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

Welcome, everyone, and thank you all for joining us for our third quarter 2024 analyst briefing. We are pleased to report that Globe saw yet another strong quarter this year, reporting healthy operating and financial results in the first 9 months. The company's consolidated gross service revenues during the period hit a record PHP 124 billion, higher by 4% year-on-year. On a quarterly basis, revenues grew by 2% to PHP 41.8 billion, growing quite healthily despite external pressures. Demand for our data-related services continued to drive growth in our top line. Note that these figures are normalized with prior periods adjusted to be comparable with the current period wherein ECPay was already deconsolidated from Globe's books. This transaction is currently being reviewed by the Philippine Competition Commission. The company's top line resiliency, complemented by our optimized cost management, resulted in EBITDA growing by 8% year-on-year to a record PHP 64.9 billion. On a sequential basis, EBITDA improved by 1%. Our EBITDA margin was sustained at over 52%, still tracking well above our full year guidance. Core net income for the 9-month period meanwhile hit a record PHP 17.6 billion, up by an impressive 22% compared to the same period last year as the robust EBITDA performance was further bolstered by higher equity share in affiliates, fully offsetting the increase in nonoperating charges. Sequentially, core net income for the period was stable at PHP 5.9 billion pesos. 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. First, the company recently announced the appointment of Mr. Carl Raymond Cruz as Deputy Chief Executive Officer of Globe, effective January 1, 2025. This transition is part of a broader leadership succession plan that is in line with Globe's forward-thinking approach and long-term vision. Second, Globe's equity share in Mynt more than doubled to PHP 3.7 billion, sustaining its outstanding growth trajectory. Third, STT GDC Philippines is on track with its data center builds. STT Fairview is set for ready for service in the second quarter of 2025, while STT Cavite 2 is set for RFS in late 2025. And lastly, given the company's strong results, our Board of Directors approved the fourth quarterly cash dividend of PHP 25 per share, consistent with our declarations over the past few years and reiterating our commitment to a sustainable dividend policy. Starting off with the wireless segment. Total mobile revenues hit a fresh record high of PHP 87.7 billion in the 9-month period, higher by 5% year-on-year. On a quarterly basis, revenues were stable at PHP 29.3 billion, reflecting the business resiliency against external pressures as we continue to monetize data. During the third quarter, we launched a series of innovative offers aimed at uplifting the everyday experiences of our customers. This customer-centric strategy, coupled with our continued market repair efforts resulted in revenue growth across all our mobile brands, postpaid, Globe Prepaid, TM and GOMO. Note that this growth was also achieved notwithstanding the typhoons that led to disruptions in mobility and traffic during the 3-month period. For context, there were nine recorded typhoons in the country in the third quarter alone versus just one in the first half, alongside the six states of calamity declared due to floods. The continued expansion of our mobile business underscores Globe's effective monetization efforts and, at the same time, commitment to providing the Filipinos with superior network connectivity at all times. Meanwhile, mobile data revenues continued to improve, growing by 9% year-on-year to PHP 72.9 billion, a fresh all-time high. This more than offset the continuing decline in mobile voice and SMS, which dropped by 5% and 13%, respectively, in the first 9 months compared to the same period last year. On a sequential basis, mobile data revenues grew by 3%, sustaining the growth Globe has been enjoying since the start of the year. The resiliency of the wireless segment is also underscored by our growing mobile customer base, a testament to the continued organic patronage of the company's brands. Total mobile subscribers grew by 10% year-on-year and 1% quarter-on-quarter to 60.2 million. Mobile data traffic soared to 4,843 petabytes as of end September, spiking by 11% year-on-year. Mobile data ATPU likewise surged by 12% to 15.4 gigabytes. Our mobile data business now accounts for 83% of mobile revenues, up from 81% last year. This higher mobile subscriber base led to a minimal dip in our blended ARPUs for the third quarter. Nevertheless, these figures have remained stable and strong since the end of the SIM card registration period last year, reflective of our quality subscriber base. Note as well that much of the decline in our ARPU was due to the shrinking voice and SMS revenues as customers continue to shift to data-related services. These results reaffirm Globe's commitment to consistently improving customer experience and network quality as more and more users join the Globe ecosystem. Moving on to the broadband business. We are pleased to report that GFiber Prepaid or GFP, continues its outstanding growth trajectory since its launch in the latter half of last year. As of the first 9 months of 2024, GFP acquisition surged by 52x compared to 2023. GFP continued to expand rapidly, achieving a subscriber base of 146,000 and demonstrating exceptional customer engagement with reload rates reaching an all-time high of 81%. This growth reflects Globe's effective customer acquisition strategy, with GFP acquisitions, specifically doubling quarter-on-quarter, underscoring a robust market demand for flexible and affordable prepaid fiber services. This growth reflects Globe's effective customer acquisition strategy with GFP acquisitions doubling quarter-over-quarter, highlighting robust market demand for flexible and affordable prepaid fiber services. GFiber Prepaid is also seeing world-class NPS or Net Promoter Score comparable to global brands as it strives to offer the fastest speeds at the most affordable rates. In addition, Globe launched a new high-speed Internet offer through GOMO Fiber in the third quarter. This is another industry first for the brand as it introduces a true digital fixed mobile convergence product in the country. Just like its mobile services, GOMO Fiber gives customers the freedom from long-term contracts and complicated billing. These innovations highlight the company's commitment to delivering seamless and accessible Internet solutions tailored to meet the diverse needs of customers. These new services were also essential to Globe's planned rightsizing of offerings, all part of the company's strategy to manage and safeguard the broadband subscriber base. The total home broadband business closed the first 9 months with PHP 17.9 billion revenues. While this is slightly lower year-on-year, the slowdown continues to be driven largely by the reduction in fixed wireless services. Our fiber business continues to expand with revenues and subscribers growing by 2% and 10%, respectively, as our GFiber Prepaid service gains traction. Fiber revenues are likewise buoyed by sustained ARPUs during the period. To ensure optimized performance, Globe also implemented a strategic rightsizing of its broadband offerings, aligning its subscriber base with individual usage habits, which contributed to a 7% year-on-year increase in fixed wired subscribers while optimizing focus on high-value customers. These results showcase Globe's commitment to adapting its broadband strategy to meet the evolving needs of Filipino households. This strategy not only protects Globe's subscriber base and minimizes churn, but also improves overall utilization. Moving on to corporate data. Revenues grew by 14% year-on-year to a record PHP 15.5 billion in the first 9 months. Sequentially, it improved by 18%. This was mainly spurred by the strong demand for ICT services and the healthy expansion of our core accounts, which grew by 16% and 13%, respectively. Corporate data remains to be one of the company's biggest drivers as Globe remains dedicated to providing customized digital solutions tailored to meet the needs of its business clients. Non-telco revenues, on the other hand, hit PHP 1.8 billion in the first 9 months, mainly due to the deconsolidation of ECPay from Globe's books following the sale of its 77% stake to Mynt. If this deconsolidation had been factored into Globe's records during the first 9 months of 2023, the overall nontelco revenues would have been lower by only 15%. Our joint ventures and affiliates continue to grow their contribution to the bottom line quite impressively. Our net share in equity gains reached PHP 3.9 billion in the first 3 quarters, more than double compared to the same period last year. Mynt on the other hand, continues to boost its outstanding contribution to Globe's bottom line and now accounts for 14% of Globe's net income before tax. Including ECPay, Mynt's equity share more than doubled to PHP 3.65 billion for the first 9 months of 2024. Consistent with the company's efforts to bring free cash flow back to more sustainable levels, Globe invested PHP 41 billion in the first 9 months of the year for network expansion and enhancement. This is lower by 24% 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 33% of the company's top line, significantly lower than the 44% CapEx to revenue ratio 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 goes back to the industry's average levels. This effort to reduce CapEx is in line with the company's continued focus on optimizing capital deployment as well. Recall, the company's heightened purchase order or 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, which has extended through 2024. Our year-to-date POs amounted to just USD 376 million, down to just 53% of actual cash CapEx. For context, PO issuances during the height of the company's spending were equivalent to 122% of annual capital expenditures. Further to this point, as of third quarter 2024, Globe's free cash flow after interest payments amounted to PHP 13.2 billion. If we were to exclude the proceeds from the tower sale and leaseback initiative, free cash flow would still have improved significantly to negative PHP 14.1 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 capital allocation levers. As in past years, the bulk of our CapEx 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. Majority 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 378 more 5G sites across the Philippines, increasing our 5G outdoor coverage to 98.51% of the national capital region and 94.91% of key cities in Visayas and Mindanao. Year-to-date, Globe has built 684 new cell sites and upgraded 2,723 mobile sites to LTE. Furthermore, as Globe continues to push the boundaries of digital connectivity and bring the benefits of advanced technologies to Filipinos everywhere, the company expanded its 5G partnerships with 133 inbound and 161 outbound global partners in 86 destinations, enhancing opportunities for seamless connectivity and collaboration. We continue to see the positive impact that these investments have made on our network performance. For example, Globe was quickly able to restore services in areas that experience network outages due to power failure caused by Typhoon Kristine. In the aftermath of the storm, Globe provided connectivity support in areas worst hit by establishing Libreng Tawag, Libreng Charge sites. Globe also actively responded to the impacts of consecutive typhoons, Leon and Marce, following Kristine, focusing on network restoration and community support in the affected regions. The company made sure to preposition technical support crews along with supplies and emergency equipment to ensure timely assistance. Globe continues to be the only telco in the Philippines with an MSCI ESG rating of AA and Five Golden Arrow Award from the Institute of Corporate Directors. The company's partnerships with ACEN Renewable Energy Solutions and First Gen Corporation drive our progress towards our net zero ambition. In line with advancing a holistic diversity, equity and inclusion strategy, we marked the pride month with several activations promoting self-expression and authenticity. True to the Alagang Globe commitment, the company was also the first telco not just in the Philippines, but also in Southeast Asia to join the Working with Cancer pledge. Our efforts to block harmful online content and expand digital literacy programs, empower a digital-first Filipino society. Globe also continues to assist communities, supporting the next generation of engineers and expanding partnerships to support the Hapag Movement. These, alongside our workplace awards, policies and public disclosures, reflect Globe's dedication to responsible business practices. Moving on to other significant company updates. Globe recently announced the appointment of Carl Raymond R. Cruz as Deputy Chief Executive Officer effective January 1, 2025. As Deputy CEO, he will be reporting directly to the CEO, managing the day-to-day activities of the company. Mr. Cruz will be nominated to the position of President and CEO of Globe Telecom in the company's Annual Stockholders Meeting or ASM scheduled for April 2025. Until then, he will report to Ernest L. Cu, who will continue as President and CEO of Globe Telecom until the 2025 ASM. Going forward, Mr. Cu will continue to hold Chairmanship for Kickstart, STT GDC Philippines and 917Ventures as well as Mynt, the holding company of GCash. Mr. Cruz brings with him a proven track record gained from his various leadership roles in other markets as well as the Philippines. He was recently the CEO and Managing Director of Airtel Nigeria, the largest operating company of Airtel Africa, where he is credited for growing the company's subscriber base and mobile data business despite the macroeconomic challenges. These leadership changes are part of a broader succession plan that reinforces Globe's long-term vision. Mr. Cruz will be supported by an experienced management team, helping to ensure strategy continuity. Globe's key officers have been with the company for decades, providing stability, industry expertise and the institutional knowledge needed to ease Mr. Cruz into his new role. Last September 2024, Globe appointed Darius Jose R. Delgado as Chief Commercial Officer, succeeding Maria Louisa Guevarra-Cabreira, who will transition into the role of Leadership Development Adviser, reporting to the Chief Human Resources Officer. Mr. Delgado brings over 3 decades of experience and leadership to the position and has been instrumental in shaping the company's strategic direction across various domains, including strategy, sales and marketing and audit. Also, most recently, we announced the retirement of our Chief Finance Officer, Treasurer and Chief Risk Officer, Rizza Maniego-Eala. She was a driving force behind Globe's success, guiding the company through some of its most challenging periods and delivering landmark achievements that shape the company's future. Succeeding her is Juan Carlo Puno, as Chief Financial Officer, Chief Risk Officer and Treasurer, this October. Mr. Puno has played a pivotal role in shaping Globe into a dynamic group of companies. His extensive experience in corporate finance, financial planning, risk management and corporate strategy makes him exceptionally well suited to lead as the company enters into its next phase of growth. Next, let's look at Globe's other ventures. For STT GDC Philippines, construction of key projects, STT Fairview and STT Cavite 2 are on track. For STT Fairview, the project is progressing smoothly with construction on schedule and structural completion anticipated by the end of 2024. By early 2025, we will launch operations for our initial customers with a full ramp-up to 12 megawatts of IT load by the end of the year. This phased rollout allows us to strategically align with market demand and maximize revenue potential as indicated by our strong sales pipeline. The facility is ready to cater to the Philippines expanding artificial intelligence landscape, offering carrier neutral and seamless connectivity options. Furthermore, STT Fairview integrates emerging green technologies to ensure energy-efficient and environmentally friendly operations, making it one of the most sustainable data centers in the region. Turning to STT Cavite 2, construction is already in full swing. We have transitioned from the design and planning phases to active structural work, and we are on track for structural completion by early 2025, with the site expected to be ready for service by late 2025. This development will contribute an additional 6 megawatts of IT capacity, addressing the growing needs of our clients and fortifying our position in the market. Combined, these projects are set to increase our total IT capacity from the current 22 megawatts to 52 megawatts by 2026. This expansion underscores our unwavering commitment to scaling our operations in response to robust market growth and rising client expectations. Our operational performance remains strong, highlighted by an impressive 80% rack utilization rate, which includes contracted space. This high utilization level is a testament to our operational efficiency and the trust that our diverse client base places and our capabilities, reflecting stability and reliability in our offerings. Beyond capacity expansion and operational efficiency, our commitment to sustainability remains a core pillar of our strategy. We are proud to share that. As of today, STT GDC Philippines is powered entirely by 100% renewable energy, marking a significant milestone in our environmental initiatives. We are also implementing off-grid charging solutions for our fully electric vehicle fleet, further enhancing our carbon reduction efforts. These initiatives are in line with global ESG standards, reflecting our role as a leader in sustainable data center operations and meeting the increasing demand for green infrastructure from both clients and stakeholders. In summary, we are confident that our strategic investments in infrastructure, technology and sustainability will not only strengthen our market position, but also drive long-term value for our stakeholders. Our focus on operational excellence, client satisfaction and environmental stewardship ensures that we remain well positioned to meet the demands of a rapidly evolving industry. Let's talk about Mynt now. Last October, GCash celebrated 20 years of empowering Filipinos with financial access through digital innovations. Today, GCash stands as a national champion for financial inclusion, where 8 in 10 Filipinos have now used GCash. We also continue to drive access for underserved segments. Now 92% of GCash users are from low income brackets, 78% are from outside of Metro Manila. 56% are from younger generations and 55% are female. Beyond consumers, GCash has also emerged as a key enabler of Filipino MSMEs with over 6 million merchants and social sellers in the largest cashless ecosystem in the Philippines. We continue to enable Filipinos to go cashless with 929,000 cash and cash out agent networks and drive digital transformation via the government's Paleng-QR program with 134,000 Paleng-QR merchants powered by GCash. GCash continues to be an empowering partner to the Filipinos, enabling them in their daily lives even as we help them to build a better future. We are working closely with public and private sector partners to journey our users towards financial health. Recently, we held our first-ever Inclusion in Action Summit with key stakeholders from the BSP, Department of Finance, NEDA, ADB and the UN Capital Development Fund. The summit emphasized the role of digital finance in pushing financial inclusion in priority underserved sectors. In the wake of Typhoon Kristine, GCash once again served as a donation portal to extend financial assistance to all those affected, sparking Filipinos' bayanihan spirit. In the same spirit, we provided a 1-month grace period on GLoan and GGives payments. To further drive access among the Filipino youth, GCash has been touring schools across the country as far as Zamboanga with [ GForMore ]. In partnership with the PSA's national drive, the project aims to jump-start the youth's financial journey by enabling students to register with GCash using their national ID for verification. The campaign has reached nearly 16,000 college students across 20 campuses with additional schools in the pipeline. In line with empowering Filipinos wherever they are, GCash Overseas is now available in 16 OFW-rich countries, helping overseas Filipinos to support their loved ones back home. Now Filipinos abroad can directly cash in from U.S. banks and coming soon for U.K. and EU banks too, and even access high interest deposits via GSave. At GCash, our goal is to empower Filipinos with the financial services that will help them to thrive today as well as prepare for their future. Starting with payments, GCash has enabled 1.2 million enterprise in Filipinos to gain access to digital solutions from payments to data with GCash for Business, we continue to provide tailor-fit solutions for Filipino businesses regardless of their size. Our GCash Pera Outlet network has also grown to 175,000 Pera Outlet retailers, 23% higher than previous year. We continue to enhance their experience with Pera Outlet Plus, which will allow them to easily track their business and transact with more billers. Through lending, we continue to provide Filipinos access to fair loans. Today, GCash has extended credit and loans to over 6.9 million unique borrowers, an increase of 105% from last year. This is powered by our in-house credit score, GScore, which allows us to identify eligible users based on their behavior on the app. For everyday essentials, Sakto Loans has helped Filipinos with access to small ticket loans as low as PHP 100. In the wealth management space, we continue to change the industry landscape, giving more users easier access to better products. GStocks now has 877,000 registered users, just 9 months since its public launch. With GSave, we now have 11.8 million users benefiting from our wide array of products. And with the new GSave tab, users can easily view their savings as they build their wealth with GCash. Through GInsure, we have sold 35.5 million policies to 11.1 million users life to date, helping them be financially resilient in case of an emergency. With Send Money Protect, we have embedded insurance in our top use case, so users can protect themselves from scams. We are excited to continue introducing innovations and empower more Filipinos as we pursue our vision of finance for all. Now moving on to the financial portion of our presentation. To summarize the earlier points, Globe's gross service revenues for the 9-month period amounted to PHP 124 billion, higher by 4% against the same period last year. This strong business performance, coupled with relatively stable operating expenses and subsidy, led to an 8% year-on-year expansion in EBITDA to PHP 64.9 billion. This is equivalent to 52.3% of top line, tracking above our full year EBITDA margin guidance. Depreciation for the period amounted to PHP 37.3 billion, 8% higher compared to last year due to continuous CapEx investments and capitalized leases. If we break our depreciation expenses down further, network and non-network related depreciation increased by just 3% year-on-year. Capitalized leases spiked by 39% year-on-year. Nonoperating charges increased by PHP 1.5 billion driven by higher interest expenses and lower gain on our tower sale and leaseback tempered by higher equity share in affiliates. For the 9-month period, our core net income, which excludes the impact of nonrecurring charges and foreign exchange and mark-to-market charges, stood at PHP 17.6 billion, growing by an impressive 22% year-on-year. Meanwhile, on a sequential basis, revenues expanded by 2% to PHP 41.8 billion, extending the strong momentum that the company reported in the first semester. With operating expenses and subsidy declining by 2% sequentially, our EBITDA for third quarter reached PHP 21.9 billion with a margin of 52.4%. Depreciation was slightly higher by 1% versus the last quarter. Nonoperating charges closed at PHP 2.4 billion versus last quarter's income of $0.6 billion, mainly coming from lower tower sale proceeds and higher net interest expense. Core net income for the third quarter, nevertheless, remained stable at PHP 5.9 billion. Looking at our costs for the 9-month period, total operating expenses and subsidy were stable year-on-year at PHP 59.1 billion. Interconnect fees increased by PHP 174 million or 17% from A2P domestic SMS payout and data roaming, partly offset by outbound SMS and NDD. Staff costs were up by PHP 726 million or 5%, while network costs increased by PHP 458 million on higher administrative costs and leases. These increases were tempered by the decline in, one, marketing and subsidy costs down by PHP 504 million from lower commissions, supplemented by lower spending for airtime and placements, production costs, and merchandising materials; and two, provisions which were lower by PHP 741 million. Services and other OpEx remained relatively stable at PHP 16.4 billion. This controlled movement in operating expenses, complemented by the robust performance of our business led to EBITDA growing by 8% year-on-year to PHP 64.9 billion in the first 9 months. On a quarterly basis, the company's total OpEx and subsidy contracted by 2% to PHP 19.9 billion. Interconnection fees increased by 2%, staff costs were up by 8% and services and other OpEx were up by 6%. Our marketing and subsidy expenses for the quarter increased by PHP 340 million from higher airtime and online placements. These increases were nonetheless more than offset by the PHP 420 million decline in network costs and the PHP 176 million drop in provisions during the quarter. This ultimately led to the company's EBITDA increasing by 1% sequentially and reaching PHP 21.9 billion. Moving on to our balance sheet. Gross debt level was lower at PHP 240.9 billion as of end September 2024, with unrestricted cash level at PHP 22.3 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 as we optimize our capital allocation in line with our guidance of measured spending. 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 December 6, 2024, to shareholders on record as of November 21, 2024. And finally, we are reaffirming our consolidated outlook for the year. Well into 2024, 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 external pressures. For our EBITDA margin, we are maintaining a guidance of 50%. And lastly, we want to reaffirm 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 will allow us to drop CapEx to USD 1 billion this year and possibly even lower in the subsequent years. In line with these capital allocation levers, on our sale and leaseback initiative, the turnover of the rest of the portfolio is progressing well, with majority of the remaining proceeds expected to come within the year. 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 to all. Before we begin with the Q&A session, we would like to introduce the management panel and ask them to join us here on or beside the stage. We have our President and Chief Executive Officer, Mr. Ernest Cu; Mr. Carlo Puno, Chief Financial Officer and Chief Risk Officer; Attorney Froilan Castelo, General Counsel; Mr. Darius Delgado, Chief Commercial Officer; Mr. Danny Theseira, Senior Adviser, Broadband Business; Ms. KD Dizon, Vice President for B2B; and Mr. Joel Agustin, Senior Vice President for Network Planning and Engineering. Mr. Carlo Malana, Chief Executive Officer of STT GDC, joins us by Zoom.

We'll now begin the Q&A session. Our first set of questions come from Kervin Sisayan of Maybank. The first question or first set of questions pertain to GCash. How much does GCash account for total earnings in terms of actual net income? Can we get a sense of how big in terms of income contribution GCash will be next year? Also is the earnings contribution of GCash in the third quarter after the dilution on the recent entry of MUFG.

I'll start. So for the first 9 months of the year, it accounted to around 14% of net income before taxes. It's a big jump from the 6% we recorded last year. In terms of 2025, we're actually still in the middle of planning both on the Globe side and on the mid side. But what we are recording as of the first 9 months of 2024 still excludes the dilution as we're still waiting for closing of the MUFG transaction.

Thanks, Carlo P. The next question is also GCash and maybe this is for Ernest. Are there any updates on the IPO timetable for GCash? Also, are there any updates on strategy or focus with the entry of the new investor, MUFG?

Regarding the IPO, we are still monitoring the market conditions. Obviously, the U.S. elections have a lot to do with it as well as markets seem to have reacted very well to the election of President Trump. And here in the Philippines, the successive rate cuts have helped us stimulate some activity and liquidity in the market. So that bodes quite well for us. So we still don't have a definite time line when we will go. All I can say, as I've said before, is the company is in the throes of preparing itself for a push-button-ready situation that once we -- and the Board decides that it is the right time to go, we'll go on mandate the banks and then move on with the process. Right now, the company is progressing very well. You can see in the successive quarters that revenues are increasing, profits are increasing, and the engagement with customers continue to progress. So that's really all we can say now for the IPO. With regard to MUFG, the premise of bringing MUFG was really to shore up GCash's growing lending business. And at the moment, a lot of discussions are ongoing with them, given that we just closed the transaction with regards to wholesale lending, securitization and others that they can provide in terms of helping us grow our lending business. We -- what I can tell you is that the lending business is going very well. We have launched a new GScore. It's now the fourth version. And the results are quite encouraging, with NPLs remaining at the best-in-class levels. Thank you.

Thank you, Ernest. The next set of questions come from Zhiwei Foo from Macquarie. And the first question, again, is on GCash. And maybe Carlo P. can answer this. Can management comment on the credit loss provisions and NPLs for GCash in the third quarter, please? Even if [indiscernible] provided a qualitative description of whether it is higher or lower versus the previous quarter will be very helpful.

I think Ernest has touched on it already. I think both credit loss provisions and NPLs are still considered best-in-class. In fact, I think the NPL levels have been going down since the start, owing a lot to the shift to the GScore 4.0, which is a unupdated algorithm for the GScoring so leading to much, much healthier NPLs.

Thanks, Carlo. The next question is also on GCash. What is the outlook on loan take-up as we head into the first half of 2025? And what are the reasons that lead you to this view?

What's the question again?

Yes. What is the outlook on loan take-up as we head into the first half of 2025? And what are the reasons that lead you to this view?

I'll take it. I think -- we believe there's just some runway on the loan take-up. I mean if you look at it, 7 million users is still quite a small penetration of the adult Filipino market. I think they are the key stats to look in there to look at would be, I think, from the adult Filipino population, I think, 60% are still tapping the gray market and only 4% actually course their borrowings through the bank. So I think there's still quite a bit of runway, particularly given there are new products that have been launched recently. Sakto Loans and borrow load, I think those will help improve and increase the adoption. So I think we're still quite bullish on that front.

Thanks, Carlo. The next set of questions come from Derrick Guarin of CLSA. And I think this is a question on mobile for Darius. Post-market repairs initiative, how should we look at mobile revenue growth, especially in light of market share growth of the third player?

Thank you for that question, Derrick. So overall, we remain optimistic about continued mobile revenue growth as there's still a significant portion of the market are still nascent in terms of data habituation. So in terms of the base, you see like 83% of the total mobile revenue still on mobile data -- already in mobile data, and there's 17% still in SMS and voice. And on the -- that's on the backdrop of increasing smartphone penetration of 93% per day. So when you compute the math, 93% have smartphone within the base, but only 87 -- 83% of revenues only come from mobile data. We also see pockets of growth opportunities in certain regions that when given a really good network experience, data habituation will follow. And that's why we are very targeted in the way we scale the network across regions. And lastly, we also anticipate revenue growth as we scale on hyper-personalization, which is our main focus today. So hence, despite the growth of the share in terms of revenues of the third player, we are able to sustain growth and relatively hold our own in terms of revenue market share without any price aggression because we are all about protecting total industry growth.

Thanks, Darius. The next question from Derrick is actually on CapEx, this is for Carlo P. Can you share with us your CapEx guidance for 2025?

Again, we're still in the process of finalizing our plans. What we have communicated to the market that we are targeting cash CapEx to go below $1 billion for 2025. Recall, we're going to end the year at $1 billion for 2024, so it's still a reduction year-on-year.

Thank you, Carlo P. Again, the next question is on GCash. And then maybe Carlo P. can address this. Just as a sense check, how much is GCash's gross transaction value in 2023? And how is it tracking now as of the end of the third quarter?

We don't disclose the amount, but it has been tracking quite well. I think we'll just point to the growth of the overall net income of Mynt, which has been growing significantly year-on-year, and a lot of it is driven by transactions and traffic.

Okay. Maybe we'll take first the questions sent by Pranav Balani of Papa Securities. And this is regarding broadband. So for Danny. Can you please provide a breakdown on how many prepaid broadband subscribers, Globe registered in Q1, Q2 and Q3 of 2024?

Well, we don't actively disclose the breakdown of the quarterly so we should just focus on what has been disclosed. But rest assured, it's really promising growth Q-on-Q that we're seeing. And it's really due to the need for a flexible and affordable connectivity where it's prepaid fiber suits -- delivers that promise. So the real rates are high, the NPS is high. It's really truly promising for the segment that we are targeting at. Thanks, Jomari.

Thanks, Danny. Then we have a few questions from Katrina Yap of Infocom. The first question is, what services contributed to the 13% year-on-year growth in core accounts? In most markets, growth of MPLS revenues has been gradually declining so growth driven by SD-WAN or dedicated Internet or are there customer segments that you are seeing growth or regrowth in core data demand, particularly for MPLS, Ethernet or lease lines?

So thank you for the question. So the growth driver actually for data core is largely direct Internet, and we're seeing growth in the more mid-market segments already of the market. Thank you, Jomari.

Thanks, KD. The second question, which applications drove this double-digit 31% growth for business applications? Which indices has the demand been coming from?

So the growth from business applications is largely on marketing tech, so marketing APIs, we also are seeing growth in the productivity tools, such as Google Workspace, particularly in the finance industries IT-BPM and supply chain.

Thank you, KD. Third question is, which products are driving the year-on-year growth for cybersecurity services?

So for cybersecurity, in particular, we're seeing a lot of growth in application security and cloud security as well.

Thank you, KD. And then the last question from Katrina is, which of the ICT services has had the most contribution to the growth of corporate data revenues for your quarter? Which ICT serves as you project will have the most impact by end 2024?

For the ICT driving the core data is still largely the business application services. So as mentioned earlier, so the APIs and the OTTs. And for the -- towards the end of this year, that's still going to continue, but we're also seeing growth in cloud and cyber as well.

Okay. Thank you, KD. The next set of questions come from Nicky Franco of Abacus Securities. I think the first question is on CapEx, again, for Carlo P. With falling CapEx intensity, is there scope to increase the dividend payout ratio by next year?

Well, I think we need to see where the market is at. And at the end of the day, I think that is a decision for our shareholders if there's comfort that we are generating sufficient cash flows. I guess, to the -- on the management side, our commitment is delivering free cash flow positive. Whether or not there's space for increased dividends is going to be a conversation with our Board as and when there's excess capital -- excess cash.

Thank you, Carlo P. Next question is on mobile for your Darius. Mobile data traffic declined Q-on-Q, but revenue per gigabyte appears to have increased significantly by 67% Q-on-Q. Is this consistent with your numbers? If so, can this improvement in revenue per gigabyte be sustained? Also this is to reflect a rationalization of the competitive landscape for mobile data.

Thank you for that question, Nicky. So a few things, so number one, it's in line with our expectations. And number two, it's brought about substantially by the nine typhoons that actually hit the mass market for the most part in quarter 3. When in fact, in the first half, we only had one typhoon. So the effect of that is that the mass market customers who are already habituated to the data actually logged from the base. They're still live in the network. But in terms of usage, it's kind of deflated. So what remained in the base are the healthy and affluent ones. And hence, you can see the better yields per GB of usage. It's also a function of how well we have stimulated spend amongst the healthy affluent cohort that's why it keeps us sustained in terms of the revenue levels. We would have declined quarter-on-quarter with the impact of nine typhoons in just 3 months. Would it not have been for the strength of the brands do we with the strength of the affluent market that we were able to retain in our base.

Thanks, Darius. Next set of questions come from Chang Qi Ong of JPMorgan Asset Management. I think maybe Ernest can lend some insight on the questions that he's asking about the succession planning. The first question is, why such a short time line, i.e., 4 months step DCO before taking over after the ASM to ramp up before it came over as CEO. Shouldn't there be a longer ramp-up?

I don't think 6 months actually is short when someone didn't wanted to go over the last 2 to 3 years. In all seriousness, I also had a very similar transition period with my predecessor 16.5 years ago. And also by that time, I also turned 65, so I don't want to wait another AGM to finally retire. But I think it's just a great -- it also bodes well for the stability of the management team in Globe. Really -- that the new CEO can come in and effectively take the seat with very little to do. The company is very stable. And the best time to do a transition is when there is a very stable industry, the company is performing extremely well, and we've got a very stable base of executives who are running the company today.

Thank you, Ernest. The second question is, will you be able to share how many internal versus external CEO candidates to the Globe Board had to contend before deciding on Mr. Cruz?

We can't really specify the number of internal and external candidates. I have to tell you that there were internal. There were external candidates as well. But as you can probably surmise, it is very difficult to hire CEOs for this particular industry. First of all, the industry is not very kind to CEOs in this industry. The typical life cycle life span of a CEO is 3 to 5 years in Europe, for instance. Not many CEOs last as long as I did. Fortunately, we've got a great team that backed me up, and we were able to have successive victories. And so it was not a long list of candidates, but it's a very high-quality list of candidates that we had to look at both internally and externally.

Thanks, Ernest. With your indulgence again, there's a third question up. What are the key pros and cons of choosing an external candidate to take over from Ernest who have built such a well-oiled engine?

I think having the well-oiled engine, I think, is the one that allows the Board to bring in someone from the outside to bring in new ideas. Just by way of recall, because a lot of you guys are pretty young, when I also joined in 2008, even I forgotten when [Foreign Language] how long is the length of time, I was also an outsider and the outside view gave me the opportunity to really shake up the industry, change a lot of things, bringing a whole lot of new ideas and really reinvigorate the company. It's a very challenging time for the overall global telco industry today, given the lack of growth as evidenced by the way, you guys rate our EBITDA multiples and net income multiples, but -- and hopefully, bringing in an outsider, coupled with a very experienced and stable management team will bring about new stimulation as well. Not -- I don't mean by competition, Darius, but really maybe new use cases and new ideas that can be brought to the public.

Thanks, Ernest. There is a follow-up question from -- but will perhaps take this offline and to give a chance to the people here present. If you have any questions, please go to the mic, introduce yourself and tell us the company that you represent. Thank you.

Steven here from China Bank Securities. A couple of questions from me. For the broadband business, maybe you could provide more color on the recent GOMO offering? And how does it differentiate from your GFiber Prepaid?

GOMO, it's a first for the brand because what GOMO introduces is not only fully digital end-to-end, but it's really a look into a first fixed mobile conversion type of product in the country. So it's a combination of where you can expand from your mobile services and also gives you the GOMO fiber in a single wallet, single platform, single app for customers to have the freedom to be able to move away from the long-term contracts and billing and just seamlessly manage their home connectivity and mobility needs.

All right. Got it. For my second question is for GFiber Prepaid. Any color you could share with regard to its revenue contribution to the home broadband segment for the third quarter?

So we don't actively publicized the breakdown. But what you have in their disclosures earlier is truly showing the strength of the product, how it gives in terms of the product market fit, the pricing fit and truly need to be able to serve that new category for flexible, affordable and reliable internet connectivity.

Right. Got it. For my last question is for the mobile business. Any trends you've been seeing in the 5G given that you've been ramping up the installation of new sites, et cetera?

So in terms of 5G, because of the lack of a killer use case that really differentiates it from 4G. It's really about densification of the areas where we have our footprint so that the customer wouldn't mind if they are on 4G or 5G. And based on the customers that we've seen latching for the most part in the 5G footprint, we've seen ARPUs increase and ATPUs increase as well. So it's really a revenue accretive approach. However, we cannot densify across all of the areas. There are multiple factors that we need to consider before we densify an area and call it a 5G golden city, which is something that we can own and brand in the market. So it's really device penetration on 5G and also the contiguity of the footprint that we serve seamless experience for the customers.

We have a hard stop at 11, but maybe you have a chance for one more.

I'm Jarred Go from AB Capital. Just a quick question for me. Maybe can we dive a bit deeper on the selection of Mr. Cruz as the next CEO. What about his experience in maybe Airtel or Unilever made you or made the Board select them as the next candidate for you?

Well, the Philippines is primarily a consumer market, right? And so I think Carl's experience in Unilever for over 30 years, bodes very well. Globe is predicated upon customer centricity, extremely good insights into the customer and knowledge. And so we're counting on his vast consumer experience to help him. And then the year that he spent in Airtel gives him a good background into telco, right? I mean it's not too dissimilar a market. It's not as sophisticated as the Philippines, but certainly, it's a low income prepaid market as well. And so that gives him a good intro into the Philippine industry.

Thank you. At this point, we would now like to turn over the floor to Ernest for his closing remarks.

Thank you, everyone, once again for joining us here in our third quarter. You will see, once again, another good quarter sequentially from the second when stable industry dynamics also happening and contributing to very good EBITDA numbers. The mobile business is doing extremely well. We can see there's some softness in the broadband business. But a lot of what's happening in the broadband business has also been seen by Globe that there is an oversaturation in the postpaid market that will eventually lead to churn. And it looks like it is happening. And then this would eventually should be replaced by the prepaid products. And you can see how the team has ramped up Globe Fiber Prepaid. You can see that the 146,000 subs that we've had since we launched the product is growing robustly with very, very good quality, which is more important. So the belief that the market indeed will prefer prepaid over postpaid for majority of the subscribers, I think, is panning out. And I think today, we still have one of the best, if not the best, prepaid product on the market, given the full digital nature of the application process and the interaction with the customer. You can see also that the subsidiaries have done really well in terms of Mynt. I mean no one can question where Mynt is today and strength continues to build on its strength and watch for more new products coming from Mynt. You've heard about the international launch that we have been going. And again, let me define international because people always think Mynt's going to go and conquer other countries? No, Mynt want to conquer the Filipinos in other countries and also the Filipinos who are going out and traveling, right? For Filipinos going out traveling, we now powered the link between Alipay and GCash. You can now use any Alipay QR code in China, which is a very big breakthrough because we all know the challenges of paying in -- when you travel to China. It also works in Japan, by the way, and I think it will work for most of Southeast Asia eventually. So that opens up another few million merchants that will accept GCash in the QR. The Visa debit card that we've been issuing has been getting glowing reviews. It's now become a travel hack for most people. And so that outbound international travel segment is expected to bring in more and more revenues. Of course, we're also now in 16 countries and the Filipinos overseas aren't being connected also by different banks. We recently signed an agreement in the U.S. where you can now cash in from any U.S. bank into your GCash account, I think we're enabling most of Europe as well and hopefully, the Middle East very shortly. So that gives us wide coverage of all Filipinos in the world. And finally, on our data center business. It's also on track to open in the first half of 2025. Not only are we building that massive data center in Fairview, which some people think, by the way, is an IKEA because of its size, but things are going really well on that. And also, we have our Cavite, which also should complete very shortly. So -- and again, kudos to our partners who have been guiding us through this process very well. So we hope to see you once again. I think it will be next year now for the full year, sometime in the February time frame. So if not, have the best of the holidays, I think we're into the holiday season. So thank you to everyone.

Thank you, Ernest. And on that note, we conclude the third quarter 2024 Analyst Brief on 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 fourth quarter 2024 analyst briefing early February 2025. Again, we wish everyone a pleasant good morning. Stay safe, everyone.