PLDT 9M 2015 Consolidated Core Net Income Slips 5% to PhP27.1B

Manila—(PHStocks)—Philippine Long Distance Telephone Co. (PSE: TEL) (NYSE: PHI) today announced its unaudited financial and operating results for the first nine months of 2015 with consolidated core net income, before exceptional items, amounting to PhP27.1 billion, 5% or PhP1.5 billion lower than the PhP28.6 billion recorded in the same period last year.

The decrease was due mainly to lower EBITDA reflecting the impact of expenses relating to the manpower reduction program, and higher financing costs, offset by lower provisions for income tax and a decrease in depreciation and amortization.

Reported net income, after reflecting exceptional transactions for the period, declined 9% to PhP25.3 billion, from PhP28 billion in the first nine months of 2014, as a result of the dip in core net income and higher foreign exchange losses.

EBITDA margin for the period was at 44%. Consolidated EBITDA for the first nine months of 2015 was 5% lower at PhP54.1 billion compared with the same period last year due to lower service revenues from the wireless business, higher cash operating expenses, which include the costs arising from the manpower reduction program, and higher provisions.

Excluding revenues from the international and national long distance (ILD/NLD) segments of P15.0 billion, consolidated service revenues grew by 2% year-on-year, from PhP104.5 billion to PhP107 billion at the end of September 2015. Consolidated service revenues for 3Q2015 posted a positive 1% growth both quarter-on-quarter and year-on-year. The improvements in 3Q2015 become even more pronounced without the drag of ILD/NLD, with 3Q2015 consolidated service revenues growing by 4% and fixed line service revenues increasing by 9%. Wireless service revenues rose by 1%, both quarter-on-quarter and year-on-year, bucking the negative levels of 1Q2015 and 2Q2015. With the drag of ILD/NLD, consolidated service revenues for the first nine months of 2015 dipped by 1% to PhP122 billion.

Consolidated free cash flow for year stood at PhP23.9 billion. Consolidated capital expenditures for the period amounted to PhP23.3 billion, PhP7.3 billion higher than the capital expenditures in the same period last year as investments were made in support of:

• Improved 3G and 4G access networks
• Increased fiber reach and capacity
• Enhanced indoor and outdoor coverage
• Continued network optimization
• Augmented network resiliency and redundancy
• Expansion of international connectivity and caching to improve internet speed and customer experience
• Increased data center capacity
• Unified Smart-Sun network project to build operational efficiency

The group’s consolidated net debt increased to US$2.5 billion as at 30th September 2015, with net debt to EBITDA higher at 1.57x. Gross debt amounted to US$3.2 billion. The group’s debt maturities continue to be well spread out, with over 60% due after 2017. The percentage of U.S. dollar-denominated debt to the group’s total debt portfolio is at 47%. Taking into account our peso borrowings, our hedges and our US dollar cash holdings, only 30% of total debt remains unhedged. The group’s cash and short-term securities are invested primarily in bank placements and government securities. PLDT continues to be rated “investment grade” by the three major international ratings agencies, namely Fitch Ratings, Moody’s and Standard and Poor’s.

Consumer

As the leader in digital services, all our offerings are premised on providing our consumers entertainment at home or on the go, urban comfort/convenience, and peace-of-mind. We therefore continue to partner with major players in the digital space – iFlix and Fox in the first part of the year followed by Zalora, Uber and Airbnb in recent months – that will enable and encourage data usage and thereby fuel revenue growth.

Data and broadband revenues continued their strong revenue growth, with wireless broadband and mobile Internet in particular posting record highs during the third quarter of 2015.

The group’s combined broadband subscriber base reached 5.0 million at the end of September 2015, 3.8 million of whom use wireless broadband mainly from Smart Broadband, Smart’s wireless broadband service. Another 1.2 million users subscribe to PLDT’s fixed broadband service.

Meanwhile, PLDT continues to strengthen its leadership with more digital services via Connected Home.

The fixed line subscriber base reached about 2.3 million at the end of the third quarter of 2015, 54% of whom have fixed broadband subscriptions.

Postpaid revenues now account for 24% of total cellular revenues, having improved by 11% to PhP17.6 billion for the first nine months of 2015.

The PLDT group’s total cellular subscriber base at the end of the period stood at 67.0 million, broken down as follows: Smart had 24.6 million subscribers under its mainstream Smart brands; value brand TNT ended with 27.7 million subscribers; and there were 14.7 million Sun Cellular subscribers.

The group’s combined postpaid cellular subscriber base grew by over 263,000 from the end of September 2014 or over 154,000 from the end of 2014, rising to just over 2.9 million at the end of the period, while the combined prepaid base stood at 64.1 million.

“The PLDT group is leading digital innovation with strategic partnerships that deliver entertainment, peace of mind and urban comfort. With the digital age blurring the traditional separation between wireless and fixed line subscribers, we are where “Connected Home” meets “Smart Life”,” stated Napoleon L. Nazareno, PLDT President and CEO.

Enterprise

The PLDT group is also uniquely positioned to serve the Enterprise sectors with six data centers that offer co-location, server hosting/outsourcing, disaster recovery, connectivity and data scrubbing. These centers are telco-grade, carrier-neutral and vendor-agnostic with an aggregate rack capacity that is the largest in the country. We are also actively enabling the digital capability of our customers by expanding our mobile and data-driven solutions portfolio, introducing innovative e-commerce platforms and fostering ICT leadership and expertise.

Consolidated corporate data and other network services were higher by 14% at PhP8.1 billion, riding on the 12% growth in corporate data and a 25% jump in data center revenues,

“Our Enterprise segment continues to grow strongly, accelerating its market leadership by digitally enabling businesses,” added Nazareno.

Digital

The innovation teams at Voyager Innovations, Inc. (Voyager) and PayMaya (formerly Smart e-Money) continue to produce pioneering services in the digital space. Voyager generated consolidated revenues of about PhP900 million in the first nine months of 2015, up by 25% from the same period last year.

On the mobile financial solutions side, Voyager launched PayMaya Visa card with Beep, an all-in-one product – a Beep card with stored NFC/value for use in Metro Manila’s light rail system, a virtual Visa card which can be used to pay for online/e-commerce transactions and a physical Visa debit card.

Voyager also unveiled SafeZone, a groundbreaking platform that allows brands and businesses to easily reach their customers nationwide through their mobile phones. The service aims to bring businesses closer to customers by offering access to their mobile apps and sites for free. For its launch in the Philippines, SafeZone partnered with the biggest names in local and global entertainment, online commerce, travel, transportation, and news.

On the investment side, the PLDT group announced the formation of PLDT Capital, an innovation gateway between Los Angeles, Silicon Valley and Southeast Asia that will support PLDT business units in growing their digital services portfolio not only here in the Philippines but globally as well. Further to this, the group also disclosed a US$10 million investment in a joint venture with Phunware, a US-based mobile platform leader for next-generation customer engagement solutions. ePLDT will be the exclusive distributor and marketing arm of Phunware in Southeast Asia.

“We continue to work closely with the mainstream businesses to ensure they keep pace with digital developments and that the products and services we develop add value to our customer propositions,” stated Orlando B. Vea, Voyager President and CEO.

Conclusion

“We are seeing some encouraging signs of progress as we execute the strategy we outlined in previous presentations. The third quarter is seasonally “soft” yet our revenues have shown a general improvement, both quarter-on-quarter and year-on-year. This is even more evident if we strip out the “drag” of our legacy NLD/ILD businesses. That said, there remains much to be done. We are proceeding briskly with our network enhancements as evidenced by our capex levels. We are talking approximately US$3.7 billion in the last five years, ending 2014, and over US$900 million this year. Our capex spend for the last six years including 2015 will therefore sum up to about US$4.6 billion. That is no small change. We believe these expenditures are vital in order to provide the level of service required by the market and for PLDT to be robustly competitive for the future. These investments, as well as our growing portfolio of partnerships with the best in the global digital space, will serve to fortify our position as the country’s leading digital services provider and enable us in the emerging digital landscape,” concluded Manuel V. Pangilinan, PLDT Chairman.