PLDT Inc. 2026 Q2 Earnings Call

Afternoon, everyone. Thank you for waiting. Apologies for that delay. Thank you for joining us today. My name is Gina Gabrillas. I am the Head of Investor Relations here at PLDT, and it is my pleasure to welcome you to our first half 2025 financial and operating results briefing. Joining us today to share insights into PLDT's performance and strategic direction are PLDT Chief Operating Officer, Mr. Butch Jimenez, our OIC CFO, Mr. Leo Posadas. We also have here with us SVP and Head of Consumer Home Business, Mr. John Palanca. We also have our Head, or OIC for Smart Communications, Mr. Lloyd Manaloto, and our Chief Legal Counsel, Attorney Joan De Venecia-Fabul. We will also be joined later by our other key officers for our enterprise business as well as our data center business.

Before we begin, I would like to remind everyone that we will have a Q&A session after the presentation. You may submit your questions via the MS Teams Q&A panel. Thank you also to those who have submitted the questions beforehand, and we will make sure to address those during the call. To start, I would like to invite our Chief Operating Officer, Mr. Butch Jimenez, to walk us through PLDT's financial and operating performance.

Good afternoon, everyone, and thank you for joining us today. I will take you through PLDT's first half 2026 financial and operating results. For the first half, gross service revenues grew 2% to PHP 108.7 billion, while service revenues net of interconnection costs increased 1% to PHP 97.8 billion. Both were tempered by softer consumer spending and wireless and the lagged revenue impact of first quarter installation constraints in Home, partly offset by continued enterprise growth. Cash OPEX subsidies and provisions were broadly flat at PHP 41.7 billion, supporting EBITDA of PHP 56.1 billion in a stable 52% margin. Below EBITDA, depreciation and amortization increased 6%, reflecting our past investments in network and infrastructure. Telco core income declined 2% to PHP 16.6 billion, while stable financing costs, contribution from Maya, and asset sales helped stabilize core income at PHP 17.3 billion. Overall, the business remained resilient with stable margins and continued financial discipline.

Looking more closely at the top line, consolidated service revenues were up 1% to PHP 97.8 billion for the first half. Excluding legacy services, revenues grew 2% to PHP 89.2 billion and now account for 91% of total. Wireless revenues were broadly stable at PHP 42.1 billion, with mobile data and fixed wireless access grew 2% to PHP 38.7 billion. Home revenues were PHP 30 billion, down 1%, reflecting the revenue lag from the installation constraints we experienced in the first quarter. Enterprise remains our strongest growth driver, with revenues up 5% to PHP 24.8 billion by corporate data and ICT. While overall growth remains measured, the mix continues to shift toward data and ICT services. Let me now take you through the performance of each of our major business units. Starting with wireless, where we saw an improvement in trends through the second quarter.

Wireless consumer revenues were PHP 42.1 billion this half, broadly stable year-on-year. Data and fixed wireless access revenues grew 2% to PHP 38.7 billion and now account for 92% of wireless consumer revenues. More importantly, the trajectory within the first half has improved. Monthly year-on-year top-ups moved from negative 3% in March to flat in April and May and positive 1% in June. This brought wireless revenues back to roughly flat for the first half. The usage numbers back this up. Active data users reached 24.1 million. Data traffic increased 12% year-on-year to 3,273 petabytes. 5G devices increased to 12.5 million, now representing 21% of the device base. ARPU also remained resilient despite the softer consumer spending environment. Wireless started the year under pressure and is ending the half on firmer footing. A lot of that comes down to how we're approaching pricing and customer engagement.

Let me show you what we're doing on that end. Two things are driving better monetization. First, we are being more deliberate on pricing, selectively moving some prepaid offers to higher price points while adding more data and benefits so customers still see good value. For example, the selected prepaid offers moved from PHP 99 to PHP 109 with additional data in the package. Second, we are getting much better at engaging individual customers. Our hyper-personalized offers use each customer's behavior and usage patterns to make promotions more relevant. The results have been encouraging. App-based hyper-personalized offers are converting at as much as 5% versus around 0.2% for generic SMS broadcast offers. That's as much as 25 times higher. These actions are helping us support higher spend while keeping ARPUs resilient in a softer consumer environment. Our network experience also remains a key strength.

In Opensignal's latest July report, Smart earned eight mobile experience awards with outright wins across gaming, voice apps, 5G upload and 5G coverage, and joint wins in video. What's worth noting is that Opensignal looks at coverage in the places people live, work, and travel, rather than simply measuring land area or population covered. It is designed to reflect the coverage users can reasonably expect in their day-to-day lives. Smart's network performance was also recognized in Ookla Speedtest Awards for the first half of 2026. Smart was named the Philippines' fastest mobile network, best mobile network, and best mobile video experience. Sharper pricing, better personalization, and a strong network experience are giving us a better path to improved monetization. Turning to home revenues were PHP 30 billion for the first half, down 1%, with fiber also down 1% at PHP 29.4 billion. It's worth remembering how home works.

It's a 99% postpaid business, so there's a natural three to four-month lag between an installation and when it shows up meaningfully in revenue. Each new installation adds to the recurring revenue base, so the benefit builds as new subscribers accumulate. That's why the first half numbers still carry from the installation constraints we saw in the first quarter. The OSS migration slowed how quickly customer orders were converted into completed installations. The good news is that we started seeing recovery signs in the second quarter as installation volumes picked up and postpaid net adds turned positive in May. On fundamentals, ARPU remains best in industry at PHP 1,330 for the first half, though down from a year ago. Net churn is industry leading at 1.8%, with postpaid churn improving to 1.4%. Lastly, fiber net adds improved to 97,000 in the second quarter, more than double the first quarter trend.

Let me show you those operating indicators in more detail because that's really where the recovery story is clearest. You can see the improvement more clearly in the operating indicators. Postpaid installations increased steadily through the second quarter, with June reaching the highest monthly level so far this year. As installations throughput improved, postpaid net additions turned positive for May. Churn also remains well managed, with monthly postpaid churn at 1% in June. We also continue to strengthen the home proposition beyond connectivity. Fiber Unli All brings fiber together with Cignal, HBO Max, and Smart data in one package. The idea is to give customers more value from their relationship and support deep engagement and retention. We continue to improve the service experience. Star Genie, our AI-enabled frontline service tool, helps our customer-facing teams resolve inquiries directly and much faster. Inquiry resolution is now around 10 times faster.

Ticket escalations have been cut by half, and more than 61,000 hours of customer waiting time have been avoided. The operating recovery is already underway as installations rebuild the recurring subscriber base. We expect revenues to follow with the usual lag. Let me now turn to enterprise, which was our strongest growth business in the first half. Enterprise revenues increased 5% to PHP 24.8 billion, while corporate data and ICT revenues also grew 5% to PHP 18.4 billion. The mix continues to shift toward higher growth services. ICT revenues increased 22% in the first half, led by 35% growth in tech services. This more than offset the continued decline in legacy services. We are also seeing good growth across underlying infrastructure base. Fiber lines increased 6%, SD-WAN lines grew 18%, and contracted third-party racks across our Vitro data centers increased 6%. A key part of the strategy is One Enterprise.

We bring together PLDT, Smart, ePLDT, PLDT Global, and Vitro to offer clients a broad set of solutions under one relationship. Increasingly, our wins involve more than one part of the group, combining connectivity with cloud, managed IT, cybersecurity, and data center services. That breadth is reflected in the growth we are seeing across the different enterprise businesses. You can see that momentum across the different businesses supporting our enterprise customers. PLDT Global's enterprise revenues grew 30%, supported by hyperscaler and carrier demand for international connectivity, cable capacity, and co-location. Smart's enterprise business grew 15%, driven by services such as A2P, GIGA, Enterprise Postpaid, and IoT. ePLDT Tech Services grew 37%, reflecting continued demand for managed IT, cloud, cybersecurity, and customer experience solutions. Vitro data center revenues grew 13%, supported by enterprise, cloud, and hyperscaler demand.

What ties these businesses together is the ability to serve more of our customers' digital requirements from connectivity all the way through to the cloud, cybersecurity, and data centers. I'd like to spend a little more time on Vitro, where we see a particularly strong growth runway. Vitro data center revenues grew 13% in the first half, supported by demand from enterprises, the public sector, and hyperscalers. Today, Vitro has approximately 34 megawatts of activated IT-ready capacity across its portfolio, making us the largest data center operator in the Philippines by live colocation IT capacity, and we have significant room to scale from here. The next 10 megawatts at VITRO Santa Rosa are targeted for activation by the end of this year. Beyond that, identified expansion opportunities across Santa Rosa, Clark, and Cebu too could take total IT-ready capacity to 62.4 megawatts.

That represents more than 80% growth from our current activated capacity. We also see a supportive backdrop for the industry. Executive Order No. 119 reinforces the importance of secure in-country hosting for sensitive government data. More broadly, it strengthens the case for building digital infrastructure locally and could support further cloud and hyperscale investment in the Philippines. Vitro is well-positioned for that opportunity, given its track record, scale, nationwide footprint, and its integration with PLDT's broader ecosystem. We are also continuing to build a platform to global standards. VITRO Santa Rosa is TIA-942 Rated III and LEED Gold certified, while S&P Global Ratings assigned Vitro a light green shade of green assessment. Turning now to operating expenses. Cost management remained disciplined in the first half. Total cash expenses, subsidies, were slightly lower at PHP47 billion, despite continued investments to support the business.

The main increases came from repairs and maintenance, up 3%, and contract-specific service costs, which rose 26% in line with higher project activities. Subsidies were also higher, reflecting our continued push to drive device adoption and customer engagement. These increases were largely offset by lower compensation and benefits, selling and promotions, and taxes and licenses. Overall, we were able to keep the cash cost base stable while continuing to fund areas that support growth and customer experience. This cost discipline helped preserve margins, which I'll discuss on the next slide. Turning to EBITDA. The semestral trend shows a steadily expanding earnings base. EBITDA reached PHP56.1 billion in the first half, marking the fifth consecutive semester of growth from PHP53.9 billion in the first half of 2024. This has been supported by a combination of steady revenues and disciplined cost management.