Okay. Good afternoon, and thank you for joining us today to discuss the company’s financial and operating results for the First Half of 2023. 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 the Investor Relations section of our website at www.pldt.com. Kindly note that this briefing is being recorded. A podcast of this event will be available on our website after the call. QR codes for the presentation, the MD&A, the financial statements, as well as the podcaster on the screen and in the confirmation notice’s e-mailed to you. For today’s presentation, we have with us our Chairman, Mr. Manny Pangilinan; Mr. Al Panlilio, our President and CEO; Mr. Danny Yu, our Chief Financial Officer and Chief Risk Officer; Attorney Marilyn Aquino, our Corporate Secretary and Chief Legal Counsel; Shailesh Baidwan, President of Maya Philippines and Co-Founder of Maya Bank as well as other members of the PLDT management team. At this point, let me turn the floor over to Mr. Pangilinan to begin the presentation.

Thank you, Melissa. Good afternoon, Chairman. Good afternoon our friends in – our analyst friends here today here in the hotel and online. Thank you for being here. Happy to report the first semester performance of PLDT Smart. I just want to start by saying that, I guess all the efforts that we’ve been doing as a company, very proud to say on this chat that we will reaffirm our top position for brand value sustainability perception value. This is critical because brand is always critical in the way we run business and trusting – it shows me a big trust in the brand and in the company that we have. So most viable brand at PHP2.6 billion. That’s up 2% actually from last year as done by brand finance and the highest – number one highest sustainability presentation value with all the sustainability initiatives that we have been doing all this time. So again, I think core to our business, I’m happy to report that we have been awarded as the – basically, we are the undisputed fastest integrated network. Both Smart and PLDT were recognized by Ookla. This happened about 2 weeks ago – 3 weeks ago here. They came over here. They did say that fixed broadband has been a leader for 5 years in this country. So that’s a fit we think that has not been done by any entity for sure in the Philippines, but I think even globally. And then also a fit that we achieved was – Smart was rewarded with the best mobile network with three consecutive semesters, and I think it’s also a fit according to Ookla. So very proud of that. So, as we went through the year, and we were able to reinforce even more our core infrastructure. Homes…

Good afternoon. I’ll be presenting the financial and operating highlights for the first semester of ‘23. Service revenues for the first semester of 2023 rose by 1% to PHP94.5. OpEx including subsidies and locations declined by2% to PHP42.4 billion. EBITDA grew by 3% to PHP52.1 billion and all-time semestral high, EBITDA margin improve to 53% from last year 52%. Telco Core income excluding the impact of assets sales and Voyager rose to PHP17.6 billion, up 3% from last year. On segment basis, Home continued to be the main driver of the growth with a 3% rise in revenue to PHP30.1 billion. Fiber only revenue is grew 11% to PHP25.7. Our enterprise business grew by 2% to PHP23.2 billion, our individual business remains stable year-on-year with revenues of PHP40.2 billion despite the absence of election related benefits in 2022. Allow me now to go through the segments in greater detail. Home broadband revenues grew by 3%. Fiber revenues which account for 85% of the total Home revenues rose 11%. The Home broadband market remains underpenetrated with unserved demand more at the lower market segments that’s more sensitive to price and inflation. Home ARPU is respectable at 1,488, Fiber net adds for the first 6 months of the year stood at 123,000. PLDT’s competitive advantages remain to be our superior network, strong brand equity, a portfolio of products at different price points using varied fixed and wireless technologies. Next page. Data and ICT remain key drivers of our enterprise business, which was up by 2% to PHP23.2 billion from the same period last year. Corporate data rose 7% from higher fiber, managed IT and I-GATE revenues. ePLDT/ICT recorded 13% improvement in revenues mainly from data center and cloud services. PLDT Global on the other hand grew 31% from IPLCs, data center, cross-connect…

Thank you, Danny. Good afternoon, everyone. So we launched Maya Bank about 12 months back and put it at the heart of our payment ecosystem. And we’ve had fantastic response to the launch of the bank, and I’ll share some of the statistics on that, along with, of course, recognition that we have got amongst not just the peers in Philippines, but globally. The launch of Maya Bank and deepening of Financial Services has, of course, helped us in the consumer business, where by virtue of having a single unified app, we are seeing the performance in terms of customers using us for multiple use cases and the app continues to be rated the best finance app. And on the other side of the payments where we power enterprises to accept Visa, MasterCard, Bank Net, QR PH, that business continues to grow in strength day by day. Today, we process more than 50% of all Visa MasterCard QR PH transactions in the Philippines. On the next slide, as I mentioned, our plan always was to launch an all-in-one digital banking solution, whether you’re a consumer or whether you’re an SME. On the consumer side of the house, we’ve already introduced saving products like the personal goals and Maya Saving our Engagement banking, and we have launched Maya credit, and we will be introducing a buy now pay later, which is already in test mode. And on the SME side, I’ll talk in a minute where on the back of providing enabling them to accept payments from all kinds of digital means. We are now adding on other services to allow them to settle that money into a business deposit and on the back of that provide working capital loans. And of course, all of this underpinned by our payment network.…

I guess this is the outlook, So I’ll just read through this. In terms of services revenue growth, the outlook is low single-digit growth for the full year. EBITDA is quite similar, low single-digit growth for the full year. Telco Core is a range of PHP33.5 billion to PHP34 billion anticipated for the full year, CapEx between PHP80 million to PHP85 billion and that’s a focus on deleveraging, I think you saw the net debt-to-EBITDA ratio as of June 30 being 2.48. We should anticipate that, that should drop to around 2.3 by year-end, in part because of healthier EBITDA for the year and proceeds from the tower sales for balance of the year. Thank you.

So we’re now ready to take your questions. [Operator Instructions]

So, we are now ready to take your questions. [Operator Instructions] Allow me to take questions on the floor first before we go to those online. Anyone? Just raise your hand. No questions. So, let’s go to the questions that we received online. There is a question from CLSA, Derek. There are three questions, so we will start with the first one. What pulled down the growth in enterprise revenues when ICT revenues rose 13% year-on-year. There is a question goes out to Mitch.

Thank you, Melissa. So, our – we actually grew 13% in the first half, but that was pulled down by the decline of legacy services like our voice services and discontinued services, like, for example, the Department of Education load that we provide to all the teachers nationwide. And due to the face-to-face learning, they stop already the service. But all-in-all, we still grew by PHP600 million in the first half, bringing our revenues to PHP33.2 billion.

The next question from Derek is, can you give us updates on the Sky Cable acquisition? Marilyn Aquino?

We are still awaiting the approval of the PCC for the transaction. So, I think there is a scheduled meeting sometime next week so that we can settle any outstanding issues with the PCC. But we have submitted a lot of documents that they requested. So, we will – that’s the only thing basically that’s outstanding, I believe at this point in time.

The next question and the last question from Derek. For Maya, the loan book has tripled year-to-date. What are the names like now and is there a new timeline for profitability?

Sorry, what was the first part Melissa?

For Maya, the loan book has more than tripled year-to-date. What are the names like now and is there a new timeline for profitability, the names?

Yes. So, at this stage, we are very pleased with the way the loan book is performing. As you know, this was – first, we started with our existing customers for whom we had rich data on their transaction history and using our internally developed AI credit scoring models. We have been disbursing them loans, and we are seeing over 80% of them coming back month-on-month for repeat. So, the names, I won’t be able to share the exact numbers, but the extremely low, in fact, our margins are very, very healthy on the loan book. The idea is to keep expanding and adding newer products. Our first product is a short tenure line of credit. We are adding now on top of that installment loans and expanding to other segments like the SME. As regards to profitability, absolutely the whole plan of introducing products like the loans products, these are high-margin products, they help us to deepen the customer relationship and we see that the usage of the loan customer is not just on the loan side, but then they use us for all the payments and other use cases. So, we make a lot more ARPU per customer once they start taking loans from us. So, the idea is as we expand the loan book to help us create higher-margin products to push towards profitability. Already all our businesses are segment EBITDA positive. Now, our pushes towards group EBITDA profitability, which we are aiming for the second half of 2024.

Any questions from the floor before we take part from the online participants? If there are none, the next set of questions are from [indiscernible] of Abacus Securities. Were there any reversals in asset impairment in the second quarter? And what is the nature of it?

There is none.

The second question, given the slight sequential decline in quarter two service revenues, where do you expect the bottom line growth to come from moving forward? Given the slight sequential decline in second quarter service revenues, where do you expect bottom line growth to come from moving forward?

Well, I think the targets really for us is higher in the second half. As we expect a lot of the long-cycle contracts, for example, contracts with enterprise, we expect that to happen in the second half. We are also seeing positive trend in wireless that has grown from first quarter to second quarter by 3%, and we could – I believe that that growth will continue in the second half. And I think for Home, showing 11% growth in fiber, that remain to be the focus on revenues for Home. So, just a bit of catch-up for Home on installation as we are able to roll out more parts in greenfield, and that’s also supposed to happen in the second half.

There is a raised hand from GP of JPMorgan. You may un-mute your mic.

Hi.

We can hear you.

Yes. So, my first question is on the increase in finance costs year-on-year of around 20%. So, what is really driving this?

Fully on the accretion of lease liabilities arising from our sales.

Okay. Got it. And the other thing is, are there any one-off costs that are impacting the EBITDA? And also if you could share the accelerated depreciation that’s recorded in second quarter?

Could you repeat your question? You were saying were there any one-off costs impacting EBITDA after that…

Yes, the second part was, is there any accelerated depreciation that is recorded in the second quarter?

For the second quarter, there is none. There is no absolute depreciation for the second quarter. What was your first question again? Sorry, I didn’t get it.

Any one-off…?

Yes.

Well, the only non-recurring items, I think I mentioned earlier is the gain on the sale of stratosphere. That’s around PHP3 billion, then partly offset by the MRP costs of around PHP1.8 billion. There was also a gain on ForEx hedging and derivatives of around PHP1.2 billion. That’s for the first semester.

Okay. But with the gain on sale of stratosphere, impact the EBITDA?

Yes, in the sense that with stratosphere there will be a reduction in depreciation online. But there is also an increase in financing costs arising from the accretion of these liabilities. Is that your question?

No, actually, I meant if anything that is impacting the operating expenses.

Whether stratosphere impacts operating expenses, the sale of towers impacts operating expenses? Is that your question?

Yes.

Yes.

Do you have any other follow-up questions?

No, that’s it. Thank you.

Thank you. Hussaini, you have your handy raised?

Yes. Okay. Hi. Good afternoon, and thanks for the call and thanks for the opportunity. Several questions from me, first is on guidance. Now as the revenue – sorry, the EBITDA growth guidance is lowered from mid to low-single digit. Just wanted to understand what is driving then the lift in Telco Core net income guidance? The second question is on the mobile side. I see that the guidance for the mobile in the second half is – or the outlook in second half is better than the first half. So, what is driving that? Are we seeing any price increase efforts in the market? And how are your competitors, especially the new players responding to that? And on the enterprise side, I read in the press release, PLDT is going for the 12th data center. So, just wanted to understand that, are we already seeing customer traction for the 11th data center? And are there any plans to monetize data center in the coming years. Thank you.

The first question is on the EBITDA guidance from mid to low.

We are expecting better revenues in the second semester combined with a reduction of operating expenses. So, that will drive the EBITDA in the – for the full year of 2023.

So, Francis on the mobile, the second question, is the second half outlook looking better than what it was in the first.

Okay. For the second half, there are a few factors that we are looking at that’s why we are more optimistic. The first one, during the first half, because of SIM registration, we have seen our churn rates reduced by around – as much as 35%. So, we expect that to continue in the second half – second semester. We have also seen our ARPU grow by at least 7.5%, also because we are getting more quality subscribers because of SIM registration. And we did a lot of revenue optimization initiatives to maximize the revenue of our subscribers. So, we expect that to continue in the second semester. Third point, we are going to further invest on improving our network experience that’s going to happen, assuming in the second semester. So, we expect some revenue definitely to come from that one. And lastly, I think there is an opportunity now to further drive activation because not only did we lose or we have unregistered subs, more so from our competition. So, there is a big sea of unregistered subs in the next few months. And finally, if I may add from a macro perspective, the inflation is also the outlook – the forecast of the inflation is much better as compared to the same period last year and even better than the first semester. So, those were the key pieces why we are more confident with the second half.

Thanks Francis, maybe if I can – just have one follow-up over here. So, based on all the points you enumerated, is the growth in the second half will be driven by market share, or you are of the view that the overall industry will grow at a healthy pace?

I think a lot of it will be driven by maximizing the revenue per subscriber from our end. Because of SIM registration, I think driving – stealing some share will be more challenging from both parties, from both players. So, I think the key to driving the further growth – let’s say we are not going to steal share because I guess – I think that’s where the network experience would come in. At the end of the day, consumers choose the better Telco with the better network experience. But I think a huge part of the growth now unlike before where we rely a lot on driving activation would be driving the attention and driving the ARPU of our current subscribers.

Hussaini, are you okay with that? We will go to the data center question.

Yes, sure.

Hi Hussaini, thank you for the question. So, with regards to data center 11, which is the first true hyperscaler data center in the country, we are on schedule, we are on track. We expect customers to be able to move in by the first quarter with full facility readiness by the second quarter of 2024. There has been a lot of interest. We have actually entertained some customers to come in and do a due diligence already on the site, and we are entertaining these as we speak. With regards to data center 12, we want to build ahead of demand, and we are in the process now of going through a very rigid site selection process to ensure that the 12th data center that we are planning to build fits all of the requirements for both hyperscalers and enterprise customers that we intend to target. Thank you.

And there was a question on the monetization of our data center.

Yes. Just – I guess I can take that. As you said on the data center when you say – in terms of monetization of auto data center, we are exploring, looking for a partner to be – to bring in into ePLDT data center business only, maybe three factors. One is we believe if we can bring a partner, we can actually drive top line even more if we can be part of the platform of this partner that we are looking at. Second is to really improve also operations in terms of they were used to operating hyperscaler data centers. And that’s something we can learn from, be more efficient, and be more cost effective. And lastly, of course capital, as we continue to build out 12 and maybe in the future, 13 and 14. So, that’s something that I think we are able – we want to have a partner come in and address those three factors for us.

Sure. Thanks. I will get back into the queue. Thank you very much.

Thanks Hussaini. Are there any questions from people who are here? There is a hand raised?

John Renz [ph], Security Bank. Did I expect any one-offs in the third quarter regarding this typhoon or this weather? That’s all for me.

One-offs due to the typhoon?

We actually don’t see any yet. I don’t think it’s going to be as bad as Odette, last year. So, there might be a few areas affected, but I think restoration is not as difficult as the one in Odette. Jeremiah, you want to add something?

Just to add to that, I was actually spot on in terms of the number of households that have been impacted. So today, we currently have about 16,000 households that we are still in the middle of actually restoring services to. So, when you look at the size and the scale of that versus Odette or other calamities that we have had in the past, it’s significantly lower. So, this is something that we will do as a matter of, I guess a regular operation. We don’t necessarily see any large one-off costs associated with it.

I just want to clarify something because earlier there was apparently a question whether there was or there are one-off items on the EBITDA. My answer is no. There is none. Because any one-off or non-recurring gain is shown after Telco Core income before reported net income.

Thank you.

Any other questions from the floor? Place the mic in the middle. Thank you.

Hi, Steven here from China Bank Securities. I just wanted to ask if you could provide more color on the lower depreciation charges for the first half. And for my second question, is PLDT planning to venture into prepaid fiber similar to what competitor has been doing? Thank you.

Why was there lower depreciation in the first half?

Last year, we had an accelerated depreciation of certain assets such as like 3G, VVDSL, transport equipment, about PHP51 billion were written up in 2022. So, that had an impact on our depreciation this year.

Under the prepaid fiber?

Sure. Just in terms of prepaid fiber. So, we are looking at all of our options, and prepaid fiber includes one of them when it comes down to our fiber monetization strategy. As you know, we actually have a slightly different strategy to what our competition is doing. We currently sit at about the 60% port utilization level. Very, very different to what our competition is doing much significantly lower. So, one of the things we are doing in looking at prepaid is actually being very, very targeted in our approach to ensure that we are using the prepaid offering as something for – to better utilize in a specific area to ensure that we don’t necessarily drive further commoditization of the sector and that we are able to actually extract as much value from the existing assets that we have already put out there.

Thanks Jeremiah. Any other questions on the floor? We will entertain questions that are e-mailed. This one is from Arthur Pineda of Citi. What is driving the reduction in revenue and EBITDA guidance for the year? I guess it’s similar to what Hussaini asked that the initial guidance for the year set out at mid-levels and then our updated guidance is on low-single digit.

So, the guidance for growth of revenue and EBITDA, similar to the first semester, the bottom line is higher.

Then the second question from Arthur. Fiber broadband net adds remain relatively soft. How do you see this as changing into the second half? Are you seeing your competitors gain from prepaid fiber?

Okay. Thanks for the question, it was Arthur, I think, am I right?

Yes. It was.

So, our focus in the first half has really been around sweating our assets. We have 6.1 million ports, and we have been very much focused in monetizing as much of that as we possibly can. That’s seen us take two approaches. Number one is switching. So, really looking at how do we have compelling switching plans for our customers so that they move over from our competition. And the second one is also looking at prepaid fiber. So, we are looking at prepaid fiber as an alternative and a way for us to be able to help drive improvement in net adds moving forward. In terms of, are we seeing any impact from competition with regards to prepaid fiber? Competition has also been very, very selective with their prepaid fiber offering. So, it’s not something that they have been offering nationally. From what we have seen on the ground they have been very, very selective in the areas that they do offer prepaid as well, and they have been very, very targeted, prominently targeted at areas where they have capacity. Now, they have – admittedly, they have actually a lot more capacity than PLDT because we are – they are currently sitting on average about 20% and we are sitting at about the 60% level. So, whilst we will be venturing into the prepaid space, we are just looking very selectively at these particular areas.

The next question from Arthur. Voyager’s loss has narrowed further quarter-on-quarter. I guess it’s similar to the earlier question. What are your expectations on the timing for profitability and what milestones need to be achieved?

Yes. As I have mentioned, all the businesses are now segment EBITDA positive. So, we are now trying to make sure that the whole company is EBITDA positive, which as I mentioned, in the second half of 2024, we will get there as we continue to launch and scale up new products with high margins, especially products like lending, as we expand into other segments. At this stage, the loan book is growing. But as we can see, the deposits are – have grown very fast. The good news is these customers are transacting, so they are giving us a lot of rich data on them, which helps us in our credit scoring model in turn to start lending to them. So, that’s one part. And the second is by helping to grow the deposit base, it continues to provide us with a very healthy cost of fund base on which as we grow the lending book over the period of the next 12 months, that helps us the balance sheet that we need. So, that is the plan in the second half 2024.

Thanks SB. And his final question. How should we look at the manpower related charges – reduction charges into the second half? This has actually declined quarter-on-quarter. Is this done and dusted or are there still more in the second half of ‘23?

I will let Gina, Head of People Group. Gina Marina Ordoñez: We don’t expect for the second – for the balance of year any additional. But what we are doing is really focusing on the up-scaling and re-scaling of our workforce, primarily in areas that are relevant now and very much aligned to the business needs. So far, if ever we have that do not be as significant as previous year.

Thanks Gina. There is one on the queue from Giorgio Gonzales of PEP [ph]. Any further update to the CapEx overrun? Has the total sum been pared down further from what was indicated in the first quarter? How much of the first half CapEx is from the overrun?

What we are going to do is to just announce to you when everything has been completed because we need to reflect in our financials any additional settlements that we enter into. So, until then, we prefer not to say anything more.

Thanks Marilyn Aquino. Any last questions from the floor? There are none on the queue. Last chance. So, if there are no further questions, we will now turn the floor back to Mr. Pangilinan for his closing remarks

Thank you for joining us for this briefing. And we would like to invite you for the FIFA World Cup starting August 25, correct. First game of Gilas against the Dominican Republic at 8:00 p.m., broadcast live nationwide and globally. So, we look forward to one or two Philippine victories, we hope. So, thank you and we look forward to seeing you again on the third quarter briefing.

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