Good afternoon everyone, and welcome to the PLDT Conference Call. This conference call is being recorded. Replay information will be provided at the end of the call. At this point, I would like to turn you over to Melissa Vergel de Dios, Head of Investor Relations of PLDT for the introduction. Please go ahead. Thank you.

Good afternoon, and thank you for joining us today to discuss the Company’s financial and operating results for the first nine months of 2013. As mentioned in the conference call invitation, today’s presentation is posted on our website. For those who have not been able to do so, you may download the presentation from www.pldt.com under the Investor Relations section. For today’s presentation, we have with us members of the PLDT Group management team namely; Mr. Polly Nazareno, President and Chief Executive Officer of both PLDT and Smart; Mr. Chris Young, Chief Financial Advisor of PLDT; Ms. Anabelle Lim-Chua, SVP and Treasurer of PLDT and Chief Financial Officer of Smart; Charles Lim, Head of our Wireless Business; and Atty Ray C Espinosa. Chris Young will do the presentations today, as Mr. Nazareno is just recovering from a very bad sore throat. At this point, let me turn the floor over to Mr. Chris Young for the presentation.

Okay. Thank you, Melissa. Good afternoon. I need to present to you PLDT’s financial and operating results for the first nine months of 2013. Starting with the presentation on Page 2. Operating conditions in the nine months of the year have been favorable for the industry as a whole and have been given a lift from the sustained improvement in the overall Philippine economy. The competitive environment proactive has allowed for growth. Our results for the first nine months of 2013, largely reflects these improvement conditions. Service revenues for the nine months ended September 2013 rose by PHP 2.6 billion or 2% year-on-year to PHP 121.6 billion. Our third quarter revenues grew by PHP 1.2 billion or 3%. Both our Wireless and Fixed Line businesses registered year-on-year and quarter-on-quarter revenue increases. EBITDA was higher by PHP 2.3 billion or 4% at PHP 59.6 billion. And EBITDA margin rose to 49% from 48%. Third quarter EBITDA of PHP 19.7 billion was PHP 900 million up 5% higher than the same period last year. And EBITDA margin for the quarter of 49% was also higher than 48% last year. Reported net income rose by PHP 600 million or 2% to PHP 29 billion. Core net income, excluding exceptional items for the period increased by PHP 1.1 billion or 4% to PHP 28.8 billion. For the third quarter, core net income were higher by 2% at PHP 9.2 billion and PHP 9.4 billion respectively. Moving onto Page 3. Core net income for the first nine months of 2013 rose by PHP 1.1 billion or 4% to PHP 28.8 billion and continues to be in line with full-year guidance of PHP 38.3 billion. Higher EBITDA as well as lower depreciation and income tax provisions accounted for the increase. Third quarter core income of PHP…

Thank you, Chris. With the favorable momentum that we have seen in the past three quarters, and given the early trends in the fourth quarter, we are confident of meeting our core income guidance of PHP 38.3 billion for this year. CapEx will also be within the guidance figure of PHP 29 billion. That captures the highlights of our results for the first nine months of this year. Thank you for joining us today and we are now ready to take your questions.

The floor is now open for questions. (Operator Instructions) One moment please, while we wait for the first question. Our first question is from Mr. Luis Hilado. Your line is now open. You may go ahead. Luis Hilado – HSBC Securities: Hi, good afternoon. Thanks for the call. I had three questions, the first two operational, and the third just housekeeping. In terms of ARPU trends you’ve seen in the third quarter, it seems like the Talk ‘N Text as well as Sun Cellular prepaid and the Smart postpaid were down Q-on-Q. Just wondering is that assumption of seasonality, competition or a trend in the economy for the quarter, or you expect this to rebound in the fourth quarter? Second question is regarding the strategy in terms of monetizing data. You’ve highlighted that during the presentation that the revenues in voice were up, but revenues down because people were going towards buckets on these plans. How do you intent to shape the mentality on the subscriber base to up the data? And the last question is just housekeeping on the tax rate, corp [ph] 16% and 19% from the first nine months. For the full-year, any guidance in terms of the tax rate?

Luis, thank you for the questions. For the first question, with decline in the ARPU quarter-on-quarter for Talk ‘N Text should be due to seasonality, really that’s what we mentioned earlier. And for the second…

Okay, this is Charles Lim actually addressing your second question. Monetizing data, there are several ways that we are going. We’re heading towards monetizing data first, is as just been reported – just reported that we have acquired considerable content for us to be able to sell – to up-sell to our subscriber basically music where we have to deal with MCA, Universal and Sony Music which are now at the corner 75% of the music of data volume of the country and co-marketed with MCA and together with Sony. So that has started already this quarter actually. We are also moving towards making data available for also our subscribers and we believe that once we are able to review further our initiatives for data that allows them more affordable services and more customized services for data, then we believe that we’ll also likely see some more revenue growth for data. Luis Hilado – HSBC Securities: Thanks.

Luis, on the tax rate, the extra corporate tax rate is a bit higher than you mentioned. The thing that we’re looking at for the full-year that are some deferred tax assets relating to the Digitel Sun acquisition, which may be adjusted, but that’s a year-end review that we take. I think we would expect the net tax rate to be close to maybe what it is year-to-date, maybe a little bit higher about 19%, 20% levels, but we won’t will not assign but we completely assessment for the year-end will be – but and that sort of place, I think 20%. Luis Hilado – HSBC Securities: Okay, thank you.

Any follow-up questions sir? Luis Hilado – HSBC Securities: No, that’s all.

All right. Thank you. Our next question is from Mr. Arthur Pineda. Your line is now open. You may go ahead. Arthur Pineda – Citigroup: Hi, thanks for the call. Several questions for me. Firstly, if you could tell about the Fixed Line division, you do see that your margins aren’t up significantly here. Where do you see margins going forward for the Fixed Line side? Second question I had is with regard to the Mobile division. If you could help us better understand the economics of moving to a postpaid bundle from prepaid, we see that you’ve put a big push there and you’d been able to capitalize revenues but prepaid actually declined with subsidy growth outpacing the revenue growth? When do we start to see this and actually raising EBITDA levels? Third question I had is with regard to your content. You mentioned a while ago, it’s a bigger push for you on these OTP content. If you could describe what your revenue model is for this? If this is more of a retention tool for you or do you actually recognize incremental revenues with the revenue share model with these providers? Thank you.

Maybe I’ll try first on the Fixed Line. We got, as you know a reasonably good result in the third quarter from the Fixed Line, in terms of both revenue growth for the full-year up 4% and then quite strong EBITDA performance in the third quarter. I think however the third quarter is probably is not indicative of the full-year, there are one or two things where accruals will made in the first and second quarter which one fully requires in the third quarter. But I think the margin that you’ve seen year-to-date is about 38%, 39% is what we would expect for the balance of the year and in fact, as we look out to 2014 as well. So the Fixed Line is – because of the more contribution of the ILD and the NLD now looking like we currently revenue growth and probably maintaining margins in the 38%, 39% level.

What’s the second one?

Postpaid.

I guess I’ll start on this Charles as follows. Postpaid business for the mobile, I guess the dynamics are largely affected by particularly by the some fees involved in the postpaid slots which as you are aware we will look upfront. So in the last few quarters, you’ve seen our postpaid subscriber numbers increase by about 115,000 in the each of the quarters. So there is of course to ramping up those subscriber numbers by way of the subsidies that you book. At some point when you settle into a more steady state I guess solution [ph], then the margins on the postpaid business somewhat look different. But you know that’s kind of a ramp-up cost involved. But clearly postpaid is now part of the whole industry dynamics particularly with the emerging importance of smartphones and its role in the data play. So there is some element of I guess shifting that is going on which helps and effect on the EBITDA margins for the very strong quarter [ph].

Yes, to also follow-up to build on what Anabelle just said, moving forward we believe that postpaid will be – they are certainly the earlier reference for smartphones, the 11% penetration for the Philippine market is [indiscernible] pick-up around 15%, that’s for all that area [ph]. Basically smartphones sell for higher ARPU in the future especially as we’re able to also might take up further that will be more popular to our subscribers. Also smartphones plan to sell for more percent purchases. Initially, we have tied it up with our content marketing that; first, we do this to differentiate ourselves in the market from our competitors; number two, it is also capitalizing on the 72.5 million subscriber base both prepaid and postpaid; and number three, it is we believe that if its revenue sharing model will also yield better revenue as we build the habit of purchasing music legitimately in the more affordable way. So we have just launched last week or quite recently a membership program that allows members to really download music, to listen the music practically, all the music they want for a fixed days which we have made to be very affordable either as a weekly, bimonthly or a monthly basis. Arthur Pineda – Citigroup: So can you take the revenue share from this model, or is it you make money from the data throughput?

I cannot – we are bound by non-disclosure agreements, but basically we believe both each aspect of – that the whole mix so that we can extract revenues or margin from all sides. So I will have to say it’s a combination of all these things. Arthur Pineda – Citigroup: Understood. Thank you.

Any other questions sir? Arthur Pineda – Citigroup: That’s all. Thank you.

You’re welcome. Next question is from Ms. Neeraja Natarajan. Your line is now open. You may go ahead. Neeraja Natarajan – Nomura: Hi, thanks for the opportunity. I have a few questions. I guess my first question is on the wireless margins. And I think you can see during 2Q to 3Q the subsidy costs have actually gone lower but your margins have continued to decline, wireless margins. So what have you seen there and I see it’s partly because of the network-related costs, so should we expect this to continue to increase? That’s my first question. And secondly, in terms of targeting the postpaid segment, in terms of the subscriber additions, it still seems to be slower than your peers, how do you see this segment is evolving for you guys? I mean should you further step up your marketing intensity, and how long would this smartphone seeding continue for you to sort of tap into this segment? That’s my second question. And then within wireless revenues, it seems like if I strip out the mobile internet, the SMS revenues have actually are declining year-over-year. Any thoughts around this, is this – are you seeing cannibalization or is it just that the yields on SMS is sort of declining? That’s my third question. And lastly the Sun ARPU seemed to have been restated lower in this quarter for both prepaid and postpaid, any thoughts on that? Thank you.

It’s hard to remember all your questions, but we’ll try and sum up the questions. On the quarter-on-quarter EBITDA margins, I guess we reflect the factors, seasonality impact and the revenue. So the revenue was higher in same quarter last year, it’s slightly down versus second quarter, that’s [indiscernible]. Then subsidies are higher and then the other costs we have in the third quarter are really some MRP manpower reduction charges that we’re taking to integrate some of the functions for the wireless between Smart and Sun. SMS revenues are as you rightly observe right now, but we – or second that would be higher domestic voice revenues and mobile. So we put those together under that middle standing [ph] revenue classification. In terms of SMS volumes, we’re being quite strong, but obviously with the shift to more and more limited towards unlimited packages, there is a yield curve pressure on the SMS revenues on that. I think we both at I guess the New Year [ph] and the third quarter results of the industry, but as far as the second quarter our net adds in postpaid was higher than the industry average.

Neera, what was your first question again with respect to network-related costs? Neeraja Natarajan – Nomura: Yes, actually I guess I was more on the wireless EBITDA margin, so I mean do you think seasonality, seems like your rent and professional services which is I think the reason for that, so it seems to be higher this quarter. And then if I just started as part of the year and then you’re also looking into three quarters, I mean there seems to be different cost items in general, but you just said, [indiscernible] the margins are declining, so is that what you’re supposed to expect for the wireless segment is my question to you.

So we have to take in part, but it’s not net – were sort of a labor impact, we will start to see savings on the network cost side which we put together at some of the – when you complete the Smart and Sun phase consolidation. So some of the things that you’d mentioned like higher professional fees etcetera are not so much network-related but some of it are support of the growing postpaid business as well. Neeraja Natarajan – Nomura: Okay, thanks. And on the postpaid side, I guess my question was, I mean you said focus on the segment, but we haven’t seen like net adds pick up in a big way, so is that something that – should we expect, that’s the first thing. And how much like in terms of – I mean marketing subsidies like do you see this going into the next three four quarters or do you think its normalized? It’s my second question.

Well, the postpaid revenues are actually up 15% year-on-year. So we’re benefiting already with respect to the increase in Fibr numbers that we have this year relative to last year. So it really depends on what your expectations are because in terms of absolute numbers of course in the context of the Philippine market, the both phase subscriber numbers will never be at the scale of the prepaid distance. So it’s really a change in mix but that’s been a shift – the business was not – or the market was not certain to postpaid markets. At the end of the day what we’re seeing is that Philippines will remain largely seen the prepaid market therefore, the shift is particularly on data penetration for prepaid, so that’s critical we highlighted in our presentation. Neeraja Natarajan – Nomura: Okay, got it. And my last question was on the ARPU restatement for Sun in this quarter?

There was a bit of subscriber base cleaned up in the first quarter actually, so some in this quarter. So that naturally sort of increases the ARPU. I am not sure if you’re referring to that as something else but we can sort of take it offline [ph]. Neeraja Natarajan – Nomura: No. What I mean is I think the ARPUs look lot lower than we had in the last quarter, and the other thing is I guess I think in 1Q also you did highlighted some ARPUs that are actually increasingly, but it now looks like it’s just been flattish. So I mean does the whole introduction of higher value offerings or extending the validity date and things like that so.

Maybe we can take that offline because our number is showing that the Sun ARPUs are [indiscernible]… Neeraja Natarajan – Nomura: Yes, sure. That’s fine. Thanks very much.

Any other question, ma’am? Neeraja Natarajan – Nomura: No, that’s it. Thank you.

Thank you. Our next question is from Mr. Chate Ben. Your line is now open. You may go ahead. Chate Ben – Credit Suisse: Thank you very much. Good afternoon everyone and first of all, I wish Mr. Nazareno a speedy recovery.

Thank you. Chate Ben – Credit Suisse: The first one is regarding the smartphone penetration. I understand that you disclosed 11% penetrations, how much of this smartphone subscribers actually are using data and generating non-SMS data revenue for you? The second question is that we are seeing some efforts in growing the revenue base obviously in the mobile data side, but that is largely offset by the continued decline in legacy business. Do you think that going forward as we continue to see the mobile data revenue growth, should we also expect that to be associated by accelerating decline in legacy revenues and therefore we are entered a regime whereby we should expect some revenue growth, but that would be like low single-digit of sales and we should not expect further acceleration? The third question is just in term of cost picture. Should we expect a material cost pressure into fourth quarter on your EBITDA, things like subsidy would increase and maybe any other cost items that you might worried about into the fourth quarter of this year? And last question, in light of the data growth, should we expect this year CapEx to be considered at a low level and therefore we should expect quite an increase into the next few years? Thank you.

Fourth quarter cost pressure, I think fourth quarter typically we do have a bit of increase in [indiscernible] but there are also increases in costs. Typically towards the year-end.

The actual smartphone users.

We’ve got less than half at the moment are actually seeing more data subsidies representing opportunity for us and [indiscernible].

On the CapEx number, that too is still in the middle of the budgeting process at the moment, but the initial cut of it looks like it’s coming out at a similar level similar to this year, about PHP 29 billion level which we run at about [indiscernible] service revenue. So we’re not seeing a sharp spike going into 2014, 2015. Well, I think there is no doubt that there is an interplay between the two. Particularly I think if you look at what happened historically on Fixed Line. The Fixed as you are aware at one stage is very large part of its revenues coming from inbound international, but as broadband grew both in the corporate and the consumer segment, that effectively led to cannibalizations on that revenue source. If you look at the chart on Page 5 now, you can see that the actual amount of inbound on the Fixed is getting to be a relatively small percentage of the total. Wireless probably still had to go through that process, so to the extent that we see growth on the mobile data side, mobile internet access side, wireless broadband, yes, that will be one of the factors which will then do the inbound international revenues of the wireless business. Quite what the relationship is between the two it’s difficult to know at this stage. I think the encouraging thing that we are seeing is that if you looked at the overall revenues which are growing which is a combination of the Fixed, Wireless, Broadband and mobile internet access and the corporate data, it’s growing at double digit rate. I think they are up to about 15% in the first nine months. On the decline, it’s declining down by about 6%. So that will result in overall growth. It will probably mean as you said, that we are probably constrained to something in the 4% or 5% growth level for the next couple of years anyway and thereabout declining part of the revenue mix, against the smaller percentage. It’s down already as you can see that the 90% but it’s still a meaningful contributor at this stage. Chate Ben – Credit Suisse: Understood. Thank you very much.

Any other question Mr. Ben? Chate Ben – Credit Suisse: No, that is right. Thank you.

Thank you. Our next question is from Mr. Tim Bill [ph]. Your line is now open. You may go ahead.

Hi, good afternoon. Thanks for the opportunity to ask some questions. The first is on your LTE size. I’m just wondering how fast you think those ramp-up from the current 1,200 – of the current 1,200, how many are located in Metro Manila and how many located outside of Metro Manila? And second question, I guess what do you think is the split of your data traffic being carried by your 2Gs versus your 3G versus your LTE networks?

Well thank you for the question, Tim [ph]. For the LTE, roughly it should be about 2,500 sites by next year. As far as coverage is concerned, we now have covered major urban areas and the initial target is a total of 174, but only concentrated on the dense areas.

I think in the quarter is not really Metro Manila but urban areas, not only – Metro Manila plus other centers of the country. So that’s where our LTE roll-out will be. Outside of that, we’ll have also a healthy increase in HSPA+ in the – outside of the LTE areas to provide a corporate LTE broadband coverage.

Okay, all right.

The bigger traffic on data over the wireless, on fixed wireless side, based on the dongles actually as of now at this point.

Right. And at the moment, overall including your Fixed Line traffic and your cellular traffic from smartphones etcetera, the split of all of that data traffic being carried by the 4G network versus the 3G network and the 2G network, what do you think that roughly is? Is the LTE network probably doing about 10% versus much extent on the other two currently or is the split now more...

I don’t have the figures right now in front of me, but as far as I can recall, something like 23% to 25% of the traffic is there in Metro Manila.

Okay, all right. Thank you.

Any other questions Mr. Bill [ph].

No, that’s fine. Thank you.

All right, thank you. Our next question is from Kunal Vor [ph]. Your line is now open. You may go ahead.

Thanks for the opportunity sir. First question is on the SMS. The SMS revenue has fairly volatile till now while data revenue is picking up at 50% kind of growth rate. How would you see it going forward over the next two, three years? Do you see SMS data revenue or SMS contribution to remain flattish, or do you expect it to decline meaningfully and where do you see that decline coming? That’s question number one. Also can you throw some light on the competitive intensity in the market rate between the top two – between the two players as well as any light on the potential new competition which is Sun Digitel [ph]. And lastly on the international long distance revenue, there has been some uptick, some increase in revenue, is it because of currency or is that both of it? Thanks.

First question. Well, as you are aware in terms of the way SMS is being consumed in the Philippines, is largely by the way of buckets or unlimited. How we’ve factored in SMS cheaply such that what I guess there is less financial incentive for what to have – what to switch to some kind of chat application. Secondly it also achieves for us basically a position where we become neutral that people are sending messages via SMS or through some kind of data application. So that’s kind of the way we’ve positioned our business. So certainly there will be shift as a behavior and community – when and if where the community moves, there will be shift, but we have achieved a situation in where we would be – especially neutral from a revenues and assuming that subsequent.

Okay.

Regarding the comparative intensity, at this point it has improved a bit. It is still – the rivalry is still there, but there are no creditworthy quality pricing that you can find anymore outside except for maybe targeted areas regionally. On Sun Digitel [ph], we do not see any expansion going on or rollouts going on the ground. However we have made some announcements that they are going to rollout certain base stations I think within Metro Manila. But at this point, we don’t see – they do need to put in their own backbone and transport which would take time and money.

Sure. Well just a follow-up on that, like do you believe the Sun network sharing or tower infrastructure sharing something – is that possible, can that help them accelerate or you don’t think any network or infrastructure sharing will happen in the market?

As of now, there is no such thing mandated by the regulator or we’re wishing to do that ourselves.

Okay. And then last question on the ILD side?

On the mobile ILD side, actually we are holding up quite well in terms of both the traffic and the balance greatly, helped a bit by efforts on [indiscernible] as well as some through internationally long for Sun [ph]. Impact of currency depreciation favored it a bit in the third quarter given that the peso weakened during the third quarter also it probably was strengthened in the fourth quarter than in the third quarter.

But I don’t think...

Exactly.

Yes. And the longer bound trend. I think the longer bound trend for both wireless and fixed will be that the international will continue to decline. Though that if you want to think, the pace of decline does not seem to be quite as high as it has been over the past few years.

Okay, great. Thank you. My question is answered.

Any other question Mr. Vor [ph].

No, thank you.

All right, thank you. Our next question is from Rama Maruvada. Your line is now open. You may go ahead. Rama Maruvada – Daiwa: Hi good afternoon, couple of questions for me please. Firstly, with regards to your CapEx, the nine month seems to be flat, I think around 50% of your full year guidance. So just wondering if your guidance is too conservative or are there any timing issues here? The second one is with regards to the prepaid subscriber additions in particular for the Smart brand. There seem to be net losses. Wondering whether this is driven by the postpaid migration trend, and in particular what should we expect for this going forward? The third one is on the cost side. As you know most of your cost items are in fluxed in a quarterly basis, so just wondering if you could provide some color on whether we should expect any additional amount to be cost going forward? And on the wireless side, just to paraphrase Neeraja’s question, your wireless margins went from 50% last year to 45%. Any comments on where the wireless EBITDA margins will settle over the next couple of years? Thank you.

Maybe just on the first question which is probably the easier one to answer. Yes, the CapEx guidance we are sticking at the PHP 29 billion. And yes, it really is a timing issue. A number of items will be booked in the fourth quarter of the year and that will bring it up to close to the PHP 29 billion guidance number.

I will address your second question on the Smart net adds for prepaid. That is only unique to the third quarter. And I mean unique because the preceding quarter was an election quarter, where during election what normally happens is that a lot of prepaid SIMs are being used by watchers in elections. So you have two, three parties building their own – there are thousands of watchers in the election booth. And of course after the elections, they don’t have need for it anymore and churn. And that is characteristics of the industry. So you see there was a spike, an unusual spike in second quarter, but you see that correcting in the third quarter. We don’t see that happening in the fourth quarter.

The MRP for the overall sites, yes, there are some ongoing initiatives to respect to the integration effort. So there are some additional costs that we will be booking in the fourth quarter, but the amounts are not significant as they were last year. Rama, is that okay? Rama Maruvada – Daiwa: Yes. And maybe on the wireless EBITDA margins, I mean I understand the change in business model to postpaid, but they seem to be down significantly on a year-on-year basis. So any comments on what do you expect the sustainable level to be? Is it 45% or should we expect it to go down or keep up from?

Well, yes the most significant change if you look at the quarter versus last year, we believe in the subsidies, so actually there is an upfront cost to the ramp-up in that business. Now taken altogether in terms of our expectations that the shift in the revenue mix, the shift in the prepaid, postpaid mix, we kind of think that the margins of the business to start of – top of 1% kind of at the year, that’s kind of our guide – that is outlook for the business in the context of single-digit versus growth in absolute term. It will still increase, but the first hand margin will even decline. Ramakrishna Maruvada – Daiwa: Okay. Thank you very much.

Any other questions? Rama Maruvada – Daiwa: No, that’s all. Thank you.

Thank you. Our next question is from Mr. Luis Hilado. Your line is now open. You may go ahead. Luis Hilado – HSBC Securities: Hi, just one follow-up question from me. With the push towards postpaid during the fee area, I guess PLDT’s quadruple-play when you put postpaid mobile along with the bundle for the Fixed Line as well as the PayTV?

Luis, you’re right, our Triple-Play and it does not include mobile services as we explained, but that is something we might consider in the future. Luis Hilado – HSBC Securities: Okay, great. Thanks.

Any other questions Mr. Luis Hilado? Luis Hilado – HSBC Securities: Yes, that’s all.

Thank you. That concludes the question and answer portion. Before I turn the conference back over to PLDT, I would like to give everyone the instant replay information for today’s call. This conference will be available on a 24-hour instant replay starting today daily on through November 19, 2013. Replay information for the 3:00 PM call, international caller number is (852) 3018-4377. U.S. toll-free is 1 (888) 566-0351. Passcode is 3525. Conference leader is Melissa Vergel de Dios. I will now turn the conference back to PLDT for any additional or closing remarks.

Thank you. Thank you very much for joining us today. We look forward to talk to you again sometime in March when we would be announcing our full-year results. Thank you.

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