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Communication Services - Telecommunications Services - NYSE - PH
$ 22.86
2.24 %
$ 4.94 B
Market Cap
8.75
P/E
EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2025 - Q1
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Jinggay Nograles

Good afternoon, everyone. Thank you for joining us today. I'm Jinggay Nograles, Head of Investor Relations here at PLDT. It's my pleasure to welcome you to our first quarter financial and operations results briefing.

Joining us today to share insights into PLDT's performance and strategic direction are Smart Communications Chief Operating Officer, Boy Martirez; PLDT Chief Operating Officer, Jimenez Jr.; PLDT Chief Financial Officer, Mr. Danny Yu; PLDT [indiscernible]; PLDT Chief Legal Counsel, Attorney Joan De Venecia-Fabul.

Before we begin, I'd like to remind everyone that we will have a Q&A session after the presentation. [Operator Instructions] To start, I'd like to invite our CFO, Mr. Danny Yu, to walk us through PLDT's financial performance for the first quarter..

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

the integration of PAL Mini application within Maya that offers users a more seamless travel and loyalty experience. Maya now provides accessible insurance products directly in the application through Singlife.

All through our partnership with Pepsi-Cola, Maya is enabling both payment processing and working capital loans for their network of more than 200,000 sari-sari stores and distributors, partnered with ABS, CBN, and GMA for Pinoy Big Brothers celebrity edition.

This campaign drove a 3% increase in viewership compared to previous seasons and significantly boosted in-app user activity via interactive voting features. Maya is also seeing strong traction in consumer credit. It has issued approximately 200,000 credit cards since its launch in August of 2024.

These moves strengthen Maya's position not just as a fintech and digital bank, but as a daily financial partner, helping Filipino spend, save, invest and borrow. Now before we close out, I'd like to share some updates on sustainability as we continue to expand our efforts to embed this in our business.

During the quarter, PLDT and Smart enacted biodiversity policies that commit to no net deforestation and no net loss in forest cover. As we roll out our network facilities, these policies ensure that we comply with environmental regulations and do not negatively impact the environment and local communities.

PLDT and Smart continued to strengthen initiatives to keep our customers safe and protect children online. This includes access to malicious content.

With the election of PLDT to the Governing Council of the Philippine Business Coalition on Women Empowerment and of our Chief Sustainability Officer to the Board of Trustees of the Global Compact Network Philippines, we have new opportunities to collaborate with like-minded institutions and champion sustainability in business.

Now that concludes our prepared remarks for PLDT's first quarter performance. At this point, we would be happy to open the floor for your questions..

A - Jinggay Nograles

Thank you, Danny, for your insights on the growth initiatives and key developments across our different business units.

As you've seen today, there are some near-term challenges, but we do remain confident in our market position, supported by our strong operational fundamentals, strategic investments in digital infrastructure, and promising growth trajectory in Maya. I'd like to open the floor to your questions. [Operator Instructions].

So we have a raised hand from Arthur Pineda of Citi..

Arthur Pineda

Three questions, please. Firstly, on the Enterprise segment. You mentioned that there were some POGO-related revenue pressures in the first quarter, which is pulling it down.

I'm just wondering, is this all done? Or do you still see further downturn from this segment? I'm basically trying to figure out if we should start to see enterprise accelerating into the following quarters, given the new capacities from data center and all? Or are there still some revenue pull from POGO cancellations? Second question I had is with regard to VITRO.

Can you provide color on the take-up levels for the new capacities? Have you actually signed anchor tenants for this? I'm wondering how material the contribution could be for profits and revenues for the year? And third question is on Maya.

Where do you see the profit momentum as trending for the balance of the year? Should we see this as further expanding on a hockey stick basis? Or is it a gradual improvement in terms of momentum?.

Jinggay Nograles

Thank you, Arthur. Okay. So you have 3 questions here. I guess we can start with your question on POGO. We have Blums Pineda here, who heads our enterprise business..

Patricio Pineda III

Thank you for the question. So on the POGO, as I think you remember, POGO was shut down actually in July of last year. So from that standpoint, we're still anticipating a continuation of the impact, especially from a same period last year compare on POGO revenues as well as other connectivity programs that were discontinued over that time.

So we should still see some drag maybe until about Q3. But I think when you look at the performance, a lot of the programs that the team has been running has helped us at least keep flat and make up a lot of that revenue gap. But there will still be some drag going into at least Q3.

For the second part of the question, I will turn over to Alfredo Panlilio, who's the President and CEO of PLDT Metro..

Alfredo Panlilio

Thank you, Blums. Thank you, Arthur, for the question. I'm happy to share that for VITRO Santa Rosa, we've actually landed a big hyperscale customer of ours that's already availing of 4 megawatts of capacity. Because it's the first hyperscale data center in the country, we've been getting a lot of interest from Western and Chinese hyperscalers as well.

There are ongoing discussions with them together with some big enterprises to help fill up the capacity in Santa Rosa..

Jinggay Nograles

And for the question Maya [Technical Difficulty]..

Unidentified Company Representative

Thanks, Arthur, for the question. I think what we have seen is that we have been consistently reducing losses throughout last year and have now turned profitable. One of the reasons for that is that we have fairly strong operating leverage in the business.

And so we should continue to see an increase in the margins and profitability as we continue to scale the business. I don't think you should expect a hockey stick growth, but a more sort of steady and gradual margin improvement over time..

Arthur Pineda

Sorry, if I could just have one follow-up. It's with regard to the mobile business. I'm just wondering what the thoughts are into the second quarter. Obviously, first quarter was challenging, contracting year-on-year, Q-on-Q.

I'm just wondering, your competitor has been communicating to the market that we've been seeing mobile improvements in the second quarter.

Are you seeing similar trends?.

Jinggay Nograles

Boy Martirez is here, who heads our Smart business. Go ahead..

Boy Martirez

We see that market has softened, but the more important thing that we are focusing on is that we continue to grow traffic year-on-year. And this gives us confidence in monetizing demand for the balance year. And our aspiration is to continue to be always better than last year. So that we will do through innovations and network [indiscernible]..

Jinggay Nograles

I have a question here from Nicki Franco of Abacus Securities from the Q&A box. So the first question is on VITRO Santa Rosa ESG.

So what is the rate of water usage for VITRO Santa Rosa? Will the local utility be able to supply the water required as it ramps up?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

Yes. Thank you for that question. Well, so far, the water utilization level or utilization that we are tracking in Santa Rosa is still at normal levels, similar to other data centers. We expect the water usage to increase once we start onboarding AI-specific workloads, which would need to run on liquid cooling technology.

We are in coordination now with the water utility to be able to anticipate and see whether we can already prepare for that eventuality. But so far, with regards to water usage utilization in Santa Rosa, it's still at normal levels..

Jinggay Nograles

Another question from Nicki, and this is in regards to Maya. Can you share interest income on loans as well as your cost of funds, also average loan tenor? Also, the loans disbursed in the first quarter amounting to PHP 28 million, include receivables from the credit card business..

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

I think we'll be limited in terms of exact disclosure of the numbers to some extent. But yes, the receivables do include the receivables from the credit card business as well. Yes. I mean, we do report numbers on a consistent basis on a quarterly basis.

But at this point, I think it will be difficult for us to talk about loan yields and cost of funds specifically..

Jinggay Nograles

Do you have a target loan-to-deposit ratio?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

Sorry, Jing, I couldn't hear you. I think you're cutting out a little bit.

Could you repeat that question?.

Jinggay Nograles

So this regards to the loan-to-deposit ratio of Maya, so [indiscernible]?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

Yes. So we don't have a specific target loan-to-deposit ratio, but we will continue to keep a slightly conservative loan-to-deposit ratio versus some of the traditional banks. I think we are still sort of early days in terms of the stability of the balance sheet, and we do run a digital banking business.

So I mean, there's no fixed sort of number, but we don't want to see the loan-to-deposit ratio at least in the near term, push very, very high like traditional banks..

Jinggay Nograles

I have a question here for the Home segment. PLDT added a significant number of subscribers this quarter. Do you anticipate this continuing at this pace for the rest of 2025? We have Jorn here who heads our home business..

Joachim Horn

Yes, we do anticipate the growth to sustain. In fact, we are looking at the growth path for the balance of the year. Our net adds has been improving, and we are launching several products and services in rapid succession in the next few months that would address not just elevating our experience, but also expanding our viewership.

So the growth is not one-off. We've actually showed this in 5 quarters, a sustained growth at increasing increments every quarter, and we expect to sustain this until the end of the year..

Menardo Jimenez Executive Vice President & Chief Operating Officer

I'll answer as well..

Jinggay Nograles

We have Butch Jimenez here, who is our COO. Go ahead, Butch..

Butch Jimenez

Growth, I guess, aside from just looking at the growth, you really have to look at either we grow by postpaid or prepaid, because that is very significant with the increase in revenue. So PLDT from a strategic point of view, we're looking at growing primarily our postpaid product because that delivers higher ARPU, lower churn.

We will also look at prepaid at a very strategic and deliberate level. But I think if you're going to compare us with other telcos, you have to compare not just the growth of subs, but you also have to compare postpaid versus prepaid. PLDT and Smart, we do have a 2-barrel shotgun to look at prepaid or to attack prepaid.

Aside from prepaid home fiber, we also have fixed wireless that Smart is handling. So I think we have enough weapons to be able to attack the prepaid market effectively while making sure we continue to grow our postpaid market, which is really the bigger driver of revenue for fixed line telco..

Jinggay Nograles

As a follow-up to that question, we have another question on churn trends. How sustainable are these churn trends at current levels? Go ahead, Jorn..

Joachim Horn

Yes. Our churn has been showing improvement over time. We have seen, our growth has been driven not just by increasing our gross adds and net adds, but also by better managing our churn. Today, we do have the best industry churn rate at a sub-2 % level, and we will continue to improve that as we approach the [indiscernible].

Jinggay Nograles

This next question is for our wireless segment, specifically on 5G. It looks like 5G adoption has increased materially quarter-on-quarter.

How is your 5G monetization strategy progressing? And any notable ARPU uplift from this?.

Unidentified Company Representative

Our focus is still on 5G and building a meaningful and dense 5G coverage, which is also reflected in our double-digit 5G traffic growth, and I think you will see that. And the other thing that I'd like to add is that, in fact, we have seen over 60% growth in 5G devices. And these 2 together would bode well for us in the coming months.

We have seen, for example, a high double-digit growth in 5G traffic. And I can say with comfort that there's a good double-digit percentage of traffic in 5G that has been offloaded for 4G..

Jinggay Nograles

[Operator Instructions] There is a question regarding depreciation and financing costs.

Can we expect depreciation and financing costs to continue increasing at similar levels? Or do we expect these to taper off moving forward? Danny, can you take that question?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

It's going to be almost on the current level. If we're acquiring all. [indiscernible]..

Jinggay Nograles

All right. On enterprise, I think this is in regards to the Asia Direct Cable.

How is this expected to enhance your competitive advantage? Any quantifiable revenue impact from the go-live?.

Boy Martirez

I'll take that. So direct cable, it is a big part of our competitive advantage. When you think about our top-tier facilities like VITRO Santa Rosa, locators are looking especially international ones, are looking for multiple legs to hubs across the region.

So the fact, for example, that people look for Japan, Singapore, Hong Kong at a minimum, right? Asia Direct Cable addresses that very specifically. And with 27 terabits per second, that's the right levels for low-latency types of workloads and requirements. So a very, very big part of our strategy.

It is not a stand-alone thing by any means, but it is a key enabler of the potential that we're driving to with our data center business..

Jinggay Nograles

We have John Te raising his hand of UBS..

John Te

Three questions from me. First is on the prepaid mobile business. There appears to be a softening of subscribers, particularly for Smart in the first quarter, though I understand that the market is soft, but anything unusual with regards to subscriber acquisition? The second question on the other hand, is on the postpaid side.

And I think there is sustained growth momentum at the expense of your competitors. So I guess a bit more clarity on what you think is mostly driving this. The third is on the broadband subscriber trends.

Sorry, I missed this earlier, but should we expect an acceleration in revenues beginning 2Q and 3Q given that the net adds in the first quarter were, I guess, stronger than what you've done over the past few quarters?.

Jinggay Nograles

So I guess we can start with the question on prepaid mobile subscribers and the softening you said, quarter-on-quarter.

Jorn, would you like to have some color on those numbers, please?.

Joachim Horn

I think it's more -- to answer on the issue of subscriber base, I think more correct in under ARPU, overall ARPU is flattish while the market ARPU is declining 6% year-on-year.

And to that extent, I wouldn't put a differentiation on postpaid and prepaid at this point, there's a blip that I see personally in that trend that we see in the rest of the industry. But in our case, our competitive differentiator is always product innovation, network experience and customer and digital experience.

And that's what we're going to build on..

Jinggay Nograles

I understand also, if I recall correctly, that we did a little bit stricter regarding our -- when we churn out some of our prepaid, right? So I guess, Jorn, part of that is also a cleanup versus last quarter in terms of the number of subs. This question is still for you, Jorn, second question.

He did note that we are gaining market share from our competitors.

So he would like to basically gain a little bit more color on how -- I guess, what we're doing in order to gain that market share, and how sustained do you think that would be?.

Joachim Horn

I think we attribute that more to our sustainable traffic growth for the last 9 quarters. And that's traffic is basically what drives monetization because when you have a growth in traffic, to have engagement, good customer engagement, and we're going to build on that.

Year-on-year, we have grown 6% on network traffic while the market has declined by 5%. So that signals our success in capturing demand and user engagement. We are hopeful in translating this to revenues through our hyper-personalized offers that we are having and we continue to have.

By the way, our hyper-personalized offers are based on best-in-class world technology like [indiscernible] in the U.S..

Jinggay Nograles

All right. Our last question, and again, this is in regards to our broadband subscriber trends. Jorn, I know you spoke on this a little bit earlier, but can you talk about what we have to look forward in terms of accelerating that..

Alfredo Panlilio

Thank you for that question, John. John, the last few quarters, especially the last 4 quarters has been very encouraging. We've seen signs, very clear signs that we have a clear path to even more growth, sustainable growth at that.

The important thing is that we keep this business on track, focusing on strengthening our core network and servicing the customer, focusing on elevating the customer experience and expanding our reach. As Butch mentioned, we are not just expanding our reach geographically, we're expanding it to reach more homes as well as more segments in the market.

All this put together, focusing on this would also reduce our churn, customers tend to stay longer.

And given that our business is hyper-focused on the postpaid side, we are seeing our ARPUs remain steady at the level 1,496 level from Q1 last year, which is a good sign as well that this has not been diluted despite the fact that we've loaded an additional 305,000 subs this March.

So it's very encouraging for us and that we do see a clear path to revenue growth. Thank you..

Jinggay Nograles

Thank you, John. We have another question here in the Q&A box Zhiwei Foo from of Macquarie. Is there guidance for 2025 net income? And if not, why? It was adjusted to be provided at the first quarter results briefing during the full year 2024 briefing.

Danny would you like to take that?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

Given the softness of the numbers in the first quarter, I think we're unable to provide guidance at this point..

Jinggay Nograles

MVP also mentioned earlier during the media briefing that it is a very fluid environment at this time. And so once things are clear, we will provide at that time. All right. Another question, and this is in regards to PLDT stake in Maya from Nicki.

What is the latest on plans to increase PLDP stake in Maya? If this happens at some point this year, will it put back your targets to achieve free cash flow as well as your 2x net debt-to-EBITDA target? Danny?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

Well, if and when we invest more in Maya, you might need the help of other affiliates of the First Pacific. But it's not going to be solid coming from PLDT..

Jinggay Nograles

If it happens..

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

If it happens..

Jinggay Nograles

A question here in the Q&A box from Marie [Indiscernible] of Landbank.

Given PLDT's current negative net working capital and debt-to-equity ratio, what specific strategies and timelines are in place to improve working capital efficiency and optimize the capital structure to achieve a healthier financial position in the short to medium term?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

Well, our main focus now is asset monetization, which includes copper mining. That's one. Second is the consolidation of central offices, which will result in selling some of the idle properties. The third is continue to look for a strategic partner in ePLDT, specifically in data center. So the timing is between now and the next 3 years..

Jinggay Nograles

All right. This next question is from Paolo Manansala, COL.

I just wanted to ask regarding the mobile business, if you are seeing an intensification of competition, or is the industry softness in mobile driven by something else? [indiscernible], would you like to take that, please?.

Unidentified Company Representative

Well, the softness I've answered, I think, a while ago. But I think the question is about the trend by which the rest of the industry is experiencing, probably the question, are we going to be in the same trend? My answer is we don't see the same trend.

In fact, our data traffic continues to grow, and we see that this is being done on the back of strong 5G networks. So we're going to be relying on that for the rest of the balance of the year and in the year to come..

Jinggay Nograles

Thank you, Boy. The next question is in regards to our data center business.

With VITRO Santa Rosa now energized, can you comment on the potential enterprise revenue uplift once BSR is fully operational? And also, do you already recognize revenues from current AI workloads?.

Boy Martirez

Thank you, Jinggay. So as you know, VITRO Santa Rosa was just energized recently. It's a 50-megawatt facility that will provide 36 megawatts of IP load divided into 18 data halls of 2 megawatts each. So far, we have an anchor tenant that's already come in that's taking on 4 megawatts of space in VITRO Santa Rosa.

But aside from that, we are again looking at other hyperscale customers and enterprise customers to come in and fill up the rest of the space that we have. But I think more than that, Jinggay, we're also happy to say that it is not only a hyperscale data center, but it is also an AI-ready data center. We are actually AI live.

And our definition of AI-ready is not a showroom, but actual GPUs that have been deployed and that is currently running live workloads and POCs for PLDT and Smart.

And we're very excited because in the next few months, we hope to launch a GPU-as-a-Service model targeting enterprises to make AI as reachable, accessible, and affordable to enterprise customers here in the Philippines. So we're looking forward to that..

Jinggay Nograles

This next question is regarding our OpEx. It looks like it has been declining over the past few quarters.

Moving forward, is there further room to significantly reduce OpEx? Or are we nearing optimal levels?.

Danny Yu Senior Vice President, Chief Financial Officer & Chief Risk Management Officer

We are nearing optimal levels at this point..

Jinggay Nograles

Any other questions from the floor? All right. It looks like we have exhausted the questions in the Q&A box as well as the questions that were sent to me earlier. If we don't have any further questions, I'd like to thank everybody who's joined us today.

We look forward to your continued interest in PLDT and look forward to having you again in our next earnings briefing come this August. Have a great day. Thank you..

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