Globe Telecom, Inc. (GLO) Earnings Call Transcript & Summary

Good morning and welcome to the virtual second quarter 2020 analyst briefing of Globe Telecom. Allow me to introduce our management panel for today's briefing. We have Mr. Ernest Cu, President and Chief Executive Officer; Mr. Alberto de Larrazabal, Chief Commercial Officer; Mr. Gil Genio, Chief Technology and Information Officer; Ms. Rizza Maniego-Eala, Chief Finance Officer; and attorney Froilan Castelo, General Counsel. Mr. Cu will present the highlights of the company's performance for second quarter 2020 to be followed by Ms. Maniego-Eala for financial results. Afterwards, we will open the Q&A session beginning with the questions sent by e-mail to [email protected] prior to the start the briefing to be followed by additional questions also sent by e-mail during the course of the presentation. May we now request Mr. Cu for his presentation?

Thanks, Jomari, and good morning. Allow me to thank everyone for joining us today. I will go through the performance for the first half of 2020 and then turn the floor over to our CFO, Rizza, to discuss our financial and operating results in much greater detail. The second quarter of 2020 bore the brunt of the impact of the country's ECQ period on our operations. It stifled the growth momentum that we've had over the past few years. As such, we see quarter-on-quarter declines across revenue, EBITDA and net income, which contributed to the year-on-year contraction in the first half. Revenues for the first 6 months of 2020 came in at PHP 72.4 billion, slightly missing last year's level by 1%. EBITDA, likewise, declined by 1% while net income declined by 5%. Despite the magnitude of the COVID-19 pandemic, we still performed better than expected, maintaining a 53% EBITDA margin for the first half, at par with last year's record margin levels. With a reported 4% Q-on-Q revenue decline, we also beat our initial estimates of low double-digit decline versus the first quarter of 2020. This is a testament to Globe's resiliency as a company and our commitment to execution excellence. I'm also happy to report that our Board of Directors approved the third quarterly dividend distribution of PHP 24.83 per share, details of which will be discussed in the gearing and dividends portion of Rizza's presentation. From a product perspective, performance was primarily driven by the home broadband segment as data use shifted to the home during the ECQ, which is evident in the increase in home broadband subscribers, which grew 58% year-on-year and 27% quarter-on-quarter to PHP 22.9 million. Especially relevant during this time is our fixed wireless products with a quick and easy self-service installation during a time when mobility was restricted and services were limited. In the second quarter alone, fixed wireless broadband acquired over 640,000 subscribers, almost double the previous quarter and triple versus the same period last year. Corporate data services, on the other hand, posted a slight 3% decline year-on-year as the ECQ prompted a few clients to cut their lease line subscriptions. Gross acquisitions are also muted as companies started operating on a work-from-home basis, leading to a net reduction in leased circuits for the period. However, we do see potential in the ICT space, which continued its growth during this quarter. Fixed line voice services, along with mobile voice and SMS, continue their decline as the data trend accelerates even further due to connectivity needs brought about by the pandemic. Mobile data revenue also grew 5% year-on-year but was unable to offset the declines in mobile voice and SMS, resulting in softening mobile revenues year-on-year. As of the first half of 2020, data-related revenues make up 75% of total service revenues versus 70% a year ago and at par with the previous quarter. Mobile data still remains the top contributor at 49%, while home broadband and corporate data contribute 17% and 9%, respectively. Although mobile data growth of 5% has softened versus previous periods, this is more a function of reduced yields as we provided our subscribers with additional 1 gigabyte of free data to help them on their quarantine. We also did the same for our home prepaid WiFi subscribers, providing them an additional 8 GB of data for their connectivity needs. Despite providing higher data allocations for the period, mobile data still grew 5% year-on-year, and home broadband revenue still managed to grow a robust 19% year-on-year. Mobile data traffic maintains its growth momentum, growing 12% quarter-on-quarter to 584 petabytes, resulting in a record 1,106 petabytes for the first half. Monthly ATPU also posted a significant improvement from 3.8 gigabytes per month from a year ago to 5.7 GB per month during the quarantine -- with the quarantine accelerating the shift towards a digital lifestyle. Mobile data users, on the other hand, saw a reduction of 8% year-on-year and 6% quarter-on-quarter as users, being homebound during the ECQ, shifted to home broadband as a connectivity medium. I would now like to give some updates on our current operations and initiatives in the context of the COVID-19 pandemic. To date, the country continues its fight against COVID-19, and while there is still no vaccine, we continue to operate our business efficiently and effectively with majority of our employees on a work-from-home basis and 15% skeletal workforce. With the relaxation from GCQ -- from ECQ to GCQ in most parts of the country, we have progressively reopened our globe stores beginning May 18 and, as of July 2020, have reopened 205 out of the 209 stores to the public. This will again have to be reevaluated based on the announcement a couple of nights ago that the country or NCR as well as some provinces around the NCR will be going back to modified ECQ. No one anticipated the impact that COVID-19 would have, but I believe that our company's agile mindset and collaborative culture allowed us to quickly adapt to these unprecedented events and positioned us to do our part in assisting the nation during this pandemic. As of June 2020, we have provided PHP 1.3 billion worth of support, which includes salaries and benefits for our employees and vendor partners, services and promos, fundraising efforts and monetary and in-kind donations. We continue to work hand-in-hand with the public and private sectors to get our nation back on its feet. One example is GCash and DSWD, who have formed a partnership to facilitate distribution of cash aid under the government Social Amelioration Program. Through the GCash platform, the distribution of funds were made more secure and convenient while also greatly reducing human contact and the risk of spreading the virus. Through Globe myBusiness, we have been partnering with public and private educational institutions alike to enable distance learning. We recognize that education is an integral part of our vision for nation-building, and we are doing our part to support the education sector by providing free access to online learning platforms, custom Internet plans, LTE pocket WiFi devices and home prepaid WiFi devices. To date, we are powering the distance learning of about 75 schools, and we welcome other LGUs and private institutions who are seeking to transition into distance learning. True to our vision of nation-building, we heed the call for greater connectivity during this time of crisis. Beginning July 2020, Globe launched its nationwide network builds project, which aims to further expand network capability by undertaking simultaneous cell site builds across the country, in major cities and rural areas alike. This is despite challenges post the pandemic. We are committed to further improving our services and delivering a better network experience for our customers. While the ECQ has indeed affected our network rollout capabilities, our aggressive expansion efforts in the past have allowed us to ably support the heightened connectivity needs during this time. Despite heavy traffic, average LTE download speed improved by 12% year-on-year, and network latency also improved by 28%. The fixed line network in the country has also shown significant improvement, and we've come a long way from 4.5 Mbps in 2016 to 23.74 Mbps today. We remain steadfast in our goal of providing the nation with first world Internet connectivity. To this end, we continue to seek the cooperation of our LGUs to [ instant ] permitting and right-of-way processes to facilitate our network rollout. Under the new normal, our customers' needs are continuously changing, and we are launching bigger and better products and services to cater to those needs from offering better deals on mobile devices for postpaid to new promos, discounts and free before prepaid. We've also launched new plans and higher speeds with data allocations for home broadband. We are on track to roll out our 5G technology beginning with select Globe postpaid and platinum subscribers if we're progressively rolling out to more areas in the country within the year. Before I end my presentation, I'd like to highlight some of the digital adjacencies that we have been investing in. These are now more relevant than ever as the COVID-19 pandemic accelerates the shift into what we believe is a lasting and sustainable digital landscape. GCash has been making strides in the last few months, becoming the mobile wallet leader in the country and even the most -- third most popular digital app behind Lazada and Shopee. During the ECQ, GCash was also among the top 3 free apps behind the worldwide viral app TikTok and the much in-demand meeting app, Zoom. GCash has shown robust growth across users, transactions and transaction values as it provides a much-needed digital payment solution during the pandemic. Other than payments, GCash also provides a variety of services from buying load, game credits and even in opening savings and investment accounts. As the leading mobile wallet in the Philippines, enabled by a scalable Alipay technology, GCash is well positioned to enable consumers and businesses alike under the new normal. We are excited to see the new heights Mynt will reach as it strives to achieve its vision of providing finance for all. Another relevant adjacent opportunity during this time is telehealth services. We currently have investments through our venture capital arm, 917Ventures. Our telehealth platform, KonsultaMD, has over 699,000 customers and reported a record 450% increase in consultations in May versus January this year as health becomes of paramount importance during the pandemic. I would also like to introduce HealthNow, another telehealth service developed in partnership with Ayala's AC Health. This aims to provide patients with remote access to doctor consultations, medicine delivery and scheduling of clinic appointments, all in one easy-to-use app. HealthNow will be available in the App Store and Google Play within the month of August. This ends my portion of the presentation, and I will now hand over the floor to Rizza for her section.

Sorry. Thank you, Ernest, and good morning, again, everyone, here in the call. Good morning, everyone. And let me now go through the details of our financial results for the first half of 2020. Our second quarter GSR registered at PHP 35.5 billion, 4% lower than the first quarter's PHP 36.9 billion. If you recall, we guided to potentially a low single-digit decline in revenues in the second quarter versus the first quarter, and we are happy to see that the business actually picked up towards the end of May and June, providing us a better-than-expected performance of a 4% decline Q-on-Q for GSR. OpEx and subsidy grew by 7% during the quarter. This includes a one-off in our provision line, and I will explain that later on. EBITDA margin was up 50%, consistent with our guidance, but lower than the 56% registered in the first quarter of this year. With a strong EBITDA relative to our estimates, net income translates to PHP 4.9 billion for the quarter, 26% lower than the first quarter, and I will also walk through a onetime other income charge below EBITDA. So from a total first half perspective, as mentioned by Ernest, revenues were at PHP 72.4 billion, just 1% lower than our record revenues, if you recall, in the first half of 2019. The PHP 72.9 billion quarterly revenues in that quarter was a record high for us, and we are quite happy that despite the pandemic and the severe lockdown for 2 months into the second quarter that we were able to keep revenues just behind that record level. EBITDA for the first half is at 53%, flat versus the same period last year. And the net income that we are reporting is at PHP 11.5 billion, 5% lower than last year. Core net income at PHP 11.1 billion, 8% lower than last year. On the next slide, let me now go through our operating expenses in more detail. Interconnection charges continued to decline due to the implementation of 0 interconnect charges on mobile domestic voice and SMS transactions at the beginning of this year. Staff costs also grew by 6% year-on-year, driven by a 7% increase in head count versus last year. Marketing and subsidy costs declined year-on-year, driven by decreased spending on ads and promos and reduced commissions from lower postpaid acquisitions, both impacted by ECQ. The increase in network costs was driven by higher repairs and maintenance charges, slightly cushioned by a decline in lease charges on deferred activation of new co-location facilities and utility spend from reduced electricity and power consumption. I mentioned earlier that we made a onetime provision this quarter, and that relates to a PHP 1.4 billion increase in our provision for doubtful accounts. In the second quarter, we booked a onetime PHP 1.9 billion provision related to the fact that we gave a 60-day credit to all our postpaid customers, both on the consumer side and also on the enterprise side during the lockdown in April and May. And after ECQ was lifted, we then subsequently extended installment payments to all our customers until the rest of the year for all of those credit that we had extended during the 2-month lockdown, and that is a PHP 1.9 billion provision that we registered in this quarter. If you look at our normal provisioning, it is about PHP 900 million a quarter. And so we took all of the credit -- potential credit risk profile through the year and booked it in this quarter so that our succeeding quarter provisions will be roughly back to the normal PHP 900 million that we are booking every 3 months. The increase contributed was offset by decline in our services and other OpEx which saw reduced subscriber line installations and customer contact services, an effect of reduced service and operations during the quarantine period. However, one more thing we'd like to highlight that another positive development during the quarter was that, in June, we actually recorded the highest collection amount that the company has registered. And we are also happy to share that this trend of record collection continued in July, and we were only shy of actually PHP 38 million in terms of the June record collections that we have been able to achieve in that one. On a year-on-year basis, we were able to manage costs and keep EBITDA decline to a minimum. And on a quarter-on-quarter basis, since the second quarter bore the full effect of the additional provisions due to the pandemic, EBITDA was negatively affected by 13%. Now let me bridge below EBITDA. Depreciation charges grew by about PHP 1 billion from sustained CapEx investments. Q-on-Q, we also saw a slight increase as we endeavor to continuously roll out our network despite the challenges imposed by the pandemic. Nonoperating expenses, on the other hand, posted a decline of PHP 597 million, as this includes another extraordinary item for the quarter. I mentioned another one-off below EBITDA. We were able to renegotiate the rates for an existing PHP 5 billion loan allowing us to book a gain of PHP 375 million for the revaluation of the loan under PFRS 9. Additionally, we are seeing lower share in equity losses from affiliates due to the improved performance of Mynt during this period. CapEx spend for the first half was at PHP 20.9 billion, a 76 -- with 76% for data related requirements. If you recall, we were guiding at about PHP 10 billion or $200 million of CapEx for the quarter, and actual CapEx came in at that guidance of PHP 10.2 billion. On the next slide, happy to include in the report that we were able to reach mid-July, PHP 600 million in international bonds, USD bonds broken into 300 million for 10-year senior notes with a Q1 rate of 2.5% and the other 300 million 15 senior notes with a Q1 rate of 3%. We went for an unrated offering, and we actually broke some records in terms of -- for the 10-year tranche, the lowest yield for an unrated USD issuance globally and the tightest spread ever for any unrated corporate USD issuance in Southeast Asia. For the 15-year tranche, our offer was the longest-ever tenor for an unrated corporate USD issuance globally, except for the only unrated 15-year bond issued was by a -- by the Chinese government entity based in Beijing. And net proceeds for our issuance will be used for CapEx, refinancing debt and also for other general corporate requirements. HSBC, JPMorgan and BPI Cap are our joint lead managers and bookrunners for this offering. Now in terms of our balance sheet, what we will be reporting excludes the impact of the new bond deal. But including the impact of this new debt, pro forma debt-to-equity is at 2.13x, and debt-to-EBITDA is at 2.47x. Cash is at PHP 4.8 billion with gross debt, excluding the $600 million bond, is PHP 152 billion. And as of the end June 2020, our ratios would be gross debt at 2.06x and gross debt-to-equity -- sorry, gross debt-to-EBITDA is at 2.06x and gross debt-to-equity would be at 1.78x. Our CEO also mentioned earlier that the Board declared a cash dividend of PHP 24.83 for the quarter, with record date on August 17 and payment date on September 2. Finally, I would like to provide updated guidance for the balance of the year. During our last meeting, we could only provide guidance for the second quarter. But for balance of the year, on the revenue side, we are estimating low single-digit decline versus last year. While we expect our business to be affected by the overall decline in the economy, we are optimistic about managing the decline as we are also seeing growth opportunities in home broadband and ICT solutions, which are becoming increasingly necessary in the new normal. But I just want to also pause and say, as we are back to MECQ, obviously, we would need to monitor the impact of this on the economy and on consumer spending. And if it will be more prolonged, MECQ state for Metro Manila and some key provinces outside Metro Manila, then, there may be negative impacts -- there may be additional negative impact into our financial performance. But granted this guidance is what we have for now on the EBITDA side. We expect to keep low 50s margin as we are balancing both the revenue decline as well as some cost savings initiative to manage the impact that still lingers from the pandemic. We also continue to reap savings from our continued work-from-home setup. So that should be a plus. Net-net, we are going to try and keep within our sweet spot EBITDA margin of 50%. For CapEx, we are revising our initial guidance downward by around PHP 12.7 billion. While we remain committed to continuously investing in coverage and capacity of our network, the reality is the rollout activities will be delayed due to the restrictions imposed by the on-and-off quarantine rules around the country. While there has been easing of these restrictions, again, depending on the time frame, we are working closely with our suppliers, and obviously, the government to try and speed things up. We are prepared to spend more than this. But again, we carved out an estimate for the market given the situation. So this concludes my report. We will now open the floor for questions. We can begin with the initial questions set prior to the start of the briefing to be followed by additional questions set during the course of the presentation. Thank you, everyone.

Thank you, Rizza. Thank you, Ernest, for your presentation. We will now begin the question-and-answer session. Our first set of questions come from Karen Hizon of UBS. The first question consists of 3 parts and reads as follows. What are the drivers of the guidance of a low single-digit revenue decline in 2020? How will the shift back from GCQ to MECQ in Metro Manila and other provinces affect the said guidance? And what were the notable changes in subscriber behavior in MECQ versus GCQ? The second question reads as follows: Could you comment on the competition in mobile and home broadband?

Perhaps I can try and characterize the drivers of decline. It was really a lot of people going back into their homes and using their home broadband and WiFi connections at home instead of mobile data. Globe has a large share in postpaid, where individuals have a lot of -- are predominantly with broadband connections as well as the high-end prepaid segment. And so this affected their mobile data usage. I mean if you imagine how much time they stay connected to WiFi vis-à-vis going out and using your mobile data connectors during the pandemic, I think you will understand that particular dynamic. As MECQ shifted to GCQ, we saw a significant amount of people once again resuming normal activity, and this created increasing demand all throughout -- I think it was lifted sometime in June to July, and increasing usage of mobile data, once again, in top-ups. We're already moving upwards at that point in time. What was the other question, Jomari? I answered the MECQ, GCQ, characterize the competition.

Yes. The second question is could you comment on the competition in mobile and home broadband.

Maybe Albert, you want to take that one on?

Yes. The mobile and broadband segments have been quite busy. A lot of it has been to address the growing needs of the consumers under lockdown. Having said that, while there has been more generous data allowances that were provided, it had, I think, less to do with competitive dynamic as it was to try and assist the subscribers at this particular point in time. I would characterize the overall competitive dynamic as quite stable, muted almost in certain respects. There has been a lot of activity in the market but primarily to address consumer needs. That's basically it.

Thank you, Ernest and Albert. The next set of questions come from Arthur Pineda of Citi. The first question is how has the receivable collection levels trended post-ECQ levels through to July. And then the second question is how have the mobile top-ups trended from April, May, June and July. Have consumers normalized consumption levels by July?

I think Rizza should cover the collections. I'll try to cover the top-ups alongside Albert. Go ahead.

As mentioned earlier, July was shy of PHP 38 million of the record June collections. So June and July actually registered over 100% collection efficiency for all of our business units, and so that's a good sign for us. We were estimating another record collections for August. However, with this MECQ status for the next 2 weeks, we have to monitor the impact. But at the very least, we already have our cadence in terms of the collection strategy once MECQ was lifted, from our experience in July and June.

And with regard to top-up, the mobile top-ups, I think, bottomed out, I would say, first couple of weeks of April and have started to move up as activity outdoor started. As I said in my previous answer, Globe is quite dependent on people actually being outside their homes and using their phones and their phone's connectivity for Internet connections. So we saw a good trend upwards in April, May, June through July. As Rizza mentioned, with the announcement that came about 2, 3 days ago, we would have to see what the effects are of moving back to the stricter MECQ and how many people will start to work from home once again and -- versus how many people would be going out in the streets.

And just to add the one minor that I mentioned to that -- to what Ernest has already said. This recovery is despite the fact that there are certain revenue streams that clearly are totally absent today, and that would be our roaming revenues, our inbound traveler revenues and a significant portion of the prepaid top-ups coming from the total segment given the fact that they are now significantly under where they used to be in terms of operations. So when you look at the core absent those, the recovery has actually been quite good.

Thank you for that. The next set of questions come from Varun Ahuja of Credit Suisse, consists of 2 questions. The first question is, what is your view on the fixed broadband segment, given that one of the new entrants has outperformed, it seems, incumbents in terms of fiber rollout and fiber subscription addition. And how do you plan to respond to the increased competition in fixed broadband? The second question is, is fiber rollout a key strategy for Globe as it seems the company has been a significant laggard relative to its peers.

I'll cover that. I think the fixed broadband segment has become more important of late because of the pandemic, because of work-from-home, because of learning from home. And as far as the competition is concerned with the new player, yes, they have been very aggressive in their building. They have different ways by which they built their facilities. Obviously, I think it's quite different from the methods used by Globe and PLDT, and I'll leave it at that. You may want to ask them about how they do it. With regard to Globe's presence in fiber, it is part of our approach that once we have garnered the market with regard to fixed wireless, that they will come back and filling in capacity to switch some of the customers to fiber. Fiber is going to be an integral part of our rollout strategy, and we are continuing to build fiber. It is now a priority for Globe to build it. Of course, the challenge for us is we have to split CapEx budgets between our mobile business and wireless business and fixed line business. However, we do believe that there is an equally large opportunity when it comes to fixed wireless and particularly in prepaid. I think that's been evidenced by the numbers that Rizza or I mentioned in my report that we added 640,000 new home prepaid wireless broadband users just in one quarter alone. This may be low ARPU. This may be, you would say, noncontracted customers, but we also know the benefit of having a large prepaid base in your business. This is the prepaid base that you don't have to collect money from, send bills for -- send bills to and so on. So we are highly prioritizing the home, and we believe that these 2 segments, both prepaid wireless and fixed line postpaid, are going to be very important part of the business.

Thanks for that. The next question comes from [ El Hamill ] of ATR Asset Management, and again, it's regarding broadband. With the rapid growth in broadband, can you talk about your strategy, both in network rollout and customer acquisition? In connection to that, how much of the PHP 50 billion will be spent on expanding your broadband network capacity? And how many kilometers of fiber will this add?

I think I've already answered the first question. Nothing more to add. Like as I said, I want to reiterate that Globe started focusing on the fixed segment about a couple of years ago and, again, believing that the opportunity does exist in both fixed postpaid and wireless prepaid as far as the home is concerned. As far as allocations, Rizza, do you want to cover some of that, if you can?

So we only disclosed that 75% of our CapEx will be data-related. So that includes our broadband investments. And if you recall, about 4 years ago, we actually committed to building 2 million connections by the end of 2020. We had actually been able to fast track that and deliver the 2 million connections at the end of 2019. And so this year's CapEx has another aggressive portion for the build of fixed line broadband, together, of course, with our fixed wireless, given that there is also great demand for that product, especially during this pandemic. On the kilometer -- number of kilometers of fiber that we have, Jomari, do you have that data with you?

No. Rizza, what I can do is we can get back to ATR came in after this call. Thank you.

Sorry, can I just add that using a metric of kilometers of fiber build is not particularly relevant if you're like an existing operator already with a lot of fiber underground because a significant chunk of our sites already have fiber to the sites. And in serving fiber to our customers, we basically would just run fiber, what we would call last mile fiber, from those sites to residences, for example. However, if you're a new operator and you haven't really covered your backbone, the Philippines and quite a number of occasions, maybe kilometers of fiber would be relevant. But at this stage, for Globe, it's not a particularly relevant metric because we have cell sites in a lot of places. We cover 97-plus-percent of our population, and most of them actually have fiber.

Thank you for that. The next set of questions come from Jun Tarrobago of ATR Asset Management. The first question is, what is your estimated market share in 2Q '20 for data compared to 1Q '20. The second question is what's your assessment of network quality and reliability of Globe versus PLDT fiber and that of Converge. And third is what is your estimate for growth in digital transactions in 2Q '20 versus 1Q '20 or even 2Q '19.

These are hard questions. First of all, for the market share, I wouldn't venture a guess because we don't know what the numbers of our competition are going to come out. Just wait for, I guess, August 6 when -- or 7 when their numbers are out. Then we can probably calculate as easy as we can know what the market shares will be with regard to data. The second question was?

The second question is what's your assessment of network quality and reliability of Globe versus PLDT and Converge.

Just anecdotally, what I can tell you is that we admit that there is a handicap with incumbents with regard to reliability because we do have legacy infrastructure that have been in the -- on the ground and in the field for many, many years, in excess of 20 years, and this has to do with copper infrastructure. Copper infrastructure will always be at a disadvantage to fiber, which is passive infrastructure. But as we know, customer experience is not determined solely by the infrastructure. It does play a role, but there's also a significant role that customer service, responsiveness and empathy for the client needs that come into play. So I -- that's all I can tell you. Again, I don't know their numbers. All I can tell you is that we -- our customers on fiber are indeed more satisfied than their customers on copper. And so we are building more fiber on the ground, replacing as much of the corporate technology that we have moving forward. Was there a third question?

The third question is what is your estimate for growth in digital transactions in 2Q '20 versus 1Q '20 or even 2Q '19.

I don't have the exact numbers for -- are you talking about GCash? Are you talking about Globe?

I think Ernest, that would be for GCash. And what we can see is we can point them to the experience of GCash over this past month. So GCash saw daily average transactions grew 116% for the month of June. Gross transaction value grew 97%. And if you look at it from a year-on-year perspective, there was 700% growth in terms of transactions for GCash. I think that's as much as we can say on the -- on that question, Ernest.

Thanks, Carlo.

Thank you for that, Carlo. There is, again, another follow-up question from Mr. Tarrobago. What is the role of GCash in the digital strategy now? And how can you make it profitable?

GCash plays a very big role in Globe strategy. As you know, Globe has been looking at adjacencies and GCash presents the perfect adjacency. We are able to make use of Globe's data about consumers, our distribution channel. We cross distribute each other's products, the GCash -- the Globe product sales inside the GCash app is growing exponentially quarter-on-quarter. Profitability for GCash will come. We're now reaching critical mass. We have started to charge for certain services that are on GCash. For instance, cash-in is now being monetized or at least charge is being passed on to the consumers. We are seeing a decline in the cash burn year-on-year, and the hope is that, at some point, once, of course, the pandemic is over, we can start charging even for -- even more services as we move forward. Mind you that the charges will be very small charges because the number of transactions are very high. We want to focus on making sure that the consumers feel that it is a good value and a great convenience factor to be using GCash.

Okay. Thank you, Ernest. Seems I missed out on one of the follow-up questions of Mr. Tarrobago. Can you -- can the team provide more color on the 5G rollout, which forms part of the 2020 CapEx guidance for the second half?

Gil, can you cover that, the question on 5G? You're on mute, by the way.

We actually don't disclose very specific things about 5G, but you will recall, we already introduced 5G for fixed wireless access last year. And we have even introduced a specific set of handsets. In fact, we had a big handset launch late last year on the mobile side. And what we will do is progressively build 5G base stations on the major highly urbanized locations, including CBDs, including the major cities outside of Metro Manila. But other than that, we don't really specifically disclose the extent of 5G construction.

So if I may add, the $1 billion guidance for CapEx this year includes our 5G initiative.

Okay. Thank you, Gil. Thank you, Ernest. There are currently no questions in queue. To all our participants, if you would like to ask a question, please send your questions to Investor Relations [email protected]. Thank you.