 to have minimum speeds of 5, 10 and 25 Mbps respectively. And the response is exactly what we hope for.

If you go to the next slide, we show a couple of screen grabs. In the midst of our DOLE issue, we got the following social media feedback: "Something positive, (foreign language)," "Thanks, PLDT Home." And in the other picture, it says, "Thank you, PLDT home," with a picture of the speed test showing even slightly higher than 5 Mbps. We have started to create social media advocates with this program, something that will help us a lot as we recover from the DOLE impact.

If you go to the next slide, please. Our extensive fiber rollout and fiber migration progress also allows only PLDT to offer beyond access solutions that require reliable, high-speed, high-quality broadband. One such innovation this Q3 is the launch of our exclusive Google Wi-Fi partnership. Now our subscribers can enjoy branded whole home Wi-Fi offer that allows our subs and their families to enjoy high-speed broadband in every corner of their home. You can get our branded Google bundle plan that already includes 3 whole home Wi-Fi packs so that you can buy -- or you can buy the standalone Google add-on pack. I'm very excited by this partnership with the global leader in digital, exclusive only to PLDT.

In August 10 of this year, PLDT also entered the home prepaid market to tap this big and un-served new segment, which has a growing need for home broadband connectivity, but with more limited spending power.

If you go to the next slide, please. We have also introduced to the market our converged retail store experience. As you can see, this new retailing format has been designed for the consumer to discover the various beyond access digital services and experiences for both home and mobile. Now you can do all your transactions in just one store. We launched this in BGC World Plaza, Smart Tower and our stores in SM North Edsa and Megamall. This ends the update of the Home business and we will now move on to Wireless.

If you go on to the next slide, in the next slide for Wireless. I'm very pleased to report that the Wireless Individual business will complete its turnaround this year as revenues accelerate from a modest single-digit growth of 2% in Q1 and Q2 to high single-digit growth of plus 8% for the quarter, with the quarter revenue standing at PHP 15.6 billion, the highest in the last 8 quarters. This brings our year-to-date growth to plus 4% or PHP 1.7 billion incremental.

Coming from the first 3 quarters of last year, where the business declined by PHP 7.1 billion, this year's performance shows an PHP 8.8 billion swing in our Wireless business and this is underpinned by our focus and growth on data.

If you go to the next slide. Zooming into our data performance this year, we see robust and sustained growth from PHP 8.4 billion in Q1 to PHP 9.1 billion in Q2 to PHP 9.5 billion in Q3, a PHP 1.1 billion incremental just in 2 quarters. This pushes our data contribution to revenue to a new high of 61% as we start to monetize the significant growth in our data traffic brought about by our YouTube Everyday promo.

If you go to the next slide. At the core of this growth is really the single-minded focus for Smart to drive growth by becoming the mobile video leader in the Philippines in both the minds of our consumers and in the quality of our network. So why the focus on video? If you look at the first infographic on the left, it says in the August report by content delivery firm Limelight Networks it was confirmed that Filipinos are among the world's most avid video consumers. It shows that viewers in the Philippines watch the most online video each week at 8 hours and 46 minutes, even more than India and the U.S. and it well surpasses the global average of 6.75 hours.

Of course the next question is: How are we meeting the demand for the online video in the Philippines? If you look at the middle infographic, it shows that based on the November OpenSignal report Smart garnered the highest video experience score in the Philippines with a score of 42.2, significantly far ahead versus the next best-in-class in the country. Furthermore, Smart score puts us at par with some international carriers. In fact, at 42.2, our score is even slightly higher than that of prominent U.S. carriers AT&T and Sprint.

If you go to the next slide. Bringing this world-class mobile data and video network experience to more and more Filipinos is a key driver for growth. And we are very happy to share the significant progress we have made in the wireless network rollout.

Since the start of the year, our network teams worked tirelessly to add 5,700 new 4G or LTE base stations and 1,000 new 3G base stations, a growth of 65% and 11% respectively. And we're not done yet. Our latest estimate is that Smart will end the year with a total of 16,694 4G or LTE base stations and 11,254 3G base stations.

If you go to the next slide. Accompanying our network rollout and a second driver of growth has been the success of our LTE migration efforts, which has yielded significant take-up, with 60% of our actives -- of our subs base now with LTE SIMs and 35% on LTE smartphones. If you look at our progress in Q1 2017, only 35% of our base had LTE SIMs. We have grown this by 70%, bringing the majority of our subs closer to using our LTE network. On LTE smartphones, we more than doubled our user base from 16% to 35%. Note that for our prepaid business, ARPU increases by 16% 3 months after the SIM has upgraded to LTE.

Lastly, if you go to the next slide. The third driver for our strong growth, a strong year-to-date result is the big success of our YouTube promo as it has truly driven data and video adoption for our brands and in the world-class -- in our world-class video network. YouTube daily active users grew from 800,000 at the start of the promo to 3.8 million at the end of the first run and up to 5 million as of October. Since the start, this growth of 6 times of daily active users. Moreover, during this promotional period we are already monetizing. We are generating an incremental of PHP 21 top-up per user and increasing ARPU by 9%.

Next slide, please. This promo has allowed us to engage our subscribers by providing inspiration for them to pursue their passions from the billions of hours of content that YouTube -- whether lifestyle and how-to videos or travel, music, tech, sports and much, much more, and in so doing, creating the consumers' mobile video habit.

If you go to the next slide. All these efforts of rolling out the best video network, massive migration of subs to LTE and building the video habit has resulted in phenomenal growth in mobile data traffic. From 81 petabytes in Q1 2017, traffic now is at 239 petabytes for the quarter. This volume of data usage growth is critical to us as it allows us a bigger base from which to monetize.

If you go to the next slide to show you how much the YouTube promo has contributed to this traffic. In April, daily YouTube traffic stood only at 73 terabytes per day. In just 6 months, we have grown this by a quantum of 13.5 times to 986 terabytes per day. What's even more encouraging is that 95% of this traffic comes only from 60% of our users. So even if we lose the 40%, we still retain the base from which to monetize because we have built a mobile video habit. And while our Phase 2 of the promo has ended in October 31, we have just launched Phase 3 this November 1.

If you go to the next slide. With the launch of Video Everyday, so now you can watch more than just YouTube for 1 hour every day. We have included our partners like iflix, iWant TV, NBA, Discovery Kids and Cignal Play. And for this space, we enter the next space of monetization, which is up-sell. We have taken out the free 1 hour YouTube promo from the PHP 15, PHP 20 and PHP 30 packs and put in our new GigaSurf family starting at PHP 50. We have also introduced as well our new monthly packs of PHP 299, PHP 599 and PHP 899.

If you go to next slide. These 3 initiatives of building the country's best-in-class and world-class video and data network, massive migration efforts into LTE and building mobile data video habits are all coming together nicely and driving acceleration of our growth.

Of course we do not stop here. Just 2 days ago, we had our Unlock event, where we launched a host of new products and innovations going into the market this Q4. Building on the big success of the YouTube promo, we launched Video Everyday. We also shared our big efforts into e-Sports and a lot of efforts into LTE smartphone for all and this is done together with partnerships with Oppo, Samsung and Starmobile, among many others.

So all these efforts aim to bring more and more data experiences to our consumers and make them feel how Smart is nothing less than simply amazing.

So that ends my presentation. Thank you, and good afternoon.

We're now ready to take questions. Operator, could you open the line, please?

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

I have 3 questions. The first was regarding the New Video Everyday promos. Are they new plans with this new denominations or essentially you are going to do the monetization by increased top-ups? Second question is regarding -- do you think your current CapEx as well as dividend payout policy is already securing yourselves for the future in terms of the potential third entrant competition? And last question is housekeeping on the DOLE. Is there any update there? Is it completely resolved or still under discussion?

Maybe I'll answer the first question, which is on Video Everyday. So we're actually infusing or re-launching an existing promo, which is GigaSurf. So we have a GigaSurf family starting from GigaSurf 50, we have GigaSurf 99. So this has been in existence in the market. But we -- and it used to be GigaSurf with Free YouTube Everyday. Now it becomes GigaSurf with Free Video Everyday. And this now comes with something new because it has new partners that we've put in to the specific package like iflix, NBA, Discovery Kids and Cignal TV.

So the monetization is more from additional top-ups I assume?

Yes, and up-sell. So because we -- the YouTube promo used to also be available in some PHP 20 and PHP 30 packs. So now for you to be able to avail that for YouTube, then you buy it at PHP 50 at the minimum.

Luis, [hang on]. Just to add to that. When we terminated the second version of the YouTube promo and removed the PHP 15, PHP 20 and PHP 30 SKUs and moved it to PHP 50, initial reports -- although this is just a few days or a week -- from our network colleagues indicate that there was no reduction in the level of video traffic over our network. So it encouragingly indicates that the habit of usage is getting stickness; and number two, that on the new programs that we're effectively starting to monetize. And it is showing in the increase in our daily top-ups.

On the CapEx, of course we don't know exactly what the third entrant will be doing. But what we can say is that the CapEx level we have this year will be [appropriate], also the level we will have next year. And we believe that is enough to prepare us for whatever will happen. And the best way to do is to continue to improve our network and to prepare also for the fifth generation standard.

On the DOLE issue, there is still a pending case in court because the decision of the Court of Appeals, which was largely favorable to PLDT, has been elevated by the petitioners for reconsideration. But as a practical matter, we have been able to implement our labor initiatives on the ground. And so for us the issue on insulation, repair and maintenance, which was highlighted by the Court of Appeals' decision, we have taken consideration of the opinion of the court. And in addressing this and basically putting the resources for insulation, repair and maintenance, we have taken note of the concerns raised by the Court of Appeals. Having said that though, we ourselves have filed a partial motion for a consideration to appeal or to seek reconsideration of the breadth of the decision of the Court of Appeals with respect to insulation, repair and maintenance.

(Operator Instructions)

If there are no further questions, operator, we just like to inform everyone that the instant replay for today's call will be available starting today up to November 15. The instant replay details are contained in the conference call invitation.

We now turn the floor over back to Ms. Anabelle Chua for any closing remarks.

Thank you, everyone, for joining us today and we'll keep you posted on when we will announce our full year results. If there are any questions you may have, you can always reach out to Melissa or myself.

Thank you.

Thank you.

Thank you.

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