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.

Good afternoon and thank you for joining us today to discuss the company's financial and operating results for the first half of 2019. As mentioned in the conference call invitation, a copy of today's presentation is posted on our website. For those who have not been able to do so, you may download the presentation from www.pldt.com, under the Investor Relations section. A podcast of this briefing will be available at our website after the call. For today's presentation, we have onstage members of the PLDT group management team namely: Mr. Manny Pangilinan, Chairman and CEO; Mr. Al Panlilio, Chief Revenue Officer, and today appointed President of Smart; Ms. Anabelle Lim Chua, Chief Finance Officer; and Atty. Ray Espinosa, Senior Adviser to the Chairman and CEO. At this point, let me turn the floor over to Ms. Anabelle Chua for the presentation.

Thank you, Melissa. Good afternoon to everyone and welcome to our first half 2019 results review. The key highlights of our financial results for the first six months of 2019 are as follows. Our service revenues came in at PHP76.7 billion, which is 7% or PHP4.8 billion higher year-on-year. Revenue growth was led by the wireless individual business, which saw a 20% boost in service revenues from PHP34.4 billion. Our Home segment grew at a more modest pace of 2% year-on-year to PHP18.3 billion due largely to the lingering impact of a disruption of our installed and repair activities. On the other hand, our enterprise business posted a 6% increase over previous year to hit PHP19.4 billion. On a combined basis thus our consumer and enterprise segment revenues which account for 94% of our total revenues grew at a higher 11% year-on-year equivalent to a PHP7.3 billion increase. Our consolidated EBITDA in the first half 2019 amounted to PHP40 billion up by 15% due to the combined impact of higher service revenues and lower cash OpEx. This figure also reflects the impact of PFRS 16, the new accounting standard for leases, which was adopted at the beginning of the year. EBITDA margins in the first half was 50%. Our telco core income which excludes the Voyager results amounted to PHP13.2 billion, which is similar to the core income amount registered at the first half of 2018. Lastly and finally, our reported net income grew 4% year-on-year to PHP12.2 billion. Now in line with our dividend policy our Board of Directors today approved an interim cash dividend of PHP36 per share for a payment on September 10. This represents a 60% payout of our PHP13.2 billion telco core earnings. On an annualized basis this resulted in a 6.4% dividend yield. Now…

Thank you, Anabelle, and good afternoon to all of you. I guess, I just wanted to share with you before I pass the microphone to both Ren and Jovy who will talk about the business and the consumer and enterprise business. Just wanted to let you know, that since I started July 1, I want to share with you what I'm trying to do with the org in terms of the Chief Revenue Officer office and how we want to organize to deliver the objectives that we have moving forward. I guess it's a driving principle for us in the new CRO office. At the end of the day, I think customers should be in the middle of our business. So, the customer will be the centerpiece for our business. Everything that we do will revolve around what we can do to improve customer experience and customer service. The other one is really service delivery. We want -- we need to improve service delivery. I know, you have expenses where installations take too long and repairs also take too long. So we will -- we're organizing our group to make it more agile and make it more efficient for our operations. And hopefully we can -- sustain the turnaround that Anabelle described and even grow the business even more. And third, is really to build a digital future structure for us in terms of not only for our customers, but also internally. So, it will be a very focused organization. We will again strengthen customer-centricity with a view again of the customer in the middle of our business. It will be a change also hopefully in our culture inside the company and mindset that we are all ambassadors to our customers. Every PLDT and Smart employee is an ambassador of…

Thank you, Boss Al. Good afternoon. I'll be sharing our first half 2019 performance for the Consumer businesses of Wireless and Home. I'm very pleased to report that the wireless individual business continues to accelerate from a Q1 2019 performance of plus 18%, while first half growth of plus 20%. Net service revenues increased from PHP28.6 billion in the first half of 2018 to PHP34.4 billion in the first half of 2019, a PHP5.8 billion incremental growth. Behind this growth is the continuous increase in our subspace. We ended the first half 2018 with 58.1 million subs and since then grew our subs space to 66.8 million as of first half of 2019. A growth of 8.7 million subs or plus 15% year-on-year. A key driver of growth has been the continuous adoption of our beyond access Video Every Day platform, which has driven growth in both video users and data usage. To illustrate, since our launch in November, we see continuous increase in monthly active users of all of the following apps: YouTube grew by plus 43%; NBA League Pass grew plus 113%; iWant TV grew 189%; and iflix grew by 244%. Beyond video, our big play in mobile gaming is also starting to pay off. Our focus on Mobile Legends is delivering significant gains in data users and traffic. Our unique subscribers using Mobile Legends grew 381% since Q3 of 2018, while data traffic has increased 12x over the same period. Furthermore, I'm happy to share that our very own PLDT-Smart Omega esports team was recently crowned champion in the National Mobile Legends Tournament for Conference 1 further building our awareness and influence in mobile gaming. I'm also happy to announce that Smart together with MMI will be bringing in U2 to the Philippines on December 11, which…

Thank you, Renren. Pleasant good afternoon to everybody. I'm pleased to present the first half 2019 results of the Enterprise business. The Enterprise business continues to grow fast. As of the first half of 2019, net service revenue stood at PHP 19.7 billion growing PHP 1.5 billion or 8% versus same year last year. The implementation of IFRS 16 has tempered that number to PHP 19.4 billion for a growth of PHP 1.2 billion or 6%. Nonetheless the performance headlines of our lines of business has remained unfazed. First, fixed line revenues continue to grow, fueled by the sustained demand for data. Second, our wireless revenue sustained its double-digit growth performance and is growing beyond just postpaid. Last but not the least, our ICT business is now growing more than two times of market pace, and is growing beyond just data center. To simplify the complexity of the B2B space, we have defined a framework we termed the Future of Work, which will guide us on how we serve our enterprise customers moving forward. And we said the Future of Work is going to be connected. The Future of Work is going to be mobile and the Future of Work must be secure. These three elements are required for businesses of all sizes to achieve success. Allow me now discuss each one. First, the Future of Work is going to be connected, and our Fixed Line business is going to be the one to enable that. Our Fixed Line business continuously is being fueled by the demand for data. Fixed data revenues increased by 9% by almost PHP 1 billion for the same period last year. And again, the implementation of IFRS that stood at PHP 10 billion by the first half of 2019 growing by 6%. Nonetheless our Fixed…

Thank you and thank you, Jovy, and good afternoon to all of you. I'll be brief. My job is to look at the guidance for second half and for the full year 2019. Focusing first on our revenues, particularly for the second half. For the wireless side, so far trend for July and August are showing similar quantum as manifested in the first half. So the first half as Ren indicated was about PHP5.8 billion growth in wireless revenues. So, we'll likely to replicate that if not a bit more in the second half. For the Home, we did lag behind in the first half. Revenues rose by only about PHP400 million. We should expect to improve significantly in the second half with the reorganization that Al described to you. So, we should see a growth in revenues north of PHP1 billion for the second half. Similarly, for Enterprise, typically the Enterprise revenues are significantly higher in the second half than compared to the first half. So the growth in revenues for the first half -- for the second half should be north of PHP2 billion. When you sum it up, it will be PHP10 billion to PHP12 billion growth for -- about PHP9 billion sorry PHP9 billion -- currently sum it up north of PHP9 billion. Now, the impact of international revenues in the first half was a negative PHP2.4 billion. In the second half, we anticipate the negative impact to dwindle down to as slow as PHP400 million. So, you're seeing that the negative impact of international revenues significantly declined. So, with that kind of growth that you're seeing for the second half across the three revenue suites, most of those would be -- will flow to the revenue line and down to EBITDA and to the bottom-line.…

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

Thank you. [Operator Instructions] Our first question comes from the line of Luis Hilado. Your line is now open.

Hi. Good afternoon. And thanks for hosting the call. I have three questions and just in relation to the focus on your customer service, both installation and repair, but reconciling it with also the manpower reduction plan. How do you intend to do the former, while also executing the latter? Will it require more outsourcing or will there be some aspects of insourcing? Second question is regarding, -- yeah to clarify on international. What is the -- what are the factors that are driving the moderation in the decline. And even expectations of growth in the fourth quarter? And last question is on, if you can get an update on mobile number portability. And what your plans are in that space, once it's already available for consumers?

Hi good afternoon. Let me take the first question with customer service. So -- in relation to, MRP, so, the whole new business model that we filed in the first half= is really to increase productivity. So, if you ask me look at without citing specific numbers. But versus the productivity that we did in the first half of last year, compared to the productivity we did in July, each team almost has doubled the level of productivity, let's say July versus last year. So that's really with the new processes and systems in place. We have improved productivity. And therefore it's still in line with MRP. And number two, I think within the organization, a new trust that Boss Al has described. We are looking to further increase even more, hopefully by another 30% within the coming months. So that's, I think, the path towards continued and better service delivery, installations and repair, while keeping costs at a manageable basis.

Thanks.

Thank you. Next question comes from the line of …

Sorry. Hello. I have two questions. I have two questions still, one on international and one on the MNP.

Your question is on international is why we did it moderate?

And will it recover even to growth yes?

I guess it's just a natural state of decay. I suppose at some point we had expected to make -- that explanation I could give. At some point, we had expected international revenues to reduce to a level of stasis right? Like what we're seeing on our voice business. So it's leveling off. And its not growing, slightly and same with SMS. It will drop to that level of consistency and we're seeing that on the international voice side, because I think 2010, was it? The kind of revenues we're seeing on the international side was a PHP5.43 billion, and now it will be anywhere between PHP8 billion to PHP9 billion this year. So there was a huge effort at replacing what was naturally occurring losing significant amounts of revenues, as we did on the voice side particularly the wireless voice and the wireless SMS. I don't offhand know the numbers in terms of the replacement. The revenues are needed to be addressed. So, if you combine that with the international effect and the voice and SMS not to brag about it, but it's been a huge effort within this organization to replace a huge amount of revenues that are being lost, as a result of technological change. And now data accounts for about 60% or 70%, of our total revenues. And now you're seeing, I think signs of growth in the business. I don't think we're completely there yet. Now, what's happening? And why are we optimistic about positive growth in the fourth quarter is because the folk's over there at international led by Cargill [ph] who is in this hall as well is that they're also transforming their business from the traditional voice and carrier business into more data right? And more Filipino content that the OFWs want. And I think that's done a good job. Who would ever think that international voice international business whatever see a positive growth. It's not going to be huge, but at least it will grow moderately in the coming years. And as I said, the worst about this international business looks like it's over. It's starting to head that way. And I think by the fourth quarter, we should be able to report to you some positive growth in revenues.

I just like to add the comments of MVP. Just on international I think he would have done good job. There are three areas where the stabilizer even growing the carrier like MVP said aside from voice, a growth which I think is stable volume anyway still. And people still want to talk to somebody, I hope. And the other one is repatriating the data. So they're able to sustain that and even grow that carrier business. The other one that's growing is roaming. It's also growing. So that business is growing and the third arm is PLDT Global which is the international retail entity. That's also driving data services or revenues for the group. Not significantly, but again it's a positive contribution to international. And third question, Vic?

On mobile number portability, the PLDT Group Smart in particular is taking steps to comply with the law and the regulation. The first step is to form the mobile number portability service provider and we are doing this together with Globe Telecom. And eventually the third player the Infotel Community will be part of this service provider. So the service provider company becomes key to the mobile number portability compliance. Internally, as far as the group is concerned steps are being taken measures are being taken already by the network group to prepare for the implementation of mobile number portability.

Thanks, all. It’s very clear.

Next question comes from the line of Arthur Pineda.

Hi. Thanks for the opportunity. Just two questions, please. Firstly, if you look at the net subscriber ads in the mobile space, it's been strong for both operators 30 million net adds this quarter, 26 million for the first half. It seems to be far sharper versus the prior quarters. Just wondering what's driving this for the sector? Is there bigger push towards acquisitions as compared to let's say top ups within the industry? Second question, I had is with regard to the headcount reduction charges any time you're looking 0.3 billion for MRP in the first half. How much more can we expect in the second half? Is there a budget for that in terms of headcount reductions? Any color on the number here so we can estimate maybe the savings going forward? Thank you.

Arthur, Renren here. On the subspace actually now we're seeing it's quite difficult to really understand what's happening in the subspace, and really it has to do with last year September to October there was a change in the way one recognizes active subscriber base. It used to be based on a 90-day total zero balance validity. So that was in the first half of the year. By September/October, the NPC changed that to a one-year validity of total zero balance. And therefore, you change the rules of when to recognize churn. So in that case, it's kind of shifting the view and if you have to total the subspace of the two operators, it's amounting to 160 million, which is not really reflective some of the true picture of active subscriber base. So I think with that it kind of gives you -- we're now kind of focused more on really active subspace and number to revenues of having metric because the subspace, it's hard to compare even the way we treat the one-year validity versus the way our competitor treats one-year validity. There might be a difference as well and that's why they're showing quite a sharp increase in the sub count. So that's for the first question.

And in our case at least we could say we do churn our sub-base. So in any event we think, that the metric the more important metric is revenues rather than subspace as we speak especially because the NTC rule which simply just inflates the number I don't know why they do that for the sake of inflating I don't know. The other thing is that there is -- while there is still a subscriber acquisition ongoing, we're still focusing obviously on top ups, because again the focus is on revenues and I think the quantum of top ups for Smart for the total wireless brands the three brands have risen significantly more than 20%.

I think that relates to your question Arthur that how does the subspace compare to the top ups. Actually there is -- well there is real growth I can say for Smart in terms of subspace. It needs converting to top up. But beyond that even our existing subs are actually growing in terms of data usage and therefore growing in terms of top ups. So our ARPUs actually increased for a bit.

Arthur with respect your second question in manpower reduction program. To be perfectly honest about it, we are still -- it is actually ongoing at the moment so therefore we do not have the numbers that you are asking for as we speak. But certainly the expectation that it will be a higher expense that we will have the book in the second half of the year compared to what we had because this is a more focused and directed program that we have this quarter at PLDT and Smart. So we would be able to give better color on that I guess when we announce our third quarter results. And we said that the general approach that we have had to our MRT program is really look for efficiencies and rightsizing. And typically, there is an upfront cost to it, but we make up for it by way of savings over time, basically is 1.5 years to two years then you sort of equalize what you spent upfront vis-à-vis the savings you have from a running basis.

Understood. Is there a number in terms of head that you reduced in the first half?

First half I think that's about 300-or-so people.

Great. Okay. Thank you very much.

Operator any other questions in the queue?

No questions over the phone. You may proceed.

We'll take questions from the floor. There are microphones in the center of the room. No questions? Last chance. There are none.

Hello. I'm [indiscernible] from Build Securities [ph]. This is regarding the Voyager. A while ago you said there's a PHP600 million plus for Voyager. So can you give us a guidance or the timeline for the turnaround of Voyager? And in the short-term, can you expect Voyager losses for EBIT and how does Voyager get into the overall strategy of the group?

Great question and very opportune because we like to introduce to you the new CEO of Voyager please? He wants to answer the question. Okay. Anyway, well we need to [Indiscernible] for the first time with the PLDT board this morning and he did give a short presentation of what his first impressions are. Could you give them more about the month? I thought it was a very clear and cogent presentation to the board. And basically, he spoke about the three lines of business of Voyager the principal ones anyway, which are the merchant acquisition, the Smart Padala which is the domestic remittance business basically and the Digital Wallet, the PayMaya business. And I think on the remittance side and on the merchant side, there's been significant progress made by Voyager for the past few months and, of course, now on the [indiscernible] who's got experience on the payment side with AMEX and with Visa. And I think we're getting traction on the PayMaya side of the business. So I think we've introduced an app already for PayMaya. We'd still see losses albeit slightly lower than what we had budgeted for the full-year, but the shareholders take ourselves and Tencent are pushing management to raise the level of the business. In other words raise the level of expenditure through the rights. We don't know if we haven't seen that 2020 budget of Voyager. But let me just say that already just talk internally amongst the shareholders a new funding round for Voyager. Not so much for this year, but for part of 2020 and beyond. So we don't have the details yet and how the quantum is going to raise the money, in due course we will let you know.

Any other questions? There are none. We'll turn the floor back over to MVP for final remarks.

Thank you, Melissa, and thank you to everyone for listening to us in the presentation. Let me just maybe in a way recapitulate what I said earlier namely, I would say a bullish outlook for the balance of the year for the second half this year. We will have revenues that are slightly in the region of PHP160 billion. And I think that's our service revenues. So that's unhistoric high for PLDT and I think that will flow down to the EBITDA, not quite to the profitability then. It should be with a -- maybe in the second. So I think we have to get our act together on the Home side on the FTTH we have about 3.2 billion fiber to the curve, 1.3 million ports that need to be sold. Remember the ARPU of that is about 3 times what fixed wireless hedges. So we need as well to get going on the fixed wireless side of the home broadband. So we're doing that in the second half this year. If we couldn’t get our act together on FTTH, we think the impact will be more in 2020 or starting 2020 and beyond. The enterprise is a consistent business under Jovy and we're quite certain that he will deliver the numbers that he is undertaking to the Board. Under pain of death, I suppose. So I did ask him whether we could show the higher numbers. He said no problems. So they're committed. So I think -- so I think 2019 would be a rather good year for PLDT. Now the question is really I guess when we report our third quarter results, we have to give you an indication of how 2020 would look like and that's a very interesting question. Because despite -- and I've raised…

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