PLDT Inc. (PHI) CEO Will Downie on FY2021 Results - Earnings Call Transcript
PLDT Inc. (NYSE:PHI) Q4 2021 Earnings Conference Call March 3, 2022 2:30 AM ET
Company Participants
Melissa Vergel de Dios - Head, IR
Manuel Pangilinan - Chairman
Alfredo Panlilio - President and Chief Executive Officer
Anabelle Chua - SVP, Chief Financial Officer and Chief Risk Management Officer
Shailesh Baidwan - President, Voyager Innovations, Inc.
Jane Basas - VP & Head of Consumer Wireless Business, Smart Communications
Jeremiah De La Cruz - Senior Advisor for Home Business
Conference Call Participants
Hussaini Saifee - UBS
Arthur Pineda - Citi
Melissa Vergel de Dios
Kindly note that this briefing is being recorded. A podcast of this event will be available on our website after the call. For today's presentation we have with us, our President, Mr. Al Panlilio; Ms. Anabelle Chua, CFO and Chief Risk Officer; Mr. Shailesh Baidwan, President of Voyager Innovations and PayMaya Philippines; as well as other members of the PLDT management team.
At this point, let me turn the floor over to Mr. Panlilio to begin the presentation.
Alfredo Panlilio
Thank you, Melissa. And Good afternoon to everyone, thank you for joining us today. Happy to start this full year 2021 financial operating highlights, I’ll go to the first page. Again, I think it was extremely good performance for the PLDP in 2021, record breaking revenues, all time high at PHP182.1 billion in revenues or a growth of 6%, in peso terms, 10.6 billion incremental versus 2020. Anabelle will mention it later but also an all time high on EBITDA. So we are at 96 -- we ended 2021 at PHP96.2 billion in EBITDA, 8% growth or PHP7.4 billion increase versus 2020 and margins of 52%, EBITDA margin.
Core net income, we ended last year at PHP30.2 billion ahead of guidance of PHP30 billion, 8% growth or PHP2.1 billion. And among the three pillars of the business, Home, grew the most, 24%, strong year for Home PHP38.5 billion last year growing by 9.3 billion in peso terms, ending 2021 at PHP47.8 billion. Individual ended the year flat, PHP86.2 billion, despite the major challenges of the lock-downs, our customers opting to obviously stay home and opting for a broadband service, so there was a shift in behavior because of the lack of mobility in the country. But having said that, and they have kept it flat at PHP86.7 billion. Enterprise, showed growth of 3% last year, again all time high for Enterprise at PHP48.0 billion growing at 1.2 billion in terms of peso.
Next slide, please. So, what were the drivers for the performance last year and the resilient business across the three pillars, the major pillars. Home, we saw a 1.13 million new fiber subs additional for last year. Home subscriber base is now at 3 million, increase of 27%. And if you just focus on fiber revenues alone, it grew by 82% or P14.9 billion ending the year on fiber alone at P33 billion, last year. For Individual, we reached the 1 million mark for 5G but we will continue to push adoption of 5G. We did grow a market share 5.5% in Fixed Wireless also reaching the 1 million level in terms of subs and the focus of [technical difficulty] on DC, Cloud and A2P, double digit growth also versus same period last year.
Next slide, please. Moving forward, you will hear us more talk about our -- one of the key pillar of transformation, this is sustainability. Just as an entry for this presentation, but as we move forward, we will have metrics that we will share. But at the high level, today the message here is really aiming for a reduction of 40% in Scope 1, Scope 2 by the -- by 2030. And we will continue to show initiatives. Again for the rest of the year, we will have our baseline numbers and we’ll show you what are our targets will be in [indiscernible].
So initiatives in this space from deployment of carbon fiber towers, the fuel cell technology for our gensets, we can show that our data centers implement practices that are sustainable in design supply and in operations. We have also blocked a record 179,000 illicit content. And we also have our #SafeAndSmart initiatives where we are -- we offer relief to about 25,000 families for Free Call/Charging/WiFi stations.
As you know, we were badly hit by the typhoon last year, the most destructive storm since Yolanda, 700 kilometers of aerial fiber impacted by 50 collapsed cell towers, 129 sites have had some form of damage. But having said that, I think our network team worked very hard to restore. So we were quick to action, we were the first to restore in a lot of these areas. In Palawan, Sugigao City, Camiguin, Dapa Siargao, Dinagat Town Proper and parts of Cebu and Bohol.
The PLDT, of course, through its PSF, PLDT Smart Foundation brought much-needed aid to the hardest hit portions of the country, distributed 8000 relief goods. We set up free power and charging areas. We did distribute 400 SatPhones at the onset where power was a problem and to the LGUs, all for one to govern [RTF] needed SatPhones to communicate with its people, we gave away free generators. And we also implemented customer related dish net and also rebates for people who have been affected.
Next slide, please. This is just one sample of many of our employees efforts in making sure they're able to restore service, Ijayson Inquig, spent his own birthday trying to restore services in Palawan. So it showed the Malasakit or compassion of our employees for our customers. Another employee actually walks 50 kilometers just to be able to bring facilities to a base station that needed restoration, so again, showcasing our value of Malasakit.
Next page. From a people point of view, massive program on vaccination, I'm happy to report that 99.8% of our employees are now vaccinated, 52% have already received their booster shots. Immunity is closer to 100%, if not 100%.
Next page, so imperatives for our targets in 2022. Just very briefly, on Home, there's still latent demand that we see out there. So we are continuously ramping up our installation, we're trying to hit 4000 installations per day and that's a major target for our Home business to achieve. We are fast-tracking, if not completing the migration of our corporate customers to cyber. And again for us to improve our operations, automation plays a big role in ensuring that we're able to ramp up installation and this is a focus area for our Home business.
For Individual, launching to use exclusive deals and partnerships as we can offer a customer base, we will continue to level up our cost experience on digital platforms pushing gigabyte even further. And we have been working very closely with Voyager as they launch Maya Bank by the end of the month, offering specific offers to our customer base in Smart. And we are seeing, since the start of the Alert Level 1 monthly, good rise in our top ups, first few days, hopefully that continues. And as we see mobility starting to happen in NCR for sure.
And Enterprise business continue to expand our data center capabilities against serving growing demand in this space. We want to be part -- be an integral part of our -- we want to be partners to our customers in their own digital transformation initiatives. And we will continue to push growth in ICT business.
Next, please. Our mission is to continue to lead and inspire Filipinos to create a better tomorrow. So our values, we want to share with everyone and also delivering awesome customer experience. We want to be more agile, fast, better than perfect. We continue to take care of our people, Malasakit, is core value, collaborate to win, and humility to listen internally. Not only internally but also for our customers.
Next, we had strong performance. Our next page is our mission. Strong performance of 2021 is a foundation for us to move forward, really aiming for greater heights for the company. And what we have done is actually we started the strategic transformation initiative for the company where we want to change the way we work, our ambitious is to be bold, we want to be the best in every market that we serve, under connectivity, capital markets, or even ICT. We know our markets are changing, so some ambition is changing. We want to be relevant and despite the competition, and really achieve full potential for the company by thinking differently and embracing the transformation. Really changing the way we work, changing the way we think we -- we have to simplify the way we work, we need to take a look at how we can lower costs.
And next page, please. And this is really the vision for 2025 PLDT, focusing on five key strategic pillars. And we want to be net, we were -- we are building our baseline across all five pillars. We would want to be measured across our five pillars. So well first is customer centricity, I've been talking about this since 2019, radically simplify our customer interactions, eliminate the pain points, really create all digital experiences for customers. Second is to be the best place to work, simplifying our structure, ways of working, empowering our people, and really improving our culture moving forward. Industry leading and excellent in the operations, we want to reset our model, our operating model, streamline operations, and bringing down costs to serve and focusing really on delivering eventually a positive free cash flow for the company. Investing on new areas of growth or profitable new growth areas, grow our core businesses, even adjacencies, where we can create and build new capabilities to do business. As I said earlier, focusing on ESG doing business, how we can sustain our business and measuring ourselves on key ESG metrics and parameters.
All these five pillars, again, we will continue to measure, share that performance with you as we continue to report this in succeeding sessions. But five pillars enabled by the way this was part of a network, same time really transforming our technology platforms, really looking at next generation digital infrastructure for the company. And last stage, I guess, if we can do all that, this will be report and we will continue to have to grow our revenues to sustainable revenue growth in the next few years.
We need to expand our budgets, improving margins, managing OpEx, decreasing depreciation and lastly, rationalize our CapEx. We've spent so much on CapEx and Anabelle will show you the details of what we’ve said, but we want to make sure that we're able to bring down the levels of CapEx moving forward. And if we can do all this, this will result into a growth in our core net income. And as I said, a measurement of how we are doing, improving our free cash flow is important.
So at this point, I'd like to give over to Annabelle for a more detailed discussion on our finances.
Anabelle Chua
Thank you. Thank you, Al. So as Al mentioned, we saw PLDT hit a record high of PHP182.1 billion in service revenues last year, notwithstanding it being a year of the Omicron type of [death] and still hybrid competition. So in terms of our business segments, Home led the charge in terms of the revenue growth last year at the tip of 24% increase year-on-year equivalent to PHP9.3. If you zero in on the fiber only sub component of Home, that actually grew at even higher and more impressive 82% last year, year-on-year. Individual, not withstanding all the headwinds in terms of this business, it was able to keep the revenue steady at PHP86.2 billion for full year 2025. Enterprise grew 4% year-on-year and is also hitting record highs. And then rounding it up with your International and Carrier business, which understandably is still down year-on-year but now at the limited amount of PHP0.2 billion.
Looking at it over, the next chart, please, on a quarterly basis, we're pleased to note also the fourth quarter 2021 was also at all time high from a quarterly revenue perspective. Next chart please? And in the next chart will show you the trajectory of our revenue improvement over the last couple of years. So after having grown 9% in 2020 and 6% in 2021, we achieved an all time high in terms of our service revenues.
Next please? The -- what drove the growth? It has been data/broadband businesses that now account for 77% of our overall revenues and increased by a click of 12% overall. Within that we saw Home broadband increase by 29%, ICT 14%, corporate data 6% and mobile data as well 6%.
Next chart. This the numbers for both Home revenues over an eight quarter period. So as noted, Home ended the year with a 24% increase, quarter four was just slightly down overall because of the impact of the typhoon in terms of the amount of appeasements and rebates we had to give. But when you look at the fiber sub component that's also an all time high from a quarterly standpoint.
We added more than 1 million customers from our -- for our fiber business last year. That was 1.13 million so exceeded our original 1 million target. In terms of ports, we were able to add 1.7 million ports, last year. And we have plans to add another 1.7 million ports in 2022 as well. ARPU in our Home business, roughly average add is about 1300 customer/month. We believe that demand will continue to be strong because of the large numbers of unserved market in this country where overall penetration is still limited to about a little over 20% compared to original peers were at 40% to 50%. So notwithstanding the easing of lockdowns, we believe that demand will continue to be strong because of the change in customer behavior, and hybrid work and study arrangements will remain.
Next chart. This shows in turn the quarterly performance of our individual business, which ended up at PHP6.2 billion for the year, stable year-on-year. Traffic usage on mobile continues to grow. We see here that in 2021, we saw a 16% increase in data traffic, there are more data users. 42.6 million of our base or regular data users who are consuming something like 7.6 gigabytes per month. So with the easing of the alert situation down to Alert Level 1, the return of mobility, we are poised to benefit from that from a mobile standpoint. And 5G will be the other factor as 5G adoption by customer rise.
Next slide. For Enterprise, as you can see here, the PHP11.1 billion in Q4 was an all time high on a quarterly basis. We're pleased to note that fourth quarter was about 9% year-on-year or full year it was up 4%. So that's driven really by higher revenues on our data center co-location business, our cloud revenues, our wireless, ATP and other corporate applications and we are well positioned to continue to invest behind this bearish growth sectors. And in particular, we are groundbreaking our 11th data center later this month in the scale of 11 data centers will be much larger than the 10 data centers at this time.
Next, please? For International, the challenges remain because of the lack of travel and Omi, but we are able to limit the impact of International with respect to overall performance improvement level.
Next slide, please. So total business across our integrated Telco platform we have 17.8 million subscribers that we serve, 71 million mobile and broadband we have about 3 million in fixed broadband and another 1 million at fixed wireless and another 1 million as well using mobile broadband. Fixed line voice had 3.6 million customers.
Next chart. We're also proud to note that we have exceeded our net adds for the year. And you will see here that in the third and fourth quarter, we will be able to ramp up our new connects for fiber at over 110,000 average per month. Our goal this year is to even outpace that. Migrations were also picking up towards the end of the year. But you should complete the corporate fiber migration by May of this year. And so that will also help improve our fiber numbers this year. So, there is a bit of a slowdown in December because of the impact of that in certain parts of the country as well as normal dip during the holidays. So you see your fourth quarter is a little off versus third quarter. But on average, as I said, 110,000 average per month in the second half of last year.
Next chart, please. So on overall P&L, as Al mentioned, are PHP96.2 billion of EBITDA last year was an all time high as well, that was achieved with the growth in revenues and managing our cash OpEx increased only about 4%. So if the margin was at 52%, depreciation is of course higher because of the higher CapEx investments that we have put into our network. So it, though, is still off by 5% year-on-year, and then net of financing costs and other items, net core income at PHP30.2 billion exceeded our initial guidance of PHP30 billion and up by 8%, or 2.1 million pesos.
This just explains kind of the bridge, EBITA grew on the back of higher revenues, lower provisions, offset to some extent by higher cash OpEx and subsidies, but 8% overall result from year-on-year increase and hitting an all time high of PHP96.2 billion. Telco core income benefited from the higher EBITDA as well as lower income tax rates as a result of the CREATE tax law offset to a certain extent by higher depreciation and financing costs. But again, PHP30.2 billion was ahead of the guidance we provided in the market.
Next chart, please. Just a bit of commentary on the impact of Typhoon Odette which hit the country in December, this was a super five typhoon and passed through quite a number of major cities and municipalities Visayas area. So from an overall P&L impact, our assessment is roughly about 1 billion pesos in terms of impact combination of -- revenue impact of about PHP500 million, because of the rebates and appeasement and knock off during those periods for the affected areas. And then another PHP350 million approximately for costs of repair and other operating costs. And then PHP170 million of in terms of damage assets that we had to write off. There are some additional costs expected in the first two months of 2022 given that we have to continue the repairs and restorations even after a year end 2021.
Next chart, please. On an overall reported income basis, the reported income for PLDT in the year 2021 was PHP26.4 billion, 9% up or 2.1 million [indiscernible]. This includes the impact of the equity share of PLDT in the performance of Voyager, which SB will talk about it later. But of course our Voyager is still [indiscernible] position. And then there are other items that we detailed out for the purpose of the differences between reported income from various one-off items.
Next chart. We're also pleased to report that the PLDT Board of Directors approved this morning the final cash dividend of P42/share payable April 4, to shareholders and recorded on March 17. Together with the interim dividend which was also at P42, the combined full year dividend per share was up P84 up resistance P17 from prior year and at the current share, the yield is close to 5%. We will obviously continue to work on improving the free cash flow position of the company so that we can continue to support both an improvement in our leverage position as well as sustained the dividend payout to shareholders
Next chart. So just on our balance sheet, giving perspective, we ended the year with a 4.5 billion US dollars of net debt 2.03x net debt to EBITDA ratio. We'll continue to work on getting that closer to the 2x level. On the debt side, pretty well spread out in terms of maturities, average interest costs of 4.3% and continue to break that down to something closer to 4%. And PLDT continues to remain at investment grade based on ratings from both S&Ps and Moody’s.
Next chart. CapEx, we did spend within the CapEx guidance last year. Our initial guidance was PHP88 billion to PHP92 billion. We came in at PHP89 billion of CapEx last year. A lot of that PHP65 billion went towards the network side and IT side, as we completed several initiatives in 2021 for LTE roll out. More cost roll out, fiberization of base stations, migration of copper to fiber, and expansion of our transport data payload capacities. PHP 17.5 billion went directly to support the new installs that accounted for the Home outperformance. So that's direct CapEx to support that last mile ICT requirements.
Next chart. Across the network, we're pleased to note that notwithstanding a year of pandemic, we continue to increase the rollouts and expanse of our network across both fixed and wireless. For fix, about 14 million homes passed now, by the PLDT network, the actual fiber reports of 5.77 million and fiber footprint 744,000 kilometers laid. And then for the wireless side, we added more 4G base stations, 5G base stations as well as 3G.
So we have a total coverage of about 96% of the country's population at the end of the year. From a usage standpoint, 5G handsets are about 2% of the overall base, predominantly 4G, 81%. And then 2G and 3G are down to 17% of overall users that we see. So next slide, just kind of shows how 5G was still relatively small from an overall standpoint, does continue to increase quarter-on-quarter.
Now at this point, let me turn over the presentation to Shailesh who will walk you through the performance of PayMaya.
Shailesh Baidwan
Thank you, Annabel. So to remind the analysts, we have two big businesses we have the Enterprise business and we have the Consumer business. On the Enterprise side of the business which is a merchant acquiring business, we provide all payments for corporates which are large, medium, small, which are online, offline or Lyra omnichannel solution. So we process Visa, MasterCard, JCB, domestic debit, QR, all payment forms. And that business through the course of 2021 saw a massive expansion in the number of points we leave for acceptance in the physical and digital world with over 430,000 points of acceptance across the country.
We are the number one provider of payment processing in the wide business across various payment forms. At the same time, on the consumer side of the business, we expanded the number of registered users across our network to 44 million. This is split between our wallet business where people get their own e-money wallet and also given that a number of people are not quite ready for the journey, we have an ongoing network of 63,000 agents, which we expanded through the length and breadth of the country, which allows people who are not ready for the digital journey to walk into one of these locations, be able to pay their electricity bill, be able to buy airtime load or to be able to send money.
Even as we expanded our core business through the course of 2021, we were focused on two critical areas which were part of our go forward plan. But the key piece of that was to procure additional bank license. We wanted to expand and provide a full suite of financial services across our Enterprise and Consumer set of customers. And as part of that we procured the Maya Bank license from the central bank BSP. We were one of the six recipients and after that the BSP has imposed a moratorium of three years for any further licenses.
Also, we want to expand into crypto. Philippines is one of the most prolific users of crypto. Philippines is one of the most prolific users of crypto for buying, selling, or for NFT's. And we achieved the -- we got and we received the Virtual Asset Service Provider license for the BSP to be able to launch this service.
Can we go to the next slide, please? Talking about Enterprise business, like I said, we're now pretty much a dominant provider of payment services. So whether you think of fuel stations, you think of quick service restaurants, think of government, think of any everyday category and chances are, PayMaya has acquired or who is enabling all kinds of payments for those locations.
With the introduction of QR Ph, we are expanding now to the long tail of MSME merchants and making sure that we process the dominant acquirer and processor for QR Ph transactions that unified QR standard in the Philippines, as it rolls out through the course of 2022.
On the Consumer side of the ground, we keep on -- we continue to add on the wallet side, a number of new services, and I'll touch upon that. And of course, converting our on-ground network as a key cash-in/cash-out channel, so even as digital wallets proliferate, the key requirements is to be able to add cash into that given the paucity of ATMs and bank branches outside of some of the key metropolitan centers of Philippines. So this ongoing network of 63,000 agents is now one of our key assets for allowing customers to cash-in and cash-out and as we introduced Maya Bank and launch that through the course of 2022, this becomes a very important aspect of us being able to provide the full set of financial services.
On the May Bank side, can we go to the next slide, please. We are targeting to start testing the launch of the Bank by the end of this month. We received a license from the BSP only on September 20 last year and we are looking at being able to launch our first test products before the end of this month. We know that consumers in the Philippines absolutely like the fact that e-wallets and the technology and the convenience and accessibility of it, including KYC-ing yourself, e-KYC-ing yourself.
At the same time in the Philippines and as per research, the trust that is there in banks because of the way they are regulated, because of the trust of BSP, because of trust of PDIC insurance, bringing the two together really will help us create a really powerful asset for both the Consumer and the Enterprise side. So from payments, we will now be adding on, deposit taking capability, offering credit and lending capabilities, investment capabilities like crypto and insurance.
These -- all these role are being rolled out progressively through the course of the coming weeks as we keep testing, adding, adding the infrastructure to get to a full rollout of the Maya Bank over the coming weeks and months.
So that is our plan to we play for the 2022. One other important aspect of our plan for 2022 is working closely with Al and the team or across the consumer business, across the retail business, across the home business, and really expanding the penetration of products by offering lending products, whether it's for device financing or to be able to provide payment facilitation for the GigaLife App. So that is another key part of our strategy for 2022 as we expand across all payments plus financial services ecosystem.
With that I'm going to hand this back to Al for an update.
Alfredo Panlilio
SB, so thank you to everyone for joining us in this online call. In terms of outlook for the year 2022, service revenue growth dissipated to the mid single-digit growth or very similar to the 6% percentage growth that you saw in 2021 against 2020 revenues for 2022 on a consolidated basis. But if we break it down into the three major revenue streams, on broadband, we expect to see growth again this year with double digit growth rates or growth rates for 2022 over 2021 and with revenue momentum to accelerate given its significant subscriber addition in 2021. So 2022 will benefit from the incremental subscription -- subscriber growth in 2021 and the additional subscribers that are expected to be added in the course of 2022 as well.
Enterprise to register stronger performance underpinned by service or solutions, the ICT services solutions over and above the connectivity revenues. That will be realized in 2022 and of course data centers with co-location and cloud services, leading charts. Wireless faces challenging environment, but should get alleviated with the opening up of the economy. I think the return to normal revenue trends for wireless is a function of whether and how fast the economy will recover given the, now that we are on Alert Level 1.
EBITDA will benefit from top line growth and cost management that are being instituted starting this year. So we expect EBITDA to actually grow by high single-digit in 2022 over 2021. And so we anticipate that EBITA levels should be north of PHP 100 billion in 2022. Telco Core, we are guiding between PHP32 billion to PHP33 billion, so that's the growth between 8% to 10% for 2022 underpinned by robust increase in EBITDA, principally because of that. CapEx, we’re throttling down to between PHP76 billion to PHP80billion compared to PHP89 billion in 2021.
In order to release and achieve free cash positive free cash -- positive free cash flow status, starting 2022 as part of division. And I believe that the sale of the towers business, I think are -- I think we indicated that the indicative bids, the binding bids that were presented on March 1, our landing a level north of 1 billion US dollars, so that will help the company achieve positive free cash flows starting 2022. Higher revenues, cost optimization with the significant manpower reduction program, starting 2022 and the sale of the towers will help us achieve that.
Our aim is to deleverage back to no more than 2.0x net debt/EBITDA, maybe even sub 20.x times depending on how much we deploy the tower proceeds to that option. As well, this puts us in a position to just pay a special dividend when we announced our interim results. So over and above the regular dividends, irregular interim dividends which is 60% on core profitability, the intention is to pay a special dividend during the interim results. That’s about it in terms of [indiscernible] the for guidance for 2022.
Over to Melissa.
Question-and-Answer Session
A - Melissa Vergel de Dios
We're now ready to take your questions. [Instructions]. I read the first question that was send by e-mail. Can management provide color on topline trends as mobile recovery started to pickup given the sustained easing of restrictions. And is the company still providing rebates to its home customers in the first part of 2022? That's one of the questions. And we’ll later on.
Alfredo Panlilio
Can’t hear.
Melissa Vergel de Dios
Let me repeat that. Can management provide color on top line trends? And has mobile recovery started to pick up given the sustained easing of restrictions? And is the company still providing rebates to its home customers in the first quarter of 2022? That's from Rodd of BDO Securities.
Alfredo Panlilio
Yeah, I think as we indicated we were seeing mid single-digit growth for the year. If we take a look at our January numbers, despite the issues with Omicron and Odette, I think we're on track on our budget. We are -- we have given easements to our customers, home customers but that's tapering off also now as restoration is slowly coming back especially on the on the fiber links now because it’s not because we're able to be recover that quickly on fiber links. It's really just the last mile that’s the problem but we're able to do already -- we're hoping by April, we will resolve all the installation issues on fiber. We have given easement programs in the past rebates but that's also that's slowing down as service is restored.
Melissa Vergel de Dios
We were raised hands from Hussaini of UBS. Hussaini, you can unmute yourself and ask the questions.
Hussaini Saifee
Thanks for the opportunity, and congratulations on the good set of numbers. Just a couple of questions from me. Firstly, on the mobile side, so some concern is being raised in 2022 growth. So just want to understand, like, is it because of consumer spending? Or is it because the cautiousness is because of the competition from the third operator? That's question number one. The second question is on the fixe broadband growth, the expectation for strong growth but just want to understand that, don't you see any pressure linked to ARPU on that side, given the strong, means everyone is adding capacity. So is there a concern of ARPUs going into 2022? Thank you very much.
Alfredo Panlilio
I’ll have Jane answer your first question, Hussaini and then Jeremiah on the second. Jane?
Jane Basas
Yeah, we did see a softening in our app in 2021 compared to 2020 and we attribute it to the fact that there's less mobility going around, the prolonged pandemic didn't help, because it did promote a work from home and study from home situation. And we need people moving for us to be able to try our mobile revenues, particularly out top ups. We did monitor the activities of our competitors but primarily we attribute the slowdown in top up from the situation that we were handed with, given the prolonged pandemic.
Hussaini Saifee
I think it's -- but I just want to understand it going into 2022, what should be the factors for the relative cautiousness on wireless you got, is it competition or is it that you still see some softness in consumer spending?
Jane Basas
There's still quite a lot of uncertainties, right? January was actually, of course, fine for us, because we didn't expect that the Omicron surge was stretched into January and will respond in other levels that would follow all the way through February. But the first few days of March are slowing very healthy growth trends. We're seeing the trend, particularly for today even significantly higher comparing it to seven days ago and 28 days ago. So we're very optimistic, we're very cautiously optimistic. But signs are there that as soon as mobility improves and gets improving and as soon as the economy improves, then we should be able to bring back the business into a healthier growth trajectory.
Hussaini Saifee
And so from the competition standpoint, you are not very much concerned, is that right?
Jane Basas
We are monitoring them, we to respect the competitors, Dito and Globe. But we want to make sure that our subscribers see value for the brand that we offer. And we very confident in this in this service that we sell, we have a very strong brand. We do have a competitive advantage when it comes to our network. We still offer the LTE network and constantly review the offers that we have and we introduce products and services to make sure that we continue to create value for our customers amidst the highly competitive environment.
Hussaini Saifee
Understood. Thank you.
Alfredo Panlilio
Jeremiah, on the second one.
Jeremiah De La Cruz
Good afternoon, Hussaini, Jeremiah here. And I’ll pick up your second question which was around fixed broadband and if I understand your question correctly, it was around expectation of pressure on ARPU. Is that correct?
Hussaini Saifee
Yes. Correct. Yeah.
Jeremiah De La Cruz
So the short answer is, we are anticipating some pressure from an ARPU perspective. I think that's going to be expected when you look at some of the pricing moves in the market and increased competition. We do have many initiatives underway. We are prepared to be able to meet that pressure and ensure that we're able to mitigate that risk as much as possible. What I can share with you is what we have seen so far is that we've not only been able to hold ARPU, but we have actually been able to grow ARPU. So the initiatives that we have had in place over the last 18 to 24 months have actually proven to be successful as but not even with the increased competition in the market, we've not only just been able to hold ARPU but we've actually been able to increase ARPU as well.
Hussaini Saifee
Understood. Thank you very much. And maybe just if I can have one follow up, just want to understand on the tower side, so is there a risk of opening up a tower up of tower and giving access to a competitor? And what kind of rental lease back, we are looking in Philippines?
Alfredo Panlilio
I’ll take the first question, maybe Anabelle will take the second. Yeah, I’ll the first question, maybe Anabelle can take the second one. I think the government came up with a policy to actually have a common tower implementation in the country. So I think that competitive advantage of having your own towers is slowly disappearing. In fact, we know our competitors have expanded their tower base by working with common towers so I think it's not going to be an issue anymore in terms of comfort, I guess in terms of an advantage and plus the fact that what we are engaging this -- in terms of this sale and leaseback, it's only 50% of our existing power so it's really, we feel that these are not going to impact anymore our tower strategy. Anabelle, on the second?
Anabelle Chua
If I understand the question correctly, I guess, today when we own our towers, we of course should have our certain running OpEx numbers, right? Basically the rental, we pay the land owner, the electricity, the security costs, the running maintenance costs, etc., etc. So, from -- when you do these, I guess the sale and leaseback transaction, essentially you recharacterize all of your expenses to rental stream payment that you make to the tower co-right. So, in terms of broad construct of how we pitch the terms of the sale and leaseback, we have more or less tried to equalize what we would have incurred by way of running OpEx into the rental payment streams we give the power companies. That’s the contract under which we ask for them to essentially name what the price they are willing to pay upfront for the sale of those towers. Did I answer your question correctly?
Hussaini Saifee
Yes, and so if I understand correctly, that the maintenance and the land lease cost will be -- you will save on that cost and in turn you will pay lease rentals to the tower co?
Anabelle Chua
Right.
Hussaini Saifee
And that will be equal to the -- all right, this is great. Thanks for the color.
Anabelle Chua
Well [indiscernible] passed through will be the electricity expense, that one will be passed to us. Right? So then again, it's neutral versus what we have incurred with it.
Hussaini Saifee
Understood. This is great. Thanks. Thanks for all of the color.
Alfredo Panlilio
Thank you.
Melissa Vergel de Dios
There’s a hand raised by Arthur Pineda of Citi. Arthur, you can unmute your mic.
Arthur Pineda
Hi, thanks for the opportunity. Three questions, please. Firstly on Voyager, are you able to share what your targets are for the Digital Bank? How does this impact the trajectory on profitability and fundraising? Second question I had is with regard to 5G targets and broadband deployment targets, are you able to share details on this? It also seems like your competitor Dito launched 5G at AA option? Do you see this as a viable opportunity for your broadband deployment? I feel its bit [indiscernible] as you're rolling out on your fiber. Last question I have is with regard to the balance sheet, you mentioned the potential for special dividends following the tower sale. What is the philosophy behind the gearing because it seems to be so elevated around 2.4 times and presumably if you sell the towers, you have to book significant lease liabilities as well? Thank you.
Shailesh Baidwan
On the first point one on Voyager, Arthur, with the launch of the Bank, what we want to do is use the data and the customer base that we have built on the payment side of the company and really monetize it to higher margin products around lending in particular, and using the model of the bank that helps us both in terms of the plan, the anchoring of that trust, plus the credibility it carries, but also a efficient way of deploying the balance sheet because we will also be taking deposits from customers. In the Philippines the penetration of basic banking accounts is in 32 odd percent. So the opportunity for us to provide banking account services along with lending which is even dismal penetration from a formal lending perspective is what we will be doing. So the impact of that to your point on the profitability is absolutely there. And we will be looking at kind of a 2024 timeframe for us to be getting to a breakeven across with -- possibly even across other businesses.
Now that's first part, on the second part as part of our expansion into the bank. We are talking to our existing investors and also as one of the foremost fintechs in the Philippines, we are constantly being reached out by potential investors. So we are talking about digital capital that we will be needing as we rollout the bank. We will have more details -- when we have more details, we will share that with you.
As regards the point on targets, for us, as we said, we have a very large customer base today of about 44 million registered users. We have a large Enterprise base that we can access today from our business plus along with our close partnership with Smart and PLDT. And at this stage really for us, it is going out to the customer base to provide more and more wallet, grow our wallet business but at the same time provide more and more products which we will co-create and develop this device financing but it is helping on the retail side for them to be able to sell more any time. So those numbers will be built out over the course of 2022 as we launched the bank, but at this stage, we won't be able to share any particular targets as such for the bank. Hope that answers your question on Voyager?
Arthur Pineda
Got it, thank you.
Alfredo Panlilio
And Jane?
Jane Basas
Yeah, allow me to answer your question on 5G. We've actually been pushing the 5G adoption of our subscribers both along the wireless side but also and the wireless broadband side. And when I refer to wireless broadband I refer to both the pocket Wi-Fi’s and the fixed wireless access devices. In 2021 we have successfully grown our 5G mobile subscriber base to north of 1 million. And we're looking at growing to more than double this year. And in terms of 5G innovations, I'd like to think that the we were really the first ones to launch 5G service commercially, the first ones to make it available as a 5G plan on postpaid. We are also ahead in launching the first 5G public WiFi and in fact ahead of Dino in launching the first 5G fixed wireless access device. We did launch that service as a prepaid service in November of 2021. We are looking to launching the postpaid version of our 5GAA service in the coming two months, the next two months.
Alfredo Panlilio
Jeremiah, broadband targets?
Jeremiah De La Cruz
Yeah, sure. So I think so the question on broadband was, we're constantly evaluating opportunities for us to be able to use all the different types of technologies to serve customers for the home. As Jane mentioned, we have already deployed some of the fixed wireless 5G devices. We're also looking at opportunities to potentially use them and we have actually used it in certain areas as an interim step, as we connect customers up to fiber. Ultimately, we do provide our customers with a choice, right? We ultimately do provide them with a choice in being able to either serve them immediately with fiber where it is possible and where not, then also with fixed wireless capability.
Arthur Pineda
Thanks. Any rollout targets in terms of number of ports to be rolled out in 2022?
Jeremiah De La Cruz
Yes, so the target we have that we actually what we've shared is 1.7 million ports for 2022. I will -- we'll probably add to that is our real focus is really around our net adds position and making sure that we serve as many of our customers as we possibly can, as opposed to just focusing only on the port count. We have a look at our performance over 2021 and I think we've had a couple of these conversations before we've actually been able to monetize a lot of our investments in the fixed space quite well, but we see utilization actually sitting quite high. So what was the port count rollout for 2022? It is actually still continuing the momentum, we have 1.7 million for the year. We will ensure that the momentum and growth in the Home business is continuing to be supported. And if that requires additional investment, and that's something that we're prepared to do but really, ultimately, it comes down to the net adds required to be able to support that growth.
Arthur Pineda
Got it. Thank you.
Anabelle Chua
Okay, let me take the towers question. So let me start first with the strategic backdrop to all of this, right? First of all, as Al mentioned, the government encouraged the entry of common towers in the Philippines, right? We started by engaging with the tower companies, first of all, with respect to our new build requirements, right? So instead of building on our own, we engage with our company so that that effectively is a measure to avoid CapEx and reduce the cash flow pressures from the build out of the tower. So that was the first step in terms of our engagement. The second step of our engagement is this current transaction that we're talking about, the sale of probably about 6000 of our existing towers. That gives us a chance to monetize in a meaningful way, the assets that we carry in our balance sheet. So the -- from use of currency standpoint, once we are able to complete this transaction, a significant portion of that cash that we receive, will be used to pay down our debt. And as indicated, we want to bring down our leverage about 2.0x better.
And the other part of it is we will also still deployed some portion of that money that we save by way of rewarding shareholder’s special dividend. So getting to your specific question in terms of the gearing level, that 2.38x that we show you is on the basis of our interest bearing debt, so that excludes our lease liabilities. So that's the reference point we're talking about. But having said that, there is an accounting difference, obviously, from doing this sale and leaseback transaction versus our -- what would have happened, right? In a way as I was answering the earlier question of Hussani. I think, from a rent perspective, the lease liability that we have, what we're trying to achieve is effectively something that equalizes what we would have spent any way by way of expenses running of OpEx in the normal course, right? The accounting I record is a bit different because in that situation, we don't have to recognize a liability for all of those OpEx but once you do a sale and leaseback there is a difference in terms of the accounting by way of the and the balance sheet side. But for me, that's not the -- there's no real difference other than the accounting in the sense that I would have to pay those expenses anyway, on a running basis. It's just that in the leaseback transaction, it's crystallized in my balance sheet, right? So that's kind of the discussion we've had about the accounting impact from the sale and leaseback. From a cash perspective, it's really, in a way no different, but we do get a significant upfront monetization that we can use to help pay down debt, reduce our interest expense, and do other things to improve the balance sheet position of the company. Al?
Alfredo Panlilio
And do you want to add some discount that we receive is basically in the second or third.
Anabelle Chua
Yeah, yeah. So just to also as Al said, part of the arrangements that we have with the tower companies, obviously, from the tower company their perspective is they would try to not just a serve us but you see the towers, or co-location and effectively accommodate either the second Telco or the third Telco into the same power step they bought from us, right? So that's part of the value creation for them. From our perspective, what we have negotiated also, is the moment they get a second tenant then we will get a discount also on the rental payments that we make and then a further discount, should they get the third one. So that's also part of the financial arrangements that we have. So now, of course all of these things is still in progress. So we're not able to give you full details, because we're still running the process. We would hope to sign something sometime second quarter. And by then we can give you further flavor in terms of the specifics of their reach and stuff that we’ll have.
Arthur Pineda
Great. Thank you very much.
Alfredo Panlilio
Thank you Arthur.
Melissa Vergel de Dios
Next raised hand is from Rachel of Maybank. Rachel, you may unmute your mic.
Unidentified Analyst
So hi. Hi, everyone. So congratulations, on the results. So just two short questions for me. First one, could you share with us an update on your agreement with Telesat , which is the low Earth orbit satellite. So when are you expecting this to be -- to start being commercially available? And when do you expect this to contribute largely to income? And the second question, I might have missed it earlier. Just curious how much percent restoration are you in [indiscernible] now after the typhoon Odette?
Alfredo Panlilio
I’ll have Mann answer both questions.
Manuel Pangilinan
Yeah. Good afternoon. We tested the low Earth orbit together with Telesat in February. They went on February 19. We were able to achieve, if I'm not mistaken, close to 100 Mbps on the download and on the download a 95 Mbps on that at a very low latency of about 26 milliseconds. Now that provides for a service that you can use for high speed communication, especially working on the Microsoft Teams or Zoom that must have been possible. That was tested and also tested was Facebook Live and all the others. This is a very interesting scenario for us because now we have tested that this will work and we can go in the rural areas and provide the high speed data. At this point, we are still in the testing stage and we will just update to when it will be commercially available.
Alfredo Panlilio
Yeah, on the [indiscernible] restoration?
Jeremiah De La Cruz
On the installation, there are certain parts, for example, commonly they [indiscernible] that's already 100% restored, and parts of Cebu almost 80% restored. Our main focus now is Surigao is still about 30% restored. So what we’re seeing is by April we will be fully restored all the circuits and we will go progressively starting from Cebu we’re already about 80% restored.
Unidentified Analyst
Do you have a sort of estimate as to how much this will cost in terms of repairs and repairs specifically?
Jeremiah De La Cruz
I think it was reported by Annabel earlier it's about 1.1 billion.
Unidentified Analyst
Sorry for the remaining Surigao and Cebu?
Anabelle Chua
So the PHP1 billion, I indicated earlier was the impact that we booked last year. So for the first quarter, additional repairs, restoration costs may be somewhere in the PHP 500 million to PHP 600 million area. So these are rough estimates.
Unidentified Analyst
Thank you very much.
Melissa Vergel de Dios
Next question is for e-mailed by John of [Fiyami]. Can you provide more color on the company's plan, rationalize CapEx? How will this pan out in the next several years and in the long term? And which segments we'll see a reduction in CapEx in line?
Anabelle Chua
So as indicated in terms of our CapEx discussion, first of all, we did spend PHP 89 billion last year and PHP 518 billion over the last 10 years. So that's huge investments we've made in terms of our infrastructure in order to ensure the quality of our service and to serve our customers very well, right? So as we look into this year, our guidance is for PHP76 billion to PHP80 billion. And we believe that we have a chance to ramp down our CapEx to somewhere below the 40% CapEx-to-sales ratio and effectively harvest some of the investments we've made. This year in particular, I think the key focus areas will be on the fixed line side. As we indicated we're still doing thing 1.7 million ports. We continue to see very strong take up on the home side. On the wireless side, I think we will be more deliberate about the 5G rollout spend. It will really recalibrate that depending on how quick or not so quick the pickup will be. So, at this point as I had shown earlier also, the main constraint is that they are only 2% of the base of 5G ports and 4G is also very good, right? So the impetus to build more 5G is not as compelling at this point or not as urgent at this point, but certainly we will not skimp on that should the demand side picking up.
So, but broadly in terms of our direction, financially speaking, we will have to ensure that the company delivers positive free cash flow. And by that we have always ensured that our EBITDA will be more than enough to cover our CapEx, whether it's our interest expense, our routing capital requirements, and at the end of the day, deliver enough cash to be able to both pay our dividends and sort of service our debts, right. So that's sort of, it's within the ambit of the financial discipline that we are looking at also at how we would manage our CapEx ensuring the rightful returns on the investments that we make.
Alfredo Panlilio
We remain at, I guess the past few years, our CapEx service revenue is about 40%, 45%, right? So we like to bring that, moving forward, to maybe the level of 35% or so, that's something that, there's a discipline, and I think Annabel was saying that we should be able to bring down our CapEx but making sure that we're able to maintain good customer experience across the process.
Melissa Vergel de Dios
The next set of questions are from [Sherwin] and they are related to Voyager. Do you have a positive net income for 2022? And can you share the GDP of PayMaya in 2021?
Shailesh Baidwan
Oh, we're not positive on net income side. Given we have many different businesses, we have the merchant acquiring business, which is a very different kind of business versus the wireless business versus the Edge, so they all have different profiles of revenue and profitability. What we are making sure is that each of the businesses, it’s unit economics are aligning towards a sustainable business and then continue to invest in terms of growth of the business which on a go forward basis is sustainable. So we did have in the course of 2021, one of the key metrics for us of success was to get to positive contribution profits so that we can, our unit economics are stable and are sustainable on a long term basis and we did achieve that milestone. And then we will continue as we go forward. And as Annabel said, now, we do have investments at this stage, as we launch Maya Bank, in particular, you will appreciate that that will take in a significant amount of OpEx and CapEx from us to the course of 2022 and 2023. But then thereafter, the accretion of margin that will come from providing high margin products and services, with a efficient balance sheet will help us to get towards profitability.
As far as the GDP targets are concerned, again, coming back to the question of our point of GDP profile is extremely different for merchant business where day-in day-out we are processing Visa, MasterCard, domestic debit, banking transactions but a pharmacy like Mercury Drug has a very different profile and GDV for their wallet. So for us, it is not a single report and particular number that we share. For us, it is really different profile, so regarding GDV versus some other profile and GDV on the wallet side for instance on the network side. So we have other metrics that we continue to track against to make sure that we're going in the right direction to both scale the business continue to scale and analyze opportunities for growth, but at the same time focusing on unit economics and the longer term paths. So it’s all [different] for us.
Melissa Vergel de Dios
The next set of questions are for our data center business. This is from German de la Paz of Abacus Securities. I’m not very familiar with data centers. Can you please briefly discuss what it is, its purpose, and why the growing investment in it recently?
Alfredo Panlilio
So thanks very much for that German. And so think of a data center as a key part of the digital ecosystem. And what's driving the growth in data centers now is everything that requires compute, which can be cloud, which is the main theme for the enterprises that transform digitally during the pandemic, right? And content also drives data center expansion. Say, for example, the explosion of traffic on Tik Tok, right? All of that content has to be stored somewhere and you normally have a better user experience if you cache that content somewhere, that content is usually cached in a data center. So both the explosion in the demand from an enterprise perspective, and the digital, having a nation of Philippines that go with a high digital aptitude of the population lends itself well to a market that will grow pretty fast. And we're quite excited about data center prospects of the Philippines. So and we believe we are best positioned to meet the growing data center demands. And we're in discussions with both enterprises and hyper scalars alike, where most of the cloud and most of the content comes from. And we believe we are best positioned to serve them, hence, our investments in our current 10 data centers, plus we are very excited to launch our 11th data center which will ground break very, very soon.
Melissa Vergel de Dios
The next question comes from Rodd of BDO Securities. Does management expects to maintain EBITDA margins at current levels?
Alfredo Panlilio
Yes, and I think we're even -- I can prove that further in terms of margin, maybe for 54% margin for 2022. As the Chairman indicated, we are for EBITDA over 100 billion.
Melissa Vergel de Dios
Finally, from Rodd, is Voyager looking to have additional funding rounds this year? Can management provide insights on the potential incremental sales contribution of Maya Bank and PayMaya?
Shailesh Baidwan
Yes, we will be having incremental funding loans through the course of these years. We will be raising funds. We will announce more the details when we are ready. That is to fund the expansion of the overall Voyager business including the Maya Bank. At this stage, as I mentioned, we have a very rich base on the payment side not only in terms of the customer base, but on the MSME side, and also the data set that we have acquired on payment side. And for Maya Bank, really that becomes an asset for you look at to provide lending on the back of those data assets to that customer base. On top of that, the second key initiative for us, as I mentioned, is really working closely with Smart PLDT across the various segments of home, consumer, retail to be able to provide further benefits on the backup, again, each Telco data that we would have. So those are the pieces that we'll be adding on and adding towards both in terms of product’s use cases, at this stage we are not sharing for the details of the offers.
Melissa Vergel de Dios
That last question if there are any further questions, you can either raise your hand or type the question in the Q&A box. Otherwise, we turn the floor over to Mr. Pangilinan
Manuel Pangilinan
Again, thank you for joining us this afternoon on this online call in respect of our full year 2021 results, and we look forward to speaking with you again. But we will be certainly meeting early May. Hopefully some of you or some of the new media in this room [indiscernible]. Thank you. Thank you so much.
Alfredo Panlilio
Thank you very much.
Melissa Vergel de Dios
And concludes today's meeting. As always, should you have any further questions or clarifications, please feel free to reach out to PLDT investor relations. Thank you for your participation. Stay safe.
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