PLDT Inc (PHI) 2021 Q4 法說會逐字稿

Kindly note that this briefing is being recorded. A podcast of this event will be available on our website after the call. For today's presentation, we have with us our President, Mr. Al Panlilio; Ms. Anabelle Lim Chua, CFO and Chief Risk Officer; Mr. Shailesh Baidwan, President of Voyager Innovations and PayMaya Philippines; as well as other members of the PLDT management.

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

Thank you, Melissa, and good afternoon to everyone. Thank you for joining us today. Happy to start this full year 2021 financial operating highlights. I'll go to the first page. Again, I think it was extremely good performance for PLDT in 2021. Our record-breaking revenues, all-time high at PHP 182.1 billion in revenues or growth of 6%. In peso terms, 10.6 billion incremental versus 2020. Anabelle will mention it later, but also an all-time high on EBITDA, where we were at PHP 96. -- where we ended 2021 at PHP 96.2 billion in EBITDA, 8% growth or PHP 7.4 billion increase versus 2020 and margins of 52%, EBITDA margin. Core net income, we ended last year at PHP 30.2 billion, ahead of guidance of PHP 30 billion, an 8% growth or PHP 2.1 billion.

And among the 3 pillars of the business, Home grew the most, 24%. A strong year for Home at PHP 38.5 billion last year, growing by PHP 9.3 billion in peso terms ending 2021 at PHP 47.8 billion.

Individual ended the year flat, PHP 86.2 billion, despite the major challenges of the lockdowns. Our customers are opting to obviously to stay home and opting for our broadband service. So there was a shift in behavior because of the lack of mobility in the country. But having said that, we have kept it flat at PHP 86.2 billion.

Enterprise showed growth of 3% last year, again, all-time high for Enterprise at PHP 48 billion, growing at PHP 1.3 billion in terms of peso value.

So what were the drivers for the performance last year? Again, very resilient business across the 3 pillars, the major pillars. Home, we saw a 1.13 million new fiber subs traditional for last year. Home subscriber base is now at 3 million, an increase of 27%. And if you just focus on fiber revenues alone, it grew by 82% or PHP 14.9 billion, ending the year on fiber alone at PHP 33 billion last year.

For Individual, we reached the 1 million mark for 5G, but we will continue to push adoption of 5G. We did grow in market share of 5.5% in fixed wireless, also breaching the 1 million level in terms of subs and the focus of

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On DC, cloud and A2P, double-digit growth also versus same period last year.

Next page, please. Moving forward, you will hear us more talk about -- we're one of the key pillar of transformation business in the Philippines, just as an entry for this presentation. But as we move forward, we will have metrics that we will share. But at a high level today, the message here is really aiming for a reduction of 40% in Scope 1, Scope 2 by 2030. And we will continue to show initiatives. Again, for the rest of the year, we will have our baseline numbers, and we will show you what our targets will be in (inaudible) terms. So a lot of initiatives in this page from deployment of carbon fiber towers to fuel cell technology for our gensets, making sure also our data centers are -- implement practices that are sustainable in design, supply and in operations. We have also blocked a record, 179,000 illicit content. And we also have our #SafeAndSmart initiatives where we are -- we offer relief to about 25,000 families for free calling and charging Wi-Fi stations.

Next page, please. As you know, we were badly hit by the typhoon last year, the most destructive storm since actually Yolanda, 700 kilometers of aerial fiber impacted by 50 collapsed cell towers, 129 sites that had some form of damage. But having said that, I think our network team worked very hard to restore. So we were quick to action. We were the first to restore in a lot of these areas in Palawan; Surigao City; Camiguin; Dapa, Siargao; Dinagat Town Proper; and parts of Cebu and Bohol. The PLDT, of course, through its PSF, PLDT Smart Foundation, brought much needed aid to the hardest hit portions of the country, distributed 8,000 relief goods. We have set up 48 Libreng Tawag and charging areas. We did distribute 400 sat phones at the onset, where power was a problem with lots of LGUs. Bohol, for one, through Governor Art Yap, needed sat phones to be able to communicate with its people. We gave away free generators, and we also implemented customer-related appeasement and also rebates for people who have been affected.

Next page, please. This is just one sample of many of our employees' efforts in making sure that we're able to restore service. Ijay, for one, spent his own birthday trying to restore services in Palawan. So it showed the malasakit, or compassion, of our employees for our customers. Another employee actually walked 50 kilometers just to be able to make facilities to a base station that we did restoration. So again, showcasing our value of malasakit.

Next page. From a people point of view, a massive program on vaccination. Happy to report that 99.8% of our employees are now vaccinated, 52% have already received their booster shots, and we will continue to do this as we get closer to 100%, if not 100%.

Next page. So imperatives for our targets in 2022. Just very briefly on Home. There's still latent demand that we see out there. So we are continuously ramping up our installation. We're trying to hit 4,000 installations per day, and that's a major target for our Home business to achieve. We are fast tracking, if not completing, the migration of our copper customers to fiber. And again, for us to improve our operations, automation plays a big role in ensuring that we're able to ramp up installation, and this is a focus area for our Home business.

For individual, launching deals, exclusive deals and partnerships as we can offer a customer base. We will continue to level up our customer experience on our digital platforms and pushing GigaLife even further. And we have been working very closely with Voyager as they launch Maya Bank by the end of the month and offerings which offers to our customer base in Smart.

We are seeing, since the start of the alert level 1, Monday, good rise in our top-ups, first few days. Hopefully, that continues. And as we see mobility starting to happen in NCR, for sure.

In Enterprise business, continue to expand our data center capabilities against serving growing demand in this space. We want to be part -- be an integral part of our -- we want to be partners to our customers in their own digital transformation initiatives, and we will continue to push our growth in ICT business.

Next page. Our mission is to continue to lead and inspire Filipinos to create a better tomorrow. So our values that we want to share with everyone and will continue to push delivering also on customer experience. We want to be more agile, fast and better than perfect. We will continue to take care of our people, malasakit, as I said, is a core value, collaborate to win and, I guess, humility to listen and learn internally, not only internally, but also to our customers.

Next, and I think this strong performance -- next page. Our strong performance of 2021 is a foundation for us to move forward, really aiming for greater heights for the company. And what we have done is actually we started a strategic transformation initiative for the company where we want to change the way to work. Our ambitions will be bold. We want to be the best in every market that we serve, either it's connectivity, capital markets or even ICT. We know our markets are changing, customer behavior is changing. We want to remain relevant to them despite the competition and really achieve full potential for the company by thinking differently and embracing this transformation. It's really changing the way we work, changing the way we -- we have to simplify the way to work. We need to take a look at how we can lower our cost to serve.

Next page, please. And this is really the vision for 2025 for PLDT, focusing on 5 key strategic pillars, and we want to be met. We are building our baseline across all 5 pillars, and we would want to be measured for across 5 pillars. So first is customer centricity. I've been talking about this since 2019, to radically simplify our customer interactions, eliminate the pain points and really create all-digital experiences for our customers.

Second is to be the best place to work, simplifying our structure, ways of working, empowering our people and really improving our culture moving forward.

Industry-leading excellence in terms of operations. We want to reset our model, our operating model, streamline our operations and bringing down cost to serve and focusing really on delivering eventually positive free cash flow for the company.

Investing on new areas of growth or profitable new growth areas, grow our core businesses, even adjacencies where we can create and build new capabilities and new business.

And as I said earlier, focusing on ESG, doing business [responsibly], how we can sustain our business and measuring ourselves on key ESG metrics and parameters.

All these 5 pillars, again, we will continue to measure. Share that performance with you as we continue to report this in succeeding sessions. But 5 pillars enabled by the widest, fastest, most reliable network, at the same time, really transforming our technology platforms, really looking at next-generation digital infrastructure for the company.

And last page, I guess, if we can do all that, this will be our report card. We will continue to have to grow our revenues, sustainable revenue growth in the next few years. We need to expand our margins, improving margins, managing OpEx, decreasing depreciation and lastly, rationalize our CapEx. We've spent so much on CapEx and Anabelle will show you the details of what we've said, but we want to make sure we'll be able to bring down the levels of CapEx moving forward. And if we can do all this, this will result into a growth in our core net income and, as I said, a measurement of how we are doing improving our free cash flow moving forward.

So at this point, I'd like to move it over to Anabelle for a more detailed discussion on our financials. Thank you.

Thank you, Al. So as Al mentioned, we saw PLDT hit a record high of PHP 182.1 billion in service revenues last year, notwithstanding it being a year of the Omicron, Typhoon Odette and [some hybrid] competition.

So in terms of our business segments, Home led the charge in terms of the revenue growth last year at a clip of 24% increase year-on-year, equivalent to PHP 9.3 billion. If you zero in on the fiber-only subcomponent of Home, that actually grew even higher and more impressive 82% last year year-on-year. Individual, notwithstanding all the headwinds in terms of this business, was able to keep the revenue steady at PHP 86.2 billion for full year 2021. Enterprise grew 4% year-on-year and is also hitting record highs. And rounding it up would be our international and carrier business, which understandably is still down year-on-year, but now at a limited amount of PHP 0.2 billion.

Looking at it over -- next chart, please. On a quarterly basis, we're pleased to note also that fourth quarter 2021 was also an all-time high from a quarterly revenue perspective.

Next chart, please. And in the next chart, we show you the trajectory of our revenue improvement over the last couple of years. So after having grown 9% in 2020 and 6% in 2021, we have now achieved an all-time high in terms of our service revenues.

Next, please. The -- what drove the growth? It has been data broadband businesses that now account for 77% of our overall revenues and increased by a clip of 12% overall. Within that, we saw Home broadband increase by 29%; ICT, 14%; Corporate data, 6%; and mobile data as well 6%.

Next chart. This is the numbers for Home, the revenues over an 8-quarter period. So as noted, Home ended the year with a 24% increase. Quarter 4 was just slightly down overall because of the impact of the typhoon in terms of the amount of appeasements and rebates we had to give. But when you look at the fiber sub-component, that's an also all-time high from a quarterly standpoint. We added more than 1 million customers for our fiber business last year. That was at 1.13 million. So exceeded our original 1 million target. In terms of ports, we were able to add 1.7 million ports last year, and we have plans to add another 1.7 million ports in 2022 as well.

ARPU in our Home business, roughly averaged out at about 1,800 per customer per month. We believe that demand will continue to be strong because of the large numbers of unserved market in this country, where overall penetration is still limited to about a little over 20% compared to regional peers, who are at 40% to 50%. So notwithstanding the easing of lockdowns, we believe that demand will continue to be strong because of the change in customer behavior and hybrid work and study arrangements will remain.

Next chart. This shows, in turn, the quarterly performance of our Individual business which ended at PHP 86.2 billion for the year, stable year-on-year. Traffic usage and mobile continues to grow. You see here that in 2021, we saw a 16% increase in data traffic. There are more data users, 42.6 million of our base are regular data users who are consuming something like 7.6 gigabytes a month. So with the easing of the alert situation down to alert level 1 and the return of mobility, we are poised to benefit from that from a mobile standpoint. And 5G will be the other factor as 5G adoption increases over time.

Next chart. For Enterprise, as you can see here, the PHP 11.1 billion in Q4 was an all-time high on a quarterly basis. We're pleased to note that fourth quarter was up about 9% year-on-year. Portfolio was up 4%. So that's driven really by higher revenues on our data center colocation business, our cloud revenues, our wireless A2P and other corporate applications, and we are well positioned to continue to invest behind these various growth sectors. And in particular, we are groundbreaking our 11th data center later part of this month. And that the scale of the 11 data centers will be much larger than the 10 data centers [in that line].

Next please. For international, the challenges remain because of the lack of travel and roaming, but we are able to limit the impact of international with respect to overall performance spread.

Next chart, please. So total business across our integrated telco platform, we have 78.8 billion subscribers that we serve, 71 million at mobile. On broadband, we have about 3 million in the fixed broadband, another 1 million at fixed wireless and another 1 million as well using mobile broadband. Fixed line voice at 3.6 million customers.

Next chart. We're also proud to note that we have exceeded our net adds for the year. And you will see here that in the third and fourth quarter, we were able to ramp up our new connects for fiber at over 110,000 average per month. Our goal this year is to even outpace that. Migrations were also picking up towards the end of the year, but we should complete the copper to fiber migration by May of this year. And so that would also help improve our fiber numbers this year.

So there is a bit of a slowdown in December because of the impact of Odette in certain parts of the country as well as the normal dip during the holidays. So you see our fourth quarter is a little off versus third quarter, but on an average, as I said, 110,000 gross connects average per month in the second half of last year.

Next chart, please. So on overall P&L, as Al mentioned, our PHP 96.2 billion of EBITDA last year was an all-time high as well. That was achieved with the growth in revenues and managing our cash OpEx increased only about 4%. So the EBITDA margin is at 52%. Depreciation is, of course, higher because of the higher CapEx investments that we have put into our network. So EBIT, though, is still up by 5% year-on-year. And then net of financing costs and other items, telco core income at PHP 30.2 billion exceeded our initial guidance of PHP 30 billion and up 8% or PHP 2.1 billion.

This just explains kind of the bridge. EBITDA grew on the back of higher revenues, lower provisions, offset to some extent by higher [cash flow subsidies], but that 8% overall result from year-on-year increase and hitting an all-time of PHP 96.2 billion. Telco core income benefited from the higher EBITDA as well as lower income tax rates as a result of the CREATE tax law, offset to a certain extent by higher depreciation and financing costs. But again, PHP 30.2 billion was ahead of the guidance we provided the market.

Next chart, please. Just a bit of commentary on the impact of Typhoon Odette, which hit the country in December. This was a super 5 typhoon and passed through quite a number of major cities and municipalities in the Visayas area. So from an overall P&L impact, our assessment is roughly about PHP 1 billion in terms of the impact combination of revenue impact of about PHP 500 million because of the rebates and appeasements and lack of a top-up during those periods for the typhoon-affected areas and then another PHP 350 million approximately for cost of -- to repair by other operating costs and PHP 170 million in terms of damage assets that we had to write off. There are still some additional costs expected in the first 2 months of 2022, given that we have continued the repairs and restorations even after year-end 2021.

Next chart, please. On an overall reported income basis, the reported income for PLDT in the year 2021 was at PHP 26.4 billion, 9% up or PHP 2.1 billion equivalent. This includes the impact of the equity share of PLDT in the performance of Voyager, which SB will talk about it later, but of course, Voyager is still in a cash burn position. And then there are other items that we detailed out here in terms of the differences between core income and reported income from various one-off items.

Next chart. We're also pleased to report that the PLDT Board of Directors approved this morning the final cash dividend of PHP 42 per share, payable April 4 to shareholders on record as of March 17. Together with the interim dividend, which was also at PHP 42, the combined full year dividend per share was at PHP 84, up versus PHP 78 from prior year. And at the current share price, the yield is close to 5%. We will obviously continue to work on improving the free cash flow position of the company so that we can continue to support both an improvement in our leverage position as well as sustain the dividend payout to shareholders.

Next chart. So just on our balance sheet gearing perspective, we ended the year with USD 4.5 billion of net debt, 2.38x net debt-to-EBITDA ratio. We'll continue to work on getting that closer to the 2x level. On the debt side, pretty well spread out in terms of maturities, average interest cost of 4.3%, and we continue to break that down to something closer to 4%. And PLDT continues to remain at investment grade based on our ratings from both S&P and Moody's.

Next chart. CapEx, we did spend within the CapEx guidance last year. Our initial guidance was PHP 88 billion to PHP 92 billion. We came in at PHP 89 billion of CapEx last year. A lot of that, PHP 65 billion went towards the network side and IT side, as we completed several initiatives in 2021 for LTE rollout, more ports roll out, fiberization of base stations, migration of copper to fiber and expansion of our transport and data payload capacities. PHP 17.5 billion went directly to support the new installs that accounted for the home outperformance. So that's direct CapEx to support the last mile and CGC requirements.

Next chart. Across the network, we are pleased to note that notwithstanding a year of pandemic, we continue to increase the rollout and expanse of our network across both fixed and wireless. So for fixed, about 14 million homes passed now by the PLDT network with actual fiber ports of 5.77 million and fiber footprint of 744,000 kilometers. And then for the wireless side, we added to our 4G base stations, 5G base stations as well as 3G. So we have a total coverage of about 96% of the country's population at the end of the year.

From a usage standpoint, 5G handsets are about 2% of the overall base, predominantly in 4G, 81% and then 2G and 3G are down to 17% of overall users that we see.

So next chart just kind of shows how 5G was still relatively small from an overall standpoint, thus continue to increase quarter-on-quarter.

Now at this point, let me turn over the presentation to Shailesh, who will talk you through the performance of PayMaya.

Thank you, Anabelle. So to remind our analysts, we have 2 big businesses. We have the Enterprise business, and we have the Consumer business. On the enterprise side of the business, which is the merchant acquiring business, we provide all payments for corporates, which are large, medium, small, which are online, off-line or need a omnichannel solution. So we process Visa, MasterCard, JCB, domestic debit, QR, all payment forms. And that business through the course of 2021 saw a massive expansion in the number of points that been enabled for acceptance in the physical and digital world with over 430,000 points of acceptance across the country. We are the #1 provider of payment processing in the acquiring business across various payment forms.

At the same time, on the consumer side of the business, we expanded the number of registered users across our network to 44 million. This is split between our wallet business, where people get their own e-money wallet. And also given that a number of people are not quite ready for their journey, we have an on-ground network of 63,000 agents, which we expanded through the length and breadth of the country, which allows people who are not ready for the digital journey to walk into one of these locations, be able to pay their electricity bill, be able to buy airtime load or to be able to send money.

Even as we expanded our core business through the course of 2021, we were focused on 2 critical areas, which are part of our go-forward plan. The key piece of that was to procure a digital bank license. We wanted to expand and provide a full suite of financial services across our enterprise and consumer set of customers. And as part of that, we've procured the Maya Bank license from the Central Bank, BSP. We were one of the 6 recipients. And after that, the BSP has imposed a moratorium of 3 years for any further licenses.

Also, we want to expand into crypto. Philippines is one of the most prolific users of crypto for buying/selling or for NFTs, and we achieved -- we got -- we received the Virtual Asset Service Provider license from the BSP to be able to launch this service.

If we go to the next slide, please. Talking about our Enterprise business, like I said, we're now pretty much the dominant provider of payment services. So whether you think of fuel stations, you think of quick service restaurants, think of government, think of any everyday category and the chances are it's PayMaya as the acquirer who is enabling all kinds of payments for those locations. With the introduction of QR Ph, we are expanding now to the long tail of MSME merchants and making sure that we process, the predominant acquirer and processor for QR Ph, transactions that are unified QR standard in the Philippines as it rolls out through the course of 2022.

On the consumer side of the ground, we keep on -- I mean we continue to add on the wallet side a number of new services, and I touched upon that. And of course, converting our on-ground network as a key cash-in, cash-out channel. So even as digital wallets proliferate, the key requirements is to be able to add cash into that given the paucity of ATMs and bank branches outside of some of the key metropolitan centers of the Philippines. So this on-ground network of 63,000 agents is now one of our key assets for allowing customers to cash in and cash out. And as we introduce Maya Bank and launch that through the course of 2022, this becomes a very important aspect of us being able to provide the full set of financial services.

On the Maya Bank side, if you go to the next slide, please, we are targeting to start testing the launch of the bank by the end of this month. We received our license from the BSP only on September 20 last year, and we are looking at being able to launch our first test product before the end of this month. You know that consumers in the Philippines absolutely like the fact that e-wallets and the technology and the convenience and the accessibility of it, including KYC-ing yourself, (inaudible) yourself.

At the same time, in the Philippines, under -- as per research, the trust that is there in banks because of the way they are regulated, because of the trust of BSP, because of the trust of PDIC insurance. bringing the two together really will help us be a really powerful asset for both the consumer and the enterprise side.

So from payments, we will now be adding on deposit-taking capability, offering credit and lending capabilities, investment capabilities like crypto and insurance. These -- all these will roll out progressively through the course of the coming weeks as we keep testing, adding, [earning] the infrastructure to get to a full rollout of the Maya Bank over the coming weeks and months. So that is our plan, our key play for the 2022.

One other important aspect of our plan for 2022 is working closely with Al and the team across the consumer business, across the retail business, across the home business and really expanding the penetration of products by offering lending product, whether it's for device financing or to be able to provide payment facilitation for the GigaLife [plan]. So that is another key part of our strategy for 2022 as we expand across the full payments plus financial services co-system.

With that, I'm going to hand this back to Al.

Thank you to everyone for joining us on this online call. In terms of outlook for the year 2022. Service revenue growth is anticipated to be mid-single-digit growth or very similar to the 6% -- percentage growth that you saw in 2021 against 2020 revenues for 2022 on a consolidated basis. But if we break it down into the 3 major revenue streams, Home broadband is expected to be growth again this year, with double-digit growth rates or growth rates for 2022 over 2021 and with revenue momentum to accelerate given its significant subscriber addition in 2021. So 2022 will benefit from the incremental subscription -- subscriber growth in 2021 and the additional subscribers that as expected to be added in the course of 2022 as well.

Enterprise to register a stronger performance, underpinned by services or solutions, ICT services solutions, over and above the connectivity revenues that will be realized in 2022; and of course, data centers, with the colocation and cloud services leading the charge.

Wireless faces a challenging environment, but should get alleviated with the opening up of the economy. I think the return to normal revenue trends for wireless is a function of whether -- of how fast the economy will recover given the -- now that we are on alert level 1.

EBITDA will benefit from top line growth and cost management that are being instituted starting this year. So we expect EBITDA to actually grow by high single digit in 2022 over 2021. And so we anticipate that the EBITDA levels to be north of PHP 100 billion in 2022. Telco core we're guiding at between PHP 32 billion to PHP 33 billion. So that's a gross of between 8% to 10% for 2022, underpinned by robust increase in EBITDA principally because of that. CapEx we're throttling down to between PHP 76 billion to PHP 80 billion compared to PHP 89 billion in 2021. In order to release and achieve free cash -- positive free cash flow status starting 2022 as part of the vision. And I believe that the sale of the towers business, I think were -- I think we indicated that the indicative bids, the binding bids that were submitted on March 1, are landing at a level north of USD 1 billion. So that will help the company to achieve positive free cash flows starting 2022.

Higher revenues, cost optimization, with significant manpower reduction program starting 2022 and for the sale of the towers will help us achieve that. Our aim is to deleverage back to no more than 2x net debt-to-EBITDA, maybe even sub 2x depending on how much we need to hold the tower proceeds to debt adoption. As well, this puts us in a position to pay a special dividend when we announce our interim results. So over and above the regular dividends, irregular interim dividends, which is 60% of core profitability, the intention is to pay a special dividend during the interim results.

That's just about it, right? It covers the waterfall for our guidance for 2022. I'll give it to Melissa.

We're now ready to take your questions. (Operator Instructions)

I'll read the first question that was sent by e-mail. Can management provide color on top line trends? Has mobile recovery started to pick up given the sustained easing of restrictions? And is the company still providing rebates to its home customers in the first quarter of 2022? That's 1 of 3 questions sent over by Rodd.

Can't hear.

Let me repeat that. Can management provide color on top line trends? And has mobile recovery started to pick up given the sustained easing of restrictions? And is the company still providing rebates to its home customers in the first quarter of 2022? That's from Rodd of BDO Securities.

Yes. I think, as MVP indicated, we're seeing mid-single-digit growth for the year. If we take a look at our January numbers, despite the issues with Omicron and Odette, I think we're on track on our budget. We are -- we have given appeasements to our home customers, but that's tapering off also now as restoration is slowly coming back. Especially on the fiber links because on wireless, we're able to recover that quickly, but on fiber links, it's really just the last mile that's the problem. But we're able to do already -- we're hoping by April that we will resolve all the restoration issues on fiber. But we have given appeasement programs in the past rebates, but that's slowing down also as service is restored.

We have a raised hand from Hussaini of UBS.

Congratulations on the good set of numbers. Just a couple of questions from me. Firstly, on the mobile side. So some concern is being raised in 2022 growth. So just want to understand, like, is it because of consumer spending? Or is it because -- the cautiousness is because of the competition from the third operator? That's question number one.

The second question is on the fixed broadband growth, the expectation for strong growth. But just want to understand that, don't you see any pressure linked to ARPUs on that side, given the strong -- means everyone is adding capacity. So is there a concern of ARPUs going into 2022?

I'll have Jane answer your first question, Hussaini, and then Jeremiah on the second. Jane?

We did see a softening in our top-up in 2021 compared to 2020. And we really attribute it to the fact that there's less mobility going around, the prolonged pandemic didn't help, because it did promote a work from home and study from home situation. And we need people moving for us to be able to drive our mobile revenues, particularly our top-ups. We did monitor the activities of our competitors, but primarily we attribute the slowdown in top-up from the situation that we were confronted with, given the prolonged pandemic.

I think it's -- but I just want to understand that going into 2022, what should be the factors for the relative cautiousness on wireless growth? Is it competition? Or is it that you still see some softness in consumer spending?

There's still quite a lot of uncertainties, right? January was actually a false start for us because we didn't expect that the Omicron surge will stretch into January and will result in the alert levels that were called all the way through February. But the first few days of March are slowing very healthy growth trends. We're seeing the trend, particularly for today even significantly higher comparing it to 7 days ago and 28 days ago. So we're very optimistic, we're very cautiously optimistic. But signs are there that as soon as mobility improves and is improving and as soon as the economy improves, then we should be able to bring back the business into a healthier growth trajectory.

Understood. So from the competition standpoint, you are not very much concerned, is that right?

We are monitoring them. We do respect the 2 competitors, DITO and Globe. But we want to make sure that our subscribers see value to the brand that we offer. We are very confident in this service that we sell. We have a very strong brand. We do have a competitive advantage when it comes to our network. We still offer the fastest LTE in data network and constantly review the offers that we have. And we introduce products and services to make sure that we continue to create value for our customers amidst a highly competitive environment.

Jeremiah, on the second one.

It's Jeremiah here. I might pick up your second question, which was around fixed broadband. And if I understand your question correctly, it was around expectation of pressure on ARPU. Is that correct?

Yes. Correct. Yes.

Okay. So the short answer is, we are anticipating some pressure from an ARPU perspective. I think that's going to be expected when you look at some of the pricing moves in the market and increased competition. We do have many initiatives underway. We are prepared to be able to meet that pressure and ensure that we're able to mitigate that risk as much as possible.

What I can share with you is, what we have seen so far is, we've not only been able to hold ARPU, but we have actually been able to grow ARPU. So the initiatives that we have had in place over the last 18 to 24 months have actually proven to be successful as. But not even with the increased competition in the market, we've not only just been able to hold ARPU, but we've actually been able to increase ARPU as well.

Understood. And maybe just if I can have one follow-up. Just want to understand on the tower side. So is there a risk of opening up of tower and giving access to the competitor? And what kind of rental leaseback we are looking in Philippines?

I'll take the first question. Maybe Anabelle can take the second. Yes, I'll take the first question. Maybe Anabelle can take the second one. I think the government came up with a policy to actually have a common tower implementation in the country. So I think that competitive advantage of having your own towers is slowly disappearing. In fact, we know our competitors have expanded their tower base by working with common towers. So I think it's not going to be an issue anymore in terms of (inaudible), I guess, in terms of an advantage. And plus the fact that what we are engaging this -- in terms of this sale and leaseback, it's only 50% of our existing power so it's really -- we feel that these are not going to impact anymore our tower strategy.

Anabelle, on the second?

If I understand the question correctly, I guess, today, when we own our towers, we, of course, should have our certain running OpEx numbers, right? Basically the rental, we pay the land owner, the electricity, the security costs, the running maintenance costs, et cetera, et cetera.

So from -- when you do these, I guess the sale and leaseback transaction, essentially you re-characterize all of your expenses to a rental stream payment that you make to the tower co, right? So, in terms of broad construct of how we pitch the terms of the sale and leaseback, we have more or less tried to equalize what we would have incurred by way of running OpEx into the rental payment streams that we give the tower companies. That's the construct under which we asked for them to essentially name what price they are willing to pay upfront for the sale of those towers. Did I answer your question correctly?

Yes, Anabelle. So if I understand correctly that the maintenance and the land lease cost will be -- you will save on that cost and in turn, you will pay lease rentals to the tower co and that will be equal to the -- all right, this is great.

What will still be a pass-through will be the electricity expense. That one will be passed through to us, right? So -- and then again, it's neutral versus what we have incurred with it.

There's a hand raised by Arthur Pineda of Citi.

Three questions, please. Firstly, on Voyager, are you able to share what your targets are for the digital bank? How does this impact the trajectory on profitability and fundraising?

Second question I had is with regard to 5G targets and broadband deployment targets. Are you able to share details on this? It also seems that your competitor, DITO, launched 5G FWA option? Do you see this as a viable opportunity for your broadband deployment, at least as a beachhead until you're rolling out on your fiber?

Last question I have is with regard to the balance sheet. You've mentioned potential for special dividends following the tower sale. What is the philosophy behind the gearing? Because it seems to be still elevated around 2.4x. And presumably if you sell the towers, you have to book significant lease liabilities as well.

So on the first point one on Voyager, Arthur. With the launch of the bank, what we want to do is use the data and the customer base that we have built on the payment side of the company and really monetize it to higher margin products around lending, in particular. And using the model of the bank, that helps us both in terms of the plan, the anchoring of that, the trust, the credibility it carries, but also a very efficient way of deploying the balance sheet because we will also be taking deposits from customers.

In the Philippines, the penetration of basic banking accounts, it's in 32-odd percent. So the opportunity for us to provide banking account services, along with lending, which is even dismal penetration from a formal lending perspective, is what we will be doing. So the impact of that, to your point, on the profitability is absolutely there. And we will be looking at kind of a 2024 timeframe for us to be getting to a breakeven across with -- possibly given across other businesses.

Now that's first part.

On the second part, as part of our expansion into the bank, we are talking to our existing investors and also as one of the foremost fintechs in the Philippines, we are constantly being reached out by potential investors. So we are talking about digital capital that we will be needing as we roll out the bank. We will have more details -- when we have more details, we will share that with you.

As regards to the point on targets, for us, as we said, we have a very large customer base today of about 44 million registered users. We have a large enterprise base that we can access today from our business, plus along with our close partnership with Smart and PLDT. And at this stage really for us, it is going out to the customer base to provide more and more wallet, grow our wallet business, but at the same time provide more and more products which we will co-create and develop with this device financing, but it is helping on the retail side for them to be able to sell more airtime. So those numbers will be built out over the course of 2022 as we launch the bank. But at this stage, we won't be able to share any particular targets as such for the bank. Hope that answers your question on Voyager.

Got it.

And Jane?

Yes, allow me to answer your question on 5G. We've actually been pushing the 5G adoption of our subscribers both along the wireless side, but also -- and the wireless broadband side. And when I refer to wireless broadband, I refer to both the pocket Wi-Fis and the fixed wireless access devices. In 2021, we had successfully grown our 5G mobile subscriber base to north of 1 million. And we're looking at growing that to more than double this year.

In terms of 5G innovations, I'd like to think that we are ahead. We were the first ones to launch 5G service commercially, the first ones to make it available as a 5G plan on postpaid. We are also ahead in launching the first 5G pocket Wi-Fi and, in fact, ahead of DITO in launching the first 5G fixed wireless access device. We did launch that service as a prepaid service in November of 2021. We are looking to launching the postpaid version of our 5G FWA service in the coming 2 months, the next 2 months.

Jeremiah, broadband targets?

Yes, sure. So I think -- sorry, for the question on broadband was we're constantly evaluating opportunities for us to be able to use all the different types of technologies to serve customers for the home. As Jane mentioned, we have already deployed some of the fixed wireless 5G devices. We're also looking at opportunities to potentially use them, and we have actually used it in certain areas as an interim step as we connect customers up to fiber. Ultimately, we do provide our customers with a choice, right? We ultimately do provide them with a choice in being able to either serve them immediately with fiber where it is possible and where not, then also with fixed wireless capability.

Are there any rollout targets in terms of number of ports to be rolled out in 2022?

Yes. So the target we have that we actually -- with what we've shared is 1.7 million ports for 2022. I will probably add to that is our real focus is really around our net adds position and making sure that we serve as many of our customers as we possibly can, as opposed to just focusing only on the port count.

If you have a look at our performance over 2021, and I think, Art, we've had a couple of these conversations before, we've actually been able to monetize a lot of our investments in the fixed space quite well, but we see utilization actually sitting quite high. So whilst the port count rollout for 2022 is actually still continuing the momentum, we have 1.7 million for the year, we will ensure that the momentum and growth in the Home business is continuing to be supported. And if that requires additional investment, and that's something that we're prepared to do, but really, ultimately, it comes down to the net adds required to be able to support that growth.

Okay, let me take the towers question. So let me start first with the strategic backdrop to all of this, right? First of all, as Al mentioned, the government encouraged the entry of common towers in the Philippines, right? We started by engaging with the tower companies, first of all, with respect to our new build requirements, right? So instead of building on our own, we engaged a tower company so that, that effectively is the measure to avoid CapEx and reduce the cash flow pressures from the buildout of the tower. So that was the first step in terms of our engagement.

The second step of our engagement is this current transaction that we're talking about, the sale of roughly about 6,000 of our existing towers. That gives us a chance to monetize, in a meaningful way, the assets that we currently carry in our balance sheet. So the -- from use of proceeds standpoint, once we are able to complete this transaction, a significant portion of that cash that we receive will be used to pay down our debt. And as indicated, we would want to bring down our leverage back to the 2x, if not better.

And the other part of it is we will also still deploy some portion of that money that we save by way of rewarding our shareholders with a special dividend.

So getting to your specific question in terms of the gearing level. That 2.38x that we show you is on the basis of our interest-bearing debt, so that excludes our lease liabilities. So that's the reference point we're talking about.

But having said that, there is an accounting difference, obviously, from doing this sale and leaseback transaction versus our -- what would have happened, right? In a way as I was answering the earlier question of Hussaini, I think, from a rent perspective, the lease liability that we have, what we're trying to achieve is effectively something that equalizes what we would have spent any way by way of expenses, running of OpEx in the normal course, right?

The accounting, I reckon, is a bit different because in that situation, we don't have to recognize a liability for all of those OpEx, but once you do a sale and leaseback, there is a difference in terms of the accounting by way of the -- on the balance sheet side. But for me, that's not the -- there's no real difference other than the accounting in the sense that I would have to pay those expenses anyway on a running basis. It's just that in a leaseback transaction, it's crystallized in my balance sheet, right? So that's kind of the discussion we've had about the accounting impact from the sale and leaseback.

From a cash perspective, it's really, in a way, no different. But we do get a significant upfront monetization that we can use to help pay down debt, reduce our interest expense and do other things to improve the balance sheet position of the company.

And if anyone adds some discount that we receive is basically in the second or third.

Yes, yes. So just to also -- what Al said, part of the arrangements that we have with the tower companies, obviously, from the tower company, their perspective is they would try to not just a serve us, but use the towers or colocation and effectively accommodate either the second telco or the third telco into the same power step they bought from us, right? So that's part of the value creation for them.

From our perspective, what we have negotiated also is the moment they get a second tenant, then we will get a discount also on the rental payments that we make and then a further discount, should they get a third tenant. So that's also part of the financial arrangements that we have. So now, of course all of these things is still in progress. So we're not able to give you full details because we're still running the process. We would hope to sign something sometime second quarter. And by then we can give you further flavor in terms of the specifics of the arrangements that we'll have.

Next raised hand is from Rachel of Maybank.

Congratulations on the results. So just 2 short questions for me. First one, could you share with us an update on your agreement with Telesat, which is the Low Earth Orbit satellite. So when are you expecting this to be -- to start being commercially available? And when do you expect this to contribute largely to your income?

And the second question, I might have missed it earlier. Just curious how much percent restoration are you in, in Visayas and Mindanao after the typhoon Odette?

I'll have Mar answer both questions.

We tested the Low Earth Orbit together with Telesat in February, the event on February 19. We were able to achieve, if I'm not mistaken, close to 100 Mbps on the download and 95 Mbps on the upload and a very low latency of about 26 milliseconds. Now that provides for a service that you can use for high-speed communication. Especially working on Microsoft Teams or Zoom, that was made possible. That was tested. And also tested was Facebook Live and all the others.

This is a very interesting scenario for us because now we have tested that this will work, and we can go into the rural areas and provide the high-speed data. At this point, we are still in the testing stage, and we will just update you when it will be commercially available.

Mar, the question, the restoration?

Now on the installation, there are certain parts. For example, Samar, Leyte, Panay, Negros, that's already 100% restored and parts of Cebu almost 80% restored. Our main focus now is Surigao, which is still about 30% restored. So what we're seeing is by April, we will be fully restored, all the circuits. But we will go progressively starting from Cebu, which is already about 80% restored.

Do you have an estimate as to how much this will cost in terms of repairs and -- repairs specifically?

I think it was reported by Anabelle earlier. It's about PHP 1.1 billion.

Sorry. For the remaining Surigao and Cebu?

So the PHP 1 billion I indicated earlier was the impact that we booked last year. So for the first quarter, additional repairs, restoration costs may be somewhere in the PHP 500 million to PHP 600 million area. So these are rough estimates.

Next questions were e-mailed by [John] of PNB. Can you provide more color on the company's plan to rationalize CapEx? How will this pan out in the next several years and in the long term? And which segments will see a reduction in CapEx and why?

So as indicated in terms of our CapEx discussion, first of all, we did spend PHP 89 billion last year and PHP 518 billion over the last 10 years. So that's huge investments we've made in terms of our infrastructure in order to ensure the quality of our service and to serve our customers very well, right?

So as we look into this year, our guidance is for PHP 76 billion to PHP 80 billion. And we believe that we have a chance to ramp down our CapEx to somewhere below the 40% CapEx-to-sales ratio and effectively harvest some of the investments we've made. This year, in particular, I think the key focus areas will be on the fixed line side. As we indicated we're still building 1.7 million ports. We continue to see very strong take up on the home side.

On the wireless side, I think we will be more deliberate about the 5G rollout spend. It will really recalibrate depending on how quick or not so quick the take-up will be. So at this point, as I had shown earlier also, the main constraint is that there are only 2% of the base of 5G ports and 4G is also very good, right? So the impetus to build more 5G is not as compelling at this point or not as urgent at this point. But certainly we will not skimp on that should the demand side picking up.

So -- but broadly in terms of our direction. Financially speaking, we will have to ensure that the company delivers positive free cash flow. And by that, we have always ensured that our EBITDA will be more than enough to cover our CapEx, whether it's our interest expense, our working capital requirements and at the end of the day, deliver enough cash to be able to both pay our dividends and service our debts, right? So that's sort of -- it's within the ambit of the financial discipline that we are looking at also at how we would manage our CapEx, ensuring the rightful returns on the investments that we make.

We remain at, I guess the past few years, our CapEx service revenue is about 40%, 45%, right? So we would like to bring that down, moving forward, to maybe in the level of 35%. So that's something that, in terms of discipline, I think Anabelle is just saying that we should be able to bring down our CapEx, but making sure that we're able to maintain a good customer experience across the board.

The next set of questions are from [Sherwin] and they are related to Voyager. Do you have a positive net income for 2022? And can you share the GDP of PayMaya in 2021?

We're not positive on net income side. Given we have many different businesses, we have the merchant acquiring business, which is a very different kind of business versus the wallet business, versus the (inaudible). So they all have different profiles of revenue and profitability. What we are making sure is that each of the businesses, its unit economics are aligning towards a sustainable business and then continuing to invest in terms of growth of the business, which, on a go-forward basis, is sustainable.

So we did have, in the course of 2021, one of the key metrics for us of success was to get to positive contribution profits so that we can, our unit economics are stable and are sustainable on a long term basis and we did achieve that milestone. And then we will continue as we go forward, as we said.

Now we do have investments at this stage. As we launch Maya Bank, in particular, you will appreciate that, that will take up a significant amount of OpEx and CapEx from us through the course of 2022 and 2023. But then thereafter, the accretion of margin that will come from providing high margin products and services with a efficient balance sheet will help us get towards profitability.

As far as the GDP targets are concerned, again, coming back to the question of our point of GDP profile is extremely different for merchant business, where day in, day out, we are processing Visa, MasterCard, domestic debit, banking transactions from, let's say, pharmacy like Mercury Drug has a very different profile and GDV for wallet. So for us, it is not a single report, the GDV number that we shared. For us, it is really a different profile, so regarding GDV versus some other profile of GDV on the wallet side, for instance, on the network side. So we have other metrics that we continue to track against to make sure that we're going in the right direction to both scale the business, continue to scale and realize opportunities for growth, but at the same time focusing on unit economics and the longer-term paths. So it's, overall, [in term paths].

The next set of questions are for our data center business. This is from German de la Paz of Abacus Securities. I'm not very familiar with data centers. Can you please briefly discuss what it is, its purpose and why the growing investment in it recently?

So thanks very much for that, German. So think of a data center as a key part of the digital ecosystem. And what's driving the growth in data centers now is everything that requires compute, which can be cloud, which is the main theme for the enterprises that transform digitally during the pandemic, right? And content also drives data center expansion.

Say, for example, the explosion of traffic on TikTok, right? All of that content has to be stored somewhere and you normally have a better user experience if you cache that content somewhere, and that content is usually cached in a data center. So both the explosion in the demand from an enterprise perspective, and the digital -- having a nation of [Filipinos] that go with a high digital aptitude of the population lends itself well to a market that will grow pretty fast. And we're quite excited about data center prospects of the Philippines.

So -- and we believe we are best positioned to meet the growing data center demands. And we're in discussions with both enterprises and hyperscalers alike, where most of the cloud and most of the content comes from. And we believe we are best positioned to serve them, hence, our investments in our current 10 data centers, plus we are very excited to launch our 11th data center, which will ground break very, very soon.

The next question comes from Rodd of BDO Securities. Does management expect to maintain EBITDA margins at current levels?

Yes. I think we're even trying to improve that further in terms of margin, aiming for 54% margin for 2022. As MVP, the Chairman, indicated, we're (inaudible) over PHP 100 billion.

Finally, from Rodd, is Voyager looking to have additional funding rounds this year? Can management provide insights on the potential incremental sales contribution of Maya Bank and PayMaya?

Yes, we will be having incremental funding loans through the course of this year. We will be raising funds. We will announce more details when we are ready. That is to fund the expansion of the overall Voyager business, including the Maya Bank. At this stage, as I mentioned, we have a very rich base on the payment side, not only in terms of the registered customer base, but on the MSME side and also the data set that we have acquired on payment side.

And for Maya Bank, really that becomes an asset for you look at to provide lending on the back of those data assets to that customer base.

On top of that, the second key initiative for us, as I mentioned, is really working closely with Smart, PLDT across the various segments of home, consumer, retailer to be able to provide further benefits on the backup, again, each telco data that we would have. So those are the pieces that we'll be adding on and adding towards both in terms of products, use cases. At this stage we are not sharing further the details in terms of offers.

That was the last question. If there are any further questions, you can either raise your hand or type your question in the Q&A box. Otherwise, we turn the floor over to Mr. Pangilinan.

Again, thank you for joining us this afternoon on this online call in respect of our full year 2021 results, and we look forward to speaking with you again. But we will be certainly meeting you early May. Hopefully some of you or some of the new media in this Zoom (inaudible). Thank you. Thank you so much.

Thank you very much.

That concludes today's briefing. As always, should you have any further questions or clarifications, please feel free to reach out to PLDT Investor Relations. Thank you for your participation. Stay safe.