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Philippine Long Distance Telephone Company (PHI)
Q3 2012 Earnings Call
November 6, 2012 2:00 AM ET
Melissa Vergel de Dios – Head, IR
Poly Nazareno – President and CEO
Chris Young – Chief Financial Advisor
Ray Espinosa – Head, Regulatory Affairs and Policies
Anabelle Lim-Chua – SVP and Treasurer; CFO, Smart
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At this point, I would like to turn you over to Melissa Vergel de Dios, Head of Investor Relations for PLDT, for the introduction. Please go ahead. Thank you.
Melissa Vergel de Dios
Good afternoon, and thank you for joining us today to discuss the company’s financial and operating results for the first nine months of 2012. As mentioned in the conference call invitation, today’s presentation is posted on our website. For those who have not been able to do so, you may download the presentation from www.pldt.com.ph, under the Investor Relations section.
For today’s presentation, we have with us members of the PLDT Group management team; namely, Mr. Poly Nazareno, President and Chief Executive Officer of both PLDT and Smart; Mr. Chris Young, Chief Financial Advisor of PLDT; Ms. Anabelle Lim-Chua, SVP, Treasurer of PLDT and Chief Financial Officer of Smart; and Atty Ray C Espinosa.
At this point, let me turn the floor over to Mr. Poly Nazareno for the presentation.
Good afternoon and thank you for joining us today. For 2012 we anticipated that the challenging operating conditions that arose in the second half of 2011 would carry into the first half of 2012 and would begin to improve in the second semester. Our results for the first nine months of the year are largely in line with this.
Consolidated service revenues as of end September 2012 grew by 12% to PHP126.2 billion compared with PHP112.3 billion in the same period last year. EBIT dipped by PHP2.5 billion or 4% year on year to PHP58.6 billion largely due to the PHP1.8 billion of manpower reduction costs booked in the second quarter. Margin was lower at 46%.
Reported net income for the first semester declined by 6% year on year to PHP28.7 billion, while core net income, excluding exceptional items, was lower by 8% year on year at PHP28 billion. Worth mentioning is that the results of the third quarter of 2012 are generally better quarter on quarter even without the contribution from digital. In addition, although third quarter metrics were lower than the same period last year, they showed improvement compared with the second quarter year-on-year results.
Our core income of PHP28 billion on the next page – our core income of PHP28 billion at the end of September 2012 was lower year on year by PHP2.6 billion. The bulk of the decline or PHP2.4 billion pertains to the first six months of 2012 compared with the same period in 2011. This reflects the impact in the first semester of competitive pressure, which led to higher selling and promotion expenses and subsidies, as well as the one-time manpower reduction costs in the fixed line.
In contrast, the core income decline of PHP200 million in the third quarter was significantly lower year-on-year and is in line with our outlook for a stronger second half of the year. Reported net income for the first nine months of PHP28.7 billion was 6% lower year-on-year due to lower core income and higher net ForEx and derivative gains.
On the next page, the PLDT Group’s combined cellular subscriber base grew to 68.6 million at the end of September 2012 with 4.9 million new subscribers from the end of 2011. Strong growth was registered by Talk ‘N Text having added 2.5 million in the third quarter alone.
Smart subscriber base stood at 25.6 million while the number of Sun subscribers cross the 16 million mark. The group’s combined postpaid cellular subscriber base, inclusive of Sun Cellular’s 1.5 million postpaid customer count stood at 2.2 million in the end of the first nine months of 2012. Smart’s postpaid additions of 108,000 for the nine month period are almost double the net additions recorded in the same period in 2011.
We expect to have 70 million subscribers at the end of 2012. The group’s total broadband subscriber base rose to 3.2 million at the end of the first nine months of 2012 reflecting net adds for the year of over 240,000; 100,000 of which were added in the third quarter alone.
The combined wireless and fixed broadband subscriber base grew to 2.3 million and 902,000 respectively. Finally, our fixed line subscriber base stood at 2.1 million at the end of September.
On the next slide, the consolidated service revenues at the end of September 2012 rose by PHP14 billion or 12% year-on-year to PHP126.2 billion. Digitel accounted for 13% or PHP16.6 billion in total group service revenues. As in other markets, our revenue mix is changing with declines in contribution from legacy businesses such as SMS, NLD and inbound international voice, partly replaced by increases in broadband and BPO revenues.