Earnings Call
PLDT Inc. (PHI)
Earnings Call Transcript - PHI Q3 2020
Operator, Operator
Good afternoon, and thank you for joining us today to discuss the company's financial and operating results for the nine months of 2020. A copy of today's presentation is posted on our website. For those who've been able to do so, not been able to do so, you can download the presentation from www.pldt.com under the Investor Relations section. For today's meeting, we have with us our Chairman, Mr. Manny Pangilinan; Mr. Al Panlilio, Chief Revenue Officer; Anabelle Lim Chua, Chief Financial Officer; Atty. Ray Espinosa, Senior Adviser to the President, as well as other members of the PLDT management team. At this point, let me turn the floor over to Mr. Pangilinan to begin the presentation.
Manny Pangilinan, Chairman
Thank you, Melissa. Good afternoon, everyone, and thank you for being here today. We are here to present our financial results for the first nine months of 2020. I will begin with a brief presentation, after which Anabelle will share the financial highlights. As we are all aware, the COVID-19 pandemic continues to affect many individuals, contributing to high unemployment and ongoing hardships. With that in mind, let’s move to the next page. Internet connectivity has become essential during this time, serving as the foundation for the digital economy. We have been diligently working to establish a digital ecosystem that meets our customers' needs. Over the past nine months, our focus has been on delivering customer-driven product and service innovations. We are committed to investing in our network even during and after the lockdown period. Initially, our mobility was impacted during the lockdown, but now we are back on track with our network projects. We are progressing with our nationwide fiber rollout and, as indicated in our first half report, we are migrating from ADSL to fiber. We have also commercially launched 5G at select locations and will continue expanding this over the coming years. In terms of LTE services, nearly 99% of our cell sites are LTE-enabled. We are dedicated to ensuring the superiority of our network, which currently covers 96% of the wireless population. We have the largest fiber footprint in the country, having laid 395,000 km of fiber cables to date and expecting to surpass 400,000 km by the end of the year. We will proceed with our rollouts into the first quarter of next year, having reached 8.3 million homes and 3.84 million ports. Our mobile data coverage is also the widest in the nation, supported by 9,892 cell sites, 56,799 base stations, 25 core and data centers, and three cable landing stations. All these metrics are set to expand further, with projections for growth in cell sites, base stations, and landing stations, potentially increasing to five by next year. Let’s move to the next page. We track our performance against competitors to enhance customer experience, consistently outpacing local competition and exceeding the Philippine average with a score of 19.45, according to the Ookla report. In Metro Manila, users can achieve speeds of 26.6 mbps across all devices, and with the right equipment, speeds can reach 41.77 mbps. Speed test results from Ookla show we outperform competitors like Globe, and our fixed-line services are also ahead of the competition. Moving to the next page, I previously mentioned the launch of Smart 5G this year, which remains a major focus for us as we develop this ultra-wideband platform. Our goal is to build various use cases around 5G as we progress. Key developments in the third quarter included the launch of our GIGA Life app, which is crucial for engaging customers digitally. We will enhance this app as we move forward. We also initiated product launches for the commercial rollout of 5G. With changing behaviors, home has become where people work, study, and play, prompting us to provide solutions that support work-at-home and study-at-home arrangements for Filipino families. In our Enterprise segment, we are focused on creating digital ecosystems to support industries like health and education, which are integral to our strategy. Additionally, we are managing our international partnerships effectively to support our business. Throughout this period, we have rolled out numerous programs and offers, including exclusive NBA content for Smart subscribers. We launched initiatives like GIGA Life, GIGA Fest activities, GIGA Study, GIGA Games, and GIGA Pro. The Enterprise segment also introduced BEYOND FIBER during the lockdown, aimed at providing connectivity solutions for MSMEs. We hosted a concert at the MVP in July, where PLDT Home offered speed boosts to select customers. The image in the top right showcases a shot taken in Clark during the PBA Bubble, where we utilized Smart 5G for broadcasting. Our collaboration with international partners such as Orange has been key in managing the complexities of our international business. I'm pleased to report that for the third quarter, our core service revenues reached PHP43.7 billion, which is an 11% increase compared to last year, translating to PHP4.2 billion in additional revenue. This marks the highest quarterly revenue for the PLDT Group, exceeding the PHP41.5 billion recorded in the first quarter of this year. Anabelle will later detail the steady growth in revenue we've maintained over the past 11 quarters, with the exception of the second quarter due to the impacts of the lockdown. Moving to the next page, our key performance indicators for the first nine months reflect our ongoing market leadership in service revenues. We have bolstered our fixed service position by enhancing our fiber installation capacity in response to increased demand for home broadband. In the wireless market, we have maintained our leadership for six consecutive quarters, ranking first in wireless data traffic and data users, with the TNT brand now being the largest prepaid service in the country. Our various initiatives demonstrate our commitment to the community, inspired by our Chairman's belief that no learner should be left behind. We are dedicated to supporting education through partnerships with the Department of Education and other organizations aligned with the PLDT Smart Home vision. Transitioning to our recovery efforts, we have been actively working to restore services in communities affected by typhoon Rolly, mainly in Albay, Catanduanes, and Camarines Sur. While we are not yet fully restored, we are at roughly 70% to 80% in most areas, with teams on the ground collaborating with local electricity providers to complete necessary repairs. We have also provided free calling and charging booths in regions that require assistance. That concludes my report. I will now hand the floor over to Anabelle Chua.
Anabelle Chua, CFO
Thank you, Al. Let me go through the financial highlights for our nine months that have passed. As Al highlighted earlier, we are very proud of the fact that we came in quite strong in the third quarter, with individual, enterprise, and home businesses all registering all-time highs. On a combined basis, these businesses are up 13% compared to the same quarter last year and 6% higher than the second quarter. Overall, PHP43.7 billion is 10% up versus last year and 6% also up versus the second quarter. Next slide. Backing this 10% rise in revenues, we saw our EBITDA also up by 12% to PHP22.7 billion with an EBITDA margin of 51%. Our telco core income registered PHP7.1 billion in the quarter or 14% higher than the same period last year. Moving on, we show here the results over the three quarters of 2020. Other than the slight dip in the second quarter, you see that we came in quite strong in the third relative to where we were in the previous quarters. All quarters are ahead of the same period last year; with a 9% increase in Q1, 7% in Q2, and a 10% increase in Q3, leading to an overall 9% growth for the nine-month period. Looking at it by business pillars, the individual business experienced a moderate dip in the second quarter, but post-Easter, we saw our top-ups hitting record highs. With PHP21 billion, that’s again an all-time high in terms of quarterly performance, leading to PHP60.8 billion, which is 16% ahead of our prior year. For enterprise, as Al mentioned, notwithstanding the challenges in the external environment, we were able to meet the digital requirements of our various enterprise customers, with numbers increasing every quarter from PHP10.1 billion, PHP10.2 billion, and now PHP10.6 billion in the third quarter or an aggregate of PHP30.5 billion, again 6% higher than the prior year. Home is quite encouraging: we saw a breakout in the third quarter at PHP10.7 billion, a 16% increase over the same period last year at PHP700 million ahead of the previous quarter, totaling PHP30.3 billion, also a 10% rise over the prior period. Moving on. The 9% increase in nine-month revenues supported a 9% increase in EBITDA to PHP66 billion. We managed our cash OpEx, rising only by about 4%. I will talk about some issues around provisions later. Telco core income was PHP21 billion, which is 8% ahead of last year, despite increases in depreciation and financing costs due to higher investments in capex. Next chart. Here we track our quarterly performance since the start of 2018. The key takeaway here is that we have seen consecutive growth every quarter since then, except for the slight dip in the second quarter. Importantly, the growth has accelerated in terms of the pick-up from the prior periods. We see not just growth but an acceleration in improvement, now at PHP43.7 billion, an all-time high. This chart shows the same trajectory, breaking revenues into data versus non-data revenues. It is clearly data that has powered the growth for PLDT Group over this timeframe. Data at PHP90.8 billion is 72% of our revenues now, with an 18% rise noted in the next chart. Half of our data comes from mobile internet, which is up 31% year-on-year. About 76% of our base home smartphones are actively using data, and we noted a record high of 36.8 million active data users during the third quarter. Traffic-wise, mobile traffic used by our subscribers has practically doubled from what it was a year ago. Home broadband is the next largest segment in terms of data service story, totaling $24 billion or 14% higher than last year. With work-from-home and study-from-home dynamics, demand for home broadband is at an all-time high. We've pushed our installations up from about 40,000 average last year to approximately 70,000 in the third quarter, although that’s still not enough to serve all the demand we see. There is a concerted effort to raise the installation figures to over 100,000 by next year. Corporate data and data center, part of our enterprise revenue segments, have also risen by about 3% year-on-year. The growth in data has more than shielded us from declines in SMS and voice, which now form a smaller proportion of our total revenue. Next chart, please. As outlined earlier, the higher service revenues allowed us to see a 9% increase in EBITDA and more than covered the higher cash OpEx and provisions during this time. Higher EBITDA offset some increases in depreciation and financing costs that led to the 8% increase we saw in telco core income. Next chart, please. This chart includes EBITDA numbers over the quarters starting from the first quarter of 2018. This year, we began with PHP21.6 billion in the first quarter and similar levels in the second quarter. In the third quarter, we saw a 5% rise to PHP22.7 billion. The average of these three quarters was PHP22 billion, clearly ahead of the PHP20.8 billion quarterly average we reported last year. Next chart. Just a commentary: we recorded a booking of higher provisions during the third quarter. We booked an additional PHP3.5 billion, and another PHP2.9 billion in the third quarter for a total of about PHP6.4 billion which is a little over 5% of our total revenues. This is in recognition of challenges around collections experienced during the relief period for subscribers during the Enhanced Community Quarantine (ECQ). Notably, starting June, our collections have exceeded previous third-quarter levels. We've collected about 86% of the billings during these nine months, and we are pushing to rise to over 90% or, in fact, closer to 95% by the end of the fourth quarter. We will consider the level of provisions in the fourth quarter based on collection efficiency levels by year-end. Next chart, please. Our telco core income has seen steady growth each quarter from PHP6.9 billion to PHP7 billion, and PHP7.1 billion in this third quarter. The average is at PHP7 billion compared to a PHP6.8 billion average last year. Our initial goal was to at least match last year's telco core income, and we feel confident that we should meet or slightly surpass last year's performance. Next chart. To summarize the P&L or reported income, that's PHP19.7 billion after accounting for our share in Voyager equity losses at PHP1.3 billion and certain other adjustments to our investments. I also want to report that we have completed the sale of all our remaining 1.9 Rocket Internet shares ahead of the public listing and better offer of the company. This has generated an additional PHP2 billion in cash proceeds fund our needs for this year. The reported income is 23% ahead of the nine-month period last year, largely because we had manpower reduction charges during the third quarter last year that we have not encountered yet this year, but we do have ongoing efforts that will involve MRP charges that we will be booking in the last quarter. Next chart. Moving to the balance sheet side, with net debt at $3.9 billion and gross debt of $4.6 billion, we saw an improvement in our net debt to EBITDA ratio to 2.13 times compared to 2.19 at half year, thanks to stronger EBITDA performance. We've managed our liabilities such that more than 50% of our maturities are extended beyond 2025. Overall cost of debt is about 4.69%, an improvement over the cost of 4.8% last year, and even the 4.7% average in the first half. The next chart shows our capex. We reported PHP43.1 billion capex for the first nine months, reflecting a slowdown during the second quarter due to lockdown challenges; however, we expect to hit at least PHP70 billion for the year, implying PHP27 billion to PHP30 billion in the fourth quarter. Of this PHP70 billion capex, PHP52 billion is dedicated to network and IT investments, PHP13 billion supports business requirements, particularly for installations and last-mile connections, generating additional sales, with about PHP6 billion for data center requirements. There are numerous ongoing projects on both wireless and fixed sides. We continue to expand our LTE coverage and our overall capacities. Our ongoing build involves adding 37 terabits per second to our existing 55 terabits per second network capacity. We are building out more ports, about 500,000 ongoing builds to supplement our 1.4 billion port inventory, upgrading from ADSL to fiber, as well as beginning our 5G rollout. All told, we expect our CapEx to service revenue ratio to be about 40% to 41% this year compared to a 45% capex to service ratio last year. The chart summarizes our rollout accomplishments for both fixed and wireless sides: 8.2 million homes passed, 14% up from year-end; 3.8 million ports, which includes 1.4 million available for sale; our fiber footprint is unmatched at 395,000 fiber kilometers. As we speak, we are working on expanding this by another 81,000 kilometers. On the wireless side, LTE base stations are at 28,700. We are continuing to roll out 3G and the 5G, demonstrating our beginnings with this rollout. Coveragewise, we reach 96% of the country’s population with our wireless network. What we observe is that about 71% of our users are on LTE, while users of 2G are down to below 20%. Metro Manila numbers are even stronger, with 80% LTE adoption, leaving only 12% on 2G and 8% on 3G. The next three slides reflect results from external third-party surveys reporting on our network's operational health and quality. The first from Ookla indicates our download speeds. Similar to earlier mentioned metrics, both fixed and mobile clearly indicate our leadership in delivering speeds to our customers. The average mobile speed across 4G and 3G is around 19 mbps, while in Metro Manila, the average is approaching 30 mbps or 29 mbps. With the right handsets, subscribers can experience speeds of 42 mbps on our network. The next chart from Opensignal illustrates our LTE availability and video experience scores. We've outperformed the competition in all regions across the country. The following one measures service quality for our mobile network, reflecting a score of 750 in the third quarter, placing us in the good category, demonstrating improvement over previous quarters. Our benchmarks are not only local but also aim to meet those of our ASEAN neighbors and eventually global telcos as well. So with that, I’ll turn it over to our Chairman, Mr. Pangilinan, for a wrap-up of our 2020 outlook.
Manny Pangilinan, Chairman
Thank you, Anabelle. Good afternoon to all of you, and thank you for joining us this afternoon. I would briefly like to provide you our latest news for 2020, particularly regarding fourth quarter prospects. First, regarding revenues: we expect the momentum established in the first three quarters to continue for the fourth quarter. Thus, across the board in wireless, home, and enterprise, we foresee continued growth. It is likely that the fourth quarter revenues in all three streams will produce another historic high for PLDT. Thus, the full year is set to be a historic high for the company. In terms of telco core, stemming from EBITDA, we anticipate rises, and the full year telco core to surpass the PHP27.1 billion we reported last year. How much higher is subject to numerous variables, including collection records and potential provisioning Anabelle may decide to establish for the fourth quarter. We maintain a dividend payout at 60%, which we might reconsider given favorable circumstances. CapEx for the third quarter totaled about PHP43 billion, and we expect total year-end figures to land between PHP70 billion to PHP72 billion. That summarizes our review for 2020. I turn it over to Melissa for Q&A.
Operator, Operator
We are now ready to take your questions.
Unidentified Analyst, Analyst
The first set of questions comes from Kervin Sisayan. Can you comment on competition? We see Globe increasing marketing spend to push more SKUs in the third quarter. Is there any effect on PLDT?
Alfredo Panlilio, CRO
Well, obviously, Globe will not be sleeping; they are offering packages in the market. We have our own offers, and I think this shows you that with a very strong third quarter, we expect, of course, competition to be there, but we will continue to offer our own packages in the market. So right now, I think we are cognizant that they are promoting their own products, but we are also doing the same.
Manny Pangilinan, Chairman
If I may add to what Al said: while we see 2021 data demand continuing to be robust, the competitive landscape will change. Dito has announced their services will be commercially available by the end of the first quarter, possibly starting in the second quarter. That will definitely be a presence in 2021. Converge has completed its IPO, so we can expect a stronger 2021 in pushing fixed broadband. Of course, Globe, as Al indicated, will remain competitive. It will be an interesting year from a competitive perspective, contingent upon the pace of our economic recovery from COVID. Initially, we thought vaccines would be approved by October or November, but we have not seen that happen yet, although there may be one or two developed by U.S. or U.K. pharma companies. I think the distribution will probably take longer than anticipated, determining the economic recovery for our country and others.
Unidentified Analyst, Analyst
Following up on Kervin's question, do you have any thoughts on the buildout from Dito?
Manny Pangilinan, Chairman
Yes, we are observing their statements and what they are doing on the ground. I think they have been able to deploy some sites. Their target is to have 1,300 sites operational by the first quarter next year. However, that will not be enough to meet their own target of 37% population coverage. They are making progress, but I think it's to be expected that they are far behind what is necessary to be truly competitive. We believe they will likely go live within the announced time frame, but it will take quite a while to achieve nationwide competition, resulting in very localized competition.
Unidentified Analyst, Analyst
A question on Converge: Converge is seeing high growth in subscribers. Are we witnessing subscribers migrating to Converge? In your press release, you mentioned that broadband installations were already at 72,000 per month, but the actual increase in fixed line subs was only 90,000. Can you reconcile these numbers?
Anabelle Chua, CFO
Just to address that: Converge has reported that 90% of their connects are new subscribers. This indicates potential for increased household broadband penetration. About the numbers: 72,000 signifies gross additions, while 90,000 for the quarter represents net adds. Recall that during the second quarter, due to the Bayanihan Act and the lockdown, we did not impose strict churn policies. Hence, there is a backlog of disconnects we needed to recognize during the third quarter.
Unidentified Analyst, Analyst
The next questions come from John Te. My first question concerns our data allocation for prepaid mobile in recent months. It has been increasing despite reduced mobility use. Do you believe this is not dilutive to ARPU as it previously was? What is the rationale behind increasing data allocations for prepaid in recent months?
Anabelle Chua, CFO
Initially, when the quarantine commenced, we did boost the data allocation to support market demands. However, we have adjusted our fund loans for prepaid home wireless. Overall, our yields in the third quarter have improved over the prior quarter.
Unidentified Analyst, Analyst
Next question: In the third quarter alone, PLDT added about 450,000 FTTH ports. You mentioned adding another 500,000 ports. Over what period will that be? Do you think your competitors’ additions are successful?
Alfredo Panlilio, CRO
First of all, one quarter doesn't make a network—it's just a snapshot. We currently have around 1 million to 800,000 ports ready to sell. We will add another 500,000 ports within the next three to four months. We are currently in planning for next year, and we will definitely add substantially to meet market demand.
Unidentified Analyst, Analyst
I want to commend the team for their outstanding results. I have three questions: Firstly, there's been notable growth in the fixed wireless area. Can management provide insight on upselling or upgrading the current subscriber base? Secondly, concerning the transition from DSL to fiber and from fixed wireless to fixed, should we anticipate some positive impact since many DSL subscribers are in a similar situation?
Alfredo Panlilio, CRO
Yes, during the first half results, we announced that we were migrating from ADSL to fiber, which is already happening now. There are about 600,000 of these customers and a third of that should be completed within the year. Besides the surge in demand, there’s also a requirement from most customers to upgrade their service as more people use one pipe at home and may find 25 mbps insufficient. So, they are upgrading to 50 mbps and even to 100 mbps.
Unidentified Analyst, Analyst
Could you discuss which segment contributed the most net adds in terms of fixed-line broadband year-to-date? Were they subscribers converting from other networks, existing fixed wireless subscribers, or first-time subscribers?
Manny Pangilinan, Chairman
It's a mix of all; unserved demand is significant, and we've seen increased interest in upgrading to superior service. Fixed wireless has spiked as an offering, and those wanting reliable speeds of 25 mbps or 50 mbps do switch to fiber. Additionally, we have many first-time subscribers, as there is a clear shift in behavior necessitating broadband at home. Hence, all these three segments contribute to our observed growth.
Alfredo Panlilio, CRO
For home broadband, our main focus is on fiber—indeed, the fiber miles or kilometers we've built over the years. Fixed wireless has also been significant. However, we must manage our numbers to avoid overwhelming our wireless network, as it operates on that network. For next year, our focus will lean towards expanding our fiber connections to meet our market demands. Moreover, full deployment of 5G is also anticipated to boost wireless infrastructure.
Unidentified Analyst, Analyst
What are your observations in terms of the regulator and the tower companies regarding common tower policies? Can you provide more insights regarding the trajectory of closing commercial agreements with the tower companies and the rollout of common towers?
Ray Espinosa, Senior Adviser
On the common tower policy, we have indeed complied with it. The government's directive is to facilitate as many common tower players as possible and encourage mobile operators to utilize their services. We have engaged with several tower providers already, signing contracts covering around 200 towers in Phase 1. With Phase 2, more towers will be established. We are determined to share these towers with Globe and Dito, as we indicated from the outset; we're committed to supporting common tower development even as we still develop on our own, which we cannot rely solely on new tower providers for our needs, given their current local capabilities. However, this cooperation will increase over time.
Unidentified Analyst, Analyst
How much is the MRP expense for quarter four?
Anabelle Chua, CFO
The program is ongoing, but roughly speaking, we estimate it will be around PHP2.6 billion for the one-off MRP premium for early retirements.
Unidentified Analyst, Analyst
Can you disclose the split between mobile and fixed tablets?
Alfredo Panlilio, CRO
It's approximately 50-50, but since we build our networks synergetically, it's challenging to specify where the base station is fixed or mobile. We utilize fiber for every service, making fiber to the base station capable of serving fiber to the home and supporting enterprise customers concurrently. Based on this, about half goes to mobile, and about half goes to fixed.
Unidentified Analyst, Analyst
What are your expectations regarding 5G coverage, specifically by year-end 2020 and year-end 2021?
Alfredo Panlilio, CRO
By year-end 2020, we will likely have around 500 sites in dense urban areas. This is not extensive coverage yet, but next year we will be finalizing our plans to significantly enhance our efforts towards our 5G rollout.
Unidentified Analyst, Analyst
What proportion of wide broadband new customers are first-timers versus churning or switching?
Alfredo Panlilio, CRO
Many of them are likely first-timers due to the strong demand surge during this period. There is still a significant amount of unserved demand out there.
Unidentified Analyst, Analyst
What has driven the strong mobile data revenue?
Alfredo Panlilio, CRO
We monitor a few metrics here. One is increasing our subscribers with reload, which we have raised by 9% compared to the same period last year—3.1 million additional subscribers are using our service. The second factor is our push towards LTE devices; as they transition from 2G to 3G, ARPU nearly doubles. This transition towards GIGA packages also drives up ARPU significantly.
Unidentified Analyst, Analyst
Could you share any CapEx plans for 2021, specifically regarding home broadband and fiber?
Alfredo Panlilio, CRO
We actually can't address that question today as our budgeting process is still ongoing. However, toward the end of the year or early next, we will provide that information to you.
Unidentified Analyst, Analyst
Next question -
Manny Pangilinan, Chairman
The initial cuts on capex were significant.
Alfredo Panlilio, CRO
To add to what the Chairman said, we know we need to continue investing in our network to ensure it remains superior, as customer experience is paramount. This is crucial considering the competitive landscape as we enter 2021 with more players, creating a resource battle regarding network investments, which directly impacts service coverage and customer experience. Other factors also play a role, such as product standards and marketing strategies.
Unidentified Analyst, Analyst
This question pertains to provisions regarding additional loss expectations.
Anabelle Chua, CFO
That's subject to our year-end review process. Primarily, it'll hinge on two factors: the collection levels we achieve by year-end and the general economic outlook, including unemployment rates, inflation, and GDP growth as part of estimating our expected credit losses.
Unidentified Analyst, Analyst
How much demand for applications were there in wired home broadband in October, and how many gross installs occurred then? Does PLDT have a backlog for installations?
Manny Pangilinan, Chairman
There was quite a bit.
Anabelle Chua, CFO
Our installation capabilities are currently below market demand, leading to a backlog that we're actively trying to address.
Unidentified Analyst, Analyst
What is the size of the untapped market for Home fiber compared to Converge? Would you consider the untapped market significant?
Manny Pangilinan, Chairman
Yes, it is significant. There are about 25 million homes. For the entire fixed broadband market, that count is 3.8 million, which includes copper DSL. For fixed wireless, we estimate 3.4 million can be upgraded to fiber. Fixed broadband currently contains approximately 7.2 million connections, with fiber representing a considerable opportunity.
Alfredo Panlilio, CRO
The importance of fiber connections, especially now, has increased. This indicates people's willingness to pay for fiber, thus expanding the market due to the pandemic.
Manny Pangilinan, Chairman
To broadly consider, there are approximately 25 to 27 million households, though not all are addressable for FTTH or fixed wireless. Affordability plays a crucial role in this; we believe that 8 million to 10 million homes cannot afford current FTTH pricing. This presents a considerable fiber market potential, especially as we look forward to leveraging 5G for lower affordability levels. In third quarter results, we added approximately 200,000—for revenues, the fixed FTTH impact is greater than fixed wireless, but we wouldn't turn that away.
Alfredo Panlilio, CRO
About 200,190 new fixed adds have been registered. The FTTH revenue impact for the quarter is significantly more than for fixed wireless.
Unidentified Analyst, Analyst
As PLDT and Smart look to maintain talent amid new competitors in the telco space, what strategies do you have to replace key talents that have left?
Alfredo Panlilio, CRO
In the third quarter results, we added approximately 200,000 new fixed connections. The revenue impact from FTTH is significantly greater than that from fixed wireless, although we wouldn't refuse fixed wireless additions. About 200,190 new fixed connections have been registered. The revenue impact from FTTH for the quarter is much larger compared to fixed wireless. As PLDT and Smart seek to retain talent in light of new competitors in the telecommunications sector, what strategies do you have to replace key talents that have departed?
Manny Pangilinan, Chairman
So far, we have been fortunate.
Alfredo Panlilio, CRO
Yes, recruitment is ongoing, and we've seen no significant departures.
Manny Pangilinan, Chairman
Thus far, no major departures that we've wanted.
Unidentified Analyst, Analyst
What are the primary regulatory hurdles PLDT is experiencing? Are various government measures such as Bayanihan I and II helping or hurting PLDT?
Manny Pangilinan, Chairman
On the regulatory front, the recent law that was passed by Congress, the Bayanihan II Act, alongside permitting laws, has significantly aided us in obtaining permits more swiftly than before. Nonetheless, some LTE permit processes remain slow, which we are addressing by engaging with national authorities like the DICT and directly with local government units. One crucial aspect is our need to secure additional frequencies as we roll out 5G; this will depend on the ERC's and NTC's frequency allocation policies, particularly considering developments in the U.S. and Europe where frequency bands for 5G have already been designated. We are keen to collaborate with the government to secure our appropriate allocation for 5G frequencies. Regarding tax reform, if the new tax reform process is passed, it will lower the corporate income tax rate from the current level of 30% to 25% over time. This would benefit us and improve our bottom line.
Unidentified Analyst, Analyst
Could you estimate the cost differential for integrated players like yourself versus standalone fixed broadband operators? What CapEx and OpEx advantages do you enjoy?
Manny Pangilinan, Chairman
It's not straightforward to make comparisons since we lack specific insights on their cost structures. However, I would note the advantages of integration: we can leverage our fiber network across multiple services, effectively reducing costs, particularly for the last mile of installation. The fiber can serve both home and enterprise businesses as well as base stations. Further, having 5G will also require fiber support to function properly—this synergy is crucial. Our strategy involves deploying more fiber across various applications. Furthermore, we participate in 16 international cable systems while investing in three more upcoming systems and have two additional cable landing stations planned for next year. This broader scale is difficult for single operators to achieve, particularly in laying fiber across the country.
Alfredo Panlilio, CRO
To add to that from a network perspective, as an integral telecom provider we're capable of offering a diverse range of products over both wireless and fixed networks, enabling us to create varied offers tailored to customers based on segments and affordability.
Unidentified Analyst, Analyst
Could you share the average lead time from application to installation?
Alfredo Panlilio, CRO
Our aspiration for lead time is 24 hours for installations and 14 hours for repairs. However, this is aspirational and we are not there yet. This is an area we are focused on improving our capacity. Currently, if facilities are available, installations can happen quickly, but in areas needing new facilities it can take additional time. The continuing increase in demand amid the pandemic has also been a factor.
Ray Espinosa, Senior Adviser
For the majority of new applications, we can actually connect in under two weeks, provided we have ports available. However, backlogs can arise due to high demand, as well as permissions and restrictions that we face, impacting our response times.
Alfredo Panlilio, CRO
We have indeed hired talents to manage installations. We've engaged Bernard from Meralco, who has performed excellently in executing our installations to date. Still, the strong demand means we have backlog challenges, leading us to partner with third-party contractors to fulfill installation demands. Additionally, we are increasing personnel for repairs and enhancing customer experience. We've recently recruited an individual with extensive experience from Telefonica in Latin America to specifically address customer complaints.
Unidentified Analyst, Analyst
Could you share the influences driving wireless movement?
Alfredo Panlilio, CRO
Our growth stems from several metrics; outside of monitoring subscriber reloads, we’ve enhanced the percentage of subscribers engaged with reload packages. Our mobile service utilization has increased significantly by 9% compared to the same year last year, reinstating a boost in subscribers. By advancing subscribers to LTE devices from 2G to 3G, we see an almost doubled ARPU; resulting from this, our GIGA packages have driven significant engagement, directly influencing our mobile growth.
Unidentified Analyst, Analyst
What are your long-term plans for the workplace? Do you anticipate maintaining a work-from-home blend with in-office presence?
Manny Pangilinan, Chairman
COVID has certainly shifted our perspective on workplace expectations. Pre-COVID, we leaned towards a sizable campus-style head office spanning about 10 hectares in the South. However, with COVID, we are reassessing our needs. Given that only around 40% of our 16,000 employees truly need office space, we’ll be reevaluating options moving forward. Personally, I prefer a campus-style work environment but question the necessity of such a large footprint, especially when our operational model is changing.
Unidentified Analyst, Analyst
This concludes our session. Thank you for joining us. Should additional questions arise, please feel free to reach out to the PLDT Investor Relations team. Goodbye.
Manny Pangilinan, Chairman
Thank you again for joining us this afternoon. I guess we will not reconvene until the full-year results sometime in March. In the meantime, on behalf of all of us, I want to wish everyone a very Merry Christmas. This Christmas may be subdued for the country and the people, but our warm greetings extend to all. Thank you.
Operator, Operator
That concludes this briefing. As always, please reach out to PLDT Investor Relations for further questions or clarifications. Thank you for participating and stay safe.
Alfredo Panlilio, CRO
Thank you, goodbye.