PLDT Inc (PHI) 2024 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 nine months of 2024. A copy of today's presentation is posted on 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 section. Finally, note that this briefing is being recorded. Podcast of this event will be available on our website after the call. A QR code for presentation is on the screen and in the confirmation notices e-mailed to you.

Joining us today is our Chairman, Mr. Manny Pangilinan; CFO and Chief Risk Officer, Mr. Danny Yu; Attorney Marilyn Aquino, our Corporate Secretary and Chief Legal Counselor. And also here with us today is our new Investor Relations Head (inaudible) as well as other members of the PLT Group's management team.

At this point, let me turn the floor over to Mr. Yu to begin the presentation.

Good afternoon, everyone. Let me share with you highlights of PLDT's financial and operating results for the first nine months of the year. Our net service revenues for the first nine months hit a new high of PHP144.9 billion, higher by 2% from last year. On gross basis, service revenue grew by 4% compared to the same period last year. Operating expenses remain stable at PHP64.2 billion.

Consolidated EBITDA increased by 3% to PHP80.7 billion with margin steady at 52%. Telco core income, excluding the impact of asset sales in Maya, rose by 2% to PHP26.6 billion. On segment basis, our individual business recorded a PHP1.5 billion or 2% rise in revenues to PHP62.1 billion.

Our enterprise segment registered revenues of PHP45.2 billion (sic - see Press Release, "PHP36.1 billion"), 4% or 1.3 billion higher than last year, while our home revenues were stable year on year at PHP45.2 billion. Fiber-only revenues increased by 6% or PHP2.4 billion to 41.7 billion. We continue to highlight that there are underlying revenue streams registering stronger growth than the headline numbers. This reflects the drag from legacy revenues.

Overall, excluding the impact of legacy revenues, net service revenues rose by 5% with the growing segment revenues accounting for 88% of the total. For the individual business, mobile data, which represents 89% of total segment revenues, grew 5% year on year, more than doubled the segment growth of 2%, which reflects the drag from legacy SMS and voice.

The overall home segment, on the other hand, remained stable year on year [with] Fiber-only revenues, which now account for 92% of the segment, actually grew by 6%. Corporate data and ICT, accounting for 72% of the total enterprise revenues, rose by 6% compared to the overall segment increase of 4%. Let me share the more details of the respective business segments.

Service revenues for the individual business rose by 2% in the first nine months of 2024, with postpaid and prepaid revenues higher by 3% and 2% respectively. Mobile data remained to be the growth driver, accounting for 89% of the segment revenues. Blended ARPU rose by 6%, mainly from a 7% rise in average usage and a 10% growth in data traffic. Notable for the segment is the continuing increase in active mobile data users to 41.2 million from 40.5 million as of end of June.

We are currently revitalizing the mobile data playbook to re-accelerate the segment's performance. Part of this includes subscriber acquisition through continued site rollout, capacity expansion and geo-targeted campaigns, upselling to higher value offers, and further stimulating usage through enhanced service offers and improved customer service.

Fiber revenues, which account for 92% of our home business, continues to rise steadily, having registered a 6% year-on-year growth. We continue to focus on managing churn and accelerating fiber installations. Improvement in service delivery continued to register industry-leading fiber churn levels of 1.7% in nine months of 2024 from 1.91% in nine months of 2023.

Fiber installation capacity continues to ramp up with 3Q 2024 fiber install of 228,000, the highest since the first quarter of 2023. Home fiber ARPU remained at around the 15,000 level, with lower price plan offered selectively in areas where we have spare capacity. There has been a strong market adoption of new broadband products, which include a fiber-only all bundle, lower price postpaid fiber plan, and a home Wi-Fi 5G plan.

Other network initiatives include leveraging on our fiber and mobile networks to grow the segment, including expanding in green and brownfield areas, as well as building and multi-dwelling unit fiberization. PLTD continues to enjoy strong brand equity and superior network quality, making it a formidable competitor in the market.

Growth in the enterprise is driven by a continued focus on pushing enterprise solutions. The enterprise segment registered a 4% growth, with corporate data and ICT being the growth drivers having grown 6% during the period. Included among the revenue streams that recorded improvements were core connectivity, higher ICT revenues from managed IT services, cybersecurity solutions, data center, and cloud services plus A2P messaging services.

Locators in our Santa Rosa data center energized in July have started to come on board. Approximately 20 megawatts of a 36 megawatts IT load capacity are expected to be available by end of 2024. The VITRO Santa Rosa data center is well positioned to capture growth from a higher scale and AI data center demand ahead of competition.

Amidst pressure from higher costs to operate, total OpEx for the period was marginally higher by PHP300 million as we continue to identify and extract operating cost efficiencies. EBITDA at the end of September 2024 rose by 3% to PHP80.7 billion on the back of higher revenues. EBITDA margin was steady at 52%.

Telco core income for the first nine months of 2024 grew by 2% to PHP26.6 billion, reflecting the impact of higher EBITDA, partly offset by higher depreciation and financing costs. On reported basis, PLDT income rose 1% to PHP28.1 billion. Our share in losses from Maya continues to decline, with Maya on track to achieve bottom-line breakeven towards the end of 2024.

Clearly, this balance sheet remains healthy with net debt to EBITDA of 2.44 times as at the end of September. We remain focused on bringing down leverage to the 2.0 times level, which we expect to attain with the anticipated increase in EBITDA, reduction in CapEx, and with the balance of the tower sales proceeds. Discussions for the potential monetization of our data center business are still ongoing.

Gross debt stood at PHP272.6 billion, of which 14% are dollar denominated and 5% unhedged. The average interest costs for the period stood at 5% pre-tax, with the average life of debt at 6.7 years. Total CapEx amounted to PHP52.3 billion at the end of September, consisting of network and IT CapEx of PHP46.7 billion and business CapEx of PHP5.7 billion.

CapEx intensity or CapEx-to-service revenue stood at 34% for the period versus 37% in 2023. Of the remaining PHP33 billion commitment, net of Advance is for major vendors. The remaining commitment has been reduced to PHP4.2 billion. For 2024, our CapEx guidance is PHP75 million to PHP78 billion, consistent with our aim to continue to reduce CapEx.

The increase in the number of unique 5G devices and 5G data traffic continues into 2024. which we expect to be sustained as the price of 5G devices trends downward. 5G adoption is one of the emerging growth streams of our individual business.

Moving on to Maya, our fintech investment, Maya Bank continues to be the Philippines' number-one digital bank based on deposit balances, which grew by 52% to PHP36 billion at the end of September. The bank continues to register robust growth in bank customers and borrowers. Loans disbursed life-to-date stood at PHP67 billion at the end of September.

Maya takes pride in its unmatched speed to market, delivering multiple high-tech banking products for consumers, SMEs, and micro-enterprises. With the Landers Cash Everywhere credit card (sic - see Presentation, slide 17, Landers Cashback Everywhere"), a collaboration between Maya and Landers, Maya delivered the first digital bank credit card in the market. As mentioned earlier, Maya is on track to turn bottom-line positive towards the end of 2024.

We're also pleased to report that PLDT's score in the S&P Global Corporate Sustainability Assessment jumped by 13 points to 71%, the highest in the Philippines as of November 2024. In October, PLDT also secured a PHP2 billion social loan from HSBC for the expansion of its fiber network to reach the fourth and sixth class municipalities. This is in line with its commitment to narrow the digital divide and support the government's initiative to connect the unconnected.

Our outlook for 2024 continues to be one of guarded optimism. We expect revenues from our data and broadband businesses to grow by mid-single digits, excluding the impact of legacy revenues. With our continued pursuit of operating efficiencies and cost rationalization, our EBITDA is anticipated to grow by mid-single digits. TelcoCorp for 2024 is expected to land north of PHP35 billion.

In line with our commitment to lower the CapEx headline number and CapEx intensity over time, our CapEx guidance for 2024 remains at PHP75 billion to PHP78 billion. We remain committed to a 60% dividend payout to bringing leverage back to our target 2.0 times net debt to EBITDA level and achieving positive free cash flow before dividends by 2025. Thank you.

(Event Instructions) We have a raised hand from [Luis Hilado]. Luis, you may unmute your microphone.

Hi, good afternoon and thanks for hosting the call. Congratulations on the results. We just have three questions. The first one is, noticed that fixed-line voice continues to be quite healthy in this quarter, just like the prior quarter. If you could remind us what's driving that. Second question is, if we could get an update for the timeline of the data center's take-sale and whether you've made a decision whether to sell a majority stake or a minority stake. And last one is, financing costs seem to be up double digit Q-on-Q and year on year. Is there any like one-off reason for that?

We'll have Jeremiah take the first question.

Yes, so good afternoon. So Louis, is it? I'll start by addressing, I think, your first question, which was fixed-line voice. And the question was around what's actually driving that continued sort of revenue stream on the voice side. So that's predominantly -- there's two parts of voice revenue. One is voice that's coming through from our copper subscribers. And with that, it has actually remained quite steady. If you look at the total number of voice on copper, the decline that we're seeing quarter on quarter, year on year has actually plateaued out now. So it is now into the long-tail component.

But the second part of voice is, actually, we do have some voice in our fiber business as well. As you would know. In our Unli All product, which is a PHP1,399 package, we have an unlimited telephony, unlimited broadband, five mobile SIMs, as well as a Cignal pay TV. So when you factor all of that in, we actually do have a voice allocation as part of that package. And that's why you'll see actually voice remain as part of the overall portfolio. And sometimes actually you'll see it grow a little bit because it's prominently an allocation basis.

Thanks, Jeremiah. That's pretty clear.

The discussion on data centers are still ongoing. We hope to complete this by May of next year. Remember, this requires PCC approval. Then to your last question, sorry, what was your last question?

Financing costs.

Yes, financing costs for the quarter seem to be up double digit.

Generally, the increase in financing costs is mainly due to the increase in the average interest rate by 50 basis points. Plus, of course, towards the third quarter, we also had an additional loan of about PHP15 billion.

Thanks, Danny. Very clear. Thanks, Melissa.

Thanks. There's a question on the status of the tower sales. What is the outlook on the completion of the sales? The tower sales, Attorney [Mava]?

Well, we're still in the process of trying to sell majority of the towers that have not been purchased but have been covered by existing contracts. So that's for the rest of the year. Well, I think we will be able to sell more or less 90% of the remaining towers that's been contracted to these -- the last two common tower providers that we have engaged with. But we continue to sell other sites that we have covered in previous contracts. We may have to do that until next year. But for this year, we will close around 90% of the towers that we have contracted with the last two common tower providers.

Thanks, Attorney Mava. There's a question on wireless. Can you describe the competitive situation in the wireless space, Mr. Martirez?

Well, hi. Thank you for having me, guys. On that question, let me start by giving my philosophy that while the situation is one where I would say is oversubscribed, Philippines being 110 million population, subscription of phones numbering over 130 million, makes you unsubscribe. And in your banking terms, probably, you call it overbanked, isn't it?

So in a situation like that, I think it doesn't make sense that players in this space compete on the basis of subscriber acquisition. Because that is going to be costly, that is destructive, and it's not healthy. In my view, what players should be doing is adding value in their offers. Put it that way, we all contribute to expanding the market. Then we just leave it to those who work the hardest to get their fair share. That's my mantra going in. Is there any other questions?

Mr. [John Te], you can join. John?

Hi, thank you for the opportunity. Just one quick follow up actually on mobiles. So the overall revenue actually dipped sequentially, and I think your competitor ascribed that to the impact of typhoons. I was wondering whether you saw the same for PLDT. More importantly, I think the net subscriber -- there were net subscriber reductions also in the third quarter. So any color in that would be very helpful. Thank you.

Well, I wish I can say that weather is a cause for problems in business, but I'm not one who would like to say that. I think it's a matter of planning. It's planning your network, planning your business. So we don't have to blame the weather if we call flat on our business. Does that make sense?

Yes, sure. But I think quarter on quarter. there was a dip in mobile revenue. So I was wondering what you think might have cost that also. And there was, I think, 500,000 subscribers who churned out on a net basis. Any explanation for that would be helpful. Thank you.

Well, generally, I think the other major player and us suffered the same kind of decline. But in our case, more than that, we did suffer a month, where in a series of days within that month, September that is, we had problems with network outages. So we've looked into that. We've made some quick fixes. But I think we are still going to make sure that we continue to have a more structural fix moving forward. So far, so good. It hasn't come back. Cross fingers. We'd like to end the rest of the year on a high note.

Thank you.

Thank you, John. Next question on Enterprise, on the data center. What is the take-up of the new data center in Santa Rosa? Jojo.

Sure. Good afternoon. Thank you for the question. So we've opened VITRO Santa Rosa, our eleventh DC. And with [contract], we fitted out for 20 megawatts of capacity before the end of the year and leading up to 36 megawatts by next year. So the [DCSON], we have interest from enterprise customers and hyperscalers. We already have an encore tenant testing in VITRO Santa Rosa. So there's already an active customer.

There's a question on the outlook for CapEx for 2025.

For CapEx for this year, it's around PHP75 billion to PHP78 billion. We're still in the planning stage right now, so we still don't have the number for 2025.

And on Maya, are they on track to become profitable, and what is the timeline for an [IPO]?

They committed to have a P&L breakeven by December of this year. So I guess they're going to be profitable the whole year of 2025.

IPO timeline?

There is no definite timeline for the IPO.

Any more questions? There is a question that was received in the email about the breakdown of our other expenses. We will deal with that offline, and we'll send the required information. The question from home, or on phone, what accounts for the better or record-breaking installs for the quarter? Jeremiah?

Thank you for that question. Actually, it's multiple factors that have actually helped drive the improvement in our home business. I think, at the beginning of this year -- we mentioned this at the very, very get-go, which was re-accelerating our rollout. 2023, we saw some challenges, and we actually had a very, very minimal rollout in 2023. In 2024, we have actually picked that up, and we have actually been able to roll out just over 400,000 ports, of which we're starting to see the impact from a revenue perspective.

Combined with the rollout that we've actually re-accelerated, the second one is we've been able to increase the sales capacity. So coupled with more ports to be able to sell in new selling areas, we've been busy working with our sales partners to be able to ramp up the selling capacity. And we're starting to see that actually flow through as well.

Finally, the other major factor is in the second quarter, we made some major interventions. So had a restructure in terms of our channel partner commissions and our engagement with our sales partners. And we also launched some new products. So you would have seen an enhanced or an Unli All product proposition where we provided more value, greater speeds, and actually started to include mobile as part of the overall bundle.

Second, we also introduced the 899 Value Plan. So it's the first time that we've actually been introducing a sub-1,000 vessel plan from PLDT. And the third, we introduced prepaid fiber. So I think the combination of all of those things have actually helped drive an improvement in our take-up in the third quarter. It's still far from where we want it to be.

The marching orders are very, very clear, and that's to continue to ramp up to previous higher levels. And that's what we actually anticipate moving forward. So we're expecting to see an increase in our installations, obviously making sure that some of the weather does permit and not hamper with some of the adverse typhoons, et cetera. But we are expecting and anticipating a continued ramp up in the home business going in through to 2025.

The next question is, could you provide more color on the press release this morning about the investment in Bayd? Attorney Mava?

We are increasing the investment in Bayad. So we're investing an additional 67% in Bayad. But that investment will require BFP approval. So we don't expect that to be implemented until after the second half of this year. That's supposed to help in the development of the current payment rate of Bayad in (inaudible), which we basically need for the Kayana business that we're building.

Thank you, Attorney Mava. Next question is --

And also, can I request Kat to put additional explanation on the commercial intent for Kayana?

Hi. This is Kat Velarde. So I think a couple of months ago, we did mention our initial investment at Bayad. At that point, it was just 10%. We made that investment alongside the full acquisition or MultiPay, another of our payment companies that exist within the group.

Now within the past three months, we were very happy with what we saw, and we feel that there is greater synergy that we can derive by bringing all of our payment companies or fintech companies together. So we understand that that's going to take some time, and that really is part of a longer process, but we want to start with Bayad as our first mover into a bolder stance in the fintech space.

Just to mention that PLDT's interest in Kayana is 45%, yes.

Next question is on DITO. What is the impact of DITO on your operations? Mr. Boy?

What's the impact of DITO on the operations or on --

On our business.

Well, DITO being a challenger, unfortunately, it comes in at this time when it's challenging two major players when the whole industry is over-backed. It would have been a different story if it comes in challenging existing major players when, let's say, the penetration rate is maybe 50% or less. But it's coming in a time when it's over-backed. So anything it does will always be destructive.

But there is an elegant way of addressing this. Because now with technology, you can have new targeting. You can be very selective. And that's exactly what we have been doing. But credit to DITO. They have taken their own pound of lead. But we made sure that they did not overstep the bounds.

We hope that we have carried out the message. We've sent the message to them enough that the way to compete is basically to add value, to make customers happy, and to expand the market. And hopefully, in due time, they will actually align with it.

Thank you. Next question, what are your initiatives around AI? Jojo?

Thank you for the question. So AI continues to be a focus for the company. We see two main use cases or two main buckets of areas where we can really help the PLDT group. First one is it improves our ability to deliver exceptional customer experiences. So we have a couple of, say, AI bots in the environment that help us be more efficient in in [collecting juice], for example, and we continue to work with the various business units to ensure that we nurture up-and-coming use cases, be it voice or text-based or even video.

The second area where AI is important is around operational efficiency. There's a couple of areas that we're targeting, but a lot of that is out of the hinge on our OSS transformation initiatives that could enable us to be more efficient in many areas with regards to network operations, things like accuracy and facilitation of how we roll out, identifying faults in the network, proactively doing troubleshooting. And so there's a lot of good work that's being done throughout the company so that we can continue to nurture the power of AI.

Next question is also for you, Jo. What are the plans for a new data center?

So we opened the eleventh. We are looking already for the location. So yes, we will build ahead of demand and continue to expand.

(Event Instructions) There are no further questions. I'll hand over the floor to Mr. Yu to give his concluding remarks -- or Butch Jimenez, our COO for PLDT, to give the concluding remarks.

Good afternoon. On behalf of MVP, I'd just like to thank everybody who joined the call today. I think we have a very challenging 2024, but looking forward to 2025, we expect a more robust performance for both PLDT and SMART. And we're seeing that in our second-half numbers in our second-half growth. And so we look forward to being able to share with you our plans for next year during the next call. But as Mr. Pangilinan said earlier, just a couple of birthdays till Christmas. So Merry Christmas to everybody.

That concludes today's briefing. As always, should you have any further questions or clarifications, Please reach out to PLDT Investor Relations at pldt_ir_center@pldt.com.ph. Thank you for your participation.