PLDT, Inc. (NYSE:PHI) Q3 2020 Earnings Conference Call November 5, 2020 2:00 AM ET
Melissa Dios – First VP, Head of IR
Manny Pangilinan – Chairman
Alfredo Panlilio – CRO
Anabelle Chua – CFO
Ray Espinosa – SA to the President
Conference Call Participants
Good afternoon, and thank you for joining us today to discuss the company’s financial and operating results for the nine months of 2020. A copy of today’s presentation is posted on our website. For those who’ve been able to do so, not been able to do so, you can download the presentation from www.pldt.com under the Investor Relations section.
For today’s meeting, we have with us our Chairman, Mr. Manny Pangilinan; Mr. Al Panlilio, Chief Revenue Officer; Anabelle Lim Chua, Chief Financial Officer; Atty. Ray Espinosa, Senior Adviser to the President, as well as other members of the PLDT management team.
At this point, let me turn the floor over to Mr. Pangilinan to begin the presentation.
Thank you, Melissa. And good afternoon to everyone, and thanks for joining us today. Today we would like to present our nine months 2020 financial results. I will start off with a short presentation then I’ll pass off to Anabelle for the financial highlights.
So, as we all know, we are still in an environment where COVID is still upon us, so there is still people who are suffering, unemployment is very high and we understand the condition that we are still in today.
Having said that, next page please. Obviously, internet connectivity has been very critical during this time. It is the foundation for us for the digital economy. We have been working very hard to actually starts off a digital ecosystems that are needed by our customer.
So, we’ve been this nine months we have been very laser focused in terms of coming out the customer driven product and service innovations, we continue to invest in our network even after the lock down. Initially during the lock down, as you know, we had problems in our mobility, but now that after the lock down we are able to restart our network projects.
So, we are continuing with our nationwide fiber rollout. And as we also indicated during the first half report, we have embarked on ADSL to fiber migration. During this time, we also launched commercially our 5G in certain sites, so we will continue to roll this out as we speak and also for the next few years.
And at LTE, which is still a focus this year close to 99% of cell sites are LTE enabled already. So, we want to make sure we secure our network superiority. Today we cover 96% of the wireless — this is wireless population coverage, we cover 96% population coverage for wireless. We still have we do have the most extensive fiber footprint in the country.
We’ve added to the numbers that we presented during the first half presentation. So, now after the third quarter, we are now at 395,000 km of fiber cables laid and we will continue to expand this and this will reach 400,000 toward the end of the year. And we will continue to roll out in first quarter next year.
We have passed homes passed 8.3 million and 3.84 million ports. We also have the nation widest mobile data coverage with 9,892 cell sites, 56,799 base stations, 25 core and data centers, and three cable landing stations. All these metrics will obviously continue to expand cell sites, base stations and also landing stations, which will grow to, I think, five by next year.
Okay. Next page please. So, we measure ourselves against competition. This is a metric that we focus on, so that we are able to provide better customer experience to our customers. So, we consistently outpace local competition, we are even above, obviously, Philippine average, we are at 19.45 based on Ookla report.
And if in Metro Manila with all technologies and all phones, you can actually get 26.6 mbps. But if you do have the right handsets, the right chipsets or right handset that you use in Metro Manila you can even hit 41.77 mbps for our wireless service. So, in terms of speed test of Ookla, again, we are highest, doing smart compared to Globe. And then for our fixed line, we are also much better than competition.
Next page. So, again, I mentioned this earlier, we did launch Smart 5G this year and we will continue to roll this out and this will be a major focus for us and really of ultrawide band platform that we have in 5G. And we will build our use cases as we roll out 5G.
So, these are the major key drivers for the third quarter. For individual, we launched GIGA Life app, which is very strategic for us from a digital engagement point of view with customers. So, we will continue to enhance this as we move forward. But I’m happy to say that, we have launched this in the third quarter.
We continue with our product launches in 5G commercial rollout, as mentioned earlier. For home, now that home has been change in behavior for our customers where home is where working is, where study is and where play is. We have also enabled solutions for work at home and study at home for our Filipino Families.
For Enterprise, focusing really on developing digital ecosystems. So, they want to enable e-industries, for example, health or education, which is very critical in our roadmap. So, the Enterprise will continue to provide and create solutions for e-industries. And for international, really managing the long tail. They’ve done a good job trying to really manage this long tail.
So, for — on top of connectivity, we were very, very busy in a lot of programs and offers in the market. We obviously, had the NBA content exclusive to Smart where you could view the livestream NBA if you were a Smart subscriber.
As I said, we launched Giga Life, we have a weekly Giga fest activities, we launched GIGA study, GIGA Games, GIGA Pro. Enterprise launched during the lockdown BEYOND FIBER, which is beyond connectivity solution for especially for MSMEs. 5G, as I mentioned, we’re looking at we had a concert during the first day of MVP in July, where actually PLDT Home offered speed boost to certain customer.
And the top right shows an absolute shot a picture shot taken in Clark where the PBA Bubble is happening and we’re using Smart 5G. And we’re really broadcasting for the first time over 5G. And maximizing our relationship, international partnership with Orange, that’s why we were able to manage the long tail for our international business.
So, happy to report for third quarter our core revenues service revenues ended at PHP43.7 billion, it is 11% higher than last year or PHP4.2 billion in terms of revenue terms. This is the highest quarter ever for PLDT Group, surpassing the PHP41.5 billion first quarter of this year.
And I think Anabelle will show later that, it’s really a study growth in terms of revenue for the past 11 quarters, except for the second quarter where basically, because of the lock down there were some softness in the business.
Next page. And broken down into the three big pillars that we have and all have shown strength resilient strength in growth. Individual grew by 15% to PHP21 billion, an increase of PHP2.7 billion from a year ago. Home, very strong 16% growth, really it is recovery or a big performance for Home this year, 16% growth, PHP1.5 billion in peso terms versus the last year, ending the quarter at PHP10.7 billion.
We ended the second quarter, actually with PHP10 billion and we increased it now to PHP10.7 billion. In Enterprise despite the issues, the difficulties that they’ve had, a lot of customers getting out of business and having to restart their businesses, still grew at a clip of 8% or PHP800 million. But for all three segments this really contributing all-time high revenues.
Next page. And for year-to-date nine months, we are at PHP126 billion — PHP106.5 billion, it’s also a 9% increase versus same period last year, or PHP10.4 billion. Individual ended at PHP60.8 billion, a growth of 15% or PHP8.1 billion versus same period last year, nine months. And Home grew at 10%, ending nine months at PHP30.3 billion and 10% and PHP2.7 billion increase versus last year.
And for Enterprise ending the third quarter year-to-date at PHP30.9 billion or 6% or PHP1.7 billion versus same period last year. I mean, just quickly just saying that a very soft second quarter as you all know, but we increased quarter-on-quarter 6% to end at PHP43.7 billion again.
Next. And really just a major, I guess, a scorecard or there is a breakthrough for us. At the end of nine months we continue to have market leadership in service revenues. We’ve strengthened our position in fixed, especially that we have increased our capacity in terms of installation for our fiber service and we will continue to enhance this as we speak.
There’s a surge in demand for home broadband, so we are also increasing our capacity to be able to be installed for our customers. Within wireless market share, again, for six consecutive quarters now, we are now number one in wireless data traffic, number one in data users and the TNT brand is the biggest prepaid brand now in the country.
So, just very briefly, doing all the — all those activities and programs and launches, we also know that we have our responsibility to the community. So, the mantra of our Chairman, no learner left behind. Education is really very close to our hearts, so we are helping DepEd and other institutions in our programs with our PLDT Smart Home vision.
Next. And really being a network of good, PSF, again, is very active in terms of its relief operations or help that we are able to give our communities. And lastly, next page, as you know, this is very — still very new, we have had a major effort to restore our communities that have been hit by typhoon Rolly, especially Albay, Catanduanes and Camarines Sur.
We are not 100% restored yet, but between 70% to 80% in most locations. And our teams are there right now trying to bring back 100%, either working with the local electrical ops to bring up the post or put microwave. But what we have also done is, we’ve offered a Libreng Tawag and Libreng Charging booth in communities that are needed, that are — that require such services. So, So, Libreng Tawag and Libreng Charging.
So, at this point, that’s my report. I’d like to pass on the floor to Anabelle Chua.
Thank you, Al. Let me go through the financial highlights for our nine months that passed. As Al highlighted earlier, we are very proud of the fact that we came in quite strong at third quarter, with individual, enterprise and home businesses all registering all-time highs.
So, on a combined basis, these businesses are up 13% for same quarter last year and 6% higher than the second quarter. On an overall basis, PHP43.7 billion 10% up versus last year and 6% also up versus the second quarter.
Next slide. On the back of this 10% rise in revenues, we saw our EBITDA also up by 12% to PHP22.7 billion and EBITDA margin of 51%. And our telco core income registering PHP7.1 billion in the quarter or 14% by end of the same period last year.
Moving on, we show here the results over the three of 2020. And other then the slight dip in the second quarter, you see that we came in quite strong in the third relative to where we were in the previous quarters. But all quarters are ahead of the same period last year.
So, with 9% increase in Q1, 7% in Q2 and then a 10% increase in Q2 that resulted in overall 9% growth for the nine month period. When you look at it by business pillars. The individual business with a bid of moderate dip in the second quarter, but post Easter we did see our top-ups hit record highs and did stronger month-on-month.
So, at PHP21 billion that’s again an all-time high in terms of a quarterly performance, leading to the PHP60.8 billion, that’s 16% ahead of our prior year.
Enterprise, as Al mentioned, notwithstanding all the challenges in the external environment, we were able to serve digital requirements of our various Enterprise customers. So, the numbers have been increasing every quarter from PHP10.1 billion — PHP10.2 billion and now PHP10.6 billion in the third quarter or an aggregate of PHP30.5 billion, again 6% higher than prior year.
Home is pretty encouraging, we saw a break out in the third quarter at PHP10.7 billion, so that’s a 16% increase over the same time last year at PHP700 million ahead of the previous quarter. So, PHP30.3 billion, that’s also a 10% rise over prior period.
Moving on. The 9% increase in the nine months revenues, again, supported a 9% increase in EBITDA to PHP66 billion. We were able to manage our cash OpEx, such as, it only rose by about 4%. I’ll talk about some of the issues around provisions later. Telco core income was PHP21 billion, 8% percent ahead of last year with some increases in depreciation and financing cost at the back of our higher investments in the capex next.
Next chart. Here we track our quarterly performance since the start of 2018. So, the key takeaway here is that, we have really seen consecutive growth every quarter since that time other than the slight dip in the second quarter. The other thing to note is that, the growth, it has been accelerating in terms of the pick-up from the prior period. So, we’re seeing not just the growth, but that acceleration improved and now we are at this PHP43.7, all time high.
Next chart is the same trajectory, this time we’ll break the revenues by data versus non-data revenues. It is clearly data that has powered the growth for PLDT Group over this time frame. Data at PHP90.8 billion is 72% of our revenues now and accounts for an 18% raise, that’s in the next chart.
When you look at where data grew, about half of our data is coming from mobile Internet, and that’s up 31% year-on-year. About 76% now of our base Home smartphones that have been actively using date, we saw a record high of 36.8 million active data users during the third quarter. From a traffic standpoint, the amount of mobile traffic used by our subscribers is practically doubled from what it was a year ago.
And Home Broadband, that’s the next largest segment in terms of the data service story. That’s close to $24 billion or 14% higher than last year. We all know that with the work from home and study from home development, the demand for home broadband is at an all-time high. We’ve seen the service applications practically double from what they were before.
We push our installations up from about 40,000 average last year to now 70,000 approximately in the third quarter, but that’s still not be enough to serve all the demand that we see out there. So, there is a concerted effort to bring up the number of installations we’re able to accomplish to more 100,000 by next year.
Corporate data and data center, which are part of our Enterprise revenue segments were up about 3% year-on-year. So, the growth in the data was more than able to shield us from the declines that we see in SMS and voice, which are now smaller proportion of our total revenue line.
Next chart, please. As explained earlier, the higher service revenues allowed us to see a 9% increase in EBITDA and covered — more than covered the higher cash OpEx and provisions and subsidies during this time. And that the higher EBITDA offset by some increases in depreciation in financing cost led to the 8% increase that we saw in telco core income.
Next chart, please. This one is the EBITDA number, again, over the quarter starting the first quarter of 2018, so this year, we started off at PHP21.6 billion in the first quarter, similar levels in the second quarter and we saw a 5% price rise by the time we hit the third quarter to PHP22.7 billion. The average of these three quarters was up PHP22 billion, so that’s also clearly ahead of the PHP20.8 billion quarterly average that we reported last year.
Next chart. Just as a commentary, there were a bit booking of higher provisions during the third quarter, so we booked additional PHP3.5 billion — sorry, PHP3.5 billion in the half and additional PHP2.9 billion in the third quarter for a total of about PHP6.4 billion, a little over 5% of our total revenues. So, this is in recognition that there are some challenges around the collections that we are experiencing as part of the relief that we gave to subscribers during the ECQ period.
But what is noteworthy here is that, starting June our collections actually have already exceeded the previous 3Q levels. On a year-to-date basis we’ve collected about 86% of the billings, during this nine months. And that we are pushing for this to rise to over 90% or, in fact, closer to 95% by the end of the fourth quarter. So, we will take start of the level of provisions in the fourth quarter depending on how the collection efficiency levels will be by the time we hit the year end.
Next chart, please. So, the telco core income, I guess, with the steady rise each quarter from PHP6.9 billion to PHP7 billion to PHP7.1 billion this third quarter. The average is at PHP7 billion versus PHP6.8 billion average last year. So, our goal initially was to at least match last year’s telco core income, so we are feeling confident that we should be to do that, if not, slightly surpass the last year’s performance.
Next chart. So, just to complete the story on the P&L or reported income, that’s $19.7 billion after taking into account our share in Voyager equity losses for us is at PHP1.3 billion and certain other adjustments to our investments.
I just wanted to also to report that we have completed the sale of all our remaining 1.9 Rocket Internet shares ahead of the public listing and better offer of the company. So, we were able to generate an additional PHP2 billion of extra cash proceeds that would help us fund our requirements this year.
The other thing to note is that, the reported income is 23% ahead of nine months last year. That’s really because we had manpower reduction charges during the third quarter last year that we have no similar charge yet on the year-to-date basis, but we do have an ongoing effort and there will be some MRP charges that we will be booking in the last quarter.
Next chart. So, moving on to the balance sheet side. With our net debt at $3.9 billion and gross debt of $4.6 billion, we actually saw a slight improvement in our net debt to EBITDA ratio to 2.13 times versus 2.19 at half year on the back of the stronger EBITDA performance.
We’ve been able to manage our liabilities such that more than 50% of the maturities are extended beyond 2025. Overall cost of debt is about 4.69%, again, an improvement over the cost of 4.8% last year and in fact even the 4.7% average in the first half.
Next chart is really to about our capex. We came in with a PHP43.1 billion capex for the first nine months, a bit of slowdown during the second quarter, because of the lock down challenges, but we do expect that for the year we will hit at least PHP70 billion at the level fit similar to what we did last year, so that implies that about PHP27 billion to PHP30 billion of CapEx in the fourth quarter that we expect to pull.
For that PHP70 billion or so capex, PHP52 billion of that is really dedicated to our network and IT investments, PHP13 billion supports the business requirements, particularly the installed and last mile and CPE requirements for generating additional sales. And then about PHP6 billion for data center other requirements. A lot of projects ongoing, at the same time, both on the wireless and the fixed side.
We continue to increase our LTE coverage and expand our capacities. We continue to expand our backhaul and transport capacity. We have ongoing work to add 37 terabits per second to our existing 55 terabits per second network capacity, our backbone. Building out more ports, about 500,000 ongoing builds to supplement our 1.4 billion port inventory.
Upgrades of ADSL to fiber and then additional cell sites build out, as well as the start of our 5G roll out. All told, we can expect our CapEx to service revenue ratio to be about 40% to 41% this year, compared to 45% capex to service ratio sales.
Next chart. The spend in the capex translates to accomplishments that we are summarizing here in this chart, a bit of a report card of all the rollout accomplishments for both fixed and wireless side. 8.2 million Homes passed, 14% up from year-end.
3.8 million ports, that’s inclusive of 1.4 million available for sale. Our fiber footprint is unmatched by anyone in this country at 395,000 fiber kilometers. And as we speak, we are working on the expansion by another 81,000 kilometers for our fiber footprint.
On the wireless side, LTE base stations, 28,700. And then 3G as well is been rolled out still. And the 5G, you can see here the beginnings of our 5G rollout. From a coverage perspective, we cover 96% of the country’s population with our wireless network.
And what we see in terms of what people are doing, about 71% of already of our users are on LTE and then the users of 2G are down to below 20%. When you look at it from a pure Metro Manila perspective, our numbers are even starter in terms of the 80% LTE adoption already and only 12% remaining on 2G and 8% on 3G.
In the next three charts, I just tried to put together some of the results of external third-party surveys that report on the health and quality of our network performance. This first one is from Ookla by way of download speeds. I think Al also showed this earlier.
For both fixed and mobile we clearly are the leader in terms of the delivery of speeds to the customers here in the country for [Technical Difficulty] average of 30 mbps, for mobile about 19 mbps, but that’s an overall nationwide average also across 4G and 3G.
When you zoom in at Metro Manila, the average speed is actually getting very close to 30 mbps or 29 mbps. And then when you have the right handsets, a subscriber can actually experience on our network about 42 mbps speeds.
The next chart shows another result of Opensignal, where we focus here on the LTE availability score and our video experience score. Just to highlight that we are doing better across all the regions in the country and we are also outpacing competition. The next one is another, I guess, what they call, more scientific study that’s done by Ookla.
It is an attempt to measure the quality of service for our mobile network. The other two were really more cloud sourcing test results. But this one is really done by experts. And we are pleased to note that we scored 750 in the third quarter, which puts us in the good category, there is clearly improvement over what we have been able to report over the past few quarters.
And we’ve been working very hard with the experts here in terms of continuing to optimize and improve our mobile network performance. And we are not stopping there, because our benchmark now is not just in country, but we are really looking at a performance that will match those of our ASEAN neighbors and eventually global telcos as well.
So, with that, turning over to our Chairman, Mr. Pangilinan for a wrap-up of our 2020 outlook.
Thank you, Anabelle. And good afternoon to all of you, and thank you for joining us this afternoon. We provide you briefly our latest news for 2020, particularly the fourth quarter prospects.
Dealing with the revenues first, we expect the momentum established in the first three quarters to continue for the fourth quarter, such that across the board wireless, Home and Enterprise will see continued growth.
And it is likely that the fourth quarter revenues in all three revenue streams will be — will produce another historic high for PLDT. So, that for full year therefore will be an historic high for the company.
In terms of telco core, flowing from that EBITDA will rise and telco core will rise. We expect the full year telco core to be higher than the PHP27.1 billion we reported last year. How much higher is a function of many variables, including our record of collections and how much provisioning Anabelle might wish to make for the fourth quarter? Dividend payout we maintain at 60%, maybe when we look back if things really turn out to be very well.
CapEx, year-to-date — sorry, third quarter was about PHP43 billion and we expect total year the land between PHP70 billion to PHP72 billion for the full year. So, that’s basically for — to complete our 2020 review.
I turn it over to Melissa for Q&A.
We are not ready to take your questions.
Q – Unidentified Analyst
We are now ready to take your questions. [Operator Instructions] First set of questions come from Kervin Sisayan. Can you comment on competition, we see Global increasing marketing spend to push more SKUs third quarter, is there any effect on PLDT?
Well obviously, Global not be sleeping, they are offering packages in the market. We have also our own offers and I think this shows you that, with a very strong third quarter, so we expect, of course, competition to be there, but we will just — I guess, continue to also offer own packages in the market. So, right now I think we are cognizant of they are promoting their own products, but we are also doing the same.
I think that if I may add to what Al said. I think that while we see 2021 data demand to be continue to be robust, the competitive landscape will change, because Dito has announced that they will be commercially available there services will be commercially available by the end of the first quarter, may be starting second quarter.
That will definitely be around in 2021. Converge has finishes its IPO, so probably slightly stronger 2021 in terms of pushing the fixed broadband and, of course, Globe, as Al indicated, they are going to stay still, so they will be competitive or more competitive in 2021.
So, it’s been interesting year from a competitive standpoint. Part of the picture will be determined by how fast or how well we recover economically from this COVID. To be honest, we thought that the vaccine would have been approved by October or November, we have not seen that yet, albeit that maybe there might be one or two, I’m talking about the States, U.S. pharmas or U.K. pharma companies.
And I think the deployment with probably be not as expected, and therefore that could determine the economic the basic economic recovery of our country, as well as other countries.
A follow-up question from Kervin. Do you have any thoughts on the buildout from Dito?
Yes, of course. We are observing their statements and also what they are doing on ground. And I think they have been able to put out some sites. Their target is, as they state, 1,300 sites for the first quarter next year, which will not be enough to meet their own targets, namely 37% of population coverage in so far as it possibly will be achieved.
I think they make progress and I think that was to be expected, it’s far behind what you need to really be competitive. So, we believe that they will be probably going live in the timeframe they announced, they will not be able to meet their targets. And it will be a very localized competition, we will not get the competition on whole country level, this will take quite a while. So, it’s, I think something we will be able to take that.
A question on Converge. Converge is seeing high growth in subs, are we seeing subscribers going to Converge. And also in the press release you mentioned that broadband installation was already 72,000 per month, but the actual increase of fixed lines subs was only 90,000. Just want to reconcile these numbers by net adds below versus installations.
Just maybe to address that, 1) Converged has said that 90% of their connects are actually new subscribers. So, it really just indicated for all of us that the potential for more household broadband penetration is really there for the picking.
2) With respect to the number, the 72,000 is the gross additions and then the 90,000 for the quarter is the net adds. If you recall, in the second quarter, because of the Bayanihan Act and the lock down and everything we really did not strictly imposed our churn policies. So, there is a bit of a catch up in terms of disconnects that we had to book and recognize during the third quarter.
Next set of questions are from John Te. First one is with respect to our data allocation for prepaid mobile in the last few months basically increasing despite diminished use in mobility. Do you think this is not dilutive to ARPU as it was previously, the rationale behind increasing data allocation for prepaid in the last few months?
I think initially when the quarantine happened did increase the data allocation to support the requirements of the market. But we’ve also made adjustments to our fund loans for prepaid home wireless. So, when you look at the overall, actually, our yields in the third quarter are improved over prior quarter.
Next question is [indiscernible] 450,000 FTTH ports third quarter alone, PLDT added about 50,000 ports in the third. When you said you are adding 500,000 ports, over what period will this be? And do you think the competitor’s addition are success.
No, I think first of all, I think one quarter doesn’t make a network. It’s just a snapshot. And we have at the moment about 1 million ports or 800,000 ports ready to sell. We will add another 500,000 ports within the next three to four months. And then for next year we are currently in the planning stage, but we will definitely add substantially in order to meet the market.
Next set of questions are from [indiscernible]. Hi, team. Congratulations for the very strong results. Three questions from my end. The first one is, 1) There is been impressive growth in the fixed wireless space, could management share how we should look at upselling or upgrading the existing subscriber base?
2) In terms of DSO to fiber and fixed wireless to fixed. Should we expect some uplift [indiscernible] on most of the DSL subscribers have? Yes. I guess, on the question, yes. We did announce during the first half results that we were embarking on a migration from the ADSL to fiber, that’s already happening now.
There is about 600,000 of those customers and a third of that hopefully will be completed within the year. So, obviously there is an upgrade on the ARPU when they move to DSL. And also aside from surge in demand.
I think there is also a requirement by most customers to also upgrade their service, because there are more people now using one pipe in the home and maybe the 25 mbps is not sufficient, so they upgrade to 50 mbps and some of them are upgrading to 100 mbps. So, there is also a requirement for them to increase their offerings.
Next question is, could you discuss which segment contributed the bulk of net ads or fixed line broadband year to date. Would it be subscribers that are churning from other networks, the same fixed wireless subscribers who are migrating or first time subscribers?
I think it’s a mix of all because there is unserved demand, there is surge demand. So, customers now want to upgrade to a better service as they mentioned. Fixed wireless has been an offering that has also spiked for us during this period. But if they want the consistency of the either 25 mbps or 50 mbps, they do go up to a fiber connection.
And of course, again, there are also a lot the first time subscribers because, again, behavior has changed and people now need broadband at home. So, I guess, it’s all those three segments contribute to the growth that we’re seeing today.
Our main focus on the home broadband is really the fiber, right? The kind of fiber miles or kilometers we’ve been building over the years. And as fixed wireless is okay, it’s we manage our numbers with respect to the adds on fixed wireless because we don’t want to unduly decongest the wireless network because it works off the wireless network, while FTTH is a separate network.
So, of course, the latter part of this year, we have allocated the higher number, because we’ve seen that’s a new market for us. But it’s still a number that we manage. It’s not that we don’t go the full half. I think the demand for us for our home broadband is really the fiber, and we continue to do so.
Now that could change with the full deployment of 5G because that could give the wireless infrastructure a fairly wide degree of capacity, right? Something that Converge doesn’t have. So, you should bear that in mind.
Next question. What have you seen on the ground from the regulator and the tower companies in terms of common tower policy? Can you provide more color in terms the trajectory of closing commercial agreements with the tower post and the rollout of common towers?
Regulation and tower policy and the status of the negotiations with the tower companies.
I think on the common tower policy, we have actually complied with the common tower policy. The policy of government is to allow as many common tower players as possible. And encouraging as well as encouraging all of the mobile operators to avail of the services of the common tower grade.
On our part, we have actually engaged with quite a lot of them already and have signed firm contracts covering around 200 of these towers, that’s Phase 1. There will be a more substantial number for Phase 2. And as we bring on more common tower to provide service, we are quite happy to share these towers, obviously, with Globe and Dito.
Seems that has absolutely been our statement early on that when it comes to the new builds of towers, we will be supportive of e-commerce tower development, even as we have to develop our own, because we cannot at this stage simply rely on the ability of this new common tower providers as far as there local capabilities I posit to build to entrust all of our tower requirements to them.
But over time, we will be able to see that more and more the tower companies will be engaged by us to put more and more of our equipment of their towers as they improve their capabilities.
Next question. How much is the MRP expense for quarter four?
The program is ongoing, but I guess, as a rough estimate, it will be somewhere in the ballpark of PHP2.6 billion in terms of one-off MRP premium that we pay for early retirement.
Next question is, are you able to disclose the split between mobile and fixed tablets?
It’s about 50-50 but as we build our networks very synergetic, it’s very difficult to say up to the base station, actually, what is fixed or mobile. We use fiber for any service, so fiber to the base station can also serve the fiber to the home and can serve fixed and enterprise customer at the same time. So, — but as a kind of guidance, about half goes into mobile, about goes to fixed.
Can you share your expectations on 5G coverage? Where you expect to see this by year end 2020 and year end 2021.
2020 we will probably end with about 500 sites that will be enough for some dense urban area coverage. It’s not a large coverage yet, but for the next year we are currently finalizing our plans, but we will for sure significantly step up our efforts to roll out 5G.
Next question is, what percentage of your wide broadband new customer’s first timers versus churn or other trades?
What would you be able to answer that question? A lot of them I think would be first timers. Because, again, there is a surge in demand during this time. So, in fact, there is still a big unserved demand as we speak. But mostly, I think its first time subscribers.
The next question is, may I ask the reason behind the strong mobile data revenue?
Yes. I guess we monitor a few metrics in this one. One is really our subscribers with reload. And we have increased that by 9% compared to the same period last year. So, we increased subscribers with reload to the tune of 3.1 million subscribers. So, more people now are using our service.
Second is really pushing them to LTE devices, because as they go from 2G to 3G, there is an uplift in ARPU, almost double. So, that’s the reason the way adoption for data and GIGA packages is very key for us, because once they go toward the GIGA plants, that’s really most probably a double the ARPU if they were just 2G.
Next set of questions are from Bernice Solco of ADTRAN. Can you share any CapEx plans for 2021, both for total and specifically for home broadband and fiber?
Well, I think maybe we can’t answer that question today, because we are still undergoing our budget process. But hopefully toward the end of the year or early next we will be able to share that data with you, that information with you.
Next question –.
The initial cuts on capex were breathtaking.
But I think I guess just to add to what the Chairman said. I think we know that we have to continue to spend on our network, we have to make sure that our network is more superior. And really at the end of the day, we want to make sure we have the best customer experience.
And so with this competitive landscape, as we enter 2021 and onwards with more players, will also be a battle of resource, right? In terms of who has the bladder to invest in networks, because that’s a key consideration in terms of service coverage and customer experience, right? So, that is also determined, of course, there are other major factors like products and standards, not the marketing persons.
This is a question on provisions in expectation of additional provisions and charges.
I think that’s subject to our year-end review process. Principally it will depend on, one, the collection levels that we are able to achieve by the end of the year. Second, is really the general economic outlook, right? So, we have to consider things like what is the expectation with unemployment, inflation, GDP growth, et cetera, as part the whole exercise of estimating our expected credit losses.
Next one is, how much demand in terms of applications per month were there in October for wired home broadband and how gross installs were there in October, if possible, maybe in September? And does PLDT have a backlog for installations?
[Indiscernible] quite a bit.
I mean, that’s why our — we are ramping up on our installation capabilities and capacities. So, there is — our capabilities is below what market demand is. So, there is a backlog and we’re trying to address them.
And a related question, how big is the untapped market for Home fiber considering the emergence of Converge, would you consider the untapped market in this segment to be still significant?
Yes, I think it is. I think there are about 25 million Homes.
25 million Homes.
I think, total fiber.
Total fixed broadband is 3.8 million for the whole market, but that includes the copper DSL, right? And then 3.4 million for fixed wireless, we have also the potential to be upgraded to fiber. So, the country really only has about 7.2 million, but if you look at fiber, now it is a big potential.
And the importance of fiber connected to whom has increased for people. This means also the willingness to pay has increased, so more people will be able to buy or will want to buy fiber. So, the market has grown through the pandemic.
Yes. I think one way to look at it more broadly is that, there are anywhere between — the numbers are not precise, 25 million to 27 million households, right? So, that’s not necessarily the addressable market for FTTH or even fixed wireless. So, it’s a question about affordability, right.
The price point. So, we think that there is maybe 8 million to 10 million homes that cannot afford the current price points on FTTH. So, that’s broadly the market for fiber then maybe to go higher, then you’ve got 5G to address the lower layer of affordability.
So, — yes, it’s potentially a big market.
Like third quarter, we added just — the revenue and still pursue the point on fixed and fixed wireless. We added about 200,000.
200,190 on big adds.
About 200,000 each for both fixed and fixed wireless. So, we had a total [indiscernible] 400,000. But in terms of the revenue impact for the quarter, the fixed, the FTTH 200,000 is significantly more than the fixed wireless. But of course, still we won’t turn it away, right, the fixed wireless revenues, but that’s the arithmetic for now.
Next question is, has PLDT and Smart [indiscernible] keep talents listing a new competitor that in the telco space. What is their strategy to replace key talents that had been [indiscernible?]
I think we have been lucky so far.
Yes. I’m sure they’re talking to some of the people. But we haven’t really seen any major departures.
Let’s say, there were no departures which we didn’t wanted.
Next question from Gerardo Naparal. What are the biggest regulatory hurdles PLDT’s experience in currency? And are there any like the various government measures Bayanihan I and II tax reform helping or hurting PLDT?
I think on the regulatory front, the recent law that was passed by our Congress, Bayanihan II Act, which and the laws on permitting have absolutely helped us significantly in securing permits, the base that’s faster than it used to be.
But there have been pockets of or areas where LTE permits are still slow and we are addressing that by actually engaging with the national government authorities like the DICT and also working directly with the local government units concerned. So, it actually becomes a more proactive, interactive process now on our part, given that the policy has been set by law and by the President himself.
One area that is important to us, obviously, is our ability to secure additional frequencies as we rollout 5G. Now that will be addressed to the policy of the ERC and how they of the NTC on how they want to allocate these frequencies, available frequencies, given especially that it developments in the U.S. and in Europe in particular, the particular bands frequency bands have been identified already for 5G.
So, we’re quite keen to work with government and get our fair allocation of this rate of frequency for 5G. On tax reform, I think that would be good for us if the new tax reform process is passed, it will bring down the corporate income tax rate from the current level of 30% down to 25% — 25% over time. So, that would be good for us. I would think, that should improve our bottom line.
Maybe the last two questions. Are you able to estimate what the cost differential would be for an integrated players, such as yourself, versus single business fixed broadband operator? What kind of Capex and OpEx advantages did you generate — OpEx advantages.
So, it’s of course not so easy to compare, because A, we don’t know exactly the cost situation of that one. But I would say the following, the benefits of an integrated operator is that we can leverage. For example, our fiber network multiple times we leverage for fiber to the home where the cost is very skewed toward the last mile, but we can also leverage at the same time for Enterprise businesses.
And in particular, to connect their base stations. And much more importantly, 5G. 5G without fiber will not work, and therefore we have a high synergy between the various networks. And we have actually in the last couple of years deployed the strategy, we call it, follow the fiber. Wherever there is fiber, we can connect any business, fiber to the home, fiber to the Enterprise and fiber to the base station.
And lastly, I think in a combined mode as we are, we are able to also invest into international connectivity like nobody else can. We current have, already 16 cable systems we are participating in. We are investing in more, there are three more upcoming, and we have three cable lending stations, at least two more coming up in the next year. And I think that’s something which a single fixed broadband operator cannot do.
In particular, when they have to grow outside of the big main post, it becomes very costly to lay all the fiber in the country. We could do that because we are using the fiber not only for the purpose of fiber to the home. We are also using it for mobile and for networks.
I guess just to add to that. That’s from a network perspective, right. But then I think as an integral telco, we’re able to offer more products in the market that spans across wireless and fixed. So, we have your mobile Internet, you have your fixed wireless and your FTTH.
So, it just gives us I guess, we can offer our customer depending on the segments and depending on affordability various offers.
The next question is, can you share what the average lead time is from application to installation?
Well, can I tell you what the aspiration is, well, our aspiration is 24 hours? And maybe repairs of 14 hours, right? But that’s aspiration, we’re not there yet today. And I think this is an area we’re really focused on improving capacity, because today if their facilities and your — it can happen almost immediately.
But certain facility — areas that we don’t have the facility, then obviously it takes more time, plus the additional capacity that, I guess, we’re working on. So –.
But the vast majority of the new applications, we actually can connect in below two weeks. If they are in an area where we have already a port available. That’s very often than the delaying factor that if a port is not available we have to build.
But plenty of demand.
Yes, because of the high demand and we have to go through the permission process and the restrictions which are there. So, this is impacting the time to react quite a bit.
I think somebody asked a question about talents, right? What are the — we have employed the talents the first instance to address the installs, right? I think, in fact, you lend or give up a major officer of Meralco who was in the installed business of the Meralco wires.
That’s Bernard and he has been doing a great job in the installs of PLDT. Yet, there’s still the demand is so strong but we still have quite a bit of backlog. So, additionals we’re going to employ more and more outsource companies to reach the level of our past capacity to install.
And then the repairs, similar thing. We are employing people to address the repairs issue. And the costumer experience. The complaints both on voice and on social media, we have recently hired a lady from Peru. Because she used to work with Telefonica and was in that principle line of responsibility with Telefonica in Latin America.
Telefonica has a big presence in Latin America, so used the last assignment [indiscernible] Telefonica in Colombia. So, she just arrived a few weeks ago. So, she is helping us out on the customer complaints, so forth and so on. So, we are mindful of that.
And last question. Could you share what are the drivers for the question regarding movement in mobiles?
Partly, I think, I answered it earlier in terms of really pushing people to use more data in GIGA platforms and us having more our subscribers with reload. So, that continues to grow. And I guess if you look at it, I think, for the nine months I think — I guess the numbers of our competitor, you could see that our mobile business grew and took on all the growth of the industry.
And maybe the decline of our competitors. So, our wireless business is very, very strong. And, yes, maybe we are getting some growth subscribers that are trying our services.
It’s a follow-up question, what are your plans for the future workplace? Do you foresee long-term need to set up work from home arrangements mixed with in-person office presence?
Well, the COVID has sort of affected our perspective of the workplace. So, pre-COVID we were moving in the direction of a campus type of head office on some, say, 10 hectares of property somewhere in the South. But this COVID has affected that perspective and we’re looking at models that we can emulate abroad, what have they done in light of this COVID.
Do we need as much space? Personally, I still prefer a campus style of working environment, but do we need as many as 10 hectares, because we figure that quite a number of our workforce are either out there in the field or can work from home. And I think the estimate is only about 40% of the 16,000 actually need office space, but it’s a hoteling kind of revolving occupancy.
So, I think we have to look at that. And so I can’t give a definitive answer. But, yes, so we’d be reexamining the options.
That is the last question. As there are no more questions, we just want to inform everyone that the podcast of this briefing will be available in our on our website after the call. We now turn the floor over back to Mr. Pangilinan for his closing comments.
Thank you again for joining us this afternoon. And I guess we will not speak with each other until the full-year results sometime in March. So, in the meantime, on behalf of all of us we wish all of you a very Merry Christmas. It’s probably a subdued Christmas for the country and for the people. So, little sad, but anyway, those are sincere greetings to all of you.
That concludes this briefing. As always, should you have any further questions or clarifications, please reach out the PLDT Investor Relations. Thanks for your participation. Stay safe.
Manuel V. Pangilinan, President and Chief Executive Officer
Thank you, bye-bye.