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

Good morning, and welcome to the Second Quarter 2023 Analyst Briefing of Globe Telecom. We will begin with a video presentation of our performance and a few updates on the Globe Group to be followed by the Q&A.

Welcome, everyone, and thank you for joining us for our second quarter 2023 analyst briefing. We are happy to report that Globe posted solid operating and financial results in the first semester of this year despite a number of macroeconomic headwinds and encountered during the period. Globe achieved a new record in quarterly revenue of PHP 40.4 billion, which brought our first half revenue to PHP 80.4 billion, also a fresh all-time high. This strong revenue growth was driven by sustained growth in mobile and corporate data and supplemented by the robust performance of our non-telco services. The sustained topline improvement and our prudent cost management resulted in EBITDA reaching PHP 40.5 billion for the first half of 2023, posting 5% sequential growth against the second half of 2022, which operated in a similar macroeconomic backdrop. First half EBITDA margin, which stands at 50% is still within Globe's guidance for the full year. Normalizing NIAT for the semester amounted to PHP 10 billion, higher by an impressive 14% sequentially as a result of the solid revenue performance and the corresponding expansion in margins. Given these results, our Board of Directors approved the third quarterly the cash dividend of PHP 25 per share, consistent with our declarations over the past few years. On our landmarks sale and leaseback initiatives, the tower transfer is progressing well. Recently, Globe generated another PHP 1.4 billion from our first proceed with Unity Digital Infrastructure last July. The company has now raised a total of PHP 49.3 billion from closings to date. We are also happy to announce that STT GDC Philippines, a joint venture between Globe, Ayala Corporation and Singapore-based ST Telemedia Global Data Centres have broken ground on potentially the largest and most interconnected carrier-neutral data center in the country. These updates as well as other operating STT metrics will be discussed in greater detail later in the presentation. Meanwhile, our strategic [indiscernible] continues to bear fruit. Overall, non-telco revenues grew by 52% year-on-year to close to PHP 3 billion and now accounts for 3.5% of total growth service revenue. This was driven by growth across all our subsidiaries with ECPay and Asticom contributing the most, followed AdSpark and Yondu. Our joint ventures and affiliates are likewise contributing to our bottom line, with our net share and equity gains growing by 13% year-on-year to PHP 1.1 billion. Notably, our share in Mynt, in particular, continues to improve, reaching close to PHP 1 billion plus in the first half, which is higher by 63% year-on-year. Mynt to increase its positive contribution to the group's bottom line as it now accounts for 5.1% of the global group income before tax. The wireless segment continues to benefit from the return to pre-pandemic levels of public mobility and growing data habituation with second quarter revenue making PHP 22.4 billion. Year-on-year, first half mobile revenue stood at PHP 54.8 billion, higher by 1%, driven entirely by growth in mobile data service. To put our performance into the proper perspective, this steady growth on the top line was despite the worsened macroeconomic environment [ that has since been ] operating year compared to the same period last year. Data continued to grow, reporting a 5% year-on-year revenue growth, which more than offset the continuing decline in mobile voice and SMS, which dropped by 13% and 10%, respectively. Mobile data now has 80% of mobile revenue from the 77% last year. On a sequential basis, the growing data habituation of Filipinos resulted in a 2% quarter-on-quarter improvement in revenue. Total mobile revenue comprised 68% of the total consolidated service revenue, with a total mobile customer base ending at 82.9 million for the first 6 months of the year. The solid top line growth was also affected by the continued spike in mobile data traffic, which hit more than 2,800 petabytes for the first half. Mobile data ATPU likewise grew, ended up at 13.0 gigabytes per month, up by 25% year-on-year. This was mainly fueled by the growing popularity of streaming and weaker generated content through social media. Globe remains to be the undisputed mobile leader in the Philippines, hedging out competitors in its user count as it logged nearly 54 million registered SIMs as of July 30, the end of a 5-day period following the 7 months of nationwide registration. Based on data released by the NTP, Globe has logged 53.7 million registered SIMs as of 11:59 p.m. on July 30, over 1.2 million higher than the fierce competition. This is equivalent to 62% of our total number of subscribers as of December 2022 and more importantly, represents over 99% of our revenue generating subscriber base. This result is consistent with Globe's guidance that the SIM card exercise will not have any impact to Globe's top line results for the year. To this day, we still experience higher levels of new acquisitions versus pre-SCR surge, more than enough to cover for any downside from SCR. Globe logged a last-minute surge in SIM registrations after the deadline lapsed on July 25, and a brief period for reactivation started on July 26, recording nearly 4 million more registered and reactivated than during the 5-day period. We would like to thank our customers for taking part in this exercise as we work together to keep spam, scam and other forms of online fraud. On the other hand, the home broadband business closed the first half of the year with PHP 12.8 billion revenue from PHP 13.8 million reported in the same period last year. The drop in the legacy and fixed wireless products was partly offset by the sustained expansion in postpaid fiber subscribers and revenues, which improved by 10% and 23%, respectively. Fiber revenues are also buoyed by sustained ARPUs as we focus on quality acquisitions. As of the first half of the year, Globe had 1.1 million fixed private subscribers, lower by 49% year-on-year. We are happy to note that the decline in fixed wireless revenues and operating metrics have begun to slow down in the second quarter of 2023, suggesting we may be nearing the bottom of this trend. The company, though, expects these fixed wireless metrics to continue to decline over the next 4 quarters, with revenues eventually dropping to around PHP 600 million from the PHP 986 million reported in the second quarter of 2023 or approximately a 10% decline reported. Fixed wireless subscribers are likewise expected to normalize in the third quarter, post-expiry of the SIM card registration period as bulk of the sub base in our fixed wireless access products are prepaid. This decline has been factored into the company's overall top line guidance. On that note, and to help cushion this declined, we are happy to report that Globe officially launched the revolutionary offering, GFiber Prepaid last July 20. GFiber Prepaid is designed to reach the mass market segment, which remains to be underserved. It aims to democratize access to fiber connectivity, offering a no-lockup, unli pay-per-use promos and buy now, pay later options with GCash. GFiber Prepaid also provides customers with a fully digital experience from applications, scheduling of installation, account managements through the GlobeOne app. Also as part of Globe's commitment to sustainability and circularity, GFiber Prepaid comes in recyclable and upcyclable packaging, which can be repurposed and used as a laptop stand. Aside for mobile data, we continue to see great traction in corporate data services, with revenues growing by 11% year-on-year to PHP 9.1 billion in the first half. This was mainly spurred by strong demand for information and communication technology services, which grew 36% year-on-year as Globe continues to support businesses in their digital transformation journey. Consistent with the company's efforts to bring free cash flow back to more sustainable levels, Globe invested reached PHP 37.7 billion in capital expenditure in the first 6 months of the year, 25% lower than the same period last year. This is in line with our guidance, the CapEx dropping PHP 71.5 billion or $1.3 billion in 2023. Bulk or 90% of this CapEx was allotted for data requirements as Filipinos continue to increase their time connected to the internet for telework, school, social media, entertainment and online shopping among others. As of June 2023, Globe built 542 new cell sites and upgraded 5,087 mobile sites to LTE in order to meet the rising demand of our customers. We also deployed around 148,000 fiber-to-the-home lines, significantly lower than last year's rollout in order to maximize the utilization of our existing inventory. As the 5G pioneer in the Philippines, Globe continues to deploy 5G wireless technology. During the period, we put up 356 sites across the Philippines, increasing our 5G outdoor coverage to 97.44% of the National Capital Region and 91% in key cities in Visayas and Mindanao. Also Globe logged 5.2 million 5G devices, reaching the 5 million mark in its 5G network for the month of June 2023. As part of our commitment to bring down CapEx spending and bring the company to free cash flow positive territory, the company has already [ dropped ] in purchase order issuances in 2023, which will dictate CapEx in the next 2 to 3 years. Purchase order issuances or PO issuance will become the company's CapEx payment commitments once these become due. Typically, a PO influence is paid in tranches over 1 to 3 years, depending on the terms of the negotiated contract. These terms would include provisions for down payments, retention as well as agreed green milestones of a project that will trigger cash payments. As these POs are paid, they get reported at the end of the company for the year, therefore, high historical PO issuance will lead to high future CapEx spend and vice versa. Globe is coming off of a period of high PO issuances, ending over USD 7 billion from 2019, 2022. Purchase orders for the period increased as the company maximized the opportunities provided by the easing of the permitting process brought about by the Anti-Red Tape law, which was put in place during the pandemic. The company likewise significantly expanded its fiber footprint during this period, rolling out over 3 million [ POs ]. This front loading of investment has been critical to our efforts to become the country's most consistent network and take advantage of the favorable interest rate environment relative to where we are currently. In 2023, aided this investment queueing, Globe's efforts shifted from opportunistic expansion through maximization of network investments to increase the validation. Target full-year PO issuances will be limited to PHP 33 billion or roughly USD 600 million, which is only 1/3 of the historical annual PO average. This drop in PO issuances will allow the company to deliver its CapEx guidance with the market of USD 1.3 billion of CapEx this year and USD 1 billion in 2024 and allow the company to get to free cash flow positive territory sooner without sacrificing network quality and customer experience. As proof of the company's sufficient investment in the network and bolstered by its efforts in network improvement, Globe was recognized by Ookla as the Most Reliable Mobile Network in the Philippines for the fifth time in a row. Globe achieved the highest consistency score of 83.64% in the first and second quarter of 2023. Based on analysis by Ookla of Speedtest Intelligence data, Globe also posted speed improvements for mobile downloads and upload speed in 127 places in the Philippine. In addition, Globe earned the Most Available All Technology mobile network title and was also deemed the Most Consistent Fixed Broadband in some areas in Macro Manila and several provinces in the country for 2Q '23. Globe has also been named the Philippines' strongest brand by Brand Finance, the world's leading independent brand valuation and strategy consultancy. In its 2023 annual report on the most valuable and strongest Filipino brands, Brand Finance highlighted Globe's impressive AAA brand strength rating and brand value of USD 2.028 billion. These achievements underscored Globe's exceptional performance and its exchange of services. Moving on to [ NIM ]. In our growth journey, the focus on GCash has been on democratizing access to as many Filipinos as possible while building a ubiquitous ecosystem to support it. The true impact of GCash is in its indispensability as Filipinos' everyday companion, that introduces and brings them towards digital financial services. We have become the most dominant platform with active users, 9x and 10x back than next e-wallet in terms of monthly and daily active users, respectively, actively as per refutable third-party provider, data.ai. We have built the largest digital financial ecosystem for our users, extending all the way to the [indiscernible] level. As of the end of the quarter, our merchants and social seller base stood at around 6 million; our cash-in and cash-out outlets were at 732,000; and small-scale community outlets were at 935,000. The strength of our cashless ecosystem was proven during the launch of the BSP coin deposit machines. As we only supported e-wallet during the launch of this scheme, we are proud to announce that most of the coins deposited in the machines were accredited to GCash. The strength of the GCash brand was also showcased in the latest public report, where GCash vested well-known banks with an 80% endearment and trust rating, almost 2x higher than competition. All these show that we are ubiquitous and relevant to the lives of ever Filipino. We continue to make a difference as we open inroads to financial services to the unbanked and underbanked. We have now extended loans to over 3 million unique borrowers, disbursing PHP 90 billion of loans life-to-date, through game-changing products such as GCredit, GLoan and GGives, which are all powered by our GScore. This is the core of our vision of finance for all, as over 60% of our borrowers come from lower socioeconomic classes and over 60% are women borrowers. On insurance, we have sold through our GInsure platform over 11 million policies life-to-date. With our GInsure partners, we continue to offer a specified [ selection ] of insurance products for health, accidents, income loss, travel, all within a few clicks on smartphones providing peace of mind for you. On trust, our GSave registered base grew to almost 9 million, a 35% growth year-on-year. We achieved this through a differentiated and seamless product offerings across our growing list of GSave dayparts. The GFunds registered 5 million, up 53% year-on-year, democratizing what was an investment opportunity reserved for a few by allowing users to invest in various funds for as low as PHP 50. Recently, we also launched, GStocks which allows our users access to paid stocks of over 280 listed companies in the Philippine Stock Exchange. This is through our partnership with AB Capital. We also introduced GCrypto in the market through our connection with [indiscernible]. Both these products are geared to break the hurdles of traditional investing through our digital platform. The Filipino remains at the heart of GCash's success, and this is built on our users' trust in the platform and the brand. We remain focused on innovating to ensure the safety and security of our consumers and to honor that trust. As part of our efforts, GCash DoubleSafe and spatial recognition adds another layer of protection for users on top of MPIN and OTP. DoubleSafe works in conjunction with other security features we have instituted such as no links in SMS and e-mails, name masking and sending all notifications to your app inbox. We have successfully rolled out DoubleSafe to 100% of our users. We have likewise doubled down on increasing awareness of scams through our GSafe Tayo media campaign. We likewise work closely with influencers and media groups to educate the public on security and scam prevention. As fraud and scam is an industry concern, we have increased collaboration with various law enforcement agencies and regulatory bodies, and have been working with the NBI, PMC and [indiscernible] among others to heighten awareness against cybercrime. And lastly, together with the Fintech Alliance, we have launched a nationwide cybersecurity awareness and education campaign, standing together with one voice against scams and fraud. Working together with these authorities, we have shown teeth to our campaign against fraudsters and scammers. We have blocked more than 4 million fraudulent accounts, taken down over 800 phishing sites and taken down more than 38,000 malicious social media posts. On the back of that trust, we likewise stay the course and focus on providing our customers greater access to financial services. The launches of GStock and GCrypto and NFTs are milestones that we are proud of. Through these innovations, we are able to further democratize access to financial services. Moving on to other updates present in Globe Group. As stated earlier, STT GDC Philippines has broken ground on potentially the largest and most interconnected carrier-neutral data center in the country. Strategically located in one of the largest cities in Metro Manila, STT Fairview will span over 83,000 square meters and will be made up of 4 buildings. It is expected to provide a development potential of 124 megawatts of designed IT capacity once fully built out, with the initial phase of operations planned for early [ 2024 ]. In addition, STT GDC Philippines has expanded its capacity by a total of 5.2 megawatts in response to high market demand and the continuing digital transformation of the country. It now has a total sellable designed IT capacity of 22 megawatts across its 5 operating data centers. These developments put STT GDC Philippines in a better position to meet the current data demand in the market as well as address the future requirements of our customers, which will translate to future profit and growth. For our corporate builder arm, we are happy to announce that 917Ventures has vetted over 500 ideas, launched 26 ventures and now has a total portfolio of 14 vendors. Just this year, it spun off 3 new portfolio companies: PetPal, our fast and accessible pet care and pet lifestyle solutions and products; Housify, our broker productivity suite that provides quality leads and concierge-level support; and Capitan, our tech-enabled consulting services to hand-hold Filipino entrepreneurs. For other highlights from the existing portfolio, 917Ventures has broken 1,400 merchants acquired or served this year for RUSH. We've placed 200 and have 1,440 graduates KodeGo and have reached over 17,000 tutoring sessions for EdVenture. Lastly, as part of 917Ventures' ongoing mission [indiscernible] and sustainability solutions in the country, together with Ayala Corp. and Gogoro, we are planning to launch Gogoro Smartscooters and battery-swapping technology in the country with public availability in Metro Manila by the fourth quarter of 2023. Moving on to the financial portion of our presentation. To summarize the earlier points, gross service revenues for the first half came in at a record of PHP 80.4 million, 2% higher against the comparable period to 2H '22, which, as mentioned earlier, operated in a similar macroeconomic environment. Coupled with operating expenses declining sequentially, first half EBITDA improved by 5% to PHP 40.5 billion or 50% of service revenue. Normalized net income for the semester stood at PHP 10 billion, posting an impressive 14% growth, while core net income, which excludes the impact of nonrecurring charges and foreign exchange and mark-to-market charges amounted to PHP 9.9 billion, 22% higher sequentially. On a year-on-year basis, first half revenues improved by 2%, while operating expenses increased by a faster pace of 4%. Despite this, however, our EBITDA remained stable with margins well within our full year guidance. The higher OpEx was largely attributed to the step-up in costs for repairs and maintenance, administrative expenses, services and others, as well as depreciation, partly cushioned by lower marketing and subsidy, staff costs, leases and provisions. Reported net income of PHP 14.4 million was lower year-on-year, owing to the onetime gain on the partial sale of Globe's data center assets in the same period of this year. Core net income decreased by 6% year-on-year due to higher expenses related to lease liabilities from the sale and [indiscernible]. Meanwhile, second quarter revenue for [indiscernible] hitting PHP 40.4 billion, a 1% improvement quarter-on-quarter. Operating expenses increased by 5% and reached PHP 20.5 billion, leading to a lower investment of PHP 20 billion. Reported net income for the second quarter amounted to PHP 7.1 billion, while normalized net income reached PHP 4.9 billion. Looking at our costs, total operating expenses and subsidy increased by PHP 1.6 billion in the semester, attributable mostly to higher network costs as our network continues to expand. Specifically, we saw increases in largely the fee charges and repairs and maintenance costs. These increases were partially offset by a decline in lease expenses that were reassessed and reclassified as capitalized leases as well as the reduction in total marketing and subsidy costs driven by the conscious effort to refer lower [indiscernible]. Provisions were likewise lower by PHP 406 million. These movements led to EBITDA remaining stable for the semester at PHP 40.5 billion. Our EBITDA margin, again, of 50% is still well within our full year guidance. As an update to the market on our sales and leaseback initiatives, we are pleased to report that the turnover of [indiscernible] to the buyers continues to progress. To date, we have turned over 3,826 sites, which is around 51% of the total power portfolio. For MIDC, we have turned over 1,020 towers, which is 47% of total portfolio, while we have transferred over 1,880 towers or 56% to Frontier. For Phil-Tower, we've turned over an aggregate 710 towers or 53% of its total portfolio. Last month, Globe generated another PHP 1.4 billion for the first closing with our partner, Unity Digital Infrastructure, so this translates to 115 towers, accounting for 26% of [indiscernible]. Last month, Globe generated another PHP 1.4 billion for the first closing with our partner Unity Digital Infrastructure. This translates to 115 powers, accounting for 26% of their total [indiscernible]. As mentioned earlier, our Board of Directors also approved the payout of PHP 25 per share, which on an annualized basis, is equivalent to 75% for 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 our commitment to delivering value to our shareholders. Dates for this declaration are the payment dates of September 8, 2023, to shareholders on record as of August 29, 2020. Moving on to our balance sheet. Gross debt level is at PHP 250 billion with unrestricted cash level of PHP 25.4 billion, higher by 41% year-to-date. All ratios are well within our back covenants and in line with peers despite the challenging macroeconomic environment. We remain comfortably within that covenant and are expected to improve in the near term, in line with our efforts on shoring up free cash flow and controlling CapEx spending. Lastly, the current macroeconomic environment and industry conditions have prompted us to revisit and revise or outlook for 2023. For service revenue, we are tempering our guidance to mid- to low-single-digit growth versus the high base from last year as consumers continue to struggle with the expanded inflationary pressures that strains disposable income. Despite these external [indiscernible] driven by the weaker ADD figures for the second quarter of 2023, we are very confident in being able to deliver overall growth to the top line. Furthermore, we maintain our EBITDA margin guidance of 50%. On the SIM card registration front. As mentioned earlier, we have registered over 99% of our revenue-generating customers, underscoring our previous guidance of the SCR happening no impact on the top line. And finally, we reiterate our major comments for our 2023 and 2024 CapEx spending. As discussed earlier, our CapEx spend for the year will remain at approximately USD 1.3 billion, a reduction of over 30% from 2022 levels as we shift our focus to optimizing capital deployment and leveraging existing capacity to bring free cash flow to more sustainable levels without sacrificing network quality and performance. This guidance will be enabled by a reduction in PO issuance for the year to only USD 600 million, owing to the opportunistic frontloading of investments during the last 4 years. This fee reduction will directly influence our spending over the next few years and allow us to drop CapEx further to USD 1 billion in 2024. These efforts show the company's commitment to deliver quality results while maintaining financial stability. That ends the presentation. We thank you very much for listening.

Thanks, [indiscernible]. Before we begin the Q&A session, we'd like to introduce [indiscernible]; Mr. Ernest Cu, our President and Chief Executive Officer, is joining us virtually. And also here in person are the following: Froilan Castelo, General Counsel; Ms. Issa Cabrera, Chief Commercial Officer; Mr. Darius Delgado, Vice President of Consumer Mobile Business; Mr. Joel Aquino, Senior Vice President for Network Planning Engineering; Mr. Raymond Policarpio, Vice President for Globe Broadband Brand Management; Ms. Martha Sazon, President and CEO of Mynt; Mr. Vince Yamat, Managing Director of 917Ventures; Mr. Carlo Malana, Chief Executive Officer of STT GDC; and Mr. Carlo Puno, Vice President of Corporate Finance. We will now begin the Q&A session.

[Operator Instructions]. First set of questions come from Gio de la Rosa of Regis Partners. First question, I believe, is for Raymond. Can you give some color on the take-up of the fiber prepaid broadband? How many of your wide home broadband subscribers are increasing?

Thank you. Thanks, Gio, for the question. We recently launched GFiber Prepaid last July 20, so it's too early to comment right now on performance. But we've gotten very good feedback and positive sentiments from the market about it. And we continue to see its potential. What we've been hearing, what we've been gathering from the market is -- what they like about it is that there's no need for documents, the convenience of the application process, the fact that there's no lockup, the price points are quite acceptable to the market. So we continue to see it as an opportunity for us. But unfortunately, we can't comment right now on the performance. Too early to call. Thank you.

Thanks, Raymond. And the next question, I believe, is for Darius. On sim registration, can you give us an estimate of the percentage revenue that the registered SIMs account for?

Thank you for that question. Good morning, everyone. So as also presented earlier, we have effectively covered 99% of our revenue base, with the balance being additively covered by sustained levels of new acquisitions. So even the other day, we have achieved at least 50% more in terms of new acquisitions versus the pre-SCR deadline run rates. And that mitigates any risk that SCR may pose in our revenues.

Thank you, Darius. Your next question is from Gabriel Madrid of [indiscernible]. Question is how many subscribers does prepaid fiber currently have? And is it on track to reach 200,000 subs by year-end? Also, are the majority of these subs new subscribers? Or is the growth coming from migration from fixed wireless?

Again, it's too early to call, can't comment on the performance. But I'd like to say that as far as expectations are concerned, we expect that the growth will come from the key mass segments, particularly those who are financial challenged, those in need of more consistent backup fiber lines. And to the question about fixed wireless, fixed wireless is [ not ] a targeted source of growth as we start moving into fiber. Thank you.

Thanks, Raymond. The next question is for Carlo Puno. On OpEx, can you provide more color on the increase in repairs and maintenance costs? Why our tower maintenance costs higher despite many towers already having been sold off?

The increase in repairs and maintenance cost is effectively driven by 3 things. The first, there is a natural increase because of the expansion of our network. There are some assets and some infrastructure assets that are coming out of warranty, those that we fired up in 2020 and 2021, which as presented, were some of the peaks in terms of our build out. So that's the first reason. The second reason, it is also in repairs and maintenance where we record business application solutions. So these are the costs related to deliver ICT revenues, which are actually increasing as well. Record levels, if I'm not mistaken. And lastly, the increase related to the tower sale in leaseback or the tower maintenance, it is a function of how we structured the transaction. In a normal sort of leaseback, the whole leaseback rate would be [ leased ] rate. However, we negotiate the tower goes to split up that lease rate into 70 -- if you put, for example, the PHP 100,000 lease rate on an average tower, PHP 70,000 would be attributed to leases, PHP 30,000 would be attributed to OpEx. We negotiated this year so that only the 30% actually escalates year-on-year rather than the whole thing escalating in a typical situation on leaseback, so it's beneficial for the company. However, this PHP 30,000 though, gets booked in repairs and maintenance, and therefore, as we share -- as we turn over more towers, we do expect that portion to increase. However, from a holistic perspective, it doesn't capture the whole story because there are reductions in our depreciation. Due to the sale, there's a reduction in other costs like security, interest expense. However, the booking of that new OpEx line related to the tower sale and leaseback is going to be in one line item. Yes.

Thanks, Carlo. Your next question is for Martha. Are there any -- is there any GPV or gross transaction value guidance for GCash for 2023 or 2024?

Over the GPV [indiscernible] on the actual, the level of engagement on the app remains strong and that's just looking at the growth of transactions maybe in the app. But just to give you a flavor of the trends, our daily average transactions year-on-year has grown 1.5x. Then the use case has also increased from -- I don't remember if I'm allowed to revise...

It's okay, Martha. they know that it's been an increasing trend. Anyway, the next question is from [ Zoren Philips ] of SB Equities. I think this question on repairs and maintenance expenses has already been asked -- I mean, answered earlier. We can just share the answers with you, Zoren, off-line. The next set of questions come from [ Adel Bermudas ] from [indiscernible] Securities. The first question, on SIM card registration, I think this was already answered earlier by Darius. We'll just shared the answer with Adel off-line. The next question is for Carlo. How much does -- Carlo Puno, to be more specific. How much does Globe expect to recognize such a gain on the sale from the sale and leaseback of telcom towers year? Also how much would be the expected total cash consideration for the same?

For the whole year, it we were expecting around PHP 12 billion post-tax gain. That's assuming we actually are able to turn over all of the sites this year. Total cash proceeds for the whole initiative is around PHP 97 billion, of which we already got PHP 30 billion last year and around, I think, PHP 20 billion year-to-date July. So we're looking at maybe around another PHP 47 billion.

Okay. Thanks, Carlo. The last question from Adel is -- it's a housekeeping question. What is Globe's smartphone penetration rate and number of active users price in...

Okay. I'll take that question. So LTE phone penetration or smartphone penetration within the Globe base is 95% driven across the 3 brands, but most notably driven by Globe prepaid and postpaid who are the early adopters on digital. And then our active mobile data users as of the second quarter is 37.5 million.

Thank you, Darius. Next set of questions come from Hussaini with UBS. Again, Darius, this is for you -- questions for you. Global revenue growth for Globe is 3% up, merely subdued. What portion of that subdued growth could you attribute to competition? Also, we are seeing competition improvement and price increases in markets like Thailand, Indonesian, [indiscernible]. Can the Philippines follow that path?

Thank you for that question again. So just the context, based on the Q2 declarations, on a purely 2-player mobile industry perspective, we grew faster than industry at 3.5% quarter-on-quarter. The industry just grew 1.8%. So we were technically driving industry growth. And that's actually good growth amidst the persistent economic constraints that the market is being plagued with. Also we've been doing the rounds of optimization across all of our brands, especially the people bands starting Q3 last year. That's why you will also notice in the MD&A, we have disclosed increases in ARPU Q-on-Q, and [indiscernible] a 2% improvement in ARPU, followed by Globe Prepaid at 4%.

Thanks, Darius. Next question is for Raymond. What led to wired broadband starts declining by around [indiscernible] second quarter? Should we expect broadband revenue to stabilize in the third quarter?

Thanks for the question. This is the result of us continuing our tighter acquisition-based management policies. We put it in place as we focus on subscriber quality. This allowed us to sustain our ARPUs, the highest in the industry, which poise our revenues in highly competitive markets even as a focus on quality acquisition, as I said. In spite of this, our fiber revenues continue to grow on a year-on-year basis. And total broadband revenue should be stable as we push ahead with our FTTH programs, both in postpaid and prepaid.

The next question is for Issa, I believe. For enterprise revenue, we incorporate data revenues. It only improved by 1% Q-on-Q. On a year-on-year basis as well, it slowed down. What drove it? And what is the outlook for the second half?

[Foreign Language] Happy to say we did outperform competition in this enterprise space. It is a challenged stream given the extended macroeconomic challenges and as well as the heightened competition in the space, we're seeing other players also coming into the enterprises, them wanting to maximize also their CapEx investments. However, we don't provide specific guidance on this revenue stream of ours. It is big in what we gave us an overall revenue guidance. So we continue to make investments in this space given the growth opportunity that we see. And one of the big drivers of which is actually our big play in investment in the data center space, which will help the revenues for this business for us in the coming years with our partner, STT GDC. At this point, I will hand over to Carlo Malana who can give you a little bit more flavor on our DC investment and our plans.

Thank you, Issa. Good morning. To address that continuing and growing demand for digital infrastructure and you've seen it with increases in digital and cloud and in the foreseeable future as well, will the trend for AI and machine learning. We really wanted to address this, and we broke ground on STT Fairview in May this year after a little over a year since we started the company. This will be the largest, most interconnected carrier-neutral and sustainable data center in the Philippines, with a capacity of 124 megawatts when fully built out. We have started work on the site, and we expect to be operational in early 2025. In the meantime, as I said earlier, we have expanded the capacity in our existing data centers, which will be online this year, putting in 5.2 megawatts of IT capacity by October. And happy to also say that a significant amount of capacity has already been vacant. We are also focused on building digital infrastructure talent in the country and announced our partnerships with several universities last month. And we've seen quite an uptick in customer interest in this space, especially from hyperscalers seeking to expand their local presence in the country.

Thanks, Carlos. Next question, question is for Martha, and this is the very classic question. With improving GCash profitability, what are the plans for its IPO?

Well, our plan is to be push-button ready. So we're focused on growth and in keeping our platform safe and secure for our customers. We recognize though that the market is depressed, and we'll continue to monitor the situation in the development globally and locally. But in terms of fundraising, we have enough funds. As you know, we're profitable. And I think we've created a runway that allows us to delay and return to the capital markets, be private or public until the most opportune time. So we have the flexibility. Hopefully, the situation improves, the extended situation improves so that we can talk more about IPO. Thanks.

Thank you, Martha. At this point, we'll now take questions from the floor. For those who would like to ask questions, please come in front and speak into the mic. Please identify yourself, your company then ask your questions. Thank you very much.

I'm Derrick from CLSA. So we have several questions for prepaid fiber front. First, obviously, the prepaid fiber thing, ARPUs are going to be more compressed on a blended basis for the home broadband. So how are margins for prepaid versus your base postpaid plans? Second, still on prepaid fiber. Is your strategy there on utilizing existing ports? Or will there be additional CapEx increases according to expansion that's outside the metro area? And then how are speeds for prepaid fiber and the data cap compared to your base postpaid plans and your fixed wireless, which is currently declining? And lastly, on the data center front, what's the current data center utilization for the full year STT GCD?

All right. Thanks. I'll try to answer all of the questions. If I forget one, please let me know. So on the prepaid margins, we do expect ARPUs to be lower than what we're currently getting. But as expected already, so that should be compensated by the volume that we expect to get from the acquisitions. In terms of margins, we've been trying to bring down our costs issue in order to keep a healthy margin. Expectation-wise, the prepaid margins from a percentage perspective won't be as far off from where we are at in postpaid, if not better, considering some cost factors would be netted out from a prepaid execution compared to a postpaid execution. In terms of utilization, what we intend to do is currently -- if it's maximizing what we currently have. So we're utilizing current facilities, we have a lot of them anyway that we've been using for postpaid. So we'll be using the same. So we don't expect much additional CapEx to serve the forecast that we have so far for prepaid. In terms of speed, the prepaid -- the Globe Fiber Prepaid is currently pegged at 30 MBPS. Comparing that to your postpaid, your postpaid has a vast range of speeds. So the premium speeds would remain to be for the prepaid -- for the postpaid service rather.

Maybe perhaps I can chime in as well on the margin side, prepaid versus postpaid. Now the product itself, broadband prepaid is designed to be profitable, as Raymond said, if not more profitable than postpaid. Remember, the acquisition mold for this is purely digital. It's all on the GlobeOne app, there is no human intervention, there are no salespeople going knock door to door like what we do with postpaid. There's no heavy store acquisition as well. There is also limited access to customer service. It's also done through app, so that minimizes cost as well. And then there is no billing, and there's no bad debt and churn -- or there is churn, but it's not like the churn we have in postpaid, where we have subsidized installation. We have subsidized the modem. Here, just an upfront payment. As for the modem and installation, that's included in the first month's charge or the charge for the kit. So it's really been designed to increase profits by removing as much costs as possible from the process. So we do expect, just like in the mobile space, that the profitability of prepaid will mirror if not exceed that of postpaid in the future as we gain scale. Sorry, Issa, I cut you off.

No, exactly the same. It was exactly what I was going to say, exactly what you said. Thank you.

And I think there was a question as well on data center utilization. Yes, in terms of our utilization today, I'm happy to say that our preexisting centers are well past the, I would say, 90% range in terms of utilization. That's what's driving the immediate increase in the current capacity in the existing centers, that 5.2 megawatts. We're putting that in this year. Our longer-term play, of course, is to utilize and build up new capacity in the greenfield data center in STT Fairview.

Thank you for that. Are there any more questions on the floor, please?

Stephen here from China Bank Securities. My question is for the mobile business. I just wanted to get a sense where ARPUs are getting post SIM registration.

So they're kind of at the same vicinity as what we have disclosed in the MD&A, as I want to repeat now, we are growing ARPUs Q-on-Q, in the Globe Prepaid side at 4%, but that true winner in terms of ARPU increases is actually the mass market [ RPM ], which has gained ARPUs by 8% Q-on-Q. The growth in the ARPUs gets sustained as we've seen the top-ups really get impacted by SCR.

Are there any more questions from the floor before we turn it over to Ernest for closing remarks? Okay. That's concludes the Q&A portion. Again, thank you to all those who sent in their questions, both online and on the floor. Ernest, any closing remarks you can share?

Yes. Thanks, Jomari, and thanks, everyone, for joining us today. I just wanted to give you my take on the business within the next 5 minutes. I guess the mobile business you've seen, I believe it's quite strong given relative performance to competition, to both the other -- the 2 other players in the market, particularly with the larger player. We've grown very well. Of course, there's headwinds coming. You know that the economy has been slowing down from 6% to 4% and we don't know where that is to. Hopefully, that will be offset a little bit with inflation, also tempering itself and coming down to the low single digits. But we're very optimistic about the prospects on the mobile side of the business as Darius said. Our TM brand has been gaining, and I believe by our own numbers, it is now the third largest revenue brand in the market. And we believe that that's going to continue. Also the competitive environment has been quite benign. We've been able to move some pricing up slowly, and it seems that competition is also responding well to that. There have been no outbreaks of any price wars whatsoever. So we think that both the major players are also focusing on improving the profitability of their respective businesses. On the broadband side, we are continuing to be very optimistic as well about our prepaid business. The response from the public to have tried it, found out about and tried it and signed up, the experience has been very, very good. So we will have to see how well this continues and how well and how fast we can get to educate people about the availability of this product, which we feel really suits the rest of the households today that don't have fiber. And on the CapEx front, you've heard that we have been tempering our spend, focusing more on utilizing what we've built in the past 2 years with the availability of the ease of licensing. We had a break, I think, in the last quarter as well when the executive order extending a lot of the relief on licensing and permitting was provided by President BBM. So we're very happy that, that continues because that will allow both [indiscernible] and telcos to continue the rollout without the impediment of excessive permits. On the GCash front, you heard Martha say that momentum is continuing. There is one aspect that we have been focusing on for GCash, it is improving that security so that we maintain the trust that the public has built up with the public over the past 5 or 6 years. We know the public very much depends on GCash today for their financial transactions and their financial well-being and their financial life. And so it is just incumbent on us to ensure that the app remains very, very secure and that we put in as many safeguards as we can to eliminate fraud, minimize fraud, minimize spoofing, minimize account takeovers and the like. And what you will hear from us in the future is a continued cooperation as well with the DOJ and the various law enforcement authorities to try and get a lot of these scammers who've been, I would say, ruining a good thing for us all. They're present not only in fintech, but they're also present in e-commerce, and I think that's something that we need to all work together to prevent. We're very much a proponent of the anti-mule act that we've been trying to sponsor and push Congress to pass, which is the pushing people to understand that allowing or selling bank accounts, selling GCash accounts, selling your identity for that matter, will be a crime punishable under the law. You will be treated as an accessory to the crime if ever there was one committed using your name. So we're quite aggressively pursuing that. And of course, on the new business front, you heard Carlo. We have good momentum on our data center business. We've broken ground on a very large complex, which goes to show that not only ourselves but also our partner, ST Telemedia GDC is also very bullish on the Philippines as a data center location for hyperscale and global players thereabouts. And 917Ventures continues on its incubation and business building efforts. Our KonsultaMD business is also gaining momentum, and you'll hear a lot more from us in the coming quarters on what we intend to do with that business. So once again, thank you very, very much for today's participation and all the questions that you were asking. Thank you so much.

Thank you, Ernest. And on that note, we conclude the Second Quarter 2023 Analyst Briefing of Globe Telecom. We should thank you again for joining us here on the call. Hope you can join us again for our third quarter 2023 analyst briefing early November 2023. Again, we wish everyone a pleasant good morning. Stay safe. Thank you.