Good afternoon. Thank you for joining us today to discuss the press release on elevated CapEx spend. For today's presentation, we have with us our Chairman, Mr. Manny Pangilinan; Mr. Al Panlilio, President and CEO; and Attorney Marilyn Victorio-Aquino, Chief Legal Counsel and Corporate Secretary. At this point, let me turn the floor over to Mr. Pangilinan to begin the briefing. Thank you, Melissa, good afternoon to everybody physically present and those online. I think we have a fairly good attendance this afternoon. We start with an open statement that I will make particularly in respect of this CapEx overrun and outlook for 2022 this year. Following me will be Al's comments in respect of prospects for 2023. As we indicated in the press statement we issued a few days ago, the CapEx overrun is likely to be up to PHP 48 billion as we indicated, which represents about 12.7% of the total CapEx spend for the period 2019 up to 2022. There's been some comment, I think that, we have gotten from, maybe from media, maybe some from you as to three years that we did not report this thing. Actually, the bulk of the CapEx overrun occurred in 2020. There's a portion in the last quarter of 2019, but the bulk of the overrun really occurred in 2020 and 2021. For 2022, CapEx has been well controlled, partly as a consequence of the discovery of this, of the quantum of this CapEx overrun. As soon as we reported to the Board, sometime early November, we informed about the potential issues around this CapEx overrun. Of course, there was an immediate mandate by the Board and the Audit Committee, and of course, internally, even before that, management has undertaken quickly and immediately a review of what happened and to determine or get a fair idea of the quantum of the overruns. It's fair to say that as of now, the substantive work has been completed in respect to the investigation, and there are discussions with the principal vendors, there are about four of them, with a view to doing three things. Number one is to reconcile their accounts with our accounts. Of course, the reduction of these budget overruns from PHP 48 billion to X, we cannot say with final determination as to where we will eventually land with the vendors, because part of it is the dynamics of negotiations. We don't want to indicate a figure that could actually determine the floor with them. We're hopeful that there will be some reduction in this total number of PHP 48 billion. Of course, whatever the agreed number with them, amongst the four major vendors, we will ask for deferred payment terms. So that should ease the impact of the cash flow of the company moving forward and ask for a no interest element to the final number of these budget overruns. The review has, and I say this with caution so far because it's still ongoing. I don't want to be 100% definitive about this point, but as so far established, again, contrary to certain reports that we have determined there's no fraud, there are no anomalies, there's no evidence of overpricing, and there are no unauthorized CapEx projects. What has happened is actually we have overordered quite a bit of equipment and work, works to be done in this past two years, 2020 and 2021 principally. The CapEx will be subject, the CapEx subject of the overruns, will be used in the business in the next three or so years. Again, will not be written off as I think some reports have said in full or in part. We may accelerate depreciation of existing assets, as we've indicated, I think in the press statement. Principally, the 2G network, which is already obsolete, 3G as well, VDSL, and the legacy elements of our transport system, which is now also the subject of a transformation project with Cisco and Huawei. We intend to finalize discussions with the vendors and documentation with the vendors by early 2023. Certainly by the time or before the time we release our full year results, which is typically early March, right, Melissa? Certainly before the financial accounts for the year, full year 2022 are released. Of course, we're looking as well, part of the investigation process is to look at the improvements in the operational aspects of procurement and network projects in order, obviously, to avoid a repeat of this incident. Finally, cooperating with the regulators in respect to the various investigations that they have related to us, principally, locally, CMIC, Capital Markets Integrity Corporation of the PSE, and the Market and Securities MSRD of the SEC. Of course, we have received reports that there's a law firm based in Pennsylvania that is threatening to launch a class action suit against the company because of our U.S. listing. Marilyn perhaps can give some color to any questions you may have in that regard, but we are now in conversation with U.S. lawyers in respect of this potential threat to the company. In respect of the 2022 outlook, the EBITDA continues to be healthy, so the business has not been significantly or not been moderately affected by this CapEx incident. We are on track to achieve EBITDA numbers of at least PHP 100 billion for the year, as we have originally indicated. CapEx will be between PHP 95 billion-PHP 97 billion from our guidance of PHP 85 billion, partly because of the Forex element, although that has mitigated in the past few weeks, and acceleration in selecting CapEx to ensure no delay in the completion of certain of the critical projects. We have like the hyperscaler data center in Santa Rosa, and of course, the continued push on Fiber Home. Telco core is likely to land anywhere between PHP 32.6 billion-PHP 33 billion. Substantially within the range of the PHP 33 billion core guidance we gave to you earlier in the year. Dividends, important point for all of you. We are maintaining our dividend payout of 60% of core income for 2022, and since we have committed a special dividend, the balance of the special dividends of PHP 3 billion. Remember we, when we announced it our sales and when we reported our interim results this year, we said the total amount of PHP 9 billion represent the special dividends. PHP 6 billion will be paid in the interim as part of the interim dividends and the PHP 3 billion as part of the final dividend. The final dividend will be calculated with reference to the. For the regular dividend, 60% Telco core of anywhere between 60% of PHP 32.6 billion-PHP 33 billion, plus the PHP 3 billion payable sometime in April, but declarable when we announce our full year results. In numbers, for the interim, we gave PHP 47 regular and PHP 28 per share, total of PHP 75 for the interim. For the final, the regular dividend will be PHP 45 per share and PHP 14, representing the PHP 3 billion special dividend which we promised. That's PHP 59 per share total for the final dividend. When you sum it up, regular dividends for out to 2022 income will be PHP 92 per share, representing 60% of Telco core per share, and PHP 42 per share of the special dividends. Total dividends will be PHP 134, representing 88% of the EPS for the year. Year-end 2022 net debt to EBITDA will be within the range of 2.3x-2.4x multiple. I'd like to turn to Al for the outlook for next year. Thank you, Mr. Chairman. Good afternoon to all. Again, thank you for being here physically and people online. I just want to you know, repeat what MVP said. I think the core business remains to be very strong. Home, Individual, and Enterprise are still very strong. I think if you take a look at the first nine month results compared to competition, we've gotten the bigger share of the growth for this year. We've started, as you know, this year also transformation of the company with the objective of really doing things better. I think, you know, management initiatives on what happened started because of the transformation. Core business is healthy. I guess for outlook on 2023, it's a year that we will consolidate. Obviously that's what MVP was referring to on the overruns. We'll have to carry the additional CapEx in 2023, but we're looking at getting back on track in 2024. Telco core or EBITDA continues to remain healthy. We're seeing a growth on EBITDA next year and also the next few years. Telco core will modestly improve. Obviously, our depreciation and amortization, and interest income will be slightly elevated because of the overruns. We will have a modest improvement on Telco core moving forward, 2023 into 2024, and start picking up again hopefully in 2025. CapEx, I think we've overspent, we've over-ordered, I guess, on CapEx. Significantly from the PHP 97 billion that MVP said CapEx, most like PHP 95 billion-PHP 97 billion that most probably will end up this year. There'll be a, you know, significant decline in 2023. We are finalizing that as we have not presented the budget also to the Board. Beyond 2023, even lower, 2024, 2025. That will be the push to bring down fresh CapEx moving forward. Worst case scenario on the impact of PHP 48 billion CapEx overrun, if all accepted next year, then this will impact our balance sheet. Like in any project, they don't complete normally in a year, so it might flow over the following year. We will follow a normal 10-year depreciation schedule, on whatever has been accepted as PPE for the company. We might need to increase our debts, possible increase in the financing costs, to cover for the CapEx. To the point of MVP, again, on negotiations with vendors, if, you know, there's some vendor financing without interest, then that will provide relief for us, moving forward also. How could we mitigate the impact? You know, again, as I said, CapEx will be much lower moving forward, because of the overrun on the CapEx. The discussion with the vendors to reduce the budget overrun and the staggered payment that was mentioned. Prior to this issue, as you know, we've been undertaking asset sales to monetize our assets and to move to an asset-light balance sheet. The tower sale is a perfect example of that. We have P&L gains in the tower sale, and this cash flow will obviously help us avoid debt as we continue to do that. We just announced a small tranche with Unity Group of Aboitiz. We closed PHP 9.6 billion tower sale last Monday or Friday. There's another close to over 1,000 that we are planning to sell. Hopefully, that gets completed also in the first quarter of next year. Moving forward on dividend payout of Telco Core, we believe that we can sustain the 60% dividend payout. As I said, EBITDA expected to remain strong. capex will be managed downwards, resulting leverage will trend towards 2x net debt to EBITDA in the course of time. We did discuss, as a management team, a shareholder buyback is considered, but we felt that a better judgment for us was to use the money instead to actually fund dividends. No? That's all that I have, Melissa. All right. We're now ready to take your questions. For those who are online, you may type your questions in the Q&A box in the upper right side of the screen. You may also click the Raise Hand button and wait for me to call your name before you unmute your microphone. You may also send your questions via email to pldt_ir_center@pldt.com.ph. Please indicate your name and company name so that we can get back to you for any additional information you may need. First, allow me to have questions from the floor. Raise your hand, and we'll give you a microphone, so you can ask your questions. Anyone? Kervin. Hi, good afternoon. This is Kervin from Manulife, and thanks for the briefing for this one. Just a couple of questions for me for now. First is that maybe can you get a bit of nature on the assets that were over-purchased in the near term? Where are these telco equipment, 5G equipment, for example, or towers, so at least we can have a bit of understanding on how this will be used in the next two to three years? Second is that while we are under investigation on the remaining PHP 49 billion overruns, how is it on the ground? Have you stopped maybe the network improvements or installations of equipment as we investigate the current equipment that we have right now? Lastly, maybe connected to the other ones that, the over-purchased assets, are these assets with us or are they still remaining with the four principal vendors that you mentioned earlier? Thank you. The bulk of the assets that are subject matter of this overrun relate to network elements. Principally, the wireless side of the business. We have equipment relating to the final build-out of the 4G network and 5G equipment as well, no? Because that has taken a bit of a slowdown in its progress of build-out. We ordered quite a bit of 5G network elements. That is in storage as we speak. There are equipment related to towers. 54 towers, from Ericsson and 61 from Huawei, which we canceled, the installation we canceled because after we launched Stratosphere One, because Stratosphere One included build-to-suit obligations to the buyers. Those were canceled. We're considering including them in the Stratosphere Two because, you know, we've launched Stratosphere Two. They are in the warehouse. They're fully paid. I guess, Kerwin, just to add a bit of context no, on the massive CapEx build up. I guess 2016, 2017, 20 18 timeframe, there was really under-investment on network and there was a decision to become a superior network against the major investments. You also know that the previous President sort of threatened the telcos if we didn't improve service. Third, of course, competition was very aggressive. DITO, Converge are very aggressive, we wanna make sure that not only on the wireless side but also on the... Also we didn't know whether DITO with China Telecom, how much impact they will have in the market. We know now, not much, but at the initial stage we didn't know the impact of DITO coming in. Converge has been very aggressive, and we had to sort of fix ourselves and make sure that we're able to serve the customers. Lastly, COVID. I mean, during the COVID, connectivity, as you know, became very important and network expansion continued to happen during that time. Just to give some context on why there was a major build-up. I think to the extent that, almost all of the equipment ordered, and most of them are actually here in the Philippines already, they can be used for future build-out. That's why when Al indicated that we could substantially reduce the quantum of fresh CapEx this year for the next three years, it's really because parang, you use your credit card to buy this equipment ahead of time, no? That's why we're saying to the vendors, "You should give us a deferred payment terms interest-free," 'di ba? Yun. Yeah. Kerwin, is that okay? Any follow-up questions? The question earlier also, have you stopped maybe anything on the ground in terms of CapEx, build out in the network as we are investigating the remaining PHP 49 billion? Well, honestly, initially, we had to hold off on all POs. We had to take control of, I guess management action immediately was to hold on all POs, especially in this area. We've started open up and continue already, you know, sites that there are congestion we're starting to roll out again and also of course the roll out of fiber soon continues. Initially with a pause just to get a grasp of where everything was. Actually, the bulk of it is really more on the wireless CapEx, 'cause this year and next year we will continue to invest on the Fiber -to- the-H ome, 'di ba. That will continue, albeit at a lower level because we will probably build less ports in the course of the year. We'll keep pushing the Fiber Home take-up of subscribers. Any other questions from the floor before we open it up to the online participants? Arthur Pineda, you have your hand raised. Hi. Thanks for the opportunity. Several questions, please. Firstly, can you just clarify what control processes broke down and what have been done to address this? Why was this not captured in the annual audits? Second question I had is with regard to the PHP 48 billion which is identified. Is there a risk on any further upside, or do you think this is already fully captured at maximum PHP 48 billion? Can we also clarify on the PHP 48 billion overrun, is the equipment related to this already operational or is still sitting in a warehouse somewhere? I'm just wondering if the existing network quality already reflects the additional PHP 48 billion. Thank you. I think taking your the third question first. Yes, there's a substantial amount of equipment, wireless equipment, are sitting in warehouses, our warehouses and the warehouses of the vendors, no? So that is, as and when we're ready to install, we will install them and therefore it will be an asset that needs to be depreciated as and when they're installed. What's the first question? Risks to the upside. You know, it's, the entire process is actually not bad. The originating unit for CapEx, generally speaking, or the bulk of it is done by network, right? Of course, the business units have their own capex spend relating to like modems and the like. But the, that's where the epicenter is. Then it moves towards procurement where it's subject to requests for proposals, so either a bidding process or at least a contested process. Before a purchase order is actually issued, it is checked with finance. Also the system. The SAP records the transactions, right? The data are there. It's within the system. The question is, to what extent are the accumulated and unspent capex reported at our level? I think unfortunately not. Frankly, we were remiss as well, because at, there's a, you know, a procurement council, right. At the management level that reviews all CapEx requests, it gets elevated to the Technology Strategy Committee of the Board that also reviews and recommends approval to the Board of that CapEx. Finally, the Board endorses it or approves it, ratifies it, pursuant to the recommendation of TechStrat. The controls are in place. Typically the question we ask, whether you're at the TechStrat committee level or at the Board level is this within your CapEx for the year? I think we were remiss in asking, I did not think of asking, "What is your--? Are there carryover CapExes?" That we didn't ask. That the reporting units, not one of Network, Procurement, or Finance, managed to report it to us. Nabulaga kami when we said, "Oh, this is, this is significant." It was higher than PHP 48 billion when we first learned about this issue. You know, it's. You know, nobody's shirking from the responsibility. I take command responsibility, and Al is also taking people's responsibility for that oversight, no. When people allege that there are no controls process in place, that's not right. It is simply not right. It's the. I think there were since late 2021 when it dawned on those involved in this supply chain internally, it dawned on them this is becoming a little large, they tried to correct the process, right? To be fair to them. It just came to light recently. there was That's, that's the control process. It's, it's really a people issue at the end of the day. I don't think there was any attempt. There are no related, you know, the four vendors principally, there might be smaller vendors, allegation that there was a related party transaction. I don't own any shares in Cisco, Huawei, Fiber Home, and Ericsson. How can anybody allege that we own, I own any shares of Ericsson or Al or whoever within the organization, right? Simply not owned. We do have a governance committee, and part of their portfolio is to look at related party transactions. There's a policy in place, and that is reviewed every time there is a governance committee meeting. That's a Board committee. The, the controls are in place. If, you know, when you're at the board level, you rely on the information supplied to you, unless you ask more questions. That question about accumulated CapEx was not raised, unfortunately. Obviously the network monitoring system or the procurement monitoring system got to be tightened, really tightened so we know, how every peso is spent. I think we probably were remiss in that respect, that we probably should have spent much less than we should have in the past two or three years, no? The question is on the risk to the upside of the PHP 48 billion. That's actually, we cannot say now, but we're trying to do that in the negotiations. The good thing is all of the vendors are very supportive, and they want to maintain their partnership with us, and they want to help us. It's not impossible. It's not, it's out there, depending on the negotiations. If I can just add to what Mr. Pangilinan said, it's really the multi-year nature of the CapEx that happened and the size of the CapEx. In the past, I don't believe we had an instance where so many huge projects like this happened in the span of like four years and in multi-year levels. I think the 5G LTE rollout alone is around PHP 30 billion+. When you see the size of project, there are more of them, including TMP, when the multi-year effect could be very severe, that's what we need to monitor in the future. Yeah, just a final point there, I think, adding to MaVA. I mean, you're talking about rollouts of sites for wireless and also for ports, no, and fiber and transport on that in multi-year. I guess project management needs improvement internally also, making sure that those projects finish on time, on budget, and that's something also we're looking into. Just one point, if I may add. This CapEx rollout came under two pressures, basically. The pressure of President Duterte at that time to fast-track infrastructure and also the pressure of COVID. We rolled out so many projects during the COVID pandemic in order to improve the connectivity. You felt it, right? People stayed at home, and you were not cut off. The connectivity was there. It is because of the CapEx that we rolled out during the pandemic. Arthur, any follow-up? I'm very clear. Thank you very much. Thank you. Next question from Veronica of UBS. Veronica Carlos. Veronica, you can unmute your mic. Oh, yeah. Hello. Just on the CapEx booking, do you have any plans on booking some of the overruns this year, or are you planning to do it entirely next year? What are the balance sheet implications of these? Whether we're planning to book any of the overruns this year, and what are the balance sheet implications. Of the PHP 48 billion, whatever assets flowing from that number will enter the, what they call GR, Goods Received, in relation, say, to equipment and installed, no? And/or works rendered, construction in progress that enters operational use. We have to book those assets, and therefore the depreciation line will get affected, right? As Al indicated, we look at, you know, the structure, right? The EBITDA is going to be healthy to continue to grow in the next five years. Our problem is now depreciation, because there's a cascade of assets that we know will be coming online effectively and affecting the P&L side, no. Let's talk about the cash a bit later. I think in certain of the statements we've issued, the impact of the PHP 48 billion is pre-tax, say, just use a 10-year metric, is about PHP 4.8 billion increase in our depreciation expense each year, no? What we intend to do is to ameliorate that pressure on the bottom line is that we, as I indicated to you, we probably have to accelerate or write off certain existing assets relating to 2G, 3G, the legacy elements of the transport system, the VDSL, which has been overtaken, we've junked it, because we're now on an all-fiber network, no. Yes, I think this year, we're likely to write off up to PHP 50 billion-PHP 55 billion of assets this year. What will get affected will be our reported income will drop significantly for 2020 to compare to 2021, no? It's more of an accounting situation. Certain of the assets of that PHP 48 billion will flow over to 2023. The write-off of assets, legacy assets, existing assets, will continue but to a lesser degree in 2023. Hopefully by that time, we will be basically out of the woods starting 2024, no? That is the picture on the accounting side of the P&L. On the cash side, as Al indicated, we looked at the cash flows. We're likely to borrow in the next two 2 years, anywhere between PHP 35 billion-PHP 40 billion to maintain the dividends to the shareholders, ensure that we have to pay off this PHP 48 billion, even if it's deferred. If you could get it interest-free, that would be great because it doesn't affect the interest expense line, and of course ameliorates the borrowing levels in the next two years, no? After that, I think we can safely say it is possible that we can generate free cash flows starting 2025. That's why Al indicated we can shoot for 2x net debt to equity by 2026 or 2027. That's the picture. The reported income this year in 2023, it will be low this year and a bit higher or higher next year, but not the same levels as previous years. Partly driven by the losses from Voyager, which we're accounting for below the telco core income line. Of course, dividends are pitched at the core income, not at the reported income. Veronica, any follow-up questions to that? Oh, that is my end. Thank you. Thank you. Next question is from Ranjan Sharma of JP Morgan. Ranjan. Thank you for the opportunity and the presentation. I have a bunch of questions, but maybe I can just start with a very simple question because I'm sorry, I don't understand completely what's happened. Is it like the network teams were overestimating network needs for four years, and that's why you have this PHP 48 billion budget overrun? Is that the reason why we're in this situation? There are two incidents, basically, two points here. It's the first is the rollout of the 5G. We ordered the hardware. The initial rollout did not attract a lot of users. We decided to stop the rollout. This 5G hardware that are here, we intend to repurpose them for 4G, the LTE rollout next year. Because the same hardware will be used, we just need to buy a different license. The other incident that happened was we decided... Remember there was a common tower built up. Well, there was common tower, and we were planning to build 61 towers for to be built by Huawei and 54 towers to be built by Ericsson. In the process, along the way, we decided to sell our towers and include a commitment for BTS sites Build-to-Suit by the buyers. What we did was, since we have commitments in around 750 towers for each, 1,500 total, roughly, we had to cancel our order for tower build from Huawei and Ericsson. That's the reason. In a sense, the plans changed, which required us to cancel because we have to shift the build-up to the BTS commitment in the Stratosphere One. In the case of 5G, the commercial response was not attractive, so we decided to temper and stop the rollout. Now we are repurposing. We're going to repurpose the hardware that we purchased for the LTE rollout next year and succeeding years. Yeah. Just to sort of slightly correct that. I think, it's happened globally, right? 5G adoption has been very slow, there was a major push to do 5G. We're not completely stopping it, but we're choosing the areas. The focus now really will be on 4G LTE, where the majority of our customers, 88%-89% are on. There are areas where capacity, you know, is an issue. Congestion is happening, very targeted expansions on 4G LTE for sure. 5G slowed down, but very targeted also. Ranjan, do you have any follow-up questions? Yes, I do have a few questions, but I'm still struggling to understand this. There was CapEx overruns for 5G rollout, but this has happened over four years. PLDT was buying equipment and putting it in warehouses and kept ordering more equipment. Is that what was happening? Whether PLDT was rolling out 5G and keeping the equipment in warehouses over the last four years. 5G rollouts started maybe sometime late 2020. 2020. Mga 2020. It's under four years. A lot of that is also in transport. 5G initially was heavy, 2020, we decided 2021, maybe we should not be as aggressive in 5G. You know, there were plans initially. As you know, when you order from vendors, there's a lead time of produced equipment. No? Nagkaroon lang ng change. As Ma'am Bai is saying, change in the business plan, change in the direction because of market. Market wasn't adapting to 5G. I think, Ranjan, if I might add to that. 5G was given as an example. It's not the only reason of the PHP 48 billion. That was just an example to kind of make it easier to understand what happened. But there are many other instances, and as ASP said, it's not only 5G alone, it's transport, it's site rollout, and a couple of other things. The Fiber- to- the- Home build out. Yeah, the 5G was just an example. Okay. Got it. The next question is, if these assets have been acquired and they're sitting in warehouses, why not reduce asset purchases going forward? Why not reduce the overall CapEx build rather than look to write off assets to reduce the depreciation? Why are we planning to write down assets rather than reduce CapEx going forward? We should do both. That's the intention. It's both. Most of those assets on the warehouses are usable for the wireless network principally, right? Should use them for the business. I think, Ranjan, you might not have been in earlier when MVP started the conversation and said that the PHP 48 billion has been established to be useful in operations, so they're not gonna get written down. The assets that he was referring to that will be written down is based on a review of the older assets within the network, which I guess is a regular exercise, right? You assess the estimated useful remaining life of the assets, and you write down accordingly. The reference to the write down is not in relation to the PHP 48 billion. That is in relation to the older assets. Okay. Yeah. I mean, I was just saying that the total CapEx build should come down by PHP 48 billion if that's the overrun. Okay, the last question I have is the response given that there were changes to the network build because of the Common Tower Policy being rolled out in the Philippines. I mean, that should not affect your network investment plans, right? I mean, you just... The radio equipment would just be deployed on common towers rather than on captive towers. If you could just explain why the Common Tower Policy has affected the budget overruns. Thank you. I just mentioned the Common Tower Policy as a progression of events that led to Stratosphere One, and which eventually resulted in our cancellation of the buildup of 61 towers by Huawei and 54 towers by Ericsson. It's just a succession of events. Yeah. I mean, to add to that, some of these towers before the common tower, before we sold it, were in the process of being upgraded. There was work being done in these towers, and it got caught in the sale, you know. Some of them had to be completed as part of the sale. Towers that were not started, you know, was sold as is. You know, it came in the middle of towers we normally refurbish, upgrade and things like that, you know, year-on-year. It was a natural maintenance and upgrading. The Stratosphere deal came in the middle, you know. Some of the committed CapEx work that was being done was completed if it's the tail end of the work. Some of them who haven't started, we've actually not done so. There is a balance of that. For those who are not familiar with what Stratosphere is, that's the first batch of tower sale that we undertook earlier this year. We call it Stratosphere internally, but externally it's tower sale in these back transactions. Sorry, tower sale. Ranjan, any questions? Any further questions? I'll stop here for now. Thank you. All right. Thank you. There's a question from Wei Shan of Wellington. Wei Shan? Management, thank you for doing this call. I have a question on your credit rating. I was wondering what kind of discussions is the company having with rating agencies. Are you seeing any pressure on your ratings? Pressure on the ratings. I don't know. Well, I don't recall any conversation with the ratings agencies. I know for specific you said the discussion one or two days ago with S&P. Right? Yes. Discussion with S&P, there's some. Could be. There was no... I think they just wanted the clarification on the numbers when the final numbers be determined. We'd obviously be cautious about the PHP 48 billion, right? Because we're subject to investigation and now this class action suit. What we can say is that it's less likely that it will exceed PHP 48 billion and more likely to be reduced. By what quantum? We don't know. Until it's done, it's not done, right? When it's done, we will tell you right away. I don't recall because I know they texted me the... I didn't get alarmed by the comments of S&P for specific. I'm sorry. Don't recall. Wei Shan, any follow-up? No, that's it. All right. The next set of questions comes from Yejide Onabule of Barings. Yehida? We were obviously. That's one of the fears we had when we learned about this overruns, right? The impact obviously on the share price on the equity side and on the debt side of PLDT. Whether are we violating our covenants in respect of loans, including the bonds outstanding of PLDT. Of course, the rating of the debt paper of PLDT, which we're trying to avoid. It all hinge on the cash flows that we can produce to all of you, particular creditors and the ratings agencies. As we indicated, the EBITDA levels continue to be rather strong to support the underlying requirements, no? We have this PHP 48 billion thing that we have to deal with, and eventually it will translate into payment of this PHP 48 billion. As we indicated, we ameliorated by two things. One is if you can get deferred payment terms, and I think we will, from the vendors that we already offered three to five years. Number two is the sale of towers. There'll be the balance of Strato One, about 1,600. Thousands. 1,200. I think Strato Two, there have been offers received for our 1,650 towers for Strato Two. That'll be a bit more cash that will flow through in 2022, and that will be used to defray any potential cash flow requirements flowing from this PHP 48 billion situation. I think we can prove that we're able to sustain this kind of level of unexpected event, no? Yejide Onabule, Barings. Hello there, and thanks for taking my question. The question was just to understand what happened with the system. You were buying the equipment, it was going into your warehouse. Was it recorded in the system? You said that the system did not pick up the recording, you later found out in October this year. Just trying to understand what happened exactly. The data are there in respect of the POs issued, in respect to goods fulfilled, in respect to the POs outstanding. We believe there are no unrecorded transactions or unauthorized transactions in the system. What was not reported to us is the accumulation of these CapEx. When we tell you the budget for CapEx this year, for example, or in any particular, you say is PHP 80 billion, we don't spend exactly PHP 80 billion, right? It will be either above that-below that, but never equal to the PHP 80 billion, otherwise you would be suspicious. Why are we spending exactly what we told you? That's not the way this business operates. We should know about the accumulated effects. Unfortunately, it was not reported to us. Maybe we should ask the second chair. Every year, I think when we report to you, we tell you what the CapEx for the year was actually spent. Right? Thanks for that. Just to understand the accounting part as well. This PHP 48 billion, none of cash has been recorded in your cash flow statements. No payments have been made out for this PHP 48 billion of CapEx, and this is why you're saying that there's going to be a cash impact in 2023. Is that correct? Well, the irony is that, quite a number of these supplies of these vendors have actually been, there were certain advances made against these orders already to them. Again, we're trying to find out which of these advanced payments have been made in relation to the POs issued as part of the overall work process that's happening, right? Because as you appreciate, the people involved in this in this particular incident are not there. They're on leave. We practically have to reconstruct the books. I mean, the Internal Audit Group finance led by Danny here and of course, legal are involved in that reconstruction process. We do know that a significant amount of advances have been made to these vendors already. To what extent will that ameliorate the cash flows moving forward? I think it will do, but we cannot tell you exactly to what extent the amelioration will be in terms of the cash flows. All we can tell you today is what you see today, right? We know, and these are books, that these advances have been made to these vendors, and they have received the money. That's why they delivered the equipment. Okay, Yejide, is that okay? Yeah, it's okay. I'm still just trying to understand, like if you have a capex budget for the year, I'm using PHP 50 billion, a rough number. Your CapEx budget for the year is PHP 50 billion. Then what you report in the cash flow statement is around that level. How was there a cost overrun? I'm still trying to understand, you know, do we expect your cash flow statements to be restated? No, because there's a line in the balance sheet that says, advances to vendors. The projects. The way the Well, all the payments to the vendors are reflected in the advances. Once the project is completed, hardware installed and services fulfilled, it is accepted by PLDT and recorded as part of a PPE. Then the subportion which is in the advances is transferred to the PPE. There is nothing that's not recorded. All of the projects that have not been completed and have not yet been delivered, all payments to those projects are in the advances. They will be transferred to the PPE once the projects are completed. Sure. Thank you. Yes. Just final point on that. I think when you talk about these POs, it's difficulty of validation kasi it's really just a lot of POs and some of the POs have so much line items into it. The validation, the completion, it takes a process, you know. That's why it's a difficult process to validate payments versus POs. We'll take a question from Matthew De Leon of COL. Matthew. Matthew, are you on the line? If not, we'll skip over to Jonathan Feng of JP Morgan. Jonathan. If not Jonathan, Hussaini of UBS. Can you hear me? Can hear you. Hi, thank you for taking my question. I just want to connect with the previous one, right? I want to get more, like, understanding about the implication on the balance sheet and also the cash flow, right? Since you have mentioned that most of the, you know, advances has been made to the vendors regarding these PHP 48 billion of the overruns of budget, right? Now you also mentioned they are looking to borrow like PHP 35 billion-PHP 40 billion of the, like the more debt, right, for the next like several years, right? Kind of to mitigate the impact on the balance sheet. What are the connections here? Are we looking to borrow like new money? Are we going to, you know, to get more financing to mitigate this kind of the overrun? Or, it's, they are kind of separate. This is my first question. The second one will be, you mentioned most of the part have been made to the vendors, right? Do you have, you know, roughly what the number of the, you know, PHP 48 billion has been made, right, to the, to the vendors so far. I think what needs to be done, Hussaini, is it? This is Jonathan. Jonathan, is to really reconcile the advances, the advance payments made to the relevant vendors and to what work or equipment have they supplied. It is possible that these advances relate to work or equipment that they have been contracted for, and it's not part of the PHP 48 billion, right? Because the advances are ahead of the PHP 48 billion. You're right. Your question is to what extent will this PHP 48 billion bypass in terms of new cash flows, right? We have to reconcile how much of the total advances we've made so far relate precisely to the PHP 48 billion or to POs issued, purchase orders issued, not part of this PHP 48 billion. And that's what we need to reconcile. We've asked for a statement of account from each of these four vendors, they've submitted the statement of accounts. We need to reconcile where the advances went to, right? Is it part of the PHP 48 billion? Or probably some are not part of the PHP 48 billion. We need to determine that. That's part of the overall work process. It's, it's sadly, again, it's a very, very tedious process. Yeah. Yeah. Yeah. How about my first question, right? The additional borrowing. What's that about? I try to understand this. We simply assume maybe for the sake of conservatism that the entire PHP 48 billion is due, because it will be due, right? As to whether we certain of the PHP 48 billion have already been paid for in relation to the advances on the books of the company, then we also need to know that. But that has got to be reconciled with the vendors. On the assumption that the full PHP 48 billion will need to be paid for, yeah, that's what I think we coming around to a number which is around PHP 35 billion, right, pesos, in the next two years that we have to borrow in order to fulfill all of these payment obligations, including the fresh CapEx for the year and the dividends commitment being made to you at 60% of core. Okay, thanks. What are the, you know, available options for us to borrow this PHP 35 billion? Are we looking to borrow from banks or from the public markets? I think the banks, it will be a bilateral transaction. Obviously, it's better if they could use these advances to pay for all or part of the PHP 48 billion. That is the ideal situation. We're striving for that as well, right? Okay. Yeah. Okay, great. I think part of the debt management plan is by 2025, we start bringing down, debt, after those two years possibly of borrowings. Okay, thanks so much for the elaboration. All right. Next question from Katie Fun of Sun Life. Katie, are you on the line? If not, we skip over to Hussaini. Hussaini of UBS. Hussaini? Going once. We'll skip over Hussaini. Dionill Jamil- Yes. Of ATR. Oh, there you are. Hello. Hi. Apologies, thanks for the call. I also joined a bit late, so my questions may have been answered. In the previous question, it was noted that certain POs are being made or booked, ordered, but it is not part of PHP 48 billion. That does mean that the PHP 48 billion number could rise? That's question number one. The second question is on the CapEx side. Means the future CapEx should come down, means outside of this PHP 48 billion, as you know, your overbuild or overspend, the real going forward CapEx should come down. Finally, just to better understand the process of what happened in the last four years, is that network teams were building or, you know, putting the orders, but it was not being reported to the BOD. Is, has this led to the CapEx overrun? Just to better understand what happened exactly. Thank you. Okay. The first question is, are POs being booked but not part of the PHP 48 billion, such that the PHP 48 billion has a risk to the upside, so that it will be greater than PHP 48 billion? I think it is less likely that you'll see a number bigger than PHP 48 billion and more likely to be a lower number than PHP 48 billion. As I said, we're being cautious as well about being very determinate as to this number because, you know, we're under investigation and this and that. We just have to be cautious about statements we're making here to you. Once that number is determined, agreed with the vendors, we will say, this is these are the numbers, and these are advances relating to that PHP 48 billion that have already been paid to these guys, right? You know. And then- This session does not give us undiluted pleasure, right? We're being transparent, totally transparent to you guys. There's nothing we're hiding here. We're not playing with the truth. Hussaini, I think the answer earlier given was the PHP 48 billion is likely to be the upside to that. I think Hussaini's second question is, will the CapEx come down therefore in the future? Because we've already sort of pulled forward some of the CapEx which form part of the PHP 48 billion. I think as I said earlier, moving forward, I think beyond 2023, 2024. It will come down next year significantly compared to 2022, but it should be at normal levels by 2024. You know, discounting already the overruns that we had. 2024 will be your normal CapEx range, and maybe we're targeting somewhere PHP 50 billion-PHP 55 billion at that time. I mean, next year will be much lower than what we're projecting for 2022. His last question is, what was happening whether the network teams continued to build but were not reporting to the Board of Directors? They go to two committees before they go to the Board. They go to the Board for approval of the projects and the size and the amount of the project. Thereafter, once they have the approval, they issue the PO, and they build. They normally do not have daily for monthly reports on the status of the project. The project is reported as completed when it's completed. So basically, they go to the Board for approval to enter into contracts for the size of the project. That's it. They build. They report the network build, the percentage of completion internally as part of the operational operational procedure. Hussaini, any follow-up to that? No, this is clear. Thank you very much. Thank you. Matthew De Leon, second round cal l. Ken Gotianse of ATR Asset Management. Ken? Skip over Ken. Hi. Yeah. Sorry to interrupt. Oh, there you go. Yeah. Just one question from me. When the news was released last Friday, it was mentioned that you were looking at some reorganization. Could you share with us what kind of management reorganization you're considering? Well, I think we also mentioned it. There are three groups that we're looking into, no? Network, Procurement, and Finance. Any further questions, Ken? Nope. Got it. Thank you. All right. Thank you. Next from Daniel Lau of Eastspring. Hi. Can you hear me? Yes, we can. Great. Thanks for this presentation. A few questions from me. I'll ask the questions one by one. The first question is on clarifications on cash flow. Can you give us a sense of how much of that PHP 48 billion has already been paid for? It's either paid for in full or in advances. How much of that has actually been recognized in the 2020 and 2021 cash flow reporting? The total advances is PHP 95 billion to these vendors. They actually are making out like a bandit because practically a big percentage of their invoices are paid for effectively in advance, I think within seven months. There's a big down payment, and there's progress payments as the events work in progress for X years. I mean, they get around. Part of it is there's a factor ing line that these vendors have agreed with the local banks. They have the ability to discount the receivables from PLDT to, or the payables of PLDT to them with these commercial banks. We take on the risk for the commercial banks. They have gotten quite a bit of the cash up front. They are more than willing to shove the equipment and the works, ahead of schedule, to us because they've got the money, right? That's part, I think, of the lack of discipline as well that happened. Now we're coming back to them and say, "Wait a minute, this cannot happen, right?" Yeah. Got it. Just to clarify, they've of that PHP 95 billion, a big part of that has been factored and has been paid for by commercial banks. The liability is still on you to pay off to the commercial banks, right? Which hasn't actually happened at this point in time. Correct. Correct. That's correct. That's correct. Got it. Of that PHP 48 billion, is it safe to say that it hasn't been recognized in the cash flow in 2020 and 2021? No, it hasn't because these are still works to be completed and goods to be delivered, right? It, it's still incoming. Part of it will be recognized in 2022, but most of it, I believe, will be in 2023. Yes. Got it. Got it. Great. Next question. Again, to the extent that we can reduce it, therefore the impact on both the accounting and the for depreciation and the cash flows will get mitigated, right? That's what we're trying to do. Are certain of these advances, do they refer to the PHP 48 billion? That's what we still have to determine. We're reconciling accounts, right? Between ourselves and the vendors. Okay. Got it. Next question, right. I think you mentioned earlier that some of these equipment of the PHP 48 billion is already sitting in your warehouse? Some of that is sitting in your vendor's- Yes. Warehouse? Yes, it is. How much of that is sitting in your warehouse in terms of value? Do you have that sense? PHP 70 billion. Okay. You've not paid for the PHP 70 billion? To vendors. You have not paid? As said, mostly in vendor warehouses. Vendor warehouses. PHP 70 billion is mostly in vendor warehouses? Vendor warehouse, yes. The remaining PHP 25 billion is sitting in your warehouse? All of them paid. Paid by banks or paid by you? By PLDT. Paid by us at this point in time. Even the refinancing has been fully paid by us. I see. The payment occurred in 2022. Okay. Got it. Got it. All right. How would you lower that PHP 48 billion? Does that mean that, you know, for some of the orders that you have not received from the vendors, you will actually cancel these orders? Will there be any penalties that comes along with? Well, most of these equipment sitting in warehouses are equipment that we will need as we progress from 4G to 5G. They can be used, right? We intend to do that in the next two to three years. The question is, how are you going to...? Yeah. You mentioned that you intend to lower that figure. Oh, well, no, because effectively we have. You know, it's like you've ordered a lot ahead of time. That's what we did, right? That's why we should be able to. The plan is to lower the fresh or new CapEx for the next three years. If we tell you that our CapEx level, the fresh CapEx will stay at PHP 80 billion or PHP 90 billion, then what have we done? We've ordered equipment that are not usable, that's not true, right? We should have the ability to lower the fresh CapEx for the next three years, and that's the plan. The total CapEx might stay at PHP 70 billion-PHP 80 billion if you take into account this CapEx overruns, right? What you see, the headline number might be, say, PHP 70 billion or PHP 80 billion, but part of that would be the overrun number. Yes. If you're asking how the PHP 48 billion could be reduced or how the PHP 48 billion is pegged with respect to our discussions with the vendors, our discussion revolve around providing us discounts and determining whether the status of the projects whether they have been completed, work in process or not yet started. For those that have not yet been started, particularly if they are already delayed, we're going to cancel them because that means is to allow us to restart what's needed by operations. Basically those are the various levers that we're using in discussing with the vendors. The vendors are very cooperative because they want to maintain their partnership with us, and they want to continue to provide services to us moving forward. Got it. Got it. Thank you. Next question is on, I'm just trying to get some color on your internal SAP system. I think MVP mentioned that earlier on. You mentioned that, you know, the information is already in your SAP system, right? It's already in the system, right? It wasn't flagged out to senior management. I guess the business heads were not talking to each other and you know, and in the management reporting it was not flagged out. If the data is already in the system, then why are we still investigating to determine the exact value of this budget overrun? Like, you know, shouldn't it be very easy to pull out the information? Does it, you know, suggest that there's still quite a bit of manual processes in this system and therefore it's leading to human oversight? One of the exercises that's taking long is really the reconciliation with the vendors. What is the status of the project? We need to verify in the field whether or not they have in fact been completed or whether they are work in process and what stage. In a PO, for example, it's like the list is so long, it's like they're listing an entire set of equipment to build a factory. Each of the line item you need to check. That is the exercise that's happening now. What's the status? It requires discussion with the vendors and our people going to the field to verify the status. Yes. I guess, to add to that, these are multi-year projects, and some of them might not have started yet, right? We're validating whether the POs going to [audio distortion] have started or is about to start, or we don't need it anymore. It's in the system, but the validation of whether those POs are still active, takes a process of validation. Got it. Thank you. A last point, I would like to make a comment, is that, I think so far it's actually still quite unclear of what exactly happened, right, that led to this CapEx overrun, a budget overrun. I would hope that, you know, perhaps you can publish a list of factors that resulted in this situation, exactly what processes failed and the actions that PLDT is taking to remedy these failed processes and the progress over the next two years. I think that will actually help investors gain a lot more confidence in the internal processes and not have this recur again. Yeah, that's a ask for me. Thank you. Thank you. I guess we can also have more sessions in the future as we roll out the plans and developments, so we can have another briefing or a press release that we will come out with. As MVP said, we've always been transparent, as best we can here, and we will continue to do so. As you know, there are several processes that's happening. One of them is basically a forensic study, which will allow us, in a sense, a complete view of what happened. We will issue a disclosure once we have completed that investigation. As we complete stages of the process, we will issue. What we're just avoiding is a premature disclosure because it could harm the public shareholders. Rest assured that there will be updates on the process that is ongoing. Okay, Daniel. Last question. Last hand raised in the queue is from Dionill Jamil of ATR Asset Management. Are you still there? Hi. Good afternoon. Hi. Hi. Can you share with us maybe a rough timeline of the resolution of the entire process? You mentioned that you're also currently talking to your vendors about possible resolution. In connection to that, I know that these vendors would wanna work with you, wanna preserve the relationship, and would want the best outcome. We wanna look at also the adverse scenario. For whatever you owe, let's say the entire PHP 48 billion, and they wanna charge interest in that. Is it safe to assume that they're gonna charge like a look back, a retroactive interest for each of the four years or over the four years or whatever whenever the debt is incurred? Thank you. The question is, under the adverse scenario, and they start to charge interest, will they charge using a look back? I guess a retroactive effectiveness of the interest. I don't think that's possible. In the first place, they are ahead in terms of payment. In a project, for example, normally in a project, like 70% is hardware and 30% is services. The hardware has been fully paid. This project is supposed to be turnkey, but they get paid ahead. Normally, that shouldn't happen, no? I don't think they will. I don't think that's a possibility because they are ahead. The vendors are ahead in this situation. Won't agree to that, right? We also are thinking and looking at the options of replacing them if they are recalcitrant in terms of the terms that are beneficial to PLDT. It's simple as that. Okay. That was the last question online. One last chance for people who've joined us here at the venue to ask questions. Just raise your hand. Nothing else. All right. I guess that ends this afternoon's presentation. Thank you for joining us today. I turn the floor over to Mr. Pangilinan or Mr. Panlilio for any last words. Thank you for joining us this afternoon. I just don't know how to feel. Certainly not feeling like Ateneo winning, more like UP losing, right? Thank you. Merry Christmas. Thank you also. Again, as I said earlier, the core business remains to be strong. We'll come out better, handling this issue. I guess thank you again for being here and advance Merry Christmas to all. That concludes today's briefing. As always, should you have any further questions or clarifications, please reach out to PLDT Investor Relations. Thank you. Merry Christmas, and join us for refreshments at the back.