PLDT, Inc. Q3 FY2026 earnings call

Financial Performance and Cost Management:

• Consolidated service revenues grew 1% to $146.9 billion, with EBITDA increasing 1% to $83.2 billion.
• Cash OPEX, subsidies, and provisions were contained, growing only 1% despite inflation.
• Net financing costs decreased 2% to $12.9 billion due to continued focus on managing borrowing costs.
• Depreciation increased by $3.3 billion as earlier investments came into service, pressuring Telco Core income.
• Free cash flow remained positive for the first nine months, with a target to maintain positivity for the full year.

Wireless Business Recovery and Monetization:

• Wireless consumer revenue returned to growth in Q3, up 2% quarter-on-quarter and 3% year-on-year.
• Pricing strategies shifted from unlimited app-based offers to bucket data offers, improving monetization.
• 5G network upgrades drove higher usage; areas with 5G rollouts saw 6.1% revenue growth and 8.4% traffic growth.
• Data traffic grew 14%, and 5G-capable devices now represent 22% of individual devices.
• ARPU improvements were observed across prepaid brands, with Smart rising to 125 pesos and TNT to 102 pesos in Q3.

Home Business Challenges and Strategic Response:

• Home revenues declined 2% due to operational support system (OSS) migration disruptions and field constraints.
• Distribution partners faced higher costs (fuel, wages, fiber cables), reducing active sales agents and coverage.
• Priority is rebuilding postpaid subscriber base through improved service reliability and faster repair turnaround.
• Expanded prepaid distribution starting November with dedicated sales and installation partners to serve affordable fiber demand.
• Subscriber count declined by approximately 4,000 in the quarter, but churn rate remains low in the postpaid segment.

Enterprise Growth Drivers:

• Enterprise group led overall revenue growth, expanding 4% to $37.2 billion.
• International connectivity (POVT Global) grew 36%, driven by hyperscaler and carrier demand.
• Enterprise wireless grew 16%, supported by business messaging, IoT, and broadband.
• Cloud services grew 13%, with Infrastructure as a Service (IaaS) up 37% and data/AI solutions up 19%.
• Data center services (Vitro) grew 11%, benefiting from co-location and government data residency requirements.

Capital Allocation and Balance Sheet Health:

• Capital expenditures (CapEx) fell 15% to $36.6 billion for the first nine months, with intensity dropping to 23% from 27%.
• Full-year CapEx guidance remains in the mid-$50 billion range.
• Net debt stood at $285.6 billion at end of September, with a net debt to EBITDA ratio of 2.6 times.
• Targeting a medium-term net debt to EBITDA ratio of 2.0 times through free cash flow generation and asset sales.
• Investment grade ratings maintained (BBB by S&P, BAA2 by Moody's).

Asset Monetization and Digital Ecosystem:

• VITRO REIT IPO paused due to high interest rates affecting dividend yield attractiveness; business continues to grow rapidly.
• Tower sales: Approaching sale of 150-200 towers, expecting proceeds of roughly 2 billion pesos, targeting Q1 closing.
• Copper monetization: Received first tranche of 3.7 billion pesos, with further tranches expected next year.
• Maya digital banking platform: Deposits reached 95 billion pesos (up 68%), loans at 44 billion pesos (up 58%).
• Maya contributed 39% more to PLDT’s core income, with net interest margin at 17.6%.
• Introduced IDLess verification using national ID eVerify, improving onboarding time by 84%.
• Launched Maya wallet card made from 100% recycled plastic and implemented 1% cash back incentives.

Consolidated service revenues grew 1% to $146.9 billion, with cash operating expenses, subsidies, and provisions increasing only 1% despite inflationary pressures. This resulted in EBITDA growing 1% to $83.2 billion, maintaining a steady margin of 52%. Net financing costs decreased 2% to $12.9 billion, partially offsetting higher depreciation which remained the primary pressure on earnings.

Telco Core Income: Reported at $23.5 billion, a 6% year-on-year decline. This was supported by increased contributions from Maya (up 39%) and gains from asset sales, bringing consolidated core income to $24.4 billion, down 4%. Reported income fell 8% to $21.7 billion, primarily due to foreign exchange losses from the weaker peso.

Enterprise Segment: Revenues grew 4% to $37.2 billion. On an expanded basis including enterprise wireless, this segment grew 8% to $31.2 billion, accounting for 84% of total enterprise revenues. Key growth drivers included international connectivity (POVT Global up 36%), enterprise wireless (up 16%), cloud services (up 13%), and data center services (up 11%).

Wireless Consumer Segment: Revenues increased 1% to $63.5 billion for the first nine months, returning to positive territory driven by a strong third quarter. Mobile data and fixed wireless access revenues grew 3% to $58.7 billion, representing 92% of wireless consumer revenues. Monthly net ARPU improved across prepaid brands, rising from 119 to 125 pesos for Smart and from 98 to 102 pesos for TNT between Q2 and Q3.

Home Segment: Revenues declined 2% to $44.8 billion. Fiber revenues, comprising 98% of home revenues, dropped 1%. The decline was attributed to lower prepaid installations earlier in the year due to OSS transformation disruptions, field constraints, and inflation impacting distribution partners. Postpaid subscription recovery remains a priority.

• Full-year Capital Expenditure (CapEx) guidance remains unchanged in the mid-$50 billion range.
• Management aims for CapEx levels in 2027 to be lower than the current year, focusing on targeted investments in wireless, home, and enterprise/data centers.
• Medium-term financial target is to reduce the net debt to EBITDA ratio from the current 2.6 times to 2.0 times.
• Guidance implies continued positive free cash flow generation to support debt reduction and business growth.
• No specific revenue or EBITDA growth guidance provided for the full year or 2027, emphasizing profitability and balance sheet health amidst macro challenges.

• Operational Disruption: Significant delays in home business revenue recovery due to OSS transformation challenges, order processing disruptions, and reduced installation capacity.
• Inflationary Pressures: Rising costs for fuel, electricity, wages, and materials (e.g., fiber cables) impacting distribution partners and field deployment capabilities.
• Foreign Exchange Volatility: Significant FX losses ($2.5 billion) driven by the weaker peso, unhedged equipment purchases, and unwinding of call spreads due to geopolitical events (Middle East war).
• Macroeconomic Headwinds: Continued pressure on household spending and consumer economizing behavior affecting wireless and home segments.
• Asset Monetization Delays: Pausing of VITRO REIT IPO due to unfavorable market conditions (high interest rates), potentially delaying capital recycling plans.
• Competitive Pressure: Low industry growth in fixed broadband (1%) and competitive dynamics requiring constant value proposition adjustments.

Q: Analyst asked why home revenue declined further in Q3 despite prior indications of recovery, and what installation run rate is needed for 2027 growth.

A: John Palanca explained that while the OSS disruption stabilized after May, the volume of recovery was insufficient to cover the 5-6 month shortfall. Additionally, distribution partners struggled to sustain economics due to inflation in fuel, wages, and fiber cable prices. Fewer active sales agents reduced selling coverage, compounded by typhoon-related disruptions. The company is rebuilding field capacity and launching a prepaid model with dedicated partners to restore order generation and protect postpaid subscribers through better retention and service reliability.

Q: Analyst questioned the drivers of wireless improvement, specifically price increases vs. usage, and asked about October/November trends.

A: Lloyd Manalo stated that improvements stemmed from two strategic pricing adjustments: repositioning 5G offers to match network rollouts, providing better value perception, and shifting from unlimited app-based SKUs to bucket data offers to monetize overages. These changes, executed alongside targeted 5G CapEx, resulted in a 3% uplift in top-ups. The momentum is sustained by these precision-guided pricing tools and enhanced network experience.

Q: Analyst asked about the restatement of prior year performance, the cause of significant FX losses despite hedges, and reasons for fixed broadband user decline.

A: Stanley Yang clarified that the restatement pertained to hedge accounting adjustments. Regarding FX losses, Leo Posadas noted that 85% of debt is in pesos, but losses arose from unhedged equipment purchases and the unwinding of call spread hedges when market movements exceeded strike levels due to geopolitical tensions. John Palanca addressed broadband declines, citing low industry growth (1%) and household economizing. However, postpaid churn remains low, and the company is protecting profitability by localizing channels and entering the prepaid space to capture customers downsizing their commitments without losing payment behavior.

Q: Analyst sought details on wireless price increases, competitor response, and the impact of churned accounts on prepaid strategy.

A: Lloyd Manalo elaborated that price adjustments were implemented in Q2 with full impact in Q3. Strategies included up-pricing 5G one-day offers (e.g., 30 to 35 pesos) and restructuring 99-peso-plus SKUs into bucket data models with new price ladders (e.g., 110 pesos) to improve upsell opportunities. Competitor responses were not detailed, but the focus was on value alignment with 5G rollouts. John Palanca explained that 152,000 churned prepaid accounts included 135,000 converted from postpaid due to billing difficulties and 17,000 lost during typhoon recovery efforts where MSF holidays were given. The company views these as manageable and is leveraging prepaid expansion to retain customers who might otherwise leave.