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

Good morning, everyone, and welcome to the Second Quarter 2024 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 2024 analyst briefing. We are happy to report that Globe continued to enjoy strong operating and financial results in the first half of 2024. The company's consolidated gross service revenues during the 6-month period reached PHP 82.2 billion, stronger by 4% year-on-year. This healthy top-line growth was driven by the company's consistently strong mobile and corporate data revenues. On a quarterly basis, revenues remained stable at $41 billion. Note that these figures are already normalized with prior periods adjusted to be comparable with the first half of 2024, where EC Pay was already deconsolidated from Globe's books. This transaction is currently being reviewed by the Philippine Competition Commission. This consistent top-line growth, coupled with effective cost management, resulted in EBITDA growing by 7% year-on-year to PHP 43 billion. On a sequential basis, EBITDA improved by 1%. Our EBITDA margin now stands at 52%, still tracking impressively above our full year guidance. Core net income for the first 6 months hit PHP 11.7 billion, higher by an exceptional 21% compared to the same period last year as the robust EBITDA performance was further complemented by higher equity share in affiliates, fully offsetting the higher interest expense during the period. Sequentially, core net income was 2% higher for the quarter. With that, we are also happy to share the following developments within Globe, each of which will be discussed in greater detail later in the presentation. Firstly, Mynt has successfully secured fresh investments from Ayala Corporation and Mitsubishi UFJ Financial Group, bringing its valuation to USD 5 billion after AC and MUFG entered into binding agreements to each acquire an 8% stake. With this investment round, Global recognize a gain of PHP 2.7 billion from the deemed sale of Mynt. Globe's resulting ownership stake will be 34.3%, while still maintaining our significant minority shareholder position. Secondly, on our sale and leaseback initiative, we have fully closed out our tower turnover with Frontier towers. Total gross proceeds to date has now reached PHP 85 billion. And lastly, given these results, our Board of Directors approved the third quarterly cash dividend of PHP 25 per share, consistent with our declarations over the past few years and reaffirming our commitment to a sustainable dividend policy. Let's start off with the wireless segment. Total mobile revenues hit a fresh all-time high, growing by 7% year-on-year, reflecting the segment's resiliency against macroeconomic pressures and competition. Our market repair efforts are bearing fruit as our customers continue to choose Globe for its sustained world-class network quality and service. The strong revenue growth across all our mobile brands is a testament to the company's robust business model. Mobile data revenues continued to grow, reporting a strong 9% year-on-year increase during the period to $48 billion, also hitting a fresh all-time high and more than offsetting the continuing decline in mobile voice and SMS, which dropped by 2% and 6%, respectively, in the first half. On a sequential basis, mobile data revenues remained stable against the first quarter, extending the strong growth momentum Globe has been enjoying since the start of the year. This momentum is further underscored by our growing mobile customer base, which attests to the continued organic patronage of the Globe brand. Total mobile subscribers reached 59.5 million as of June 2024, higher by 1% quarter-on-quarter. Mobile data traffic soared to 3,256 petabytes as of the first half, spiking by 16% year-on-year. Mobile data ATPU likewise surged by 20% to 15.6 gigabytes. Our mobile data business now accounts for 82% of mobile revenues, up from 80% last year. These mobile revenues, juxtaposed against our growing customer base, led to a minimal decline in ARPU in the second quarter. Nevertheless, these ARPUs have been stable and strong following the SIM card registration period. Deactivating about 30 million SIMs left us with quality revenue-generating subscribers who continue to stay on our network and support the Globe brand. These results also reaffirm the company's commitment to continuously improving customer experience and network quality. Meanwhile, the home broadband business closed the first half of the year with PHP 12.1 billion revenues from PHP 12.8 billion reported in the same period last year. The drop in the legacy and 4G fixed wireless products was partly offset by the sustained expansion in fiber subscribers and revenues, which both improved by 3%. Fiber revenues are also buoyed by sustained ARPUs during the period. Consistent with the company guidance, we reiterate that fixed wireless revenues and other operating metrics are continuing their expected normalization as the market shifts to more stable, wired connectivity post pandemic. The decline is nevertheless decelerating. This trend, along with our latest offering, GFiber Prepaid, is expected to result in positive growth in overall broadband revenues during the second half of the year. We are also happy to share that the company is starting to move to a full digitalization of acquisition channels. The traditional channels are now assisting our customers to the digital app or portal to enable end-to-end application to scheduling. This is in line with the company's commitment to driving digital transformation and improving connectivity and services in the Philippines. Recall that GFiber Prepaid is the country's first end-to-end digital prepaid fiber service. The goal is to eventually do the same with postpaid within the year. This not only enhances the experiences of our customers, it also enables the company's cost transformation efforts in the form of cost avoidance with printing of applications and lower back-end support needed. On that note, we are pleased to share more information about GFiber Prepaid. Customers continue to like the fully digital experience, affordability, reliable network connectivity and convenient loading through GCash and additional application payment channels, GrabPay and ShopeePay in 2Q. This reflects Globe's deep understanding and comprehension of the prepaid consumer market, which predominantly makes up the industry as a whole. GFiber Prepaid has been exhibiting outstanding growth trajectory since its launch in the latter half of last year. Our acquisitions continued to increase, more than tripling in the second quarter. On top of this, the 71% reload rate, which was the highest in 4 quarters, reflects our efforts in acquiring quality subscribers, real intenders that will stay in our network for longer. As a result, we are seeing accelerated growth in service revenues for GFiber Prepaid with 2Q more than doubling the prior periods and 78% of the revenues on 30-day and annual SKUs. GFiber Prepaid continues to have the highest ARPU and reload rate across all Globe prepaid brands. Corporate data also remains to be one of the company's biggest drivers, with revenues growing by 8% year-on-year to PHP 9.8 billion in the first half. This was mainly spurred by the strong demand for ICT services and the steady growth in core accounts, which grew by 9% and 7%, respectively, as Globe continues to support businesses in their digital transformation journey. On a quarter-on-quarter basis, corporate data revenues inched lower by 2%. Non-telco revenues, on the other hand, hit PHP 1.2 billion in the first 6 months as the company steadily delivers life-enabling innovations to solve the everyday pain points of the Filipinos with an unparalleled ecosystem of products and services. Note that this figure already excludes ECPay as the terms and structure of the agreement required the deconsolidation of this business from Globe's books. Our joint ventures and affiliates continue to grow their contribution to the bottom line quite impressively. Our net share in equity gains reached PHP 2.6 billion during the semester, more than double compared to the same period last year and stable quarter-on-quarter. Mynt continues to boost its positive contribution to Globe's bottom line and now accounts for 12% of Globe's net income before tax. Including ECPay, Mynt's equity share more than doubled to PHP 2.3 billion for the first 6 months. Consistent with the company's efforts to bring free cash flow back to more sustainable levels, Globe invested PHP 28.3 billion in the first 6 months of the year for network expansion and enhancement. This is lower by 25% than the same period last year and is in line with our guidance of CapEx dropping to USD 1 billion this year. This figure is equivalent to just 34% of our top line, significantly lower than the 44% CapEx to revenue ratio the company logged in 2023. This is on track with our target range of 30% to 35% CapEx to revenue ratio for the year as the company aims to go back to the industry's average levels. This effort to reduce CapEx spending is in line with the company's continued focus on optimizing capital deployment and bringing free cash flow into positive territory by 2025. Recall, the company's heightened PO issuances in the past led to elevated CapEx payments as Globe front-loaded spending in 2020 to 2022, given the opportunities brought about by the ARTA law. In 2023, we shifted from this opportunistic capacity expansion to maximization of network utilization, effectively allowing the company to return to more sustainable CapEx levels without sacrificing network quality nor capacities. As such, there was a notable drop in PO issuances last year, and this has extended through the first half of 2024. Further to this point, as of 2Q 2024, Globe's free cash flow after interest payments amounted to PHP 6.7 billion. If we were to take out the proceeds from the tower sale and leaseback initiative, free cash flow would still have improved significantly to negative PHP 7.5 billion compared to the negative PHP 28.9 billion we reported in 2023. We expect this position to further improve in the next months, enabled by the previously discussed expenditure levers. Of the PHP 28.3 billion spent, about 91% was allocated 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. Bulk of these investments were made for our mobile network as we shift our focus on the fiber front from rollout and expansion to port utilization. To ensure quality network customer experience for our 5G users, we fired up 256 more 5G sites across the Philippines, increasing our 5G outdoor coverage to 98.45% of the national capital region and 94.19% of key cities in Visayas and Mindanao. As of June 2024, Globe built 352 new cell sites, and upgraded 1,942 mobile sites to LTE. Furthermore, as Globe continues to push the boundaries of digital connectivity to bring the benefits of advanced technologies to Filipinos everywhere, the company expanded its 5G partnerships with 194 partners across 145 destinations. We continue to see the positive impact that these investments have made on our network. Case in point, Globe's core services, which include call, text and data connectivity, remained unaffected during the CrowdStrike software issue that caused a global IT outage last July 19, 2024. The issue was isolated to a few Windows-based workstations that our employees use for work for the most part and some servers that do not materially affect our core services. Globe's network and core services also remained operational amid the nonstop rains and floods brought by Typhoon Carina and the Southwest monsoon. Call, text and data services in areas affected by the typhoon remained operational with isolated cases of interruption due to commercial power outages. Nevertheless, Globe prepositioned personnel for quick response in case of any network emergency. This is proof that the company's network resilience efforts work. Globe also provided connectivity support and other forms of aid for residents in affected areas. This demonstrates Globe's commitment to its customers beyond telecommunications, extending support that underscores its role as a dedicated partner in making sure communities stay connected even amid challenging times. Globe also welcomes President Ferdinand Marcos Jr.'s recent signing of the Anti-Financial Account scamming Act, seem to address prevalent online scans through more robust deterrence and enforcement measures. The company believes this law will complement the Cybercrime Prevention Act and the SIM registration Act, strengthening security measures against ever-evolving scam tactics by fraudsters. In the first half of the year, Globe blocked over 2.74 million bank-related spam and scam messages, a decline of 43.56% compared to the 4.85 million messages blocked in the same period of 2023. This reflects how Globe's collaboration with banks and other financial institutions to curb financial fraud has been working. That ends the first portion of the presentation. Let's now delve deeper into the company's other businesses. As we continue to navigate through an era of remarkable growth and strategic expansion at STT GDC Philippines, we are excited to share our key updates and future prospects with you. Firstly, let's talk about our flagship projects, STT Fairview and STT Cavite 2, which are central to our development strategy. We are pleased to announce that STT Fairview is now scheduled for completion by April 2025. We are on track to complete the structure within the next few months and power up our systems at the start of next year, and we are seeing a healthy pipeline of customers for this project. Meanwhile, STT Cavite 2 has wrapped up its design phase and secured all necessary preconstruction permits. On-site contractor mobilization, site clearing and temporary facilities works are ongoing. The general contractor has been awarded. Long-lead equipment orders have been placed. These developments are crucial as we aim to elevate our IT capacity from today's 22 megawatts to an ambitious 52 megawatts by 2026, more than doubling our current capabilities and reaffirming our commitment to scaling our technological infrastructure. Our current rack utilization rate stands at 80%, demonstrating our strong ability to sell a significant portion of our data center capacity. This high utilization rate reflects robust market demand and the confidence our clients place in our services. Importantly, this figure includes the additional capacity we expanded last year, highlighting our continued growth and effective use of our resources. We have seen positive revenue growth across our key segments. However, it's important to note that market dynamics such as the migration of enterprise businesses to the cloud continue to shape our growth opportunities. Moreover, we are currently in the process of repricing and recontracting initiatives and have achieved 70% of our target, estimated to be 100% by the end of the year. The recontracting also ensures that we have a signed or formal commitment of SLAs to our customers, keeping our services competitively priced while maintaining high-quality standards. Our approach to expansion is also characterized by a strong commitment to sustainability. We integrate cutting-edge technologies and sustainable practices to minimize our environmental impact while improving our operational efficiency and infrastructure resilience. This balanced growth strategy is designed to enhance shareholder value, attract investment and ensure sustainable development. We are grateful for the support and partnership of all our stakeholders as we strive to lead in innovation and set new benchmarks in the data center industry. Moving on to the Mynt portion of our presentation. We are pleased to share with you GCash's growth highlights in the second quarter of 2024, kicking things off with our most recent and exciting announcement. GCash successfully secured fresh investment from the Ayala Corporation and MUFG. This investment pushes Mynt's valuation to $5 billion, more than doubling our valuation of $2 billion back in 2021. Through this deal, both Ayala and MUFG will each acquire an 8% stake in the company after entering into binding agreements to invest in the company for a total cash consideration of USD 786 million. Ayala's direct ownership will hence forth increase to 13%. With their combined expertise and reach, GCash hopes to further expand access to financial services in the Philippines and make financial health and wellness a reality for more Filipinos. Also, with this investment round, Global recognized a gain of PHP 2.7 billion from the deemed sale of Mynt. Globe's resulting ownership stake will be 34.3%, while still maintaining our significant minority shareholder position. Moving forward as it further strengthens its capabilities and customer reach, count on Globe to work more closely with GCash, not only for the core telco business, but also for our life-enabling digital solutions as we help advance the country's digitalization goals. On to our business updates on Mynt. In pursuit of our vision of financial inclusion, now 8 in 10 Filipinos have already used GCash. GCash remains the #1 finance super app in the Philippines and largest digital cashless ecosystem, maintaining a monthly active user base that's 5x more than the next finance app based on data.ai June data. This highlights GCash's sustained relevance and value in the everyday lives of Filipinos. With our continued focus on our customers, we are grateful to be recognized across various awarding bodies in the region. More recently, we've won at the Asia Banking & Finance Fintech Awards and The Asia-Pacific Stevie Awards, citing industry excellence for customer experience, SMEs and digital transformation. In line with this, we aim to empower Filipinos with access to financial services and help them achieve progress. Through lending, we continue to provide Filipino's easy access to affordable credit, having disbursed $155 billion worth of loans, life to date, a 105% growth year-on-year to over 5.4 million unique borrowers. GCash partnered with Farm Konekt to give farmers and fishermen access to noncollateralized loans powered by Fuse. We continue to change the game in the wealth management space, allowing users to save and invest their money for a better tomorrow. GStocks now has 682,000 registered users in just 8 months since its public launch. With GSave, we are making it easier for our 10.9 million users to view and manage their savings with the new GSave tab embedded in the dashboard. Lastly, through GInsure, we have sold 23.8 million policies across 7.8 million users life to date, helping them be ready and bounce back from the most unexpected emergencies. GCash has also teamed up with Oona to offer its smart flight delay insurance to give Filipino travelers extra peace of mind during their travels. Beyond our core, our continued focus on innovation drives our mission to change the game and create meaningful impact in the lives of Filipinos. With Sakto Loan, we have extended credit for as low as PHP 100 to over 400,000 unique borrowers. Ultimately, this product helps these users graduate and avail of higher ticket loans. Through GStocks PH, we have helped boost the number of Philippine investors, where 1 in 5 PSE accounts trade via GCash. Send Money Protect offers users protection against scammers. We have enabled 6.3 million policy subscribers to experience worry-free transactions for just PHP 30 for up to 30 days. We also launched GJobs to provide 1.3 million users with more opportunities to find livelihood and earn additional income. GJobs now has the highest job search traffic among job platforms today. For kababayans abroad, we introduced International bank cash in to enable easier cash into their GCash wallet from 12,000 U.S. banks. We're also happy to share that GCash is now the #2 finance app in UAE, proving that where there's a Filipino, GCash will deliver. Lastly, with GREEN TRANSACTION ALERTs, users can immediately track their environmental impact for every digital transaction. Today, GCash transactions have helped reduce 138,000 tons of carbon dioxide emissions. Last June 28, GCash held Futurecast to enable Filipinos to experience the future of fintech. Here, we introduced 20 new innovations across 7 experienced teams, all inspired by our customers' stories, needs and dreams. Starting with innovations for a safer, app enabled by state-of-the-art security features and products that empower users to protect themselves from cyber threats. We also introduced new app experiences, along with AI-powered technology to enhance customer experience and new green innovations to track end users' environmental impact. For the youth, we're creating next-generation experiences via GCash Jr. And for overseas Filipinos and travelers, we're introducing new global payment experiences. Lastly, we're redefining the future of payments with new ways to borrow and pay, giving users more ways to enjoy using GCash. We are excited to launch these innovations in the upcoming months to bring Filipinos closer to a bright future powered by fintech. Ultimately, these innovations add to our GCash story as we continue to make progress towards financial inclusion and make Filipinos' everyday lives better. Moving on to the financial portion of our presentation. To summarize the earlier points, gross service revenues for the first half amounted to PHP 82.2 billion, higher by 4% against the same period last year. This strong business performance, coupled with the controlled increase in operating expenses and subsidy of just 1% year-on-year, led to EBITDA improving by 8% to PHP 43 billion in the first half, equating to 52.3% of service revenues. This margin is tracking above our full year guidance. Depreciation for the period was 8% higher compared to last year due to continuous CapEx investments and capitalized leases. If we break our depreciation expenses down further, network and nonnetwork-related depreciation increased by just 4% year-on-year. Capitalized leases, which include lease contracts related to our sale and leaseback initiative, spiked by 38% year-on-year. As such, core net income for the semester, which excludes the impact of nonrecurring charges and foreign exchange and mark-to-market charges stood at PHP 11.7 billion, higher by an impressive 21% versus the same period last year. Meanwhile, second quarter revenues were stable at PHP 41 billion, extending the strong momentum that the company reported in the first quarter. With operating expenses and subsidy declining by 2% sequentially, our EBITDA for 2Q reached PHP 21.6 billion, with a margin of 52.6%. Core net income grew by 2% quarter-on-quarter and reached PHP 5.9 billion. Looking at our costs. Total operating expenses and subsidy declined by 2% year-on-year in the first half, attributable mostly to the PHP 827 million decline in services and other expenses on lower miscellaneous bank charges and insurance. We also saw a PHP 822 million drop in marketing and subsidy costs, driven by lower subsidies and commissions, coupled with reduced spending on airtime and placements and merchandising materials. Provisions, likewise, declined by 6% or PHP 312 million. On the flip side, Globe's network costs grew by 4% year-on-year due to higher utilities, supplies and other administrative expenses. We also recognized higher lease expenses during the first half, mainly from joint pole, data center and cell sites. Nevertheless, the net decline in operating expenses, boosted by the strong performance of our business, led to EBITDA growing by an impressive 7% year-on-year to PHP 43 billion in the first half. On a quarterly basis, our total OpEx and subsidy shrank by 2% to PHP 19.5 billion. While we saw some increases in our interconnect fees, marketing and subsidy expenses and network costs, these were fully offset by the PHP 517 million drop in services and other expenses. The PHP 462 million decline in our staff costs and our provision costs decreasing by PHP 179 million. This ultimately led to our EBITDA increasing by 2% sequentially, reaching PHP 21.6 billion. We are also very pleased to give more updates on our sale and leaseback initiative, which is progressing quite well. Globe turned over 746 additional towers in the second quarter of 2024. As of the end of the first half, total gross proceeds stood at PHP 72.1 billion. In addition to this, last July 23, 2024, Globe achieved a milestone in its partnership with Frontier Towers with the closing of the last batch of towers comprising 1,037 sites for a cash consideration of PHP 13.17 billion. This transfer effectively wraps up Globe's tower sale to Frontier Towers, following the closing of a total of 3,529 towers since 2022. To date, Globe has officially turned over 6,628 out of the 7,506 towers included in the sale and leaseback portfolio, generating approximately PHP 85.2 billion in proceeds. In 2022, Globe transferred 2,410 towers, followed by 2,057 the succeeding year. Year-to-date transfers have now reached 2,161 towers, resulting in proceeds of approximately PHP 27.8 billion. The completion of our Landmark tower deal this year allows us a higher level of financial flexibility to manage our leverage ratios and effectively address the evolving consumer demands while ensuring sustainable network expansion. Plans are in place to ensure that we turn over the balance of the portfolio within the year. As a result of the foregoing, our Board of Directors have approved the dividend payout of PHP 25 per share. 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. Key dates for this declaration are the payment date of September 5, 2024, to shareholders on record as of August 20, 2024. Moving on to our balance sheet. Gross debt level was lower at PHP 248.7 billion as of end June 2024 with unrestricted cash level at PHP 18.6 billion. Our gearing remains comfortably within our bank covenants. We expect these ratios to further improve towards the end of the year as the remainder of the proceeds from the turnover of the tower assets sold to our sale and leaseback partners continue to flow in. And finally, we are reaffirming our consolidated outlook for the year. We are happy to report that all things are largely on track. For service revenues, we continue to guide low to mid-single-digit growth versus the record-breaking level of 2023, buoyed by the resiliency of our services against challenging macroeconomic pressures. For our EBITDA margin, we are maintaining a guidance of 50%. On our sale and leaseback initiative, the turnover of the rest of the portfolio is progressing well. The completion of our deal with Frontier Towers is a good indication that we are on track to achieve our goals by the end of the year and will secure the bulk of the proceeds. In line with this, we also reiterate our major commitment to shoring up free cash flow. As stated earlier, this guidance is being buoyed by our reduction in CapEx spend, enabled by the streamlining of PO issuances for 2024 to USD 600 million or less. This more targeted level of POs is a result of the well-executed CapEx plan of the company and will be a leading indicator of spending over the next few years. This will allow us to drop CapEx to USD 1 billion this year and possibly even lower in the subsequent years. These efforts show the company's commitment to deliver exceptional services and quality results, all while maintaining financial sustainability. That ends the presentation. Thank you all for listening.

Good morning again, and on behalf of the Globe team and management, of course, we'd like to thank all of you for joining us this morning's analyst briefing. I've been asked to make sure that there's no dead air. So maybe I can share with you a fun fact about our head office at Globe Tower. Did you know that the shape of our building resembles that of a cell phone signal. There's no truth to the rumor that we spent less on CapEx. That's why spent less on the façade. No, that's not true. Okay. And before we begin with the Q&A session, we would like to introduce the management panel and ask him to join us here in front. First, of course, we have our President and Chief Executive Officer, Mr. Ernest Cu; our Chief Finance Officer and Chief Risk Officer, Ms. Rizza Maniego-Eala; of course, our General Counsel, Attorney Froilan Castelo; and next is our Vice President, Consumer Mobile business, Mr. Darius Delgado. Of course, we also have the President and CEO of Mynt, Ms. Martha Sazon; and also our Senior Vice President for Network Planning Engineering, Mr. Joel Agustin. Finally got that right. And then, of course, our Vice President for B2B, Ms. KD Dizon; and also our senior adviser for the broadband business, Mr. Danny Theseira. Last but not the least, the Chief Executive Officer of STT GDC, Mr. Carlo Malana.

If you'll allow me, we'll now begin the Q&A session. Our first set of questions come from Mr. John Te of UBS. The first question is for Rizza. His -- he would like to ask whether cost growth of negative 2% in the first half will be sustained in the second half. And are you maintaining the 50% EBITDA margin.

Thanks, John, for the question. Yes, we are keeping to our 50% EBITDA margin guidance. And typically, we would see back half of the year, seeing some increase in costs versus the first half of the year.

Thank you, Rizza. The next question is for Darius. Mobile revenue growth was flat quarter-on-quarter, seemingly decelerating in the second Q -- in second quarter rather, with a slight decline in ARPU. What are your thoughts on, one, broad consumption or mobile trends? And two, competition?

Okay. So let's dissect that question, but thank you, John, for that question. So there's a lot -- it's kind of a loaded so let's start with ARPU declining quarter-on-quarter. As you've seen in the MD&A, it's in the prepaid brands that you see, like, PHP 2 to PHP 3 decline from quarter 1 to quarter 2. And that's because June was the start of the school holidays. The school year ended on May 31 and it resumed on July 29. That's why we also see top-ups coming back from the student base in August. The student base, for example, is about 30% of the prepaid base. So whatever happens to the student base in terms of mobility, it impacts the top-ups and there's a lot of offload broadband during the school holidays. However, you will also notice that postpaid, as a brand, actually increased ARPU by PHP 11 because of the increased plan mix, improving plan mix, migration to more SIM-only plans versus device plans, and that contributed to faster ARPU growth. And you've also noticed that from Q1 to Q2 despite an ultra-penetrated mobile market, we gained more than 700,000 net adds. The combined impact of the increase in net adds or cume base of 700,000 customers coupled with the increase in ARPU of postpaid of PHP 11 more than compensated for the bleed in ARPUs of prepaid. That's why you will notice that total service revenues of mobile actually grew slightly from Q1 to Q2 by PHP 140 million. So -- and there's also a question about what are your thoughts on broad consumption in mobile trends and competitive intensity. Let me answer the second one. Competitive intensity is relatively benign. In fact, we're happy to note also that the third player in the mobile industry has started to monetize and become more rational in their SKUs. And then secondly, in terms of mobile trends, we have seen, in our base, more habituation in MDS or mobile data services. We have seen the migration of spend to the mobile brands amongst multi-SIM-ers within the base, and we have seen an increase in days active in MDS amongst our active loaders on prepaid. So that, in summary, tells you net of the impact of the school holidays, ARPUs are absolutely healthy.

Thank you, Darius. The next question from John is for Martha. Martha, John is asking what are your thoughts on Mynt's profitability, having said relatively flat Q-on-Q?

Is it flat?

Yes.

No, no, right? They were -- it's not flat. Do I need to explain. Well, our business continued to grow on all fronts, whether that's payments and transfers, lending and other financial services, even our international and new businesses continue to grow significantly, like ad tech, data tech, insurance, so it's not flat.

Thank you, Martha. Okay. The next set of questions come from Zhiwei Foo of Macquarie. The first question is, could you elaborate on the drivers of the solid Q-on-Q performance of Mynt?

So now it's solid performance, so good. Well, we have a strong payments business where 1,810 Filipinos have used GCash and are connected with 6 million merchants and social sellers. Second, we have a sustainably scaling lending business with life-to-date disbursement of PHP 155 billion that's growing 73% year-on-year and with unique borrowers of PHP 5.4 million already. That's higher, 71%, versus a year ago. And third, a growing wealth management business that I've alluded to earlier, especially the insurance business. With GSave users reaching close to 11 million users already, that's up 27% year-on-year and GInsure users at $7.8 million. That's higher by [ 40% ] year-on-year. There's also a nuance to that. We're not just doing it for the sake of just revenues, but more importantly, a journey towards financial wellness. So in the overall scheme of pursuing financial inclusion, it's important that we don't just enroll them into our platform, but we help them to continue to grow financially and prepare for their rainy days and prepare for that one day. Other pillars of growth are ad tech, data tech, among others, that diversify sources of growth for the company.

Thank you, Martha. Thank you for the insightful and comprehensive reply, so much so that it already answers Zhiwei's second question, which we will share with them offline. The next set of questions is from Pranav Balani of Papa, and the first 2 questions are regarding GCash, which you already answered earlier. So we'll just share with Pranav off-line after the call. Now the third question from Pranav is for Darius. "On the core business, I noticed that mobile ARPU deterioration slowed. How do you see this moving forward?"

Just to be precise, it says here, the question is mobile ARPU deterioration slowed. So maybe let's attack it in 2 fronts. On the postpaid side, it keeps on increasing. If you look at even the previous MD&As, we have been consistently increasing ARPUs on postpaid because we have been improving the plan mix and really pushing per SIM-only plans, which doesn't have dependency on subsidies. On prepaid, it declined because of the school holidays. However, we have seen that smartphone penetration in the base and actually in the entire country is about just 2%. But when you look at the contribution of our MDS revenues to total mobile revenues, it's only 83%. So there's still a headroom to actually habituate more customers to MDS. And therefore, my quick conclusion to your question is, definitely, there will still be growth. It will be driven by continuous growth on MDS, continuous penetration of the base on MDS. We expect sustained growth on an MDS perspective, especially we've seen MDS grow by 9% in -- year-on-year in quarter 2. So we expect sustained growth. Maybe not 9%, but it's not still cognizant of the likely impact of inflation rates coming back up in July, which was driven by fuel, utility, power and water costs going up. In the last year, based on our market research, we have seen also that customers, especially the less affluent ones, will easily trade off spend for the more basic commodities, which are those utilities more than telco. So definitely, there will be impact, but in the sense that we have -- we are confident in the back half in terms of our customer programs and campaigns, we will sustain the growth that we've seen in Q2.

Thank you, Darius. The next set of questions come from Dick Puig of Wealth Securities. I believe these are for Rizza. The first question is, "What is causing the sharp decline, both year-on-year and sequentially in 2Q '24 in nonservice revenues?"

Thanks for the question, Dick. This is due to the lower subsidies that we have as we push for line-only. And the intent really is to lower the subsidy costs that we have. And pushing for line-only also increases our -- or increases the quality of our credit profile.

Thank you, Risa. Dick's second question is marketing, subsidy and utilities costs are picking up in 2Q '24, do you expect this to continue in the preceding quarters?

I think I -- the question earlier alluded to this as well. And yes, we expect expenses to increase over the next few quarters and that -- despite that, our guidance remains at the 50% EBITDA margin for full year 2024.

Thank you, Risa. The next set of questions come from Arthur Pineda of Citi. Can we ask about the annual cash burn on Mynt. With the equity infusion from MUFG, will Mynt need to issue new equity over the next 2 years?

Let me answer that question. First of all, there's no cash burn at Mynt. There has been no cash burn admit since, I think, 2021. The reason we raised the capital for MUFG was to bring in a strategic partner. MUFG presents a wide portfolio of services, and their reach globally provides significant strategic partnering opportunities for Mynt, particularly centered on our lending business. The fact that we issue them equity was just a way to strengthen our relationship with them other than simply a lending relationship, right? So there was really no need for us to raise this money except for the fact that we were bringing in a strategic partner. Now in line with this when we -- when Ayala heard that we were raising money, then they also asked if they could participate in the round, which is a very good show of faith in the PHP 5 billion valuation that we were able to achieve in this particular round. It validates the fact that an existing shareholder will take out some private equity investors at a premium valuation. It just really signifies the belief in the business among our stakeholders. As far as use of funds and priority, it really will go towards lending. It will go towards expanding the international business. You heard in the presentation that it is now the #2 finance app in the UAE. The team has done an exceptional job in building cash-in channels in the U.S. 12,000 banks can now -- customers of 12,000 banks can now cash-in to GE cash for free, basically. So it extends the reach of the Filipinos who traditionally are the biggest remitters of cash to the Philippines as well, right? And the other angle, the other aspect we want to use it for is payments, continue to expand their payments business. I think there was a tourist business also that we're going to develop in the Philippines as well as lending and other things that I already mentioned.

Thank you, Ernest. The follow-up question from Arthur is, of course, is listing still on the cards for Mynt?

It's still in the cards, but I think this particular round of fundraising reduces the pressure on us to go public at any time soon, right? That being said, of course, market conditions, as you know, are not ideal, right? I guess we saw what happened in the last 48 hours to global markets because of some nervousness about the U.S. economy. So really, we are very fortunate. The time, once again, this fund raise, right, before that news came out. And also, I guess, it gives us a lot of runway now to decide when the right time to go public will be.

Thank you, Ernest. We have a follow-up question from John Te. Actually, he would like to apologize since, I think, he was looking at a different company set of numbers, maybe the number 2. A quick follow-up question is, "What are your thoughts on Mynt's strategy of staying primarily a platform for loans and insurances as compared to taking more balance sheet risk having recently secured funding."

Well, we are -- we continue to balance the off-books and on-books ratio of our lending business despite the fact that we have best-in-class NPLs, which we cannot divulge. But we have a very healthy lending business. And to further ensure its sustainability, we're already forward-looking in terms of, like, balancing how it's funded. We entered into strategic partnerships in terms of loan book sale, off-books funding, even as we retain a big chunk on books. So that's our strategy on lending.

Thank you, Martha. There are currently no questions in the queue, and we're already nearing our hard stop, but maybe perhaps we can take 1 or 2 questions from the people here joining us live. If you have any questions, you can step up to the mic, identify yourself and your company.

[ Stephen ] here from China Bank Securities. Just one question for me. Any thoughts on the competition in the prepaid fiber market considering PLDT's recent entry in the business?

Thanks for the question. If you look at the growth of broadband in the Philippines, it's clearly within the socioeconomic class of the D segment, and this is where we believe that the prepaid fiber will thrive in terms of a product offering to the market. So we, together with Converge, is already into that business for prepaid fiber. And we're seeing positive growth and traction month-on-month. And I think, with PLDT coming into the picture, it will just be further connecting more homes within that particular segment. And it's the right offer, because for us, it's done fully digital. You check out in under 5 to 7 minutes. You pay through GCash. And recently, we've also expanded to other wallets, and you can get it installed within 24 hours. And then it's no-contract plan. So you top up and use when you feel like it.

[ Jared Ko ] From AB Capital. Just another quick follow-up question on prepaid. How do you see pricing moving forward? I noticed on GFiber side, you did drop to PHP 700 per your monthly plan as well, and do you see that holding moving forward?

Yes. So we have 7 days SKUs, 15, 30 and annual. What we noticed is a vast majority of our customers are topping up the 30-day and annual SKUs. So right now, ARPU levels are pretty healthy, and we foresee it to continue within the 30 days to the annual SKUs. And our pricing, together with Converge is already pretty competitive. So with PLDT coming into the market, I guess, we'll then see if there are any more shifts happening in that space.

And just to clarify, when you say a 70% reload rate, that's within what time frame are we looking at?

It's looking within a monthly time frame, because while it's prepaid, interestingly, they're behaving like a postpaid where they are topping up in advance either for 12 months or 30 days.

So you can add to that, the reason also why we say it's already the fit for market in terms of the SKUs, and we don't anticipate further price downs that the way we look at the economics of prepaid fiber is that it should be combined in the way we look at the economics of mobile because we're just serving the same household. At the current SKUs, it's less than PHP 30 per day already on GFP. It cannot go any lower because that will be a price war. And it's not like broadband has bigger margins than mobile. So we have to protect the entire portfolio that way. So I think it's a price fit for market. The features are fit for market. When you go feature by feature versus Surf2Sawa and even the PLDT equivalent of prepaid fiber, we are far more superior. And we're the only brand in the market who has been building the equity on prepaid fiber in the market. The others are more postpaid. Even Surf2Sawa is so below the line. So it will take time for PLDT to actually catch up because they're known as a postpaid provider.

Thank you. And since there are no further questions on queue, we'll conclude the Q&A portion. And before I adjourn, will now turn it over to Ernest for his closing remarks.

First of all, let me thank you once again. I think we've got 100 people plus -- 100-plus people in the virtual audience and a good set of analysts here. For the telco business, I think we saw another stable quarter. I think Darius gave you a good feel for competition being -- continuing to be benign and the pricing stability is still in the market. I think -- and I anticipate that both telcos will show pretty good results in this particular quarter. We also are well on our path to being cash flow positive. The CapEx has been reducing. You can see the gearing is also coming down for the main business as well. And we are definitely showing great signs on the prepaid fiber side of the business. The recent moves of the team, congratulation to Danny and the team, I think, have been really fruitful in terms of boosting up the volume. We will be talking about this a little bit more in the succeeding quarters. I think the -- finally that the promise that a digital -- all-digital way of acquiring customers is quite effective. It does take a while to get to where we are today, but it is indeed the way to bring about reduced cost, high quality of acquisitions and stability in our acquisition base. Of course, GCash, that's the news of the month, I would say, or the quarter. with the Landmark valuation that Martha and team. I'd like to publicly congratulate Tek Olano, the CFO, for the hard work on bringing this in. As I mentioned, this was not a planned round. It came about through discussions on trying to expand our lending business. And as luck would have it, we, again, got the big fish in terms of one of the largest financial institutions in the world. Our hope is that the MUFG partnership will be akin to the [ AC ] partnership were totally transformed the business with their tech platform. Maybe we can transform the business, the lending business with MUFG's platform. So the team continues on its way into building the various facets of the fintech business of Mynt. There -- as Martha mentioned many times, ad tech, data tech, as the other non-fintech nonfinancial businesses that we have, but are beginning to gain scale as well. So you can start to see a very diversified revenue base for Mynt very shortly in the succeeding quarters here. We also expect, with Ayala's increased equity in the company, that we will be able to drive more synergies and closer synergies within the other members of the group. I think there'll be more impetus now with their ownership of 13% coming up. So again, continuing to be very, very optimistic about the prospects of Mynt. And Martha and team are working very hard to ensure that the lead and the dominance remains in the Philippines. Another business that's coming into view is our data center business. I think -- what we wanted to show you guys today was this is not all smoke and mirrors. We were indeed building this behemoth of a facility in Quezon City. And you can see how big this thing is because that is on a facility with land area of around 5 hectares, right? It's going to be the largest data center in the Philippines at 124 megawatts. And we are very optimistic given the demand brought about by AI revolution that we will be there to capture this beginning the second quarter of 2025 when we inaugurate the facility. So I suggest you also keep your eyes peeled on that particular business, and it could be the next one that Globe will scale. With that, again, thank you very much for being here today, and see you next quarter. Thank you.

Thank you, Ernest. And on that note, we conclude the Second Quarter 2024 Analyst Briefing of Globe Telecom. We should thank, again, all of you who joined us here and in the call. We hope you'll join us again for our third quarter 2024 analyst briefing in early November. Again, we wish everyone a pleasant good morning. Stay safe, everyone.