Sitio Royalties Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 11 speakers on the call.

Operator

Good afternoon, and thank you for joining us today to discuss the company's financial and operating results for the Q1 of 2023. A copy of today's presentation is posted on our website. Outlook. For those who have not been able to do so, you may download the presentation from www.com under the Investor Relations section. Outlook.

Operator

I'd like to note that this briefing is being recorded. A webcast of this event will be available on our website after the call. Outlook. QR codes for the presentation, the MD and A, FS and the podcast are on the screen and in the confirmation notices e mailed to you. Outlook.

Operator

In today's presentation, we have with us our Chairman, Mr. Manny Pangirinan Alcon Lillo, our President and CEO outlook. So, Danny Yu, our newly appointed Chief Finance Officer, and Marylin Aquino, our CoreSec and Chief Legal Officer outlook. Shailesh Baiduwan, President of Voyager Innovations in Maya, Philippines as well as other members of the PLDT management. Earnings.

Operator

At this point, let me turn the floor over to Mr. Pandiglio to begin

Speaker 1

the presentation.

Speaker 2

Thank you, Melissa. Good afternoon to all and thank you for joining us outlook. I'm happy to report the Q1 result. But as you all know, the Q1 has been very tough for us, challenges operational performance that we had in the Q1 that we're able to resolve in the Q1. Having said that, I think last year we also defined operational purpose.

Speaker 2

I think first time we'll go over to final question, we'll begin with Smart. Just wanted to share that we are a Filipino company with Smart solution and meaningful connections to the relation That has been the purpose that we define as management and working with the entire organization also. We've also defined our vision and mission. So you can read on the screen. Next page.

Speaker 2

So That purpose drives us in our key business priorities. It is where we shape the market with innovation, the new products, operating expenses. As we continue obviously to grow our core business, we continue to strengthen this operational and operational excellence. Very healthy businesses that we have from individual wireless, home to enterprise, the business level still operating margin. Very healthy 52% margin

Speaker 1

in the

Speaker 2

Q1 compared to 51% in 2022.

Speaker 1

And operational

Speaker 3

and operational excellence.

Speaker 1

And

Speaker 2

also of course, NASH is part of our strategic 100% ABLR should seek to continue to streamline our operations, operating expenses. Bringing cost to serve down, having more efficiencies and really being more productive as a company. Outlook. So, we continue to reinforce our core infrastructure built in Smart. Close to, Jeremiah, about How many barangays?

Speaker 2

About 17,000 barangays also out of the 42,000 barangays. And operational footprint. Outlook. So the fastest most extensive network in the country. Next page please and happy to share with you.

Speaker 2

Next page. Outlook. Happy to share that we are still the undisputed fastest integrated network in the country. In Barcelona, during the mobile conference in Feb, Smart was awarded the Philippines' fastest and best mobile network, operating expenses. And then only 2 weeks ago, Ookla was in town and awarded the operating activities.

Speaker 2

As the Philippines passes fixed network for 5 straight years also. So, a lot of hard work and a lot of our CapEx obviously getting ongoing to the network, making sure that we have the most reliable and integrated network. Operational performance. So our 2022 sorry, there's a typo in 2023 Q1 performance operating performance. We continue to strengthen the offerings in at home, operating on fixed line subscription, describe the installation challenges that we face and Thank you.

Speaker 2

I hope this is better. And then for Smart, Maybe leaving more for today. I think the new tagline for Smart is live more operational excellence. Today, I'm really able to have stable revenues this past few quarters and the efforts of Francis to really strengthen the smart brand, Kinsta is already very strong, so smart operating Smart Brand and the mobile business. And also again offering more products in the market That also offer live events powered by our fastest mobile network.

Speaker 2

For enterprise, continue to aspire to be the trusted partner of growth outlook for our enterprise business and our SMEs. So growing core business driven by higher digital adoption and business transformation, operating connectivity management to enable for businesses in the Philippines. So again, aspiration to operational excellence. Next page. So, this is just One of the solutions that we brought to the market and we continue to push solution services, managed services to the market.

Speaker 2

This is only like a couple of weeks ago, Beauty Enterprise partnered with Toyota in their My Toyota Connect operational excellence with Smart IoT eSIM solutions that are put in the cars. The Smart's platform that will enable the auto to maximize the benefits of an integrated connectivity management platform, giving more offering more data to Toyota In terms of how they can manage the cars. And it's a similar solution that you could not only use in the automobile industry, But also help revolutionize other industries like logistics and fleet management and the like. So operational excellence. We will continue to push a lot of these kinds of solutions to the market and really making sure that the digital transformation across operational and regulatory requirements.

Speaker 2

Next page, please. And of course, sustainability is in our DNA, focusing on business continuity, energy efficiency and operating expenses. So we are ISO certified for security and resilience and focus on operational excellence. We are also certified in terms of energy management systems and this is true for, outlook. For example, our EPLDT data centers in Clark, Makati, Passi, Ncibo, and aim to really improve energy usage and development outlook on Energy Management System.

Speaker 2

Just yesterday, we signed up a partnership with First Gen Energy Development Corp. Outlook. In terms of renewable contract for our PLT Smart facilities, the source will be a geothermal energy that will power up operational excellence. Seven facilities in Visayas, amounting about 3.7 megawatts. And once Mingda now opens up operational excellence.

Speaker 2

Because open access, there's another 3.45 megawatt of renewable power that we can outlook. Again, this is part of our commitment to reduce our Scope 1 and Scope 2, to renounce gas emissions by 40% operational performance by 2,030. So at this point, I'd like to move the mic to Dani sorry, last slide. Operational. Just to summarize, despite those challenges that we have faced in the Q1, operational excellence.

Speaker 2

We have shown growth behind all this adversity. We've shown resilience. TelcoCore operational performance. It's up 5% to ARS 8,600,000,000 compared to last year's ARS 8,200,000,000. Net service revenues are up 2% operational results.

Speaker 2

RMB47.1 billion versus last year RMB46.1 billion. And EBITDA, which is a high all all time high quarterly EBITDA of DKK 26 billion or plus 2% versus same period last year, again at a 52% operating margin for EBITDA. So I'll move you to Danny to go to more detail in terms of our financial performance. Operational and financial and operating

Speaker 4

results for the Q1 of

Speaker 2

outlook. Next,

Speaker 4

consolidated service revenue for the Q1 of 2023 amounted to 47,100,000,000

Speaker 2

operational performance or higher

Speaker 4

by 2% from last year. EBITDA for the quarter also rose 2% to $26,000,000,000 an all time high quarterly high. Outlook. EBITDA margin remained strong at 52%, higher than the full year margin of 51% in 2022. Outlook.

Speaker 4

Telco core income excluding the impact of asset sales and Voyager grew 5% to $8,600,000,000 from last year's earnings release. Next please. Looking at the segment performance, our home business continued to be the main operational performance. Driver of growth with a 6% year on year increase to $15,000,000,000 Fiber only revenues rose by 14% to 12.8 operational excellence. Our enterprise business improved by 5% to $11,800,000,000 In the face of industry headwinds, outlook.

Speaker 4

Our individual business remains stable year on year, registering revenues of RMB 19,800,000,000. Outlook. Let me now go through the segments in greater detail. The home broadband business continued to show growth, albeit at a slower operational performance and economic performance. The market remains underpenetrated.

Speaker 4

However, unswerved demand is more at lower segments, outlook, thereby more sensitive to inflation. Fiber home revenues now account for 85% of the total home revenues, up from 81% outlook for full year of 2022. Home ARPU grew 3% year on year. Fiber net adds of 81,000 operational performance. In the Q1 are more than 3 times that in the Q4 due to lower churn and higher migrations.

Speaker 4

Outlook. PLDT's competitive advantages remain to be strong brand equity, superior network quality and having a fixed and wireless portfolio, which allows us to offer Barent Technologies and price points to address different markets. Operational excellence. We're also seeing strong emerging revenue growth drivers in the enterprise business. Outlook.

Speaker 4

Corporate data grew 7% due to higher fiber, managed IT and iGate revenues. Outlook. EPLDT rose 14%, mainly from data center and cloud services. In addition, PLDT Global registered a 42% increase in revenues from the enterprise IPLC, data center and carrier hubbing. Outlook.

Speaker 4

PLDT's data center, 11th data center expected to be operational in the Q1 of 2024. Next please. The individual business managed to keep revenues stable compared to the same quarter last year outlook. Mobile data revenues grew by 4% to RMB 17,000,000,000 operational performance. As data usage per sub and data traffic continued to register year on year increases despite a dip in data users, which declined due to impact of

Speaker 1

operating income registration.

Speaker 4

Except for the impact of inflation on our low end brand TNT, smart prepaid and smart Postpaid revenues were higher year on year. Initial impact of SIM registration reduced gross adds, outlook. But we said minimal impact on revenues. Network superiority in terms of speed, low latency, reliability and operational excellence and nationwide reach remain Smart's competitive differentiator. Next.

Speaker 4

In the Q1 of 'twenty three, DataNow outlook.

Speaker 1

Thank you, John. Thank you, John. Thank you, John. Thank

Speaker 4

you, John. Thank you, John. Thank you, John. Good afternoon and thank you for joining us today to discuss the company's financial and operational performance. While home broadband rose 8% and corporate data by 7%.

Speaker 4

ICT registered a 20% increase, earnings, which included a 19% rise in data service revenues. Consolidated EBITDA in the Q1 amounted to ARS26 billion or 2% higher versus last year as the ARS1.111 billion increase in revenues operational excellence and fully absorbed the R500 $1,000,000 rise in costs. Next please. Outlook. TelcoCorp registered a strong start for the year at $8,600,000,000 This is 5% or $400,000,000 higher than last year outlook as higher EBITDA and lower depreciation fully offset increases in financing costs and tax provision.

Speaker 4

Outlook. Next please. On reported basis, PLDT's income stood at 9,000,000,000 outlook for 2019. Thank you, sir. Thank you, sir.

Speaker 4

Our next question comes from the

Speaker 1

outlook for

Speaker 4

the full year. We expect to be in the range of $4,600,000,000 Next, please. Outlook. PLDT's balance sheet remains strong with net debt to EBITDA in the Q1 having improved to 2.18 earnings release from last year's 2.25 and 2021's 2.38. Outlook.

Speaker 4

This resulted from a reduction in net debt and an improvement in EBITDA. Gross debt amounted to $247,700,000,000 outlook, of which 16% are dollar denominated and 5% unhedged. Interest costs for the quarter stood at operational performance. Our average life of debt is 6.6 years. Next, please.

Speaker 4

Outlook. Total CapEx for the quarter amounted to $19,300,000,000 consisting of network and IT CapEx of earnings release. $17,700,000,000 and business CapEx of $1,600,000,000 Included in the CapEx outlook for our 11th data center among others. To optimize CapEx spend, PELDT is pushing to further improve port utilization and operational excellence and is undertaking a network optimization program, which aims to repurpose underutilized 5 gs base stations for LTE use.

Speaker 2

Operational performance. The latter is

Speaker 4

expected to improve CX and achieve OpEx, CapEx and spectrum efficiencies. Outlook. Note that CapEx is expected to trend downward in the company's goal to achieve CapEx intensity and achieve positive free cash flow. Operational excellence. This page shows our usual network highlights.

Speaker 4

On the fixed network, we passed 17,200,000 homes

Speaker 1

and operational performance and

Speaker 4

cover about 17,900 top barangays, representing 42% of all barangays in the Philippines. Operational performance. Total fiber ports stood at $6,100,000 utilization of these ports remained high at operational efficiency levels. And as I mentioned earlier, we intend to further improve the utilization. Outlook.

Speaker 4

PLDT total fiber footprint remains unparalleled with a total of over 1,100,000 kilometers. Outlook. In so far as wireless network is concerned, our population coverage stands at 97% with a total of 76,500 base stations. We have about 38,800 LTE base stations. Outlook.

Speaker 4

About 80% of the total handsets on the network are LTE. You may note that there was a minimal movement in the statistics from the end of operational excellence. This was natural consequence of the deep dive review of internal processes related to CapEx. Outlook. A few of our 5 gs stats are found on this page.

Speaker 4

The number of unique 5 gs devices and 5 gs data traffic continue to rise. Our 5 gs speeds remain faster than that of competition outlook based on Acla's speed test. That ends my report. Let me now turn you over to SB operational outlook for Maya presentation.

Speaker 5

Thank you, Danny. Good afternoon, everyone. So we are coming to our 1st year anniversary of the launch of Maya Bank. Operational excellence. Last year in May is when we launched Maya Bank and we're very pleased with the recognition that we've seen from customers in particular on the consumer bank side outlook.

Speaker 5

As we hold that out, for us to be also recognized by external forums like the Forbes as part of the world's best banks, the only operational excellence. Bank from the Philippines to make that list has been extremely rewarding. Just to remind, while we have the bank, which we put at the heart operational and financial services. We have 2 other large pieces of the business where the bank is now powering additional financial services. Operational.

Speaker 5

One of those is where we service enterprises, large, medium, small, while providing the payment processing facilities. We are the number one merchant acquirer, outlook. Whether it is Visa, Mastercard, domestic debit or QR, we process all transactions. And that is operational excellence and operational excellence. On the other side of the house, on the consumer side of the house, We have the Maya app, which was a Swalpay Maya, where we completely revamped the facility, the customer experience

Speaker 1

and operational performance.

Speaker 5

And I've been again very richly rewarded by the ratings that we have got on whether it is on the Android or operational excellence on the Apple Play Stores with very high ratings. So we put the bank at the heart of our ecosystem, operational performance and now expanded that beyond payments into a fuller suite of services. On the next slide, outlook. If you look at our business, so on the merchant acquiring, which is what I spoke about where we have a very, very large market share where we are the market leaders, operational excellence. We have gone beyond now the large enterprises and providing them with omni channel payment solution to really expanding in a big way into the micro and SME.

Speaker 5

And by putting the bank at the heart of it, we will be now providing not just payment solutions, but really helping MSMEs with a full banking solve operating expenses by providing them with short term working capital loans, enabling them to use that as their deposit settlement account, helping them with disbursements and payments that they need to make as operational and operational processes. On the consumer side of the house, that is where the bank is already deeply entrenched and integrated in its 1st year of operation, operational excellence. Where the customers now are able to use their balances, save their balances through our high engagement banking product,

Speaker 1

operational excellence.

Speaker 5

Through our personal goals and other innovations that we have and on the back of the rich transaction data that we have for millions and millions of customers, outlook. We launched our first lending product, MyaCredit, and now we'll be rolling out the subsequent next set of products with things like MyaPay in 4 and others to follow outlook for the next 6 to 8 weeks. To give you some statistics on the performance of the bank in its 1st year, operational performance. This is data as of March this year. So in the 1st year of operation, we hit 1,800,000 customers.

Speaker 5

Operational performance. We're pretty confident that before we complete the full year operation which is end of this month, we should be at over 2,000,000 customers, which is a big milestone for us. Operational. These customers as of March deposited over Ps. 21,000,000,000 with us.

Speaker 5

And this has become a primary account for these customers where they're using us operational excellence, not just to save the money, but also to do to all the transactions, whether it is paying their smart BLDC bill or whether it is buying goods online or any other transaction that they need to do. On the back of our in house proprietary credit scoring algorithms, We have been able to start dispensing loans to our customers. Our key product over there is a short term credit product called MYAG Credit, which we launched operational excellence. And we have already dispensed, disbursed more than MXN 6,000,000,000 operational results through the course of its launch in the April, May time frame through to the Q1, ending of Q1. So these were some just early statistics to show you the progress that we have made by integrating the bank into the heart of the rest of our ecosystem, which spans both consumers and on the enterprise side.

Speaker 5

And as we go forward over the coming weeks months, newer and newer products, both for the consumer side of the house and of course operational excellence for the Micro SME segment, which is an area again which is deeply underserved in the Philippines. So, this was a quick update on Maya. Outlook. I'll hand it over to Al.

Speaker 2

Thank you, SB. Just a few updates. First, same registration, outlook. As you know, it has been extended till July 25, 2023. But as of May 3, operational performance.

Speaker 2

Smart has registered 44,700,000 of its subscribers, dropping 67% of our operational performance. Declared base before and over 80% of our revenues are actually coming from this 44.7%. So we'll continue to work on this operating performance and hopefully looking for another 9,000,000 to 10,000,000 subscribers till July. On the Class 2 developments, just to update, there have been 2 individuals, each represented by different law firms. Operational performance.

Speaker 2

To submit a separate motion to serve as lead plaintiffs for the Class 2, total numbers of shares owned by the 2 37 shares and the total losses claimed is only P. 2.63 dollars So, lead Claim taken counsel appointed by the court. So, PILITY will have the opportunity to file a motion to dismiss the U. S. Class action After it is served, a copy of the amended complaint filed by the newly appointed lead plaintiff.

Speaker 2

For the purchase of Sky Cable Corp. As a broadband business, operational results. We've already filed a notice with the Philippine Competition Commission on March 3023 and just awaiting to start operational and regulatory review. Ongoing technical, legal and labor, finance and tax due diligence review operational outlook. So we're hoping I think we will be also sending some more documents for the review and hoping for an approval soon after.

Speaker 2

Operational. On the sale and leaseback of the first set, a CytoSphere 1, 5,907 towers that disclosed April of last year. Outlook. After a year as of 30 April, a total number of towers sold and leased back at 5,182 or 88% outlook for a total consideration of close to MXN 68,000,000,000. We will include those additional 135 towers closing in this April, operational excellence.

Speaker 2

Close to RMB1.9 billion and the balance of the RMB725 towers expect to be transferred on or before August 2023. Outlook. And for Stratosphere 2, 7 Bismap of 650 towers in December and 11 operational excellence. In March, we've already gotten PTC clearance operational performance. The transaction of Uniti Digital Infrastructure, which is the 650 towers closed December last year and we expect operating expenses.

Speaker 2

And closing of about 125 powers amounting to about RMB1.7 billion on May operating expenses. I think that's it, Melissa. Thank you very much. Outlook.

Operator

We're now ready to take your questions. You may type your questions in the Q and A box in the upper right side of the screen. You may also click the raised hand button and wait for the moderator to call your name or you unmute your microphone. You may also send your questions via email to pldtircenterpldt.com.

Speaker 1

Earnings. Operational

Operator

excellence. We have a hand raised outlook from Arthur Pineda, Citi. Arthur, you may unmute your mic.

Speaker 2

Hello.

Operator

Hi, Arjun.

Speaker 6

Hi. Yes. Thanks for the opportunity. Just three questions, please. Firstly, in the past action lawsuit, if I may just clarify.

Speaker 6

Am I to understand that this is done and dusted at $2.63 and that there's no subsequent operational and regulatory

Speaker 2

filings. The second question

Speaker 6

I had is with Maja. I do know that you've got 21,000,000,000 operational performance on your deposit base against a loan disbursement of just around $6,000,000,000 What's holding the company back from more aggressively monetizing on the deposit base? Any guidance operational performance on the drive to profitability would be useful. And the third question I have is with regard to the SIM registration process. It seems like it's been quite slow in terms of I'm just wondering what are the key bottlenecks to this?

Speaker 3

Is there any risk that we

Speaker 6

could actually see a revenue drop off By the deadline in July, if these are not addressed. Thank you.

Speaker 2

Hi, Arthur. Thank you. Let me answer the 3rd question first and then maybe the first by Antoni Maba and I think the process has been quite easy for us to actually invest in the system To make it happen is why we're already at that 67% clip. What's coming out is really maybe your real active operational base of subscribers. We will obviously continue to push for the balance.

Speaker 2

But as I said, 67% of our base has been operational excellence. Which carries over 80% plus of our revenues. So we don't see on our part, we don't see operational and regulatory requirements. Any risk on the revenues as we're able to we're close to, I guess, maintaining the base that are really active outlook for our SmartBase. Our job is to be the primary SIEM in the market and make sure that we're able operational excellence to gain the customers.

Speaker 2

Unless, Frans wants to add anything else, I think again, I think the process has been very, very simple on our

Speaker 3

outlook. Just to add, I think the challenge, I think that all of us facing or the telcos face is really operational excellence. We don't have a national idea in the other countries. But again, we've been working closely with NTC to provide solutions on that one. And the other challenge of course would be still going out there for subscribers who are either not smartphones or are not techie.

Speaker 3

Operational excellence. What have we done in the past few months, we've been very aggressive in really reaching out to them both online and on-site. Outlook. And like ASP said, I think we're quite confident that Mediatek will be able to secure our business.

Speaker 2

Outlook. Mawa, maybe you can answer the last two questions.

Speaker 7

Yes. The first question is whether they are the only auditors of the depository receipts that filed for a class suit, right? And the answer is yes. They are the only ones that filed within the deadline set by the court. So no others joined the ClassSuite process.

Speaker 7

Operational results. And it's going to be a long process. We expect that

Speaker 1

operational and regulatory filings. The process of filing

Speaker 7

an amended complaint and motion to dismiss and the resolution on the motion to dismiss and operational performance. We'll take at least a year, so sometime next year in June next year, 2024.

Speaker 1

Yes, the lawyer fees are probably bigger than the

Speaker 2

Yes. They've already lost more. Go ahead, Mamba. Did you want to add?

Speaker 7

It's okay.

Speaker 4

We have

Speaker 7

nothing more to add.

Speaker 5

Outlook. Thanks, Arthur. So on your question on monetization, so first of all, a lot of the excess operating activities. We are placing it in things like the BSP overnight deposits and other short term highly liquid and 0 close to 0 risk Assets and those are yielding us today close to 5% to 6%. So that has been extremely helpful to us during this period of operating income and interest rate in terms of being able to place that.

Speaker 5

But that has helped us to manage the kind of gap that we have between the loans and the deposit ratio. Outlook. The second part I would say is that our deposits, the way we have designed the products, we call it the high engagement banking. Customers to earn the interest they have to transact with us, because we know that the transaction data is actually the richest way of us getting a data asset that tells us insights into the customer. If I know the size of the electricity bill that you pay, the kind of transactions you do outlook on a monthly basis, what other purchases you make and what other transactions you do.

Speaker 5

That then goes into my credit scoring model. So our whole operating profit. Saving proposition is built around high engagement where in order to enjoy different slabs of interest rate, you have to do and show us more and more transaction and spend with us. Operational excellence. That data is feeding into our proprietary in house, aadivant, pettoscopy model.

Speaker 5

And that in turn is helping to drive the loan disbursement. And you're absolutely right at this stage, at a little over MXN6 1,000,000,000 that loan book disbursement is still growing. But just to give you a sense on the back of that operational transaction data. We have over 1,000,000 customers today who are now eligible for some of these short term loans. Of course, not everybody is going to take it.

Speaker 5

Of course, we have a number of new products coming out. Our P and L product will be launching. We're already testing it actually in

Speaker 2

the market. We'll be going live

Speaker 5

with that over the coming weeks. Longer term installment loans for consumers will be going live again within the next 4 to 6 weeks, which will give longer tenure and larger loan sizes.

Speaker 1

And operational excellence. And then on the MSME side of the house, we

Speaker 5

are already testing again short term working capital loans and those will get expanded out. On your question on profitability, given that the business is made up of different components. So for us, one of the key markers is segment EBITDA. So for us, operational and regulatory processes. Two businesses, the merchant acquiring business and the bank are already segment EBITDA positive.

Speaker 5

So that was a big milestone that we hit in the Q1 of this year. And operational performance. And before this year is through, we will be segment EBITDA positive across all our businesses. And in the course of towards the end of 2024, the company outlook. So that is our plan on the balance sheet of it.

Speaker 1

Understood.

Operator

Are there any follow-up questions?

Speaker 6

Operational. Thank you very much.

Speaker 2

Thank you, Arthur.

Operator

Sameh, you have your hand raised.

Speaker 8

Yes. Hi. Thanks for the opportunity and good afternoon, everyone. Operational. Several questions from me.

Speaker 8

Firstly, on the fiber adds or net adds of around 81,000 and operational performance. At aggregate level, it was 33,000 net subscriber additions, broadband subscriber additions. Just wanted to understand operational. Is this the new run rate or we expect this to accelerate potentially going into 2nd and third quarter? That's question number 1.

Speaker 8

2nd is on the CapEx. I understand that the CapEx intensity remains high, but operational outlook. Just wanted to understand that over the medium term, where it is expected to settle down? Is operating expenses. Philippines is in a different structure where CapEx intensity over the medium term will be around say 20% to 25% or operational outlook.

Speaker 8

Can it go to say mid teens kind of level, which we have seen in markets like Malaysia?

Speaker 1

And And then just

Speaker 8

on the and just maybe just one housekeeping. Outlook. Are we done with the tower sale or are there more towers which could potentially be divested? Thank you.

Speaker 2

Outlook. Thank you. I'll have Jeremiah answer the first question and I'll take on the second and third question. Go ahead, Jeremiah.

Operator

Thanks.

Speaker 3

Thank you, Al. Outlook. Good afternoon and thank you for

Speaker 4

the question. I'll start off the question. I think you had kind

Speaker 9

of 2 parts to the question. One was around fiber net adds. The second one was you're looking at the total net adds across the PLDT base and across the geologies that we have. Operational performance. The 81,000 is what we are seeing is

Speaker 4

we are seeing a actually on

Speaker 9

a couple of fronts an improvement on a journey perspective. Operational performance. We mentioned it, I think in the last full year results that in quarter 3, quarter 4, we were going through a cleanup. So we've seen our total churn actually start to operational performance. I should start to go down.

Speaker 9

But what we have seen is we've actually had an impact in terms of our new customer acquisition. That's impacted on two fronts. The first one is, as you would note in the in our release, we have actually had a limited greenfield rollout operating expenses in the Q1. Part of that is because we have been very focused on CapEx cleanup and we have actually diverted some of our attention from rolling out, actually ensuring We have taken stock of all of the CapEx deployment that we have had. The second one is we also operational and operational excellence.

Speaker 9

We're going to have a very

Speaker 1

strong financial performance. We're going to have a very strong financial performance. We're going to have a very strong financial performance.

Speaker 9

We're going to have a very strong earnings. And we're looking to make some adjustments to see how we could improve on that to ensure that we maximize profitability. Both of those fronts are things that we're actively working on. Operational performance. So now that the CapEx crash is well and truly behind us now, the network team are focused in on accelerating as much of that employment as much as we can operating expenses towards the latter part of this year.

Speaker 9

And the second one is we've made adjustments to that credit control process outlook to ensure that we have that fine balance between taking on the right proportion of risk as well as making sure that we continue to get the growth available market. So we do that is a quarter 1 is actually a slight increase from our quarter 4 performance, operational performance. Not quite at the same level as quarter 3. Our ambition is to actually increase that. So I wouldn't say that we actually want to be staying at that level.

Speaker 9

It's our ambition to

Speaker 2

outlook. Thank you, Jiraimaya. On your second question, I think outlook. I don't think it's possible to have our CapEx, they show us at in the teens. Outlook.

Speaker 2

I think what we're looking at is maybe somewhere in the vicinity of 25%, 30% maybe in the midterm, and that's the target. So we're bringing down to the €11,000,000,000 in the next few years now, but maybe 25%, 70% operational ratio is the more reasonable ratio for us. On the towers, I think we still have to complete obviously a lot of SatoSphere 1, we have a pending about 750 towers yet to be sold. And Sato operational and operational performance. Total of 11 100 sorry, 12 on Portfolio 1 with Frontier and outlook.

Speaker 2

About $650,000,000 for Unity. We're still waiting approval operational. We got approval for PCC on Unity, and civil waiting approval for Frontier. But I think for now, outlook. We'd like to complete SATOSPHERE 1 and 2 first.

Speaker 2

And again, based on the chart I showed earlier, SATASPHERE 1 will be completed hopefully by August 2023. So you expect SATASPHERE 2 to follow suit maybe in the 3rd, Q4. So we'd like to focus on that. So the balance of 4,500 or so towers left with us, We have not had any internal discussion to sell more of that. I just want to complete what we've sold so far.

Speaker 2

Outlook. I hope we've answered your questions.

Speaker 8

Yes. This is very clear.

Operator

Thank you very much.

Speaker 2

Thank you.

Operator

Next question, Doctor, you have your hand raised. Hello? Hi, Doctor. Outlook. We can hear you.

Speaker 10

Okay. Yes. Hi, this is Asharia from JPMorgan. I have two questions. One is on the accelerated debt

Speaker 2

operational performance

Speaker 10

for 1Q. What is the operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational and operational

Speaker 8

What's that? What's that? Accelerated depreciation.

Operator

The second one, CapEx, budget, risk. What are the details for that? Finance, Lucas.

Speaker 4

Outlook. Hello. For the first one, there is 0

Speaker 2

outlook. I guess for the top of the slide, I think when you say details, what do you I mean by that, we've actually brought down that over and to about RMB33 1,000,000,000 and that's what we're working through for the next few years. Okay.

Speaker 10

So that would be the CapEx of around €33,000,000,000

Speaker 2

€33,000,000,000, yes.

Speaker 10

Okay. And so if there's no accelerated depreciation, what are the adjustments which lead to telco core income?

Speaker 4

Outlook. Can you show that slide, Matt? Well, the major adjustment on the telco, Are you referring to reported income or is it the telco core income?

Speaker 10

Yes, I'm referring to the telco core income like from the reported income, how do we arrive all that.

Speaker 4

Can we show the slide again? Outlook. Can we show that slide? Our Tenco core income was 8.6 After taking out the losses of Voyager, it's down to RMB8 1,000,000,000. Then you have non recurring items there, which include sale gain on sale of towers outlook.

Speaker 4

That's about RMB2.1 billion. There is also ForEx derivatives and other sectors of around outlook. Then you had MRP costs around RMB1.5 billion plus gain on sale of Mabalacat property of around €300,000,000 So including tax effect, your reported net income was €9,000,000,000

Speaker 10

outlook. Okay. Yes, this is helpful. Thank you and congrats on the results.

Speaker 2

Thank you very much. Thank you.

Speaker 9

So, just to clarify,

Speaker 8

operational and operational expenses.

Speaker 7

Just to clarify.

Speaker 2

Go ahead, Brian.

Speaker 7

Yes. The RMB33 billion is the CapEx carryover net of advances to vendors for the 4 major vendors. So and we're negotiating with the other the non major vendors operational excellence. This year to bring down also the CapEx carryover from them. The non major vendors, I think, constituted at the beginning outlook.

Speaker 7

When

Speaker 10

you say carryover, the bridge year does the CapEx put into, is IFRS twenty

Speaker 7

three. Yes. The RMB 33,000,000,000 from the major vendors operational performance. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] It will be a carryover CapEx for 2023 and possibly 2024 depending on the completion of the projects. Operational performance.

Speaker 7

When the projects are delivered, then they're booked in the year

Operator

of the delivery. Okay, got it.

Speaker 2

Thank you.

Operator

Thank you. Outlook. Our third, we had a follow-up question.

Speaker 6

Yes. Hi. Sorry. Yes. Just a follow-up question on the broadband side.

Speaker 6

You mentioned higher default rates and tighter credit controls for the broadband users now. Are you looking to launch Prepaid broadband as well as per what your competitors have been talking about. I'm just curious because I know that your focus has been mainly on postpaid broadband, But if it does pick up, how quickly can PLLDT launch a similar product?

Speaker 9

I'll pick up with that one, if that's okay, Arthur. We constantly evaluate the different product and proposition options that we do have. Prepaid is one of them that we have had a look at. But as you're familiar with prepaid, there is a difference in the way that the fixed network actually runs versus mobile. So if you look at the fixed network, to be able to connect up a home, you actually still have to do the last mile truck roll as well as the modem CPE, etcetera.

Speaker 9

When you look at all of those things kind of added together, then you'll it's actually quite a high starter kit you'll be looking at, which kind of defeats the purpose of trying to target a prepaid segment, Because more often than not, it's that segment that doesn't have the cash to be able to avail of those services.

Speaker 1

So it's

Speaker 9

one of those things that we are looking at, we're balancing and evaluating. Rather than just only looking at our fiber option, we are looking a couple of things. Can we look at a, say, for example, a lower price plan but still postpaid, operating expenses. Bringing that in with greater value using our fiber plan. And alternatively, we also have the benefit of also having the fastest mobile network.

Speaker 9

So we're able to offer operational excellence to customers on a prepaid basis or a postpaid basis and targeting customers that perhaps may not be able to afford The 1400, 1500 vessel ARPU area.

Speaker 6

Okay, understood. Okay. Thank you.

Speaker 9

Outlook. Thanks, Arthur. Thank you.

Operator

From the question and answer chat box, we have a question from Ken Cotyanze offs APR. On Maya, how much of the last fundraising is remaining and when do you expect to close another round?

Speaker 5

Outlook. So, yes, as I mentioned, we already have a number of businesses which are moving into have moved into segment EBITDA positive. But outlook. As we spoke, the opportunity for us to expand and grow the full footprint of our financial services, especially as we go into the micro SME segment in a big way, which is Massively underserved and also on the consumer side of the house as we continue to add products. So we had raised $200,000,000 around this time last year.

Speaker 5

We do have a large part of that still with us. But as we expand and look at the opportunity over here, we are talking of those existing shareholders. We've also had our feedback from some of the other potential shareholders. So it is early at this stage for us to outlook on that front. We'll come back when we have more details.

Speaker 5

Outlook. But as I mentioned, we have the existing shareholders as you're well aware, KKR, Tencent, IFC and of course Smart PLDT

Operator

outlook. It's a question from Stephen Gabriel Oliveros of China Bank. I just wanted to ask what is the reason behind the lower depreciation charges in the Q1 of 2020 and

Speaker 4

earnings. It's basically savings from accelerated depreciation book in 2022.

Speaker 1

Operational results.

Operator

I'm Georgios Gonzalez of Bamil Pep. Should we expect special dividends from pending tower sales in the same proportion as the previous tower sales? Or how would the proceeds of the future tower sales be used? Thank you.

Speaker 2

Maybe not. I guess the POSIX will always be used for the CapEx and requirements. Outlook. We have a

Operator

question from Zoran Filip Mosnier. Is there an updated guidance for full year 2023 telco core income? Is the growth rate for the Q1 telco outcome expected to be successful.

Speaker 2

Well, it's a tough

Speaker 9

At this

Speaker 2

point, we're also still settling down on all the settlements in Brazil. But basically I think it will be north of RMB33.1 billion, it will be north of that. Operational performance. So we're working very hard and we're seeing some of the we're looking at the fab expense which are Still very high like electricity and the like, so we're trying to manage some of the cost elements of the business, operational initiatives to really control costs. So I guess for now, we will just say it's north of RMB33.1 billion.

Speaker 2

Operational excellence.

Speaker 1

We will now take a

Operator

question from Francis Chua on Internet service with workers and students returning to work in school. Has there been a decline in connections or downgrade in plans? Do you see this as a challenging move forward in terms of growth?

Speaker 9

Outlook. I'll jump in with that one, Al, if that's okay.

Speaker 2

Go ahead.

Speaker 9

I think there's a couple of things in play that are actually still playing itself out in the marketplace. Outlook. I'll start with number 1. To your point, the pandemic is over, fortunately, and everybody is out and about. And so the burning platform or the need to get Broadbanding the home is perhaps not as critical as it has been in the past.

Speaker 9

Secondly, it is quite well documented that we have quite a lot operational performance. The 3rd element that I'll talk about It's really the fact that if you look at the number of broadband households on a postpaid plan that it played for about 6,000,000 households. When When you look at the total penetration of the market, it's actually very, very high in terms of postpaid. Probably beyond, say, for example, the total price I'll say credit cards or other sort of postpaid services. What that means is we are actually starting to push deeper and deeper into the households in the market outlook on not only in terms of their affordability, but secondly also with regards to their comfort level with regards to postpaid plans.

Speaker 9

All of these things are coming together and it actually we are starting to see some pressure on that front. And that's why we had as I had mentioned, there was some pressure for us outlook. To have a look at our credit policy, to see what changes and tweaks we can make to ensure that we maximize any of the capacity we have available to us to make sure that they are going to operating subscribers that are going to stay with us, right. So there is some of those elements in place in the marketplace. We are still seeing demand in the market, especially in areas where they're still underserved.

Speaker 9

So we are still seeing quite a bit of demand in the I think the challenge now is for us to get out there and say, for example, the greenfield environment, all being able to share, competitor customers To show them that actually our network is far superior than their current service provider.

Operator

A follow-up question from Zoran Moussni on home broadband. Can you give more color on the installation challenges cited in the fixed line, which was mentioned in the earlier part of the presentation?

Speaker 9

Outlook. From a color point of view, I think, as I mentioned, there were 2 things. You'll take note that in the Q1 of 2023, operational performance. We deployed out 12,000 new ports, right? So that was 12,000 new ports.

Speaker 9

When you compare that to the previous first quarters

Speaker 1

operational excellence. In the

Speaker 9

last 2 years, that's actually significantly down. We have mentioned in the past that actually we have seen a high take up rate, an extremely fast take up rate whenever we go greenfield. And that has been our strategy for the last few years. And when we don't have the greenfield deployments, you can see that whilst we're selling in the brownfield and there is still a outlook there. It is actually much harder, not only because a lot of these customers have existing services, But also because it means we are going deeper into the pyramid, actually lower into the different socioeconomic sectors on that front.

Speaker 9

The second thing I mentioned was really outlook. In working with and trying to improve the level of defaults outlook for new customers. We actually tightened up our credit policies. This is actually quite we were out in the market and we asked all customers to have one AMSF. So we actually asked all customers, irrespective of which area you were in, to be able to provide a one AMSF.

Speaker 9

What we saw, quite frankly, was operational excellence. We saw quite a big hit in terms of our new connections, and that's simply because of the readiness for customers to be able to pay that AMSF. Operational performance. And as a consequence, we actually made a tweak to that policy, right? So we've actually made a change to that policy where we focused on collecting that one ANSF in areas outlook.

Speaker 9

We have seen higher default rates, whereas other areas which we haven't seen as sort of default rates, we're actually working back in terms of our original policy. Operating expenses. We've seen our installed volumes improve since then. So we'll continue to work on that front to ensure that we have the right balance between growth as well as managing any Bad debt or customers that are actually not going to be long term customers for PLDT.

Operator

Sanyil, you have your hand raised again.

Speaker 8

Yes. Hi. Thanks again. So just going back to The previous question on fixed wireless as a potential option. I just wanted to understand, will it be on 4 gs or will it be on 5 gs?

Speaker 8

And just looking at your fixed wireless subscribers, which had been coming down To an extent, something similar is happening with one of your competitors as well. So wanted to understand that does that proposition need a bit of reset outlook. Before we see growth coming into the base once again, just question number 1. Second question is on the mobile side. Outlook.

Speaker 8

I just wanted to understand how is the competitive dynamics in the market? Is macro a bigger factor or competition operating expenses leading to a softer growth. And just a bit of clarification, which is on figure sorry, on Slide 22. Outlook. If I see the base station count, even from 2021, it is relatively stable.

Speaker 8

So I understand from 2022 going to Q1 of 2023 because of the CapEx over an issue. But why is this stable even from 2021 levels. Thank you.

Speaker 9

I might start with fixed wireless, if that's okay, Zigmi. Outlook. I'll start with the fixed wireless question. We have also similar to your observation, fixed wireless numbers in total market has declined. We think that originally the explosion in fixed wireless subscribers across the board was obviously, operational excellence.

Speaker 9

I guess it's exacerbated by the pandemic, so everyone rushing to be able to get connectivity within the home. As we've increased our fiber rollout capacity and we've We've seen that across all competitors. We've seen some correction in the marketplace. What we are doing now with fixed wireless is we are actually going to be using it for 2 main areas. Outlook.

Speaker 9

Number 1, we will be using it as a postpaid offering for our existing fiber customers. So it becomes a backup service to ensure that they have operational performance. 20 fourseven, 3 65 days a year connectivity. And so it helps them support and ensure that they stay online as a family. Outlook.

Speaker 9

The second market that we are actually using for wireless to target is going to be to reach areas where we currently don't have fiber. So as Al had mentioned, we currently have 17,000 verungas that we cover. But as you know, there are still about 42,000 or not additional, but total 42,000 verungas in the market. So still at least another 20,000, 25000 Borongas that currently don't have any connectivity options. And that's where we're going to be leveraging fixed wireless to be able to get out there and reach out to those outlooks that connect those homes.

Speaker 9

Your other question that you asked was really, is it going to be around 4 gs and 5 gs? At the moment, the current fixed wireless offering is leveraging our 4 gs network. That's not to say that we haven't had a fixed wireless offering with our 5 gs operating expenses. Historically, we have actually had that, I think it was in 2021 2022, sorry. But what we will be doing is Actually revamping the whole portfolio, so you will have an option for different types of 4 gs devices as well as 5 gs.

Speaker 9

That will offer different levels of quality of service, as you would know, whether it's RxDiversity, on, say, for example, some slightly lower end our starter kits for fixed wireless, still leveraging the 4 gs network, but also having much superior 4 gs devices as well to be able to give them the

Speaker 2

I'll give Francis the second question.

Speaker 3

Hi, good afternoon. So I'll take on your questions for mobile. I think this quarter, there are 2 external factors that affected outlook. The first one is SIM registration. I think what we have seen this quarter, there was a significant reduction in new activation operational cost because of SIM registration.

Speaker 3

So I guess I'm sure that all the tests telcos are also affected in that same way. The second, explain why with inflation. Our inflation in January went hit the highest in 14 years

Speaker 2

outlook for the Q1

Speaker 3

of 2019. That's more than double versus compared to the inflation we had same quarter of last year. And operational performance. And for the whole for February March, we saw that the inflation remained elevated with February at 8.6% and around 8% in March. And operational outlook.

Speaker 3

And I guess and I'm sure that our competitors are also felt that affecting our other subscribers consumer wallets, especially for our value brands. In our case, it's TNT. Operational performance. We really saw that they are more affected by these headwinds or this inflation. Now to what extent our competitors are affected, We have yet to find out

Speaker 1

when they

Speaker 3

release their results in the coming days.

Speaker 2

I guess what's the third question?

Operator

Actually the competitive dynamics, macro or competition.

Speaker 2

No, I didn't. That's it. Okay. I understand the fair question.

Speaker 6

Thank you.

Operator

Fili, any follow ups?

Speaker 8

Yes. Sorry, the third question was on Slide 22 on the base station.

Operator

Outlook. The base stations count for 4 gs, 3 gs and 5 gs seems to have been relatively flat from 2021 onwards. I think that was your question, now, Hussein. Yes.

Speaker 2

I guess for 2022, I think outlook. There was a focus on building out a fixed network in 2022 because we did

Speaker 1

operational excellence. I have a lot

Speaker 2

of flowers on both for 5 gs and 4 gs. What we're doing now is looking at And if you compare the Q1, obviously, not much

Speaker 1

of what

Speaker 2

happened in the Q1 for us. So but moving forward, I think you will now see operational and regulatory requirements. Some new towers for the wireless space. We're also increasing capacity for Our 4 gs LTE where the majority of our client base is on. We're trying to maximize where 5 gs is, Trying to repurpose 5 gs base stations that are not with very low traffic and use operational excellence.

Speaker 2

Also, I use a spectrum for 4 gs. So these are the things that we're doing in terms of

Speaker 1

operating expenses. Making sure that we're able to optimize the network.

Speaker 2

But, yes, there was really that was intended in 2022 to really our focus a lot of the investments on the fixed network.

Speaker 8

Understood. This is very clear. Thank you very much.

Speaker 2

Thank you.

Operator

There are no more questions in the queue. Last chance to ask the questions. Outlook. If there are none, we'll now turn the floor over back to Mr. Padilla for closing remarks.

Speaker 2

Well, again, thank you very much For being here today. We look forward to

Speaker 9

AGM, June

Speaker 2

13, operational performance. And again, thank you.

Operator

If you if you have any questions, please feel free to reach out to Investor Relations. Thank you very much.

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Earnings Conference Call
Sitio Royalties Q1 2023
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