PLDT Inc. today announced its unaudited financial and operating results for the first quarter of 2019 with Consolidated Service Revenues (net of interconnection costs) rising 7% year on year to Php38 billion, lifted in large part by its resurgent Wireless Individual business.

Service revenues of PLDT’s three major business groups – Wireless Individual, Home and Enterprise – now account for 94% of total service revenues and reached Php35.8 billion, up 12% compared to the same quarter in 2018.  The 12% increase is an acceleration from the 6% year-on-year growth registered for the full year 2018. 
 
Data and Broadband service revenues grew 21% on like-for-like basis to Php24.4 billion and now account for 68% of total service revenues (excluding International). 

Consolidated EBITDA, excluding exceptional manpower rightsizing program (MRP) costs and including the impact of PFRS16 (the new accounting standard for leases which took effect on 1 January 2019), increased 16% versus Q1 2018 to Php20.1 billion.  This was due to the combined impact of higher service revenues and lower cash opex.  EBITDA margin improved, reaching 51% compared with last year’s 46%.  
 
Telco Core Income amounted to Php7.2 billion, up 6% from last year.  This increase is also stronger than the 2% full year growth recorded for 2018.  Reported Net Income was Php6.7 billion, 3% lower year-on-year, mainly due to lower gain in the valuation of PLDT’s investment in Rocket Internet for the first quarter of 2019 compared with the same period last year.  
 
Consolidated Net Debt stood at US$2,451 million whilst Net Debt to EBITDA was 1.92x for 1Q 2019.  Gross Debt was US$3,313 million, of which 12% is US$-denominated.  Only 7% of total debt is unhedged.  Fixed-rate loans comprised 89% of total debt (postinterest rate swaps).  Average interest cost (pre-tax) stood at 4.7%.  
 
“Two things stand out in our results for the first quarter of 2019.  First, close to 70% of our service revenues are now from data and broadband underscoring the fact that our secular shift to data and digital services is moving at a faster clip reflecting our ability to attract more data customers and migrate our legacy subscribers to data.  Second, our Individual Wireless business, which started to take off in the last quarter of 2018, gained more momentum in the first quarter this year, surpassing even our expectations,” said Manuel V. Pangilinan, Chairman and Chief Executive Officer of PLDT Inc. and Smart Communications.

Video and Games 

Among the major business groups, Individual Wireless set the pace, boosting revenues by a record 18% to Php16.9 billion, on the back of rising data usage and a surge in subscriber growth. 

Growth was driven by the prepaid segment, which accounts for about three-quarters of the wireless business, increasing revenues by 28%. 

Moreover, Individual Wireless added 3.4 million subscribers in the first quarter of 2019. When combined with new subscribers acquired in the last quarter of 2018, the total increase for the past two quarters add up to 5.8 million. Total subscribers reached 63.4 million as of end-March 2019. 

Crucially, a growing number of subscribers have become active data users as more andmore shift to using web-capable smart phones. Approximately two thirds of our subscribers now own smartphones, of which about 70% are data users. It is encouraging to note that ARPUs from data users are up to 4x higher than non-smartphone users. 

As a result, broadband and data revenues rose to nearly Php11 billion and now make up 65% of wireless revenues. This growth was powered first, by the continued increase of video usage and second, by the mounting popularity of mobile gaming. 
 
Riding on the momentum generated by the Free YouTube promo in 2018, Smart introduced its Video Everyday data packages late last year. Further enhanced in 1Q 2019, these offers have driven up subscriber take up of various video services. 

The monthly users of Youtube, already elevated by the promo last year, further increased by 35% in 1Q 2019. Meanwhile, viewership of other video apps included in the Video Everyday packages increased dramatically: viewers of the NBA video service nearly doubled whilst iWant viewers jumped by 153% while viewers of iflix soared by 170%. 

At the same time, PLDT and Smart took fresh initiatives to promote mobile gaming in 1Q 2019. They organized their official professional eSports team called “Omega” in February 2019. The following month, Smart backed the current season of Mobile Legends: Bang Professional League Philippines. As a result, the number of monthly unique users of the popular mobile game Mobile Legends increased by five times from June 2018 to end-March 2019. 

PLDT Home shakes off drag 

Revenues of the Home Business grew at a moderate pace of 3% yoy to Php9.1 billion. The impact of the DOLE ruling on outsourced services and the consequential disruption of repair and installation services starting mid-2018 continued to impact net take up of Home broadband subscribers. Net subscriber growth stalled in the last two months of 2018 and softened revenue growth in 1Q 2019. 

As a result of ongoing changes in PLDT’s repair and installation processes, however, the Home subscriber base returned to growth in the first quarter of 2019, enabling the business to post a pick-up in revenues. Subscriber take-up should accelerate in the course of the year. 

During the period, data and broadband continued to drive growth and accounted for 76% of Home revenues. To bolster its digital shift, Home introduced its Google WiFi offer which uses mesh technology to provide unlimited fiber-powered WiFi connectivity in every room of the customer’s home. This offer is the first instalment of a campaign to offer a superior level of internet service to Home customers. This covers not only fiberto-the-home customers, but also the conversion of existing DSL subscribers to fiberpowered service as well as fixed wireless customers. 

“In the first quarter, our Individual Wireless business gave Consumer Group revenues a strong boost. In the coming quarters, we are ramping up our efforts to better serve the strong demand for PLDT’s fiber-powered broadband services. We expect that these initiatives will boost Home revenues and further raise overall Consumer revenues to new highs,” said Oscar A. Reyes, Jr., Senior Vice President of Consumer Market Development for PLDT and Smart. 

Enterprise sustains robust growth 

The Enterprise Business Group sustained its robust growth record, increasing revenues by 9% to Php9.8 billion. ICT services led the pack, climbing 26% to Php1.1 billion on the back of breakthrough growth by cloud and cybersecurity services, which more than doubled revenues for the period. 

This was followed by Wireless services, up 12% to Php1.5 billion on the strength of Enterprise wireless solutions, such as M2M IoT services, which grew 37%. 

Fixed line services, which contribute the largest share of Enterprise revenues, grew 6% to Php7.2 billion. Growth was driven by demand for data connectivity which pushed the share of data revenues to 70% of total. A strong growth area was International Operations which increased revenues 114% by connecting enterprises in the Philippines to various parts of the world. 

Meantime, the Enterprise Group continued to take the lead in developing applications and use cases for 5G. In March 2019, PLDT, Smart and Nokia signed a Memorandum of Understanding (MoU) to pilot the deployment of 5G wireless broadband technologies and services in schools, colleges and universities. 

Under the MoU, PLDT/Smart will collaborate in identifying real world and enterprise-led 5G solutions, such as artificial intelligence, drones, and IoT applications, for use in schools, colleges and universities. The first school to join this initiative is the Ateneo de Manila University. 

This followed the setting up of Smart 5G cities in Clark, Pampanga and the central business district of Makati City late last year. In Clark, PLDT and Smart partnered with Ericsson and with the Bases Conversion and Development Authority and the Clark Development Corporation to pilot 5G applications. In Makati, the partnership is with Huawei Technologies. 

“Our 5G initiatives are part of our broader effort to provide Enterprise customers the most advanced digital solutions which will enable them to be active participants in what has been called the Industrial Revolution 4.0. That revolution is already raging and 5G will speed it up and make it far more widespread,” said Juan Victor Hernandez, Senior Vice President and Head of Enterprise Business for PLDT and Smart. 

Fiber power 

Underpinning all these business initiatives and the accelerating rise of our data revenues is the continuing expansion and modernization of the fixed and mobile networks of PLDT and Smart, which in 2019 is being supported by an historic-high capital expenditure of Php78.4 billion. 

The growth of mobile video viewing among Smart subscribers, for example, has been helped by the ability of its cellular network to deliver what internet analytics firm OpenSignal called, in its latest country analysis released in April 2019, “the better video experience.” 

In 1Q 2019, PLDT further expanded the coverage of its fiber-powered, fixed line broadband network to 6.7 million homes passed, a 6% increase from end-2018. Total number of fiber ports as of end-March 2019 reached 2.96 million, of which 1.2 million are available for new customers. 

Smart added about 1,700 LTE base stations to its mobile network, during the period, raising the total number of LTE base stations to 18,000. Further, Smart is activating the carrier aggregation feature of these LTE base stations, enabling the Smart network to deliver even faster mobile internet services by combining the capacity of two or more frequency bands. Smart also increased its 3G base stations by about 500, bringing the total to about 12,100. 

Moreover, PLDT expanded the total footprint of its fiber optic cable network to 259,000 kilometers, up 6% from end-2018. This fiber network serves both PLDT and Smart and has been critical in enabling their fixed and mobile networks to be the best in the country, delivering internet services that have won awards from independent firms like Ookla and Opensignal for being such. 

In April 2019, PLDT partnered with global technology leader Cisco to help transform its fiber transport network into a fully automated, software defined 5G-ready IP transport network over the next three years. This represents a further major step in our Network’s transformation. 

Under this project, PLDT and Cisco will deploy technologies across PLDT’s transport network to make it highly efficient, resilient, scalable, and easier to maintain and repair. The software-defined architecture will also enable PLDT to equip customer services with highly dynamic and agile networking capabilities, as well as tougher cybersecurity. This new infrastructure will enable PLDT to deliver to its customers the growing range of nextgeneration digital services that use artificial intelligence and the IoT. 

“This transport transformation program is a crucial part of our ambition to strengthen the network leadership that PLDT and Smart have won through consistent efforts over the past three years. Combined with our ongoing overhaul of our IT systems and processes, this initiative will radically improve our ability to serve our customers with compelling digital services,” said Mario G. Tamayo, Senior Vice President for network planning andengineering of PLDT and Smart. 

Conclusion 

“As we move deeper into 2019, we are transitioning our focus and effort from placing the Company back on the growth path into initiatives that should raise the business to the next level. There are still rough patches, such as the operational snags that our Home Business encountered. But our agenda now is clearly to elevate our game,” Pangilinan said. 

“To achieve that, we are more determined to push forward our digital shift — everything from the transformation of our transport network to the overhaul of our customer service policies and practices. Our objective is clear – for PLDT and Smart to work closely together to deliver the best possible service to our customers and improve the lives of our people.  

“In this light, and based on the momentum we have seen in the first quarter, we maintain our guidance that full-year telco core income shall rise to (at least) Php26.0 billion, and holding our capex level at Php78.4 billion,” Pangilinan concluded. 

Read the full disclosure here.