PLDT Inc (PHI) 2022 Q3 法說會逐字稿

Good afternoon, and thank you for joining us today to discuss the company's financial and operating results for the 9 months of 2022. A copy of today's presentation is posted in our website. For those who have not been able to do so, you may download the presentation from www.pldt.com under the Investor Relations. Kindly note that this briefing is being recorded. (inaudible) of this event will be available on our website after the call. (inaudible) report to the presentation, the MD&A, the [MPS] and the podcast are on the screen and in the (inaudible).

Today's presentation, we have with us, Mr. Al Panlilio, President and CEO of PLDT and Smart Communications; Anabelle Lim Chua, Chief Financial Officer and Chief Risk Officer; Mr. Orlando Vea, Founder and CEO of PayMaya Philippines, as well as other members of the PLDT management team. At this point, let me turn the floor over to Mr. Panlilio to begin his message.

Thank you, Melissa and good afternoon to everybody. Thank you for joining us today. Apologize for my voice (inaudible). We've been 94 years this month, anniversary but we've also gone to a lot of (inaudible). And really our mindset is (inaudible) with adversity. We shifted from a pandemic plan including an open economy, but we're facing a different set of headwinds (inaudible). And we're expecting to turn point (inaudible) high inflation, which affects (inaudible), which has additional effect on both OpEx and CapEx, increasing the fuel price due to inflation and also affected (inaudible), and the recent Typhoon Paeng (inaudible). But despite that, I think we've done a lot to business (inaudible) initiatives to this key areas of our business.

Next page, I'd like to report fiscal report for the first 9 months, our performance -- our financial performance (inaudible). Our year-to-date, Telco is at PHP 25.4 billion, this is in the third quarter -- sorry, 9 month (inaudible). Telco Core which is 10% higher than last year. Our net service revenues is at an all-time high, 9 months all-time high of almost PHP 142 billion. And our EBITDA is also on an all-time high, [PHP 75.4 billion], which we're also maintaining our EBITDA margin (inaudible).

Next Page, please. So as we have indicated in the past, the new strategic pillars, we continue to focus on. One is customer centricity. Customer promise is still top for us (inaudible). Also started our own (inaudible) initiatives, and we launched our CX consultation initiatives and we launched 6 charter. Our customer promise aims to amplify the culture of customer obsession within the company.

Second, next page please, is still doing business -- doing business responsively, cultivating a greener organization. We've actually built our 1st PlantSmart GrowHub as a commitment to helping Philippines with food security. We also expanded our solar rooftop facilities in our own locations in (inaudible), as we speak. (inaudible) also based on SMB is generating (inaudible) growth on this measure from 47 in (inaudible) of 51 last year, and we're tracking -- we're reporting 89 for 2022. And we continue to reduce greenhouse gas emissions by 75 tons. We are going to focus this efforts in terms of ESG and making sure that we're able to sustain our business (inaudible).

We also continue to invest on being a superior network in the country. We have recently launched actually Integrated Operations Center in the (inaudible) where we're able to monitor our -- our network almost real time, if not real time, then we'll be assessing the health of our network, ensure that they're able to meet (inaudible) customers as well and continue to provide service that provides excellent customer experience.

We've also -- after launching Jupiter about 2 months ago, we've also (inaudible) part of Asia Direct Cable, which we'll now land on the west side of the country, in Batangas. This should add another 36 terabits to our 16 terabits of capacity that would really drive digitally new facilities, improving again (inaudible). So by next year, hopefully, almost have -- we will almost have almost 100 terabits of capacity in international (inaudible).

We're also in the middle of Vitro Santa Rosa, which we broke ground in March, started pouring cement into the infrastructure. And we are on track in terms of completing this by the end of 2023. And this sets us up for really the hyperscaler business and we will have an additional 4,500 (inaudible) with increase late next year.

So moving forward, to end of the year in a strong way and also looking out for what (inaudible) 2023 really the one (inaudible) company. And again (inaudible) focus on working on managing customer centricity because we continue to be obsessed the customers (inaudible) by digital platforms to able to build efficiencies in our organization so we can operate extensively, break down cost to serve and (inaudible) aim to be the best place to work. We're also resetting our ratings in order to support the growth and looking for efficiencies moving forward. And obviously, we will also continue to invest in profitable new growth for the company.

We're also looking at really, maybe only PLDT can do this (inaudible) potential Fixed and mobile style product . The average (inaudible) enabling customers in their digital lifestyles. And lastly, as I mentioned, continue to go into sustainability as a way of working for (inaudible).

So at this point, I'd like to shift over to do deep dive on the financials and the like, Anabelle will cover this. Thank you.

Hi. Good afternoon, everyone. As Al has highlighted, we are pleased to report PLDT's 9-month results with our service revenues at PHP 141.9 billion, being all-time high for the company. That's on the back of a growth of 4.5% equivalent to PHP 6.1 billion year-over-year. Our home business and our Enterprise business have both also achieved record high in terms of the 9-month revenue numbers. We totaled at PHP 42.7 billion or 21% increase year-on-year, equivalent to (inaudible). Within both, the fiber business is actually growing 52% year to year. Enterprise, likewise, has achieved a high at PHP 35.2 billion or 9% increase year-on-year.

Our Individual business remains our largest business revenue contributor at PHP 61.7 billion, although we see some headwinds at a 5% decline. International and carrier rounds that up at PHP 2.4 billion, which is 22% versus PHP 0.7 billion lower year-on-year.

Now next chart, please. When you look at the PHP 141.9 billion revenues we reported in the first 9 months, 80% of that or equivalent to PHP 113.2 billion comes from data broadband services, which are up 9% year-on-year. Some of the more exciting pieces within that data service growth is mobile data, is up 2%. That is adding the pressures on the overall individual Wireless business. Home Broadband is registering the highest growth at PHP 5.9 billion year-on-year or equivalent to 18%. Corporate data, up 12%. ICT, up 10%. And within our ICT, that includes our data service revenues, which are up 14% year-on-year.

Next chart, please. So just deep diving a bit into the three business segments, starting with Home. As I mentioned, Home is up 21% which is a 9-month all-time high. Likewise, at PHP 14.6 billion, the third quarter is an all-time high quarter for us. And of that, PHP 14.6 billion, PHP 12.4 billion is coming from Fiber, which is up 36% year-on-year.

Demand continues to be strong for Fiber requirements, albeit our net additions were impacted by higher churn during this time. We saw net adds of 489,000 for the 9-month period. So the churn is coming principally from impact of Typhoon Odette after we were able to restore service and apply the normal credit requirements as well as, I guess, tougher economic conditions affecting some customers' ability to pay.

Market, we believe, is still very promising at the penetration rate of 25% with an upside on the way to 50% for broadband penetration. Growth will likely come from different segments going forward, new areas of growth in terms of geographic regional areas as well as likely a lower part of the market, which had been (inaudible). We still remain quite bullish about the prospects for our home growth business going forward.

Going into the next chart, which is our Individual business, you see here some improving trends with respect to the quarter-on-quarter performance vis-à-vis the prior -- same quarter, the prior year. So the rate of decline has decelerated in terms of the percentage terms as well as the peso amounts as highlighted in this chart.

Now the third quarter is seasonally a lower quarter following the second quarter, which was better because of the pre-election spending. We do expect that in the fourth quarter, we should be able to enjoy a bit of a holiday uplift as well as the continuing benefit of reopening of the economy.

There are first more active competitive loans in the market with the third layer as well as our main competitor, Globe. So these are the other thing we're watching out for is really how consumer wallets are being impacted by higher inflation, particularly for the more prepaid mass market segment. We have a tendency to economize during hard times.

Our network leadership and superiority will remain our key differentiator, and we'll continue to support and roll out new promos that serve the needs of our customers and stay as well about all the segments of our market.

Moving on to the Enterprise business. As highlighted, Enterprise has hit an all-time high of PHP 35.2 billion during the 9-month period and an impressive PHP 12 billion quarterly revenue performance during the third quarter. We see the resurgence of business activity post the lockdowns for COVID. And as businesses also work on their own respective digital transformation programs, for each company, we are there to help accelerate such transformation, be it for large corporates, SMEs or even government as well as the increasing demand from hyperscalers who have discovered the Philippines as an ideal location for data centers as well. So our three business heads are here with us today, and they will be able to talk to some of the other key drivers and dynamics with respect to this business segments during the Q&A portion.

Moving on to the P&L for the 9-month period. With the increase in revenues, we did see also our EBITDA hit PHP 75.4 billion, which is up 6% as we were able to manage our OpEx increase to 3%. EBIT is likewise up 14% at an EBIT margin of 27%. And our Telco Core income at PHP 25.4 billion is 10% higher year-on-year.

Next chart, please. This kind of shows the same numbers, just highlighting that we were able to grow our revenues on the back of higher service revenues, offsetting -- more than offsetting increased OpEx that we saw in the business. Higher EBITDA helped boost our Telco Core income by 10%.

We did see increase in OpEx that we saw during the 9-month period. I'd like to highlight in the next chart, some of the major ones that have had some negative impact on our OpEx levels during the period. So in particular, I may highlight is three items: Electricity, fuel and the Odette restoration costs, right?

So for electricity, you've seen the average rate per kilowatt hour rise by around PHP 1.80 during the 9-month period for us from an average of about PHP 7.39 to PHP 9.19 per kilowatt hour as well as the impact of heavy (inaudible) fuel cost rate adjustments that have been passed on by the rest market.

So if you look at these two, the price variance and that we see as a result of higher rates is as high as PHP 1.7 billion in terms of higher OpEx that we did not plan for our budget. Fuel, likewise, in terms of average rate per liter has increased from around PHP 41 per liter to close to PHP 60 per liter at the average. So that also has hit us to about PHP 364 million in our OpEx. And then on top of that, we've talked about Odette and the efforts to bring back the service and the ensuing costs that, that has evolved this year of close to PHP 1.26 billion.

So these so-called headwinds adversely contributed to expense pressures to the tune of PHP 3.2 billion. That's obviously partly offset by our efforts to try to focus on various operating efficiency measures, which Al talked about, principal one being reduction of our consumption, looking at more energy efficient measures and fuel savings, reductions in our fleet, number of cars and many others. There are also benefits we've seen in terms of contribution to the comp and ben or salaries and benefit line as a result of the earlier manpower rightsizing program that PLDT and Smart worked on. And then other items like selling and promo, subsidies and obsolesce have likewise been managed now.

So we see that the higher inflation impact will remain part of the landscape going into next year. So we will continue to strive for more ways to drive higher efficiencies and manage our costs going forward.

With that though, I'm still pleased to highlighting in the next chart that we have been able to keep our OpEx -- our EBITDA levels at the PHP 25.1 billion average during this period and being able to cross the PHP 100 billion mark for EBITDA over the last 12 months as was our goal we stated earlier. So EBITDA margin of about 51% now.

Telco Core income as mentioned, next chart, is at PHP 25.4 billion, 10% up. We are on track to achieve our full year guidance of PHP 33 billion. In fact, automatically, that just requires PHP 7.6 billion in the last quarter to get that and we've been doing better than that over the last 3 quarters. So we are confident that we should be able to get to the full year income guidance that has been provided.

Now other drivers of our profitability, in the next chart. We do have to pick up our share in the performance of Voyager, which has been increasing its losses as a result of higher cash burn as well as the startup of the (inaudible). (inaudible) will be with us later to talk about some of the key highlights and achievements that Maya has been able to attain during post the launch of the bank in particular.

With that, we do have also, on top of that, the benefit of the gain from the sale and leaseback of our towers. The PHP 22.3 billion pretax or PHP 17 billion post-tax reflects the gain from the first three closings that we have done, equivalent to 4,176 sites. We did add a few more sites in October, so that we are 75% completion rate for our tower sale, and we do hope that we can do one more closely early December although there is a portion of the towers that will only be closed towards the early part of next year.

So there's this PHP 22.3 billion. We do have other things that have been booked earlier part of the year, the MRP costs in the first quarter, principally the accelerated inflation that we saw in the second quarter. Forex fluctuations will impact our bottom line as the peso has been quite volatile hitting 58.646 as of the end of September, although it has improved slightly from that, but Forex remained something that we'll see a lot of uncertainty over. So all told, with all of these plusses and minuses, we have a reported income of PHP 27.4 billion, which is a solid PHP 8.5 billion ahead of last year.

Now moving on to our balance sheet, some (inaudible) highlights. In terms of our net debt, that was at USD 4 billion as of end of September, equivalent to a net debt-to-EBITDA ratio of 2.36x. We did pay out our interim regular dividend as well as some special cash dividend in the month of September, hence, this reflects its capture in lower cash levels in this chart.

From a debt management perspective, we continue to see our maturities pretty well spread out. Average interest cost remains at 4% overall. Although admittedly for new borrowings, the cost will be much higher than that already. Average life of our debt has been average level at close to 7 years or more exactly 6.91 years. We continue to manage (inaudible) exposures on an FX basis, 5% will be unhedged. And then a net interest basis, 60% on a fixed rate loans.

Now moving on, CapEx for the period came in at PHP 67.3 billion, PHP 52.5 billion of that was behind our network and IT investments. There's another PHP 3 billion of the data center CapEx that we also recognized and further another PHP 9.3 billion, what we would call the business CapEx, largely to support the new installs of our fiber broadband where we do have to do the last mile install as well as we do cover the CPE cost for those reconnects.

So CapEx has covered a wide span of activities and initiatives, including our investment to support the home broadband business by adding and rolling out more (inaudible) to the tune of PHP 1.22 billion as of the 9 months, vis-à-vis our target of PHP 1.7 billion (inaudible).

We've seen data usage growth, and data as we noted is 80% of our revenues. But data usage has seen, increase of 29% of wireless and as high as 39% on the Fixed side. We are constructing our 11th data center as well as expanding our Vitro Makati data center, which still has additional floor capacity.

We have been investing in International Cable Systems, Jupiter, which was activated a few months ago as well as other international cable systems coming live next year, which includes Asia Direct Cable and also Apricot. We will continue to invest behind our network in order to serve our customer requirements, but we are looking at ways such as the use of (inaudible) covers will help us move CapEx model to a rental model as well.

Going to the next chart just kind of highlight as to how the money has been invested, we see here some of the statistics behind our network spread and scope. We passed 16.8 million poles in our fixed network broadband liquidity. We show here also that we are present in 17,000 out of the 42,000 barangays in the Philippines. It's roughly 40% barangay presence. We've increased our ports that are available for sale as well as sold combined to 5.9 million ports. And then our fiber footprint continues to be something that we are way ahead of others in the market. This one, we show here the breakdown between 860,000 fiber kilometers on a domestic in-country basis as well as another 231,000, representing the extent of the international cable systems that we are either co-owner, consortium or have IRU rights over.

On the Wireless side, our total base station count is 77,200. Biggest piece would be in the LTE 4G, those 40,000, 3G at 17,000 and 5G at 7,300. Adoption of 5G is still limited at 4% as price points of the devices remain still quite high for this market. Clearly, the market is driven by LTE 4G at 82% adoption whereas 2G and 3G have continued to drop in terms of the relative proportion now down to less than 50% on (inaudible) device that we see in our network. We continue to cover 97% of the country with all our various elements from the mobile side.

So just highlighting quickly some more items at 5G adoption, we see something like 2.5 billion 5G connected devices out of roughly 41-plus million data users. And then in terms of traffic, 31,000 terabytes in the third quarter compared to less than 10,000 in the fourth quarter of last year.

On various speed tests and other performance measurements by independent agencies, our network continues to outperform the others. So we just highlight here, in particular, the Ookla speed test for our 5G network is way ahead of our main competitor.

So with that, let me turn over to Doy Vea to talk about recent developments in the Maya business.

Good afternoon, everyone. Let me give you a quick update on Maya. It's only been 6 months since we launched Maya Bank and since we relaunched -- rebranded our app into now Maya app, the only all-in-one money app in the country. Since then, we believe we have changed the conversation (inaudible) fintech.

The game is now beyond wallet. It's about digital banking and wallet, multimode payments, savings, credit, crypto, investments, insurance and more, all in one single app.

Maya's trailblazing efforts has landed it among CBE Insights prestigious FinTech 250 list, a listing of top fintechs in the world for venture capitalists. Maya Bank was also named as the Best Digital Bank by Juniper Research.

Allow me now to share some highlights on this continuing journey of ours. We have the fastest-growing customer base and deposit balance among the digital banks, registering 1 million customers, just 5 months into our public launch. The only digital bank to go live in just 6 months after the BSP Monetary Board -- sorry -- we're the only digital bank to go live in just 6 months after the BSP Monetary Board granted us the authority to set up a digital bank last September 2021. This rapid growth underscores the growing preference of Filipinos for an all-in-one digital banking and payments experience.

Let me now go to the consumer side of the business, where Maya is now the top rated finance app in the country. Propelling this rapid growth and high customer engagement which are game-changing customer experience, powered by innovative services for personalized features and an exceptionally reliable and secure platform. Customers are excited over the Maya Save feature that offers up to 6% interest rate per annum, with interest credited daily and no maintaining balance.

They like the ability to manage their finances through personal goals that earn high yield interest. We allow them to set up at most five gold-based accounts like saving for a trip, saving for a gift or saving for a budget. They like the convenience of seamlessly moving their money from their savings account to and from their wallet without signing up to another third-party bank provider.

We've also started offering credit up to PHP 15,000 to Maya app customers and (inaudible) loans to our major network via the Maya business app.

We have popularized and simplified crypto. At the start of every month, you can choose if you want to receive your cash-back in cash vouchers or Bitcoin. And soon, we're simplifying the payment experience even more with a user name feature.

Now on the Enterprise side. We're the largest fully integrated payments processor for businesses with over 810,000 registered merchant acceptance points as of September, and September 2022, triple the number we had from last year. The majority of these are already QRPH enabled. This underpins our leadership position versus all other payment processors in the country. And we've also started offering business deposit accounts to enterprises. And soon, we're also introducing various credit products for their customers.

Next slide, please. What is extremely exciting for us and significant for the whole industry is that more digital banking services, such as savings and credit are positively driving digital payment transactions. It is a symbiotic fintech ecosystem. Customers who have savings accounts, for example, are highly active in using their wallets for everyday payments because of the -- because the experiences is conveniently seamless and intuitive.

Our unique capabilities underscore our big opportunity as we embed digital banking services across our comprehensive financial services ecosystem. So expect more exciting services as we enable Filipinos to make bolder choices through fintech. Let me now turn you over to Melissa.

Hi. We're now ready to take your questions. (Operator Instructions) We have a raised hand from Hussaini Saifee.

Several questions from me. Just on SIM registration. So just want to understand how it will be taken forward? And will it entail any cost? Or will -- is there a risk that it can lead to higher competition? What I understand is that one of the neighboring countries, country in the ASEAN had similar situation and that led to significant increase in competition. So I just wanted to get your thoughts on SIM registration in Philippines.

And the related question on the mobile side is, I just wanted to understand your view on competition. Is the competition driven by -- or the softness in growth is driven by competition, particularly from the third operator? Or is it -- or the softness is linked to weak macro?

And finally, when you said that Philippines is one of the key markets for hyperscalers, just wanted to understand what are the factors which is driving demand from hyperscalers, particularly in Philippines where the cost of power is high?

[Francis Flores] will take on the SIM registration and also the (inaudible).

On the SIM registration, as we speak, right now, all the telcos are meeting with the National NTC in terms of verifying what will be (inaudible). So I think what we want all of us, especially in (inaudible) happen is to make sure that our goal is to have a continued easy SIM registration experience for our subscribers . Now that we have to make sure that we also have very clear implementation rules. So as we speak, all the (inaudible) gathered National Telecommunications Commission in order to make sure that we have really clear and higher (inaudible).

Now on your question on how (inaudible) back the business. We have studied how SIM registration (inaudible) we know that there is a base that the number of applications will (inaudible). Other hand, we see an opportunity that we would also think (inaudible) possibly is churn. And therefore, it's also an opportunity for us to get market share from our competitors. The key there, again, goes back to how our capability in providing a very really good solution and may be a convenient, easy and even rewarding SIM registration experience for subscribers.

If I just add another point, if you talk about savings, we potentially, we had a huge number of additional churners. So hopefully, there'll be some savings in SIMs that (inaudible). Yes, (inaudible) that is for privacy of the service (inaudible).

Now on the softening of the business, it's that combination of different factors because of the macroeconomic factors, because of the rising cost and inflation. I think what they observed in the past 3 months with a high increasing losses of (inaudible) here in the Philippines. We've seen the consumers to be economizing to expand in terms of the (inaudible) or the loads, primarily in terms of frequency. We've seen that in the (inaudible) frequency. Some subscribers (inaudible) .

At the same time, we're also seeing some of the (inaudible) going for lower denomination offers. As a result, we see this impacting our (inaudible), especially for our (inaudible). Most subscribers are really more of the low-income base. So that's how we see (inaudible).

Of course, we cannot also the discount the competition, especially the (inaudible) out in the market who are giving away free SIMs. So there's a lot of trial happening for that. We don't discount that. It's not affecting us directly. (inaudible) that one. But we think our eyes are still focusing on providing best offer in light of all this inflation to our subscribers. That's why we launched a number of new promo offers that would provide the best value and affordability for our subscribers.

On your question regarding the hyperscalers and the growth in the Philippines, this is primarily driven by two things. The first is data usage. So in terms of digital adoption, in terms of usage of different apps from both consumers and enterprises, we see growth coming from consumption. And this has really fueled the need for most of the big hyperscalers to look for a destination to be able to provide seamless user experiences for these end users. To give you a very specific example, TikTok in terms of Philippine consumption, we're the seventh largest TikTok users in the world. And you will see this also in different other applications that are being used by the Filipinos here.

The second reason on what's driving the hyperscaler industry is actually the geopolitical situation in other parts of Asia. In Singapore, there has already been a moratorium for new data center build. And we see that the Philippines is now being either a safe gate or a new hub market to accommodate a lot of data center and traffic coming from the region, connecting to the U.S. and Japan. So, because of this, we are actually partnering with government with the Department of Trade and Industry to position the Philippines as the next hyperscaler hub for the region. And we are building the infrastructure, not only for the data centers, but even for our connectivity assets on a global fiber (inaudible) network, together with international submarine cable systems, connecting us to the rest of our network.

Maybe if I can ask one more question, it is on fixed broadband side. Now I read that PLDT is looking to offer more affordable plans. My question is, won't it be margin dilutive, number one? And what is the risk of higher-end subscribers down trading to those low speed or low denomination plans and how PLDT is going to tackle that?

Hussaini, it's Jeremiah here. What we're actually talking about is being able to provide a broader range of plans available for our customers to be able to serve the different segments and the different requirements that our customers may have had. You would have observed over the last 2 years, we have actually dramatically increased the inclusions within the different plans that we have available for our customers. So what price would have been paying for 100 megabits per second, say, for example, in 2020 or 2019 would have been far higher than what you would be paying for 100 megabits per second in 2022.

The key thing for us when we do provide more and more -- a greater range of plans and especially as we provide greater value for customers at the lower end is being able to make sure that we continue to match the value we make available for our existing customers. And that's something we've been able to manage over the last 2 years. If you have a look at our ARPU, we've actually been able to hold and if not grow, our fiber ARPU over the last few years. So that's stayed just a little about 1,500 in that level. The real challenge for us is to make sure that we continue to provide value for the customers at the different price points that they do have, despite providing lower price points to different segments.

Now other things that we'll also be looking to do is being able to introduce other products or other services that will differentiate our range of plans, right? Say, for example, if you already see this with the introduction of Lionsgate, the streaming service that we make available for all PHP 1,600 plus customers. So we'll be actually using and leveraging other services available to our customers to differentiate higher and different segments or different types of plans make available. Does that help answer your question, Hussaini?

Yes, this is very clear.

Now we'll go to Luis Hilado. Luis?

Sorry, I think I was muted. I think congrats on the results. A couple of questions from my side. Essentially, following on, on what Hussaini was asking. On the fixed broadband side, as you go into these new areas, is there a way for you to manage the cost in those areas to help protect the margins for the overall business? It is cheaper to roll out there, marketing and otherwise.

Second question is on the current rise in the independent tower companies in the fields, thanks to your cells and Globe selling towers and leasing back. On your part, are there any -- is there a significant number of towers that are used to be just Globe owned that now you would be keen on co-locating in?

Third question is two housekeeping questions. Third is the Odette expenses. The PHP 1.2 billion, how much has been recovered already in terms of insurance payments? And the last housekeeping question is interconnect expenses, up quite substantially in the quarter. Is this mostly volume going to Globe or Dito? Or is there some kind of a change in the rates?

Absolutely. So I'll start off with the first question. And if I -- I make sure that I got that correct. The question was really as we look to expand into other areas, what are we going to do to be able to help to keep the margin? Was that correct?

Yes. Manage clearly -- any cost management measures in those areas, which help you protect the margin.

Yes, that's correct. I'll start off with -- by saying, as we go out and expand into these new areas, we actually see different types of situations actually arise where potentially, if we're coming into a new area and there is no broadband provider available at all the (inaudible) space, then obviously, we have been post market. And that comes with some efficiencies with regards to sales as well as installations, right?

The second type of environment is where we have gone in and expanded in an area which may have an existing provider. That poses some other challenges for us. But what we do find in general is a very warm reception when we go into those areas, where customers often have commented that they've been waiting for PLDT services and they actually do tend to attract customers over to the PLDT service. Now the challenges on that front when there is an existing provider is, obviously, they have some commitments that they already have with an existing provider, right? So really, that's where it becomes key to be able to show, perhaps some aggressive switching offers, but beyond that, actually provide -- continue to differentiate our services by showing how it is a superior service, much faster, much more stable. And the overall quality of experience that they'll have with PLDT is much higher than any existing provider.

Now on a much broader scale, Luis, as you'd be aware, it's something that Al and the whole team have been talking about this year is we have actually being really focused in on our overall cost base, been looking at the way that we have gone to market and our overall operating model. And we're continuously looking at different ways that we can improve, improve our overall efficiency in rolling out the network and being able to connect that customers as well as being able to service them ongoing. So it's not a 1-year activity. That's something that we want to continue to do. We're seeing some improvements already this year. And we're looking to continue to make those improvements next year and beyond.

And these are the things that we'll look to do. So as you see some commoditization from a price point of view happen, we'll also be focusing on actually making sure that costs are set actually decreases, so we're able to sustain, if not be able to grow those margins.

And just on the (inaudible), I think we have benchmark ourselves. I believe (inaudible) that goes in the bigger opportunities for us and we put in process. I think Eric will answer the tower question.

Sure. I'll probably share with you (inaudible). I would like to answer your question about towers. So these are considered common towers, which are -- which we are closely including in our network design plan and enhancement plan (inaudible). So we're looking at it goes (inaudible) provide benefits forward in all of our network planning initiatives thinking.

On the Odette insurance claims, we're able to recoup something like close to PHP 250 million from the insurance. But Luis, just to be complete about the info, the cost that I show where the expenses we booked this year, right? So there was also some expenses like -- to the tune of about PHP 1 billion actually that we already booked last year, right? So also, when you look at the impact of Odette, quite massive, but over PHP 2.3 billion, of that about PHP 250 million are -- came from the insurance providers.

We will look at that. I think it's not too much interconnect, I think, maybe us between ourselves and others. It may be more an intersegment interconnect almost with PLDT and Smart, but we'll take a look at that though.

[Rachel], you may unmute your mic.

So I have three questions. First one is on fixed line. So you reported that there was about 3 -- 286,000 gross additions for the quarter. But in terms of net adds, it's just about 40,000. So this shows that churn has been very high still. So do you expect this to normalize? And are you also looking into going to prepaid broadband? So that's the first question.

Second one is on Voyager. You reported about PHP 2 billion in losses. Is this a one-off thing in terms of the size of the loss and expected to decrease next year?

And then lastly, just a housekeeping question. Is there any impact from the recent Typhoon Paeng?

[Rachel], I'll start off with the first question you asked, which was really looking at the net adds for quarter 3. You are correct that we did see actually a 7% increase in gross installations in quarter 3. So that's something we're quite happy with, and we're looking to continue to build on that momentum. But what we did see is actually our churn impacted in our numbers from an as point of view, were affected partially because of the Odette, continue to process that impacted customers.

The number that we had for quarter 3 is actually 88,000 net additions. So it's actually 88,000 for our fiber business. What we're focused on particularly and specifically is going to be our fiber business. So that's 88,000 net adds in our fiber business. We are starting to see actually an improvement in our overall numbers. And I think that's sort of the second part of your question is are we seeing an improvement in, I guess, moving forward? Yes, we do expect that, especially as we've seen the tailwind of Odette-impacted customers. Knock on wood. We don't see additional, I guess, any further big storms that would impact our customers beyond Paeng.

I think you asked a question as well on prepaid broadband. As mentioned, right, we have to that, we will increase our installation capacity quarter-on-quarter by 7%. So that's a 280 -- or circa 280,000 gross additions. For the installations of the applications we've had still far exceed the number of installations we have been able to do. So what we're doing is lost demand remains strong. We're really prioritizing and focusing our installation capacity on our postpaid customers.

And the reason why we're doing that really twofold. Number one, our postpaid is generally a higher ARPU customer. So we're really focusing on the higher value, higher ARPU customer that will yield a better result for PLDT Home. And secondly, the postpaid customer actually provides a longer-term commitment. As you know, many of our customers are signing up to 36-month contracts, whereas the prepaid tend to have a shorter cycle. So whilst we're still in a situation where demand far outstrips our ability to supply from an installation perspective, we'll continue to focus our installation capacity on our postpaid customers.

So that's not to say that we're not going to go after more customers in the market. We do have available, our prepaid phone WiFi. So that's actually being made available to customers on a prepaid basis. And that allows you to be able to leverage the speed of our mobile network whilst providing an ability to share that with multiple users within the household. Does that answer your question, Rachel?

Can you take that question, the investment?

The losses on Voyager affected the -- reflect our proportionate equity share in the performance of Voyager. Now as I kind of mentioned earlier, one is I think Voyager has ramped up its acquisition efforts in an effort to build its user base as well as merchant base, et cetera. So that has been an uptick in terms of the cash burn that Voyager Maya has been spending in order to ramp up its operations.

At the same time, we also started digital back this year. So as with any thing that is start-up in its first year, we are seeing some investments behind the startup costs for the bank as well, right? But we are proud to say that the deposit base has grown to over PHP 10 billion now. I think following that would be a growth in the asset book side -- from our loan book side. So there are a number of offers that are going out -- they have gone out and are going out in this fourth quarter in terms of credit products that we offer generally speaking, and as well as to build the subscribers.

So while there is still losses on the back in the initial base, I think once we are able to get the loan portfolio up, I think the path to profitability for the digital back, we can see that side, right? Obviously, it is -- Doy has described it as a whole ecosystem play. We'd like -- we will see the initial success of how the efforts on the bank side has helped on the wallet side as well as speeds into the merchant side. So I think the whole ecosystem labor Voyager is something that we continue to support and invest it in.

I think one of the things that Al has pushed very strongly is a closer synergies and working relationship between PLDT, Smart and Maya as well. So there are a number of efforts that should help improve the financial results for Voyager.

The last question on (inaudible). We're not seeing major expense and it's very, very minimal.

Any more questions, Rachel?

No more questions for me.

Next, [Isvarya]. You may unmute your mic.

So my question, I'm looking at the postpaid blended ARPUs for the Wireless segment. So I just wanted to understand why that has softened over the third quarter? Sorry, I'm not able to hear you clearly. I'm not sure if there's an issue only in my end.

Can you hear me now?

Yes. Clear now.

Okay. Again, right, your question was why the business softened in the third quarter?

Right. Yes, specifically looking at the postpaid blended ARPUs.

Actually, for our postpaid business, the decline is primarily because of our (inaudible). Last year, we have two brands under the postpaid, Smart and Sun. And Sun postpaid was we actually ended that business. And fortunately, we were able to fully recover all the subside risk on the business coming from the Sun postpaid. And the profile of the Sun postpaid business is actually -- are the ones that are more ARPU.

Now -- but if you look at our Smart postpaid business, at least on the third quarter, we're still seeing some growth for revenue basis versus really Smart business.

Isvarya, any other questions?

Yes, it does. Just wanted to check that even with just if I look at only Smart as well even that though ARPU has come down, right? So is there any specific reason for that?

I think for the Wireless business, the ARPU, what we saw was that the decline primarily coming from prepaid because I shared a while ago. What happened in quarter 3, there are some headwinds, primarily the rising positive. There's a lot of inflation on essential goods here. And as a result, consumers are economizing their spend particularly on telco. They have either reduced the frequency per month or reduce their basket size or their denominations, reduce their load and denominations, both of which have resulted in decline in their ARPU at this point.

Hussaini, you're doing a second round of questions?

Some follow-up questions. First is on the -- I mean I see that more than PHP 10 billion in deposit base at Maya level. Just wanted to understand how much of it is deployed as loans as of third quarter? And what is the outlook on further deployment of that deposit base to the loans?

And the second is on the CapEx cycle. So it is depending on the higher side in the last 3, 4 years. So just wanted to understand how should we see the CapEx going forward?

On the first question, yes, we have more than PHP 10 billion in deposits. We cannot disclose as of now, how much of that is deployed from credit extensions. But a good part has been deployed. As you know, we launched our credit service after -- a bit after we have started operations, and it's only now we have started building up the loan book, but it has good traction. And we expect to grow the credit part of the business as fast as the deposit part of the business going forward. I cannot give out -- sorry, I cannot give out any figures now.

Also are deploying a credit algorithmic model in terms of our lending side for Maya. So I think there's a -- as you may appreciate, there's this learning -- self-learning type of approach to this lending side as well. So you need a bit of time to kind of see those models mature it. So the initial base would be little slower to start, but as we get more experience, I think that will enhance the credit models that both Maya sees.

More experience data.

It will be both (inaudible) on your CapEx question, what was on your question on that, Hussaini?

I just wanted to get a view on how should we see the CapEx intensity going forward? I mean I understand that it has been spending at the higher side, thus there has been elevated spending on the fixed broadband in the last 2, 3 years. So how should we see the spending going forward in the fixed broadband space also?

Yes. We again continue to invest on a lot of CapEx item. The network (inaudible). The data center that we're doing. So there might still be quite few investments to secure the requirement for the business moving forward. It is elevated at this point. Hopefully, we're looking at the glide path and 1 to 2 years, maybe that we're keeping the envelope maybe at the more PHP 85 billion per year. It's something that we're trying to look at it with this happening that we're also looking at.

We introduced -- as negotiation factory, also in (inaudible), we were able to hopefully bring down cost in terms of our negotiation with vendors. So there are a lot things that are happening, but takes a bit of time, but we do understand that, but there's an envelope that we want to achieve in the next 2 years, hopefully. Maybe achieved some maybe some 14% CapEx.

Luis?

My follow-up was actually regarding the CapEx. You mentioned in the press release that you're evaluating it for the full year and it could exceed PHP 85 billion. What's the timetable for the review to be concluded? And if you look at the 9-month run rate, if we can annualize it, it will be closer to PHP 89 billion. Would that be a ballpark?

We're reviewing right now, Luis. And I would probably think that yes, the guidance will be that we exceed PHP 85 billion. But we're hoping that we can finish it within 3 to 4 weeks, but we will issue disclosures. We are able to identify the level of it.

We're taking the question in the chat box. This is from [Joshua]. Congrats on the nine months. Just wanted to ask the following questions. Please share your CapEx guidance for full year 2023 and the breakdown of the major infrastructure investments in (inaudible). In relation to this, obviously, I think we plan to fund the CapEx next year. Will there be a need for additional loans in the projected generated funds be enough to (inaudible)?

For 2023, we're in the middle of the budget cycle also. So (inaudible) determine and CapEx needed and how we would finalize that, maybe (inaudible) the budget for next year (inaudible) so we'll have a better picture about the print.

Also from Joshua, given the 40% of your loans are floating, what is the additional impact of the P&L for full year 2023? Is there a plan to refinance?

I guess we would have to manage our interest rate exposure in an overall portfolio basis. The -- as you may imagine, as you reprice the loans, the rates will get higher, right? So -- but at the moment, we're still able to on, an overall basis keep our cost of debt quite good at 4.01%, right? So -- but the new loans are definitely not going to be at the (inaudible) price right?

So as Al said, we are still in the middle of doing our budgets for next year. So there will have to be a bit of a determination of -- with how much the (inaudible) do we have, what kind of sort of balance to be strike into tenders versus rates and all. So I think a little still early to talk about that aspect result impact is in 2023.

He is asking questions. Please share your dividend guidance? And will PayMaya need additional investments in 2023? If yes, would you share guidance of that?

On Maya, I guess there was a Series C round that they took this year. So we participated in that. So that's part of our support to Maya. I think potentially, there could be another funding round. Not clear exactly when and what one do. So I think there is still early days in terms of how Maya is looking at it because there is eventually going to be still some funding support required for the bank, some funding support for this ramp-up that they are doing. So too early to also pin out the set configurating for that.

Having said that, we have very good support from our shareholders. And we are -- well, as Anabelle said currently, well funded. So we'll make the proper fundraising call at the proper time. But in the meantime, the last round of $210 million also validated our strategy of doing that consistently.

That's the dividend guidance.

Dividend.

No change in terms of...

No change.

Next question came back from Stephen of China Bank. How are consumer top-ups faring in the third quarter versus second quarter? And do you have early indications of how these are performing a very important part.

So top-ups in the third quarter are softer versus (inaudible). Now in credit indications, I think net of the pipelines that we have in (inaudible) we see some slightly (inaudible) over the quarter. We're more optimistic as this comes (inaudible).

We have follow-up. How are your consumers behaving in the light of macro uncertainties? Do you expect these behaviors to persist through 2023? What is your outlook for 2023? And what were the growth drivers?

Okay. And if you share the behavior in that sort of the (inaudible) inflation. Most -- I think most are consumer goods. Consumers are economizing. They're also prioritizing to spend or their recover. A lot of the essentials are more prioritized. We think that (inaudible) has become one of the extensions, but we do see that therefore also equity (inaudible) of the loads or their top-ups because the most use cases are actually for playing games and also watching videos and going to social media.

So these are some of the bilaterals as essential, but based on it, I think there's such a healthy. We expect his challenges to continue in next year. I think the economic -- macroeconomic factors, the vision was still as by next year. But what would be key for us is really to go forward, what initiatives that would like to be aspiring. At the same time, continuously providing our customers (inaudible) to make some challenging company.

I think the question on 2023, I think started the presentation on driving (inaudible) geopolitical issues that are happening relatively more. And we still see that there will be some challenges, still that will continue next year. That's what we're preparing for a famous company we should remain to offer relevant problems and customers and the main growth give a great cost experience and really try to manage also our own operational efficiencies.

As we said earlier, trying to drive cost as a ongoing more concerned as we expect to continue to face the headwinds, but there's the challenge more is how we continue to grow and not (inaudible) to drive amidst this difficult times.

The next set question of questions. What are your comments on the styling tie-up compared to need of (inaudible)?

Yes. So what's happening right now in the market is that Starlink is in some of this satellite providers are for collaborating with the telco providers. So similarly, we are working with this satellite providers such as [AS Telesat]. We know we understand the technology at low orbit -- lower orbit satellites, and we would like to make sure that this would complement our terrestrial sites in areas, particularly in some issued locations and rural areas.

There's a question on Maya. What is the assessment of your competitive advantage compared to other digital banks and other people?

I think what we're doing now already validates the direction that we have taken, which was to create a full ecosystem such that to the customer, what he sees is a single app that can address all these financial deals. Now at the back end, on our side is to create a set of platforms that can work together to be able to provide an interlocking set of services that are seamlessly connected. So the objective is the, of course, seamless customer experience. And this has, I think, proven fruit as of this time.

To address the question directly, what advantage we have is that the other digital banks do not have a wallet -- a mobile wallet or -- to feed their banking business. They also don't have a merchant business that, to us, is a very important linkage with these merchants who also bring in their own customers -- us via customers. So it's a full ecosystem play. And fortunately, I think we're the only ones with a set of assets that -- of these assets that I described that can put them together, leverage them with each other to create the best customer agreements. We're seeing that now.

Customers are you don't have to go in and out of the app to do whatever you want to do in terms of fintech services. It's all in the app. We are our own bank. We don't need to -- our customers don't have to step out and go to a third-party bank app just to complete whatever transaction he wants. In our case, everything is within the same app, its payments, credit, savings, insurance, investments or crypto, whatever.

Last two questions we received in the email. What is your ForEx exposure? And what is the status of your (inaudible)?

From a ForEx standpoint, we do still have a quite significant dollar late revenues that offset our dollar expenses. So we're net positive on an EBITDA standpoint. However, of course, there are CapEx, for example, we've indicated that 45% of CapEx would be dollar. I think what also is more than anything that's hard to -- is really the speed and the extent of the movement, right? So managed movements are always easier to deal with. I think, the high volatility and the sharp operations are the ones that we have watched out for.

On the EBITDA payables, I think their deadline is tomorrow. It's still not paid anything (inaudible) explore all our legal options. I think, (inaudible) comment.

Yes. They promise to give us a proposal today, but we have not received the proposal. So if they do not receive any proposal by tomorrow, they will be in default and we will be back up to exercise all our options under the (inaudible).

Can I add something to the Maya question. I missed, I think, an important point. Doing the ecosystem play also puts us in a position to have a very rich data source. So data from the bank, data from the wallet, data from our network, this enables us to understand our customers better and to address them better in terms of their requirements. And of course, it also gives us the agility to move faster rather than depending on partners.

Everything is in the Maya Bank, and we don't have to rely on others to create a rich customer experience. We can be very quick in developing and offering features and functionalities, which would otherwise take us a lot of more time to put together with partners.

Looks like there are no further questions. So at this point, we now turn the floor back to Mr. Panlilio for his closing.

Again, thank you very much for joining us this afternoon. We're getting ready to close the year and also preparing for next year. I guess, moving forward, hopefully, merrier Christmas and better year next year. So advance Merry Christmas to all then. Thank you.

And that concludes today's meeting. As always, should you have any further questions or clarifications, please reach out to PLDT Investor Relation at pldt_ir_center@pldt.com.ph. Thank you for your participation. Stay safe.

Thank you.