2Q/1H 2017 Analysts Briefing 8 August 2017 The Globe Tower BGC
Performance Highlights: Record revenues and EBITDA driven by data services. NIAT impacted by higher depreciation and interest charges. 1H17 2Q17 Service Revenues 62.9 Php billion EBITDA 27.3 Php billion +5% YoY +6% Record revenues again led by data-related revenues. Record EBITDA driven by record revenues, overcoming increases in operating expenses. +6% vs. 2Q16 Service Revenues 31.8 Php billion EBITDA +11% 13.9 YoY vs. 2Q16 Php billion Normalized NIAT 1 8.7 Php billion Normalized NIAT 1-4% Lower NIAT due to higher depreciation -3% 4.5 YoY and interest expenses. vs. Record date on August 22, 2017 Payment date on September 6, 2017 2Q16 +3% vs. 2Q16 Php billion 3Q17 Cash Dividend 22.75 /sh 2 1 Excludes SMC-related charges for comparability
Revenue growth led by Mobile and Home Broadband Mobile Home Corporate Fixed Line Total Broadband Data Voice Δ1H17 +5% +8% +3% -5% +5% Δ2Q17 +8% +7% -1% -8% +6% Mobile Subscribers Home Broadband Subscribers 61.3 million -3% 59.7 million 1.14 million +8% 1.23 million 2Q16 2Q17 Beginning 2017, Globe to report prepaid subscribers which exclude those who do not reload within 90 days of the second expiry period versus the previous cut-off of 120 days. 2Q16 Postpaid Prepaid TM Wireless Wired 2Q17 Increase in subscriber base due to strong gross acquisitions in fixed wireless segment 3
Data-related services now account for 53% of total service revenues Mobile Data In Php Billions 20.3 Home Broadband In Php Billions Corporate Data In Php Billions 7.7 5.0 +24%* +8% +3% Total Data Revenues as a Percentage of Total Service Revenues 50% 53% Mobile Data Users as a % of Mobile Subscribers 1H16 1H17 55% Mobile Data Traffic 1H16 1H17 1H16 1H17 151 +85% 280 Petabytes Petabytes Non-Data Revenues Data Revenues 44% +11 ppts 4 *Normalized to account for the impact of revenue allocation rules
On a normalized basis, mobile data revenues would have grown by 24% year on year. Facebook Traffic End of TM s free Facebook offer +1125% Paid FB volume End of Globe Prepaid s free Facebook offer +24% Normalized MDS growth Mobile Data In Php Billions Paid Free 17.9 +13% 20.3 Jan- 16 May- 16 Jun- 16 Jul-16 Apr- 17 May- 17 Jun- 17 1H16 1H17 Period of adjustment following end of Free FB promotion followed by an increase in paid traffic Paid traffic increased significantly from January 2016 given the shift in usage habits of consumers MDS revenues grew 13% on reported revenues but normalized MDS growth at 24% Normalized MDS growth more reflective of the state of the MDS business
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Financial Highlights
Consolidated Financial Highlights: Record revenues and EBITDA but higher operating and non-operating expenses, and depreciation resulted in lower NIAT and Core NIAT. 6M17 Reported 6M16 Reported YoY % VTI Impact (6M17) 6M17 Normalized YoY% 2Q17 1Q17 Gross Service Revenues 62,901 59,872 5% 62,901 5% 31,779 31,122 *OPEX & Subsidy (35,642) (34,274) 4% (35,642) 4% (17,836) (17,806) EBITDA 27,259 25,598 6% 27,259 6% 13,943 13,316 EBITDA Margin 43% 43% 44% 43% Depreciation (13,067) (11,458) 14% (13,067) 14% (6,630) (6,437) EBIT 14,192 14,140-14,192-7,313 6,879 Non-Operating Charges (2,477) (1,353) 83% (727) (1,750) 29% (1,157) (1,320) Provision for Income Tax (3,627) (3,813) -5% 161 (3,788) -1% (1,829) (1,798) Net Income 8,088 8,974-10% (567) 8,655-4% 4,327 3,761 **Core Net Income 7,974 8,837-10% (567) 8,541-3% 4,293 3,681 * OPEX & Subsidy includes interconnect charges. ** Core Net Income excludes forex, mark-to-market gains and losses, and non-recurring items. Decline in 2Q17 non-operating charges stems from lower equity in net loss related to SMC transaction due to reduced losses in the joint venture and reversals of previous accruals for spectrum amortization. 8
Record EBITDA on the back of record revenues partially offset by higher operating expenses YoY Change in EBITDA In Php Millions 25,598 6M16 EBITDA 3,029 Inc. in Revenues 583 Dec. in Interconnect Charges - 822 827 1,129 Inc. in Staff Costs +6% Dec. in Marketing & Subsidy 818 - - Inc. in Network Costs Inc. in Provisions, Services & Other OPEX - 27,259 6M17 EBITDA QoQ Change in EBITDA In Php Millions - 13,316 657 60 52 271 +5% 217 75-13,943 1Q17 EBITDA Inc. in Revenues Inc. in Interconnect Charges Dec. in Staff Costs Dec. in Marketing & Subsidy Inc. in Network Costs Inc. in Provisions, Services & Other OPEX 2Q17 EBITDA 9
Reported NIAT lower by 10% year on year as increases in depreciation and nonoperating charges negated record EBITDA; on a normalized basis NIAT lower by 4% year on year. YoY Change in Reported Net Income In Php Millions 1,661 1,609 1,124 186 567 8,974 8,088 8,655 6M16 Reported Net Income Change in EBITDA Inc in Depreciation -10% Inc in Nonoperating Expenses -4% Dec in Tax 6M17 Reported Net Income SMC Impact 6M17 Normalized Net Income QoQ Change in Reported Net Income In Php Millions 3,761 1Q17 Net Income 657 30 193 163 31 +15% Inc. in Revenues Inc. in OPEX Inc. in Depreciation Dec. in Nonoperating expenses 4,327 Inc. in Tax 2Q17 Net Income 10
Capital expenditures at approximately Php27.5 billion or USD553million*, with 87% related to data requirements 21.2 Capex* In Php Billions 32.1 36.7 27.5 2014 2015 2016 6M17 * Based on FX rate of Php49.72 37.0 Capex Breakdown 35% 49% 48% 65% 87% 36% 27% 30% 14% 15% 10% 8% 10% 1% 15% 15% 15% 11% 6% 6% 2013 2014 2015 2016 6M17 Business Support Others Core Data 2Q17 Roll-out Updates 1,133 LTE SITES + ~150K HOME BROADBAND SUBSCRIBER LINES 11
Following payment of the final tranche of the SMC transaction in 2Q17, debt levels remain within covenant ratios. Gross Debt In Php Millions Gross D/E Ratio Covenant = 2.5:1 72,229 105,729 123,578 1.22 1.67 1.89 2015 2016 6M17 Gross Debt/EBITDA Covenant = 3:1 2015 2016 6M17 3Q17 Dividends Cash Dividend per Common Share: Php 22.75 1.51 2.15 2.44 Record Date: August 22, 2017 Payment Date: September 6, 2017 2015 2016 6M17 12
C R E A T E. W O N D E R F U L.
Appendix 1 Historical Consolidated Gross / Net Service Revenues and EBITDA Margin 2015 2016 2017 (In Million Pesos) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q CONSOLIDATED SERVICE REVENUES Mobile 21,635 22,826 23,052 23,730 23,148 22,779 22,577 23,753 23,799 24,520 Mobile Voice 9,191 9,556 9,315 9,065 8,181 8,471 8,752 8,662 7,901 8,322 Mobile SMS 6,807 6,757 6,641 6,192 5,763 5,577 5,704 6,155 5,930 5,860 Mobile Data 5,636 6,513 7,096 8,472 9,203 8,731 8,121 8,936 9,968 10,338 Fixed Line & Broadband 4,585 4,784 6,475 6,593 6,856 7,089 7,079 7,308 7,323 7,259 Home Broadband 2,300 2,419 3,127 3,474 3,534 3,615 3,738 3,793 3,844 3,882 Corporate Data 1,543 1,603 2,349 2,204 2,367 2,496 2,443 2,567 2,541 2,481 Fixed Line Voice 742 762 999 916 955 978 898 949 938 896 Total 26,220 27,610 29,527 30,323 30,004 29,868 29,656 31,061 31,122 31,779 EBITDA 11,043 11,672 12,073 11,174 13,067 12,531 11,912 12,468 13,315 13,944 EBITDA Margin 42% 42% 41% 37% 44% 42% 40% 40% 43% 44% 2014 2015 2016 (In Million Pesos) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Net Service Revenues 24,162 25,438 27,565 28,084 27,689 27,537 27,423 28,933 29,065 29,662 Interconnection Settlement Costs 2,057 2,173 1,962 2,238 2,316 2,330 2,233 2,129 2,057 2,117 14
Appendix 2 Mobile Subscribers, Net Adds, Churn Rates and Gross ARPUs 2015 2016 2017 Subscribers 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Globe Postpaid 2,458,045 2,517,215 2,561,290 2,597,027 2,564,148 2,521,218 2,508,800 2,489,719 2,467,069 2,460,671 Globe Prepaid 22,214,373 23,287,012 24,391,990 25,915,096 25,452,193 27,381,884 29,409,827 28,433,793 26,678,674 27,696,014 TM 23,745,018 25,195,520 26,130,002 27,670,555 29,249,341 31,408,346 33,444,153 31,875,346 29,434,517 29,565,407 Total 48,417,436 50,999,747 53,083,282 56,182,678 57,265,682 61,311,448 65,362,780 62,798,858 58,580,260 59,722,092 2015 2016 2017 Net Adds 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Globe Postpaid 9,361 59,170 44,075 35,737 (32,879) (42,930) (12,418) (19,081) (22,650) (6,398) Globe Prepaid 1,071,443 1,072,639 1,104,978 1,523,106 (462,903) 1,929,691 2,027,943 (976,034) (1,755,119) 1,017,340 TM 1,248,151 1,450,502 934,482 1,540,553 1,578,786 2,159,005 2,035,807 (1,568,807) (2,440,829) 130,890 Total 2,328,955 2,582,311 2,083,535 3,099,396 1,083,004 4,045,766 4,051,332 (2,563,922) (4,218,598) 1,141,832 2015 2016 2017 Churn Rate 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Globe Postpaid 3.5% 2.9% 3.3% 3.2% 3.7% 3.7% 3.1% 2.8% 2.8% 2.5% Globe Prepaid 5.9% 6.2% 6.1% 5.2% 7.7% 5.7% 5.3% 8.2% 10.0% 6.8% TM 6.7% 6.6% 6.8% 6.1% 6.1% 6.0% 5.2% 8.8% 10.5% 7.5% Blended 6.1% 6.2% 6.3% 5.5% 6.7% 5.8% 5.2% 8.3% 9.9% 7.0% 2015 2016 2017 Gross ARPU 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Globe Postpaid 1,116 1,130 1,088 1,122 1,105 1,123 1,143 1,168 1,158 1,177 Globe Prepaid 128 130 124 117 116 109 99 104 111 119 TM 74 76 73 70 65 61 57 60 64 68 Blended 153 154 146 141 136 128 119 123 130 138 2015 2016 2017 HOME BROADBAND 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Revenues 2,300 2,420 3,126 3,474 3,534 3,615 3,738 3,793 3,844 3,881 Subscribers 779,590 826,001 1,026,466 1,068,920 1,101,189 1,136,608 1,147,951 1,130,750 1,191,261 1,229,573 Gross Adds 100,387 111,152 139,094 137,417 144,543 158,130 159,041 144,515 157,401 156,396 Churn Rate 2.7% 2.7% 3.6% 3.5% 3.4% 3.6% 4.2% 4.7% 2.9% 3.3% 15
Appendix 3 Reconciliation of Net Income to Core Net Income (in Million Pesos) 2Q17 2Q16 % Change 1Q17 % Change Reported Net Income After Tax 4,327 4,639-7% 3,761 15% Deferred Tax on Unexercised Stock Options 8 (7) -224% (44) -118% Add (deduct) Forex loss (gain) (60) 27-325% (64) -6% Other Adjustments (including acc. depreciation) 18 (8) -325% 28-36% Core Net Income 4,293 4,651-8% 3,681 17% 16