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Edited Transcript of TEL.PS earnings conference call or presentation 7-Nov-19 7:00am GMT

Q3 2019 PLDT Inc Earnings Call

Makati Metro Manila Nov 23, 2019 (Thomson StreetEvents) -- Edited Transcript of PLDT Inc earnings conference call or presentation Thursday, November 7, 2019 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

* Juan Victor I. Hernandez

PLDT Inc. - Senior VP & Head of Enterprise Business

* Melissa V. Vergel de Dios

PLDT Inc. - First VP & Head of IR

* Oscar Enrico A. Reyes

PLDT Inc. - Senior VP & Head of Consumer Business Market Development

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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

* Luis A. Hilado

Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst

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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 conference call is being recorded. At this point, I would like to turn you over to Melissa Vergel de Dios, Head of Investor Relations of PLDT, for the 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 first 9 months of 2019. As mentioned in the conference call invitation, a copy of today's presentation is posted on our website. For those who've not been able to do so, you may download the presentation from www.pldt.com under the Investor Relations section. A podcast of this briefing will be available on our website after the call.

For today's presentation, we have with us Mr. Al Panlilio, Chief Revenue Officer; Ms. Anabelle Lim Chua, Chief Financial Officer; as well as other members of the PLDT management team.

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

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

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Good afternoon. Welcome, everyone, to PLDT's third quarter 2019 results received. Let me run you through quickly the key highlights of our financial results for the third quarter of the year. Our service revenues came in at PHP 39.6 billion which is 9% or PHP 3.3 billion ahead of last year and 2% ahead of the previous quarter. Revenue growth was led by the Wireless Individual business with a 21% increase in revenues year-on-year. This also grew 4% Q-on-Q.

Enterprise business, which is 25% of our total, gaining a 5% ahead of same quarter last year and 3% ahead of the previous quarter. Our home business grew at a more modest pace of 2% year-on-year. So on a combined basis, our Consumer and Enterprise segment revenues, which account for 94% of our total revenues, grew at a higher 11% year-on-year. Also noteworthy to point out that our international carrier revenues for this quarter is stable versus the previous quarter.

EBITDA for the third quarter was up PHP 20.4 billion, which is 19% or PHP 3.3 billion ahead of last year and 2% ahead Q-on-Q. Telco Core of PHP 6.2 billion was 5% ahead of last year, 3% ahead of previous quarter.

Now just to highlight also the 9-months financial results for the PLDT Group. Our revenues are on the same basis, came in at PHP 116.3 billion, which is 8%, or PHP 8.1 billion ahead of last year. Revenue growth was led by Wireless Individual, with 20% revenues, Enterprise 6% increase, and our home segment at 2% increase year-on-year. So combined, again, 11% year-on-year increase for 94% of our revenue base.

Our consolidated EBITDA in the 9 months amounted to PHP 60.3 billion, up by 16% due to the combined impact of higher service revenues and lower cash impact. Just to highlight the EBITDA for the current year reflects the impact of PFRS 16, the new accounting standard for leases. EBITDA margin in 9 months is 51%. Our Telco Core income, which excludes the Voyager results amounted to PHP 19.4 billion or 1% higher than the core income, a mark registered in 2018.

Now as shown in the next slide, our 9 months consolidated service revenues for the last 7 years. We are pleased to report that this year's service revenues of PHP 116.3 billion is now the highest recorded level, surpassing our previous high of PHP 114.5 billion in 2014. Compared to 2014, is an increase of PHP 1.7 billion in our top line. And when you break it down further, the growth is even more than that. We actually saw a growth of PHP 11.8 billion in our non-IoT service revenues, which shielded us completely from the decline of PHP 10 billion in our IoT revenues per comparative period.

Now moving on to the next slide, where we review our results on a quarterly basis. Service revenues in the third quarter of 2019 rose 9% year-on-year and 2% quarter-on-quarter to PHP 39.6 billion. There has been a sustained trend of improving revenue performance each quarter, the last 2 years. Also noteworthy that we see an acceleration in growth when we compare the current 9% increase in Q3 2019 versus Q3 2018 versus the revenue growth a year ago, which was up 1% in Q3 2018 versus 2017.

Now looking at our consolidated service revenues by service, data and broadband revenues up PHP 76.7 billion are up 20% year-on-year and now comprise 66% or about 2/3 of our revenues. If we exclude international, data and broadband really accounts for 70% contribution to the Consumer and Enterprise revenue.

If you look at the growth in the third quarter it is even higher than the year to date growth of 20% to 22%, and across mobile internet, home broadband and corporate data, we're seeing quite good growth for all of these revenues streams.

The balance of 34% for our service revenues is consisting of 25% from domestic voice at PHP 29.6 billion, 6% from SMS, a PHP 6.5 billion revenue contribution, and we see the 3% from international voice at PHP 3.40 billion.

Now moving on to the back of our higher service revenues, our consolidated EBITDA came in at plus 16% higher to reach PHP 60.3 billion for the 9-month period, with EBITDA of PHP 20.4 billion in Q3. The adoption of PFRS 16 resulted in a PHP 4.4 billion increase in EBITDA, with the reclassification of rent expense. Without that, our pro forma EBITDA is still 8% higher year-on-year with an increase of PHP 4.1 billion.

Our EBITDA margin rose to 51% at PFRS 16 basis. Now please note that the EBITDA of PHP 60.3 billion does exclude the one-time expenses associated with our manpower reduction program, which amounted to PHP 2.4 billion in the 9 months of 2019. We are undertaking another rightsizing program as part of our manpower efficiency issues.

Now moving on to the next slide, on a quarterly basis you will see that our EBITDA in the first 3 quarters of 2019 are at a higher level than the quarterly EBITDA we saw in 2018. EBITDA in the third quarter is higher by 19% in the same quarter and up PHP 20.4 billion. Our EBITDA in the third quarter is the highest since 2Q 2013.

Turning to the next slide, core income. Our core income from telco operations hit PHP 19.4 billion, up 1% year-on-year, which was driven by PHP 8.5 billion, uplift in EBITDA, offset by higher noncash expenses, principally depreciation of PHP 5.2 billion and higher financing cost of PHP 1.2 billion. Our Telco Core income due to impact of our share in the losses of Voyager, about PHP 1 billion, and gains from sale of Rocket Internet shares of about PHP 200 million.

Now with respect to our reported net income, we came in at PHP 16 billion of reported net income for the 9 months. This is a shade lower than prior year due to the combined effect of a number of items: Higher MRP expense this year compared to PHP 0.40 billion last year, PHP 2.4 billion this year; lower gains on the sale of Rocket shares given that we have sold more shares in Rocket and we had a bigger position from which we were evaluating. So that accounts for the difference in the quarter than we did last year. Now, the PHP 19.4 billion Telco Core income, which is 1% ahead in comparison to last year, still puts us on track to achieve our guidance for the year.

Our third quarter Telco Core income of PHP 6.2 billion is 5% up when compared to the same quarter in 2018, and we do expect that the Telco Core income in the fourth quarter will be higher than that in the third quarter. And based on our guidance, that would be at least PHP 7 billion in the last quarter of the year.

So let me move on to a few highlights on the balance sheet side. As of the end of September, our consolidated net debt stood at USD 2.9 billion, while our net debt-to-EBITDA ratio was at 2x. Our gross debt amounted to PHP 3.45 billion, only 6% of which is unhedged or exposed to the U.S. dollars and only 11% of our debt is exposed to interest rate fluctuations. Our average cost of debt stood at 4.8% per annum. So PLDT completed its consent solicitation to amend the debt-to-EBITDA covenant of our outstanding debt for retail bonds. The amendment aligns our various debt ratio covenant requirements. It doesn't mean that we will map this out, but it gives us some flexibility to support our funding advised corporate entity fee levels. So our policy remains to be that we would like to see our consolidated net debt-to-EBITDA ratio closer to the [full tax].

So PLDT's credit rating remain at investment-grade levels.

Now the next slide shows some of our CapEx highlights. PLDT and Smart have continued to invest behind the rollout of the group's fixed and mobile networks, which provides a strong lift for revenue growth. Our CapEx for 9 months came in at PHP 53.4 billion, of which almost PHP 40 billion or 75% of that was spent on network and IT CapEx. CapEx investments we've made over the years of as much as PHP 368 billion allowed PLDT's network to continue to be recognized for its superiority in various third-party service such as OpenSignal survey results as well as the Ookla Speedtest Awards. OpenSignal has recognized the superiority of our network in various metrics such as video experience, download speed, upload speed, latency and even 4G availability as of the latest review. So we do recap here, in this slide, the most recent published are the scores from OpenSignal, which do show that PLDT and Smart has the fastest mobile and fixed broadband in Philippines. So we continue to step up the expansion in each of our fiber optic cable network and fiber-to-the-home as well as the conversion capacity of our LTE and 3G networks to better serve the rising demand for data and video services.

It's also something we should highlight that in the third quarter, we had -- on the mobile data side, our mobile traffic registered 437 petabytes, which is about 20% higher than the second quarter and 83% higher than last year. Looking at it on a year-to-date basis, mobile traffic rose to 1.1 exabytes or that's 1,106 petabytes in 9 months, which is double the levels we saw in 9 months 2018. So we're pleased to note that investments behind our network is supporting the increased data traffic that addresses our customer requirements.

Now as of September 2019, PLDT increased the coverage of our fiber-powered fixed broadband network to 7.1 million homes passed, up from 6.3 million homes passed at the end of last year. We see our port capacity to 3.38 million ports. We have ready 1.2 million fiber ports that we intend to sell this year to next year in support of a higher revenue contribution from our home business.

In mobile, Smart has installed over 21,700 LTE 4G base stations and another 12,900 3G base stations. With the step-up rollout of LTE and 3G allows Smart to meet our commitment to provide high-speed wireless data services in almost all of the country's cities and municipalities.

Now at this point, let me 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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Good afternoon. Thank you for being here today. Just a few highlights, and I'd like to pass on in more detail to -- to the head of the segments later on. But just to highlight, I guess, for the PLDT Smart revenue group, the top line is really again 9% increase in revenues between quarter 3 2019 versus quarter 3 2018 or PHP 3.35 billion increase in revenues. From a year-to-date point of view, September ending year-to-date 2019, 8% growth or PHP 8.13 billion for the period. And we measure this, really, in key metrics for this growth. One is really the accelerated adoption, data adoption and usage for the wireless space. For -- in terms of home, really improved CX, activations and managing churn is the method of growth for us. For Enterprise really growing beyond connectivity and providing solutions and services and making sure that we are part of the digital transformation for Philippine enterprises. Then for international, long tail in that business, as you know. It's a challenge business because we have done a good job long tail in the business. But on top of that, uplifting the user base by widening international reach.

So just a few more details on this one for accelerated data adoption and usage. From Q3 2019, a reported increase of 21% versus same period last year really being driven by aggressive data usership and push on videos and gaming and migration to LTE of our subscribers.

As I mentioned for home, a modest 2% growth in quarter 3 year 2019, are really launching a new way of doing business, new process in terms of trying to be more efficient in our rollouts hopefully to boost the income group's CX, and again increasing installation and lowering churn.

For Enterprise, 5% growth quarter 3 2019 driven by ICT business with a strong growth path thanks 2x of market and 16% growth. Wireless continues to grow double digit driven by both postpaid and M2M, and driving IoT solutions up 9%. Fixed business for Enterprise growing at 3% in the same period.

For international, again, despite the challenges on ILD, they have found ways to increase other parts of the business. They've grown roaming data revenues by 195% vis-à-vis same quarter last year. One more -- they're also monetizing application to personal messaging traffic which increased by 673%, again versus same period last year.

Just to highlight third quarter, just on market share between Q2 and Q3. We'd like to report that for Wireless, at least for the past 2 consecutive quarters, we have gained market share, 0.6% and 0.2%. And for Fixed, we have grown like 0.1% in the third quarter. So I think after a long time, I think, our total market share is up 51.9%. Although very small, but I think we're able to hopefully, arrest the decline for many years and showing a reversal of the trend. And of course, our objective is to continue driving this and gaining market share.

And lastly, and I think to the point of Anabelle earlier on, I think at least for the third quarter, our data traffic compared to Globe is 50-50. We grew by 437 petabytes compared to Globe's 430 petabytes. But from a third-party growth on data users, we grew -- the growth rates for the third quarter, 85% of the growth went to Smart. And for data revenues, 60% of the growth in the third quarter went to Smart.

So now I think I'd like to ask Ren to present in more detail the Wireless business.

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Oscar Enrico A. Reyes, PLDT Inc. - Senior VP & Head of Consumer Business Market Development [5]

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Good afternoon. I will be sharing the consumer wireless performance and highlights for Q3 2019. So if you can go to the slide on revenue. I am very pleased to report that the Wireless Individual business accelerates from 18% in Q1 2019 to 20% in Q2 and 21% in Q3 2019, with PHP 18.2 billion service revenues for the third quarter. This brings September year-to-date net service revenues to PHP 52.6 billion, delivering a growth of PHP 8.9 billion or 20% year-to-date.

Next slide, please. A key driver of this continuous increase or increase in subs base, we ended Q3 2018 with 57.6 million subs. And since then, we grew our subs base to 70.7 million subs for quarter 3 2019, a growth of 13.1 million versus last year.

Next slide, please. A bigger driver of growth is improving the usage experience of our subscriber base, with the continued progress in our LTE migration efforts. This chart shows our progress in increasing LTE-capable devices, LTE devices with LTE SIMs and LTE data users. That focus on the bottom-most chart, which actually talks about LTE data users, as this will be the key driver to growth.

Index versus Q3 2017, we have grown the LTE data user base by 171% by Q3 2018 and another 86% by Q3 2019. Over the span of 2 years, we have pushed this by 4x, and we have more programs set and accelerate progress further in the coming quarters.

Next slide, please. This has driven data revenue contribution to growth from 60% in Q3 2018 to 70% in Q3 2019 at PHP 12.7 billion, where data revenues are growing between PHP 800 million to PHP 900 million in the quarter.

Next slide, please. The big activity for Q3 was our Free YouTube for All campaign, where we incentivized consumers to upgrade to LTE and use giga video. In 3 months, we added 1.37 million new YouTube users on Smart, 1.43 million on TNT and 230,000 for Sun. This drove a 57% increase in ARPU among the promo takers of YouTube for All.

Next slide, please. Further, we scaled our activities in gaming with Mobile Legend tournaments nationwide, holding Vlogger camps for our youth and driving engagement amongst postpaid subscribers with our Smart signature series.

Next slide, please. And here are the upcoming events for the rest of the year to make sure that we maintain the strong wireless performance in Q4. Smart -- first, Smart's biggest ever raffle promo, Smart Giga Mania, with over PHP 30 million in prizes; and number two, the company's biggest ever Mobile Legends gathering, Smart Club's Saya, with the biggest ever prize pool of PHP 20 million.

So start loading Giga and play Mobile Legends so you too can win.

So thank you. And I'd now like to pass on to Jovy Hernandez to discuss Enterprise.

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Juan Victor I. Hernandez, PLDT Inc. - Senior VP & Head of Enterprise Business [6]

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Thank you, Renren, and good afternoon, everybody. I'm pleased to present the performance of the Enterprise business.

For the third quarter, the Enterprise business was able to sustain its growth path, growing 6% year-on-year, delivering an incremental growth of PHP 1.6 billion.

The main headlines are as follows: Fixed Line delivered incremental growth of PHP 700 million year-on-year, fueled by the continued demand for data; our Wireless business continued to deliver double-digit growth of 11%, increasing by PHP 400 million, fueled by growth in both postpaid and wireless solutions.

Our ICT business, on the other hand, continue to outpace the market by a factor of 2x, growing at 19%, delivering incremental growth of PHP 500 million versus same period last year.

Allow me to discuss some details on each business pillar. Next slide, please. For our Fixed Line business, our Fixed Line continues to grow and remains to be the largest contributor of growth in terms of absolute peso value. Growth has been fueled by the continued demand for data primarily driven by fiber-based services such as broadband and networking solutions.

Enterprise customers outside the country have also taken note of the wide range and the level of quality of our fiber-based data service offerings. As a result, revenue from our international enterprise operations serving companies out of the U.S., the U.K., Hong Kong, China, Singapore and Australia increased by 56%. Fiber is still the preferred technology for enterprises as it provides a robust and secure highway for their mission-critical workloads. Our continued investments in expanding our fiber footprint, both domestically and internationally, it ensures that we will continue to offer the best quality in the market worthy of the trust of our enterprise customers regardless of their size.

Next slide, please. Moving on to our Wireless business, we continue to deliver double-digit growth. Our postpaid business grew 6% year-on-year, mainly on account of sales from competition. Our M2M, or internet of things solutions portfolio increased by 17%. It is worthy to note that we have reached the half a million mark, and we now have more than 500,000 M2M or IoT connections nationwide. With the eventual commercial deployment of our 5G service, we expect this revenue category to continue to increase year-on-year.

Lastly, we have started to deploy mobile solutions to our enterprise customers and our mobile platforms category increased by 49% year-on-year.

Next slide, please. Moving on to our ICT business, we continue to outpace the growth of the market by a factor of 2x. ICT revenues increased by 19% year-on-year. We continue to leverage on our leadership in the data center, and it has allowed us to grow our data center and club revenues by 12%, delivering half of our growth year-on-year. Equally important to note is that our ICT growth is starting to diversify.

Our cybersecurity business has more than doubled, as enterprises have recognized that cyber threats are not only technical concern but more significantly, a strategic risk. Our security operations center is the largest and the most sophisticated in the country with a cyber intelligence database of 160 million indicators compromised and growing every day. Using this threat database, we prevent about 300 million attempts to access malicious sites on a weekly basis, and we have an average of less than 1 minute response time to cyber incidents and threat alerts. We see this area of our business [stay on] exponential growth as we continue to aim (inaudible) Philippine cyberspace.

Next slide, please. These 3 pillars, Fixed Line, Wireless and ICT, when combined together, form a very powerful proposition in the market that sets PLDT Enterprise apart. This enables us to aggressively pursue our own transformation from just being a traditional connectivity provider to a true connected industry orchestrator. That allows us to aggressively move toward design thinking in service co-creation with key industry verticals, with the mission of enabling industry solutions with real value, such as managed networks, smart retail, connected health, smart banking, smart cities and many more.

It is in line with our mission of enabling the digital transformation of our customer.

And with any digital transformation, one will realize that there are a lot of complexities in the back end. Our purpose is clear, and that is to make the complex simple for our customers.

That's it for Enterprise. And I turn over to (inaudible).

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Unidentified Company Representative, [7]

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Good afternoon, I'll be presenting the home business performance for Q3 2019. Next slide. There was a modest growth for the home business of 2% from Q3 2018 to Q3 2019.

Next slide. In terms of quarter-on-quarter growth, similarly moderate growth between Q1 all the way up to Q3 of 2019. The moderate growth led us to take a look at the challenges that the Home business had to face and had to solve.

And if you go to the next slide, we were able to enumerate these challenges that we saw leading to the moderate growth, and these are as follows: First of all, we have to adjust to the new zone operation model. If you remember sometime last year, the DOLE, or the Department of Labor made decisions against PLDT in terms of contractualization. And so we had to revisit and revise our way of installing and repairing. We instituted this revision in June, and we had to face a transition challenge between June all the way up to July, August and September.

The second challenge that we had was a delay in before launching of both the prepaid and postpaid fixed wireless business. And so we were not able to drive those 2 strong potential revenue streams for the home business.

The third challenge we saw was high broadband churn or an average of 28,000 for the third quarter, hitting a high of almost 30,000 in July of last year -- of this year. And third, operationally, again, our low flow through conversion rates from sales applications all the way to installations. Because of these identified challenges, we launched October Rising, an internal campaign to be able to address and solve all of these problems that we saw in the third quarter.

If you go to the next slide, in simple terms, October Rising led to the alignment of the different critical groups that deliver the installation and repair of PLDT Home service, that's the alignment with marketing, with sales, with our network and commercial ops and our field operations. Aside from that, we had instituted very strict monitoring of all the performance metrics so that we can see where the gaps are and fix those gaps on a daily basis. But more importantly, having all that data, we are now able to cut down the gaps and the problems on a zone-per-zone level, analyze them and solve them almost in real-time.

Because of these changes in the way we do things and addressing all the problems at hand, we were able to show significant gains in October. While the numbers are still being -- are still being finalized, I can say that in terms of total connects, there have been a significant increase in the total connects or total installations of PLDT Home. Secondly, there has been a reduction in churn from the high of 30,000 to about 25,000 in the month of October. We also had one of the highest net gain numbers in the last 24 months. And we've also seen an all-time high in the sales of prepaid home Wifi. So with that, we're looking at a stronger growth in the fourth quarter of 2019 leading to, again, a much stronger performance in 2020. One of the things that we're looking forward to is in the fourth quarter of this year, but more so starting 2020, PLDT Home will have 3 fully loaded nationwide weapons: Leveraging on the Philippines' fastest internet network, and that's fiber; prepaid fixed wireless; and postpaid fixed wireless. And so with all of that coming together, we're looking at a strong end for 2019 and definitely a stronger 2020.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [8]

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That's it for the presentation. We're now ready to take questions. 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 Luis Hilado of Maybank.

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Luis A. Hilado, Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst [2]

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I have a few questions. The first is regarding home broadband. So far how would you characterize the competition in the fixed wireless -- in the fixed wireless part of your competitor? Is it still a rational pricing environment?

Second question is I really don't understand if there could be another round of -- sorry.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [3]

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I think our connection is not good.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [4]

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You're coming in very choppy. Could you move a little closer to the line or talk slower? Yes.

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Luis A. Hilado, Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst [5]

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Yes. So I heard Anabelle earlier saying that there's an additional [MRP] coming in the fourth quarter. Could you disclose what that amount is and the type of rightsizing you are looking at? And just to check on the last question which is on accelerated depreciation in the fourth quarter, are you expecting any?

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [6]

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To the last question of the depreciation in the fourth quarter. But what was the previous 2 questions?

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [7]

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Additional MRP. [Additional expenses in the] MRP count.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [8]

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MRP. Well, Luis, there is some additional expenses in the fourth quarter with respect to MRP, but not as high as the amount we booked in the third quarter.

Now we just kind of have to put it in context, I guess, PLDT continues to review our employee profile, particularly as we move into more and more data and digital services, and also to -- in our quest for better efficiency in an operating level.

Okay. And the question on accelerated...

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Luis A. Hilado, Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst [9]

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And on the accelerated depreciation? Yes.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [10]

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It's typically is a year-end exercise in terms of the review before we finalize the accounts for the year. So right now, nothing specific being discussed yet, but we do have to do a bit of a review as part of the year-end closing process.

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Luis A. Hilado, Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst [11]

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Just my first question was a bit unclear, but -- I was actually asking whether home broadband competition, how would you characterize the level of competition experienced between rational pricing between yourself and growth?

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [12]

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You were asking something about competition? Can you...

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Luis A. Hilado, Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst [13]

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Competition from broadband.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [14]

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From broadband only?

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Luis A. Hilado, Maybank Kim Eng Holdings Limited, Research Division - Senior Research Analyst [15]

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That's right.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [16]

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All right. (inaudible) will take that question.

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Unidentified Company Representative, [17]

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Yes. Well, we were looking at the competition against Globe when it comes to home broadband. We have definitely a head start and a huge lead when it comes to fiber, but they had a 1.5 or 2-year head start when it comes to fixed wireless. Our plan, which I shared earlier is now to compete as well in the fixed wireless game. By the fourth quarter of this year, we would be launching both our prepaid and postpaid in fixed wireless. By the start of next year, we're going to be aggressively competing on that space. So we are going to have 3 weapons, like I said, 3 fully loaded weapons nationwide against Globe: That will be fiber, that will be prepaid fixed wireless, and that will be postpaid fixed wireless. So we hope to continue our lead in the home business and, of course, maintain the dominance in that arena.

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Operator [18]

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Our next question comes from Arthur Pineda of Citigroup.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [19]

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Three questions, please. Firstly, on the MRP charge of PHP 2.4 billion, how many heads were reduced on this? And was the annual recurring cost base, which can be removed going forward, as a result?

Second question I have is with regard to the network elements. It seems that your networks are clearly better if you refer to the OpenSignal reports. Are there any other elements of the business that you still think needs to be addressed, or do you think with what you have now, you're happy and you're at the optimal state to compete?

Last question I had is with regard to competition. Given that you do seem to have a network advantage, are you happy with the momentum on mobile growing alongside market? Or is there a need, you think, to push to grow faster with a more competitive approach? Thank you.

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Anabelle Lim Chua, PLDT Inc. - Senior VP, CFO & Chief Risk Management Officer [20]

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Let me take the first question on MRP. With respect to the, I guess, the full year outlook in terms of number of MRP abatement, this will be around 1,200, 1,300 to those who would avail of early retirement. So the MRP expense reflects the premium that we paid over the [adjustment] retirement procedure as a part of an exit package. So again, you're right that this will result in savings for the next year by way of a lower compensation and benefits with respect to the reported growth. So typically, it depends on specific situations. But in general, I guess, we recovered that premium expenses in about approximately 2 years.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [21]

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Understood.

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Juan Victor I. Hernandez, PLDT Inc. - Senior VP & Head of Enterprise Business [22]

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So Arthur regarding network, I think we will have to continue to invest in order to, first, to manifest the lead we have in terms of customer experience and quality. Because the traffic consumption is continuously increasing, and the increase is actually accelerating, which is encouraging. But we have to do the right things on the capacity side in order to provide for this capacity in time so there's no congestion.

The second is we still continue to push for coverage. There will be a pretty large number of sites being put up. But the focus moves from outdoor to indoor. That's a very important step forward. This will consume some investment. And then, of course, we have been preparing for 5G. As you may remember, we launched the transformation of our transport network, where the first phase will be launched this year. And we will continue to push the transport network to fully software-defined architecture to be able to cater for the new services coming up with 5G for the next 5 to 10 years. And so this will be the focus going forward. So we are happy where we are. We are not satisfied, we cannot stand still. We have to continue to invest in time, otherwise we cannot maintain the good progress we have made.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [23]

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Just on the Wireless. Let me answer your question on wireless. I think this is the update also to what [Juan] was saying, I think we've seen 2 quarters that we'll gain market share. But obviously, we're not happy with that. We want to have our customers experience our network, our better network. So we will continue to push with our data plans and our promise, and that's something that I think we will push hard on to continue to hopefully gain market share.

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Operator [24]

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(Operator Instructions)

Our next question comes from [Joshua Generoso] of Guild Securities.

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Unidentified Analyst, [25]

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I have at least 2 questions. Number one is based on your report, the mobile data revenues amount to around 32 -- I'm sorry, around PHP 37 billion, PHP 38 billion already, but the traffic is at 1,106 petabytes. Compared to the competition, that's only short by at least 100 petabytes. But the competition is reporting around PHP 52 billion. So could you explain the disparity in the revenue numbers?

And then the second question is, recently, the competition launched, I think, a different promo for their mobile, that it's essentially a bit cheaper, offering more data for the same amount of pesos. I would like to ask though how's your outlook for the mobile data space? Will it continue to have a lower pricing in response to competition? Will there be a price war in the future for mobile data services?

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Oscar Enrico A. Reyes, PLDT Inc. - Senior VP & Head of Consumer Business Market Development [26]

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Let me answer your questions. So I think first on the mobile data revenues, I think one of the big activity that we had in Q3 is our YouTube promo, Free YouTube for All, where we actually get our subscribers to try out more of our data services. We gave certain free trials for a limited period of time. And what we see is what we do with data is we see how good our network is if they enjoy it. And once we -- the promo ends like it ended in December 30, we then start monetizing it. So they actually are willing to pay more and enjoy more of our services. And I think that's why you see a higher -- while our traffic is almost the same that's why it's -- the revenue is slightly lower because we have certain promotions that we actually did give to the market. And this is really in line with our strategy to keep increasing usage. And then from the usage then we start increasing revenue. So that's something we've been doing over the past 2 years and has been working a lot. And that's actually something we consider (inaudible). So far, in that path we want to accelerate further moving forward. So that, I hope answers your first question.

On the second question, I think in terms of competition in promotion and pricing. Actually, the pricing has been very rational over the past quarters, in past couple of years. And I think we are happy with that, so that we can actually focus more on the marketing. So when it comes to the marketing what we're trying to do is trying to change consumer behavior, so that more consumers will actually use more data. And in using more data, they actually end up paying more and actually enjoying the service more. So one thing that we actually see is the total industry is growing, and that's a good thing. So both us and our competitors are actually both growing. And that's a positive sign for the industry, and actually it's a good sign because there is still more subs that will book the data. And as we move to data, there's more growth to be had in the industry. So I think what we see is while they're getting -- they seem to be applying the same strategy that we have applied in the past, which is to let consumers try this data. And once they try it, they like it and then they start monetizing. So that's something that we will do, and they will do and I think it's good for the market.

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Operator [27]

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Thank you. As of this time, we don't have any further questions on queue. I'll hand the call back over to Ms. Melissa Vergel de Dios.

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Melissa V. Vergel de Dios, PLDT Inc. - First VP & Head of IR [28]

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Thank you, operator. 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 November 14. The instant replay details are contained in the conference call invitation.

I'll now turn the floor over to Mr. Panlilio for closing remarks.

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Alfredo S. Panlilio, PLDT Inc. - EVP & Chief Revenue Officer [29]

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Well thank you for joining us this afternoon. Looking forward to a stronger fourth quarter for us, and we'll see you in the report for our 2019 in March. So thank you very much. Thank you. Merry Christmas.

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Operator [30]

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