PLDT, Inc. Q1 FY2024 earnings call

Management Statement and Operational Highlights

• Consolidated service revenue for the first quarter grew by 3% to ₱48.7 billion year-on-year. On a gross basis, service revenues were up 5%. EBITDA rose 5% to ₱27.3 billion with an EBITDA margin of 52%. Telco core income, excluding asset sales impact in Maya, expanded by 8% to ₱9.3 billion.
• Individual segment saw 7% growth, driven by strong data monetization; blended ARPU was up 21% with 10% rise in average usage. Mobile data users increased to 39.4 million, mobile data revenues up 11%.
• Home segment: Fiber-Only revenues rose 7%, Home segment revenue stable; Fiber churn improved to 1.82%.
• Enterprise segment: Corporate data and ICT up 8%; Sta. Rosa data center on track with first 10 megawatts capacity expected by July.
• Maya Philippines: Digital bank with 3.4 million depositors, ₱29 billion deposit balance, loan disbursements over ₱34 billion; processes 45% of all QRPH transactions by account and 49% by value.

Segment Performance

• Individual or Mobile business: Grew 7% to ₱21.1 billion in the first quarter. Mobile data, accounting for 88% of total segment revenues, grew 11% year-on-year. Prepaid and postpaid revenues each rose 7%.
• Enterprise segment: Recorded a 3% revenue increase to ₱12.1 billion. Corporate data and ICT, growing revenue streams, were higher by 8%, stronger than the overall segment growth.
• Home segment: Revenue stable at ₱15 billion year-on-year. Fiber revenues were higher by 7% or ₱900 million compared to the same period last year, with Fiber-Only revenues accounting for 92% of Home segment revenues and rising 7%.

Guidance

• Anticipate mid-single digit growth in service revenues, underpinned by robust data and broadband revenues.
• Expect EBITDA to grow by mid-single digit and aim for telco core north of ₱35 billion in 2024.
• CapEx guidance for 2024 is ₱75 billion to ₱78 billion.
• Aim for 60% dividend payout and deleveraging to 2.0x net debt-to-EBITDA by 2026, expecting positive free cash flow after dividends by 2026.

Risks

• Competitive landscape in wireless space with focus on service quality and customer relevance; macroeconomic factors affecting customer behavior.
• Challenges in data center divestment discussions, including potential loss of revenues if majority interest is divested, and considerations of REIT options with implications for control and expansion.

Question and Answer

Q: Can you characterize the competitive landscape in the wireless space?

A: Manuel Pangilinan noted continued focus on service quality and network build, with emphasis on remaining relevant to customers considering behavioral shifts and macroeconomic indicators, needing to accommodate customer requirements for longer validity, higher bandwidth, etc.

Q: On your guidance on telco core income of ₱35 billion or more, how should we think about it?

A: Manuel Pangilinan stated they strive to achieve numbers close to ₱35 billion, with momentum in wireless business and expectations of growth in Home Broadband and Enterprise segments, and likelihood of free cash flows before dividends for 2024.

Q: On the mobile side, was the blended ARPU growth driven by subscribers moving up to higher plans or reduced promotional items?

A: Danny Yu said ARPU growth was due to growth in mobile data revenues and increased daily active customers reloading, with growth in 5G devices and efforts to reduce LTE congestion.

Q: On the fixed broadband side, is the net growth in broadband subs due to internal migration or real growth?

A: Jeremiah De La Cruz explained fixed wireless saw 4% growth, Fiber had 37,000 net adds excluding a one-off cleanup, with churn improving and focus on ramping up fiber rollout and customer acquisitions.

Q: What is the rationale for Radius acquisition?

A: Danny Yu said Radius has a strong enterprise brand, leveraging synergies with PLDT's network, better execution in rollout and platforms, and strategic benefits for both Home and Enterprise segments.

Q: Any updates on the data center sale?

A: Manuel Pangilinan discussed discussions with parties interested in data centers, including NTT DOCOMO, considerations of majority control, revenue implications, and exploration of REIT options.