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Edited Transcript of TEL.PS earnings conference call or presentation 5-Mar-20 7:00am GMT

Full Year 2019 PLDT Inc Earnings Call

Makati Mar 27, 2020 (Thomson StreetEvents) -- Edited Transcript of PLDT Inc earnings conference call or presentation Thursday, March 5, 2020 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alfredo S. Panlilio

PLDT Inc. - EVP & Chief Revenue Officer

* Anabelle Lim Chua

PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer

* Jane Basas

* Joachim Horn

PLDT Inc. - Chief Technology & Information Advisor

* Melissa V. Vergel de Dios

PLDT Inc. - First VP & Head of IR

* Menardo G. Jimenez

PLDT Inc. - Senior VP & Deputy Head of Business Transformation Office

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Conference Call Participants

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* Arthur Pineda

Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research

* German de la Paz

Abacus Securities Corporation, Research Division - Junior Investment Analyst

* Ramakrishna Maruvada

Daiwa Securities Co. Ltd., Research Division - Head of Singapore Research

* Ranjan Sharma

JP Morgan Chase & Co, Research Division - Analyst

* Varun Ahuja

Crédit Suisse AG, Research Division - Associate

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Presentation

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Operator [1]

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

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

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [2]

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Good afternoon, and thank you for joining us today to discuss the company's financial and operating results for the full year of 2019. As mentioned in the conference call invitation, 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 section. Podcast of this briefing will be available at our website after the call.

For today's presentation, we have on stage members of the PLDT Group management team, namely Mr. Al Panlilio, Chief Revenue Officer and President of Smart Communications; Ms. Anabelle Lim Chua, Chief Finance Officer; and Atty. Rey Espinosa, Senior Adviser to the Chairman and CEO.

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

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [3]

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Thank you, Melissa. Welcome, everyone, to PLDT's full year 2019 results briefing. Let me first run you through the key highlights of our results for the fourth quarter of 2019. We're pleased to report that our fourth quarter service revenues crossed the PHP 40 billion mark and came in at PHP 41.4 billion, which is 10% or PHP 3.8 billion ahead of prior year and 5% or PHP 1.8 billion higher than the third quarter.

Breaking this down by business segment, revenues from our Wireless Individual business rose by 18%, Enterprise came in 3% higher and Home business is up 6% over prior year. Even our International segment saw an increase of 6% year-on-year. Compared to the third quarter, our Individual service revenues increased by PHP 1.2 billion, Home is up by PHP 0.4 billion and Enterprise higher by PHP 0.2 billion. With the increase in revenues, coupled with lower OpEx, our fourth quarter EBITDA grew by 39% to hit PHP 22.8 billion.

Even without the benefit of PFRS 16, the new accounting standard for leases, our fourth quarter EBITDA was higher year-on-year by 33%. As a result of the higher EBITDA, our telco core income, which excludes the Voyager results, rose to PHP 7.7 billion in the fourth quarter, the highest quarter for the year.

Turning now to our full year 2019 financial results. Our service revenues came in at PHP 157.7 billion, which is 8% or PHP 11.9 billion ahead of prior year. Revenue growth was led by the Wireless Individual business with a 20% boost in service revenues to PHP 72.1 billion. Our Enterprise business group posted steady growth with a 5% increase over previous year to hit PHP 39.2 billion. Our Home segment grew to PHP 37.2 billion, up 3% year-on-year, as we ramp up our installed capacities. On a combined basis, our Consumer and Enterprise segment revenues, which account for 94% of total revenues, registered at 11% growth year-on-year, equivalent to a PHP 14.8 billion rise.

EBITDA in 2019 amounted to PHP 83.1 billion, up by 22%, due to the combined impact of higher service revenues and lower cash OpEx. EBITDA margin improved to 52% from 45% in 2018. The EBITDA for the current year reflects the impact of PFRS 16, which reduced rent expense by PHP 5.3 billion for the year. On a bottom line basis, our telco core income climbed 13% to PHP 27.1 billion, PHP 3 billion higher than the core income amount registered in 2018. Our reported net income also jumped 19% to PHP 22.5 billion.

We show in the next slide our consolidated service revenues for the last 8 years. We're pleased to report that the 2019 service revenues is the highest full year revenue that PLDT has attained, having steadily improve from 2017, up 2% in 2018 and then a higher 8% in 2019. Before this, our previous peak was PHP 153.5 billion revenues in 2014. But compared to 2014 and earlier years, we -- when we had as much as PHP 18 billion to PHP 20 billion per annum in ILD revenues, what we have seen now is a growth in data and other non-ILD voice revenues, which shielded us completely from the decline in our ILD revenues for the comparative periods.

Now Slide 5, moving on, viewing our revenues on a quarterly basis. Service revenues in the fourth quarter of 2019 rose 10% year-on-year and an impressive 5% quarter-on-quarter to hit PHP 41.4 billion. We have had a sustained trend of improving revenue performance each quarter in the last 2 years. Also noteworthy is that we are seeing an acceleration in the growth rate when you compare the latest increase in Q4 of 10% versus prior year versus the revenue growth a year ago, which was up 5% year-on-year, and then 1% year-on-year back in Q4 2017.

Looking at our consolidated service revenues by service type, data and broadband revenues of PHP 105.2 billion purely powered the revenue growth in 2019, rising 20% year-on-year and now comprise 67% of our consolidated revenues. If we exclude the International segment, data and broadband already account for 70% share of the Consumer and Enterprise revenues. Contributing to the rise in data revenues are the following: mobile Internet revenues are up 45%, home broadband is higher by 7%, corporate data rose by 5% and data center revenues grew by 14%. The balance of 33% of our revenues consist then of 25% from domestic voice at PHP 39.7 billion, 5% from SMS and international voice down to 3%.

On the back of our higher service revenues, our consolidated EBITDA came in 22% higher to reach PHP 83.1 billion for the year, with EBITDA of PHP 22.8 billion in Q4. As mentioned earlier, there is a PHP 5.3 billion increase in EBITDA with the reclassification of rent expense. Without that, our pro forma EBITDA is still 14% higher year-on-year with an increase of PHP 9.6 billion.

Our EBITDA margin rose to 52% on a PFRS 16 basis. Even on a pro forma basis, our EBITDA margin would have been 48%, still higher than the 45% registered in 2018. The EBITDA here excludes the onetime expenses for our Manpower Reduction Program, or MRP, which amounted to PHP 3.3 billion of expenses in 2019. We have undertaken a significant rightsizing program as part of our manpower efficiency measures, which helps lower our people cost base for 2020 onwards. Okay.

Turning on to the next page. When you look at the EBITDA over the years, we have seen an improvement from a low in 2016 to 2019 now being close to a record high and margins now over 50%. This is despite a change in revenue mix with declines in the higher-margin services like ILD and SMS.

Moving on, our core income from telco operations hit PHP 27.1 billion, up PHP 3 billion or 13% year-on-year. This was driven by a PHP 14.8 billion uplift in EBITDA, offset by higher depreciation expense and higher financing costs. The adoption of PFRS 16 on a net basis actually results in a fairly neutral impact of only PHP 0.2 billion.

Our telco core income, as mentioned, excludes the impact of our share in the losses of Voyager, which amounted to PHP 1.8 billion in 2019, and gains from the sale of Rocket shares of about PHP 0.2 billion. Now with respect to our reported net income, which came in at PHP 22.5 billion, this is higher versus prior year by PHP 3.6 billion, largely due to the higher telco core income as well as lower losses from Voyager by PHP 1.2 billion, offset by higher MRP cost and lower gain from sale of certain assets like the Rocket shares.

So with our fourth quarter, telco core income was PHP 7.7 billion, we hit a PHP 27.1 billion telco core income for the year. And clearly, we've seen a steady rise in our core income numbers over the last few years from PHP 21 billion in 2016, now PHP 27.1 billion in 2019.

In line with our dividend policy of paying out 60% of our telco core earnings, the PLDT Board this morning declared a final cash dividend of PHP 39 per share for payout on the 3rd of April. Combined with the interim dividend we paid at the half year, so the dividend per share is PHP 75 on a core EPS of PHP 125. This results in a dividend yield of around 7.4% to 7.5% based on current share price.

Moving on. As of end December 2019, our consolidated net debt amounted to USD 3.3 billion, while the net debt-to-EBITDA ratio stood at 2x. Gross debt was USD 3.8 billion with maturities fairly well spread out. Only 8% of our debts are unhedged or exposed to the U.S. dollar, while 88% of our debts are fixed rate in nature. Our average cost of debt stood at 4.8% per annum. PLDT has maintained its credit ratings at investment-grade levels.

Now the next few slides, I'll talk about CapEx and some of our highlights from a network perspective. So PLDT and Smart have continued to invest behind our fixed and mobile networks in order to significantly raise our service quality levels and to provide a strong lift for revenue growth. So our CapEx for 2019, while lower than our original guidance, still came in at a record high of PHP 72.9 billion, of which PHP 61 billion were spent on network and IT expansion and other transformation programs, while close to PHP 12 billion was spent for our business installation-driven CapEx.

The CapEx investments we've made over the last 9 years of as much as PHP 388 billion allowed PLDT's network to continue to be recognized for its superiority in serving the fast-growing data usage of our customers. For 2020, we expect to allocate an even larger CapEx budget of PHP 83 billion to widen PLDT's lead in network quality to also provide superior data, CX. Of the PHP 83 billion, PHP 64.6 billion are earmarked for network, IT and other general CapEx, while PHP 18.5 billion is to be spent for business installation CapEx in order to support a higher level of broadband connections this year.

5Gs in investment, we will start to make in a more meaningful manner this year. So we have several pilot deployments of 5G with various equipment vendors: Huawei, Nokia, Ericsson, Samsung. We have fired up 5G base stations for ongoing pilots, namely at the PLDT headquarters here in Makati; in the Ateneo campus; at Araneta in Quezon City; and in Clark City, Pampanga. Early applications for 5G includes e-sports and mobile games. Also, we are working closely with Cisco to transform our transport network into a fully automated, software-defined 5G-ready network.

In the next slide, we show some selected metrics of our fixed and wireless networks as an indication of how we continue to strengthen our network advantage. As of December 2019, PLDT increased the coverage of our fixed fiber broadband network to reach 7.2 million homes passed, so that's up 15% from 6.3 million a year ago. We boosted our ports capacity to 3.5 million ports. We have ready 1.2 million fiber-to-the-home ports that we intend to sell this year and next year in support of a higher revenue contribution from our Home business.

The total footprint of PLDT's fiber optics network grew 32% to 322,000 cable kilometers, still by far the most extensive digital backbone in this country. In mobile, Smart has installed over 24,600 LTE/4G base stations and another 13,800 3G base stations. The step-up rollout of LTE and 3G allowed Smart to cover 94% of our population with 4G and 3G and meet our commitment to provide high-speed wireless data services in almost all of the countries, cities and municipalities.

Moving on to the next slide. Our sustained network improvement efforts have enabled us to offer compelling data services and carry the growing demand for data. Here, you'll see that our mobile traffic has risen to 1.6 exabytes or 1,600 petabytes in the full year 2019, double the traffic we saw in 2018 and 4x that of 2017. Notwithstanding the dramatic surge in traffic, several independent international entities continue to site the superiority of our network. One of them is OpenSignal, which reported that Smart provided the country's best video experience, the fastest data download and upload speeds as well as the highest 4G availability in both urban and rural areas.

At this point, I'll turn over the presentation to Al Panlilio.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [4]

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Thank you, Anabelle. Good afternoon to all. In behalf of MVP, thank you for being here also today to be with us.

I just wanted to just highlight, I guess, the summary what Anabelle said earlier in terms of 2019 performance. We did achieve 5 -- PHP 157.5 billion revenues last year, growth of almost PHP 12 billion or 8% compared to 2018. And broken it down into the 4 pillars: Individual, contributing PHP 72 billion last year, a 20% increase versus the same period 2018, that's almost an increase of PHP 11.8 billion; Home grew by a modest 3% or PHP 37.2 billion; Enterprise also grew modestly at 5% at PHP 39.2 billion; and International, PHP 9 billion.

When I came in about 8 months ago, I did say that there were 3 focus areas last year that I wanted to just focus on. Revenue growth, driving data adoption, targeting passion points in the Individual, Home and International segments, while Enterprise grew wireless beyond its core products. We also -- I also said that we'll focus on CX optimization, customer experience, and we started implementing operational efficiencies in our Home business through, hopefully, an enhanced installation and repair process, really focusing on service delivery, improving installation rates, arresting churn and strengthening leadership in the Home segment. So we have a stand path in those directions. And because of that, I think we've been able to deliver the promised revenues last year.

For 2020, as we embark, of course, the expectation of MVP and the Board is to even increase performance and drive growth again in 2020. But if I may just share the key initiatives for us in 2020 across the 4 pillars. For Individual, we continue to drive customer engagement through customized data offers that support their different passions and interests. So this is really a more personalized service across our customer base in wireless. For Home, we will redesign customer service throughout the customer journey and be the driver for smart homes in 2020.

And for Enterprise, play a more active role in enabling all businesses to grow and maximize their potential by being the trusted adviser. So creating partnerships for our Enterprise business, big -- both big and small enterprises. And for International to maximize partnerships to deliver seamless connectivity for customers whether here or abroad.

So we spent the first 2 months basically focusing on what we have to do in 2020, but really beyond. And we had a strategic planning with top management and also our seniors in Feb, and we looked into 3 key pillars that we will drive our business, not only in 2020, but in beyond, and making sure that we're able to future-proof our revenues and shield our subscribers in 2020.

The 3 main pillars that we feel that we should be good at will be, of course, starting from the right side, building the business of tomorrow. So we have to continue to innovate and become relevant for our customers. We need to operate excellently. So we're doing -- we have a lot of initiatives to improve our efficiencies for -- and also productivity in terms of operations, and really improving customer experience. So we have to be good in all 3, but we have to be world-class in one, and that we have identified to be in customer experience.

So as part of our planning session, we are continuing the journey that MVP started in 2016 in terms of transformation journey for PLDT, and we are just really just enhancing the plan that MVP has put in place. And we have defined, since we want to be world-class in customer experience, we have defined our purpose. And our purpose is as follows: customer-centricity is our true north, we enable every Filipino's dreams and passions; to provide trusted services and solutions by building an ecosystem that uplifts Filipinos through consistent heartfelt experiences. So this will be our core. We will be customer-obsessed, and we want to make sure that we're able to address all the concerns of our customers and deliver the service that is deserving of our customers.

Thank you. Anabelle?

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [5]

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Just by way of recap in terms of our view for 2020. As indicated earlier, we have set aside PHP 83 billion for CapEx spend this year, PHP 64.6 billion for network, IT and other general CapEx and PHP 18.5 billion for installations related to business growth. We expect the upward momentum in our revenues to continue across the Wireless, Home and Enterprise segments. And we expect our telco core income to be higher in 2020 than 2019.

But we are not giving a firm number in terms of our profit guidance at this point in time, just given a lot of uncertainties in the current environment. So hopefully, maybe when we see each other in May or sometime middle of the year, we'll be able to give you a better sense of what we expect for this year by way of the core profit. But certainly, our expectation is that it will be a better year in terms of telco core income in 2020 than 2019. And lastly, of course, we affirm our dividend payout of 60%.

So Melissa?

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [6]

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Arthur Pineda from Citi.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [2]

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Three questions, please. Firstly, can I clarify, your CapEx has been rising for the last 3 years, yet your D&A expenses have actually been shrinking over the last 3 years, which appears to be counterintuitive. What's driving this divergence? And where should we see this heading into 2020?

Second question I had is with regard to the labor cost. You've put in PHP 2.4 billion in MRP charges this year. How much should that reduce your labor cost into the next year? And do we expect more MRP charges as well?

Last question I had is with regard to what you're seeing on the ground on competition. Are you seeing any progress from your competitor's network build-out? When I say competitor, I mean, the new operator.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [3]

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I'll probably take the first 2 questions, and then I'll let Al handle the third one. So on the depreciation expense, it will be higher in 2020 than 2019. Now if you kind of look back over the last couple of years, there were certain times when we had accelerated the depreciation of certain items that may have increased the numbers. So there was, I don't know the exact year now, there was a year where we had to depreciate the Metro Manila wireless network when we swapped out of the previous provider into a Huawei platform. There are -- that was one big one that we had -- I don't remember what year, what, 2017?

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [4]

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'17.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [5]

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'17, right? Yes. And then a few other things along the way. So -- but certainly, with the higher CapEx, the depreciation expense will be higher.

Now on the labor MRP cost, that was actually PHP 3.3 billion in 2019, although there was a smaller amount of, I think, PHP 1.7 billion or PHP 1.8 billion in the year before that, so essentially, we continue to look at how we can be more efficient in terms of our manpower. But when you look at what we do, it allows us to be able to support a certain level of increase in our comp and benefit by doing a bit of rightsizing. We did hire more employees in 2019 as a result of some of the developments along the contractualization issue. But in terms of just the amount, the people who retired tend to have a much higher salary base than the people that we've hired. So overall, we're able to manage the overall manpower cost that way.

So maybe Al can take the next one.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [6]

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So on your third question on competition, I guess for the third player, Dito, we just know what we also read in the media. And I guess we know they have a plan to roll out in -- I guess they'll just follow their own plans. For Globe, obviously, I'm sure they're not sleeping, and they will continue to also enhance their network.

I guess our focus is in -- based on your first question on CapEx, I think our focus is also just making sure our network is better than our competition. And I think we have gotten recognition that we are the fastest and widest -- nation-widest network today. And we will continue to drive that, obviously, and be ahead of the curve. Our main priority is at least to ensure that customer experience is remained at the level that satisfies our existing base, and we will continue to invest in our network.

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Operator [7]

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Our next question comes from Ranjan Sharma from JPMorgan.

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [8]

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Two questions from my side. Firstly, what are the disruption that you're seeing or thing that could come through from COVID-19, which does not allow you to give a guidance for this year? Because I think we are seeing telcos around the region who have been giving guidance for 2020.

The second one is, I think you mentioned the use case of 5G's e-sports and mobile gaming. Now that's quite interesting because I don't think I've heard other companies talk about it, unless it's cloud gaming, but that becomes a very, very developed market use case. So how do you think you'll be able to monetize gaming, especially because of 5G services?

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [9]

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I'll have Jane, who heads our Wireless business, answer the question on the 5G.

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Jane Basas, [10]

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We've actually been working with our technology, our network team, to plan out a rollout strategy for 5G this year. We are targeting a few thousands of sites. But given the limitation of that deployment, our priority is to actually roll out those sites in areas where we feel there is a high incidence of high-end handsets because these are the guys that will probably be able to pay for 5G services, which we expect to be charged at much higher prices than 4G, given that it's a new investment in CapEx.

We've also planned to actually roll out 5G facilities in e-sports hubs. In Manila, in particular, we're looking at partnerships with companies like Bren and Gariath Concepts, MNST and DNC, because these are the guys that actually have a need for 5G networks as they do compete in games like Mobile Legends and other mobile-based games.

Just as an example, we actually did the first live e-sports competition running on our 5G network here in Makati. It was a competition between PLDT-Smart Omega and Cignal Ultra Warriors. It was a live fight, and it was running on -- powered by our 5G network. And that particular experience proved that the latency for the game was as low as 3 millisecond, and it was an average of actually 5 millisecond. Whereas if they were to play it in a fiber environment, they would typically play with a latency of around 9 millisecond to around 11. So that is a good, successful trial of the network.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [11]

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On your first question, and to clear about the question that -- you talked about disruption. I think today, when you talk about coronavirus affecting our business, we don't see much of that, really, even in our supply chain. Also, maybe a little disruption maybe on the POGO side, but it's still also very small. But in terms of maybe first 2 months of the year, we're doing well. So maybe most probably after the first quarter, we can give some guidance on how the year will look like.

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [12]

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Okay. Maybe a follow-up question for the 5G use case. Do we actually need like 5 milliseconds latency or 7 millisecond latency? I thought many of these games can operate at even 50 milliseconds latency. So do gamers actually need that kind of latency? And will they pay for it? Just wondering if how you'll monetize your 5G investment.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [13]

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Jorn will answer the question. But I mean just my view also is, I mean, I think at the end of day, we want to test these use cases, and that's why we're going through all this pilots. And hopefully, obviously, the -- our objective is to monetize 5G also. Jorn?

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Joachim Horn, PLDT Inc. - Chief Technology & Information Advisor [14]

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I think the question, you have to ask the gamers, of course. But they have been very excited about the low latency because the lower the latency, the better, the smoother the gaming experience. And it's really about how fast does the screen react to my push of the button or move of the joystick or whatever it is. And it has been proven that if the latency is super low, ideally 0, that's the best experience. And if it's half compared to what it was before, the gamers actually feel it. They love it, and that's then where they are going to. And so do they need it? I don't know, but they love it.

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Operator [15]

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Our next question comes from Rama Maruvada from Daiwa.

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Ramakrishna Maruvada, Daiwa Securities Co. Ltd., Research Division - Head of Singapore Research [16]

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I have a couple of questions, please. Firstly, with regards to the full financials, I apologize for this, I can't find divisional breakdowns. I'm just wondering when they would be made available.

And with regards to these 2 questions, number one is your overall cash position. It looks like for 2020, given PHP 83 billion in CapEx, you're going to be free cash flow negative. So just wondering how you're thinking about managing the business on a cash basis for 2020. Are there any asset divestments or noncore assets that you still have that you could monetize?

Second one is with regards to the revenue growth in the fourth quarter vis-à-vis the third quarter. Unclear to me if it is led by mobile. I assume that is the case. And if that is the case, then I'm wondering what is the driver? Are there any specific promotions that happened in the fourth quarter that led to this revenue growth?

The third one is with regards to your cost side. Again, just following up on Arthur's questions. Are there any other major items or initiatives that you have for 2020 in terms of the cost trends? That is, are there any cost-saving initiatives that could potentially come through? Or vis-à-vis, are there any other one-offs that you expect for 2020?

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [17]

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Rama, the full set of MD&A and financial statement should be available today. I think it's just for filing at the Philippine SEC, and it will be uploaded as soon as that is confirmed, the filing here.

I think the question on the free cash flow, certainly, with the higher CapEx is an expectation that EBITDA will rise. Now as we highlighted, PHP 18.5 billion of that CapEx or more than 20% of that is sales-driven. So as you saw in 2019, we gave a higher number before to the extent if we connect, we incur it; to the extent we don't connect, we don't incur as much. But for everything that we connect and spend for, effectively, there is a live customer at the end of the day who will pay us a monthly recurring revenue that will support that spend. So that's kind of the way we look at it, that, that type of CapEx returns cash fairly quickly.

Now we do recognize that there are still some supplementary activities we need to do with respect to asset sales. So there are a number of initiatives going on. We have identified at least 5 real estate properties that we are in the midst of disposing. 2 or 3 of them might close, actually, as early as this first quarter. And there are -- we could raise a few billion pesos from that.

So I guess maybe jumping to the third question before we go back to the mobile drivers. On the cost side, yes, aside from Manpower Reduction Program, which is something effectively we continue to undertake, we continue to review our manpower complement, where we can be more efficient, what are the new ways of working. We continue also to look at the efficiency of our, for example, our install and repair activities. We are tracking very closely how much is each person or each crew able to deliver per day. So there are certain metrics that we have set internally for our Home and Enterprise crews, and we track it down area by area in terms of what kind of productivity they're achieving, what kind of tools do they need to support faster dispatch, what kind of customer support systems do we need to put in place so that we can address also more quickly the source of trouble, for example, for our customers.

So there are a lot of things we need to do on the operations side across all the businesses to improve our efficiency, our turnaround time, our cost base and, effectively, not just the cost, but our ability to provide a better customer experience to our customers. So that's kind of a key initiative -- one of the key initiatives the group has. I think Al highlighted it under the heading Operational Excellence as one of the anchor priorities for the business this year.

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Jane Basas, [18]

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For the fourth quarter of 2019, there are actually 2 primary drivers of the growth of data revenues. The first is there's actually a higher migration of -- from 2G to 3G -- 2G, 3G phones to LTE devices. That is actually a push that we are also doing on ground. Secondly, there's also a higher adoption of our data promo called Storage for All. This is a bundle of social media apps, which includes Facebook, Instagram and TikTok. So those were the primary drivers.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [19]

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I think just to add on the wireless, I think the basket size per subscriber also increased, up 20%. And also, the number of customers who are topping up is also higher.

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Jane Basas, [20]

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The -- those promos under the GIGA portfolio are actually being sold anywhere between PHP 50 to a high of PHP 499. So imagine the legacy promos on data were being sold anywhere between PHP 10 to PHP 30. So this is really an upward migration to a higher value data promos.

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Operator [21]

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Our next question comes from Arthur Pineda from Citi.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [22]

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Sorry, just one follow-up related to Rama's earlier question on free cash. It seems that you've been borrowing to sustain the 60% payout, and that will likely sustain into 2020 given that your CapEx is even higher. How comfortable are you with the 60% payout? And how sustainable is this over the longer run? Is this the final year, basically, where we see CapEx growing as -- growing to this level?

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [23]

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I think, Arthur, I'd like to highlight that our net debt-to-EBITDA ratio stood at 2x, and that's where we've guided. That's where we're comfortable with, right? So effectively, we've not sort of gone off from that guidance that we've given in terms of the kind of leverage that we are carrying. So effectively, yes, we are investing behind our network and our IT platforms, and we're incurring CapEx. We do -- we have affirmed the dividend guidance, and we are, at the same time, maintaining our leverage ratios in line with our policies. So we're trying to do everything, right?

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [24]

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Understood. Okay.

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Operator [25]

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At this time, there are no further questions. Speakers, please continue.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [26]

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We'll take questions from the floor. There are microphones on the floor if you would like to ask questions. No questions? Last chance. There.

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Unidentified Analyst, [27]

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First question is related to the Home broadband segment. I think during the last 9 months, you mentioned that you're going to roll out the fixed wireless service. So I'd like to get an update or how is that development going?

And then still going to ask about the promos. Right now, your mobile data revenue is at PHP 52 billion. So against the competitor, we're around -- down by around PHP 19 billion. So how do we catch up that gap? How do we slowly close that gap between you guys and the competitor? What steps are we moving to in the mobile data space?

And then I also forgot on the Home broadband, you mentioned the churn rate of subscribers. I think it was around 27,000, 28,000 per month. Has the churn rate gone down? And should we expect the growth rate of the Home broadband to go back from around 8% to 10% again like in previous years?

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [28]

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I'll have Butch answer the Home broadband questions.

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Menardo G. Jimenez, PLDT Inc. - Senior VP & Deputy Head of Business Transformation Office [29]

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I think in the last briefing, I did say that from one weapon, which was really just fiber, we're going to move into 3 weapons that we're going to attack 2020 with, and one of them was prepaid home WiFi. We just started launching prepaid home WiFi towards the end of last year, and so the growth in that space was a little bit muted, now maybe about 10,000, 11,000 subs. However, good news for the opening of 2020, we're actually already hitting nearer 25,000, 30,000 subscribers a month. And that's huge for prepaid home WiFi for PLDT because we've not even come out with a mature and fully structured channel for selling that, but we're already hitting about that level, 30,000 or so. We think that's going to continue to go up. We haven't even launched postpaid home WiFi as well or fixed wireless. The moment we launch that, then you're going to now see all 3 weapons going after the market. So definitely, prepaid, fixed wireless doing well, doing better than what we expected.

In terms of the churn, same. I think the last time I talked to everybody, we showed you that the churn for fourth quarter, there was a churn of about even 29,000 for that month. January was a bit difficult for us primarily because of certain force majeure issues, like the Taal Volcano eruption and all, so our churn was at about 27,000. However, when we started looking at our operational deficiencies and we've started making moves towards fixing the operational programs of PLDT, churn for February is probably going to be under 24,000 or 23,000, maybe even under 22,000. So definitely strong push for churn, strong advancements on the churn. So it's setting us up for quite a strong 2020.

Now guidance for the full year, 8%. Are we going to go back to the 8%? We're really going to try to push for higher than that. We'll see eventually what we can do, but we're starting off strong for Home.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [30]

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But just to add to that. I think there's a major effort, Anabelle alluded to the installation and repair. We're focusing a lot of our efforts also in making sure that we're able to address those issues. Again, customer experience is our mantra, and we're really pushing hard on making sure that we're able -- we're more productive and we're able to address churn or repairs, basically, to also avoid churn.

Question on mobile data.

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Jane Basas, [31]

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It's actually not a secret that the competitor started pushing their data services and digital services much earlier than we did. In fact, one of the primary platforms for buying digital promos, data promos, which we call USSD, was something that they launched, I think, around 6 to 7 years ago, whereas we launched ours only last year.

So to be quite honest, the data adoption amongst our base actually came in quite late. But we're very, very excited because on a year-on-year basis, we're seeing very, very strong growth in terms of the adoption of all our promos. The utilization of our USSD platform has increased 185% on a year-on-year basis, and it still just accounts for less than 50% of our total transactions. So there's a lot of growth that we are actually looking forward to actually upgrade more subscribers into owning LTE phones, LTE SIMs and learning more and more about our data offers.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [32]

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Any more questions from the floor before we go back to the conference facility?

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Operator [33]

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Our question over the phone comes from Rama Maruvada from Daiwa.

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Ramakrishna Maruvada, Daiwa Securities Co. Ltd., Research Division - Head of Singapore Research [34]

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I have a quick follow-up on the broadband space, please. I note, you have launched the fixed wireless broadband products. Just wondering what the broader strategy here is. You have lagged Globe in terms of articulating a strategy on wireless broadband, fixed wireless broadband. So wondering whether there's a change in heart here, or how do you scope the opportunity ahead for you for 2020 on this?

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Menardo G. Jimenez, PLDT Inc. - Senior VP & Deputy Head of Business Transformation Office [35]

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Well, since we do have, like I shared earlier, we do have 3 strong weapons now that we're launching, we have the fixed and the prepaid and postpaid fixed wireless, we need to come out with a strategy that will maximize all 3 or optimize all 3 and make sure that cannibalization -- a, cannibalization doesn't happen; secondly, congestion of our wireless network doesn't happen. So the strategy that we are putting forth is to make sure that we continue to grow fixed wireless -- sorry, we continue to grow fixed because that is really the driver of our revenue. Number one, that is where we have a huge competitive advantage, and none of our competitors at this point in time comes close to us. For us to give that up as the #1 priority of our strategy doesn't make sense. So that will continue to be the main focus of how we're going to grow the business.

However, we now have both postpaid and fixed and prepaid fixed wireless to be able to complement and supplement the growth of our fixed strategy. So how we're going to do that is our postpaid fixed wireless is going to attack the areas where we do not have fiber or where fiber is eventually going to be rolled out. We'll roll out our postpaid fixed wireless first. The prepaid fixed wireless is going to go after a lower segment of the market that cannot afford either postpaid fixed wireless or prepaid -- or our fixed fiber.

So generally, that's how we're going to attack the market. It's not going to be, we'll let all the horses run and see how we can sell as many as we can everywhere and anywhere. It's really going to be a balanced, calibrated attack to make sure that all our 3 weapons are optimized and maximized and, therefore, both our facilities, our infrastructure and our revenue will be maximized as well. So that's how we're looking at it. That's how we're planning it, and that's how we're going to execute it.

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Operator [36]

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Our next question comes from German de la Paz from Abacus Security.

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German de la Paz, Abacus Securities Corporation, Research Division - Junior Investment Analyst [37]

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Three questions for me. First, on the CapEx figures. Just want to ask the reason why the target CapEx figure for 2019 was not met.

Second, you mentioned lower losses for Voyager for 2019. Just want to ask if there is a target time line on when we can expect a positive bottom line contribution from this segment.

Third question is, should we expect any more MRP expenses for 2020 and how much? That's all.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [38]

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In terms of the 2019, we were PHP 5.5 billion lower than the original guidance. So that essentially relates more to the business side. So basically, we had certain assumptions in terms of how many new broadband connects we will have, and we effectively undershot that. So -- but effect -- the net effect of that is really pushing that PHP 5.5 billion into 2020.

On Voyager, there was a lower loss in 2019, given that we now -- equity account about 48% of Voyager versus we were carrying 100% of Voyager losses in the past. The new management team of Voyager, led by SBU is here today with us and Doy Vea, have laid out a business plan that has been signed off by all the shareholders with respect to where they want to bring the business by way of a ramp-up in the -- both the consumer and the enterprise side. And I guess they can talk about that in more detail, but I think the expectation is that a few more years of cash burn as they ramp up the acquisition target, but hopefully, to be positive EBITDA by around 2023.

And on MRP, we probably will still have some MRP expense this year, but not at the level that we booked last year. So it will be more certain particular areas that our HR team is focused on.

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Operator [39]

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Our next question comes from Varun Ahuja from Crédit Suisse.

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Varun Ahuja, Crédit Suisse AG, Research Division - Associate [40]

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I've got 3 questions. First, I think the line wasn't clear, but if you have answered that, it'd be really helpful if you can give a little bit more color. The mobile service revenue looks strong this quarter and your guidance is also for growth in next year. Just wanted to understand what is leading to this growth? Is the competition stable? There has been price increases? Or there has been more frequent recharges by consumer on the data side, and hence, you continue growth in the revenue? So I appreciate if you could give some more color. Apologies, if you already commented on this theme. And on 2020, any guidance, any clarity what will lead to the growth in revenue?

Second, on the tower side. Your competitor had a very good growth in towers in 2019. Just wanted to see how many towers have you rolled out during this year. And have you seen some improvement in rollout process or from the government side in terms of speeding up of license approval? Any clarity on that, that will be helpful.

And if you can also comment, I know you said that your -- Dito, you know only what is happening on the public side, whatever the comment they are making. But on the ground, when you go and see, is there any tower that you're seeing that have been coming across from Dito? Any color that will be helpful.

And lastly, I see you're still spending on 3G. But in some of the other markets, you see more investments on the 4G side, and few markets are closing down their 3G network. So what's your view on this 3G CapEx spend? And how soon do you think that 3G can shut down in Philippines? So that will be all.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [41]

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Well, Jorn can take the questions.

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Joachim Horn, PLDT Inc. - Chief Technology & Information Advisor [42]

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Yes. What was the first question?

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [43]

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Towers and the 4G. On the towers -- how many towers...

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [44]

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How many towers have you built this year?

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Joachim Horn, PLDT Inc. - Chief Technology & Information Advisor [45]

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Okay. Our tower, overall, we actually are increasing the number of towers we are building. While we, at the same point in time, move the focus from outdoor to large towers, more to indoor and microsat because of the significant traffic increase, and more and more data usage is actually performed indoor. A substantial increase. Of course, we are also working with tower companies. And if there are opportunities where tower companies can help us, we will take these opportunities.

On the 3G, that's an interesting question. What we are actually already doing is reducing the frequencies we allocate for 3G and 2G. Thanks to the technology we have deployed in the Philippines, in all our base stations, we are actually able, just by reconfiguration, to allocate spectrum or reform spectrum from 2G and 3G to LTE and later even to 5G. So from that angle, we are already taking benefit from significantly reduced, halving 2G. In 3G, the traffic is actually stable as for the time being, but we are seeing the number of 3G phones going down rapidly. And as we match the LTE coverage with the 3G coverage by end of this quarter, there will be exactly the same coverage. We expect more and more traffic moving out of 3G.

Now the fact that we can reallocate the frequencies already doesn't actually put a lot of pressure of shutting it down completely. So that is something we have to find also consensus with the regulator because that is a significant impact on the customer base as well. But what we are doing is take the opportunity to take the spectrum, which is the most important asset we have in this context and reallocate it wherever possible.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [46]

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Do you think what you're seeing on the ground is expected?

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Joachim Horn, PLDT Inc. - Chief Technology & Information Advisor [47]

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I would say there are activities. The main thing we see -- we cannot speak for Dito, of course. What we see is there's a lot of hiring going on or attempt to hire, and that's a challenge for some of our subcontractors. The impact on us is limited, I would say. Until now, we can cope actually very well. We haven't seen a lot of towers coming up. We have heard a lot of claims. But in reality, what we see down on the street is quite limited. Now we don't know exactly where they are building. So -- and so far, it's a very subjective view. Until now, I don't think they have a lot built.

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Jane Basas, [48]

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On the question on existing data revenue, I think I've answered that, but allow me to answer it again. The primary growth drivers of the increase in data revenues is really because we've observed a significant increase in activity rate among our subscribers. So we have more and more customers actually transacting with us and actually paying us. The second driver is the fact that they're actually paying us more. So on a per-transaction basis, the consumption basket size has actually increased roughly around 23% on a year-on-year basis. So you have more customers buying, and they're actually buying higher-priced promos. So the impact of that is increased data revenues and, in fact, increased top-up for the business.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [49]

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And just to add on the revenues, I think as a group, I think we see a good year in terms of revenues. Aside from the mobile growth, I think we're addressing the issues on Home, so we see also growth in 2020, and same with Enterprise. Our focus also is on operational side, but also growing the business with our Enterprise customers. So we hopefully are seeing a good year also in terms of revenues for the group.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [50]

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Back to the floor for more questions...

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Varun Ahuja, Crédit Suisse AG, Research Division - Associate [51]

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Just 2 follow-ups. So when you say that you're seeing a lot more activity and a lot more higher price point, were these customer dormant? Or these are new customers, as in now, they are using more -- as in, they're spending now more with you versus your competitor? Is there any insight that you can give?

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Jane Basas, [52]

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It's a combination. A lot of our subscribers are adopting LTE phones. A lot of our subscribers were previous data users, but non-GIGA users. So -- and we're actually getting some customers from global security in our postpaid segment as well. So it's a combination of all those things.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [53]

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I'm not sure whether Anabelle has a chart on this. But on terms of data revenues, I think for Home, it's 77% data; for Mobile, it's 69%; and for Enterprise, it's 67%.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [54]

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Last chance for questions on the floor. Since there are none, we'll have the operator read the replay facility.

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Operator [55]

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Certainly. If there are no further questions, we just want to inform everyone that the instant replay for today's call will be available starting today up to March 12, 2020. The instant replay details are contained in the conference call invitation.

We now turn the floor back over to Mr. Pangilinan for his closing remarks.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [56]

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Again, thank you again for being here this afternoon in behalf of MVP, and we look forward to the briefing after the first quarter. Thank you. Thank you very much.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [57]

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Thank you. Join us for refreshments offline.

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Operator [58]

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