PLDT Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2025

There are 10 speakers on the call.

Operator

Good afternoon, everybody. Thank you for joining us today. I'm Jingai Nograles. I'm the Head of Investor Relations here at PLDT. And it's my pleasure to welcome you all to our full year financial and operating results briefing.

Operator

So joining us today to share insights into PLDT's performance and strategic direction are Butch Jimenez. He is the PLDT Chief Operating Officer. Joining us right now is Smart Communications' Chief Operating Officer, Boye Martinez. We also have here PLDT Chief Financial Officer, Mr. Danny Yu and our Chairman and CEO, Manuel Manuel V.

Operator

Pangilayan, will be joining us later during the presentation. So before we begin, I'd like to remind everyone that we will have a Q and A session after the presentations. So for those who are joining us virtually, you may submit your questions via the MS Teams chat in the Q and A panel. So to start, I'd like to invite our Chief Financial Officer, Mr. Danny Yu, to walk us through PLDT's financial performance for 2024.

Operator

Danny?

Speaker 1

Good afternoon, everyone, and thank you for joining us today. Allow me to walk you through PLDT's twenty twenty four financial and operating performance. Amid a dynamic and competitive landscape, we delivered consistent top line growth and stable margins. Let's start with the financial highlights. Our service revenue grew 2% year on year to RMB194.7 billion, driven by fiber, mobile data and enterprise ICT.

Speaker 1

On gross basis, revenue rose by 3% to RMB208.4 billion. EBITDA expanded by 4% to DKK108.5 billion on the back of revenue expansion and operating efficiency. Our EBITDA margin remained strong at 52%, underscoring our ability to sustain profitability even as we continue investing in network leadership and innovation. Telco core income grew by 2% to RMB35.1 billion, reinforcing earnings stability and financial resilience. Our focus remains on expanding revenues, managing costs and improving cash flow generation in 2025.

Speaker 1

PLDT service revenue growth reflects consistent demand across key business segments Mobile Data, Fiber and Corporate Data and ICT, which now account for 88% of total revenues, continued to expand, offsetting legacy revenue declines. Excluding legacy services, total revenues grew by 5%, emphasizing our shift towards data driven and digital services. Moreover, our growing segments more than offset the drugs from legacy services with individual mobile data up by 5%, home fiber by 6%, and corporate data and ICT services by 5%. We also expect legacy revenues drag to moderate supported by customer migration to these segments. Total revenues for our individual segment rose by 2% to RMB83.5 billion, led by Mobile Data, which rose by 5% year on year and a strong 7% in the fourth quarter.

Speaker 1

Mobile data now accounts for 89% of segment revenues. Key metrics have also increased: blended ARPU move up 9% average monthly mobile data usage per user grew 5% while active data user reached 41,300,000. To stay ahead in a competitive market, we are driving higher data monetization, deepening customer engagement and delivering an enhanced user experience. We are leveraging on five gs expansion to optimize revenue generation and increase ARPU, continued expansion and upgrades for our network and IT infra as well as AI driven marketing strategies. With our extensive network and digital innovations, we are well positioned to capture further opportunities in the mobile data space.

Speaker 1

PLET Home continues to strengthen its leadership with total home revenues hitting RMB60.7 billion. Fiber only revenues grew RMB3 billion or 6% to RMB56 billion and now accounts for 92% of the segment revenues. We continue to set the industry benchmark with a churn rate of just 1.7% reflecting strong customer loyalty. Meanwhile, PLDT's ARPU of RMB $14.88 remains at a premium to the rest of the industry. A key driver of our success has been the higher adoption of premium plans with over 75% of new activation opting for plans above RMB $12.99.

Speaker 1

Helping this is our ability to differentiate ourselves from competition through our bundled plans which account for about 40 of new activations. We're extending our fiber reach strategically, deploying additional ports while exploring new growth areas including prepaid fiber offerings in select locations. In 2024, we expanded our reach to 2,500 additional barangays. Our strategy remained clear: strengthen retention through improved customer experience, maintain ARPU and expand our fiber footprint. Enterprise revenues grew 3% to RMB48.4 billion with ICT services continuing to be the fastest growing segment, up 15% to RMB35 billion.

Speaker 1

Key growth areas include managed IT services which grew 48%, cloud solutions up 30%, data center colocation which rose by 22%. In addition, Vitro continues to lead the industry with Vitro Santa Rosa as the country's first and only AI ready data center. Recently energized, it has already secured anchor tenants. Our focus is to expand our enterprise digital ecosystem, accelerate cloud adoption and reinforce PLDT's leadership in the ICT space. PLDT delivered R108.5 billion dollars in EBITDA, a 4% increase year on year, demonstrating steady revenue growth alongside effective cost management.

Speaker 1

OpEx, including subsidy and provisions, declined by DKK1 billion to DKK86.1 billion, reinforcing operational efficiencies. Our EBITDA margin remained strong at 52%. PLET telco core income increased by 2% to RMB35.1 billion, core income expanded 5% to RMB34.2 billion, supported by lower losses from Maya Innovations, which posted its first profitable month in December 2024. Maya Bank, on the other hand, has been profitable since September 2024. This demonstrates the positive trajectory of our fintech investments and their growing potential in contributing to our bottom line.

Speaker 1

Reported income surged 21% to RMB32.3 billion, up RMB5.7 billion year on year, owing to higher core income, derivative gains and lower asset impairment. Tower sales continued with three fifty six additional sites sold in 2024 and additional towers earmarked for sale in 2025, reinforcing our asset monetization strategy. We continue to optimize investments, steadily reducing CapEx intensity while maintaining network improvement. 2024 CapEx totaled RMB78.2 billion with CapEx intensity further declining to 38%. Our CapEx guidance for 2025 is between RMB68 billion and RMB73 billion with investments in the following key priority areas: new cell sites plus LTE and five gs upgrade home fiber ports increased focus on AI and network AI ready data center submarine cable investment, upgrades and modernization of network and IT to improve our quality of service.

Speaker 1

While we work on decreasing CapEx, we are committed to deliver greater outcomes through strengthened negotiation and efficient use of capital. PLUT remains in a strong financial position. Our net debt to EBITDA currently stands at 2.52 times and we're working to bring this level down to two point zero times in the mid term. In addition, we strive to deliver positive free cash flow by next year. Debt maturities are well spread out with 50% maturing beyond 2,030, ensuring manageable refinancing requirements over the coming years.

Speaker 1

Our debt portfolio is well balanced with 14% dollar denominated debt, of which 95% is hedged, thereby reducing ForEx risk. Interest costs remain competitive with a healthy mix of 41% fixed rate and 59% floating rate. Average debt maturity stands at six point six years. We're also pleased to report that we have retained our investment grade ratings from S and P and Moody's, reinforcing our prudent debt management strategy. For 2024, total dividends amount to RMB97 per share, reflecting a 60% regular dividend payout aligned with our policy.

Speaker 1

A final dividend of RMB47 per share was declared today. PELDT continues to focus on deleveraging to generate positive free cash flows. As of yesterday, PLDT's twelve month trailing dividend yield stands at 7%, positioning us as one of the most attractive dividend plays in the market. Now for Maya. I'll be presenting its 2024 operating highlights showcasing its strong growth and market leadership in fintech.

Speaker 1

Maya remains the number one digital bank in The Philippines by deposit balance and customer base. It also continues to lead in merchant acquiring, holding the largest market share in card acquiring and QRPH transactions. As of December 2024, Myabang's customers base grew significantly, up 71% year on year to 5,400,000 bank customers, while lending expanded to 1,600,000 borrowers, doubling from the previous year. Deposits rose 59% to DKK39 billion and cumulative loans disbursed reached DKK92 billion with 2024 issue with RMB68 billion issued in 2024 alone. Most notably, May achieved positive net income in December 2024, marking a major milestone for its financial sustainability.

Speaker 1

These accomplishments demonstrates Maya's strength in providing seamless digital banking and financial services, further solidifying its dominance. Maya's financial performance is backed by significant growth in deposit and increasing loan to deposit ratio. Over the past two years, deposit more than doubled from JPY 14,700,000,000.0 in 2022 to JPY 39,300,000,000.0 in 2024, while the loan to deposit ratio increased from 5% to 42%, highlighting efficient capital deployment and growing credit demand. On the lending front, Maya has experienced exponential growth. Cumulative loan disbursement now totaled RMB 92,000,000,000 while outstanding loans have reached RMB 16,700,000,000.0 as of December 24.

Speaker 1

Maya's disciplined risk management continues to set it apart with an NPL ratio of only 3.5%, significantly below the 7.1% industry average, demonstrating strong underwriting and high quality loan portfolio. Beyond deposits and lending, Maya has continued to expand its product offering, launching new solutions for both consumers and businesses. In the consumer segment, the company successfully introduced its first credit card product, the Maya Landers Cashback Credit Card, issuing over 100,000 cards within just five months of its commercial launch. This expansion enhances Maya's engagement with growing customer base and strengthens its position in offering credit to the customers. For enterprises, Maya has introduced bill payments for merchants in Maya business deposits.

Speaker 1

It also rolled out custom loan terms for Maya business advance, offering flexibility to business needs. These initiatives reinforce Maya's commitment to innovation and financial inclusion, providing seamless digital solutions that empower businesses and individual alike. With its continued focus on growth, Maya is well positioned to expand its fintech ecosystem and drive further financial empowerment in The Philippines. PLTs made significant progress in the area of sustainability, which we define as ensuring long term profitability by doing business responsibly. Our S and P corporate sustainability assessment score rose 14 points to 72, the highest among Philippine corporates.

Speaker 1

As a result, PLDT was the only Philippine company included in the 2025 S and P global sustainability yearbook, joining seven eighty companies out of 7,700 assessed worldwide. PLDT was also recognized as an industry mover in global telecommunications for its strong sustainability performance. Child protection remains a key sustainability focus. Under the Global Child Forum benchmark, PLDT ranks second globally among over 1,000 companies and was the highest ranked telco reinforcing our commitment to protecting vulnerable users of our connectivity. We entered 2025 with each business primed for expansion.

Speaker 1

We're harnessing innovations and digital transformation to unlock new opportunities and deliver greater value. We continue to invest strategically, strengthening our network infrastructure, expanding five gs and leveraging AI driven marketing and enterprise solutions to sustain growth. Our business remains resilient with steady revenue growth and stable EBITDA. We remain focused on cost efficiency while ensuring CapEx is directed towards high impact areas. With that, let's now discuss the key growth initiatives for each business unit.

Operator

Thank you, Danny. All right. So now to provide further context on our operational performance in key business unit developments, we will hear from our business unit heads. So first, Mr. Boi Martares, Chief Operating Officer of Smart, will discuss developments in our wireless business.

Operator

Then after him, Jeremiah de la Cruz, SVP and Head of our Home business, will provide an update on his segment. And lastly, Georgio Hendano, SVP and Head of Enterprise, will walk us through the latest in our Enterprise segment, including our updates on our data center and ICT initiatives. Gwen, over to you.

Speaker 2

Thank you, Jinbeg. A pleasant good afternoon to all our partners from the investment analyst community. Today, I'm going to be talking about unlocking wireless growth, particularly on our five gs. And I will also be touching on AI and a smarter way to monetize data. I will speak on two major points.

Speaker 2

The first one is about scaling our five gs adoption and therefore monetization. The second part will be about AI. On the first part, I will be touching on our rollout, particularly what we call five gs cities and how together with combining it with affordable phones, five gs phones, will result in expanding mass adoption. The second point that I will take up along this first set of issue is about monetization, okay? And then I will talk about the five gs migration and of course, the five gs devices.

Speaker 2

So on the first part, on five gs cities, our philosophy is to basically not roll out on the basis of just pure reach because that will require a lot of CapEx. A more sensible thinking around this is to ensure that we roll out on the basis of a home, work, play, seamlessness. Now maybe that may not give you enough reach, but it will give you a more meaningful way of providing a five gs experience for all the people who would adopt five gs. So alongside that is a combination of putting five gs devices. That kind of rollout plus the five gs devices is I think in our view the best way that we provide you the adoption that we want that we are desiring of.

Speaker 2

The second point to talk about five gs and monetization is also the issue of experience based monetization. Now what do we mean by that? Experience based monetization is something that can only be delivered by innovation. Innovation because it is actually the touch points by which we're able to tell the customers, here is our offer, here is our offer at the right place, at the right time for you. So that that way, we engage them better.

Speaker 2

When we engage customers better with innovations like this, we are able to achieve the monetization that we so desire. The third point is about migration path from two gs to three gs, three gs to four gs and four gs to five gs. And that hopefully will create the ARPU lift. We have shown to ourselves and we have demonstrated to ourselves that when we did this in a way that we established it in BGC, the twin introduction of our back to back introduction of five gs in BGC, which we were able to achieve a 20% ARPU lift across at least 500,000 subscribers that were in that particular incident. So this for us is a very good demonstration of the model itself and using AI, we would like to be able to scale this up moving forward.

Speaker 2

Five gs devices in a smart network. The five gs devices in a smart network in the year that under review actually grew by 67% versus a year ago, and that is significant for us. Our aspiration is to grow it even better moving forward. So all of these together points out that we would be able to scale five gs adoption and monetization in the way that we would like it to be. Let me go to the second part of my discussion, which is being an AI native organization.

Speaker 2

AI to us is very, very important. AI to us is that leading edge technology that will enable us to achieve what we want to achieve our goals. But we have never lost track of the fact that the more important thing and the more overriding thing for us is customer centricity. We have to deliver what the customers aspire for and the technology is the one that will enable us to get it. A lot of telcos have fallen to the trap of falling in love with technology.

Speaker 2

We have not. We have seen technology only as an enabler. We have never lost track of the fact that our more overriding concern is to give Filipinos the best global service there is. And that still is our true north. So to talk about it, we have embedded AI in our network.

Speaker 2

You will see that AI, we have a SON in our AI, a self optimizing network. The sterings of that SON is basically the fact that we're able to get load sharing in our network. We have also activated data analytics, which is now has morphed into AI driven analytics. So with that, we're able to have a better and a more meaningful approach in obtaining an increase in revenue and a decrease in cost. Advertising our advertising has become more meaningful in the sense that instead of advertising in a broad way like what it was before, the old school way, now we're able to geo target to be able to deliver a particular message across a specific target as a segment who really needs a specific offer.

Speaker 2

And that is

Speaker 3

a use case for us.

Speaker 2

It's an AI use case. We have also put in analytics into every aspect of our organization. So all of these network, hyper personalization and all of these initiatives have actually helped us already in 2025. And we will do more in 2024 and we will do more in 2025. I'm going to be open for questions.

Operator

Thank you, Bloy. And then we have Jeremy next for our Home segment.

Speaker 4

Good afternoon, everyone. I'd just like to touch on two things for home, and it's really around innovation. At the November 2024, PLDT leveraged our advantage as an integrated telco by launching a service for the home that uses both our fiber as well as our mobile network. A first in the world, it provides connectivity to the home utilizing PLDT's extensive XGS POD network as well as our mobile network. What it does is it ensures that our customers are able to actually have connectivity in the home when they want it, how they want it, and making sure that that reliability actually remains for them.

Speaker 4

This is the very first service, it's very first time this service has been made as an integrated service. So seamlessly bringing those two technologies together so that the customers don't have to worry about which technology or which service that they're actually using. In addition, PLDT has actually taken innovations not just externally, but actually internally as well. I just wanted to build on what Boyd was saying, which is actually around AI and embracing AI. We've actually embraced AI within PLDT Home in two main areas at this point in time.

Speaker 4

It really is the tip of the iceberg. So we've embraced AI in its application with regards to collections. So historically, collections is something that is done by people actually picking the phone up, calling, and it can be actually quite a tedious exercise. And sometimes you have a mixed bag of lollies with regards to the results. Very exciting that we've been able to deploy AI to help us in this particular area, and we have seen very, very promising results.

Speaker 4

Not only has it actually yielded the same performance, if not better, but it's actually enabled us to reach out to the different languages, the different dialects within The Philippines. So using AI to be able to reach out to the different and using native language as well to reach out to them in a language that better resonates and has actually helped us yield better results. We've extended that capability to also our cross sell and up sell. So we've actually started to use AI as well to be able to reach out to our customers to talk to them about other services, other offerings that we have available in a timely fashion. So, in the past, we've actually been limited by the number of manpower, the number of hours that we have available in the day.

Speaker 4

But moving forward with AI, we now have the flexibility and the elasticity to be able to reach out to them at the time that best suits them and is most, I guess, most appropriate for them as well. So for PLDT Home, our innovation is really two pronged. It's new innovations with regards to new technology and the things that we launched with AlwaysOn, making new services available for our customers, but also innovation internally where we're taking and embracing new technology like AI and making our operations much, much more efficient and more relevant for our customers.

Operator

Thank you, Jeremiah. And lastly, we have Mr. Giorgio Hendrana, who will be talking about our Enterprise business as well as our Data Center initiative.

Speaker 5

Thank you very much and good afternoon. Our enterprise business remains committed to help our customers through innovation. So we are excited to provide value through the capabilities of our network and of course our people. For large scale operations in remote areas needing resilient infrastructure, five gs mobile private networks are being designed for select customers, particularly in mining and ports. In dense locations, five gs slicing through five gs stand alone enables a differentiated network for use cases like public safety and security, smart meters and smart cities.

Speaker 5

We have a robust a very robust partnership ecosystem with known brands in five gs that we continue to collaborate with together with our customers to deliver solutions that matter. On the next front, we're also excited to announce that we are the first Philippine operator to achieve GSMA Open Gateway Certification for the number verification API. So what does this mean? In using APIs to expose the capabilities of our network, mobile applications are able to silently and securely authenticate a user or a transaction without the need for a one time PIN. We are already working with the banking ecosystem, including aggregators, And this area, which is called network APIs, is likely one of the major topics in Mobile World Congress next week in Barcelona.

Speaker 5

And we are excited about the potential for the new revenues and to add value to our customers. And it's just the start. So number verification is one of the multiple APIs that the industry through the GSMA have developed and we will be launching more in the next few months. Next slide, please. Also, Vitro Santa Rosa is now live as evident by the picture on the slide and our backdrop, right, located in an optimal facility for hyperscale data centers.

Speaker 5

It was energized last year with an anchor tenant and other businesses already using our state of the art facility. Next slide please. We are committed to continue to lead in the data center space, leading in both capacity and flexibility with our unmatched 11 carrier neutral and resilient by design locations all over the country, trusted by both hyperscalers and enterprises. We are currently the only AI ready hyperscale DC in The Philippines. VITRO Santa Rosa is able to support the immense compute demands needed to run AI with IT cabinets planned to support up to 100 kilowatts per rack.

Speaker 5

This is necessary for us to provide GPUs as a service to meet the increasing demands for AI. And as we expand our footprint, sustainability remains a priority. We are committed to running our data centers on at least 40% renewable energy by 02/1930. We are ISO fourteen thousand and one and fifty thousand and one certified, reinforcing our dedication to environmental responsibility. Beyond sustainability, our data centers have been critical in national infrastructure, supporting mission critical applications such as the COMILEX election infrastructure and the GSISS disaster recovery systems, further strengthening trust in PLDTs and EPLDTs capabilities.

Speaker 5

With AI, cloud and hyperscaler demand driving a major shift in data center requirements, PLDT and EPLDT are strategically positioned as the leading AI ready, hyperscale capable data center provider in The Philippines. Our robust infrastructure, connectivity leadership and commitment to sustainability makes us the ideal partner for global and local enterprises seeking secure, high performance data solutions. We remain committed to scaling ahead of demand to support the country's digital transformation and establish The Philippines as a key data center hub in Asia Pacific. Thank you.

Operator

Thank you, gentlemen. And I'd like to acknowledge the presence of our President and CEO, Manuel B. Paterinan as well as our Corporate Secretary, Bernie Macca. All right. So with that, I'd like to move on to Q and A.

Operator

I'd like to emphasize that while 2024 was a year of resilience and execution, we remain focused on our long term growth priorities. Our network leadership and digital transformation efforts will continue to be at the core of our strategy as we drive sustainable value creation for our stakeholders. Now we'd like to open the floor to your questions. And for those joining us on-site, please go ahead and raise your hand. We'll provide a microphone for you.

Operator

Please state your name as well as your company affiliation, and you can go ahead and ask your question. For those joining us online, please submit your questions via the Q and A panel. You may also raise your hand and we can unmute you as well. Thank you. While we wait for some questions, I did get a few questions emailed to me prior.

Operator

So this first question is regarding the Koniktatum Pinoy Act. Someone posed a question that some industry stakeholders have opposed a bill due to national security and digital fraud concerns. What is PLDT's stand on this bill? And how do you see this impacting competition, especially from foreign players?

Speaker 6

Sertadong Pinoy mainly focuses on open access. Even without the bill, we're already providing open access to some data transmission providers, including Converge and the like. So our only request is that the bill basically treat everyone without discrimination and equally. And so we are supportive of the government's effort to provide open access. And our hope is the law, when it is actually passed, will be crafted such that there are reasonable restrictions and protection to those who own the assets.

Speaker 6

And what else? We also would like to be treated equally with the data transmission providers because currently, our business, around 78% of our business is already data transmission. So in that sense, any protection being provided to the data transmission providers should also be provided to us. So and I think that's basically our position. And we are going to work with the government on this law and we are going to also work with the government and the regulators in respect of the promulgation of rules and regulations in the event the law is passed.

Operator

Thank you, Attorney Maba. Any questions from the floor? All right. I'll move on to some of the other questions that were sent to me beforehand. This is for the Home segment.

Operator

TLBT Home has maintained an industry leading churn rate of 1.7% and stable ARPU. What are some key initiatives driving customer retention? How sustainable are these trends? And can you talk in more detail about your push for prepaid fiber?

Speaker 4

Thank you for the question. I think it's very obvious that in the market, there is actually quite a lot of price competition happening. And you can actually see that with the advent of lower price points as well as prepaid offerings. FieldDT Home is committed to making sure that we have relevant offers for the different segments in the marketplace. So we've been very, very focused in making sure that we have a competitive offer at all of the different segments, whether that's the entry level, mid, as well as the high end.

Speaker 4

So some of the initiatives that we've been embarking on at PLDT Home is making sure that we've actually given the best proposition and package available for all of our customers. That includes actually increasing the speeds on certain price plans, making sure that customers are aware of new offerings. And all of these initiatives combined have actually helped us sustain our ARPU. If you look at the level of competition and the level of commoditization over the last few years, if you go back to 2020, for fifteen ninety nine vessels, you would only get 50 megabits per second. Today, you're looking at 300 megabits per second.

Speaker 4

So, there actually is quite a lot of commoditization happening in the marketplace. And PLDT being the incumbent has had actually the most amount of price pressure applied to us. We've been able to sustain our ARPU simply because we've continued to provide value for our customers. So making sure that they actually have the right plan, the relevant plan and continuing to enrich the offerings that we have available for them and sustaining that price point. Now, that includes not just increasing speeds, but making sure that we also provide additional services for them.

Speaker 4

In fact, today, a vast majority of our customers now availing of our PLDT home subscription does so with two other additional inclusions beyond just data connectivity. They do that with some the benefits of having signal instantly within their package. And additionally, we also provide some prepaid mobile offering. So, many of our customers actually now enjoy, included in their PLDT home subscription, five smart prepaid SIMs that they're actually available and enjoy the benefits of a calling circle amongst themselves. So, that's something that's been very, very important and key to us in being able to deliver and maintain our ARPU at the level that it has.

Speaker 4

Now, what's really important as well for all our customers to ensure that we maintain our churn levels is service. I think we all hear about it constantly, service, service, service. It is absolutely critical. And we've been spending more and more time and more and more efforts in actually improving that service. I'm not going to stand here in front of you and say we've actually cracked it and we're there yet.

Speaker 4

It's a journey. And in fact, that journey, we've made significant strides to improving our service and we've seen the speed of restoration dramatically decrease. So increase, but the amount of time that you've been waiting has actually decreased. And we're seeing that translate to not just faster times for our customers, but we're seeing that with our churn rate. If you look at our churn rate, it is industry leading.

Speaker 4

We're at 1.7%. Our nearest competitor stands at 2.1. Ultimately, our customers are going to vote with their feet. If they're unhappy with your service, they're going to decide to find another alternative service, and we're seeing that. We see that.

Speaker 4

And that's why we're absolutely committed and driving to actually improving our service even further. In fact, our 2025 outlook, we will be spending more money in our network and actually maintenance of our service of our network. So not just rolling out. In fact, from a network side of things, we're not just focused on rolling out and creating new areas, but we're also focusing on making sure that we upgrade and maintain our existing network as well. Now, with regards to the question on prepaid, prepaid is part of our overall offering, but our focus has been squarely on postpaid at this point in time.

Speaker 4

We have had prepaid that is available. We don't disclose the numbers, but I wanted to be transparent with you. We do have prepaid customers on our network and we do make it available. We're in a different situation to our competitors simply because we if you look at the number of ports that we have available and the number of customers we have on our network, it is significantly higher. So, we have to also be careful that when we offer prepaid that it's not necessarily impacting negatively our postpaid customers and actually doesn't have a massive dilution with regards to our ARPU as well as our profitability.

Speaker 4

You will see us doing more and more in the prepaid space, absolutely. But we'll be very, very selective about it and we'll be very, very purposeful in how we do it so that we don't see a dilution in our not just ARPU, actually not necessarily ARPU in the prepaid space, but we don't see a dilution with regards to

Operator

profitability. Thank you, Jeremiah. Let me just go through the Q and A box here. I think we have some questions in. All right.

Operator

From Ziwei Fu of Macquarie. Can we discuss your mobile business? How did PLDT drive the higher ARPU quarter on quarter for 4Q whilst your peers saw decline? How do you see consumers being able to take higher ARPUs once price competition eases?

Speaker 2

That's a question for mobile. Let me tackle that. Fourth quarter saw us in a situation where we were able to build data and then it's a question of monetizing it. And we monetize it on the basis of the fact that we have upscaled our sales and marketing infrastructure. We've rolled out our five gs network in the work home play regime that we talked about a while ago.

Speaker 2

And plus the fact that we have five gs phones with us. So all of that confluence to having been able to achieve what we were able to achieve in that fourth quarter. I cannot speak for my competitors, but probably it looks like we did better. So I hope I answered.

Operator

Yes. Thank you, Voj. All right. We have another question here on the Q and A box from Voe Van Lin. May I get your thoughts on why revenues of fiber broadband may be falling behind industry growth?

Operator

How's the expected unit economics for always on package, given that it's just $2.99 pesos a month?

Speaker 4

I'll start off with a question on the speed of the market. So we saw some challenges at the beginning of twenty twenty four. We actually had to make some adjustments with regards to some of the go to market activities we had as well as accelerate the rollout. As I think you would all remember, 2023 was a challenging year with regards to network rollout for us. So we wanted to accelerate that network rollout.

Speaker 4

So with a combination of some of the adjustments we've made as well as the rollout, we've actually seen the second half of twenty twenty four perform much better. If you look at our net adds, we saw a 190% increase in the number of net adds that we had in the second half, which is actually helping to contribute an improvement in our overall fiber growth as well as our home performance. If you deep dive into the performance of home in 2024, you'll see that there was actually quite flat in the first half, but we saw an increase coming through in the third as well as the fourth quarter. In fact, the trajectory is continuing through and we'll expect that to continue on, especially as we've seen the net adds increase quite substantially in the third as well as the fourth quarter. Now, we're going to continue to support that.

Speaker 4

We have a rollout that's planned as well and focusing on delivering in the first half. So, we'll continue to support that with additional rollout, and we'll start to see that the overall growth of home as well as our fiber business actually not just continue to lift, but actually be much, much higher than where it is today. Now, the second question was I think the economics with regards to our always on solution. I can't go into the detail of the product economics, but what I can share with you is the innovation actually uses two of our networks, right? So, our XGS PON, our fixed and fiber network and the second one is our mobile network.

Speaker 4

The customers are looking for the fastest and the best connection possible. And that really is for the home and most use cases is really around using the fiber network. So most of the time when a customer is using an always on service, they will be using our fiber network. In the event that there's service interruption, and that can happen for a number of reasons, whether that's the weather, whether it's nature, whether it's an accident or there's some digging that actually happens down your street, there may be instances where that connectivity has been interrupted. And that's where we're able to leverage the fact that PLDT is an integrated network and we also have one of the widest and fastest mobile networks in the country.

Speaker 4

We're able to leverage our mobile network into continuing to deliver a service into the home. So, they don't have to worry about, hang on, I've had a service interruption, I now need to change SSIDs, I now need to change networks, I need to think of an alternative method. No. The always on service makes sure that we actually continue to deliver a service into your home no matter what. So, in terms of unit economics, really I can't go into the detail of the unit economics,

Speaker 5

But

Speaker 4

what I can share is it does leverage the strength of PLDT and Smart because we are an integrated network. We're able to leverage those two networks that we've invested quite significantly in over the years.

Operator

Thank you. I have a question here about our legacy drags. How much longer will legacy businesses be a drag to top line growth? Any initiatives being done to migrate or sunset these businesses and migrate customers? I think that's a question for both our wireless segment or actually all our segments actually.

Operator

So, I don't know who wants to take it first.

Speaker 3

Well, on the network side, when it comes to our legacy services, right, especially on the fixed line, we are accelerating the migration of all our copper subscribers to fiber. In fact, you're going to see a very strong reduction in our copper subscribers even just on the month of January alone. We have a mandate to significantly do the finish the migration by mid year or third quarter of next year. And so that's a target that we're going to be going after. And so we will see that drag of legacy services continue to decline and hopefully by next year will be completely wiped out.

Speaker 3

But acceleration of migration will happen this year and will almost be completed.

Speaker 2

On that, our target is to sunset basically the lower generation technologies and do it within this year. Helping that would be basically the availability of handsets, particularly on four gs and five gs, by which we would be able to migrate our existing subscribers on this lower generation technologies to higher generation where hopefully, decisively, there would be better ARPU and better revenue. And I think that helps into the situation of the industry as well.

Operator

Thank you, Boi. And thank you, Plutch. I have another question here. Let me just from Brian Lim of Guild Securities. Can you clarify the 11% increase in fixed line from 2023 to 2024?

Operator

Is this a result of the 40% bundled packages, I guess, for the fiber acquisitions? If not, can you expound on this a bit? So I guess, why is voice growing? Yes. So, I think it's the growth in fixed line voice.

Operator

So, it seems to be growing from 2023 to 2024. Is it because it's part of the bundled fiber product?

Speaker 4

Component of voice that may be growing, and I think you've already hit a nail on the head there. It's really a cost allocation that we have as we sell more and more bundled products and as brought on products, as we sort of shared was about 40% of our customers are availing of a bundled product, whether that's bundled with signal as well as with voice and also mobile, there is a small component of that that's actually allocated. So, we'll be looking that's really that's the driver. But what's most important for us is then looking at the difference between copper as well as our fiber business, because voice in itself is not necessarily a bad thing. Voice in itself is not necessarily a bad thing, providing it's actually conducted or served over our fiber network.

Speaker 4

Moving forward, it will be our fiber network that will remain with us for the next ten, twenty, thirty years. It's really what will be sunset is copper. So, that's why we're really, really focused in on moving our customers, as Butch had mentioned, migrating as many of our customers over from our copper network to our fiber network. We are seeing naturally we see and we talk about the decline of voice because we are seeing customers move away from voice centric services to data centric services, and that's predominantly broadband, especially with voice over IP, right? We will see that.

Speaker 4

But within fiber itself, that movement between the two is really just a cost allocation amongst the different product lines.

Operator

Thank you, Jeremiah. Okay. I have a raised hand here from John Deh of UBS. Let me unmute you, John. One moment.

Operator

All right, John, you are unmuted. Go ahead and unmute your question, please.

Speaker 7

Hi, Jingai. Thank you for the opportunity. Three questions for me. First is, any preliminary guidance for 2025 from the Chairman? Second is on mobiles.

Speaker 7

While it was very strong, we did see some subscriber losses on prepaid in the fourth quarter. Any specific reason or any color on that? Third, on broadband, again a strong result, but the net add momentum slowed from about $100,000 in the third quarter to about $40,000 in the fourth quarter. Is there any seasonality or any particular reason why that's it for me? Thanks.

Operator

Yes, we can start with the guidance.

Speaker 8

Well, at this point, I don't think we are comfortable about giving any specific guidance for for income for 2025. We do know that we do have targets, we do have budget numbers and they show increases in revenues and profitability for 2025. But we'd like to be better prepared, I think, better certain, more certain about how our numbers would spin out, especially in corporate stability for the full year 2025. We've seen some softness in the market, not only telcos but also in the power business and so forth. And we're not quite sure why that is so at this stage.

Speaker 8

So I think it's best to be prudent and perhaps after the first quarter, when we have a better reading of the economic situation in this country, then we can provide some guidance as to the full year view of quarterly income for PLDT.

Operator

Thank you, Mr. Chairman. I think the next question was regarding our mobile subscriber base and the decline in the fourth quarter. So we saw some subscriber losses on prepaid in the fourth quarter. Any specific reason why that occurred?

Speaker 2

Well, to that question, that was just a result of the cleanup on subscribers. So and that's a year end cleanup, as our CFO was saying.

Operator

All right. And I think third is the broadband.

Speaker 4

Thanks. Very similar to what Boi mentioned, we do seasonally do some cleanups with regards to subscriber numbers. And so, you'll see that show a seasonally low figure. We are seeing though I can share with you that our gross additions over that period as well as our migrations actually remain steady. There are typically, we do see some challenges in the fourth quarter simply because of the Christmas period.

Speaker 4

As you know, people's accessibility just not the same. So, you see a lot of December actually take a hit. However, I can share with you that we did see our gross additions continue to grow in the fourth quarter. And in fact, that has continued through two of twenty twenty five. So, we're anticipating a much, much stronger 2025 carrying that momentum in from the second half of last year and building on the third quarter of last year as well.

Operator

Thank you. Thank you, John. All right. We have time for a few more questions here. This is on GPU as a service.

Operator

Can you speak more about that product offering? What has demand been like now that it has been launched? Any enterprises open to this type of service?

Speaker 5

Sure. So thank you very much for that question. Our GPU as a service offering in EP and EP is still in its fairly early stages. So we have a modest farm in Lipo Santa Rosa that actually has active workloads and active use cases on those GPUs. Too early to say on the specific pricing model once we get to full launch, but this is an area that we intend to be very aggressive in and the pricing that we have to come up will have to be competitive.

Speaker 5

We've been in discussions with a lot of enterprises. We see a lot of demand coming and it's important that we continue to work together with them not just on providing the GPUs, but also sitting down with them and really working together with them on the use cases. On top of that, we also see a lot of activity from other GPU as a service providers that want to come into The Philippines. They are welcome and we are welcome to host them in Bifrosta Santa Rosa. Thank you.

Operator

We have about a minute left in the briefing. Any questions from the floor? Derek?

Speaker 7

Hi. This is Derek from CLSA. I have several questions. First on the fintech side, I saw Bloomberg headline earlier, PLDT would like to purchase the KKR stake on Mai. How do you intend to finance this buyout if ever?

Speaker 7

And is it strictly going to be through PLDT? That's number one. Number two, on the asset sales, is there possibility for PLDT to monetize non tower or non data center assets? I'm talking about the legacy assets you have in line with your with the question earlier about legacy migration. That's all.

Speaker 8

Well, I think there's no certainty yet that AKR is a seller. I think we do know who asked this question. We do know that they have engaged two American banks to scan the market and get an idea of what the value of MYA might be as a whole. And in the next few weeks or so, they have undertaken to give us an indication of what that valuations are going to be and probably themselves assess whether the value they get from the market is within their price range and whether we ourselves would be prepared to buy certain shares from them. We did say that we are not a seller unless they come back with a humongous price, in which case we may consider selling together with them, right?

Speaker 8

But if the values are within our own range, then we might consider buying. But together with First Pacific, PRDuty owns a slightly less than 40%. So we need to buy only about 11% for us to achieve control of the company, of my group. So of course, if they come back with US10 billion dollars you probably will sell and get US4 billion dollars and get rid of all of our debts. That's music to Eris Danny, right?

Speaker 8

And we don't try to explain about Tardier and all that sort of thing. Yes, so we don't know. So let's wait for a month or two and see what those values are. That would be interesting. We are not altogether optimistic that they can get the values that they want, I think, given the market and situation elsewhere in the world.

Speaker 3

Let me take the second question regarding monetization of our legacy assets. We are really focused on being able to take a look at the legacy assets that we have and starting to monetize them and we are going to initiate the first and foremost the copper monetization. In fact, in the next couple of weeks, we're already going to do operational POCs. It's not that easy to just rip out the copper and sell it, right? There may be copper facilities that are linked to subscribers.

Speaker 3

So it's a very operational endeavor. And we've engaged Deutsche Telekom and Detekon who has done copper monetization and copper mining through many telcos all over the world to take us through all the processes and make sure that when we do start ripping out these copper facilities of ours, we're not affecting other subscribers, right? So we are doing POCs in four of our exchanges just to study how difficult it is. If you look at the copper facilities, the aerial copper facilities, you'll already see how many telcos are intertwined with each other. So it's not as easy to just rip that out and sell it.

Speaker 3

Secondly, one of the things that we're studying is the value chain. You can rip out the copper and sell it as scrap and there's a price to that. But if you start processing it, the price actually goes higher. There's also the wisdom of warehousing because as you know, commodity prices of copper go up and down. We are projecting copper prices for 2025.

Speaker 3

That seems like it's going to start escalating going up. So you may want to warehouse and sell when the price is high and not just sell whenever. So all these things we are studying and we are going to be initiating this for PLDT. It's really being able to monetize trash, right? It's something that we don't use and something that we can sell and is very valuable.

Speaker 3

But the beauty of the legacy monetization is that while copper is a big one, there are other legacy infrastructure that we have that we can sell. When we migrate three gs, you know those three gs cell sites, those things can be sold to maybe third world countries that still want to use three gs. So we are looking at this whole ecosystem

Speaker 8

assets. You mentioned a while ago, you're trying to monetize, right? But if it's trash that you mentioned, how much money can you earn? I mean, we're moving past that already, right? So maybe give you a ballpark number, how much was copper last year?

Speaker 8

Sorry, you can divulge it. Yes. Right at this point,

Speaker 3

we can, but it is

Speaker 8

a lot copper wires that we have that we have pulled out. And are we okay to okay. Sorry, I mean,

Speaker 3

but it's in the billions of pesos.

Speaker 8

So you were asked by me, but we were just verboten to indicate. But we've pulled quite a bit of copper wires. And if Norelco wants to buy it, we'll give it to them, right? I don't think so far power doesn't run on fiber. Yes.

Speaker 8

So that's one. Of course, you asked us how we can finance the acquisition, say, of 10% or 11% of Maya. Well, that's one. We sell our copper. That's more than enough, I think, to buy the 10%.

Speaker 8

Of course, it depends what the values are. Number two, the Board just reclassified certain of our properties as those properties for sale that are not currently in use or access to our requirements. Number three, we could sell down our data center, correct? So I think we'll have more than adequate ammunition to buy at least 10% of Maya. I don't want to trade the value of data centers for Maya.

Speaker 8

Maybe that will work, maybe that will not work from a value standpoint. But certainly, the copper wires will go and the excess properties will also go in the course of this year.

Operator

We're a little bit over time, but we still have quite a number of questions. So the queue, maybe I'll take a few more. This one is on Maya from Z Wave. We have Ayush on the line as well, who is the CIO of Maya. So maybe you can take this question, Ayush.

Operator

It says, Congratulations on Maya turning around to profitability. Can we discuss how such a strong turnaround was achieved in the fourth quarter? What business helped to drive this turnaround? And how should we expect that segment and loan growth to perform in 2025?

Speaker 7

Thanks, Shengai, and thanks for that question. Good afternoon, everyone.

Speaker 9

I think we have seen a broad strength in the business across the board. Both the payments and the banking business have done well. Our strategy of offering a consolidated financial services through our platforms, both for businesses and for consumers, have worked very well. We have seen a higher cross sell rates of different products on our platforms. And it's really just sort of launching products that have that the market needs and being able to scale those products in a profitable manner that has sort of worked in our favor.

Speaker 9

And we've done that while maintaining a laser focus on our cost and our ability to service our customers at a fairly fixed sort of cost to serve, which has been a strength of ours given that we own a lot of our tech infrastructure, our front end, our back end. And so with scale, the profitability has been there.

Operator

Thank you, Ayush. All right. I think that's all the time we have for today. For those whose questions we were not able to answer, I'll try to get back to you as soon as possible. I've collated the questions here.

Operator

But that concludes today's briefing. So thank you again for your time and for your support, and we look forward to our next update with you guys on May. Have a great afternoon, everyone. Thank you.

Powered by Quartr
Earnings Conference Call
PLDT Q4 2024
00:00 / 00:00