PLDT Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 12, 2024

There are 10 speakers on the call.

Operator

Afternoon, and thank you for joining us today to discuss the company's financial and operating results for the 9 months of 2024. 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.eldt.com under the Investor Relations section. Kindly note that this briefing is uniquely Joining us today is our Chairman Mr. Mani Pangirinan, CFO and Chief Risk Officer, Mr.

Operator

Danny Yu Attorney Marilyn Aquino, our Corporate Secretary and Chief Legal Counsel. And also here with us today is our new Investor Relations Head, Mr. Brian Libranes, as well as other members of the Pialdini Group's management team. At this point, let me turn the floor over to Mr. Liu to begin the presentation.

Speaker 1

Good afternoon, everyone. Let me share with you highlights of FieldDuty's financial and operating results for the 1st 9 months of the year. Our net service revenues for the 1st 9 months hit a new high of 144,900,000,000 higher by 2% from last year. On gross basis, service revenue grew by 4% compared to the same period last year. Operating expenses remained stable at $64,200,000,000 Consolidated EBITDA increased by 3% to $80,700,000,000 with margins steady at 52%.

Speaker 1

Telco core income excluding the impact of asset sales in Maya rose by 2% to 26,600,000,000. On segment basis, our individual business recorded a 1,500,000,000 or 2% rise in revenues to 62,100,000,000. Our Enterprise segment registered revenues of $45,200,000,000 4 percent or $1,300,000,000 higher than last year. While our Home revenues were stable year on year at $45,200,000,000 Fiber only revenues increased by 6% or RMB2.4 billion to RMB41.7 billion. We continue to highlight that there are underlying revenue streams registering stronger growth than the headline numbers.

Speaker 1

This reflects the drag from legacy revenues. Overall, excluding the impact of legacy revenues, net service revenues rose by 5% with the growing segment revenues accounting for 88% of the total. For the individual business, mobile data which represents 89% of total segment revenues grew 5% year on year, more than global segment growth of 2%, which reflects the drag from legacy SMS and voice. The overall Home segment on the other hand remained stable year on year with fiber only revenues, which now account for 92% of the segment, actually grew by 6%. Corporate data and ICT accounting for 72% of the total enterprise revenues rose by 6% compared to the overall segment increase of 4%.

Speaker 1

Let me share the more details of the respective business segments. Service revenues for the individual business rose by 2% in the 1st 9 months of 2024, with postpaid and prepaid revenues higher by 3% and 2%, respectively. Mobile data remained to be the growth driver, accounting for 89% of the segment revenues. Blended ARPU rose by 6%, mainly from a 7% rise in average usage and a 10% growth in data traffic. Notable for the segment is the continuing increase in active mobile data users to 41,200,000 from 40,500,000 as of end of June.

Speaker 1

We are currently revitalizing the mobile data playbook to reaccelerate the segment's performance. Part of this includes subscriber acquisition through continued site rollout, capacity expansion and geo targeted campaigns, upselling to higher value offers and further stimulating usage through enhanced service offers and improved customer service. Fiber revenues which account for 92% of our home business continues to rise steadily having registered a 6% year on year growth. We continue to focus on managing churn and accelerating fiber installations. Improvement in service delivery continued to register industry leading fiber churn levels of 1.7% in 9 months of 2024 from 1.91% in 9 months of 2023.

Speaker 1

Fiber installation capacity continues to ramp up with 3Q 2024 fiber installed of 228,000, the highest since Q1 of 2023. All fiber ARPU remained at around 15,000 level with lower price plan offered selectively in areas where we have the spare capacity. There has been a strong market reduction of new broadband products, which include a fiber annually all bundle, lower priced postpaid fiber plan, and a home Wi Fi 5 gs plan. Other network initiatives include leveraging on our fiber and mobile networks to grow the segment, including expanding in green and brownfield areas, as well as building and multi dwelling unit fiberization. PLDT continues to enjoy strong brand equity and superior network quality, making it a formidable competitor in the market.

Speaker 1

Growth in the enterprise is driven by continued focus on Flushing Enterprise Solutions. The Enterprise segment registered a 4% growth with corporate data and ICT being the growth drivers, having grown 6% during the period. Included among the revenue streams that recorded improvements were core connectivity, higher ICT revenues from managed IT services, Cybersecurity Solutions, Data Center and Cloud Services, plus A2P messaging services. Locators in our Santa Rosa Data Center energized in July have started to come on board Approximately 20 megawatts of a 36 megawatts IT load capacity are expected to be available by end of 2024. The Vitra Santa Rosa data center is well positioned to capture growth from a hyperscale and AI data center demand ahead of competition.

Speaker 1

Amidst pressure from higher costs to operate, total OpEx for the period was marginally higher by 300,000,000 as we continue to identify and extract operating cost efficiencies. EBITDA at the end of September 2024 rose by 3% to BRL80.7 billion on the back of higher revenues. EBITDA margin was steady at 52%. Telco core income for the 1st 9 months of 2024 grew by 2% to $26,600,000,000 reflecting the impact of higher EBITDA, partly offset by higher depreciation and financing costs. On reported basis, PLDT income rose 1% to DKK28.1 billion.

Speaker 1

Our share in losses from Maya continues to decline with Maya on track to achieve bottom line breakeven towards the end of 2020. PLDT's balance sheet remains healthy with net debt to EBITDA of 2.44 times as at end of September. We remain focused on bringing down leverage to the 2.0 times level, which we expect to attain with the anticipated increase in EBITDA, reduction in CapEx and with the balance of the tower sales proceeds. Discussions for the potential monetization of our data center business are still ongoing. Gross debt stood at 272,600,000,000 of which 14% are dollar denominated and 5% unhedged.

Speaker 1

The average interest cost for the period stood at 5% pretax with the average life of debt at 6.7 years. Total capex amounted to 52,300,000,000 at the end of September consisting of network and IT capex of 46,700,000,000 dollars and business CapEx of R5.7 billion dollars CapEx intensity or CapEx to service revenue stood at 34% for the period versus 37% in 2023. Of the remaining DKK33 billion commitment net of advances from major vendors, the remaining commitment has been reduced to DKK4.2 billion. For 2024, our CapEx guidance is DKK75 billion to DKK78 billion, consistent with our aim to continue to reduce CapEx. The increase in the number of unique 5 gs devices and 5 gs data traffic continues into 2024, which we expect to be sustained as the price of 5 gs devices trends downward.

Speaker 1

5 gs adoption is one of the emerging growth streams of our individual business. Moving on to Maya, our FinTech Industry. Maya Bank continues to be the Philippines' number 1 digital bank based on deposit balances, which grew by 52% to RMB36 billion at the end of September. The bank continues to register robust growth rate in bank customers and borrowers. Loans disbursed life to date stood at R67 $1,000,000,000 at the end of September.

Speaker 1

Maya takes pride in its unmatched speed to market, delivering multiple high-tech banking products for consumers, SMEs and micro enterprises. With the Landers' Cash Everywhere credit card, a collaboration between Maya and Landers, Maya delivered the 1st digital bank credit card in the market. As mentioned earlier, Maya is on track to turn bottom line positive towards the end of 2024. We're also pleased to report that PIA DT score in the S and P Global Corporate Sustainability Assessment jumped by 13 points to 71%, the highest in the Philippines as of November 22. In October, PLDT also secured a $2,000,000,000 social loan from HSBC for the expansion of its fiber network to reach the 4th and 6th class municipalities.

Speaker 1

This is in line with its commitment to narrow the digital divide and support the government's initiative to connect the unconnected. Our outlook for 2024 continues to be one of guarded optimism. We expect revenues from our data and broadband businesses to grow by mid single digits, excluding the impact of legacy revenues. With our continued pursuit of operating efficiencies and cost rationalization, our EBITDA is anticipated to grow by mid single digit. Delco core for 2024 is expected to land north of R35 $1,000,000,000 In line with our commitment to lower the CapEx headline number and CapEx intensity over time, our CapEx guidance for 2024 remains at €75,000,000,000 to €78,000,000,000 We remain committed to a 60% dividend payout to bringing leverage back to our target 2.0 times net debt to EBITDA level and achieving positive free cash flow before dividends by 2025.

Speaker 1

Thank you.

Operator

So we're now ready to take your questions. You may type your questions in the Q and A box at the upper right side of the screen. You may also click the raise hand button and wait for your name to be called before you unmute your microphone. You May you also send your questions via email to plddircenterpldd.com. Ph.

Operator

Please indicate your name and company name so you can get back to you over any additional information you may We've a raised hand from Louis Lado. Louis, you may unmute your mic.

Speaker 2

Hi, good afternoon and thanks for hosting the call. Congratulations on the results. Just had three questions. The first one is, we noticed that fixed line voice continues to be quite healthy in this quarter, just like the prior quarter. If you could remind us what's driving that?

Speaker 2

Second question is, if we could get an update for the timeline of the data center stake sale and whether you've made a decision whether to sell a majority stake or a minority stake? And last one is financing costs seem to be up double digit Q on Q on year on year. Is there any like one off reason for that?

Operator

Let me take this question.

Speaker 3

Hi. Yes. So good afternoon. It's Louis, is it?

Operator

Yes.

Speaker 3

Sorry. I'll start by addressing, I think, your first question, which was fixed line voice. And the question was around what's actually driving that continued sort of revenue stream on the voice side. So that's predominantly there's 2 parts of voice revenue. One is voice that's coming through from our copper subscribers.

Speaker 3

And with that, has actually remained quite steady. If you look at the total number of voice on top of that, the decline that we're seeing quarter on quarter, year on year has actually plateaued out now. So it is now into the long tail component. But the second part of voice is actually we do have some voice in our fiber business as well. As you would know, in our only old product, which 13.99 package, we have an unlimited telephony and unlimited broadband, 5 mobile SIMs as well as single pay TV.

Speaker 3

So when you factor all of that in, we actually do have a voice allocation as part of that package. And that's why you'll see actually voice remain as part of the overall portfolio. And sometimes actually you'll see it grow a little bit because it's predominantly an allocation basis.

Speaker 2

Thanks, Gerard. That's pretty clear.

Speaker 4

Thank

Speaker 1

you. Discussion on data centers are still ongoing. We want to complete this by May 10th of next year. Remember, this requires PCC approval. Then to your last question, what was sorry, what

Operator

is your last question? Financing costs.

Speaker 2

Financing costs for the quarter seem to be up double digit.

Speaker 1

Generally, the increase in financing cost is mainly due to the increase in the average interest rate by 50 basis points. Plus, of course, towards the Q3, we also had additional loan of about 50 $1,000,000,000

Speaker 2

Thanks, Danny. Very clear.

Speaker 4

[SPEAKER PIERRE ANDRE DE CHALENDAR:] Thanks,

Operator

Dominika. There's a question on the status of the tower sales. What is the outlook on the completion of the What's What's tower sales at any bank?

Speaker 5

Well, we're still we're in the process of trying to sell, majority of the towers that are still not that have not been purchased but have been covered by existing contracts. So that's for the rest of the year. You mean, well, I think we will be able to sell more or less 90% of the remaining carriers that we've contracted to this, to the last 2 common power providers that we have engaged in, engaged with. And, but we continue to sell other sites that we have covered in previous contracts. And so that's the but we we may have to do that, until, next year.

Speaker 5

But for this year, we will close around 90% of the towers that we have contracted with the last 2 common tower providers.

Operator

It's a question on wireless. Can you describe the competitive situation in the wireless space, Mr. Martinez?

Speaker 4

Well, hi. Thank you for having me guys. On that question, let me start by giving my philosophy that while the situation is one where I would say is oversubscribed, you know, Philippines being 110,000,000 population subscription of phones numbering over 130,000,000 makes you unsubscribe and in your banking terms probably equal to over banked, isn't it? So in a situation like that, I think it doesn't make sense that players in this space compete on the basis of subscriber acquisition, because that is going to be costly, that's destructive and it's not healthy. In my view, what players should be doing is should be adding value in their offerings.

Speaker 4

So that way, we all contribute to expanding the market. Then we just leave it to those who work the hardest to get their fair share. That's my mantra going in. Is there any further

Speaker 6

Hi. Thank you for the opportunity. Just one quick follow-up actually on mobiles. So the overall revenue actually dipped sequentially, and I think your competitor ascribed that to the impact of iPhones. I was wondering whether you saw the same for PLDT.

Speaker 6

More importantly, I think the net subscriber there were net subscriber reductions also in the Q3. So any color on that would be very helpful. Thank you.

Speaker 4

Well, I wish I can say that weather is a cause for problems in business, but I'm not one who would like to say that. I think it's a matter of planning, it's planning your network, planning your business So we don't have to blame the weather if we fall flat on our business. Does that make sense?

Speaker 6

Yeah, sure. But, I think quarter on quarter, there was a was a dip in mobile revenue. So I was wondering what you think might have caused that also. And there was a, I think 500,000 subscribers churned out on a net basis. Any explanation for that would be helpful.

Speaker 6

Thank you.

Speaker 4

Well, generally, generally, I think the other major player and us suffered the same kind of decline. But in our case, more than that, we did suffer a few a month. Where in a series of days within that month, September that is, we had problems with network outages. So we've looked into that. We've made some quick fixes, but I think we are still going to make sure that we continue to have a more structural fix moving forward.

Speaker 4

So far so good, it hasn't come back and cross fingers, we'd like to end the rest of the year on high note.

Speaker 6

Thank you.

Operator

Thank you, John. Question on the enterprise on the data center. What is the take up of the new data center in Santa Rosa? Rosa?

Speaker 4

Sure. Good afternoon. Thank

Speaker 7

you for the question. So we've opened, BPRO Santa Rosa, our 11th DC. It's, and with OnTrak, we fitted out for 20 megawatts of, capacity before the end of the year and leading up to 36 megawatts by by next year. So the DCSO and we have we have interest from enterprise customers and hyperscalers. We already have an anchor tenant testing in Detroit Santa Rosa.

Speaker 7

So there's already an an Acro costal.

Operator

There's a question on the outlook for CapEx for 2025.

Speaker 1

Our CapEx for this year is around 75 to 78. We're still in the planning stage right now, so we still we still don't have the number for 2025.

Operator

Are they on track to become profitable? And what is the timeline for KIT?

Speaker 1

They committed to have a P and L breakeven by December of this year. So I guess they're going to be profitable the whole the whole year of 2025.

Operator

IPO timeline.

Speaker 1

There is no definite timeline for the IPO.

Operator

Any more questions? Here's a question that was received in the email about the breakdown of our other expenses. We will deal with that offline, and we'll send the required information. A question from whom? For Onfang, what accounts for the better or record breaking installs for the quarter?

Operator

Jeremiah?

Speaker 3

Thank you for that question. Actually, it's multiple factors that have actually helped drive the improvement in our home business. I think at the beginning of this year, we mentioned this at the very, very get go, which was reaccelerating our rollout. 2023, we saw some challenges and we actually had a very, very minimal rollout in 2023. In 2024, we have actually picked that up and we have actually been able to roll out just over 400,000 ports, of which we're starting to see the impact from a revenue perspective.

Speaker 3

Combined with the rollout that we've actually reaccelerated, the second one is we've been able to increase the sales capacity. So coupled with more ports to be able to sell in new selling areas, we've been busy working with our sales partners to be able to ramp up the selling capacity. And we're starting to see that also actually flow through as well. Finally, the other major factor is in the Q2, we made some major interventions. So we had a restructure in terms of our channel partner commissions and our engagement with our sales partners.

Speaker 3

And we also launched some new products. So you would have seen an enhanced or only all product proposition where we provided more value, greater speeds and actually started to include mobile as part of the overall bundle. 2nd, we also introduced the 899 value plan. So it's the first time that we've actually been introducing a sub-one thousand vessel plan from ELDT. And the third, we introduced prepaid fiber.

Speaker 3

So I think the combination of all of those things have actually helped drive an improvement in our take up in the Q3. It's still far from where we want it to be. The marching orders are very, very clear and that's to continue to ramp up to previous higher levels. And that's what we actually anticipate moving forward. So we're expecting to see an increase in our installations.

Speaker 3

Obviously, making sure that some of the weather does permit and not hampered with some of the adverse typhoons, etcetera. But we are expecting and anticipating a continued ramp up in the home business going in through to 2025.

Operator

Next question is, could you provide more color on the press release this morning about the investment in Payel?

Speaker 5

We are increasing the investment in Viad, meaning

Speaker 8

67.

Speaker 5

To 67. So we're investing at nutritional 57% in Viad. But that is not that investment will require BSP approval and its BSP approval. So we don't expect that to be implemented until after the 2nd half of next year. So with that, please, that's supposed to help in the development of the current payment gateway of hire.

Speaker 5

In Austria, which is, which we basically need for the Guyana business that we're building.

Operator

Thank you, Penny Marba. Next question is about Also maybe I can request Scott to Hi. So this is Scott,

Speaker 9

Abelardes. So I think, a couple of months ago, we did mention our initial investment required at that point was just 10%. We made that that investment alongside that full acquisition of MultiPay, another of our payment companies that exist within the group. Now within the past 3 months, we are very happy what we saw and we feel that there is greater synergy that we can derive by bringing all of our payment companies or the tech companies together. So we understand that that's going to take some time and that really is part of a longer process, but we want to start with Payad as our first mover into a bolder stance in the in the Fintech space.

Speaker 9

Just

Speaker 5

to mention, PLDT's interest in Guyana is 40. 45%. Yes.

Operator

Next question is on the dock. What is the impact of the

Speaker 4

Well, with Dito being a challenger, which I think unfortunately he comes in at a challenge at this time when he's challenging 2 major players when the whole industry is over packed. It will be a different story if he comes in challenging existing major players when let's say the penetration rate is maybe 50% or less. But he's coming in at a time when it's over packed. So anything he does will always be destructive. But there is an elegant way of addressing this because now with technology, you can have new targeting, you can be very selective and that's exactly what we have been doing.

Speaker 4

So but credit to Dito, they have taken their own bound of life But we made sure that they do not overstep the bounds. We hope that we have carried out the message. We've sent the message to them enough that the way to compete is basically to add value, to make customers happy and to expand the market. And hopefully, in due time, they will actually align with this.

Operator

Thank you, Eric. Next question, what are your initiatives around AI?

Speaker 7

Thank you for the question. So, AI continues to be a focus for the company and we see 2 main use cases or 2 main buckets areas where you can really help the BLDP group. First one is, it improves our ability to deliver exceptional customer experiences. So we have a couple of, say, AI bots in the environment that help us be more efficient in in in collecting juice, for example. And we continue to work with the virus business units to ensure that we nurture up and coming use cases be it, voice, voice protect space or even video.

Speaker 7

The second area where AI is important is around operational efficiency. There's a couple of areas that we're targeting, but a lot of that is actually hinge off on our OSS transformation initiatives that could enable us to be more efficient in many areas with regards to network operations. Things like, accuracy and, in facilitation of how we roll out, identifying faults in the network proactively, doing troubleshooting. And so there's a lot of good work that's being done throughout the public so that we can continue to nurture the power of the AI.

Operator

Next question is also for you, Joel. What are the plans for a new data center?

Speaker 7

So we've opened a lesson. We are looking already for the cloud location. So, yeah, we we will build ahead of demand and continue to expand.

Operator

Please raise your hand or chat put your tech questions in the chat box. If you have any questions We do a final round. There are no questions in the queue.

Speaker 4

Good afternoon on behalf of,

Speaker 8

M v p. I just like to thank everybody who joined the call today. I think we have a very challenging 2020 for looking forward to 2025. We expect a more robust performance for both BLT and smart, and we're seeing that in our second half. Numbers in our second half growth and so we look forward to being able to share with you our plans for next year during the next call.

Speaker 8

But as Mr. Pangilinan said earlier, just a couple of our days till Christmas. So Merry Christmas to everybody.

Operator

That concludes today's briefing. As always, should you have any further questions or clarifications, please reach out to PLT Investor Relations at PLTTIRCenterplkt.com.

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