75 years of providing communications solutions to all filipinos philippine long distance telephone...

75 YEARS OF PROVIDING COMMUNICATIONS SOLUTIONS TO ALL FILIPINOS

Philippine Long Distance Philippine Long Distance Telephone CompanyTelephone Company

Presentation to Investors and AnalystsPresentation to Investors and Analysts

Financial and Operating ResultsFirst Quarter 2004

May 4, 2004

1. Financial and Operating Results Three Months Ending March 2004

2

3

PLDT Group: Reaching New Levels

PLDT Group’s strategy to continue growing its cellular business, deleverage and improve operating efficiencies of its fixed line business while maximizing opportunities for its ICT business, allowed the Group to deliver robust financial results

Consolidated revenues up 19% to P27.1 billion (1Q03: P22.7 billion) and EBITDA increased 28% to P16.3 billion (1Q03: P12.8 billion) as EBITDA margins reached 60%

Consolidated net income grew 111% to P5.2 billion in 1Q04 (1Q03: P2.5 billion) driven by higher earnings of Smart and increased contribution from PLDT Fixed Line and ePLDT

(1) EBITDA without deducting MRP-related costs, other non-recurring charges booked in 2003

5.25.4

4.0

-0.7

2.5

-1

0

1

2

3

4

5

6

1Q03 2Q03 3Q03 4Q03 1Q04

Consolidated Revenues and EBITDA(1)Consolidated Revenues and EBITDA(1) Consolidated Net IncomeConsolidated Net Income

Billion Pesos

Billion Pesos

22.7 23.5 24.227.3 27.1

12.8 13.2 14.0

17.4 16.3

0

5

10

15

20

25

30

1Q03 2Q03 3Q03 4Q03 1Q04

Revenues EBITDA

% Margin 56% 55% 58% 64% 60%

4

First Quarter 2004: Financial Highlights

PLDT Group’s financial results demonstrate the Group’s commitment to PLDT Group’s financial results demonstrate the Group’s commitment to increase earnings and improve cash flows for debt reduction.increase earnings and improve cash flows for debt reduction.

First Quarter 2003 % Change

in Pesos Millions ConsolidatedNo. of SubscribersFixed Line 2,150,453 2,150,453 2,111,720 2%Cellular (Smart and TNT) 14,356,186 14,356,186 9,368,513 53%

Revenues 14,711 11,640 27,092 22,737 19%Operating Expenses 7,908 8,080 16,619 15,645 6%

Cash Operating Expenses 4,695 3,982 8,873 8,697 2%Non-Cash Operating Expenses 3,212 4,098 7,746 6,948 11%

Operating Income 6,804 3,560 10,473 7,092 48%

EBITDA 9,700 6,728 16,346 12,761 28%

EBITDA Margin 66% 58% 60% 56%

Net Income 5,152 217 5,240 2,483 111%

Capex 3,460 797 4,299 1,890 127%

Free cash flow 4,216 5,261 9,267 6,421 44%Debt reduction (in US$ millions) 29 40 75 89 -16%

First Quarter 2004Smart PLDT-Fixed Consolidated

5

PLDT Group: Maximizing Cash Flows

CapexCapexCapexConsolidated Free Cash Flow

Billion Pesos

9.3

22.621.9

-8.3

8.5

-10

-5

0

5

10

15

20

25

2000 2001 2002 2003 1Q04

Consolidated capex spending in 1Q04 of P4.3 billion was mainly due to the continued expansion of Smart’s GSM network

Consolidated free cash flow in 1Q04 reached P9.3 billion due mainly to the continued strong cash flow generation from Smart and PLDT Fixed Line

Free cash flow has been utilized to reduce debt by approximately US$75 million in 1Q04 Smart will pay cash dividends of P11.3 billion to PLDT in the second quarter of 2004, representing

70% of Smart’s net income in 2003

27.130.6

14.717.8

4.3

16.7

45%43%

18% 18%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2000 2001 2002 2003 1Q04

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Capex Capex estimate Capex as % of Revenues

Billion Pesos

Consolidated Capital Expenditures

2. Cellular

6

7

Smart: First Quarter 2004 Financial Highlights

Smart’s robust performance remains anchored on its strategy of tailoring Smart’s robust performance remains anchored on its strategy of tailoring innovative products for various market segments to grow its subscriber innovative products for various market segments to grow its subscriber

base while efficiently managing costs and cash flows.base while efficiently managing costs and cash flows.

% ChangeSmart(in pesos millions)

Revenues 14,711 10,744 37%Operating Expenses 7,908 6,901 15%

Cash Operating Expenses 4,695 4,352 8%Non- Cash Operating Expenses 3,212 2,549 26%

Operating Income 6,804 3,843 77%

EBITDA 9,700 6,094 59%EBITDA Margin 66% 57%

Net Income 5,152 2,773 86%

Capex 3,460 1,119 209%Free cash flow 4,216 4,451 -5%Net Debt/EBITDA 0.11x 0.67x

1Q04 1Q03

8

Smart: Capitalizing on Positive Momentum

Smart and Talk ‘N Text, together, added over 1.4 million subscribers in 1Q04 – setting a new historic high for the group

Smart’s network had 14.4 million system-wide subscribers as at 1Q04, representing an estimated market share of 45% for Smart and 13% for Talk ‘N Text

Approximately 85% of Smart Buddy subscribers were using Smart Load as their reloading mechanism, accounting for about 59% of reload sales values

Smart and Talk ‘N Text SubscribersSmart and Talk ‘N Text Subscribers

8.16.8 7.4 9.0 10.1 11.2

3.22.9

2.52.2

2.01.8

14.412.9

11.610.3

9.48.6

18.7% 20.3% 22.0%24.5%

27.3%30.0%

0

2

4

6

8

10

12

14

16

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04

0%

10%

20%

30%

40%

50%

Smart Talk 'N Text Cellular Penetration Rate

Millions

Systemwide Subscribers as of March 31, 2004:Prepaid = 14,090,343 (98%) Postpaid = 265,843 (2%)

Smart and Talk ‘N Text Quarterly Net AdditionsSmart and Talk ‘N Text Quarterly Net Additions

100

205

242

320

327 304

1,1051,069868

754564

876

1,4091,396

1,187

769

995976

0

250

500

750

1,000

1,250

1,500

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04

Smart Piltel Talk 'N Text

In Thousands

Total Net Additions 1Q04: Prepaid = 1,392,123 Postpaid = 16,866

9

Smart: Translating Growth into Profitability Growth in subscribers has translated to 37% year-on-year increase in revenues to P14.7 billion

(1Q03: P10.7 billion) while cash operating expenses grew by a lesser 8% to P4.7 billion (1Q03: P4.4 billion)

EBITDA grew significantly to P9.7 billion (1Q03: P6.1 billion) as margins improved to 66% (1Q03: 57%)

Net income reached P5.2 billion, an 86% improvement year-on-year (1Q03: P2.8 billion) Smart’s results demonstrate that increased revenues derived from a growing subscriber base coupled

with controlled variable costs will result in a healthy bottom line

3.5

-0.4

6.25.2

16.1

-2

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 1Q04

Smart – Revenues and EBITDA

11.5

21.9

33.1

49.9

14.7

2.8

10.9

31.8

9.7

17.9

0

10

20

30

40

50

60

2000 2001 2002 2003 1Q04

0%

20%

40%

60%

80%

100%

Revenues EBITDA EBITDA Margin

Smart - Net Income

Billion Pesos

Billion Pesos

10

Smart: Balancing ARPU and SACs

Prepaid ARPU decline was complemented by a more significant decline in prepaid subscriber acquisition cost, improving payback period to 1.2 months in 1Q04 (1Q03: 1.7 months )

Based on current blended ARPU and subscriber acquisition costs, payback period has been reduced to 1.7 months compared to 2.5 months in 1Q03

702749 714

611

443383

454404426416

0

250

500

750

1,000

1Q03 2Q03 3Q03 4Q03 1Q04Prepaid ARPU (Net) Prepaid SACs

Smart - Prepaid ARPU (Net) and SACsSmart - Prepaid ARPU (Net) and SACs

Pesos

PaybackPeriod 1.7 1.8 1.8 1.3 1.2

Smart - Prepaid and Postpaid ARPU (Gross)

Pesos

1,716 1,751 1,756 1,800 1,762

533 527 490 535 463

0

250

500

750

1,000

1,250

1,500

1,750

2,000

1Q03 2Q03 3Q03 4Q03 1Q04

Postpaid ARPU (Gross) Prepaid ARPU (Gross)

11

Smart: Building for the Next Wave

Capex spending 1Q04 stood at P3.5 billion versus full year estimate of approximately P15 billion

Smart’s network currently consists of 32 switching centers and over 4,200 base stations covering 92% of the country’s total population

Free cash flow remained strong at P4.2 billion (1Q03: P4.4 billion) and was used to pay down debts of US$25 million and increase its cash balance to P15.3 billion

Smart will pay cash dividends of P11.3 billion to PLDT in the second quarter of 2004

Smart - Free Cash Flow*Smart - Free Cash Flow*

4.2

16.6

12.9

-10.6

-0.1

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

2000 2001 2002 2003 1Q04

* Cash flow available for principal repayments and dividends

Smart - Capital ExpendituresSmart - Capital Expenditures

3.5

11.3

7.1

19.0

14.7

11.5

78%

22%

103%

23%

0

5

10

15

20

2000 2001 2002 2003 1Q04

0%

25%

50%

75%

100%

125%

Capex Capex Est. Capex as a % of Revenues

Billion Pesos

Billion Pesos

3. Fixed Line

12

13

PLDT Fixed Line: First Quarter 2004 Financial Highlights

(1) EBITDA in 2003 is presented without deducting MRP-related costs and other non-cash provisions

(2) Cash flow from operations, including changes in working capital less tax payments, capex, investments, interest paid and dividends paid plus dividends received

(3) Adjusted EBITDA represents EBITDA over the last twelve months including dividends from Smart of P6.2 billion paid in 2Q03 and 4Q03

PLDT Fixed Line remains focused on maintaining the stability of its revenues PLDT Fixed Line remains focused on maintaining the stability of its revenues while rationalizing expenditures, improving operating efficiencies and reducing while rationalizing expenditures, improving operating efficiencies and reducing

debt.debt.

% ChangeFixed Line(in pesos millions)

Revenues 11,640 11,281 3%Operating Expenses 8,080 7,992 1%

Cash operating expenses 3,982 4,064 -2%Non- Cash Operating Expenses 4,098 3,928 4%

Operating income 3,560 3,289 8%

EBITDA(1) 6,728 6,291 7%EBITDA Margin 58% 56%

Net income 217 190 14%

Capex 797 706 13%Free cash flow(2) 5,261 1,477 256%Debt reduction (in US$ millions) $40 $50Net debt/Adjusted EBITDA(3) 4.00x 4.90x

Lines per employee 210 177

1Q04 1Q03

14

Fixed Line: Staying the Course

Fixed Line revenues increased by 3% to P11.6 billion (1Q03: P11.3 billion) mainly due to positive impact of rate and interconnect changes on ILD and NLD revenues

EBITDA improved to P6.7 billion (1Q03: P6.3 billion) as the increase in revenues were further enhanced by a 2% decline in cash operating expenses; EBITDA margin increased to 58% (1Q03: 56%)

Fixed Line operating results highlight the benefits of the manpower reduction program implemented in 2003

4.3

6.3

6.0

6.3

6.0

6.71.9

10.3

7.8

0

2

4

6

8

10

12

14

1Q03 2Q03 3Q03 4Q03 1Q04

Dividends from Smart

Parent RevenuesParent Revenues Parent EBITDA(1)Parent EBITDA(1)

Billion Pesos

Billion Pesos

53% 56%% Margin(2) 56% 51% 58%

11.3 11.2 11.3 11.6 11.6

0

2

4

6

8

10

12

14

1Q03 2Q03 3Q03 4Q03 1Q04Local Exchange International Long DistanceNational Long Distance Data and Other Network Miscellaneous

(1) EBITDA including dividends from Smart without deducting MRP-related costs and other non-recurring charges booked in 2003

(2) EBITDA margin excluding dividends from Smart

46%

25%

14%

12%

46%

25%

15%

12%

45%

27%

13%

13%

44%

28%

14%

12%

44%

26%

15%

12%

15

Fixed Line: Increasing Free Cash Flow for Debt Reduction

PLDT incurred capital expenditures of P797 million in 1Q04 versus full year estimate of P6 - 7 billion

PLDT’s free cash flow increased by 256% to P5.3 billion (1Q03: P1.5 billion) on account of higher revenues, lower cash operating expenses and a positive change in working capital

PLDT reduced total debts by US$40 million for 1Q04 and had in place transactional hedges covering 40% of its total debt (4% of total debt is denominated in Pesos)

PLDT – Capex and Free Cash Flow *

11.5

9.7

6.96.1

0.8

5.3

2.8

0.9

9.2

11.5

0

2

4

6

8

10

12

14

2000 2001 2002 2003 1Q04

Capex Free Cash Flow

Billion Pesos

* Cash flow from operations less tax payments, capex, investments, interest paid, dividends paid, plus dividends received

MillionUS$MillionUS$

$40

$127

$180

$388$400

$210

0

50

100

150

200

250

300

350

400

450

2002 2003 2004F 2005 2006

PLDT Debt Maturity Profile*PLDT Debt Maturity Profile*

Actual net debt repayment for 2002 and 2003

* After taking into account impact of undrawn committed long-term facilities amounting to US$70MM as of YE03

*$250

4. Information and Communications Technology: ePLDT

16

17

ePLDT: Making Strides

ePLDT is in a strong position to enhance its position in the ICT market by maximizing ePLDT is in a strong position to enhance its position in the ICT market by maximizing resources and opportunities available to it as the ICT arm of PLDT Group.resources and opportunities available to it as the ICT arm of PLDT Group.

(1) EBITDA and Recurring net income in 1Q03 is adjusted for non-cash charges amounting to P387 million booked in 1Q03.

in Pesos Millions 1Q04 1Q03 % Change

Revenues 442 357 24%

Adjusted EBITDA(1) 126 58 117%EBITDA margin 28% 16%

Recurring net income/(loss)(1) 48 (54) -190%Reported net income/(loss) 48 (441) -111%

Call Center Operating StatisticsParlance

No. of Seats 522 522 - No. of CSRs 646 493 31%

VocativNo. of Seats 722 500 44%No. of CSRs 614 204 201%

Infocom Subscribers 38,613 26,847 44%

5. Recent Developments

18

19

Update on the Piltel Debt Exchange Transaction

Smart grants a final extension of the deadline for Piltel’s creditors to offer to sell their indebtedness to Smart up to May 31. Deadline originally set on April 20, 2004 and subsequently extended to April 30.

Offers received by Smart now exceed 50% but still below the 75% overall threshold and certain individual facility thresholds set by Smart to proceed with the transaction

Smart does not intend to revise the economic terms upon which it would acquire the Piltel debt. Options available to Piltel creditors are:

cash settlement at US$0.40;

US$ Smart debt due December 2007 at the rate of US$0.525, with interest at L+1%;

US$ Smart debt due December 2008 at the rate of US$0.575, with interest at L+1%;

US$ Smart debt due June 2014 at par with fixed interest at 2.25%;

US$ 12-year RoP-guaranteed bonds at par (option not available to Piltel bondholders)

20

PLDT: Delivering on All Fronts

Sustaining Earnings Growth Momentum

Smart’s strong performance will continue to drive the earnings of PLDT Group PLDT-Fixed Line expected to deliver stable earnings ePLDT to further strengthen operations and generate increased profits

Deleveraging to Increase Equity Value

PLDT Group to continue maximizing cash flows for debt reduction Reduced debt levels will result in higher value accruing to

shareholders

Restoring Common Dividends in 2005

Growth of Smart and deleveraging of PLDT-Fixed improves the Group’s financial position

PLDT on track to restore dividends to common shareholders by the first half of 2005

Positioning for Further Growth

Identify growth opportunities that capitalize on the individual and combined strengths of the Group’s various businesses

Appendix

21

22

Earnings Highlights

(In million pesos)

*

(1) Recurring Net Income and EBITDA in 2003 is presented before deducting MRP-related costs, other non-recurring charges booked in FY03

1Q04 1Q03 % Change 1Q04 1Q03 % Change

Revenues 27,092 22,737 19 11,640 11,281 3 Expenses 16,619 15,645 6 8,080 7,992 1

Operating income 10,473 7,092 48 3,560 3,289 8 Other expenses 3,383 3,601 (6) 3,216 3,033 6

Income before tax 7,090 3,491 103 344 256 34 Provision for tax 1,854 1,004 85 127 66 92

Income before minority 5,236 2,487 111 217 190 14 Minority interest (loss) (4) 4 (200) - - -

Net income 5,240 2,483 111 217 190 14

Adjusted EBITDA (1)16,346 12,761 28 6,728 6,291 7

EBITDA Margin 60% 56% 58% 56%

PLDT Non-ConsolidatedPLDT Consolidated

23

Operating Revenues

(In million pesos)


Fixed line servicesLocal exchange 5,188 5,248 (1) 5,157 5,221 (1) International long distance 3,218 3,053 5 3,074 2,870 7 National long distance 1,798 1,638 10 1,761 1,624 8 Data and other network 1,432 1,422 1 1,413 1,403 1 Miscellaneous 58 79 (27) 235 163 44

11,694 11,440 2 11,640 11,281 3

Wireless services 14,956 10,940 37

ICT 442 357 24

27,092 22,737 19


24

Operating Expenses

(In million pesos)


CashCompensation 2,800 2,741 2 1,723 1,867 (8) Selling and promotions 2,158 2,246 (4) 350 293 19 Maintenance 1,285 1,273 1 787 697 13 Rent 714 743 (4) 341 397 (14) Professional and other service fees 437 421 4 224 241 (7) Insurance and security 395 365 8 177 187 (5) Taxes and licenses 327 278 18 154 122 26

Others 757 629 20 226 260 (13)

8,873 8,696 2 3,982 4,064 (2)

Non-CashDepreciation 6,520 5,803 12 3,404 3,226 6 Provision for D/A 1,098 1,130 (3) 694 702 (1) Provision for inventory obsolescence 128 16 700 - - -

7,746 6,949 11 4,098 3,928 4

Total operating expenses 16,619 15,645 6 8,080 7,992 1


25

Cash Flow Highlights

(In million pesos) (In million pesos)


Net income before tax 7,090 3,491 103 5,367 2,549 111 Add (Deduct:)

Non-cash charges 11,051 10,643 4 1,957 4,319 (55) Changes in working capital (1,462) (2,214) (34) 1,160 (1,645) (171)

Net cash from operations 16,679 11,920 40 8,484 5,223 62 Less: Capital expenditures 4,299 1,890 127 797 706 13 Investments 29 (7) - - - - Interest, net 2,169 2,421 (10) 2,076 2,108 (2) Dividends paid/(received) 393 368 7 393 368 7 Others 522 827 (37) (43) 564 (108)

Free cash flow 9,267 6,421 44 5,261 1,477 256 Net cash used in financing activities (4,490) (4,726) (5) (2,511) (2,743) (8)

Change in cash 4,777 1,695 182 2,750 (1,266) (317) Cash balance, beginning 19,263 10,876 77 5,278 4,165 27

Cash balance, end 24,040 12,571 91 8,028 2,899 177


26

Balance Sheet Highlights

(In million pesos)

(1) EBITDA before deducting MRP-related costs, other non-recurring charges booked in FY03

Mar-04 Dec-03 Mar-04 Dec-03

Total Assets 301,412 297,626 266,244 261,184

Short-term Debt 2,132 2,133 1,982 1,933 Long-term Debt 154,828 157,681 131,020 132,242

Total Debt 156,960 159,814 133,002 134,175

$2,857 $2,932 $2,431 $2,471

Net Debt 132,920 140,551 124,974 128,897

Equity 98,451 93,578 98,451 93,578

Debt/Equity 1.59x 1.71x 1.35x 1.43x

Net Debt/Equity 1.35x 1.50x 1.27x 1.38x

Net Debt/Adjusted EBITDA(1)2.18x 2.45x 4.00x 4.19x

Adjusted EBITDA(1)/Interest expense, net 5.30x 4.98x 3.05x 3.04x

PLDT Consolidated PLDT Non-Consolidated

27

Smart: Earnings and Cash Flow Highlights

(In million pesos)

1Q04 1Q03 % Change

Earnings HighlightsOperating revenues 14,711 10,744 37 Operating expenses 7,908 6,901 15

Net operating income 6,804 3,843 77 Other expenses, net (64) 144 (144)

Income before tax 6,868 3,699 86 Provision for tax 1,712 926 85

Income before minority interest 5,155 2,773 86

Minority interest 3 - -

Net income 5,152 2,773 86

EBITDA 9,700 6,094 59

EBITDA Margin 66% 57%

Cash Flow HighlightsCash from operations 8,110 5,981 36 Less: Capital expenditures 3,460 1,119 209 Interest, net (29) 185 (116) Others 462 225 105

Free cash flow 4,216 4,451 (5)

Debt repayments, net (1,603) (1,668) (4) Dividends paid - - - Cash balance, end 15,284 8,200 86

28

Smart: Balance Sheet Highlights

(In million pesos)

Mar-04 Dec-03Total Assets 79,631 74,839

Total Debt 19,213 20,586

342$ 370$

Net Debt 3,929 7,872

Equity 47,170 42,018

Debt/Equity 0.41x 0.49xNet Debt/Equity 0.08x 0.19xNet Debt/EBITDA 0.11x 0.25x

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