PLDT Inc (PHI) 2018 Q4 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 introduction. 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 full year of 2018. As mentioned in the conference call invitation, a copy of today's presentation is posted on our website. For those who've not been able to do so, you may download the presentation from www.pldt.com under the Investor Relations section. A podcast of today's briefing will be available at our website after the call.

For today's presentation, we have on stage members of the PLDT Group management team, namely, Mr. Manny Pangilinan, Chairman and CEO; Ms. Anabelle Lim Chua, Chief Financial Officer; Mr. Eric Alberto, Chief Revenue Officer; and Attorney Ray Espinosa.

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

Thank you, Melissa. Good afternoon, everyone, and welcome to PLDT's 2018 Full Year Results Briefing.

The key highlights of our 2018 results on a pro forma PAS 18 basis are as follows. Our service revenues, net of interconnect, came in at PHP 149.4 billion, which is 5% or PHP 7.1 billion higher year-on-year. If we zero in on our Consumer and Enterprise segment revenues, our growth is even higher at a record high of 9% or PHP 11.3 billion increase year-on-year. Our quarterly revenues have been trending higher every quarter over the last 2 years, and revenues in the fourth quarter of 2018 was at a high of PHP 38.6 billion.

Our telco EBITDA in 2018 amounted to PHP 69.2 billion with an EBITDA margin of 44%. With the increase in service revenues, our telco core income, which excludes the Voyager results, rose 3% year-on-year to hit PHP 24.4 billion, ahead of our guidance for the year. If we include results of Voyager as well as gains from our asset sales and certain other adjustments, our core income for 2018 amounted to PHP 26.2 billion.

Reported net income stood at PHP 19.2 billion, which is 44% higher than the previous year as the amount of network swap-out costs in 2018 was much less than the prior year.

As we had adopted the PFRS 15 accounting standard in 2018, we show in this slide our results under the new standard side-by-side with the previous PAS 18 basis. On a PFRS 15 basis, our consolidated service revenues amounted to PHP 145.8 billion. There is a PHP 3.6 billion downward adjustment in our service revenues offset by a plus PHP 2.9 billion upward adjustment in nonservice revenue, resulting in a PHP 900 million change in the EBITDA number. At the net income level, the adjustment from using the new standard is a net PHP 300 million decrease. As such, our statutory reported income amounted to PHP 18.9 billion for 2018.

Now in order to make comparable the year-on-year financial information, we show our numbers on a pro forma PAS 18 basis for the rest of this presentation.

As highlighted, our pro forma 2018 consolidated service revenues reached PHP 149.4 billion, up PHP 7.1 billion or 5% higher year-on-year. Now looking at our consolidated service revenues by service, data and broadband revenues of PHP 90.2 billion for the year now comprise 60% or the largest portion of our consolidated revenues. This represents a significant uplift compared to 47% contribution in prior year. Effective 2018, we have now updated our revenue allocation of both our fixed and wireless service revenues to reflect the current consumption trends of bundled packages based on our observed network usage review. The revenue split among data, voice and SMS was thus revised, which resulted in a higher contribution by data revenue spend. This is consistent with underlying usage trends for data traffic has indeed registered significant volume increases. With this change in the revenue allocation, we reported an increase in data revenues by 37%. If we just make it apples-to-apples, we note that data revenues still have grown by a healthy 18% based on the previous revenue allocation method. The balance of 40% of our service revenues consists then of 28% from domestic voice at PHP 42.6 billion, about 7% now from SMS with PHP 10.3 billion revenue contribution and the balance of 4% from international voice at PHP 6.2 billion.

Turning to the next slide, if we focus on the revenue contributions by major business segments. The 3 main business units that account for 91% of our total service revenues grew 9% year-on-year for PHP 137.4 billion combined service revenues. Our Individual, Enterprise and Home business segments all registered impressive revenue growth. Data and broadband remain the growth driver across all the business units.

On Wireless individual, it was a clear turnaround story for our Wireless business for Smart, TNT and Sun in 2018, where we posted revenues of PHP 62.5 billion and registered a positive 7% rise year-on-year versus the declines that we were posting in prior years. This was driven swiftly by growing mobile data revenues resulting from higher smartphone ownership and greater data adoption and supported by the step-up in our network performance. The contribution of data to our individual business has risen to 60% of the revenue pie.

PLDT's Enterprise service revenues, now that had raised its growth rate to 10% year-on-year to hit PHP 38.4 billion. Growth continued to be driven by increasing corporate data, mobile cloud and other ITT services. 64% of Enterprise revenues are data driven.

PLDT's Home business unit also grew 10% year-on-year to PHP 36.4 billion, underpinned by strong demand for our fiber-powered broadband service. 75% of our Home revenues are broadband revenues.

As for our international carrier business, revenues from this legacy segment are lower by 26% year-on-year. This includes the impact of lower interconnect rates implemented in September of approximately PHP 1.3 billion, which added to the decline in our traditional ILD business.

At the back of our higher service revenues, our consolidated telco EBITDA came in at a higher PHP 69.2 billion, with a PHP 0.2 billion increase from 2017. Our EBITDA margin remained healthy at 44%. The EBITDA number of PHP 69.2 billion excludes the onetime expenses associated with our manpower reduction program or early retirement program amounting to PHP 1.7 billion.

Also just to note, starting December 2018, PLDT no longer consolidates Voyager revenues and expenses after our ownership dropped below 50% post the entry of the new investors, KKR, Tencent and IFC, who had, on an aggregate, infused $215 million of new money into Voyager. So for the 11-month period before that, we recognized the negative PHP 2.5 billion of EBITDA of Voyager as Voyager was spending to ramp up its digital payments' pillar in an effort to spur greater adoption among consumers, enterprises and communities with PayMaya. Now the cash support provided by PLDT in 2018 was actually reimbursed out of the proceeds of the fundraising.

Turning to the next slide, we show our net income at several basis. Our core income from telco operations hit PHP 24.4 billion, increasing 3% year-on-year. In addition to the uplift in EBITDA, we were able to manage down our noncash expenses and financing costs, which enabled us to report a 3% increase in our telco core income and exceed our earnings guidance.

On a consolidated core income including Voyager and gains from asset sales, it reached PHP 26.2 billion. While losses from Voyager's operations diluted our reported earnings by PHP 3 billion, we had a gain and a loss of control after we deconsolidated our investment in Voyager. The deconsolidation resulted in a gain of PHP 10.9 billion based on the fair market value of our investment as reflected in the values attributed to Voyager in its fundraising ramp.

The PHP 26.2 billion core income also includes a PHP 1.8 billion gain from our sale of 7.5 million Rocket Internet shares. Against this, we booked in 2018 a net amount of PHP 7.9 billion in accelerated depreciation arising from the shortened estimated useful life of certain network assets affected by our network upgrades and modernization program.

Finally, with respect to our reported net income of PHP 19.2 billion, this is up 44% from 2017. The most significant item that impacted our reported income was a balance of PHP 4.5 billion nonnetwork -- noncore network expense in connection with our swap-out of our network equipment in NCR. This PHP 4.5 billion is much lower than the amount booked in prior year.

Today's results -- earnings announcement is based on unaudited numbers, but we expect to complete our audited financial statements in 2 weeks' time. And in line with our dividend policy, we would then expect to declare a final cash dividend of PHP 36 per share for a payout in April. Combined with the interim dividend we paid at the half year, which also was at PHP 36, our dividend per share of PHP 72 results in a dividend yield above 6%.

Now as of the end of 2018, consolidated net debt stood at USD 2.4 billion, while net debt to EBITDA improved to 1.93x. Our gross debt amounted to $3.4 billion, only 8% of which is unhedged or exposed to the U.S. dollars, while 89% of our debts are fixed rate loans post our interest rate swap. Our average cost of debt stood at 4.5% per annum.

In 2018, our cash flows were supplemented by PHP 7 billion proceeds from discounting our MPIC receivables arising from the previous sales of our Beacon shares and approximately another PHP 11.4 billion from the sale of 7.5 million Rocket shares. We still own 2.6 million shares in Rocket, equivalent to approximately EUR 56 million in market value.

PLDT's credit ratings remain at investment-grade levels.

Moving on to the next slide, here, we show that PLDT and Smart have accelerated the rollout of the group's fixed and mobile networks, providing a strong lift for our revenue growth. Our CapEx for 2018 came in at a record of PHP 58.5 billion, consistent with the CapEx guidance for the year. Of the PHP 58.5 billion, PHP 48 billion was spent on the network and IT platforms and approximately PHP 7 billion for business sales-related CapEx.

The CapEx investments we have made over the years have driven up PLDT's network to the top, as recognized in various third-party service -- surveys such as the Ookla Speedtest Awards and the OpenSignal survey results. We recapped here in this slide the most recent published speed latency and other results from Ookla and OpenSignal, which show PLDT and Smart to have the fastest mobile and fixed broadband in the country. We continue to step up the expansion of the reach of our fiber optic network and fiber-to-the-home broadband network as well as the coverage and capacity of our LTE and 3G networks to better serve the rising demand for data and video services. We expect to allocate again at least another PHP 48 billion this year to widen PLDT's lead in network quality.

In addition, with the ports that we have already rolled out that are available for sale to the home customer base, we expect the business sales-related CapEx to rise to up to PHP 16 billion. This is a budget spend for last mile and customer premises equipment like modems and ONUs that are associated with each new customer that we connect.

In this slide, next slide, we show that as of December 2018, PLDT increased the coverage of our fiber-powered fixed broadband network to 6.3 million homes passed, which is up from 4 million homes passed as of end 2017. We have actually in 2018 already exceeded our previous target to have 6 million homes passed by 2020. We boosted our port capacity to 2.62 million ports, and we have ready 1 million ports that we intend to sell this year in support of a higher revenue contribution from our Home business.

In mobile, Smart installed over 7,500 new LTE base stations, boosting total count by 86% to over 16,200. The step-up rollout of LTE and 3G base stations allowed Smart to meet our commitment to government to provide high-speed wireless data service in over 90% of the country's cities and municipalities by end 2018. So not only are we improving LTE coverage in more areas of the country, we're able to activate LTE-Advanced, which offers even higher data speeds.

Now at this point of the presentation, I'll turn over to Eric Alberto, who -- and he's -- and Renren and Jovy Hernandez to speak to -- more about our business performance.

Thank you, Anabelle. Good afternoon to everybody. Today, we are pleased to share with you our 2018 business revenue performance.

Since 2012, we have a series of declines, which are attributable to price-focused competition in the Consumer Individual business and a massive OTT disruption that affected both the Consumer Individual business and our international business. The extent of this disruption over the 7-year period amounted to a negative total of PHP 28.6 billion, with our individual business at negative PHP 13 billion and our international business at negative PHP 15.6 billion. However, the continued steady growth performance of both our Enterprise and our Home businesses over the same period more than compensated and offset this disruption by a PHP 29.4 billion gain over the same period, with our Enterprise business at PHP 17 billion positive and Home at an incremental PHP 12.4 billion over such period.

The group closed the year 2018 with clear loss reversal and a strong recovery on the Consumer Individual business, with the ongoing progress by Home and Enterprise, by posting a consolidated service revenue performance of PHP 149.2 billion, delivering 5% or PHP 7.1 billion growth year-on-year. This 2018 performance is a stark contrast to the PHP 142.1 billion in 2017, which was a negative PHP 4.6 billion or minus 3% decline that the group posted versus the PHP 146.7 billion in 2016. In addition, the said revenue performance is PHP 117 billion growth turnaround as the previous -- versus the previous year, thereby placing the group on a clear and sustainable growth path and a positive outlook for 2019 and beyond.

Data revenues have been consistently growing until 2017, principally driven by Home and Enterprise. But in 2018, the year is a different story, where all our engines, now including our Consumer Individual Wireless business, are running. Wireless is now a major contributor to the data growth, allowing us to post a record year with a massive PHP 24 billion or a 37% growth over 2017. This is also the year when our fast-growing data revenues have overtaken legacy, voice and SMS.

In 2018, Smart was able to capture a bigger share of mobile revenue data growth at PHP 14.4 billion versus our competition's PHP 12.2 billion. We are encouraged by the continued robust mobile data usage in the first 2 months of 2019, which gives us confidence that this continuing growth in data take-up, coupled by a similar continuing growth in our subscriber base and our ability to monetize such growth in data traffic, is now strongly sustainable.

I'd like to run you through a summary of each of the businesses, starting with Enterprise. Our Enterprise business delivered a strong double-digit 10% growth or PHP 3.6 billion incremental revenues, ending 2018 at PHP 38.4 billion on account of the following: robust growth in our Fixed business as corporations leverage more on the Internet for private connections between its branches and its international operation requirements; breakthrough growth in the Wireless business on both postpaid and mobile applications and the Internet of Things; and last but not least, a differentiated ICT growth coming from data center, cloud, managed IT and cybersecurity solutions, which are now being in demand -- growingly in demand by enterprises.

Our Home business, like Enterprise, also registered a strong 10% double-digit growth or PHP 3.5 billion, ending 2018 at PHP 36.4 billion. This performance is driven by the strong demand for broadband service in the Home as well as our successful bundling of whole home Google Wifi solutions and PLDT Home entertainment and content with such partners as Cignal, Netflix, Amazon, Samsung TVs, games, among others.

Our Consumer Individual Wireless business is now, as aforementioned, on a clear growth trajectory, finishing 2018 at PHP 62.5 billion, boasting PHP 4.2 billion or 7% incremental growth. This was achieved through continued robust growth in mobile data usage and an increase in our subscriber base given our increased leverage and reliance on data analytics, insights and customer value management, enabling us to launch new data products with deeper customer engagements, which are powered by our strong partnerships with key content and other digital providers such as YouTube, Netflix, iflix, NBA, e-games; as well as service beyond access in e-loading and e-loans, e-payments and e-commerce spaces.

The subtotal of our growing businesses delivered PHP 137.4 billion, growing at a rate of 9% or PHP 11.3 billion in 2018.

Before I pass the floor to my colleague to discuss the details and dynamics of each of the business segments Enterprise and Consumer, I'd like to reiterate our commitment that we remain resolute to -- and committed to establish PLDT and Smart to be the clear and superior network in the Philippines, which will allow us to deliver best quality experiences for all our customers in Enterprise and Consumer.

At this juncture, I'd like to call on my colleagues, Jovy Hernandez, to deal with the -- to discuss the dynamics of the Enterprise business; followed by Ren Reyes, who will handle our Consumer business of Home and Wireless. Thank you.

Thank you, Sir, Eric. A pleasant good afternoon to everybody. And I'm pleased to present the details of our full year 2018 results for our Enterprise business.

2018 was a great year for Enterprise as we achieved several breakthroughs in our business. We ended 2018 with revenues of PHP 38.4 billion, up 10% or an incremental growth of PHP 3.6 billion, the highest growth that we've ever achieved. Moreover, if you take a look at our revenues quarter-on-quarter, Q4 of 2018 was a historic high as revenues reached the PHP 10 billion level.

Allow me to share with you the pertinent details of our performance across our 3 revenue pillars, namely Fixed Line, Wireless and ICT.

Our Fixed Line business continues to show robust growth, ending the year with PHP 27.8 billion in revenues, up 7% or PHP 1.8 billion. Fixed Line growth has been fueled by the demand for data. And consistent across all of our customer segments, whether large enterprise or small and medium enterprises, businesses continue to build and expand their enterprise data superhighways. The data network has become the lifeblood of any business.

Our Fixed Line data business was up 13% versus same period last year, delivering an incremental growth of PHP 2.1 billion. Our broadband business is now a PHP 10 billion business. It grew 16% versus same period last year, delivering incremental growth of PHP 1.4 billion. And the total subscribed data bandwidth of our enterprise customers have now reached 3 terabits per second, up 37% year-on-year. Now 90% of this growth in revenue and subscribed data bandwidth was attributable to fiber-based broadband services. While fixed wireless technologies are indeed available, enterprises have clearly shown preference towards fiber technology as it provides robust, reliable, scalable and secure data highways.

The enterprise data network also of our customers go beyond the borders of our country. And our enterprise global operations further differentiates us from our competition as we are well positioned to support the global requirements of our customers. Our enterprise global operations is now a PHP 1 billion business. It grew 36% versus same period last year, delivering PHP 300 million in incremental revenues. Our U.S. and U.K. operations actually grew 29% and is now a $12 million business. And our Asia Pac operations, with presence in Hong Kong, Singapore and Australia, grew 45% and is now a $9 million business.

Moving on to our Wireless business, our Enterprise Wireless business is growing like never before, and it's now a PHP 7 billion business, up 24% year-on-year, delivering incremental growth of PHP 1.4 billion, the highest growth that we've ever achieved in our Enterprise Wireless business. Enterprise postpaid was at PHP 5.37 billion, up 21% year-over-year, delivering incremental growth of close to PHP 1 billion, attributable to over 100,000 net new postpaid subs. More importantly, our growth in our Wireless business is beyond just postpaid. Our IoT solutions portfolio is now a PHP 1 billion business, and it was up 48% or PHP 370 million year-on-year. We now have more than 100,000 live IoT connections out there. This is particularly important in the medium term as we roll out more 5G sites, allowing us to capitalize on Smart's stronger wireless network to deliver more IoT connections and solutions to the market, such as Smart City management solutions.

Last but not the least, our ICT business. Our ICT business stood at PHP 3.7 billion, up 14% year-on-year, delivering growth of PHP 0.5 billion. And our ICT business is growing faster than the market base of 9%. ICT is the bedrock of any digital transformation. And as enterprises pursue their own digital aspirations, our clear leadership position in this space will allow us to serve the market better. Our data center business has breached the PHP 2 billion mark as it grew 18% year-on-year, delivering incremental revenues of PHP 350 million. Our 9,000 racks capacity across our 10 data centers in the country is unrivaled. And beyond data centers, we are the only full-spectrum ICT services provider in the country, delivering data center services, cloud services, managed IT and cybersecurity. With all of these capabilities across our Fixed, Wireless and ICT businesses, we are strong in our resolve that -- to maintain and even improve our indisputable market leadership position in the market space.

Thank you. That's it for Enterprise. And I'll now turn you over to my colleague Renren Reyes to discuss the Consumer business.

Good afternoon. In the next few slides I will be sharing the 2018 results for the Consumer businesses of Home and Wireless.

I am very pleased to report that PLDT Home delivered a record all-time-high performance for 2018, with revenues hitting PHP 36.4 billion for the first time ever, adding PHP 3.4 billion in service revenues or plus 10% growth in value, with data or home broadband growing to a high of PHP 27.2 billion, a fixed, wired data growth at 33%.

A key driver for PLDT Home growth is the quality and continued expansion of our fiber network. In 2018, PLDT was awarded with the fastest fixed Internet in the Philippines by third-party speed test provider, Ookla. This is a testament to our thrust to deliver the best customer experience to our subscribers and which is the reason why consumers continue to patronize PLDT Home's fixed fiber plans versus others in the market.

Further, our network teams have worked tirelessly to deliver new and modernized fiber facilities to more municipalities, now with over 2.6 million fiber-fast broadband ports, resulting to 6.3 million fiber homes passed and 244,000 kilometers of fiber in the country. This provides PLDT Home a wide base from which to deliver further growth in 2019 and beyond.

To further PLDT Home's differentiation and experienced superiority, we are raising the standard in home broadband with branded partnerships with Google and TV Link to make whole home WiFi as the new standard offer from PLDT. Our new plans include these WiFi mesh technologies that allow multiple access points to be deployed in the home and increase coverage in the home. We also brought to market together with Samsung the first Smart TV home plans that allows subs to avail of Samsung Smart TVs through PLDT Home amortized over 24 months. These new plans further gives our subs direct access to digital video platforms from YouTube, iflix, NBA and Netflix to gain joys on their big-screen TVs, improving their video experience. Clearly, PLDT Home continues to raise the level of best in-home experience, which further sets us apart in the market.

Moving on to the Wireless or Individual business. After stabilizing the revenues quarter-on-quarter in 2017, I am pleased to report that the Individual business has turned around and hit PHP 62.5 billion for 2018, a year-on-year growth of PHP 4.2 billion or 7.1%. Further to this, the Individual business is accelerating quarter-on-quarter from PHP 1.4 billion -- from PHP 14.8 billion in Q1 to PHP 15 billion in Q2, to PHP 15.6 billion in Q3, to a high of PHP 17.1 billion in Q4; and quarter-on-quarter growth rates ramping up from plus 2% to plus 1%, to plus 4% and to a plus 9%, solidifying the turnaround.

Behind this acceleration, it's an increase in data subs and also total subs, with total subs count going up to 60 million by year-end with a full year gain of 2.1 million subs for 2018. This increasing subs base is a further validation and testament to the quality of Smart's mobile data network, consistently being awarded by third-party agencies Ookla and OpenSignal on fastest download speeds, lowest latency, best in video experience and having the country's fastest mobile Internet.

In 2018, our network teams have also expanded our LTE and 3G base stations by 49%, ending the year with 25,566 base stations. Now more and more subs are enjoying the fastest and best data network in the country.

On the back of our superior data network, we have successfully launched new data promos, new data products and consumer engagement programs to drive data usage. Amongst our promos are the Free YouTube Every Day promo, which we followed up with other new data products, such as TNT's SURFSAYA. And we ended the year with our 25th year anniversary promo.

On the back of our superior network and our highly engaging marketing initiatives, we have successfully built consumer habits of mobile data usage and subsequently driven monetization. The key highlights are: number one, the increase in YouTube usage, where terabytes per day increased by 14.9x from the start of the YouTube Every Day promo in April to its completion in October. This promo was a key driver to total data usage in our network, where -- (foreign language). This promo was a key driver to total data usage in our network where we have grown from 30 -- 395 million petabytes in 2017 to 824 million petabytes in 2018, more than doubling our data traffic in 1 year, driving individual data revenues to an all-time high of PHP 37.6 billion, a growth of plus 63% and building the momentum to carry over to 2019.

Looking at both Consumer Home and Wireless businesses, we see significant revenue increases driven by best network experience, relevant and differentiated data products and highly engaging marketing activities. Beyond the 2018 results, these provide Consumer business a momentum and base from which to grow in 2019 and beyond.

That ends the Consumer presentation. Thank you very much.

Good afternoon to everybody. My task is just to give the guidance for 2019.

And we're guiding telco core income for the full year at PHP 26 billion, which is a function of the first instance of revenues continuing to demonstrate momentum. We expect the Fixed Line business, both the Home revenues and the Enterprise revenues, to demonstrate double-digit growth as we did in 2018, so continuing in 2019 and, of course, acceleration of revenue growth of the Wireless business. And I must say that for the indications for the first 2 months and the early part of March indeed demonstrate that the Wireless revenues have increased quite well. And even -- there's been a positive growth in subs numbers for the first 2 months and indications that this is positive as well for the month of March, so something that both in terms of the quantum of revenue increase and the positive growth of sub numbers we haven't seen for quite some time. So at least the early indications for the year are very positive.

The international revenues are likely to continue to decline for this year another PHP 4 billion, as it was in 2018, mainly due to the effect of the interconnect fees that has impacted international revenues. Net of those interconnect fees, the organic decline in international revenues would be only about PHP 1.5 billion. Now those interconnect fees will no longer happen in 2020, so I think by next year, we should be released from the adverse significant impact of the decline in international revenues.

Of course, on the cost side, we have to keep a close watch in terms of the growth in our cost and expenses. There will be another round of manpower reduction that we intend to launch or that we have launched in the early part of this year and continue for the better part of 2019 and other expenses that have got to be controlled. Some expenses are largely uncontrollable, like depreciation arising from the significant CapEx in 2018 and another round of CapEx increase in 2019, the relevant increase in hopefully not significant in financing costs and, of course, the repairs and maintenance related to the network. We don't think the third telco would have a significant impact on revenues and operations in 2019 but perhaps in 2020.

For CapEx we're guiding our number at PHP 78.4 billion, about a PHP 20 billion increase from what it was in 2018. In large parts, we feel that the CapEx for 2019 will be funded by our anticipated increase in EBITDA for 2019.

The dividend payout, same as it was for the past 3 or 4 years, 60% of telco core but including exceptionals, as has been done in the past as well. So we're maintaining that dividend payout of 60% for 2019 if performance ends up doing well. Of course, we'll (inaudible) this adopting a look-back strategy for 2019 if things work out well for this year.

Thank you.

We're now ready to take your questions. We will take questions from those who've joined through the conference call facility before we take questions from the floor. Operator?

(Operator Instructions) Our first question comes from the line of Luis Hilado, Maybank Kim Eng Holdings.

I have 3 questions: the first 2 on the mobile business and the second on the fixed broadband business. Just wanted to get an update in terms of the YouTube promotion, the current -- in current form. What's the lowest denomination out there right now? Has it changed since fourth quarter? And second question is regarding the potential impact of MNP being applied perhaps later this year or early next year. Do you intend to go after the -- I guess, the premium postpaid base of your competitor? And last question is regarding your outlook in terms of 5G. Your competitors, of course, using it as a potential substitute for your -- against your fiber broadband business. How do you view 5G? And how do you intend to launch it on your own?

This is Renren Reyes. So for the first question on the YouTube promo, we actually see very significant success factor on YouTube. So some key metrics, number one is we already showed earlier the base traffic brought about by YouTube. Another key factor there is actually the daily active users, which was one key metric that we actually had jointly with YouTube, which actually has more than doubled in just 3 months. So that means the regular usage of YouTube actually has gone up. And even after the promo, that has continued. So -- and what we actually saw in our last review with YouTube that, after the promo in October, there was a slight dip. And after that, when we came out with the Video Every Day promo, then it started to slide up again. And that's something that they've never seen in any other country, so that's a very big success for both PLDT, Smart and YouTube when we had the meeting in NWC last week. On the -- so the -- we're continuing. What we are seeing is that consumers are adapting the insight that we actually got, which was that consumers are afraid to use video on mobile data because they think it will significantly decrease their data allocation, data allowance. And they didn't see the value of doing that for video. After the promo, they actually got used to watching video on their data, and they actually saw the value of doing so. And that's why now we're actually seeing ARPU increases even after -- during and after the promotion. So they're actually willing to pay now to actually use mobile data. And that -- this is what we mean by really build -- changing consumer habits towards mobile data adoption and video adoption on data. So that's why we're saying that the YouTube promo, which is the start of the whole thing, was a big success, which we have continued with Video Every Day and which we'll -- we will further continue with other promotions such as gaming that we are now doing. I think there was also a question...

I'm sorry, just a follow-up on that, is it still PHP 50 in order to avail? Or -- I recall during the last call, you had to remove the PHP 15 denomination and so people have to increase their ARPU in order to avail. Is this still the case?

Yes. So the lowest promo that you actually can get it now is at PHP 50. We've taken out the PHP 15, PHP 20 and PHP 30 loads. And we've seen that consumers actually have increased their ARPU and adopted the higher promo load. And that's the value of trial when it comes to the promo.

Okay.

On the number of portability, there are just a couple of points. First is the while the law has been passed and has taken effect, the implementing rules and regulations have still to be issued -- need to be issued. And it will take some time before the regulator comes up with the proper framework for number of portability. And how basically customers are allowed to switch from one network to the other. This may actually require a sort of interchange facility that would allow the interchange of the numbers as they move from one network to the other. So I understand that in countries where this has been implemented, it has taken the regulator quite some time to put the proper framework in place. Having said that though, the impetus for subscribers to switch between several networks is really driven largely by issues about network quality and the relevant or applicable plans and promos. In our case, we have demonstrated, I think, coming off 2018, that we have the capacity now to become the clear and clearly superior network. And this has gained actually more subscribers for us out of last year. I think we added more than 2 million subscribers last year. So it's a testament to our ability now to move subscribers from competition to our side on the back of a strong network and on the back also of very relevant and attractive plans and promos.

I'd like to answer the third question, Eric Alberto here, on our plans for 5G and maybe pass on the mic to my colleague, Joachim, who's our Chief Technical Adviser. We are proud to say that we've pushed the launch of commercial 5G in the last part of the year with Smart 5G City in Clark as well followed very closely by our launch of Smart 5G Makati in the CBD. Our 5G strategy is really based on our ability to optimize efficient use of our available wireless spectrum, particularly in areas where we see user densification. Now in terms of the approach and strategic approach, we have taken an approach that we utilize fiber as a dedicated point-to-point unlimited resource of bandwidth throughput, particularly in enterprises where they require robust and high-speed dedicated connection as well as in the home where there is a growing need for higher bandwidth in terms of their changing habit usage, particularly for heavy bandwidth content such as video and gaming. Now in respect to the strategy of the competition, maybe you should ask them, but, yes, we did realize that their sites have been very active in utilizing their 4G LTE spectrum. But I think the third-party independent network outfits and analyst outfits such as Ookla, OpenSignal, Tutela and P3 all overwhelmingly indicate that this actually creates some adverse consequences when you've got -- utilize your 4G wireless network for use also on fixed wireless. We have taken a different path. We believe that to deliver a robust 5G service in the future, that it is backhauled by adequate fiber capability. We have just attended the MWC, Mobile World Congress, in Barcelona. Early days use cases, a lot was talked about 5G, but still a lot more showcases than use cases, but it's clearly indicative that they're first adapters of the enterprise for high-density cases on fixed wireless applications, particularly with the explosion of IoT. The consumer applications would come much later. Maybe I should hand the floor for more technical discussions to Horn.

Yes, Horn here. There are basically 3 different ways to use -- make use of 5G. One is the fixed wireless access, while it sounds reasonable, it is actually more complicated. In our discussions we had just in Barcelona, the cost of the device for fixed wireless access is today between $500 and $1,000. That's the expected price just to compare to a fiber modem is about $50 to $60. So it is a very costly exercise in order to bring broadband to the house at the moment. It may change over time, but for the time being, it is very costly. And we actually do trial this also, already we have the first households connected via a 5G modem. The second is actually a capacity increase for 4G. As the traffic grows and last year we have done the 25% growth, the capacity expansion for 4G is the most obvious use case. Here, the key question is when are the device prices low enough in order to not have a big differential between 4G and 5G. And according to what vendors told us this will take 2 to 3 years from now at the minimum. Huawei said in 2 years from now, the lowest cost will be $300. I think for the Philippines, we need to fall below $200 in order really to make a dent, right? And so also that is 2 to 3 years from now. So the third one is, is the most interesting one, these are the so-called new use cases. And also there are different areas, IoT, everybody knows about this. The second is entertainment. We saw fantastic use cases related to sports supported by virtual reality and augmented reality, they are really interesting things. And the third is automation or industrial type of applications. Now this is the new field, which needs a lot of deliberation. That's the reason why we as PLDT and Smart have decided to create pilot areas where we work with potential customers and commercial-grade networks and try this -- different partners, industrial partners. We try out these new use cases. So that in the course of this year -- and this is led by business, supported by technology. In the course of this year, we get a better understanding on what will be the real application to drive the 5G investment. So by the end of this year, beginning of next year, we will know more and this will be filed in our investment strategy for next year.

Our next question comes from the line of Arthur Pineda from Citigroup.

Three questions, please. Firstly, can you get a sense of the CapEx program beyond 2019? Should we see CapEx sustaining at these levels or declining going forward? Second question I had is with regard to the debt covenants. The PHP 78 billion CapEx is much higher versus prior year's EBITDA, so that probably in crisis, you need to finance this for this year. Are there any further assets that you could sell as well into 2019 to finance this? Last question I had is with regard to the core guidance of PHP 26 billion. What kind of revenue growth do you need to see in order to drive this from PHP 24 billion to PHP 26 billion, considering the significant CapEx of PHP 7 billion, PHP 8 billion this year? I assume the O&M charges, financing and MD&A would have to rise. I am just trying to understand the growth parameters here.

So on the CapEx program, you should know that in the PHP 78 billion, the increase actually doesn't go to network and IT CapEx. The increase goes mainly to consumer CapEx with -- related to the equipment for customers to be built when you put the fiber-to-the-home, the ONUs, or respective enterprise customers. There is a little bit other CapEx for one-time effect in terms of adding so many people. The program is, if I look to the program, what I just said about 5G, at the moment, we are still pushing LTE to the last corner here in the Philippines, and that will probably swing over to next year, although we intend to arrive this year at a 95% population coverage. So that starting next year, the CapEx for rollout of 4G will probably slow down giving us the space to reallocate CapEx then for 5G if we decide that we want to do that by the end of this year. So from that angle, I think this year is definitely a high CapEx. In terms of debt covenants, I'd rather give that to Anabelle.

Just to reiterate, Arthur, as mentioned, PHP 16 billion of the PHP 78 billion CapEx is what we would call sales-related CapEx, meaning if you have a customer that you want to connect then you have to spend for the CPE, modem, last mile and some other upfront costs to that. So you only incur it if you have a sale essentially. So in that sense, it pays for itself very quickly. So -- and then it will be calibrated depending on the level of connections we have, right? So we're obviously pushing for a much higher gross connect number for -- particularly for our home business next year, hence the big increase in CapEx. So at some point, the levels of connections could temper depending on what happens after that, right? So -- but the short point that I wanted to make is that essentially, it pays for itself very quickly. And I think you also saw that effectively, while we had increased our CapEx in 2018, it really is directly correlated to the kind of revenue growth we saw, right? So essentially, these are all investments that are meant to generate a higher level of revenues and essentially higher levels of EBITDA going forward. So in the short term, there may be some sort of funding pressures for the short term just to sort of bridge the timing gaps. But essentially, the expectation is that the EBITDA will rise to support the rise in CapEx investments. We would, of course, still look at trying to supplement, in the short term, the requirement -- the funding requirements with, what, asset sales. We have identified a number of real estate properties that we could dispose of, but this again relate to the excess space we have from exchanges that we no longer need and they are too big for our requirement, so we can take advantage of good property prices to dispose of some of these assets this year. So we already have identified 5 or 6 properties for this exercise. And then, of course, we still have our Rocket Internet shares. We -- it's something that's tradeable. And so it's an option to liquefy them as well.

On the last question, how much revenues should we generate to be able to support the PHP 26 billion core profit number? Quick and dirty plus our cost management activities, we should -- quick and dirty, we are looking at a revenue increase of about 9% to 10% for us to deliver the kind of core profit outside of whatever asset disposal on that.

Our next question comes from the line of Gopakumar from Nomura.

Just a few questions. Firstly, I saw the comments that your network's quality is much ahead of the -- your peer. So going forward, do you think you would have to spend more on promotions and subsidies if you have to gain your fair share of market, which is in line with your better network quality on the mobile business? So some thoughts here would be appreciated. Secondly, on the fixed broadband side, are you seeing Globe getting a bit more traction on the ground given whatever they're talking on the fixed wireless solutions or not really? If so, if there is a traction, would you -- how would you expect the competition here to trend for 2019? Third is a question on dividends, slightly into, say, 2020 and beyond, do you think your 60% payout is sustainable on the dividend side? I'll stop here.

I'd like to pass on the first question, Eric Alberto here. Thank you for the comment on the network quality. Precisely the point, we're already exerting efforts to establish ourselves as the best network in the country with clear superiority over any other player. And because of this, we'd like to play in the value space and not in the pricing game. Having said that, we are indeed, we are committed to provisions, certain, and reserve some budget that we promote ourselves so that people would get to experience our quality networks and get our -- another critical factor is for us in the wireless space to migrate our 2G, 3G customers. There is still a huge percentage of that, to move up and elevate their experience to a 4G experience where they would experience a much better quality of our network. Promotions will be -- still be there, cost to sell and our ability to promote the relevant data products will be there. But certainly, the purpose of improving the -- our network quality is actually for us to shy away from pricing competition, but actively present ourselves on the proposition of value. The next question is, Victor, did you get the next question?

Maybe just add a little bit more on the first question. We have a very good network, and what we want to -- consumers to try is how good this network is. So one such use case is video. Because if you don't have a good and fast network then the video will just buffer. And that's why we actually have promos like YouTube and Video Every Day, which actually allows them to try so that they can then adopt. So and we were talking primarily to our own subs, but, of course, when you spread that actually it's a good experience then we get trial as well from other subscribers. So that is the nature from which we plan to grow and get our subs into our network. It is through the quality and demonstrating how good and superior our network is versus pricing. So we don't want to play the pricing game. So that's on the first question. On the second question, on the fixed wireless, particularly of our competition, what we see is a very different market. So if you actually look at the ARPU of the PLDT fiber subscriber relative to the fixed wireless subscriber of our competition, it's 1 is to 3. So 1 sub of fixed wired, they need to get 3 subs of fixed wireless. And that's why if you actually look at the results, our revenue is still growing faster in terms of broadband revenue relative to our competition, because we are actually getting high quality subscribers, we are getting high ARPU subscribers. Those who are really after unlimited and really fast speeds, getting -- using Whole Home WiFi, using video in the home and actually eventually adopting Smart Home. So these are the types of subscribers that we see growing and we are getting more of them and where we actually expand into new territories. Of course, because of the unlimited nature of fiber and because of the equality and equity of fiber, we actually get a lot of subs to switch from fixed wireless into fixed fiber. So that is still the preferred and superior network experience. Of course, on distribution, it's faster to distribute fixed wireless, because there is no truck roll needed. You just plug-and-play. We actually have our own fixed wireless play where we actually have that same product so we actually have that. But we know it is more to serve a different purpose, right, relative -- and that's why the focus still primarily is on fiber, which we see. We'll have the huge base from which to tap. Third one is on dividend.

The third question relates to whether the 60% is sustainable. Well, I'd like to think so. The -- well, we clearly expect EBITDA to rise to the level of what our CapEx -- anticipated CapEx spend would be. Well, I just got a text from someone saying that the market was surprised by the CapEx there, right. But I signaled it will be at least PHP 70 billion. But getting down to that surprise, if I may, the core CapEx spend is in the area of PHP 58 billion similar to what it was in 2018, which is what Juan indicated to you. Now we will substantially complete our build-out of the 4G for LTE-A in 2019, right? I think we have already substantially completed our 3G build-out. So the question is will this PHP 58 billion, just focusing on that, continue in 2020 and beyond? I think it's a question of what these 5G CapEx requirements will be and at this stage, it's hard to give you an indication of what the actual CapEx levels would be. But if you assume that the core network expenditures, both at fixed and wireless, will continue, then you will be seeing a CapEx spend in the area of PHP 50 billion a year. Now what Anabelle indicated to you is the incremental PHP 20 billion, 80% of PHP 20 billion is related to sales. If there are no sales, the CapEx will not be spent, because this relates principally to the home fiber -- home -- fiber-to-the-home modems and the lines -- the last mile lines from the curb to the home, et cetera. So we will spend that if the revenues are to be realized, so we'd like to think that we -- that, that kind of expenditure will be recovered within a number of months simply because the ARPU of home, as Ren indicated, is about PHP 1,500 a month. Now why are we bullish on the fiber-to-the-home? Because to begin with, it is the preferred platform for broadband to the home. And in terms of the addressable market, we have about 2 million broadband subscribers, right, both on the old DSL, which are now being fiberized and, of course, on fiber-to-the-home. And we have at the moment 1 million ports to be sold this year. And I would like to think that Ren -- pushing Ren to sell that number, so, up. And I know it's not given, all of the complications of dollar and so forth, but look at the numbers. If indeed we could sell 1 million, the impact of 1 million additional subscribers in 2020 is in the area of -- it's a big number, PHP 1.5 billion a month, right, so that's about PHP 18 billion. It won't happen in 2019, because you have to divide by at least 2 in the full year, yes. Anyway, so there are 23 million households in this country, not all of those households can afford that kind of price point. In fact, as we push the home broadband numbers to more than, say, 3 million to 4 million, there will be some price erosion. We realize that. But still the ARPU on home broadband will continue to be ahead of the fixed wireless solution. It could be higher, because it's -- it's better quality. And we have not really seen what -- how versatile this home broadband platform can do to the home, because there would be advances in smart devices that are being built for the home, right? They have not seen that. And the problem with fixed wireless solution, albeit, 5G always bigger capacity. It's both in device side, which is still expensive in the next 2 or 3 years, plus -- well, the capacity, the shared capacity between what you're offering on the wireless bit and on the fixed wireless side of your business. So I think I mentioned 80% of the PHP 20 million. So that might continue depending on how hard we push the home broadband. But we are telling you that there will be no CapEx if there are no revenues, right? The PHP 3 billion to PHP 4 billion that Anabelle mentioned to you relates to the number of vehicles and laptops and so forth, because heretofore our install and repairs on the fiber-to-the-home has been fully outsourced, but with the DOLE ruling sometime in the middle of last year, we have had to adopt an entirely different approach to the installs in the homes. So we had to hire people to the tune of at least 3,000 geeks who got to be trained and for whom we have to buy vehicles, and all the wonderful things about laptops and tools and so forth. So we made Toyota and Alfred's team very happy with our order of about 3,000 things. And all I got from Alfred is a free lunch at the Grand Hyatt. Anyway, so I think that's a onetime expenditure, right? So long as we have changed the way we're going to install our fiber-to-the-home and I think that will enable the home installation team to be a bit more flexible and more agile and more adept at installing, no? So -- and the PHP 3 billion to PHP 4 billion we're spending is a onetime CapEx. So that will not happen, no? So I think that's the profile of our CapEx. Now how do we fund it? Clearly, we expect the EBITDA to rise. Eric indicated to you that we anticipate that the traditional lines of wireless, home and enterprise will grow by around 10%, 9% to 10%, right? So that's about PHP 14 billion, give or take. Now that will get a boost to the tune of PHP 4 billion by the international. Now last year, we grew our revenues by PHP 7 billion and the impact on the bottom line in profitability terms is about PHP 800 million. So we anticipate that with the PHP 3 billion incremental growth of PHP 7 billion to PHP 10 billion, that better will translate into that PHP 26 billion number. Now what we also told you is the first quarter numbers are trending higher than what we anticipated or budgeted for 2019 so far. Three years do not make 12 months -- 3 months, sorry, 3 months. Yes, this is my tenth board meeting, so I'm sorry for that, I'm getting confused with my numbers. Anyway, so we know that we have to produce revenues that is more than what we have budgeted, we know that, we know that. And we know we have to contain our costs. We know we are -- and we have to tell you we are mindful of how we're going to fund this CapEx, right? Anabelle indicated we may have to sell assets. We will sell assets in order to reduce the kind of debts that may have to be -- incremental debts that may have to be incurred and our job is to minimize any incremental debt, because, again, we are mindful, while we do have some headroom in terms of net debt to EBITDA, we would like to restrict that to no more than 2x. Now at the moment, as of last year, we are down to 1.93x, right? So we do have a bit of headroom, but I can assure you we don't want to exceed 2x, right? And you need to look at our -- yes, anything else? That's it? Any further questions?

Our next question comes from the line of Rama Maruvada from Daiwa.

A couple of questions from me, please. Firstly, with regards to your home broadband, could you give us some guidance on how many customers you intend to add in 2019 and 2020? The second one is with regards to your CapEx. And you indicated that -- I did hear that you said in such a space some of it is that has to do with the CPE for modems and all that. So do you actually -- are you going to capitalize the costs for these modems for home broadband? And if so, what is the lifespan that you expect that to be? And the third one is with regards to your guidance, could you give some -- I -- we heard that your revenue guidance you're looking at is 9% to 10%. Could you talk a little bit about EBITDA and more importantly on depreciation, mainly, because you had a lot of accelerated charges in the past 2 years? So wondering how the overall depreciation would be trending for 2019?

Hello, on the first question on the home broadband subs, well, we intend -- as the Chairman has said, we have 1 million ports, so we have a very ambitious target to install 1 million subs, 1 million new connects. But of course, we actually have churn that we expect, which is a regular part of the business. So we -- that might end up in the tune of over 0.5 million to 700,000 additional subs. So -- but -- it starts with a very, very stretched ambition we have never reached that level in the past, but we are building the capability to do so. And actually as the Chairman has mentioned, we actually have new geeks coming in that is part of the capacity and capability to install more. And we've also improving processes internally working with third-party operations consultant actually to streamline and increase our productivity when we go out on field. So these are among the things that we are doing for this year and for next year. If you actually look at the potential in the market, we have a sight that the market can take up to 10 million to 12 million home broadband subs and possibly on the more premium side up to 6 million subscribers. So given that we currently have over 2 million subs, we still have a long way to go. So we might -- we will want to continue at that level in that space if not higher.

Just to add very quickly to what Ren said and alluding to what the Chairman said, there are 32 million households in the Philippines, 105 million people. Of the 32 million, we see a sizable market that will be desirable for broadband in the home in the -- to the tune of 11 million, 12 million, that can afford. And as Ren mentioned that there is a market there, anywhere from 6 million to 7 million that will most certainly prefer a fiber connection, a point-to-point fiber connection to the home, because it's a most robust transport of broadband to the home. And that -- to that end, given that study, we will play to our strength in terms of our fixed line superiority.

Rama, with respect to the model for the home customers, basically PLDT acquires the CPE, the -- that is the ONUs, so it is a different model from the mobile where typically the customer would pick up the device and so on. So it's an asset in our books. And effectively, we don't charge the customer, but effectively, it's embedded in the monthly fee that he pays is that we provide the modem or the ONU to him. So typically, we would look at the useful life basically as well as the customer life. But on the average it's about 3 years, I guess, for most of these types of assets. And the other question on depreciation. So if you kind of extract away the accelerated depreciation that we book last year, our depreciation expense was something like PHP 32 billion in 2018. Now there's of course lag effects, because the startup depreciation lags the CapEx, right? So we would have to start to see the increase in depreciation this year arising from the PHP 58 billion we spent last year and then the effect of the PHP 78 billion will kick in a year after that, generally speaking, right? So but at the moment, from the PHP 32 billion, we do expect that the depreciation will rise

(technical difficulty)

Basically on the CPEs and CapEx, as Finance Chief implicated, on an average commercial life of 3 years, I'd like to point out that our Fixed Line subscribers net of churn have an average life of beyond 5 years. Sorry, about -- yes, north of 5 years.

Okay, I think the -- hello?

Rama?

Yes, hi.

Did you have a follow-up question?

No, I think the line is a little bit unclear, but I'll follow up off-line.

There are no questions on the conference facility -- one more question.

Hello? Can you hear me?

Yes, Rama.

Yes, I think, I have no more questions.

All right, thank you.

Our next question comes from the line of Luis Hilado from Maybank Singapore.

Just 2 follow-up questions from me. Just to clarify the new guidance is based on the PFRS 15 already, so if I am -- if we're looking at a 9% to 10% revenue growth, we should be looking at service revenues base of PHP 146 million or the previous PHP 149 billion. And second question is regarding the fixed broadband growth expectations. Could you just remind us what PC penetration is like currently and whether you're expecting that the growth will come from people using WiFi on their phones while they're at home or whether it is tablets or it's really going to be PC penetration driving that demand?

Let me answer the second question first. So actually, what's driving usage at home is really still smartphone penetration followed by other home devices. PC is not really the main driver of usage. They -- yes, Smart TVs, you have home cameras now and then tablets. So it's really smartphones. So using WiFi, that is the use case. Why is that? Because they want to be able to have that really fast and consistent WiFi connection, which is driven by an unlimited fixed fiber connection. So that's the big use case for the home. There are other devices that they use, but it's not actually dependent on PC penetration.

And if I could just add to that, coupled with our ability to bundle the globally reliable partnership -- globally proven brand Google Whole Home WiFi solution, it is something that actually extends the power of fiber in the home, into every room in the home, right, that each individual family member in the home can optimize the use of fiber-to-the-home.

And I think another reason for usage, especially on WiFi, multiple device usage. So in the home versus individual, individual is only for you. Sometimes you tether, but that's really going to drain your battery, that's going to drain your load. So the home WiFi with unlimited is multiple device usage. We're actually seeing between 4 to 18 devices actually connected in the home.

Luis, on your first question, I don't want to be too technical about it, it doesn't matter that much actually. So -- and VP said that it's -- and Eric said that 10% growth on the 3 main businesses is about PHP 14 billion and then take out PHP 4 billion roughly kind of effect from the ILD interconnect, so that's about PHP 10 billion that roughly, we are talking about PHP 10 billion to PHP 11 billion of revenue growth. Now everybody is still a bit -- mindset is still more PAS 18. But if you translate it to PFRS 15, I think in terms of the numbers, it's not going to differ too much. It just moves from service and nonservice.

All right. So we should be to looking at total revenue, okay, cool.

Our next question comes from the line of Varun Ahuja from Crédit Suisse.

I've got a few questions. First I just want a little bit clarity on that PHP 8 billion comment in the media that has made a lot of noise. So just wanted to hear from the management what -- if you have any clarity what is this amount being talked about, the President, so that would be helpful. Secondly MRP, manpower reduction expense, company did in the fourth quarter for the last 2 to 3 years, so just wanted to understand what happens and why they suddenly come up in fourth quarter? Is it anything planned exercise that you do and it comes in fourth quarter? Any color on that will be helpful. Third, the new operator, is there any progress or in your future outlook when you are looking at CapEx or dividends for that matter? Are you looking at some competition? When do you think you will start factoring in, in your financial forecast and hence looking at the dividend sustainability from that perspective? Are you thinking in 2020 you will have a fourth operator coming in and some pressure on revenue? Any commentary on that will be helpful. The fourth one is I just want to refer to your Slide 35 of the presentation. I want to understand what -- how do you bifurcate MRP into, some of it is included in telco core, some of it is not -- is included in reported net income similarly accelerated as depreciation. So what I'm saying is some of the net -- last year's MRP expense you included in the core income calculation while this year you didn't include. So how do you decide, which one to include which one not to include similarly for accelerated depreciation? So it will be helpful if you can provide a little bit color what is happening in there? And lastly, I just want to go back to the earlier comment as Anabelle made on the accounting. My understanding is if you are accounting a CPE equipment like in case of this one, wouldn't you -- okay, it's not a -- okay, it's fine, because it's not a outright sale so you have to include it in your P&L and I want -- I got it, okay. That's it, not the last one.

Okay, thank you. I will answer the first of your 5 questions, which I think is the easiest. We have clarified to government that we don't owe them PHP 8 billion. We have asked them to clarify where that figure came from and up to now, no clarification has been forthcoming from the government. So we should just leave that as that in the meantime.

The manpower review is effectively something that we would continue to look at. There are, of course, a lot of changes in transformation the company is going through. And effectively, that has an impact on people management as well, right? So the kinds of talents, the skill sets that we require is, of course, changing over time. So that's something that we would have to continue to undertake and to look at efficiencies and other opportunities to perform better. So -- and then there are all sorts of other things to take into account when you undertake these types of exercises including our relationship with our unions, et cetera, et cetera. So in 2018, the manpower reduction programs principally revolve around 2 items: the first one was the engagement of Amdocs to handle our IT functions, okay, and manage services initially for applications development and maintenance; and then second for the handling of the IT operations and our own data centers. So that was part of what we did and timing was driven off the agreements with Amdocs. And most of these people that we retired were actually hired by Amdocs. And then the second exercise towards the year end was really to look at some of, I guess, the more legacy type of talents, skill sets in the light of the changing requirements, particularly for home customer operations and as well as our enterprise operations. Now -- and some sort of forward-looking thing I think one of the things that we have to pay attention to this year in terms of the cost management will really be a very stringent review of the manpower complement and some of this rightsizing and retooling that we want to do. So in that sense, I guess, there may be a bigger number that we are aiming to do this year than last year. But in essence, we are saying that these are really not core activities. There's a big onetime payout, because we tend to pay a premium over their vested retirement benefits. In the case of PLDT, most of those people are quite tenured and in terms of the payout, it could be quite meaningful in terms of the quantum. So we have classified that as non-core. We also understand from Chris Young and our First Pacific friends that all the other MVP companies have done it that way, so they were -- told us to do it that way. So that's essentially it. In terms of the accelerated depreciation, the distinction really was the big one that we did in 2017 was the decision to swap out our access -- wireless access network in the whole of NCR. And if you recall, that was effectively PHP 16.5 billion sort of write-off or accelerated depreciation that we had to take. Now in that place, we were -- money-wise, we were given a better deal in terms of notionally by the new vendor. But that's why, again, that was classified differently because of the sheer size and quantum and, I guess, bigness of the exercise.

Well, we took the opportunity to offset the significant gain from the Beacon, Meralco sale in 2017 and Voyager was and (foreign language) Beacon -- the other one. The Voyager was 2018. So we take that occasion to clean up the books, because we could have carried on the Nokia assets, which we were basically swapping out to our friends from China, right?

I think somebody answered that earlier. We don't expect them to operate in 2019. So effectively, the guidance assumes that no third players operate in 2019. If ever, I think, the earliest time they could operate is sometime end of 2020.

By their own pronouncement, the earliest they can roll out is second quarter of 2020.

There are no more questions from the conference call facility. We'll take questions on the floor. Anyone? Take advantage while MVP is still here. He has to leave in a while, at this time. Any questions?

Good afternoon, Melissa. I would just like to ask the new capital structure for Voyager after the acquisition, what's the amounts?

So effectively, after the infused entry of KKR, Tencent and IFC, our ownership fell below 50%. So to be more exact, it's 48.7%.

And then how much did the PLDT invested into Voyager before the acquisition of KKR and Tencent?

Well, essentially, we got back what we invested. That's why we have -- we're effectively recognizing back what we have invested. The gain effectively represents that.

And then for 2019, did they expect more accelerated (inaudible) 0 equity force now moving forward? (inaudible).

(inaudible) more months, However, (inaudible) TV5 (foreign language) better financials now, right? I think this year, this EBITDA will be below PHP 1 billion. So that's a huge achievement, actually.

And then again on the accelerated depreciation, should we expect more in 2019 or moving forward?

Probably not for 2019 anymore, because, essentially, what we have dealt with were assets that were affected by the upgrades to -- for fiberization, some of our transport assets as well. And then -- now just a lot of the CapEx will translate to newer assets, so that I don't think we should expect that much.

And then lastly, on the -- in the big Wireless segment on the data revenues versus the incremental core revenues, does that [break up] the reallocation done in this? So could we compare it to the historical data?

There's a slide in the appendix that will show you that. So in a way, the 2018 has the new allocation, the 2017 is the old allocation. But we have a slide that will show you what if we did not change, right, what would be the allocation. There is a slide on that.

Any more questions before we close the session? If there are no more questions, we will revert back to the operator before we close the call.

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