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

Good morning, and welcome to the Virtual First Quarter 2021 Analysts' 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; Ms. Rizza Maniego-Eala, Chief Finance Officer; Ms. Issa Guevarra-Cabreira, Chief Commercial Officer; Mr. Darius Delgado, Vice President and Head of Consumer Broadband Business; Attorney Froilan Castelo, General Counsel; Mr. Joel Agustin, Senior Vice President for Program Delivery; and Ms. Martha Sazon, President and CEO of Mynt. Mr. Cu will present the highlights of the company's performance for the first quarter 2021, to be followed by Ms. Guevarra-Cabreira who will discuss the performance in greater detail. Afterwards, Mr. Agustin will provide updates on our network. He will be followed by Ms. Sazon who will discuss the latest developments concerning Mynt and GCash. Then we will return to Mr. Cu, who will discuss developments regarding 917Ventures portfolio. Finally, Ms. Maniego-Eala will present the financial results. We'll then have the Q&A session beginning with the questions sent via e-mail to [email protected] prior to the start of the briefing, to be followed by additional questions also sent via e-mail during the course of the presentation. We'll now hand over the virtual floor to Mr. Cu.

Thank you, Jomari. Good morning to everyone who's joining us virtually today. I'm still looking forward to the day where we can have our usual late morning sessions at Globe and have a chance to chat on the side as well. For this quarter, I'm very pleased to report that we have service revenues of PHP 37.8 billion, which is an improvement of 3% year-on-year and 1% on a quarter-on-quarter, led by the continued record performance of home broadband. It is worth noting that in the first 3 months of 2020, the economy was still largely free from the effects of COVID unlike 2021. Seeing this momentum of sustained revenue recovery, we have also been ramping up our activities, which translated to higher operating expenses. Consequently, EBITDA reported an 11% decline year-on-year to PHP 18.3 billion, equivalent to a 48% EBITDA margin, quarter-on-quarter though EBITDA improved 6%. Net income for the period registered PHP 7.3 billion, an 11% improvement year-on-year and 168% quarter-on-quarter improvement, mostly due to the retroactive impact of the newly passed CREATE Law, which reduced corporate income taxes. Rizza will provide more color on the impact of this particular bill later on in the presentation. I'm also pleased to announce that our Board of Directors approved the second quarterly cash dividend of PHP 27 per share. On an annualized basis, this represents 74% of full year 2020 core net income. I will now turn over the floor to Issa to discuss our performance in greater detail.

Thank you, Ernest. As mentioned earlier, the Home Broadband segment drove performance for the first quarter, growing 27% year-on-year to an all-time high of PHP 7.4 billion. Demand for Home Broadband services continued to grow with fixed wireless subscribers, reporting 105% growth year-on-year to now 3.3 million. Fixed wireless subscribers likewise grew double digits, up 22% year-on-year. In total, our Home Broadband subscribers grew 81% year-on-year, surpassing now 4 million. The robust performance of Home Broadband largely contributed to the 15% year-on-year growth in the Fixed Line and Home Broadband business. Corporate Data services registered marginal growth year-on-year from higher ICT services, but was weighed down by a decline in international leased line services. Sequentially, Corporate Data services continued to recover, improving by 2%. For the Mobile business, we are also seeing sustained recovery in mobile data, which improved 4% year-on-year and 3% quarter-on-quarter. Mobile voice and SMS services on the other hand continued to decline, now bringing our total Mobile revenues down 2% year-on-year to PHP 26.3 billion. This brings our total Mobile revenues to improve by 1%. Data-related revenues continued to grow, now accounting for 79% of our total service revenue. Mobile data remains to be our largest contributor, now representing 51% or more than half of our total service revenues. Data consumption likewise continues to rise, both in absolute traffic and average traffic per user. Mobile data traffic for the first quarter of 2021 grew 60% year-on-year and 11% Q-on-Q to a record high of 836 petabytes. The average mobile data user is now consuming 7.7 gigs of data on a monthly basis. This is 61% higher versus last year and 6% higher Q-on-Q. Our mobile data user base likewise grew 4% year-on-year to now 38.4 million users, which speaks to the relevance of our data product offerings. At Globe, we constantly strive to provide the best experience for our customers. And now more than ever, it is essential that we innovate so we can provide relevant products and services for a lifestyle that has been greatly altered by this pandemic. In this data-driven landscape, we recognize customers' needs to make the most out of their data promos and packages. For our mobile prepaid customers, we are offering larger data allocations and longer validity for maximum value. We are even encouraging our customers and allowing them to share their data allocations across people, mobile devices and their home devices. We also continue to encourage them to upgrade to 5G SIMs so they can now enjoy faster speeds on our 5G network. And for our postpaid customers, we recently launched the GPlan, our newest postpaid offering, the first of its kind to offer GCash credits, which our customers can allow -- which allow our customers now to spend however they choose. This is one way for us to provide more flexibility for our customers, giving them more control over their spend. With GPlan, it offers generous data allocations, unlimited allnet calls and text, free GoWiFi, unlimited teleconsultation via our KonsultaMD and 3 months insurance via GInsure. Cognizant of the current health situation, we have endeavored to keep all our customers safe. So we have offered GInsure across all our products and brands to cover customers up to PHP 140,500 in insurance. Now for our Home Broadband, we continue to delight our customers by providing affordable Internet plans, relevant content packages and exciting rewards. For customers to experience even better speeds and services, we encourage them to avail of our fiber plans. These are just a few of the many innovations that are redefining our customers' experience today and empowering their lifestyle with choice as we embark towards better days ahead for all of them. That ends my portion of the presentation. And now I turn you over to Joel, who will provide updates on our network.

Thank you, Issa. Underscoring all our efforts to reinvent the customer experience is our commitment to improving of our network, which will enable us to provide best in quality service. In the first 3 months of 2021, we put up 318 new cell towers, 152% improvement versus the same period last year. On wireless expansion, we completed upgrades on 4,210 mobile sites, up 106% versus last year. For broadband rollout, we installed over 287,000 high-speed broadband lines. I am proud to report that our ongoing network transformation efforts are bearing fruit as evidenced by data from third-party analytics providers. Globe was recently recognized in Opensignal's Global Mobile Network Experience Awards for 2021 as one of the top 30 companies globally in terms of network improvement. Globe also received Global Rising Star Awards for Most Improved Video and Voice App Experience. Additionally, Ookla data shows an improving network experience with double-digit gains year-on-year across average LTE download and upload speed and latency. Ookla has confirmed that as of the first quarter of 2021, Globe has the fastest mobile median download speeds in 10 of 17 Philippine regions and is the company's most consistent network with a score of 70.43%. Consistency score reflects the percentage of a providers' data samples that meet minimum threshold per speed. For mobile, the threshold are 5 Mbps minimum download speed and 1 Mbps minimum upload speed. While we are pleased with the results that we've achieved, we'll continue to strive for even better results to give our customers the best experience. To reiterate our CapEx guidance for the year, we are committed to spending PHP 70 billion to transform our network and contribute towards our goal of providing first-world Internet experience. I will now turn over the floor to Martha, who will discuss the latest developments in Mynt and GCash.

Thank you, Joel, and good morning, everyone. Thanks for giving me time to share recent developments in GCash and how we continue to empower Filipinos, especially at this critical time. The pandemic highlighted the demand for safe and convenient access to digital payments and transfers. And after ending with 33 million registered users in 2020, we have sustained our momentum with our user base growing to 38 million as of March 2021 and over 40 million by the end of April. That's 40% of Filipinos now having a GCash account. Active users have grown 4.3x year-on-year with our app being used more than 2 times a day, showing how important GCash is to our users. We now have 1.6 million merchants and social sellers using GCash for cashless payments via the use of QR codes and P2P. Lastly, the introduction of more relevant products and a larger ecosystem to interact with, we have reached PHP 200 billion in monthly GTV in March. With this, we are trending to hit PHP 2.5 trillion GTV by end of the year. That's more than doubled what we did in 2020. And our revenues for the first quarter of the year have grown 5.4x year-on-year. That's on top of a 4x growth last year, creating a clear path to sustainability and steps towards profitability. As a lifeline to many Filipinos, we will continue to innovate and provide relevant and accessible financial services for all. Currently, 1/3 of our monthly active users are subscribed to at least one of our financial services products. With GSave, our users enjoy the best savings interest rate in the country with up to 4% per annum. By the end of March, we have 3.8 million savings accounts and PHP 7.7 billion in AUM. To date, we have reached 4 million and PHP 8 billion in savings account and AUM, respectively. With our fully digital credit line, GCredit, we offer pay later services for their bills, off-line purchases and online shopping via Shopee, the App Store and Google Play Store. We now have 1.2 million active credit lines and have disbursed a total of PHP 12 billion in credit as of end March 2021. Enabling our digital credit line is a proprietary trust platform, GScore, which redefines creditworthiness, even for users without any credit history and without them having to submit any documents. We note that our default rates are best in class. Early in the year, we launched the following game-changing initiatives that not only provide differentiation from our competitors but also are huge steps towards our vision for finance for all. GInvest, we've added 4 new funds that allow users to participate in the growth of local and global brands such as Apple, Google, Microsoft, Globe, Amazon, Ayala, among others. 1.2 million users are investing through GCash, essentially tripling the number of UITF accounts in the country. We've been experiencing growth -- record growth as we received PHP 15 million in average daily buy value in April. That's only less than 2 months from our launch of the 4 funds. Our GInsure platform, which provides affordable coverage to life and health insurance, has sold over 200,000 policies by end March and over 265,000 by end of April. At one point, we even doubled the daily registrations of insurance in the country. Recently, we worked with Globe to offer 3 months coverage for COVID and dengue for free, bundled with select Globe and TM Data promos. Moving from financial services to digital lifestyle, our app-in-app proposition, GLife, has been making waves after we launched exclusive deals with over 35 big named brands like McDonald's, KFC, et cetera. GLife garnered an average of 64,000 daily views in March with the platform peaking at 100,000 daily views in April, coinciding with partner promos. Lastly, we have GCash International. This year, we are looking to further expand GCash by tapping into important segments, and one of our focus areas is serving the needs of Filipinos abroad. Our goal is to make their remittances as frictionless as possible. Through GCash, they can send money to their families to pay their bills and even save or invest what's left. Beyond the growth and scale of our business, let me tell you about GCash as a member of the Filipino community. As we continue to push for accessibility, now not only office workers but even enterprising Pinoys such as fishermen, tricycle drivers and palengke vendors are using GCash to accept cashless payments. Just imagine the possibilities if every Filipino had GCash. We remain committed to serving all Filipinos as we strive to make Filipinos' everyday lives better. This ends my portion. I will now turn over to Ernest or Rizza. Thank you.

Thank you, Martha. GCash is just one of the many companies under our 917Ventures' incubation portfolio. I'd like to highlight a few other of these companies that have been gaining traction in this digital era. PureGo, a partnership between 917Ventures and supermarket chain, Puregold, is an e-commerce platform for online grocery shopping that covers same-day delivery, scheduled delivery, multiple payment options, bulk orders and more. In just 1 quarter since its launch, PureGo has acquired over 20,000 users across 17 cities. HealthNow, the all-in-one app by 917Ventures and AC Health, has likewise seen great adoption with over 260,000 downloads. In the month of April 2021, it was the #1 medical app in the App Store as well as #1 health and fitness app in Google Play. 917Ventures also recently launched Velocity, a regional venture incubation program dedicated to giving prospective builders and other talents the opportunity to build successful businesses in the areas of e-commerce, fintech, healthtech and adtech. Since its inception in the last quarter of 2020, Velocity has received over 250 applications and launched 5 new angel ventures with 3 more in the pipeline in the coming quarter. Through this program, 917Ventures hopes to nurture innovation, build meaningful products and source successful businesses. With that, I will now turn you over to Rizza to give you more detail on our financials.

Thank you, Ernest, and good morning to everyone. Service revenues continued to recover, growing by low single digits year-on-year and Q-on-Q, a welcome improvement amid the current pandemic. EBITDA, on the other hand, declined by 11% versus the high-margin first quarter of 2020 due to higher operating spend. Higher OpEx notwithstanding, EBITDA margin for the first quarter of 2021 is at 48%, an improvement versus the 46% in the fourth quarter of 2020. Net income for the period is at PHP 7.3 billion, higher than the previous year and the quarter largely due to the retroactive impact of the new tax law. Core net income registered at PHP 7.4 billion, also improving versus previous periods. Excluding the impact of the new tax law, normalized net income would have declined 27% year-on-year and only increased 27% quarter-on-quarter to PHP 5 billion. On my next slide, I will give a bridge on our EBITDA. And year-on-year EBITDA is lower due to the continued network expansion, cloud and marketing costs. If we look at the top end of this slide, increase in revenues year-on-year was at PHP 930 million. And if we look at the big jump in expenses, we have close to PHP 520 million in network costs. This, in particular, includes a 32% increase in lease expenses resulting from increased cell site builds and local interconnection facilities. These additional cell site builds also contributed to rising electricity consumption and utility costs. Cautioning these increased expenses is a slight 5% decline in repairs and maintenance costs. Marketing and subsidy expenses also increased year-on-year from higher spend on ads, promos and commissions. Services expenses rose 18% versus last year from higher managed and cloud services, as I mentioned earlier, as well as higher subscribe line installations from Home Broadband. Provisions also grew from additional trade receivables as our postpaid business had grown during the quarter. Staff costs are also up 10% year-on-year due to our higher headcount. Taken altogether, these contributed to the 11% EBITDA decline that I mentioned just a few minutes ago. And despite relatively higher OpEx versus the previous year sequentially, first quarter OpEx was lower versus the seasonally high expenses in the fourth quarter, resulting in a 6% improvement in EBITDA quarter-on-quarter. Moving on to the next slide below EBITDA. Depreciation grew 6% year-on-year and 4% quarter-on-quarter, in line with our ongoing network transformation efforts. Nonoperating charges and tax provisions on the other hand declined significantly year-on-year owing to the retroactive impact of the CREATE Law or the new tax law, which became effective last March. And this effectively reduced corporate income tax rate effective July 2020. The impact of this was retroactively applied in the first quarter of 2021, resulting in a PHP 1.4 billion upside in NIAT. Additionally, this is also impact -- this has also impacted our share in the equity gains or losses, the net effect of which was also an upside to NIAT. These contributed to an 11% increase in NIAT year-on-year. Sequentially, nonoperating expenses recorded a steeper drop versus the fourth quarter, which included a onetime impairment loss net of the dilution gain from NIM. Moving on to CapEx. Our spend for the first quarter came in at PHP 19 billion, on track with our full year CapEx guidance of PHP 17 billion. Consistent with the past few years, majority of the spend was allocated for data-related requirements as we continue to accelerate our network transformation efforts and maximize the support we are receiving from the government to hasten our site builds and upgrades. As an essential service, we are also further enabled by the government to keep up with our network rollouts and upgrades despite the reimposition of ECQ across different provinces, in Luzon earlier this year. Even amidst the ongoing pandemic, we remain committed to investing in our network, future-proofing it to capture growing demand. For gearing, we remain comfortably within our covenant ratios. We ended the quarter with a cash balance of PHP 14.5 billion. And if you look at our ratios on this slide, on a net basis, debt to equity is at 1.8x and net debt-to-EBITDA at 2.25x with debt service coverage at 2.6x. As earlier mentioned by Ernest, our Board of Directors also approved yesterday the declaration of our cash dividend for the second quarter of PHP 27 per share with a record date of May 21 and a payment date of June 4 this year. In the same meeting yesterday, the Board also approved the redemption of our Series A nonvoting pref shares. The redemption will take effect on August 2022, which marks the seventh year anniversary since the shares were issued. The redemption price is equal to the issue price of PHP 500 per share plus any accrued and unpaid dividends up until August 2022. This concludes my report, and we now open the floor for questions. Over to you, Jomari.

Thank you very much, Rizza. We'll now begin the Q&A session. Our first set of questions comes from Jon Latuja of PNB Securities. First question reads, "Can the company describe its prepaid fixed wireless customers? And how do they differentiate from postpaid customers?"

Sure. Let me take that, Jomari. Thanks for that question, Jonathan. So our prepaid fixed wireless customers come from families who actually prefer not to commit to a monthly postpaid plan, either due to economic reasons or just a matter of preference. But whose Internet needs have grown bigger and they became more demanding as the family is at home, such that they would require something bigger than just a mobile connectivity. For these customers, our home prepaid WiFi product offers would be an easier transition to fixed home connections given that it's a pay-as-you-go model, giving them a stronger Internet connection they need, but still staying in the same payment structure that they've been used to as a mobile customer. Also, what we've seen is there's a small segment who sees the value of having a home prepaid WiFi also as a backup connection to their primary fixed broadband service as these services, as we know, may go down as well and they cannot afford to have downtime in their homes today as it is the school and the office already. And so they will also have an HPW, or home prepaid WiFi, in handy even if they have already a fixed high-speed broadband connection in their homes.

Thank you, Issa. Next question is, "How does the company plan to sustain the growth of its prepaid fixed wireless subscribers? And what's the long-term plan for these types of customers? Will they be eventually converted to postpaid which guarantees higher ARPU?"

Okay. Let me take that again, Jomari. So home broadband internet penetration remains to be relatively low today, and we see our home prepaid WiFi playing a very crucial role in bridging that gap as we roll out our fixed services. HPW allows us to roll out in a fast and efficient manner, bringing the services immediately to the customers, while we are laying the cables that they need for the high-speed broadband. We believe that many of these customers who are currently on HPW will eventually upgrade to fiber given their growing connectivity needs at home. So we see a portion who will definitely upgrade to a postpaid plan given their home demands as their needs mature, as they get comfortable as well with having commitment in monthly payments. But naturally, there will also be a segment that will remain and will prefer to stay prepaid.

Okay. Thanks for that. The third question is more financial in nature. The question is, "What will be the retroactive impact of the CREATE Law on Globe's tax provisions?"

Sorry, Jomari, my connection is breaking.

Rizza, why don't you shut off your video or Carlo can take it.

Yes. So we have adjusted our deferred tax income using the 25% CREATE -- the new tax rate for the CREATE bill. Since we are in a net detailed position, the resulting impact is an upside of PHP 1.6 billion. For BIR filing purposes, the 2020 income tax return filed to the BIR already reflects the CREATE rate -- a CREATE tax rate of 27.5%, which is essentially the average tax rate, balancing out the 30% the first half of the year and the 25% based on BIR's regulation. Considering this retroactive effect, this has also been an upside of PHP 700 million in our current income tax.

Thanks, Carlo and Rizza.

Thanks, Carlo. Thank you, Carlo. Sorry about that. I believe that [indiscernible] not the Internet [indiscernible] and represents the new statutory rate for corporate income tax that we will be using going forward. Thanks, Carlo.

Yes. Rizza, you came in a bit choppy. I'll reiterate. So moving forward, the tax rate that we will be using will be 25%.

Okay. Thank you, Rizza and Carlo. The next set of questions come from [ Sevi ] Sevidal of BPI Securities. The first question is, "In the third quarter briefing, Globe management shared the 40% figure of targeted home broadband customers to migrate to higher-speed networks. Maybe ask for an update on this target and if there is a new target for end 2021?"

Sure. I can take that also, Jomari. For the 40% that we were talking about back in quarter 4 was based on the conversion rate at that time, based on the leads that we were having, which we have clearly achieved by end of 2020. And given the ramp-up of sales that we've achieved in 4Q as well as this quarter, we have significantly increased our migration opportunities almost by 2x. In fact, today, we are on track in our migration target of about 60% of a bigger migratable base that we see in 2021 given as well -- given the efficiencies that we've seen as well in our builds and our utilization. We're still generally in line with that target of 60%. So there is a need to refine as migration is fully subject to several factors. For this year, what we are targeting is, as mentioned, 60% of migratable leads to be converted to our high-speed broadband plans.

Okay. Thanks, Issa. Actually, the second question is a follow-up or in relation to the first question. "Could you ask for more color on the kind of traction that you're seeing in terms of the upselling of existing fixed wireless access subscribers to fiber? Would you be able to share how much of these upgraded customers are as a percentage of fixed wired net adds?"

For first quarter, we've actually migrated around 1/3 of our customers into fiber. So that's coming from our lower speed plans now migrating into fiber. And we see that actually in the coming months as we roll out more fiber and as customers actually clamor for more high-speed Internet to continue on for the balance of the year.

Okay. Thank you for that, Issa. Now the third and last question is basic combination of network and business. I'll read it out now. "Any color on the 5G rollout so far? And then based on the early indications, what kind of uplift in ARPU are you seeing from 5G relative to 4G LTE?"

Okay.

Go ahead, Joel. Over to you, Joel.

Okay. Let me cover on the network side. So we were able to carry the momentum from last year. So Globe's 5G network now covers about 84% coverage in Metro Manila. So we are able to expand now our total sites to 1,383 sites, including Bacolod, Boracay, Cebu, Iloilo, Cagayan de Oro, Davao as of end of quarter 1 2021, right? So this drive will improve our coverage continuity and improving better -- improving customer experience for our customers in those areas. So turning it over to you, Issa. Can you cover on the ARPU side?

Yes, yes. So specific to the ARPU lift. Today, well, the base of 5G users is not yet tremendous. Although it's getting good traction for us. And as what we're seeing is we're actually -- we actually have more customers than our competitors who are latching on to 5G. But we see that as the -- as we roll out our network builds, that's probably a better time to determine if indeed it will give enough ARPU lift for us because the skew of 5G traffic vis-a-vis 4G is just not there yet. So not enough data. Perhaps towards the end of the year, we'll be able to give a little bit more flavor and color on an ARPU lift impact for 5G traffic.

Understood. Thank you, Joel and Issa for that. The next set of questions come from Bern Solco of ATR Asset Management. The first question reads, "From which affiliates are the equity share of earnings coming from?"

Thanks, Jomari. Thanks, Bern. Actually, we have this in our financial statements. I think it's on Note 11. And so the bulk of the contribution for this quarter came from our investment in Vega Group. So that contributed about PHP 1 billion and PHP 900 million of that was because of the tax change. We also have there disclosed all our other affiliates, including Mynt. And if you look at that chart, our Mynt losses for our share of it in 2021 first quarter was PHP 280 million. It was PHP 736 million in the same period last year. So I think, yes, Note 11 as for that question.

Okay. Yes. Thanks, Rizza. I guess you also were able to answer the second question, which was -- she was asking about Mynt's losses in first quarter 2020 and in fourth quarter 2020. Thank you for that. The third question relates to CREATE. And the question is -- and I believe this was already answered earlier, but I will just read it for the record and maybe share later again with Bern the answer that was given. "How much was the effect of the retroactive application of the CREATE bill on second half 2020 results?" So we can just...

So that's a total of PHP 2.3 billion, Jomari. And I think I already gave the breakdown earlier.

Yes. Thank you for that. The next set of questions come from [ Janelle Bunagan ] of UBS. The first question is, "Globe have seen slower growth compared to PLDT over the past few quarters, particularly on mobile. What do you think is the reason behind this? And what should we expect going forward?"

Let me take this one. Yes, our competitor has been surging over the past, say, 7 quarters or so. They really put aggressive plans to the ground, improving their network and taking advantage of the structural advantage they have. They've got significant spectrum resources and certainly have an advantage at Globe that can equate to anywhere from nearly 60% capacity to 20% capacity depending on how we configure and all. But we made a call sometime last year to go all out and reverse the trend. Admittedly, Globe has also been a bit more passive in the past. As we gained leadership, we had hoped to bring some market repair and profitability, which I do think in some respects we did. You saw the EBITDA margins rise in the industry, and there was good pricing stability that we have achieved. But we also, I think, over the last year, have really increased the investments we made in the network to try and reduce the gap between their reported speeds and ours. And I think what has happened over time is that the gap has become less relevant to consumers as the overall speeds in the country go up. I believe Globe's speed is now at 24. Certainly, competition is higher than that admittedly in some areas, as Joel mentioned. However, in 10 out of 17, we are either at par or even better. What's more important for us is the consistency score. Consistency of performance in the network has to be there so that more of the customers experience good service more at -- most of the time or more of the time. So that is something that we strive to achieve. And I'm sure that as speeds continue to improve, speed and [indiscernible] speed will become nothing more than a marketing push. We have also increased the relevance of our offers this past few months. You've seen that past -- Issa and team have put out very aggressive products there to hope to address the customers' needs during this pandemic. And the market has reacted very positively to this change as evidenced by the results of the quarter.

Okay. Thanks, Ernest. The next set of questions come from Arthur Pineda of Citi. The first question is actually again related to CREATE Law, and I think that was already answered in full by Rizza, but I will just read it again for the record. "When we get clarification on savings booked from the CREATE Law, how do we get to PHP 2.4 billion tax benefit if Globe has a total of PHP 5 billion in deferred tax liabilities against PHP 2.6 billion in deferred tax assets in 2020? Is this first quarter booking one and done? Or are there further adjustments to be made?" Perhaps you can just share later with Arthur, the answer that we gave earlier.

Jomari, maybe -- yes, if Arthur wasn't there when it was answered a couple of times. So the PHP 2.3 billion upside comes from PHP 670 million deferred tax -- income tax impact.

Yes. Sorry, I think, Rizza -- sorry, Rizza, you're coming in a bit choppy. I'll...

And another 600 -- okay, is this better?

Yes. That's better, Rizza.

Okay. So the PHP 2.3 billion upside comes from PHP 670 million deferred income tax impact, another PHP 695 million current income tax impact and the PHP 935 million balance, is impact to investment in our Vega associates, as I also had explained earlier. So going forward, we will be using the 25% tax rate. And in fact, for the first quarter, we had already used that rate for 2021.

Okay. Thank you, Rizza. The next question is on 5G and again, I think, this question is already answered by Joel and Issa earlier. But again, I will read it for the record. "Are you able to share your programs on 5G rollouts? How relevant are these to your premium postpaid subscribers?" So I guess that's been sorted out earlier. The third and last question is on GCash. "What are the plans in monetizing GCash with 40 million users and 1.6 million merchants? It appears that the business is already of scale. What can be done to drive this to profitability?"

Maybe I'll cover that one, Jomari. Obviously, there are plans to monetize GCash in the future. The various options are still being considered. There's always the IPO path, there's the SPAC path, there's the waiting for profitability before listing path. There's many things we're doing, right? And all that is being considered at the moment. Now scale, as you mentioned, has already been reached, but it is still growing. However, I'm a believer that scale without profitability or without evidence of revenue growth is not going to maximize the value of the company. You've seen over the past year we've done and executed step-wise on first, making sure that we have tremendous scale in the business, and we do. We talk about 40 million users. We talk about PHP 2.5 trillion GTV coming into the platform and so on. That gives you the scale. You've seen us increase revenue over time. And the corresponding decreases now in losses that you're seeing, as Rizza answered that question on the attributable loss that we take in from Mynt. I think over time, this will lead to breakevens and profitability. And at that point, I think we will have a clearer view on what our monetization options would be.

Okay. Thank you, Ernest. The follow-up question, the next sets of -- next 2 questions are follow-ups from, again, Bern Solco of ATR Asset Management. "Do you expect marketing and subsidy costs to continue to ease as EBITDA margin -- and with EBITDA margins increase?"

Maybe I'll take that. And the way to answer that is maybe -- I wouldn't answer it directly, but we'd like to share that our guidance for full year in terms of EBITDA margin remains to be at 50%. So I think we will be having various marketing efforts across the next few quarters. But then again, the target is to be within an EBITDA margin of 50% for full year 2021, consistent with our guidance.

Okay. Thank you, Rizza. The next question is related to, again, industry competition. Question is, "Has competition with PLDT and DITO intensified?"

Issa, would you like to comment or you want me to comment?

Sure. Well, as Ernest earlier mentioned, clearly, PLDT had a little bit of a run back in -- for the full year of 2020 and for the most part of 2019. However, based on the results that we're showing in Q1, clearly, we're seeing some reversal already to the trend that still comes back fairly strongly, both on the back of our consistent -- and commitment on our network builds as well as in our offerings that are relevant to our customers. So if they have had a good run and we are back on track, so the customer wins in the end. DITO, we've seen, true to their commitment, they did launch early March as part of their commitment to the government. But what we've seen is as they launched a certain offer they did pull back even before the promo period ended. But we did see that they did expand their coverage of launch for DITO. So exciting times ahead, I think, in the telco space. But in the end, we remain focused in our customers and giving them the best service as possible. So exciting times ahead.

Okay. Exciting times indeed. Thanks for that, Issa. The next set of questions come from Mr. Jan Derrick Guarin of First Metro. The first question is, "How much the global chip shortage affected the company, especially on its expansion capabilities?"

Maybe I'll take that one. We've received assurances from our various equipment vendors that there will be no effect on their deliveries certainly this year and hopefully into 2022. All I can say is we're monitoring the situation. But for the near term, we should see no effect on our plans.

Okay. Thanks, Ernest. The second question is on GCash. "Can you share delinquency levels for the credit extended so far? Also, are there plans for synergy with BPI?"

Without tax figures, best in class definitely, single digit. And it's backed by GScore. So it just shows how strong our GScore is. As to synergies with BPI, definitely, and it's -- we are actively and aggressively pursuing it. But we're also doing the same with other banks. So you expect to see more banks inside our platform.

Okay. Thank you, Martha. Best in class, indeed. The next set of questions come from John Te of Merrill Lynch. "Congrats on the strong subscriber adds. Just a quick question on ARPU, which fell quarter-on-quarter. You mentioned longer data validity and larger data allocation. It's hard to pinpoint whether the ARPU decline in the first quarter was a function. The lockdowns are partly spin downs because of higher data. So are there any insights on the potential spin downs?"

So clearly, as our customers are locked inside their homes, we've seen that their needs for mobile data packs have tremendously diminished in favor of in-home connectivity solutions that they may have subscribed to during the pandemic. And in that case, whilst at the same time, the mobile data packs are also increasing in both validity and allocation, we've seen the ARPU clearly shift towards the broadband traffic during this pandemic.

Okay. Thank you. There's a follow-up question to that. "Conversely, on pricing competition, do you think you'll -- that Globe will see more of this in the future?"

In the pricing space, it's less about pricing, but it's more about giving what's relevant for the customers. I did talk about allowing our customers the flexibility of using mobile data packs either for their -- their data packs now, specifically as an example, Surf4All, for use both in mobile and even in their home devices. So it's less about pricing, but really giving the control to our customers. I did talk about also our postpaid plan, which is called GPlan wherein instead of just giving them mobile devices, we are now allowing our customers to have GCash and have the flexibility of buying whatever it is they need for their in-home stay nowadays, right? So less about pricing, but more about giving control to the customers really is what we're seeing will be the theme for us in Globe.

Okay. Thanks for that, Issa. And then finally, the last question from John is that, "Can you share any insights on how Globe Cebu/Davao business has been since DITO's entry last March?"

Well, they have to make -- they have Ernest. They have yet to make a dent as they actually still are rolling out their network in Cebu and Davao.

Yes. I mean they have a handicap in the sense that they require people to have a certain functionality on their phones prior to being able to use their voice and call services. And so that could be a bit of a mismatch with the market -- target market they're going after, which is the lower end of the segment. So we'll have to see how it goes. From indications that the network performs well, I mean, like I said before in the past, any network with no subscribers performs really well. The real test comes when congestion starts to appear and scale starts to build. We've seen that in many telcos around the world as well.

Okay. Thank you, Issa and Ernest. The last question in the queue so far comes from Gio de la Rosa of Regis. "Is the loss of Mynt in the first quarter reflective of what we can expect for the rest of the year?"

Well, the trend for Mynt is we've seen improvement in the bottom line, mainly because of the improvement in revenues -- the exponential improvement in revenues and as we control costs, although month-on-month there might be fluctuations depending on the marketing efforts and the campaigns that we will be implementing. So that's the answer to that question.

Yes. I think just to add to what Martha said, I echo Martha's view. Obviously, it's not a business that's mature yet so we can identify trends. But what we're seeing is that as scale is brought into the business, not only does the revenue go up but costs go down. And I think I can comfortably say that in the next quarter or so, you will start to see, again, some improvements in the cost line from particularly in what we consider fulfillment or bringing people into the service or cashing into the services.

Okay. Thank you, Martha. Thank you, Ernest. There are currently no other questions in the queue. [Operator Instructions] Yes. As there are no further questions, we will now end the Q&A portion. Before we adjourn, Ernest, do you have any final message that you would like to share to the audience?

No, I just wanted to -- well, first of all, thank the team for their perseverance that they've had over the last 7 quarters. It's been a big effort to try to bring about network, marketing, product together. So in short, we remain competitive and bring the aggression that I've said would come back, and I'm glad to see that it's back. So hopefully, you'll see more good things come from Globe in the coming quarters. Thank you all for joining the conference or the meeting. Thank you.

Okay. Thank you, Ernest. And on that note, we conclude the Virtual First Quarter 2021 Analyst Briefing Globe Telecom. We should thank you again, all of you who joined the call. We hope you'll join us again for our Second Quarter 2021 Analyst Briefing in August. Again, I wish everyone a pleasant good morning. Thank you. You can now log off at your convenience.

Thank you, everyone.

Thank you.

Thank you.