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

Good evening. Welcome to the first quarter 2023 analyst briefing of Globe Telecom. We will begin the presentation with Mr. Ernest Cu, our President and Chief Executive Officer, giving an overview of our performance and a few updates on the Globe Group. Without further ado, we now hand over the floor to Mr. Cu.

Thank you. Thank you, Colleen, and good morning to everyone, and welcome to our very first analyst briefing that is in hybrid mode. And we got a few people here, so I get it's a start that people want to start to do these kinds of events face-to-face. So to start off, I'd like to say we're very, very happy to report that Globe posted strong operating and financial results for the start of this year, despite the challenging macroeconomic environment that carried over from last year. First quarter revenues ended at PHP 40 billion, up 2% against the same period last year and relatively flat against the record-breaking level of the fourth quarter of 2022. As with the past period, this growth was mainly driven by mobile services, a clear growth of our ICT business as well as the increased revenue contribution of our non-telco subsidiaries. This performance is a good start to the year, particularly given the inflationary pressures of the consumer market and what we're continuing to face. These results put us in a promising position for the balance of the year and are generally in line with our full year guidance provided to the market last quarter. EBITDA for the period, likewise, showed great resilience, ending at PHP 20.5 billion, an increase of 4% versus last year and a 9% increase versus the last quarter. This was driven by the continued cost management efforts of the company given the renewed focus on cash flow health and sustainability. This translates to an EBITDA margin of 51%, which is trending a little bit higher than our full year guidance. Normalized net income, which takes out the -- this created the nonrecurring gains and expenses ended flat against last year, but grew 55% on a quarter-on-quarter basis. In terms of our landmark sale and leaseback initiatives, our tower transfer continues to progress well, with Globe generating another 11 [indiscernible] with closings that we did this year with our partner, Phil-Tower. Furthermore, I'm happy to report to you that we just signed with Unity Digital Infrastructure the sale and leaseback of 447 additional towers under the same terms and conditions to our past transactions. Our group CFO, Rizza, will provide you with a more comprehensive update later in the presentation about this transaction, which is just announced this week. On the 917 Ventures front, our global health care initiative, once again, achieved a major milestone by launching the new super app, Uplift Health that showcases new capabilities and a deeper and broader provider network. Gogoro, our entry into the Climatech industry also publicly launched its pilot last month. The target is making these scooters available to the public by the fourth quarter this year. Finally, our Board of Directors updated the dividend declaration of PHP 25 per share, which is consistent with our past quarterly declarations and is a testament to our commitment for a sustainable [indiscernible]. Our nontelco subsidiaries and [indiscernible] again delivered robust performance, complementing our core telco services. Our subsidiaries contributed PHP 1.4 billion in revenue for the first quarter of the year, which is higher than last year. ECPay and Asticom were among the largest contributors to our pipeline, representing 0.35% and [ 37% ] of gross service revenues, respectively. Our joint ventures and affiliates contributed as well to the bottom line with a net share with equity gain for nearly PHP 300 million or [ 12.2% ] of net income before tax underpinned by our equity share remained of [indiscernible] higher versus last year. This concludes my portion, and I'll now turn you over to Darius to discuss in detail what happened in the core and telco business. Darius?

Thank you, Ernest, and good morning, everyone. For the core telco business, the mobile segment continued its steady growth, closing the first quarter with PHP 27.1 billion in revenues, equivalent to a 1% improvement year-on-year. This growth stems from the company's prepaid brands, as the impact of public mobility returning to normal lessened the downward pressures brought about by the challenging economic environment. Mobile data services sustained its growth momentum, increasing by 4% year-over-year and ending the period with all-time high revenues of PHP 21.7 billion, as well as deliberate monetization efforts and base management initiatives continued to bear fruit. Mobile data traffic reached over 1.3 extrabytes to our monthly ARPU ended at 12.9 GB per month, growing by double digits against last year given the increasing relevance of this service to the Filipinos. On a sequential basis, total mobile revenues for the quarter improved by 1%. This growth was driven by the good quarter-on-quarter performance across the board, across the brands, driven specifically by postpaid and GOMO. We applaud the government led by the Department of Information and Communications Technology for extending the SIM registration deadline, as this gives millions of our unregistered customers more time to comply with the law. In addition to our several online channels, Globe's 147 stores and 25 EasyHubs across the country are open for customers who need help registering their SIMs. Globe has also been regularly joining SIM registration assistance initiatives led by the NTC since January and works with local government units, groceries and malls to set up assisted registration booths in various sites, focusing in more remote locations. In terms of this effect in our financial and operating metrics, we reiterate to the market that we are confident that this government initiative will not have any negative impact to our top line. To date, we have already registered about 85% of our revenue generating, those in the 90-day extension would be more [indiscernible] registering the balance of 15%. We do see some reduction in the subscriber count due to SIM registration, as we churn out nonactive SIMs from the network. However, this will translate to ARPUs in subscriber counts that will be more reflective of our actual active levels and, at the same time, also lower costs to operate on the network side. Moving on to broadband. Total revenues for the business ended at PHP 6.5 billion, and that's 7% lower than last year and 1% lower on a sequential basis, owing to the continued normalization of the Home Prepaid WiFi business. This led to the wireless subscribers and revenues decreasing by 51% and 39%, respectively, impacting the overall Home Broadband performance. Again, this reduction in the Prepaid WiFI business was expected and anticipated. Fixed wire subscribers meanwhile continued to grow, increasing by 8% year-over-year to 1.1 million due to the [indiscernible] Postpaid fiber, which saw an 80% increase in subscribers and a 30% increase in revenues year-on-year, bouncing on Globe At Home's competitive portfolio in Postpaid. As mentioned in the past, we recognized that the postpaid home fiber network is highly saturated. And currently, [indiscernible] our commitment to deliver higher connectivity to the broader market, I am happy to announce that Globe will be launching prepaid fiber by June to cater to the underserved segment. This will feature a fully digital experience, coupled with sachet pricing and a host of financing options that's most relevant and accessible to that kind of a market. We felt that the initially launched TMBayan Fiber WiFi last year, which can to sari-sari stores, town plazas and other neighborhood [indiscernible] WiFi hotspots. [indiscernible] to solidify our portfolio of our prepaid segment. Lastly, Corporate Data segment delivered revenues amounting to PHP 4.5 billion, higher by 15% year-on-year on the back of the sustained strong performance of ICT, which increased by 52% year-on-year in terms of revenues. The growth in ICT was led by cybersecurity services, business application solutions, cloud solutions and data center services, consistent with the prior quarter's [indiscernible]. That ends my portion, and I'll now turn you over to Bec for the network updates.

Thank you, Darius, and good morning to all. In the first 3 months of 2023, our capital expenditures amounted to PHP 17.6 billion, lower by 16% year-on-year, and this is consistent with our guidance of reducing CapEx spend following years of record-level investments. Bulk of this amount, or 90%, was allotted for data requirements as a testament of our commitment to enable the digital lives of Filipinos by giving them access to quality health care, education and financial services, including livelihood opportunities. During the first quarter, Globe built 220 new cell sites and upgraded over 3,000 mobile sites to LTE in order to keep pace with the dynamic and evolving connectivity needs of its customers. LTE remains to be the primary technology to deliver mobile data services, hence, our continued investments in this space. On the other hand, Globe continues to scale up the deployment of 5G wireless technology nationwide in step with the anticipated adoption curve on 5G devices. We installed 66 new 5G sites in the first quarter, leading to 5G outdoor coverage of 97.2% of the National Capital Region and 90.2% of key cities in Visayas and Mindanao. Globe also logged 4.3 million devices in its 5G network in March 2023. I am also proud to report that all these investments we have made on the mobile network has allowed us to maintain the excellent quality of our service to our customers. For 4 consecutive quarters now, Globe has been recognized by both Ookla and Opensignal as the most reliable mobile network. This only reflects Globe's continuous efforts to enable the lives of our customers with a network that they can fully rely on as we strive to provide them a consistent experience worthy of their patronage and loyalty. Globe was also the only operator cited and given the 5G experience awards covering 5G video, games and voice app experience. I now turn you over to Tek, who will be providing updates on Mynt.

Thank you, Bec. Good morning, everyone. We sustained our momentum from 2022 and started the year strong built on our focus and commitment to improve our users' daily lives. As of end March, our registered base grew to 81 million users, over 30% more than the same period last year. Moreover, our merchant and social seller base grew to 6 million, up 20% year-on-year, while our cash in and cash out outlets grew to 672,000, 2.5x than last year. We were offering the most number of touch points across our cashless ecosystem, providing the most convenience to our users. We also remained steadfast in our expansion into more sari-sari stores, tricycle operators, public markets and convergence zones, growing by 200% year-on-year, ensuring that we meet our customers wherever they may be. This dominance is further validated by external sources. Our daily active users and monthly active users are now 13x and 6x larger than that of the next e-wallet, and even higher than those of popular social media sites. This is based on the reputable third-party platform, data.ai. One of the highlights of quarter 1 was also being recognized as the Best Digital Wallet in the Asia Pacific by the Asian Banker International Awards. This is a great honor for the whole GCash team that works tirelessly every day to make a difference in the lives of Filipinos. We continuously innovate to -- next slide, please. We continuously innovate to make more financial services available and positively impact the lives of our users. For lending, we ended the quarter with PHP 74 billion total disbursed value across 2.8 million unique borrowers. The real value of what we do is reflected in the following statistics. 2 of every 3 borrowers we have enabled our: one, located outside Metro Manila; two, belong to lower socioeconomic classes; three, are women borrowers. This validates the headway we have made in making financial services available to the financially excluded. Through all these growth in borrowers and loan disbursements, we maintained best-in-class NPL rates across our 3 products. The strength of our products come from our unique ability to preapprove our users powered by our GScore, which is our proprietary trust platform and the most pervasive credit scoring model in the country today; and two, to auto deduct in real time the GCash wallet, enabling increased collection efficiency. For savings, in quarter 1, our GSave base grew to 8 million registered users, 1.4x year-on-year. We now have 4 partner banks and neobanks, CIMB, Maybank, BPI and the newest bank, UNO Bank. Through UNO, we launched our first time deposit product in the GSave marketplace with an interest rate of up to 6.5% per annum. For our insurance marketplace, GInsure, policies sold reached PHP 8.7 million, which is 6x more than last year. We did this by growing our marketplace to 36 products across 8 insurance categories through 16 reputable partners. We have also added travel insurance to our growing product line. This is through Malayan Insurance and Standard Insurance. We continue to be the country's trailblazer in the financial services industry and offer accessible and relevant and impactful products to Filipinos. Next slide, please. At GCash, we continue -- we work for innovation that serves the real needs of Filipinos, whoever and wherever they may be. We value our users' trust and help them to be secure and safe in their use of our app. Recently, we launched GCash DoubleSafe, which helps users protect their accounts by including both OTP and selfie scans under log-in. We've also identified our efforts -- we intensified their efforts to work with the PNP anti-cyber crime group as well as other government agencies to help combat scammers. We enabled our users to plan for their future, while enjoying today. With GStock and GInsure, we give them opportunities to grow their wealth as well as protect their resources from sudden depletion. Through GCrypto and our NFT hub, they can use crypto to enjoy our exclusive collections of digital art, and then all new GGives allows users to pay their online purchases with 0 interest installments in select merchants. We also empower our users to go global. With GCash overseas, Filipino migrants can use the GCash app with their international SIMs in the U.S., Italy, Australia, Japan, the U.K. and Canada. These users can easily send money for free, buy load, pay for their bills of their families back home and do bank transfers using the GCash app all in these countries. Our global pay services enables our users to travel cashless and worry-free without being burdened by high service fee across 9 different countries. More than an indispensable tool for safe and convenient everyday transactions, GCash has evolved into a symbol of hope for many as a partner in building their future. This concludes the GCash updates for the quarter. We continue to solidify our market leadership and reinforce our efforts as a national champion for financial inclusion. I now turn you over now to Natasha for her presentation. Thank you.

Okay, and a pleasant morning to everyone. As discussed in the past, 917 Ventures comprises of growth initiatives on building the future. We ideate, launch, accelerate and scale these businesses that uplift the lives of Filipinos, and these will typically be tech-enabled businesses that fall under our 8 focus areas of fintech, adtech, digital health, education, e-commerce, media and entertainment, B2B SaaS, or our SME solutions and, last but not the least, our newest vertical Climatech. Since 2019, our inception, the 917 Ventures team has vetted over 500 ideas, launched 25 ventures and now have a total portfolio of 12 companies. As mentioned by Ernest earlier, one of our most promising new initiatives is our partnership with Gogoro, where we'll be bringing battery swapping technology and electric scooters into the country. The team is working hard to ensure Gogoro Smartscooters and the entire infrastructure and network are up and running, available to the public before the end of this year. The launch will be driven by our B2C efforts tucked in on [indiscernible], our flexible financing options and a small subset of B2B target customers as well. Another one of our winning initiatives is KonsultaMD. As of last month, we've launched the KonsultaMD super app, creating an even more intuitive and customized experience for patients. Users can now opt for a full suite of medical services, including medicine delivery care of HealthNow and home care, care of AIDE on one comprehensive platform related to where exact needs, from being served in specific dialects to consulting with leading specialists nationwide. We've actually seen traction in growth outside of Metro Manila for not just telehealth consultations, but medicine delivery. And as we expand our partnership network, the strong growth will continue. As KonsultaMD grows, it will look into something to continue expanding basically as well. For example, we recently launched a mental health offering as we aim to become any Filipino's one-stop shop for all their health care and wellness needs. We continue to expand our innovation capabilities to the wider Ayala Group as well. Velocity, our venture incubation program is now in its third year, working with a variety of different companies across the group to foster entrepreneurship in a structured manner. We have seen and continue to expect many of the group's new fastest-growing companies to come from the Velocity. Select portfolio companies and seed ventures borne out of this program include our EdTech portfolio companies, KodeGo and EdVenture, and our venture under [ test and learn ] Housify. That ends my presentation. I will now turn it over to Rizza for the first quarter 2023 financial highlights.

Thanks, Natasha, and good morning, everyone. To recap, gross service revenues reached nearly PHP 40 billion, up 2% year-on-year and flat on a sequential basis, despite all the macroeconomic headwinds. Year-on-year, OpEx and subsidy remained flat. This complemented by our top line growth led to our EBITDA margin expanding to 51%, which is trending above our full year guidance. Depreciation grew by just 1% from the same period last year and was lower by 10% sequentially on the back of last quarter's higher amortization for capitalized leases. Reported net income for the first 3 months of 2023 amounted to PHP 7.3 billion, lower year-on-year due to the onetime gains related to the sale of our data center in the first quarter of 2022. If we take these one-offs out, normalized NIAT would have been steady year-on-year and 55% higher on a sequential basis. Showing our bridge slide in terms of OpEx, marketing and subsidy expenses dropped by PHP 240 million or 13% year-on-year, as we ensured efficiency in our spending on advertising and promotions. Staff costs posted a decline of 2% year-on-year, while provisions also decreased by PHP 602 million or 10% year-on-year due to lower trade provisions. Meanwhile, network costs are up PHP 255 million driven by higher utility and administrative expenses as well as repairs and maintenance charges from the expanded network. This is partially offset by lower lease expense due to the reassessment of certain operating leases to capitalized leases. Interconnect fees increased by PHP 37 million or 11% year-on-year due to the increase of our A2P business, partly offset by the decline in outbound IDD. Lastly, services and other expenses were higher by PHP 586 million year-on-year from higher platform fees and bank charges. Hot off the press, as Ernest mentioned in his slides, last night, we signed a sale and leaseback agreement with Unity Digital Infrastructure for the sale of close to 450 towers. The tower assets consist of 84% ground-based towers and 16% rooftop towers. The sale comes with a commitment to build over 200 towers across Visayas and/or Mindanao, and we expect to raise total proceeds of PHP 5.4 billion from executing this transaction. The towers, which are all located in Luzon, will be leased back to Globe for an initial period of 15 years, and the first close for this portfolio is targeted to occur in the third quarter of this year, with subsequent closings happening as and when we close the conditions or when closing conditions are met. We estimate the pretax net transaction gain from this transaction to be PHP 1.8 billion, reporting and recognition of which will be according to the timing of the transaction closing. So if we summarize our entire sale and leaseback initiatives, I'm pleased to report the turnover of our tower assets to the buyers have been proceeding as planned. To date, we have turned over 3,100 sites or around 44% of the total tower portfolio. Breaking down further, for our partner, MIDC, we have turned over 860 towers, which is 39% of their portfolio. We have also transferred 1,550 towers or 44% to Frontier. Globe generated another PHP 2 billion with the second closing with our partner, Phil-Tower last April, and this tranche translates to an aggregate of 710 towers or 53% of Phil-Tower's total portfolio successfully turned over. We expect to transfer a few more towers over the next few days. So in summary, our total tower sold is at 7,509. Closing to date is at 3-1-20, that's 44% of the total portfolio with gross proceeds of PHP 4.5 billion. Ernest also mentioned that our Board of Directors approved the payout of PHP 25 per share, which on an annualized basis is equivalent to 75% or the maximum of our dividend payout range of 60% to 75% of prior year's core net income. This is proof of Globe's commitment to a sustainable dividend policy that is in line with our earnings and cash flow generation as well as to our commitment of delivering value to our shareholders. The dates for this declaration are the payment date of June 2, and this will be made to shareholders on record as of May 18. Moving on to our balance sheet. Gross debt level is at PHP 234 billion, with unrestricted cash at PHP 16.2 billion. All ratios remained well within our bank covenants, with only a slight increase in our debt during the period. We expect these gearing ratios to further improve through the end of the year, as proceeds could flow in from turnover of the tower assets sold to our sale and leaseback partners. I also have a last slide on reiterating our guidance, which we shared in our last investor call in February. For service revenues, we are guiding towards mid-single-digit growth versus the record-breaking level of 2022, while for EBITDA margin, we are maintaining our guidance of 50%. For CapEx, we are committing to $1.3 billion for the year, as we ramp down our spending and maximize the investments made in the last few years. We are likewise committing to focusing our efforts to free cash flow sustainability, with 2024 CapEx further declining to around $1 billion. As mentioned by Darius earlier on the SIM card registration front, we do not expect impact on our top line, while all investments needed in the implementation of this initiative has been considered in the development of these guidance numbers. Finally, other items for consideration would be to consider the higher depreciation charges expected this year still coming from the elevated CapEx spending from the last 3 years, as we consider the full year impact of the assets booked in 2020. So this ends the portion of my presentation. I will now turn you over to Jomari for the Q&A portion.

Thank you, Rizza. So before we begin the Q&A session, we would like to introduce [indiscernible]. Of course, we have our President and CEO; Mr. Ernest Cu; our Chief Financial Officer, Ms. Rizza; our General Counsel, Attorney Froilan Castelo; our Chief Transformation Operations Officer, Ms. Rebecca Eclipse; our Vice President for Consumer Mobile business, Mr. Darius Delgado; our Chief Financial Officer of Mynt, Tek Olano, joining us via Zoom; our Vice President for Globe Broadband Brand Management, Mr. Raymond Policarpio; and of course, Ms. Natasha Bautista, our Head of Growth and Programs for 917 Ventures. I will now begin the Q&A session. Our first and second questions come from Adel Bermudez of First Metro Securities. The first question is for Rizza. Now the question is regarding [ towers] how much does Globe expect [indiscernible] as gain with the sale and leaseback of telcom towers this year. Also how much would Globe's expected total cash consideration for the same?

Thank you for the question. On a post-tax basis and assuming we are able to transfer the balance of the sites, which I itemized in my presentation, then we would recognize a gain of around PHP 10 billion. Recall, we recognized around PHP 6 billion in post-tax gain last year from closing 34% of the portfolio. So there would still be around PHP 60 billion of gross proceeds left, bulk of which we aim to receive this year. This also includes the Unity transaction that we signed last night, which I mentioned earlier.

Okay. Thank you, Rizza. The next question is for Darius, I believe. The questions, are the SIMs in the wireless broadband, particularly modems, covered by the SIM card registration?

Thank you for that question. So the answer is, yes, wireless broadband is covered by the SIM registration law. And under that law, 4 kinds of wireless SIM types that provide SMEs, [indiscernible] and data services will need to be registered.

Thank you, Darius. The next set of questions come from Arthur Pineda of Citi. Again, Darius, the first question is for you. On SIM registration, the take-up has been quite slow with the hard deadline. Based on the 49% who have registered, what percentage of mobile revenues have been secured? How confident are you that there will be no revenue drop off at the expiry of the registration process?

Thank you for that question. Also we mentioned earlier during the presentation, we have about 52% of our SIM booths of 84 million as disclosed in Q1 2023 already registered, and that translates to 85% of our revenue generating subs. Given also our learning in the last 120 days of implementing the SIM card registration law, we are confident that the additional extension of 90 days will be enough for us to cover the remaining 15% unregistered base.

Thank you, Darius. The next question is for Raymond, I believe. The question is, can we get any clarity on the fixed broadband business? How many subscribers have signed up for the service in first quarter 2023? And where is the company on the prepaid broadband launch?

Thanks for the question. So as mentioned earlier, as of Q1, we already have 1.1 million fixed broadband subscribers with our fiber subscriber base growing 20% year-on-year with the revenues coming off from that business around 30% growth year-on-year. In line with -- to further accelerate the fiber penetration in the country, we are rolling out our prepaid fiber this June. So we are on track for our commercial launch. We're currently wrapping up our user tests with some live customers already. So by June this year, we should be having our commercial launch for our prepaid fiber group.

Thank you, Raymond. The next question is for Rizza. On the cost side, we've seen significant reductions in OpEx and D&A. Is this the new benchmark level going forward? Or were there any adjustments made in the first quarter?

Thanks, Arthur. On the OpEx levels, we are still committed to our guidance of 50% margin for full year 2023. So I believe I mentioned in my presentation that we are outperforming in the first quarter, but we expect this to be muted in the next 3 quarters so that we end at around the 50% guidance. There's a second portion of the question related to depreciation and amortization. And we expect depreciation to continue to increase as we are still continuing our CapEx investments, albeit at a smaller scale than in the past 2 years. In terms of guidance, we can say that our depreciation is -- we'll more or less be posting the same growth level as in 2022.

Okay. Thank you, Rizza. The next question is for Tek. The question is, on Mynt, there was a significant jump on equity contributions in both quarter-on-quarter and year-on-year. What accounts for this significant jump? We were any material expansion -- expansions, rather, on take rates, product offers or GMV?

Yes. Thanks for the question. Without getting into too much detail, the growth in equity contributions is basically driven by, one, the scale as we continue to grow. And the other part is really the diversity and relevance of various use cases. So as we discussed earlier, we continue to grow. Your registered base continues to increase on a year-on-year basis. And we've also been able to scale both -- scale or lending biz services, wealth management and insurance. This combination allows us to kind of grow both the top and bottom lines. Just to note, that there will be periods where these equity contributions might likely swing up and down as determined by our various product launches and our aggressiveness in the market. Thank you.

Thank you, Tek. The next question -- the next set of questions come from Hussaini of UBS. The first question is for Darius -- within the audience, there is a question. On SIM registration, Globe is lagging its peers on the percentage of subs registered. Does it pose a risk of disconnections?

Thank you for that question. So of course, we expect that inactive subs would no longer register. In that case, that will have an impact on the reported cumulative base. However, as mentioned earlier and emphasized earlier as well, that won't have any impact on the revenues as we have substantially registered our revenue-generating base.

Thank you, Darius. Again, the next question is for you. Industry mobile growth remains relatively subdued, although we do know that Globe continues to outperformed it's immediate competitor. What is driving slower mobile growth? Is there a room for telcos to price up as we are seeing in markets like Indonesia and India?

Thanks for that question, again. So firstly, we believe mobile is in an unhealthy state amidst inflationary measures in quarter 1, given the following proof points that you can also see in the MD&A. Number one, [indiscernible] traffic localization, and that is -- also into an increase also in terms of app use across our base by 3% to 4%. That activity is improving among our base translated also into healthy ARPUs. Going across the brands. So first is Globe, 3% Q-on-Q. Total users increasing of [ 3% on basis ], trailed by TM, which is the most financially constrained. And yet, it grew 4% in terms of ARPU. Churn also across the Globe improved, given our base management initiatives, and those losses [indiscernible] including share growth q-on-q, while postpaid [ share has held ]. [indiscernible] already started to implement [ unitization ] efforts since Q4 last year, and we see the results to date. And the business was also being sensitive to the situation with the mass market, whose purchasing power is well known as a little bit challenged. It also helps that our network has been touted as the most reliable network in the Philippines for 4 straight quarters. That's because of the improvements across the 4 key measures that I mentioned earlier. And lastly, we are looking increase 1% versus Q4, where Q4 is a quarter that is seasonally high during the year. So I believe that our [indiscernible] business is in a very good place.

Thank you, Darius, for the comprehensive reply. The next question is for Raymond. When do we expect the drag in the fixed wireless space to be arrested? When will Globe roll out fiber broadband to a wider base? And what is the [ name ] full-fledged fiber prepaid rollout?

All right. Thank you for the question. Well, we are still experiencing the normalization of the fixed wireless space, and we expect this to stabilize immediately after the SIM registration deadline passes, and also as the country fully normalizes from the uncertain use cases brought about by the pandemic. Our wireless prepaid WiFi will continue to provide connectivity, though, for customers in areas not covered by our FTTH as we evaluate these areas' viability. Now even with the expected decline in fixed wireless, we are well positioned to caution this with our fixed wireless business. We continue to accelerate our push for fiber as the demand shifts to more reliable fixed broadband. As we scale up our fiber business, very important is for us to be able to reach the mass market segment which till now remains to be underserved, thus, prepaid fiber. Now for prepaid fiber, while we are very, very keen in ensuring that the fully digital experience that we will launch with will live up to the expectations of the market. We are on track for our commercial launch by June this year as we currently wrap up our user tests that we are doing with live customers.

Thank you, Raymond. The next question is for Rizza. First quarter 2023 costs were well managed. Sales and marketing staff cost provisions were down year-on-year. What drove the decline in those costs? And if the margin in the first quarter of 2023 is sustainable.

Thanks. I think in my presentation, I mentioned staff costs were down 2%, although network costs increased. And with better-than-expected overall performance, then we generated over 50% EBITDA margin. Now we are also continuing our group-wide review of all our costs, consistent with what we did in the past 2 years so that costs that we no longer need to incur are no longer spent, and it can be moved to other new costs that we would need to fund. We are also looking at efficiencies brought about by the spend on our automation in the past 2, 3 years. And so we are working on that overall cost initiative, again, so that spending would be more geared towards the new direction or the new growth areas of the company. But we continue to see that, for full year, we will be within a 50% EBITDA margin.

Thank you, Rizza. The next question also is for you. Where should we see the medium-term CapEx intensity to settle down? Given the very high CapEx spend the last 5 years, can medium-term CapEx to sales ratio go below 20%?

Well, first, our guidance for this year is $1.3 billion in cash CapEx, declining to $1 billion in 2024. Now there are structural issues specific to the Philippines that keep CapEx, and therefore CapEx-to-revenue ratio, high. Like for example, the lack of the national broadband -- a national broadband network. So if you look at like a 20% number, that might not be realistic. However, you also need to consider that there are some investments that are quite significant in other [ markets ] but are not present here. Like our access to frequency is much lower than other regional players, albeit on the flip side, we do pay a lot of frequency-related taxes. So if we look at it from that perspective, you will see that we are actually close to our peers and total network investments.

Thank you, Rizza. The next set of questions come from Matthew De Leon. The first question is, what's the subscriber breakdown between wired and fixed wireless broadband for the home broadband? Raymond, please?

Yes. So for fixed wired, it's 1.1 million subscribers. And we have 1.2 million in fixed wireless base.

Thanks, Raymond. The second question of Matthew has already been addressed earlier, so maybe we'll just share that reply, too, with Matthew.

But I can answer. I can add some answers.

Yes, please go ahead. Yes, go ahead.

Okay. Thank you for that question, Matthew. So first and foremost, there's a significant chunk of the population, like 30% to 40%, who don't have government IDs. And that's why we're also working proactively with the government, especially DICT and NTC, to allow a conditional registration flow so that we can expand the available IDs that customers can use to be able to register. And there's also a question that, but will there be risks to revenues? As I also mentioned earlier, 85% of our revenue-generating base has been registered as of May 4 already. So we're getting safer with the extension.

Thank you, Darius. The next set of questions come from German de la Paz of Abacus. The first question is regarding the SIM card registration, and I think this was already addressed earlier. We'll just share the answer offline with German. The next 2 questions are regarding Mynt, so this is for Tek. For Mynt, do we expect any fundraising in the near term? And are there any updates on the planned listing of Mynt?

I guess, from a capital markets perspective, I think we're still not out of the woods. We still see -- we see a bit of signs of early recovery, and that might signal an opportunity for us to go back into the market. As we're doing this now, we're preparing as if a return to the capital markets might happen in the future, subject to the improvement of the market. In terms of, I guess, on a question of the IPO, we're currently looking towards preparing as if we're going to get there in the next 1 or 2 years. But -- and we're going to approach it on a strategic basis and on an opportunistic basis as well. Thank you.

Thank you, Tek. The next set of questions come from Rachel Rodriguez of Maybank. The first question is for Raymond. May I ask the reason for the drop Q-on-Q of 11,700 in fixed broadband and a huge 234,000 drop in wireless subscribers? What is your outlook here?

Yes, so thanks for the question. The decline really is in line with the expectations from the declining fixed wireless as the market shifts to more reliable wired connectivity. A huge chunk of that churn in wireless subscribers is really coming out from the earlier demand from the acquisitions for the pandemic use cases, study from home, work from home and those kinds of use cases. So as the country normalizes, we do expect that the demand will be shifting to a more reliable connectivity, which is fixed wired, so in line with our trust to accelerate our penetration on fiber -- FTTH.

Thank you, Raymond. The next question is regarding GCash and Mynt, so this is for Tek. Can you give more updates on GStocks? And also, can you perhaps share profit numbers for GCash and Mynt?

On GStocks, I think we've already announced previously that we were planning to launch this together with AB Capital as our partner. We're currently at pilot stage with mostly testing across friends and families, with -- across friend lists. And the plan is to launch this on improved user experience maybe in the next 1 or 2 months. The second question, on profit. I think an earlier slide shows the contribution of Mynt in Globe at $400 million net income. That should be -- that's an indication of the profit levels of Mynt of the -- as of the first quarter.

Thanks, Tek. So at this point, we would now give an opportunity to members of the live audience to ask questions. Please state your name and your company and then your question, please.

I'm Derrick from CLSA. I have a few questions. First on 5G, so you're seeing an increase in 5G in [indiscernible] on quarter-on-quarter basis, considering the past few quarters have been down in demand for that. [indiscernible] expanding your data center services or perhaps constructing new data centers? Then lastly, on Mynt. Regarding your expansion abroad, are you looking at more countries outside of Australia, or Japan and Italy? And what functionalities were you expecting to roll out for these countries?

Thanks. Maybe I'll try and give a stab. 5G is going to be flat, I think. It's remaining flat. There are no significant use cases that appeal to the public at this time. The technology is wonderful, but having 100 mbps on your handset really doesn't really do anything different today with a large group of people. So we expect that, unless something really drastically changes, it should remain status quo, or be natural change, where a person will change your handsets with wired 5G. Your second question had to do with data centers. Just to refresh your memory, we actually carved out our data center business into a joint venture with ST Telemedia Global Data Centres or STTGDC. We are in the process of designing and constructing 128 megawatts complex. It's going to be one of the biggest in the Philippines, if not the biggest, in the Fairview area. That will be broken ground over the next week or so with the first building hopefully up in 12 to 15 months' time. [ We did include that in today's scheme. ] It's a really significant investments, so we are very bullish on the [indiscernible] And very, very [indiscernible]. [ So we're building ] [indiscernible].

And the last question had to do with Mynt. Care to take the question, please?

I can take the question. I think the question was related to GCash overseas, and how we plan to expand outside of the currently 6 countries that we're -- the countries that we're currently available in. The plan is to continue to expand to where large OFW communities would be residing. And this expansion would be in coordination the regulator as well as potential partners in those particular countries that we have our minds set on.

But we have an eye set on localities like Hong Kong, the Middle East, where there's a good bit of Philippine OFW population.

[ Jeff from Ad Invest ]. My question is related to Mynt. Can you give us a feel in terms of how we expect GTV to grow this year? And how did GTV grow in the first quarter? And then just get us a sense also of the monthly active user or daily active users out of that. What percentage of the 81 million registered users are daily or monthly active users? And then also if you can get some color in terms of the GTV breakdown, which areas are growing the fastest in Q1 and also maybe for all of last year.

We don't disclose GTV numbers and MAU numbers per se. But just to give you a picture, I think we've communicated in the past briefings that we were well over our PHP 6 trillion target as of 2022, and we continue to kind of outpace in terms of our own internal forecast in terms of the growth on those GTV. I think more than the GTV per se, what is now very critical to us is the diversity of the products and the use cases that we're currently building. In the past, our GTV was largely on payments and transfers. I think what we're seeing now is there's an over-index in terms of the growth from other use cases, particularly on the lending side, where we're seeing significant traction, both in terms of the -- say, the disbursements, but more so in terms of the revenues given the value differential in terms of the take rates we do on the more complicated services vis-a-vis payments and transfers. On MAU, I apologize, we don't disclose MAU.

[ Jared from SB Equities. ] So my question is, what are the optimizations you could do in you cost base? And is accelerated depreciation of the legacy assets included in this? That's the question.

Thanks for that. Let me answer. There is no accelerated depreciation plan or foreseen for this year. So in terms of optimization of costs, there are actually a lot of opportunities across the board. So in the first quarter, you've seen marketing and subsidy decline. But we'd like to play around with our OpEx depending on the needs, and thus, we're sticking to the 50% guidance. So while there are opportunities, for example, to reduce network costs, these could be offset by the high prices of both electricity and oil or fuel. So there is a balancing act that we need to do, given that this year's inflation has not been expected to be this high. Although it's good that we've seen inflation come down from the 8%, 7% level in the past 30 days.

This is Manuel Castro of Regina Capital. I have a question regarding the towers. Are there any plans to convert existing 5G towers with low traffic for 4G?

The towers have -- there's no solo 5G tower. So a 5G tower is also a 4G tower, so there's no need to do that. Basically, we just add 5G to the existing tower.

Last call for questions from the live audience before we go back to a virtual audience with their follow-up questions. Okay. Next set of questions come from Varun Ahuja of Credit Suisse. First question, I believe, is for Darius. Can you please provide an update on 5G takeup? Also, how do you see the monetization potential over a 2-year horizon?

Thanks for that question, Varun. So as also mentioned by Ernest, there's no real use case for 5G that differentiates it from 4G, especially if you just use 5G in a small smartphone screen. To date, as of March 31, 2023, we have seen 4.3 million 5G devices being active in the network. It's not to say they're using 5G predominantly because the contribution of that in terms of traffic versus 4G is still insignificant. So if we go back to the lack of a use case that actually differentiates the technology versus 4G, especially when you use a small screen. So we don't see any killer use case in the next 2 years, and so the take up the 5G will predominantly be driven by the take up in adoption of 5G devices in the market.

Thanks, Darius. The next question is for Rizza. On CapEx, how much is being spent on the tower rollout currently? Is it not that the coming of the TowerCos have been reducing the tower-related CapEx?

Thanks for that. Bulk of the rollout this year for the passive assets is already through our build-to-suit partners or with respect to the SLB arrangements that we had. So this has helped lower their CapEx such that our guidance, we'd like to reiterate, is at USD 1.3 billion for this year. However, the larger component of network-related CapEx still is with the active equipment, which is still for our account.

Thank you, Rizza. The third question is for Darius. We are seeing the entry of new players on the enterprise side, particularly on the fixed line side of the business. How is Globe looking at the enterprise side of the business?

We've seen -- thank you for that question. So we've seen an increasing digital maturity across the large enterprises, most of which are actually are accounts in Globe. And we expect also the ICT market to continue growing in the midterm. This is a space that we intend to dominate and we actually dominated in Q1, where we have the lion's share of ICT revenues. ICT, we believe, is a growing solution, whereas to solidify [ as we stated, some ] offers in the accounts that we serve.

Okay. Thank you, Darius. Again, we would like to ask the live audience if you still have any questions. If not, we again would like to request those dialed in on Zoom to send their questions to [email protected]. There are no more questions online. So again, we'd now like to turn it over to Ernest for his closing remarks.

Thanks, Jomarie. I'd like to close by just saying thank you to the team for a wonderful quarter across the group, particularly in the [ telecom ] business. Despite the maturing base that we have here in the Philippines, the headwinds brought about to our mass market base by inflation, and the lack of attraction for people going on 5G, we still eked out decent growth numbers that we will hope to sustain over the coming years. I noticed quite a bit of interest in 5G. We are looking at various ways to stimulate revenue and usage. I don't think it's just Globe, it's the whole industry globally looking for some really mass use of the technology to go that could take advantage of the high speeds, the low latency and the high IoT connectivity capabilities of that technology. [ And just feeling of there being ] [indiscernible] [ attended short window, we get another great use case. ] And once that comes out, you can expect Globe to be on it. It's the same, where we were leading use case proliferation for 4G. I also want to talk about the SIM registration. There seems to be quite a bit of concern. I did expect that the numbers will be low. But again, Globe has never done a company that focused itself on SIM cards or subscriber counts. We focus on revenue. And as you heard Darius speak, we're approaching excess of 85% of revenues already registered. So as we stated at the beginning of the SIM registration process, we are confident that this will not have any effect on our revenues. And I reiterate that once again. The other sort of the recurring theme here is on the reduction of fixed wireless customers, prepaid fixed wireless customers. We believe that the plan has been slowing, although as we report [indiscernible] that we will be able to give you a more definitive number as to where bottom is, [indiscernible] [ But we are on the execution that this will be ] we pretty believe that this is highly prepaid-limited. You see -- and evidence to the fact, if you see the numbers for other players in the inventory, including Globe, the acquisition numbers have tapered off over the past year significantly. It's interesting to note that we, as the third player, is the fastest-growing in terms of our fiber base and fiber revenues compared to the competition. [ So we're at peace ] with the way we have entered the market, albeit maybe 12 months later [ into the market ]. So we'll be providing you with more of that. ICT. Again, congratulations to the team for being advantage of recovery of the business sector in the country. And we've been able to take advantage of that by providing more services. And expect more from Globe as we scale up data center, as we scale up IT services. All of those are coming out in the next couple of quarters, you will see from us. GCash continues its lead. I believe it is, importantly, the undisputed leader. I've seen [ one house ] come out with a study that stated that it has 90% of the payments market in the Philippines. Which is not -- we didn't put that survey out. It's one of the investment houses, and a pretty large one, that mentioned that. So we expect to continue that dominance. And we're very bullish on majority of the use cases as payments continue to accelerate, more and more people continue to adopt e-payments in this country. We're also very glad to see that the growth now, funds, [ that arrow ] is no longer timing just from NCR, but coming from the Visayas region. Very shortly, I'm sure, we'll be setting it in the Mindanao region as well as our efforts there being [ in charge ] in the National Capital Region. [indiscernible] as well on lending. As Tek mentioned, funding members have been growing their industry, [ being able to manage numbers ] at excellent standards, even better than we see in most consumer lending companies. In fact, this is because of the continuous [ improvement ] of our GScore. As we described, it is the only score that rates a very high number of citizens in this country. And then, of course, excitement on the new ventures, led by our health tech venture. We just signed a deal with the City of Makati. They are always the first to come up and adapt these new technologies, starting with the city employees, and hopefully soon to launch the 500,000 Makati citizen members. Just wanted to remind. Makati was also one of the first to adopt GCash, with GCash as the de facto standard. This is a sign of things to come [indiscernible] that this country has. And of course, very early in the game, but the Gogoro battery-swapping cycles will be made available to a pilot group already. There is one station here at the tower. If you would like to see it, just go by the driveway and maybe we can show you that. But by fourth quarter, we should have consumer bikes available and the first flagship store available in Makati. Thank you very much for joining us today, both here physically and as well as on Zoom. We've got more people now physically, and this is a good start for us to go on active conversations. Thank you, and have a good morning. Thank you.

Thank you. We have some snacks and refreshments there at the side, so please help yourself. Thank you very much.