UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

August 3, 2023

PLDT INC.

(Translation of registrant’s name into English)

Ramon Cojuangco Building

Makati Avenue, Makati City

Philippines

(Address of registrant’s principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F  Form 40-F 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1): Yes  No 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7): Yes  No 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes  No 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Registrant: PLDT Inc.
Signature and Title:	/s/ Alfredo S. Panlilio
	Alfredo S. Panlilio
	President and Chief Executive Officer
Signature and Title:	/s/ Danny Y. Yu
	Danny Y. Yu
	Senior Vice President
	(Principal Financial Officer)
Signature and Title:	/s/ Gil Samson D. Garcia
	Gil Samson D. Garcia
	First Vice President
	(Principal Accounting Officer)

Date: August 3, 2023

SEC Number	PW-55
File Number

PLDT Inc.

(Company’s Full Name)

Ramon Cojuangco Building

Makati Avenue, Makati City

(Company’s Address)

(632) 82500254

(Telephone Number)

Not Applicable

(Fiscal Year Ending)

(month & day)

SEC Form 17-Q

Form Type

Not Applicable

Amendment Designation (if applicable)

June 30, 2023

Period Ended Date

Not Applicable

(Secondary License Type and File Number)

August 3, 2023

The Philippine Stock Exchange, Inc.

6/F Philippine Stock Exchange Tower

28th Street corner 5th Avenue

Bonifacio Global City, Taguig City

Attention: Ms. Alexandra D. Tom Wong

Officer-In-Charge - Disclosure Department

Securities & Exchange Commission

Secretariat Building, PICC Complex

Roxas Boulevard, Pasay City

Attention:	Mr. Vicente Graciano P. Felizmenio, Jr.
	Director – Markets and Securities Regulations Dept.

Philippine Dealing & Exchange Corporation

29th Floor, BDO Equitable Tower

8751 Paseo de Roxas, Makati City 1226

Attention: Atty. Marie Rose M. Magellan-Lirio

Head - Issuer Compliance and Disclosure Department

Gentlemen:

In accordance with Section 17(b) of the Securities Regulation Code and SRC Rule 17.3, we submit herewith a copy of SEC Form 17-Q with Management’s Discussion and Analysis and accompanying unaudited consolidated financial statements for the six months (6) months ended June 30, 2023.

This submission shall also serve as our compliance with Section 17.1 of the Securities Regulation Code regarding the filing of reports on significant developments.

Very truly yours,

/s/ Marilyn A. Victorio-Aquino

MARILYN A. VICTORIO-AQUINO

Corporate Secretary

PLDT Inc.

COVER SHEET

SEC Registration Number
P	W	-	5	5

Company Name

P L D T I N C .

Principal Office (No./Street/Barangay/City/Town/Province)

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Form Type					Department requiring the report					Secondary License Type, If Applicable
	1	7	-	Q		M	S	R	D

COMPANY INFORMATION

Company’s Email Address	Company’s Telephone Number/s	Mobile Number
gdgarcia@pldt.com.ph	(02) 8816-8056

No. of Stockholders	Annual Meeting Month/Day	Fiscal Year Month/Day
11,415 as at June 30, 2023	Every 2nd Tuesday in June	December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person	Email Address	Telephone Number/s	Mobile Number
Gil Samson D. Garcia	gdgarcia@pldt.com.ph	(02) 8816-8056

Contact Person’s Address

11/F Ramon Cojuangco Bldg. Makati Ave., Makati City

Note: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

QUARTERLY REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE (“SRC”) AND

SRC 17 (2) (b) THEREUNDER

1.	For the quarterly period ended		June 30, 2023
2.	SEC Identification Number		PW-55
3.	BIR Tax Identification No.		000-488-793-000
4.	PLDT Inc.
	Exact name of registrant as specified in its charter
5.	Republic of the Philippines
	Province, country or other jurisdiction of incorporation or organization
6.	Industry Classification Code:		(SEC Use Only)
7.	Ramon Cojuangco Building, Makati Avenue, Makati City			0721
	Address of registrant’s principal office			Postal Code
8.	(632) 8816-8056
	Registrant’s telephone number, including area code
9.	Not Applicable
	Former name, former address, and former fiscal year, if changed since last report
10.	Securities registered pursuant to Sections 8 of the SRC
	Title of Each Class		Number of Shares of Common Stock Outstanding
	Common Capital Stock, Php5 par value		216,055,775 shares as at June 30, 2023
11.	Are any or all of these securities listed on the Philippine Stock Exchange?
	Yes [ X ]	No [ ]
12.	Check whether the registrant
(a)	has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding 12 months (or for such shorter period the registrant was required to file such reports):
	Yes [ X ]	No [ ]
(b)	has been subject to such filing requirements for the past 90 days.
	Yes [ X ]	No [ ]

TABLE OF CONTENTS

PART I –	FINANCIAL INFORMATION	1
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
	Financial Highlights and Key Performance Indicators	2
	Performance Indicators	3
	Overview	4
	Management’s Financial Review	5
	Results of Operations	7
	Consolidated	8
	Revenues	8
	Expenses	10
	Other Income (Expenses) – Net	10
	Net Income (Loss)	11
	EBITDA	11
	Core Income	12
	Telco Core Income	12
	Wireless	12
	Revenues	12
	Service Revenues	13
	Non-Service Revenues	16
	Expenses	17
	Other Income (Expenses) – Net	18
	Provision for Income Tax	19
	Net Income	19
	EBITDA	19
	Core Income	19
	Fixed Line	20
	Revenues	20
	Service Revenues	20
	Non-Service Revenues	21
	Expenses	21
	Other Income (Expenses) – Net	22
	Provision for Income Tax	23
	Net Income	23
	EBITDA	23
	Core Income	23
	Others	23
	Revenues	23
	Expenses	23
	Other Income (Expenses) – Net	24
	Net Income (Loss)	24
	Core Income (Loss)	24
	Liquidity and Capital Resources	24
	Operating Activities	25
	Investing Activities	26
	Financing Activities	26
	Changes in Financial Conditions	28
	Off-Balance Sheet Arrangements	29
	Equity Financing	29
	Contractual Obligations and Commercial Commitments	29
	Quantitative and Qualitative Disclosures about Market Risks	30
	Impact of Inflation and Changing Prices	31
PART II –	OTHER INFORMATION	32
	Related Party Transactions	33
ANNEX –	Aging of Accounts Receivable	A-1
	Financial Soundness Indicators	A-2
	SIGNATURES	S-1

 

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Our consolidated financial statements as at June 30, 2023 (unaudited) and December 31, 2022 (audited) and for the six months ended June 30, 2023 and 2022 (unaudited) and related notes (pages F-1 to F-178) are filed as part of this report on Form 17-Q.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In the following discussion and analysis of our financial condition and results of operations, unless the context indicates or otherwise requires, references to “we,” “us,” “our” or “PLDT Group” mean PLDT Inc. and its consolidated subsidiaries, and references to “PLDT” or “the Company” mean PLDT Inc., not including its consolidated subsidiaries (please see Note 2 – Summary of Significant Accounting Policies to the accompanying unaudited consolidated financial statements for the list of these subsidiaries, including a description of their respective principal business activities and PLDT’s direct and/or indirect equity interest).

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes. Our unaudited consolidated financial statements, and the financial information discussed below, have been prepared in accordance with Philippine Financial Reporting Standards (“PFRS”) which is virtually converged with International Financial Reporting Standards as issued by the International Accounting Standards Board. PFRS differs in certain significant respects from generally accepted accounting principles (“GAAP”) in the U.S.

The financial information appearing in this report and in the accompanying unaudited consolidated financial statements are stated in Philippine Peso. Unless otherwise indicated, in this report and in the accompanying unaudited consolidated financial statements, the exchange rate used to convert the U.S. Dollar amounts into the Philippine Peso was Php55.37 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the Bankers Association of the Philippines as at June 30, 2023.

Some information in this report may contain forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current beliefs, expectations and intentions as to facts, actions and events that will or may occur in the future. Such statements generally are identified by forward-looking words such as “believe,” “plan,” “anticipate,” “continue,” “estimate,” “expect,” “may,” “will” or other similar words.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We have chosen these assumptions or bases in good faith. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors. When considering forward-looking statements, you should keep in mind the description of risks and other cautionary statements in this report. You should also keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as at the date on which we made it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the statements in this report after the date hereof. In light of these risks and uncertainties, you should keep in mind that actual results may differ materially from any forward-looking statement made in this report or elsewhere.

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Financial Highlights and Key Performance Indicators

	Six months ended June 30,						Increase (Decrease)
	2023			2022(1)			Amount			%
(amounts in million Php, except for EBITDA margin and earnings per common share)
Consolidated Income Statement
Revenues		104,038			100,787			3,251			3
Expenses		78,340			97,095			(18,755	)		(19	)
Other income (expenses) – net		(924	)		17,980			(18,904	)		(105	)
Income before income tax		24,774			21,672			3,102			14
Net income		18,507			16,977			1,530			9
Continuing operations		18,536			17,038			1,498			9
Discontinued operations		(29	)		(61	)		32			52
Core income		16,599			16,042			557			3
Continuing operations		16,628			16,103			525			3
Discontinued operations		(29	)		(61	)		32			52
Telco core income		17,562			17,109			453			3
EBITDA		49,719			44,736			4,983			11
Continuing operations		49,758			44,744			5,014			11
Discontinued operations		(39	)		(8	)		(31	)		388
EBITDA margin(2)		50	%		46	%
Reported earnings per common share:
Basic		85.27			77.56			7.71			10
Diluted		85.27			77.56			7.71			10
Reported earnings per common share from continuing operations:
Basic		85.40			77.84			7.56			10
Diluted		85.40			77.84			7.56			10
Core earnings per common share(3):
Basic		76.69			74.12			2.57			3
Diluted		76.69			74.12			2.57			3
Core earnings per common share from continuing operations:
Basic		76.82			74.40			2.42			3
Diluted		76.82			74.40			2.42			3

	June 30,		December 31,		Increase (Decrease)
	2023		2022		Amount			%
(amounts in million Php, except for net debt to equity ratio)
Consolidated Statements of Financial Position
Total assets		624,627		624,162		465			—
Property and equipment		313,415		292,745		20,670			7
Cash and cash equivalents and short-term investments		16,452		25,594		(9,142	)		(36	)
Total equity attributable to equity holders of PLDT		113,844		108,727		5,117			5
Long-term debt, including current portion		268,069		249,580		18,489			7
Net debt(4) to equity ratio	2.20x		2.05x			—			—

(1)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PLDT Global One Aviation Company, Inc. ("PG1") effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries.
See Note 2 – Summary of Significant Accounting Policies – Discontinued Operations and Note 11 – Investments in Associates and Joint Ventures – Investment in Associates – Investment in PG1 to the accompanying unaudited consolidated financial statements for further discussion.

(2)EBITDA margin for the period is measured as EBITDA divided by service revenues.

(3)Core earnings per common share (“EPS”) for the period is measured as core income divided by the weighted average number of outstanding common shares for the period.

(4)Net debt is derived by deducting cash and cash equivalents, short-term investments and debt instruments at amortized cost from total debt (long-term debt, including current portion).

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	Six months ended June 30,						Change
	2023			2022			Amount			%
(amounts in million Php, except for operational data)
Consolidated Statements of Cash Flows
Net cash provided by operating activities		42,905			37,736			5,169			14
Net cash used in investing activities		(46,603	)		(16,783	)		(29,820	)		(178	)
Payment for purchase of property and equipment, including    capitalized interest		(56,544	)		(49,044	)		(7,500	)		(15	)
Net cash used in financing activities		(5,032	)		(6,307	)		1,275			(20	)
Operational Data
Number of mobile subscribers		62,953,818			69,398,133			(6,444,315	)		(9	)
Prepaid		60,891,135			67,365,162			(6,474,027	)		(10	)
Postpaid		2,062,683			2,032,971			29,712			1
Number of broadband subscribers		3,901,553			4,082,223			(180,670	)		(4	)
Fixed Line broadband		3,294,012			3,200,872			93,140			3
Fixed Wireless broadband		607,541			881,351			(273,810	)		(31	)
Number of fixed line subscribers		3,823,629			3,821,296			2,333			—
Total number of subscribers		70,679,000			77,301,652			(6,622,652	)		(9	)
Number of employees:		15,987			17,609			(1,622	)		(9	)
Fixed Line		11,665			12,714			(1,049	)		(8	)
LEC		10,244			10,795			(551	)		(5	)
Others		1,421			1,919			(498	)		(26	)
Wireless		4,322			4,895			(573	)		(12	)

Exchange Rates – per US$	Month end rates		Weighted average rates during the year
June 30, 2023		55.37		55.24
December 31, 2022		55.82		54.52
June 30, 2022		54.97		52.15
December 31, 2021		50.97		49.28

Performance Indicators

We use a number of non-GAAP performance indicators to monitor financial performance. These are summarized below and discussed later in this report.

EBITDA

EBITDA for the period is measured as net income excluding depreciation and amortization, amortization of intangible assets, asset impairment on noncurrent assets, financing costs – net, interest income, equity share in net earnings (losses) of associates and joint ventures, foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net, provision for (benefit from) income tax and other income (expenses) – net. EBITDA is monitored by management for each business unit separately for purposes of making decisions about resource allocation and performance assessment. EBITDA is presented because our management believes that it is widely used by investors in their analysis of our performance and can assist them in their comparison of our performance with those of other companies in the technology, media and telecommunications sector. We also present EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Companies in the technology, media and telecommunications sector have historically reported EBITDA as a supplement to financial measures in accordance with PFRS. EBITDA should not be considered as alternative to net income as an indicator of our performance, nor should EBITDA be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to any other measure determined in accordance with PFRS. Unlike net income, EBITDA does not include depreciation and amortization, or financing costs and, therefore, does not reflect current or future capital expenditures or the cost of capital. We compensate for these limitations by using EBITDA as only one of several comparative tools, together with PFRS-based measurements, to assist in the evaluation of operating performance. Such PFRS-based measurements include income before income tax, net income, and operating, investing and financing cash flows. We have significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in EBITDA. Our

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calculation of EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

Core Income and Telco Core Income

Core income for the period is measured as net income attributable to equity holders of PLDT (net income less net income attributable to noncontrolling interests), excluding foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net (excluding hedge costs), asset impairment on noncurrent assets, other non-recurring gains (losses), net of tax effect of aforementioned adjustments, as applicable, and similar adjustments to equity share in net earnings (losses) of associates and joint ventures. Core income results are monitored by management for each business unit separately for purposes of making decisions about resource allocation and performance assessment.

Meanwhile, telco core income for the period is measured as net income attributable to equity holders of PLDT (net income less net income attributable to noncontrolling interests), excluding foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net (excluding hedge costs), asset impairment on noncurrent assets, non-recurring gains (losses), net of tax effect of aforementioned adjustments, as applicable, and similar adjustments to equity share in net earnings (losses) of associates and joint ventures, adjusted for the effect of the share in Voyager Innovations Holdings, Pte. Ltd. (“VIH”) losses, asset sales, and accelerated depreciation. Telco core income is used by the management as a basis for determining the level of dividend payouts to shareholders and one of the bases for granting incentives to employees.

Core income and telco core income should not be considered as alternatives to income before income tax or net income determined in accordance with PFRS as an indicator of our performance. Unlike net income, core income and telco core income do not include certain items, among others, foreign exchange gains and losses, gains and losses on derivative financial instruments, impairments on non-current assets and non-recurring gains and losses. We compensate for these limitations by using core income and telco core income as few out of several comparative tools, together with PFRS-based measurements, to assist us in the evaluation of our operating performance. Such PFRS-based measurements include income before income tax and net income. Our calculation of core income may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

Overview

We are one of the leading telecommunications and digital services providers in the Philippines, in terms of both subscribers and revenues, serving the fixed line, wireless and broadband markets. Through our three principal business segments, Wireless, Fixed Line and Others, we offer a diverse range of telecommunications and digital services across our extensive fiber optic backbone and wireless and fixed line networks.

As at June 30, 2023, we serve 70.7 million customers through the provision of mobile, fixed line and data services. In addition to the business units discussed below, we have found it beneficial to view our business from a customer-served perspective. Accordingly, we also assign metrics along the following marketing verticals: Home, Individual, Enterprise and International.

Our three business units are as follows:

•Wireless Our wireless business focuses on driving the growth of our data services while managing our legacy business of voice and short messaging services (“SMS”). We generate data revenues across all segments of our wireless business, whether through the access of mobile internet via smartphones, mobile broadband using pocket WiFi or home WiFi using fixed wireless broadband devices. We provide the following mobile telecommunications services through our wireless business: (i) mobile services, (ii) fixed wireless broadband services, and (iii) MVNO and other services.

•Fixed Line We are the leading provider of fixed line telecommunications services throughout the Philippines, servicing retail, corporate and SME clients. Our fixed line business group offers data, voice and miscellaneous services. We also provide other fixed line services such as data center, cloud, cyber security services and managed information technology through PLDT’s subsidiary, ePLDT.

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•Others Our other business consists primarily of our interests in digital platforms and other technologies, including our interest in VIH.

Management’s Financial Review

In addition to consolidated net income, we use EBITDA, core income and telco core income to assess our operating performance. Set forth below is a reconciliation of our consolidated net income to our consolidated EBITDA, and a reconciliation of our consolidated net income to our consolidated core income and consolidated telco core income for the six months ended June 30, 2023 and 2022.

The following table shows the reconciliation of our consolidated net income to our consolidated EBITDA for the six months ended June 30, 2023 and 2022:

	2023			2022(1)
	(amounts in million Php)
Net income from continuing operations		18,536			17,038
Net income from discontinued operations		(29	)		(61	)
Consolidated net income		18,507			16,977
Add (deduct) adjustments to continuing operations:
Depreciation and amortization		23,950			40,694
Financing costs – net		6,552			5,418
Provision for income tax		6,238			4,634
Equity share in net losses of associates and joint ventures		1,325			1,400
Amortization of intangible assets		110			100
Other non-recurring expenses		—			258
Interest income		(486	)		(269	)
Foreign exchange losses (gains) – net		(551	)		4,283
Gains on derivative financial instruments – net		(727	)		(2,184	)
Other income – net		(5,189	)		(26,628	)
Net loss on debt modification		—			294
Gain on dilution in VIH		—			(572	)
Income from prescription of preferred shares redemption liability		—			(7,839	)
Gain on sale and leaseback of telecom towers - gross of expenses		(3,640	)		(17,443	)
Others		(1,549	)		(1,068	)
Total adjustments		31,222			27,706
EBITDA from continuing operations		49,758			44,744
EBITDA from discontinued operations		(39	)		(8	)
Consolidated EBITDA		49,719			44,736

(1)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1 effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 – Summary of Significant Accounting Policies – Discontinued Operations and Note 11 – Investments in Associates and Joint Ventures – Investment in Associates – Investment in PG1 to the accompanying unaudited consolidated financial statements for further discussion.

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The following table shows the reconciliation of our consolidated net income to our consolidated core income and telco core income for the six months ended June 30, 2023 and 2022:

	2023			2022(1)
	(amounts in million Php)
Net income from continuing operations		18,536			17,038
Net income from discontinued operations		(29	)		(61	)
Consolidated net income		18,507			16,977
Add (deduct) adjustments to continuing operations:
Manpower rightsizing program		1,767			4,830
Net loss on debt modification, net of amortization of debt discount		89			383
Core income adjustment on equity share in net loss (income) of associates and joint ventures		73			(216	)
Impairment of investments		70			50
Accelerated depreciation		—			16,487
Other non-recurring expenses		—			258
Income from prescription of preferred shares redemption liability		—			(7,839	)
Net income attributable to noncontrolling interests		(56	)		(191	)
Foreign exchange losses (gains) – net		(555	)		4,282
Gains on derivative financial instruments – net, excluding hedge costs		(847	)		(2,311	)
Gain on sale and leaseback of telecom towers - net of expenses		(3,037	)		(16,537	)
Net tax effect of aforementioned adjustments		588			(131	)
Total adjustments		(1,908	)		(935	)
Core income from continuing operations		16,628			16,103
Core loss from discontinued operations		(29	)		(61	)
Consolidated core income		16,599			16,042
Core income from continuing operations		16,628			16,103
Add (deduct) adjustments:
Share in VIH losses		1,164			1,594
Gain on asset sales, net of tax		—			(487	)
Gain on dilution in VIH		(230	)		(101	)
Total adjustments		934			1,006
Telco core income		17,562			17,109

(1)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1 effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 – Summary of Significant Accounting Policies – Discontinued Operations and Note 11 – Investments in Associates and Joint Ventures – Investment in Associates – Investment in PG1 to the accompanying unaudited consolidated financial statements for further discussion.

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Results of Operations

The following table shows the contribution by each of our business segments to our consolidated revenues, expenses, other income (expense), income (loss) before income tax, provision for (benefit from) income tax, net income (loss)/segment profit (loss), EBITDA, EBITDA margin, core income and telco core income for the six months ended June 30, 2023 and 2022. In each of the six months ended June 30, 2023 and 2022, majority of our revenues are derived from our operations within the Philippines. Our revenues derived from outside the Philippines consist primarily of revenues from incoming international calls to the Philippines.

	Wireless			Fixed Line			Others				Inter-segment Transactions			Consolidated
	(amounts in million Php, except for EBITDA margin)
For the six months ended June 30, 2023
Revenues		51,589			59,606			—				(7,157	)		104,038
Expenses		41,247			44,287			7				(7,201	)		78,340
Other income (expenses) – net		1,390			(1,069	)		(1,278	)			33			(924	)
Income (loss) before income tax		11,732			14,250			(1,285	)			77			24,774
Provision for (benefit from) income tax		2,764			3,481			1				(8	)		6,238
Net income (loss)/Segment profit (loss)		8,968			10,769			(1,286	)			85			18,507
Continuing operations		8,968			10,769			(1,286	)			85			18,536
Discontinued operations		—			—			—				—			(29	)
EBITDA		25,803			28,896			(7	)			(4,934	)		49,719
Continuing operations		25,803			28,896			(7	)			(4,934	)		49,758
Discontinued operations		—			—			—				—			(39	)
EBITDA margin(1)		55	%		49	%		—				—			50	%
Core income (loss)		6,535			11,238			(1,159	)			14			16,599
Continuing operations		6,535			11,238			(1,159	)			14			16,628
Discontinued operations		—			—			—				—			(29	)
Telco core income (loss)		6,535			11,008			5				14			17,562
For the six months ended June 30, 2022(2)
Revenues		52,012			70,446			—				(21,671	)		100,787
Expenses		54,367			64,009			8				(21,289	)		97,095
Other income (expenses) – net		13,053			17,128			(810	)			(11,391	)		17,980
Income (loss) before income tax		10,698			23,565			(818	)			(11,773	)		21,672
Provision for (benefit from) income tax		2,138			2,442			(78	)			132			4,634
Net income (loss)/Segment profit (loss)		8,560			21,123			(740	)			(11,905	)		16,977
Continuing operations		8,560			21,123			(740	)			(11,905	)		17,038
Discontinued operations		—			—			—				—			(61	)
EBITDA		25,640			26,555			(8	)			(7,443	)		44,736
Continuing operations		25,640			26,555			(8	)			(7,443	)		44,744
Discontinued operations		—			—			—				—			(8	)
EBITDA margin(1)		53	%		38	%		—				—			46	%
Core income (loss)		3,758			25,436			(1,004	)			(12,087	)		16,042
Continuing operations		3,758			25,436			(1,004	)			(12,087	)		16,103
Discontinued operations		—			—			—				—			(61	)
Telco core income (loss)		3,758			25,335			103				(12,087	)		17,109
Increase (Decrease)
Revenues		(423	)		(10,840	)		-				14,514			3,251
Expenses		(13,120	)		(19,722	)		(1	)			14,088			(18,755	)
Other income (expenses) – net		(11,663	)		(18,197	)		(468	)			11,424			(18,904	)
Income (loss) before income tax		1,034			(9,315	)		(467	)			11,850			3,102
Provision for (benefit from) income tax		626			1,039			79				(140	)		1,604
Net income (loss)/Segment profit (loss)		408			(10,354	)		(546	)			11,990			1,530
Continuing operations		408			(10,354	)		(546	)			11,990			1,498
Discontinued operations		—			—			—				—			32
EBITDA		163			2,341			1				2,509			4,983
Continuing operations		163			2,341			1				2,509			5,014
Discontinued operations		—			—			—				—			(31	)
Core income (loss)		2,777			(14,198	)		(155	)			12,101			557
Continuing operations		2,777			(14,198	)		(155	)	-		12,101			525
Discontinued operations		—			—			—				—			32
Telco core income (loss)		2,777			(14,327	)		(98	)			12,101			453

(1)EBITDA margin for the period is measured as EBITDA divided by service revenues.

(2)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1 effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 11 – Investments in Associates and Joint Ventures – Investment in

7

 

Associates – Investment in PG1 and Note 2 – Summary of Significant Accounting Policies – Discontinued Operations to the accompanying unaudited consolidated financial statements for further discussion.

On a Consolidated Basis

Consolidated

Revenues

We reported consolidated revenues of Php104,038 million for the six months ended June 30, 2023, an increase of Php3,251 million, or 3%, as compared with Php100,787 million in the same period in 2022, primarily due to higher revenues, net of intersegment transactions, from data and voice services in our Fixed Line business segment, partially offset by lower revenues, net of intersegment transactions, from mobile and fixed wireless broadband services in our Wireless business segment.

Our consolidated service revenues of Php99,251 million for the six months ended June 30, 2023, increased by Php2,751 million, or 3%, from Php96,500 million in the same period in 2022. Our consolidated non-service revenues of Php4,787 million for the six months ended June 30, 2023, increased by Php500 million, or 12%, from Php4,287 million in the same period in 2022.

Consolidated service revenues, net of interconnection costs of Php4,720 million, amounted to Php94,531 million for the six months ended June 30, 2023, an increase of Php879 million, or 1%, from Php93,652 million in the same period in 2022.

8

 

The following table shows the breakdown of our consolidated revenues by service for the six months ended June 30, 2023 and 2022:

	Wireless		Fixed Line		Inter- segment Transactions			Consolidated
			(amounts in million Php)
For the six months ended June 30, 2023
Service Revenues
Wireless		47,022				(344	)		46,678
Mobile		46,165				(324	)		45,841
Fixed Wireless broadband		837				—			837
MVNO and others		20				(20	)		—
Fixed Line				59,386		(6,813	)		52,573
Voice				12,977		(751	)		12,226
Data				46,230		(5,933	)		40,297
Home broadband				25,272		(13	)		25,259
Corporate data and ICT				20,958		(5,920	)		15,038
Miscellaneous				179		(129	)		50
Total Service Revenues		47,022		59,386		(7,157	)		99,251
Non-Service Revenues
Sale of computers, phone units, mobile handsets and broadband data modems		4,567		218		—			4,785
Point-product sales		—		2		—			2
Total Non-Service Revenues		4,567		220		—			4,787
Total Revenues		51,589		59,606		(7,157	)		104,038
For the six months ended June 30, 2022(1)
Service Revenues
Wireless		47,940				(419	)		47,521
Mobile		46,781				(360	)		46,421
Fixed Wireless broadband		1,100				—			1,100
MVNO and others		59				(59	)		—
Fixed Line(1)				70,231		(21,252	)		48,979
Voice				22,995		(11,787	)		11,208
Data				47,027		(9,326	)		37,701
Home broadband				23,801		(17	)		23,784
Corporate data and ICT				23,226		(9,309	)		13,917
Miscellaneous				209		(139	)		70
Total Service Revenues		47,940		70,231		(21,671	)		96,500
Non-Service Revenues
Sale of computers, phone units, mobile handsets and broadband data modems		4,072		159		—			4,231
Point-product sales		—		56		—			56
Total Non-Service Revenues		4,072		215		—			4,287
Total Revenues		52,012		70,446		(21,671	)		100,787

(1)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1 effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 11 – Investments in Associates and Joint Ventures – Investment in Associates – Investment in PG1 and Note 2 – Summary of Significant Accounting Policies – Discontinued Operations to the accompanying unaudited consolidated financial statements for further discussion.

The following table shows the breakdown of our consolidated revenues by business segment for the six months ended June 30, 2023 and 2022:

													Change
	2023			%			2022			%			Amount			%
	(amounts in million Php)
Wireless		51,589			50			52,012			52			(423	)		(1	)
Fixed Line		59,606			57			70,446			70			(10,840	)		(15	)
Inter-segment transactions		(7,157	)		(7	)		(21,671	)		(22	)		14,514			67
Consolidated		104,038			100			100,787			100			3,251			3

Our consolidated revenues are further segmented by market, based on the type of customers served. “Home” refers to household subscribers, “Individual” covers mobile wireless individual customers, “Enterprise” encompasses business-based customers, corporate or micro, small and medium enterprises, and “International” refers to international carrier customers.

9

 

The following table shows our consolidated revenues by market segment for each of our business segments for the six months ended June 30, 2023 and 2022:

									Change
	2023		%		2022(1)		%		Amount			%
	(amounts in million Php)
Wireless		46,678		45		47,521		47		(843	)		(2	)
Individual		40,209		39		40,369		40		(160	)		—
Home		837		1		1,100		1		(263	)		(24	)
Enterprise		4,823		4		5,249		5		(426	)		(8	)
International		809		1		803		1		6			1
Fixed Line		52,573		51		48,979		50		3,594			7
Home		29,310		28		28,162		28		1,148			4
Enterprise		18,670		18		17,605		18		1,065			6
International		4,567		4		3,171		3		1,396			44
Others		26		—		41		—		(15	)		(37	)
Total Service Revenues		99,251		95		96,500		96		2,751			3
Wireless		4,567		5		4,072		4		495			12
Individual		3,798		4		3,301		3		497			15
Home		44		—		111		—		(67	)		(60	)
Enterprise		720		1		649		1		71			11
International		5		—		11		—		(6	)		(55	)
Fixed Line		220		—		215		—		5			2
Home		95		—		78		—		17			22
Enterprise		125		—		137		—		(12	)		(9	)
Total Non-Service Revenues		4,787		5		4,287		4		500			12
Total Revenues		104,038	100			100,787	100			3,251			3

(1)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1 effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 11 – Investments in Associates and Joint Ventures – Investment in Associates – Investment in PG1 and Note 2 – Summary of Significant Accounting Policies – Discontinued Operations to the accompanying unaudited consolidated financial statements for further discussion.

Expenses

Consolidated expenses decreased by Php18,755 million, or 19%, to Php78,340 million for the six months ended June 30, 2023 from Php97,095 million in the same period in 2022, primarily due to lower expenses related to depreciation and amortization, selling, general and administrative expenses, asset impairment, and provisions, partially offset by higher interconnection costs, and cost of sales and services.

The following table shows the breakdown of our consolidated expenses by business segment for the six months ended June 30, 2023 and 2022:

													Change
	2023			%			2022			%			Amount			%
	(amounts in million Php)
Wireless		41,247			53			54,367			56			(13,120	)		(24	)
Fixed Line		44,287			56			64,009			66			(19,722	)		(31	)
Others		7			—			8			—			(1	)		(13	)
Inter-segment transactions		(7,201	)		(9	)		(21,289	)		(22	)		14,088			66
Consolidated		78,340			100			97,095			100			(18,755	)		(19	)

Other Income (Expenses) – Net

Consolidated other expenses – net amounted to Php924 million for the six months ended June 30, 2023, a change of Php18,904 million as against consolidated other income – net of Php17,980 million in the same period in 2022, primarily due to the combined effects of the following: (i) lower other income – net from our Wireless business segment mainly on account of a lower gain on sale and leaseback of telecom towers, and from our Fixed Line business segment, owing mainly to the income from prescription of preferred shares redemption liability in 2022; (ii) lower net gains on derivative financial instruments from our Fixed Line and Wireless business segments;
(iii) higher net financing costs from our Fixed Line business segment; (iv) net foreign exchange gains from our Fixed Line and Wireless business segments in 2023 as against net foreign exchange losses in 2022; and (v) lower equity share in net losses from our Other business segment.

10

 

The following table shows the breakdown of our consolidated other income (expenses) – net by business segment for the six months ended June 30, 2023 and 2022:

							Change
	2023			2022			Amount			%
	(amounts in million Php)
Wireless		1,390			13,053			(11,663	)		(89	)
Fixed Line		(1,069	)		17,128			(18,197	)		(106	)
Others		(1,278	)		(810	)		(468	)		(58	)
Inter-segment transactions		33			(11,391	)		11,424			100
Consolidated		(924	)		17,980			(18,904	)		(105	)

Net Income (Loss)

Consolidated net income increased by Php1,530 million, or 9%, to Php18,507 million for the six months ended June 30, 2023 from Php16,977 million in the same period in 2022, primarily due to higher net income from our Wireless business segment, partially offset by lower net income from our Fixed Line business segment, and higher net loss from our Other business segment. Our consolidated basic and diluted EPS increased to Php85.27 for the six months ended June 30, 2023 from Php77.56 in the same period in 2022. Our weighted average number of outstanding common shares was approximately 216.06 million for each of the six months ended June 30, 2023 and 2022.

The following table shows the breakdown of our consolidated net income (loss) by business segment for the six months ended June 30, 2023 and 2022:

													Change
	2023			%			2022			%			Amount			%
	(amounts in million Php)
Wireless		8,968			49			8,560			50			408			5
Fixed Line		10,769			58			21,123			124			(10,354	)		(49	)
Others		(1,286	)		(7	)		(740	)		(4	)		(546	)		(74	)
Inter-segment transactions		85			—			(11,905	)		(70	)		11,990			101
Continuing operations		18,536			100			17,038			100			1,498			9
Discontinued operations		(29	)		—			(61	)		—			32			52
Consolidated		18,507			100			16,977			100			1,530			9

EBITDA

Our consolidated EBITDA amounted to Php49,719 million for the six months ended June 30, 2023, an increase of Php4,983 million, or 11%, as compared with Php44,736 million in the same period in 2022, primarily due to higher EBITDA from our Fixed Line and Wireless business segments.

The following table shows the breakdown of our consolidated EBITDA by business segment for the six months ended June 30, 2023 and 2022:

													Change
	2023			%			2022			%			Amount			%
	(amounts in million Php)
Wireless		25,803			52			25,640			57			163			1
Fixed Line		28,896			58			26,555			59			2,341			9
Others		(7	)		—			(8	)		—			1			13
Inter-segment transactions		(4,934	)		(10	)		(7,443	)		(16	)		2,509			34
Continuing operations		49,758			100			44,744			100			5,014			11
Discontinued operations		(39	)		—			(8	)		—			(31	)		(388	)
Consolidated		49,719			100			44,736			100			4,983			11

Our consolidated EBITDA, excluding MRP and expenses related to the sale of our telecom assets, amounted to Php52,128 million for the six months ended June 30, 2023, an increase of Php1,568 million, or 3%, as compared with Php50,480 million in the same period in 2022.

11

 

Core Income (Loss)

Our consolidated core income amounted to Php16,599 million for the six months ended June 30, 2023, an increase of Php557 million, or 3%, as compared with Php16,042 million in the same period in 2022, mainly on account of higher EBITDA excluding MRP, lower depreciation and amortization and lower equity share in net losses of associates and joint ventures, partially offset by higher financing costs and provision for income tax. Our consolidated basic and diluted core EPS increased to Php76.69 for the six months ended June 30, 2023 from Php74.12 in the same period in 2022.

The following table shows the breakdown of our consolidated core income by business segment for the six months ended June 30, 2023 and 2022:

													Change
	2023			%			2022			%			Amount			%
	(amounts in million Php)
Wireless		6,535			39			3,758			23			2,777			74
Fixed Line		11,238			68			25,436			159			(14,198	)		(56	)
Others		(1,159	)		(7	)		(1,004	)		(6	)		(155	)		(15	)
Inter-segment transactions		14			—			(12,087	)		(76	)		12,101			100
Continuing operations		16,628			100			16,103			100			525			3
Discontinued operations		(29	)		—			(61	)		—			32			52
Consolidated		16,599			100			16,042			100			557			3

Telco Core Income

Our consolidated telco core income amounted to Php17,562 million for the six months ended June 30, 2023, an increase of Php453 million, or 3%, as compared with Php17,109 million in the same period in 2022, mainly due to higher EBITDA excluding MRP, and lower depreciation and amortization, partially offset by higher financing costs and provision for income tax.

The following table shows the breakdown of our consolidated telco core income by business segment for the six months ended June 30, 2023 and 2022:

											Change
	2023		%		2022			%			Amount			%
	(amounts in million Php)
Wireless		6,535		37		3,758			22			2,777			74
Fixed Line		11,008		63		25,335			148			(14,327	)		(57	)
Others		5		—		103			1			(98	)		(95	)
Inter-segment transactions		14		—		(12,087	)		(71	)		12,101			100
Consolidated		17,562		100		17,109			100			453			3

On a Business Segment Basis

Wireless

Revenues

We generated revenues of Php51,589 million from our Wireless business segment for the six months ended
June 30, 2023, a decrease of Php423 million, or 1%, from Php52,012 million in the same period in 2022.

The following table summarizes our total revenues by service from our Wireless business segment for the six months ended June 30, 2023 and 2022:

									Increase (Decrease)
	2023		%		2022		%		Amount			%
	(amounts in million Php)
Service Revenues:
Mobile		46,165		89		46,781		90		(616	)		(1	)
Fixed Wireless broadband		837		2		1,100		2		(263	)		(24	)
MVNO and others(1)		20		—		59		—		(39	)		(66	)
Total Wireless Service Revenues		47,022		91		47,940		92		(918	)		(2	)
Non-Service Revenues:
Sale of mobile handsets and broadband data modems		4,567		9		4,072		8		495			12
Total Wireless Revenues		51,589		100		52,012		100		(423	)		(1	)

12

 

(1)Includes service revenues generated by MVNOs of PLDT Global subsidiaries and facility service fees.

Service Revenues

Our wireless service revenues decreased by Php918 million, or 2%, to Php47,022 million for the six months ended June 30, 2023 as compared with Php47,940 million in the same period in 2022, primarily due to lower revenues from mobile, fixed wireless broadband, and MVNO and other services. As a percentage of our total wireless revenues, service revenues accounted for 91% and 92% for the six months ended June 30, 2023 and 2022, respectively.

Wireless service revenues, net of interconnection costs of Php391 million, amounted to Php46,631 million for the six months ended June 30, 2023, a decrease of Php875 million, or 2%, from Php47,506 million in the same period in 2022.

Mobile Services

Our mobile service revenues amounted to Php46,165 million for the six months ended June 30, 2023, a decrease of Php616 million, or 1%, from Php46,781 million in the same period in 2022, primarily due to the favorable impact of election-related activities in 2022, as well as the continued albeit easing inflation. Mobile service revenues accounted for 98% of our wireless service revenues in each of the six months ended June 30, 2023 and 2022.

The following table shows the breakdown of our mobile service revenues for the six months ended June 30, 2023 and 2022:

									Increase (Decrease)
	2023		%		2022		%		Amount			%
	(amounts in million Php)
Mobile Services:
Data		36,608		79		35,811		77		797			2
Voice		5,987		13		7,443		16		(1,456	)		(20	)
SMS		2,614		6		2,936		6		(322	)		(11	)
Inbound roaming and others(1)		956		2		591		1		365			62
Total		46,165		100		46,781		100		(616	)		(1	)

(1)Refers to other non-subscriber-related revenues consisting primarily of inbound international roaming fees and facility service fees.

Data Services

Mobile revenues from our data services, which include mobile internet, mobile broadband and other data services, increased by Php797 million, or 2%, to Php36,608 million for the six months ended June 30, 2023 from Php35,811 million in the same period in 2022 due to higher mobile internet revenues driven mainly by the continued strength of our mobile network, as cited by Ookla as the Philippines' Best Mobile Network during the first half of 2023, and promotion of data offers such as Power All, Double Giga and Smart Signature, which cater to the needs of prepaid subscribers looking for data flexibility as consumers shift from working and studying from home to a more hybrid work and school environment, partially offset by lower mobile broadband revenues.

Data services accounted for 79% and 77% of our mobile service revenues for the six months ended June 30, 2023 and 2022, respectively.

The following table shows the breakdown of our mobile data service revenues for the six months ended June 30, 2023 and 2022:

									Increase (Decrease)
	2023		%		2022(1)		%		Amount			%
	(amounts in million Php)
Data Services:
Mobile internet(2)		34,624		95		33,558		94		1,066			3
Mobile broadband		1,538		4		1,752		5		(214	)		(12	)
Other data		446		1		501		1		(55	)		(11	)
Total		36,608		100		35,811		100		797			2

13

 

(1)Certain amounts for the six months ended June 30, 2022 were reclassified to conform with the current year presentation.

(2)Includes revenues from web-based services, net of discounts and content provider costs.

Mobile Internet

Mobile internet service revenues increased by Php1,066 million, or 3%, to Php34,624 million for the six months ended June 30, 2023 from Php33,558 million in the same period in 2022, primarily due to the increase in mobility and consumer adoption of our mobile data offerings such as Power All, Double Giga, Giga Power, Magic Data, TNT's Affordaloads, and Smart Postpaid's Unli 5G plans.

Smart continues to drive GigaLife App, which now supports more payment solutions for top-up and SIM registration services. Smart also has Smart Live App, which provides its subscribers exclusive video access to live sports streaming such as the UAAP, PBA, PVL and NBA TV Philippines channel, as well as pay-per-view (“PPV”) concerts. In February 2023, Smart kicked off its FIBA World Cup campaign by streaming the FIBA games on the Smart Live App. Smart also launched "Live More Today" brand campaign, which helped deliver Smart's stronger brand promise and connect with its subscribers.

Mobile internet services accounted for 75% and 72% of our mobile service revenues for the six months ended June 30, 2023 and 2022, respectively.

Mobile Broadband

Mobile broadband revenues amounted to Php1,538 million for the six months ended June 30, 2023, a decrease of Php214 million, or 12%, from Php1,752 million in the same period in 2022, primarily due to lower mobile broadband subscriber base.

Mobile broadband services accounted for 3% and 4% of our mobile service revenues for the six months ended June 30, 2023 and 2022, respectively.

Other Data

Revenues from our other data services, which include value-added services (“VAS”) and domestic leased lines, decreased by Php55 million, or 11%, to Php446 million for the six months ended June 30, 2023 from Php501 million in the same period in 2022. The decrease was primarily due to lower revenues from VAS via direct carrier billing, driven by the game publishers and tollways payment provider's shift to digital payment solutions.

Voice Services

Mobile revenues from our voice services, which include all voice traffic, decreased by Php1,456 million, or 20%, to Php5,987 million for the six months ended June 30, 2023 from Php7,443 million in the same period in 2022, due to subscribers’ shift to alternative calling options, digital teleconferencing solutions, and other OTT services. In view of these new digital solutions and to improve its voice service, Smart has been provisioning its mobile users for Voice over LTE (“VoLTE”) and Voice over Wifi (“VoWiFi”) services which routes the voice calls through digital channels and offer better voice quality. Mobile voice services accounted for 13% and 16% of our mobile service revenues for the six months ended June 30, 2023 and 2022, respectively.

Domestic voice service revenues decreased by Php1,248 million, or 18%, to Php5,513 million for the six months ended June 30, 2023 from Php6,761 million in the same period in 2022, mainly due to lower traffic from domestic outbound voice services.

International voice service revenues decreased by Php208 million, or 30%, to Php474 million for the six months ended June 30, 2023 from Php682 million in the same period in 2022 resulting from the declining trend of international inbound voice traffic due to subscribers’ shift to application-based form of communications and other OTT services.

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SMS Services

Mobile revenues from our SMS services, which include all SMS-related services, decreased by Php322 million, or 11%, to Php2,614 million for the six months ended June 30, 2023 from Php2,936 million in the same period in 2022, mainly due to the decline in SMS volumes arising from the increased adoption of alternative messaging solutions such as OTT services, social media, and messenger application, partially offset by the increase in Application-to-Person (“A2P”) service revenues. Mobile SMS services accounted for 6% of our mobile service revenues in each of the six months ended June 30, 2023 and 2022.

Inbound Roaming and Others

Mobile revenues from inbound roaming and other services increased by Php365 million, or 62%, to Php956 million for the six months ended June 30, 2023 from Php591 million in the same period in 2022 mainly due to higher revenues from inbound roaming services driven by the increase in international travel and higher revenues from other subscriber-related income.

The following table shows the breakdown of our mobile service revenues by service type for the six months ended June 30, 2023 and 2022:

					Increase (Decrease)
	2023		2022		Amount			%
	(amounts in million Php)
Mobile service revenues		46,165		46,781		(616	)		(1	)
By service type
Prepaid		36,533		37,189		(656	)		(2	)
Postpaid		8,676		9,001		(325	)		(4	)
Inbound roaming and others		956		591		365			62

Prepaid Mobile Revenues

Revenues generated from our prepaid mobile services amounted to Php36,533 million for the six months ended June 30, 2023, a decrease of Php656 million, or 2%, as compared with Php37,189 million in the same period in 2022. The decrease in revenues from our prepaid mobile services was attributed to lower SMS, voice and VAS revenues, partially offset by the growth in data revenues. Nevertheless, prepaid data revenues excluding VAS increased by 2% for the six months ended June 30, 2023 as compared with the same period in 2022, driven by TNT's "Pinakamalakas" network campaign and continued promotions of prepaid offers such as Power All, Double Giga and Affordaloads. Prepaid mobile service revenues accounted for 79% and 80% of mobile service revenues for the six months ended June 30, 2023 and 2022, respectively.

Postpaid Mobile Revenues

Revenues generated from our postpaid mobile services amounted to Php8,676 million for the six months ended June 30, 2023, a decrease of Php325 million, or 4%, as compared with Php9,001 million in the same period in 2022. The decrease in revenues from our postpaid mobile services was attributed to lower voice, SMS and mobile broadband services. Postpaid mobile service revenues accounted for 19% of mobile service revenues in each of the six months ended June 30, 2023 and 2022.

In April 2022, we implemented the rebranding of Individual Sun Postpaid into Smart Postpaid. Sun subscribers retained their existing Sun numbers, SIM and plan inclusions while enjoying the services and perks of a Smart subscriber such as Smart 5G, access to GigaLife App, Smart notifications and billing, and other Smart add-ons and features. The subscribers may also avail of the Signature plan which provides the subscribers with a better experience, access to the fastest mobile network, better plan packages and latest devices.

Subscriber Base, ARPU and Churn Rates

In October 2022, R.A. No. 11934, or the SIM Registration Act took effect which mandates that all SIMs be registered. The law aims to address the proliferation of text scams in the country, as well as other crimes committed through text messages. Under the law, the telcos are required to collect the full name, date of birth, complete

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address, gender, valid government IDs and the attestation of the end users. Smart officially launched its registration portal on December 27, 2022. The original deadline for mandatory SIM registration was April 26, 2023, which was subsequently extended until July 25, 2023. Smart registered over 52.5 million of Smart’s subscribers as at July 30, 2023.

The following table shows our mobile subscriber base as at June 30, 2023 and 2022:

					Increase (Decrease)
	2023(1)		2022		Amount			%
Mobile subscriber base
Smart(2)		25,506,553		27,641,951		(2,135,398	)		(8	)
Prepaid		23,486,725		25,679,480		(2,192,755	)		(9	)
Postpaid		2,019,828		1,962,471		57,357			3
TNT		37,404,410		41,685,682		(4,281,272	)		(10	)
Sun Postpaid		42,855		70,500		(27,645	)		(39	)
Total mobile subscribers		62,953,818		69,398,133		(6,444,315	)		(9	)

(1)In view of the SIM Registration Act, beginning 1Q 2023, our policy is to recognize a prepaid mobile subscriber only when the subscriber activates and uses the SIM card and is considered inactive if the subscriber does not reload within 120 days after expiration of the last reload.

(2)Includes mobile broadband subscribers.

The average monthly churn rates for Smart Prepaid subscribers was 3.9% and 4.6% for the six months ended June 30, 2023 and 2022, respectively, while the average monthly churn rates for TNT subscribers were 4.3% and 4.4% for the six months ended June 30, 2023 and 2022, respectively.

The average monthly churn rates for Smart Postpaid subscribers were 1.4% and 1.3% for the six months ended June 30, 2023 and 2022, respectively. The average monthly churn rates for Sun Postpaid subscribers were 3.5% and 2.9% for the six months ended June 30, 2023 and 2022, respectively.

The following table summarizes our average monthly ARPUs for the six months ended June 30, 2023 and 2022:

	Gross(1)				Increase (Decrease)						Net(2)				Increase (Decrease)
	2023		2022		Amount			%			2023		2022		Amount			%
	(amounts in Php)
Prepaid
Smart		124		119		5			4			108		102		6			6
TNT		99		97		2			2			89		84		5			6
Postpaid
Smart		725		794		(69	)		(9	)		684		755		(71	)		(9	)
Sun		531		621		(90	)		(14	)		530		621		(91	)		(15	)

(1)Gross monthly ARPU is calculated by dividing gross mobile service revenues for the period, including interconnection income, but excluding inbound roaming revenues, gross of discounts, and content provider costs, by the average number of subscribers in the period.

(2)Net monthly ARPU is calculated by dividing gross mobile service revenues for the period, including interconnection income, but excluding inbound roaming revenues, net of discounts, and content provider costs, by the average number of subscribers in the period.

Fixed Wireless Broadband

Revenues from our Fixed Wireless Broadband services amounted to Php837 million for the six months ended June 30, 2023, a decrease of Php263 million, or 24%, from Php1,100 million in the same period in 2022 primarily due to shift in customer demand from wireless broadband to home fiber.

MVNO and Others

Revenues from our MVNO and other servicesamounted to Php20 million for the six months ended June 30, 2023, a decrease of Php39 million, or 66%, from Php59 million in the same period in 2022.

Non-Service Revenues

Our wireless non-service revenues consist of sale of mobile handsets, broadband data routers, tablets and accessories. Our wireless non-service revenues increased by Php495 million, or 12%, to Php4,567 million for the

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six months ended June 30, 2023 from Php4,072 million in the same period in 2022, primarily due to higher sale of postpaid mobile handsets.

Expenses

Expenses associated with our Wireless business segment amounted to Php41,247 million for the six months ended June 30, 2023, a decrease of Php13,120 million, or 24%, from Php54,367 million in the same period in 2022. The decrease was attributable to lower expenses related to depreciation and amortization, selling, general and administrative, provisions, asset impairment and interconnection costs, partially offset by higher cost of sales and services. As a percentage of our total wireless revenues, expenses associated with our Wireless business segment accounted for 80% and 105% for the six months ended June 30, 2023 and 2022, respectively.

The following table summarizes the breakdown of our total wireless-related expenses for the six months ended June 30, 2023 and 2022 and the percentage of each expense item in relation to the total:

									Increase (Decrease)
	2023		%		2022		%		Amount			%
	(amounts in million Php)
Selling, general and administrative expenses		18,761		46		19,711		36		(950	)		(5	)
Depreciation and amortization		15,368		37		27,762		51		(12,394	)		(45	)
Cost of sales and services		6,251		15		5,609		11		642			11
Interconnection costs		391		1		434		1		(43	)		(10	)
Provisions		349		1		663		1		(314	)		(47	)
Asset impairment		127		—		188		—		(61	)		(32	)
Total		41,247		100		54,367		100		(13,120	)		(24	)

Selling, general and administrative expenses decreased by Php950 million, or 5%, to Php18,761 million, primarily due to lower expenses related to compensation and employee benefits, professional and other contracted services, selling and promotions, insurance and security services, communication, training and travel, and taxes and licenses, as a result of our continuous optimization efforts, partly offset by higher expenses related to repairs and maintenance, and rent.

Depreciation and amortization charges decreased by Php12,394 million, or 45%, to Php15,368 million, mainly on account of lower depreciation due to shortened life of 3G technology-related equipment in 2022 resulting from the

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migration to faster speed LTE and 5G technologies, partly offset by higher amortization of capitalized leases arising from the sale and leaseback of telecom towers.

Cost of sales and services increased by Php642 million, or 11%, to Php6,251 million, primarily due to SIM registration and higher SIM printing costs, as well as higher cost of mobile handsets.

Interconnection costs decreased by Php43 million, or 10%, to Php391 million, primarily due to lower interconnection charges on international voice services and A2P transactions.

Provisions decreased by Php314 million, or 47%, to Php349 million, primarily due to lower provision for inventory obsolescence, partly offset by higher provision for expected credit losses.

Asset impairment decreased by Php61 million, or 32%, to Php127 million primarily due to impairment charges in 2022 related to certain network equipment damaged by Typhoon Odette.

Other Income (Expenses) – Net

The following table summarizes the breakdown of our total wireless-related other income (expenses) – net for the six months ended June 30, 2023 and 2022:

							Change
	2023			2022			Amount			%
	(amounts in million Php)
Other Income (Expenses) – Net:
Foreign exchange gains (losses) – net		445			(1,900	)		2,345			123
Interest income		335			184			151			82
Gains on derivative financial instruments – net		100			852			(752	)		(88	)
Financing costs – net		(4,404	)		(4,501	)		97			2
Other income – net		4,914			18,418			(13,504	)		(73	)
Total		1,390			13,053			(11,663	)		(89	)

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Our Wireless business segment’s other income – net amounted to Php1,390 million for the six months ended June 30, 2023, a decrease of Php11,663 million, or 89%, from Php13,053 million in the same period in 2022, primarily due to the combined effects of the following: (i) lower other income – net by Php13,504 million mainly due to the lower gain on sale and leaseback of telecom towers, which decreased by Php13,803 million, or 79%, to Php3,640 million in 2023 from Php17,443 million in 2022; (ii) lower net gains on derivative financial instruments by Php752 million mainly due to the appreciation of the Philippine peso relative to the U.S. dollar in 2023 as against the depreciation of the Philippine peso to the U.S. dollar in 2022; (iii) lower net financing costs by Php97 million;
(iv) higher interest income by Php151 million; and (v) net foreign exchange gains of Php445 million in 2023 as against net foreign exchange losses of Php1,900 million in 2022 mainly on account of revaluation of net foreign currency-denominated liabilities due to the appreciation of the Philippine peso relative to the U.S. dollar in 2023 as against the depreciation of the Philippine peso to the U.S. dollar in 2022.

Provision for Income Tax

Provision for income tax amounted to Php2,764 million for the six months ended June 30, 2023, an increase of Php626 million, or 29%, from Php2,138 million in the same period in 2022, primarily due to higher net income before tax, lower optional standard deduction gain from Digitel Mobile Philippines, Inc. ("DMPI") in 2023, and local tax deficiency settlement made by Smart Broadband Inc. in 2023 for which no tax benefit has been realized.

Net Income

As a result of the foregoing, our Wireless business segment’s net income increased by Php408 million, or 5%, to Php8,968 million for the six months ended June 30, 2023 from Php8,560 million in the same period in 2022.

EBITDA

Our Wireless business segment’s EBITDA increased by Php163 million, or 1%, to Php25,803 million for the six months ended June 30, 2023 from Php25,640 million in the same period in 2022. EBITDA margin increased to 55% in the six months ended June 30, 2023 from 53% in the same period in 2022.

Core Income

Our Wireless business segment’s core income increased by Php2,777 million, or 74%, to Php6,535 million for the six months ended June 30, 2023 from Php3,758 million in the same period in 2022, mainly on account of lower depreciation and amortization excluding depreciation of assets with reduced estimated useful life, partially offset by higher provision for income tax.

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Fixed Line

Revenues

Revenues generated from our Fixed Line business segment amounted to Php59,606 million for the six months ended June 30, 2023, a decrease of Php10,840 million, or 15%, from Php70,446 million in the same period in 2022.

The following table summarizes our total revenues by service from our Fixed Line business segment for the six months ended June 30, 2023 and 2022:

									Increase (Decrease)
	2023		%		2022		%		Amount			%
	(amounts in million Php)
Service Revenues:
Data		46,230		78		47,027		67		(797	)		(2	)
Voice		12,977		22		22,995		33		(10,018	)		(44	)
Miscellaneous		179		—		209		—		(30	)		(14	)
		59,386		100		70,231		100		(10,845	)		(15	)
Non-Service Revenues:
Sale of computers, phone units and point-product sales		220		—		215		—		5			2
Total Fixed Line Revenues		59,606		100		70,446		100		(10,840	)		(15	)

Service Revenues

Our fixed line service revenues decreased by Php10,845 million, or 15%, to Php59,386 million for the six months ended June 30, 2023 from Php70,231 million in the same period in 2022, primarily due to lower revenues from our voice, data and miscellaneous services.

Fixed line service revenues, net of interconnection costs of Php5,087 million, amounted to Php54,299 million for the six months ended June 30, 2023, a decrease of Php1,717 million, or 3%, from Php56,016 million in the same period in 2022.

Data Services

Our data services, which include Home broadband, corporate data, and ICT portfolio with data center, cloud, cyber security, and managed IT offerings, posted revenues of Php46,230 million for the six months ended June 30, 2023, a decrease of Php797 million, or 2%, from Php47,027 million in the same period in 2022, primarily due to lower corporate data and leased lines, and ICT services, partially offset by higher revenues from home broadband services. The percentage contribution of this service segment to our fixed line service revenues accounted for 78% and 67% for the six months ended June 30, 2023 and 2022, respectively.

The following table shows information of our data service revenues for the six months ended June 30, 2023 and 2022:

					Increase
	2023		2022		Amount			%
	(amounts in million Php)
Data service revenues		46,230		47,027		(797	)		(2	)
Home broadband		25,272		23,801		1,471			6
Corporate data and ICT		20,958		23,226		(2,268	)		(10	)

Home Broadband

Home broadband data revenues amounted to Php25,272 million for the six months ended June 30, 2023, an increase of Php1,471 million, or 6%, from Php23,801 million in the same period in 2022. This growth is driven by increasing demand for broadband services, including fixed wired (PLDT Home Fibr), which we are providing through the nationwide roll-out of its fiber-to-the-home (“FTTH”) network and its existing copper network, which is progressively being upgraded to fiber. Home broadband revenues accounted for 55% and 51% of fixed line data service revenues for the six months ended June 30, 2023 and 2022, respectively. PLDT’s FTTH nationwide

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network roll-out has reached over 17.2 million homes passed as of June 30, 2023, while the number of ports has grown to about 6.1 million.

Corporate Data and ICT

Corporate data services amounted to Php17,638 million for the six months ended June 30, 2023, a decrease of Php1,790 million, or 9%, as compared with Php19,428 million in the same period in 2022, mainly due to lower leased line revenues owing from the reduction in rate with our Wireless business. Excluding intersegment transactions, corporate data services would have increased by Php848 million, or 7%, to Php12,657 million for the six months ended June 30, 2023 from Php11,809 million in the same period in 2022. Corporate data revenues accounted for 38% and 41% of our total data service revenues for the six months ended June 30, 2023 and 2022, respectively.

ICT revenues decreased by Php478 million, or 13%, to Php3,320 million for the six months ended
June 30, 2023 from Php3,798 million in the same period in 2022, mainly due to lower intersegment revenues with our Wireless business. Excluding intersegment transactions, ICT services would have increased by Php273 million, or 13%, to Php2,381 million for the six months ended June 30, 2023 from Php2,108 million in the same period in 2022. The percentage contribution of this service segment to our total data service revenues accounted for 7% and 8% for the six months ended June 30, 2023 and 2022, respectively.

Voice Services

Revenues from our voice services decreased by Php10,018 million, or 44%, to Php12,977 million for the six months ended June 30, 2023 from Php22,995 million in the same period in 2022, primarily due to lower revenues from international services of PLDT Global resulting from the transfer of load business to Wireless business segment. The percentage contribution of voice service revenues to our fixed line service revenues accounted for 22% and 33% for the six months ended June 30, 2023 and 2022, respectively.

Miscellaneous Services

Miscellaneous service revenues are derived mostly from rentals and management fees. These service revenues decreased by Php30 million, or 14%, to Php179 million for the six months ended June 30, 2023 from Php209 million in the same period in 2022.

Non-service Revenues

Non-service revenues increased by Php5 million, or 2%, to Php220 million for the six months ended June 30, 2023 from Php215 million in the same period in 2022, primarily due to higher sale of broadband routers and WiFi mesh, partially offset by lower sale of managed ICT equipment, as well as lower point-product sales.

Expenses

Expenses related to our Fixed Line business segment totaled Php44,287 million for the six months ended June 30, 2023, a decrease of Php19,722 million, or 31%, as compared with Php64,009 million in the same period in 2022. The decrease was primarily due to lower interconnection costs, depreciation and amortization, selling, general and administrative, cost of sales and services, and asset impairment, partially offset by higher provisions. As a percentage of our total fixed line revenues, expenses associated with our Fixed Line business segment accounted for 74% and 91% for the six months ended June 30, 2023 and 2022, respectively.

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The following table shows the breakdown of our total fixed line-related expenses for the six months ended June 30, 2023 and 2022 and the percentage of each expense item in relation to the total:

									Increase (Decrease)
	2023		%		2022		%		Amount			%
	(amounts in million Php)
Selling, general and administrative expenses		22,519		51		26,592		42		(4,073	)		(15	)
Depreciation and amortization		13,560		31		19,993		31		(6,433	)		(32	)
Interconnection costs		5,087		11		14,215		22		(9,128	)		(64	)
Provisions		1,667		4		1,405		2		262			19
Cost of sales and services		1,450		3		1,715		3		(265	)		(15	)
Asset impairment		4		—		89		—		(85	)		(96	)
Total		44,287		100		64,009		100		(19,722	)		(31	)

Selling, general and administrative expenses decreased by Php4,073 million, or 15%, to Php22,519 million primarily due to lower expenses related to compensation and employee benefits on account of lower MRP, selling and promotions, professional and other contracted services, insurance and security services, rent, and other miscellaneous expenses, partly offset by higher expenses related to taxes and licenses, and communication, training and travel.

Depreciation and amortization charges decreased by Php6,433 million, or 32%, to Php13,560 million, mainly driven by additional depreciation in 2022 due to the shortened life of copper-based technology, resulting from the migration to FTTH, and the modernization of network equipment.

Interconnection costs decreased by Php9,128 million, or 64%, to Php5,087 million, primarily due to lower international interconnection costs of PLDT Global mainly due to the transfer of load business to Wireless business segment.

Provisions increased by Php262 million, or 19%, to Php1,667 million, primarily due to higher provision for expected credit losses, mainly from Home's trade receivables.

Cost of sales and services decreased by Php265 million, or 15%, to Php1,450 million, primarily due to lower cost of services, partly offset by higher cost of WiFi mesh and routers.

Asset impairment decreased by Php85 million, or 96%, to Php4 million primarily due to impairment charges in 2022 on certain network equipment damaged by Typhoon Odette in 2022.

Other Income (Expenses) – Net

The following table summarizes the breakdown of our total fixed line-related other income (expenses) – net for the six months ended June 30, 2023 and 2022:

							Change
	2023			2022			Amount			%
	(amounts in million Php)
Other Income (Expenses) – Net:
Gains (Losses) on derivative financial instruments – net		627			1,332			(705	)		(53	)
Interest income		165			78			87			112
Foreign exchange gains (losses) – net		119			(2,526	)		2,645			105
Equity share in net earnings (losses) of associates and joint ventures		(110	)		99			(209	)		(211	)
Financing costs – net		(3,258	)		(2,973	)		(285	)		(10	)
Other income – net		1,388			21,118			(19,730	)		(93	)
Total		(1,069	)		17,128			(18,197	)		(106	)

Our Fixed Line business segment’s other expenses – net amounted to Php1,069 million for the six months ended June 30, 2023, a change of Php18,197 million from other income – net Php17,128 million in the same period in 2022, primarily due to the combined effects of the following: (i) lower other income – net by Php19,730 million mainly due to lower dividend income from Wireless business segment, and income from prescription of preferred shares redemption liability of Php7,839 million in 2022; (ii) lower net gains on derivative financial instruments by

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Php705 million mainly due to the appreciation of the Philippine peso relative to the U.S. dollar in 2023 as against the depreciation of the Philippine peso to the U.S. dollar in 2022; (iii) higher net financing costs by Php285 million; (iv) equity share in net losses of associates and joint ventures of Php110 million in 2023 as against equity share in net earnings of associates and joint ventures of Php99 million in 2022; (v) higher interest income by Php87 million; and (vi) net foreign exchange gains of Php119 million in 2023 as against net foreign exchange losses of Php2,526 million in 2022 on account of the revaluation of net foreign currency-denominated liabilities due to the appreciation of the Philippine peso relative to the U.S. dollar in 2023 as against the depreciation of the Philippine peso to the U.S. dollar in 2022.

Provision for Income Tax

Provision for income tax amounted to Php3,481 million for the six months ended June 30, 2023, an increase of Php1,039 million, or 43%, from Php2,442 million in the same period in 2022, primarily due to higher taxable income. Net income before tax in 2022 included significant non-taxable income from the dividends recognized from our Wireless subsidiaries.

Net Income

As a result of the foregoing, our Fixed Line business segment registered a net income of Php10,769 million for the six months ended June 30, 2023, a decrease of Php10,354 million, or 49%, as compared with Php21,123 million in the same period in 2022.

EBITDA

Our Fixed Line business segment’s EBITDA increased by Php2,341 million, or 9%, to Php28,896 million for the six months ended June 30, 2023 from Php26,555 million in the same period in 2022. EBITDA margin increased to 49% for the six months ended June 30, 2023 from 38% in the same period in 2022.

Core Income

Our Fixed Line business segment’s core income decreased by Php14,198 million, or 56%, to Php11,238 million for the six months ended June 30, 2023 from Php25,436 million in the same period in 2022, primarily due to lower other miscellaneous income.

Others

Revenues

Revenues generated from our Other business segment amounted to nil for the six months ended June 30, 2023 and 2022.

Expenses

Expenses related to our Other business segment amounted to Php7 million for the six months ended June 30, 2023 from Php8 million in the same period in 2022.

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Other Income (Expenses) – Net

The following table summarizes the breakdown of other income (expenses) – net for Other business segment for the six months ended June 30, 2023 and 2022:

							Change
	2023			2022			Amount			%
	(amounts in million Php)
Other Income (Expenses) – Net:
Interest income		4			7			(3	)		(43	)
Foreign exchange gains (losses) – net		(72	)		76			(148	)		(195	)
Equity share in net losses of associates and joint ventures		(1,215	)		(1,499	)		284			19
Other income – net		5			606			(601	)		(99	)
Total		(1,278	)		(810	)		(468	)		(58	)

Our Other business segment’s other expenses – net amounted to Php1,278 million for the six months ended June 30, 2023, an increase of Php468 million, or 58%, from Php810 million in the same period in 2022, primarily due to the combined effects of the following: (i) lower other income – net by Php601 million mainly due to VIH gain on dilution in 2022; (ii) net foreign exchange losses of Php72 million in 2023 as against net foreign exchange gains of Php76 million in 2022; and (iii) lower equity share in net losses of associates and joint ventures by Php284 million mainly due to lower equity share in net losses in VIH.

Net Loss

As a result of the foregoing, our Other business segment registered a net loss of Php1,286 million for the six months ended June 30, 2023, higher by Php546 million, or 74%, from Php740 million in the same period in 2022.

Core Loss

Our Other business segment’s core loss amounted to Php1,159 million for the six months ended June 30, 2023, a decrease of Php155 million, or 15%, from Php1,004 million in the same period in 2022.

Liquidity and Capital Resources

The following table shows our consolidated cash flows for the six months ended June 30, 2023 and 2022, as well as our consolidated capitalization and other consolidated selected financial data as at June 30, 2023 and December 31, 2022:

	Six months ended June 30,
	2023			2022
	(amounts in million Php)
Cash Flows
Net cash flows provided by operating activities		42,905			37,736
Net cash flows used in investing activities		(46,603	)		(16,783	)
Payment for purchase of property and equipment, including capitalized interest		(56,544	)		(49,044	)
Net cash flows used in financing activities		(5,032	)		(6,307	)
Net increase (decrease) in cash and cash equivalents		(9,026	)		15,030

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	June 30,		December 31,
	2023		2022
	(amounts in million Php)
Capitalization
Long-term portion of interest-bearing financial liabilities – net of current portion:
Long-term debt		234,623		217,288
Current portion of interest-bearing financial liabilities:
Long-term debt maturing within one year		33,446		32,292
Total interest-bearing financial liabilities		268,069		249,580
Total equity attributable to equity holders of PLDT		113,844		108,727
		381,913		358,307
Other Selected Financial Data
Total assets		624,627		624,162
Property and equipment		313,415		292,745
Cash and cash equivalents		16,185		25,211
Short-term investments		267		383

Our consolidated cash and cash equivalents and short-term investments totaled Php16,452 million as at
June 30, 2023. Principal sources of consolidated cash and cash equivalents in 2023 were cash flows from operating activities amounting to Php42,905 million, proceeds from availment of long-term debt of Php25,500 million, proceeds from disposal of property of equipment of Php9,673 million, mainly proceeds from the sale and leaseback of telecom towers, interest received of Php471 million and proceeds from maturity of short-term investments of Php440 million. These funds were used principally for: (1) purchase of property and equipment, including capitalized interest, of Php56,544 million; (2) cash dividends paid of Php12,736 million; (3) short-term and long-term debt principal and interest payments of Php6,687 million and Php4,479 million, respectively; (4) settlement of obligations under lease liabilities of Php5,570 million; and (5) settlement of derivative financial instruments of Php800 million.

Our consolidated cash and cash equivalents and short-term investments totaled Php45,283 million as at June 30, 2022. Principal sources of consolidated cash and cash equivalents in 2022 were proceeds from disposal of property of equipment of Php39,490 million, mainly proceeds from the sale and leaseback of telecom towers, cash flows from operating activities amounting to Php37,736 million, proceeds from availment of short-term and long-term debts of Php10,000 million and Php5,000 million, respectively, proceeds from the release of preferred redemption fund of Php7,839 million, and proceeds from maturity of short-term investments of Php2,775 million. These funds were used principally for: (1) purchase of property and equipment, including capitalized interest, of Php49,044 million; (2) long-term debt principal and interest payments of Php11,896 million and Php4,430 million, respectively; (3) cash dividend payment of Php9,064 million; (4) payment for purchase of short-term investments of Php6,767 million; (5) settlement of obligations under lease liabilities of Php3,743 million; and (6) payment for acquisition of investments in associates and joint ventures of Php3,303 million, mainly PCEV’s additional investment in VIH’s preferred shares.

Operating Activities

Our consolidated net cash flows provided by operating activities increased by Php5,169 million, or 14%, to Php42,905 million for the six months ended June 30, 2023 from Php37,736 million in the same period in 2022 primarily due to lower prepayments, lower payments of pension and other employee benefits, and higher operating income, partially offset by higher level of settlement of accrued expenses and other current liabilities, and accounts payable, and lower level of collection of accounts receivables.

Cash flows provided by operating activities of our Wireless business segment increased by Php10,232 million, or 37%, to Php37,591 million for the six months ended June 30, 2023 from Php27,359 million in the same period in 2022, primarily due to lower prepayments, lower level of settlement of accounts payable, and lower payments of pension and other employee benefits, partially offset by lower level of collection of accounts receivable. Cash flows provided by operating activities of our Fixed Line business segment increased by Php6,963 million, or 36%, to Php26,320 million for the six months ended June 30, 2023 from Php19,357 million in the same period in 2022, primarily due to higher level of collection of accounts receivable, lower payments of pension and other employee benefits, lower level of settlement of accounts payable, higher operating income, and lower prepayments, partially offset by higher level of settlement of accrued expenses and other current liabilities. Cash flows used in operating

25

 

activities of our Other business segment amounted to Php989 million for the six months ended June 30, 2023 as against cash flows provided by operating activities of Php2,748 million in the same period in 2022, primarily due to higher level of settlement of accounts payable and lower level of collection of receivables.

Investing Activities

Consolidated net cash flows used in investing activities amounted to Php46,603 million for the six months ended June 30, 2023, an increase of Php29,820 million from Php16,783 million in the same period in 2022, primarily due to the combined effects of the following: (1) lower proceeds from disposal of property and equipment by Php29,817 million, mainly proceeds from the sale and leaseback of telecom towers; (2) higher payment for purchase of property and equipment, including capitalized interest, by Php7,500 million; (3) net proceeds from maturity of short-term investments of Php116 million in 2023 as against net payment for purchase of short-term investments of Php3,992 million in 2022; and (4) lower payment for acquisition of investments in associates and joint ventures by Php3,232 million, mainly PCEV’s additional investment in VIH’s preferred shares in 2022.

Our consolidated payment for purchase of property and equipment, including capitalized interest, in 2023 totaled Php56,544 million, an increase of Php7,500 million, or 15%, as compared with Php49,044 million in the same period in 2022. Smart’s payment for purchase of property and equipment, including capitalized interest, increased by Php14,129 million, or 65%, to Php35,712 million for the six months ended June 30, 2023 from Php21,583 million in the same period in 2022. Smart’s capex spending was primarily focused on LTE (4G) coverage and capacity expansion, and rollout of new sites and 5G base stations in key business areas and dense communities nationwide. PLDT’s payment for purchase of property and equipment, including capitalized interest, decreased by Php6,801 million, or 26%, to Php19,425 million for the six months ended June 30, 2023 from Php26,226 million in the same period in 2022. PLDT’s capex spending was used to finance fixed line install, rollout, expansion and modernization of fiber optic transport network and backbone resiliency, and expansion of our international submarine cable network. The balance represents other subsidiaries’ capital spending.

As part of our growth strategy, we may from time to time, continue to make acquisitions and investments in companies or businesses.

Financing Activities

On a consolidated basis, cash flows used in financing activities amounted to Php5,032 million for the six months ended June 30, 2023, a decrease of Php1,275 million, or 20%, from Php6,307 million in the same period in 2022, primarily due to the combined effects of the following: (1) higher proceeds from availment of long-term debt by Php20,500 million; (2) lower payment of long-term debt by Php9,209 million; (3) higher cash dividends paid by Php3,672 million; (4) proceeds from the release of preferred shares redemption fund of Php7,839 million in 2022; and (5) payment of short-term debt of Php4,000 million in 2023 as against proceeds from availment of short-term debt of Php10,000 million in 2022.

Debt Financing

Proceeds from availment of long-term debt for the six months ended June 30, 2023 amounted to Php25,500 million mainly from PLDT, Smart and ePLDT’s drawings related to financing of capital expenditure requirements. Payments of principal amounted to Php6,687 million while payments of interest on our total debt amounted to Php4,473 million for the six months ended June 30, 2023.

Our consolidated long-term and short-term debts increased by Php18,489 million, or 7%, to Php268,069 million as at June 30, 2023 from Php249,580 million as at December 31, 2022 primarily due to drawings from our long-term facilities, partially offset by debt amortizations and the revaluation of foreign currency-denominated debt. As at June 30, 2023, PLDT’s long-term and short-term debt level increased by Php9,276 million, or 6%, to Php166,092 million from Php156,816 million as at December 31, 2022, Smart’s long-term and short-term debt level increased by Php6,235 million, or 7%, to Php98,999 million from Php92,764 million as at December 31, 2022, and ePLDT's long-term debt level at Php2,978 million.

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See Note 20 – Interest-bearing Financial Liabilities – Long-term Debt to the accompanying unaudited consolidated financial statements for a more detailed discussion of our long-term and short-term debts.

Debt Covenants

Our consolidated debt instruments contain restrictive covenants, including covenants that require us to comply with specified financial ratios and other financial tests, calculated in conformity with PFRS, at relevant measurement dates, principally at the end of each quarterly period. We have complied with all of our maintenance financial ratios as required under our loan covenants and other debt instruments.

As at June 30, 2023 and 2022, we are in compliance with all of our debt covenants.

See Note 20 – Interest-bearing Financial Liabilities – Compliance with Debt Covenants to the accompanying unaudited consolidated financial statements for a more detailed discussion of our debt covenants.

Financing Requirements

We believe that our available cash, including cash flows from operations, will provide sufficient liquidity to fund our projected operating, investment, capital expenditures and debt service requirements for the next 12 months; however, we may finance a portion of these from external sources if we consider it prudent to do so.

The following table shows the dividends declared to shareholders for the six months ended June 30, 2023 and 2022:

	Date			Amount
Class	Approved(1)	Record	Payable	Per Share		Total
				(in million Php, except per share amount)
For the six months ended June 30, 2023
Common
Regular Dividend	March 23, 2023	April 11, 2023	April 24, 2023	45			9,722
Special Dividend	March 23, 2023	April 11, 2023	April 24, 2023	14			3,025
Preferred
Series IV Cumulative Non-convertible    Redeemable Preferred Stock(1)	January 31, 2023	February 27, 2023	March 15, 2023		—		12
	May 4, 2023	May 19, 2023	June 15, 2023		—		12
Voting Preferred Stock	March 2, 2023	March 17, 2023	April 15, 2023		—		3
	June 13, 2023	June 28, 2023	July 15, 2023		—		3
Charged to Retained Earnings							12,777
For the six months ended June 30, 2022
Common
Regular Dividend	March 3, 2022	March 17, 2022	April 4, 2022	42			9,075
Preferred
Series IV Cumulative Non-convertible    Redeemable Preferred Stock(1)	January 25, 2022	February 21, 2022	March 15, 2022		—		12
	May 5, 2022	May 20, 2022	June 15, 2022		—	13
Voting Preferred Stock	March 3, 2022	March 23, 2022	April 15, 2022		—		2
	June 14, 2022	June 30, 2022	July 15, 2022		—		2
Charged to Retained Earnings							9,104

(1)Dividends were declared based on total amount paid up.

Our dividends declared after June 30, 2023 are as follows:

	Date			Amount
Class	Approved	Record	Payable	Per Share		Total
				(in million Php, except per share amount)
Common Stock
Regular dividend	August 3, 2023	August 17, 2023	September 1, 2023	49			10,587
Preferred
Series IV Cumulative Non-convertible    Redeemable Preferred Stock(1)	August 3, 2023	August 18, 2023	September 15, 2023		—		12
Charged to Retained Earnings							10,599

(1) Dividends were declared based on total amount paid up.

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See Note 19 – Equity to the accompanying unaudited consolidated financial statements for further details.

Changes in Financial Conditions

Assets

Our total assets amounted to Php624,627 million as at June 30, 2023, an increase of Php465 million from Php624,162 million as at December 31, 2022, primarily due to higher noncurrent assets by Php3,813 million, or 1%, partially offset by lower current assets by Php3,348 million, or 4%.

Noncurrent Assets

Property and equipment increased by Php20,670 million, or 7%, mainly due to capital expenditures, partially offset by depreciation and disposal for the period including sale to tower companies.

Right-of-use assets decreased by Php650 million, or 2%, mainly due to depreciation for the period, partially offset by the leaseback of telecom assets sold to tower companies.

Investments in associates and joint ventures decreased by Php1,298 million, or 3%, mainly due to equity share in net losses of VIH and other associates and joint ventures.

Deferred income tax assets decreased by Php3,396 million, or 19%, mainly due to lower deferred tax on unearned revenues and pension and other employee benefits.

Other noncurrent assets decreased by Php11,513 million, or 8%, mainly due to lower advances to suppliers and contractors.

Current Assets

Cash and cash equivalents decreased by Php9,026 million, or 36%, mainly due to the combined effects of cash flows provided by operating activities of Php42,905 million, cash flows used in investing activities of Php46,603 million, and cash flows used in financing activities of Php5,032 million.

Short-term investments decreased by Php116 million, or 30%, mainly due to maturity of investments, partially offset by the purchase of short-term investments.

Inventories and supplies decreased by Php577 million, or 16%, mainly due to net issuances of commercial inventories.

Assets classified as held-for-sale increased by Php7,382 million, or 84%, mainly due to the completion of additional telecom assets for sale and leaseback.

Other current assets decreased by Php1,011 million, or 2%, mainly due to lower receivables.

Liabilities

Our total liabilities amounted to Php505,616 million as at June 30, 2023, a decrease of Php4,585 million, or 1%, from Php510,201 million as at December 31, 2022, primarily due to lower current liabilities by Php22,692 million, or 9%, partially offset by higher noncurrent liabilities by Php18,107 million, or 7%.

Noncurrent and current interest-bearing financial liabilities increased by Php18,489 million, or 7%, primarily due to drawings from our long-term facilities, partially offset by debt amortizations and the revaluation of foreign currency-denominated debt.

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Other noncurrent liabilities increased by Php772 million, or 2%, primarily due to higher pension and other employee benefits and lease liabilities – net of current portion due to near maturing portion reclassified as current.

Accounts payable decreased by Php20,496 million, or 19%, primarily due to lower payables to suppliers and contractors.

Accrued expenses and other current liabilities decreased by Php3,350 million, or 3%, primarily due to lower accrued utilities and taxes, partially offset by liabilities related to telecom towers for sale and leaseback.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have any current or future effect on our financial position, results of operations, cash flows, changes in stockholders’ equity, liquidity, capital expenditures or capital resources that are material to investors.

Equity Financing

On August 2, 2016, the PLDT Board of Directors approved the amendment of our dividend policy, reducing our dividend payout rate to 60% of our core earnings per share as regular dividends. This was in view of our elevated capital expenditures to build-out a robust, superior network to support the continued growth of data traffic, plans to invest in new adjacent businesses that will complement the current business and provide future sources of profits and dividends, and management of our cash and gearing levels. Starting in 2019, we based our dividend payout on telco core income. In declaring dividends, we take into consideration the interest of our shareholders, as well as our working capital, capital expenditures and debt servicing requirements. The retention of earnings may be necessary to meet the funding requirements of our business expansion and development programs. However, in the event that no investment opportunities arise, we may consider the option of returning additional cash to our shareholders in the form of special dividends of up to the balance of our core earnings or to undertake share buybacks. We were able to pay out approximately 100% of our core earnings for seven consecutive years from 2007 to 2013, approximately 90% of our core earnings for 2014, 75% of our core earnings for 2015, 60% of our core earnings for 2016, 2017 and 2018, 60% of our telco core income for 2019, 2020, 2021 and 2022. The accumulated equity in the net earnings of our subsidiaries, which form part of our retained earnings, are not available for distribution unless realized in the form of dividends from such subsidiaries. Dividends are generally paid in Philippine pesos. In the case of shareholders residing outside the Philippines, PLDT’s transfer agent in Manila, Philippines, as the dividend-disbursing agent, converts the Philippine peso dividends into U.S. dollars at the prevailing exchange rate and remits the dollar dividends abroad, net of any applicable withholding tax.

Our subsidiaries pay dividends subject to the requirements of applicable laws and regulations and availability of unrestricted retained earnings, without any restriction imposed by the terms of contractual agreements. Notwithstanding the foregoing, the subsidiaries of PLDT may, at any time, declare and pay such dividends depending upon the results of operations and future projects and plans, the respective subsidiary’s earnings, cash flow, financial condition, capital investment requirements and other factors.

Consolidated cash dividend payments amounted to Php12,736 million for the six months ended June 30, 2023 as compared with Php9,064 million paid to shareholders in the same period in 2022.

Contractual Obligations and Commercial Commitments

Contractual Obligations

Various Trade and Other Obligations

PLDT Group has various obligations to suppliers for the acquisition of phone and network equipment, contractors for services rendered on various projects, foreign administrations and domestic carriers for the access charges, shareholders for unpaid dividends distributions, employees for benefits and other related obligations, and various business and operational related agreements. Total obligations under these various agreements amounted to

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approximately Php156,677 million and Php178,219 million as at June 30, 2023 and December 31, 2022, respectively. See Note 23 – Accounts Payable and Note 24 – Accrued Expenses and Other Current Liabilities to the accompanying unaudited consolidated financial statements.

Commercial Commitments

Major Capital Expenditure Vendors

During the last quarter of 2022 up to the first half of 2023, we have engaged in discussions with the major capital expenditure vendors of PLDT and Smart regarding the status of the capital expenditure commitments and related outstanding balances. These discussions resulted in a number of Settlement and Mutual Release Agreements, or SMRAs, signed between us and the vendors, taking into consideration our program priorities and current business requirements. As a result of the signing of the SMRAs, the remaining significant commitment in respect of major capital expenditure vendors of PLDT and Smart amounted to about Php33,000 million, net of advances, as at March 23, 2023. As at June 30, 2023, the commitment related to the major capital expenditure vendors increased to Php41,300 million, net of advances, owing to new purchase orders issued in the first half of 2023.

Other Capital Expenditure Vendors

For the other capital expenditure vendors, we are currently in ongoing negotiations. Any adjustments as a result of these discussions shall be taken up in our consolidated financial statements as they occur.

We have no outstanding commercial commitments, in the form of letters of credit, as at June 30, 2023 and December 31, 2022.

Quantitative and Qualitative Disclosures about Market Risks

The main risks arising from our financial instruments are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk. The importance of managing those risks has significantly increased in light of the considerable change and volatility in both the Philippine and international financial markets. Our Board of Directors reviews and approves policies for managing each of these risks. We also monitor the market price risk arising from all financial instruments.

For further discussions of these risks, see Note 28 – Financial Assets and Liabilities to the accompanying unaudited consolidated financial statements.

The following table sets forth the estimated consolidated fair values of our financial assets and liabilities recognized as at June 30, 2023 and December 31, 2022 other than those whose carrying amounts are reasonable approximations of fair values:

	Fair Values
	June 30,		December 31,
	2023		2022
	(amounts in million Php)
Noncurrent Financial Assets
Debt instruments at amortized cost		383		573
Other financial assets – net of current portion		3,504		3,278
Total noncurrent financial assets		3,887		3,851
Noncurrent Financial Liabilities
Interest-bearing financial liabilities		221,302		201,703
Customers’ deposits		1,436		1,449
Deferred credits and other noncurrent liabilities		178		307
Total noncurrent financial liabilities		222,916		203,459

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The following table sets forth the amount of gains (losses) recognized for the financial assets and liabilities for the six months ended June 30, 2023 and three months ended March 31, 2023:

	June 30,			March 31,
	2023			2023
	(amounts in million Php)
Profit and Loss
Interest income		486			278
Gains on derivative financial instruments – net		727			(640	)
Accretion on financial liabilities		(179	)		(89	)
Interest on loans and other related items		(5,722	)		(2,700	)
Other Comprehensive Income
Net fair value losses on cash flow hedges – net of tax		(740	)		(197	)

Impact of Inflation and Changing Prices

Inflation can be a significant factor in the Philippine economy and we are continually seeking ways to minimize its impact. The average inflation rate in the Philippines for the six months ended June 30, 2023 and 2022 were 7.2% and 4.4%, respectively. The BSP’s latest estimates indicate that the average inflation will be at 5.4% in 2023, while the average inflation forecast in 2024 is 2.9%. This is partly driven by the decline in global oil and non-oil prices. The risks to the inflation outlook are continuing constraints in the supply of key food items, the adverse impact of El Niño on food and electricity prices, and the effects of potential increases in transport fares and minimum wages. Alternatively, a weaker global economic recovery may cause inflation for 2023 and 2024 to be lower than the forecasts.

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PART II – OTHER INFORMATION

Class Action Suit Against PLDT

On February 6, 2023, plaintiff Sophia Olsson filed a putative class action in the United States District Court for the Central District of California (the "Court") against PLDT and certain current and former directors and officers ("U.S. Class Action"). On April 7, 2023, Ms. Olsson and another individual, Kevin Douglas, each represented by a different law firm, submitted separate motions to the Court to serve as lead plaintiff in the U.S. Class Action. On May 1, 2023, the Court granted Mr. Douglas’s motion to serve as the lead plaintiff.

On May 8, 2023, Mr. Douglas (“Plaintiff”) filed a joint stipulation and proposed order providing that PLDT accepts service of the complaint and establishing a schedule for Plaintiff to file an amended complaint and for PLDT to move to dismiss or otherwise respond to the amended complaint. The schedule provides that: (i) Plaintiff will amend the complaint by July 7, 2023; (ii) PLDT will move to dismiss or otherwise respond to the amended complaint by September 5, 2023; (iii) Plaintiff will file an opposition to any motion to dismiss by November 6, 2023; and (iv) PLDT will file a reply brief in further support of any motion to dismiss by December 6, 2023.

On July 7, 2023, Plaintiff filed an amended complaint. The amended complaint alleges that PLDT and certain of its current and former directors and officers (collectively, the “Defendants”) made materially false and misleading statements regarding PLDT’s capital expenditures and internal controls during the period April 23, 2020 through December 19, 2022. The amended complaint asserts claims under Sections 10(b) and 20(a) of the United States Securities and Exchange Act of 1934 (and related rules) but does not specify the amount of the purported damages.

Due to the early stage of this matter, uncertainties related to the potential amounts to be claimed by Plaintiff, and the inherent unpredictability of litigation, PLDT is unable to determine if any liability will arise or provide an estimate of any potential liability. The Company will continue to vigorously defend itself against the allegations in the amended complaint.

Proposed Acquisition of Sky Cable Corporation (“Sky Cable”)

On March 16, 2023, PLDT entered into a Sale and Purchase Agreement with Sky Vision Corporation, ABS-CBN Corporation and Lopez, Inc. for the proposed acquisition by PLDT of 100% of Sky’s total issued and outstanding capital stock for the aggregate purchase price of Php6,750 million, subject for any adjustment in accordance with the provisions in the Sale and Purchase Agreement. The closing of the transaction shall be subject to compliance with certain conditions precedent which include, among others, the termination or cessation of operations by Sky Cable of its PayTV and cable business, obtaining all applicable government approvals and clearances, obtaining all required consents and corporate actions. On closing, PLDT will pay the purchase price for 100% of Sky Cable's shares.

On March 28, 2023, PLDT filed its notice with the Philippine Competition Commission regarding the purchase of Sky Cable's broadband business.

Sale and Leaseback of Telecom Towers

In 2022 and in the first half of 2023, Smart and DMPI signed sale and purchase agreements with tower companies (the “TowerCos”) in connection with the sale of telecom towers and related passive telecommunications infrastructure. Concurrent with the execution of the sale and purchase agreements, Smart has also entered into Master Service Agreements (“MSA”) with the TowerCos where Smart has agreed to leaseback the towers sold in the transaction for a period of 10 years. In addition to space, the TowerCos will also be responsible for providing operations and maintenance services as well as power to the sites. The sale and leaseback will be complemented by a new tower build commitment over the next few years. The closing of the agreements are on a staggered basis depending on satisfaction of closing conditions, according to the number of towers transferred.

The proceeds of the sale will be used to prepay debt, fund major cash requirements for operations and capital expenditures resulting in debt avoidance, and pay special dividends.

Through this landmark deal, Smart and DMPI pioneered tower sharing in the Philippines and in support of the Philippine Department of Information and Communications Technology’s goal of improving tower density. In

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addition, this arrangement will further solidify Smart’s superior network quality, enhance customer experience and give rise to significant operating and cost efficiencies.

For updates relating to the above discussion, please see Note 9 – Property and Equipment to the accompanying unaudited consolidated financial statements in Item 7. “Financial Statements”.

Investment of PCEV in Maya Bank

On February 17, 2023, PCEV entered into another subscription agreements with VFC and PFC to subscribe to 8.0 million Common B shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

On May 30, 2023, PCEV entered into another subscription agreements with VFC and PFC to subscribe to 5.3 million Common B Shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

Cybersecurity

Pursuant to Philippine laws, the Company has notified the relevant regulatory authorities that, in the second quarter of 2023, it experienced cybersecurity attacks on its network and systems and, with the help of leading cybersecurity experts here and abroad, the Company was able to contain the effects of such cybersecurity attacks on network and systems performance. Upon detection of the incidents, the Company immediately activated relevant security protocols, and worked around the clock to protect its network and systems.

The Company is analyzing and enhancing its network and systems to introduce further security measures, and fortify its network environment. Further, it has retained external cybersecurity experts to ensure that it deploys the latest technology, and adopts global best practices to detect and prevent cybersecurity attacks.

Other Matters

For updates on matters relating to the (1) Department of Labor and Employment (“DOLE”) Compliance Order to PLDT, and other pending cases, see Note 27 – Provisions and Contingencies; and (2) Petition against the Philippine Competition Commission, see Note 11 – Investment in Associates and Joint Ventures, to the accompanying unaudited consolidated financial statements.

Related Party Transactions

For a detailed discussion of the related party transactions, see Note 24 – Related Party Transactions to the accompanying unaudited consolidated financial statements.

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ANNEX I – AGING OF ACCOUNTS RECEIVABLE

The following table shows the aging of our consolidated receivables as at June 30, 2023:

Type of Accounts Receivable	Total		Current		31-60 Days		61-90 Days		Over 91 Days
	(amounts in million Php)
Retail subscribers		18,454		10,926		811		170		6,547
Corporate subscribers		14,331		4,192		2,263		663		7,213
Foreign administrations		1,108		516		60		30		502
Domestic carriers		267		158		67		10		32
Dealers, agents and others		6,427		2,569		41		21		3,796
Total		40,587		18,361		3,242		894		18,090
Less: Allowance for expected credit losses		15,492
Total Receivables - net		25,095

A-1

 

ANNEX II – Financial Soundness Indicators

The following table shows our financial soundness indicators as at June 30, 2023 and December 31, 2022:

	2023			2022
Current Ratio(1)	0.35:1.0			0.33:1.0
Acid Test Ratio(2)	0.19:1.0			0.21:1.0
Solvency Ratio(3)	0.37:1.0			0.46:1.0
Net Debt to Equity Ratio(4)	2.20:1.0			2.05:1.0
Net Debt to EBITDA Ratio(5)	2.54:1.0			2.38:1.0
Net Debt to EBITDA (ex-MRP) Ratio(6)	2.48:1.0			2.24:1.0
Total Debt to EBITDA Ratio(7)	2.71:1.0			2.66:1.0
Asset to Equity Ratio(8)	5.49:1.0			5.74:1.0
Interest Coverage Ratio(9)	2.02:1.0			1.92:1.0
Profit Margin(10)		6	%		5	%
Return on Assets(11)		2	%		2	%
Return on Equity(12)		11	%		9	%
EBITDA Margin(13)		50	%		48	%

(1)Current ratio is measured as current assets divided by current liabilities (including current portion – LTD, unearned revenues and mandatory tender option liability.)

(2)Acid test ratio is measured as total of cash and cash equivalents, short-term investments and trade and other receivables divided by total current liabilities.

(3)Solvency ratio is measured as adding back non-cash expenses to the net income after tax divided by total debt (long-term debt, including current portion.)

(4)Net Debt to equity ratio is measured as total debt (long-term debt, including current portion) less cash and cash equivalents, short-term investments and debt instruments at amortized cost divided by total equity attributable to equity holders of PLDT.

(5)Net Debt to EBITDA ratio is measured as total debt (long-term debt, including current portion) less cash and cash equivalents, short-term investments and debt instruments at amortized cost divided by EBITDA for the last 12-month period.

(6)Net Debt to EBITDA ex-MRP ratio is measured as total debt (principal amount of long-term debt, including current portion, i.e., excluding debt issuance cost) less cash and cash equivalents, short-term investments and debt instruments at amortized cost divided by EBITDA, excluding MRP and expenses related to the sale of our telecom assets, for the last 12-month period.

(7)Total Debt to EBITDA ratio is measured as total debt (long-term debt, including current portion) divided by EBITDA for the last 12-month period.

(8)Asset to equity ratio is measured as total assets divided by total equity attributable to equity holders of PLDT.

(9)Interest coverage ratio is measured by EBIT, or earnings before interest and taxes for the year, divided by total financing cost for the last 12-month period.

(10)Profit margin is derived by dividing net income for the year with total revenues for the last 12-month period.

(11)Return on assets is measured as net income for the last 12-month period divided by average total assets.

(12)Return on Equity is measured as net income for the last 12-month period divided by average total equity attributable to equity holders of PLDT.

(13)EBITDA margin for the period is measured as EBITDA divided by service revenues for the last 12-month period.

EBITDA for the period is measured as net income for the year excluding depreciation and amortization, amortization of intangible assets, asset impairment on noncurrent assets, financing cost, interest income, equity share in net earnings (losses) of associates and joint ventures, foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net, provision for (benefit from) income tax and other income (expenses) – net for the year.

A-2

SIGNATURES

Pursuant to the requirements of the Securities Regulation Code, the registrant has duly caused this report for the first half of 2023 to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant: PLDT Inc.
Signature and Title:	/s/ Alfredo S. Panlilio
	Alfredo S. Panlilio
	President and Chief Executive Officer
Signature and Title:	/s/ Danny Y. Yu
	Danny Y. Yu
	Senior Vice President
	(Principal Financial Officer)
Signature and Title:	/s/ Gil Samson D. Garcia
	Gil Samson D. Garcia
	First Vice President
	(Principal Accounting Officer)
Date: August 3, 2023

S-1

 

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022 (AUDITED)

AND FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)

F-1

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at June 30, 2023 and December 31, 2022

(in million pesos)

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
ASSETS
Noncurrent Assets
Property and equipment (Notes 9 and 21)		313,415			292,745
Right-of-use assets (Note 10)		28,213			28,863
Investments in associates and joint ventures (Note 11)		50,248			51,546
Financial assets at fair value through profit or loss (Note 27)		491			432
Debt instruments at amortized cost – net of current portion (Note 12)		395			596
Investment properties (Notes 6 and 13)		1,008			1,015
Goodwill and intangible assets (Note 14)		64,445			64,549
Deferred income tax assets – net (Note 7)		14,240			17,636
Derivative financial assets – net of current portion (Note 27)		27			81
Prepayments – net of current portion (Notes 18, 24 and 25)		69,678			81,053
Contract assets – net of current portion (Note 5)		586			662
Other financial assets – net of current portion (Note 27)		3,741			3,489
Other non-financial assets – net of current portion		159			166
Total Noncurrent Assets		546,646			542,833
Current Assets
Cash and cash equivalents (Note 15)		16,185			25,211
Short-term investments (Note 27)		267			383
Trade and other receivables (Note 16)		25,095			26,255
Inventories and supplies (Note 17)		2,991			3,568
Current portion of contract assets (Note 5)		1,532			1,571
Current portion of derivative financial assets (Note 27)		4			—
Current portion of debt instruments at amortized cost (Note 12)		200			—
Current portion of prepayments (Notes 18 and 24)		14,045			14,696
Current portion of other financial assets (Notes 19 and 27)		308			206
Current portion of other non-financial assets		1,201			668
		61,828			72,558
Assets classified as held-for-sale (Notes 9 and 10)		16,153			8,771
Total Current Assets		77,981			81,329
TOTAL ASSETS		624,627			624,162
EQUITY AND LIABILITIES
Equity
Non-voting serial preferred stock (Note 19)		360			360
Voting preferred stock (Note 19)		150			150
Common stock (Note 19)		1,093			1,093
Treasury stock (Note 19)		(6,505	)		(6,505	)
Capital in excess of par value (Note 19)		130,312			130,312
Retained earnings (Note 19)		24,473			18,799
Other comprehensive loss (Note 6)		(36,039	)		(35,482	)
Total Equity Attributable to Equity Holders of PLDT		113,844			108,727
Noncontrolling interests (Note 19)		5,167			5,234
TOTAL EQUITY		119,011			113,961

See accompanying Notes to Consolidated Financial Statements.

F-2

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

As at June 30, 2023 and December 31, 2022

(in million pesos)

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
Noncurrent Liabilities
Interest-bearing financial liabilities – net of current portion (Note 20)		234,623		217,288
Lease liabilities – net of current portion (Note 10)		32,269		31,958
Deferred income tax liabilities – net (Note 7)		171		204
Derivative financial liabilities – net of current portion (Note 27)		78		190
Customers’ deposits (Note 27)		2,243		2,313
Pension and other employee benefits (Note 25)		2,172		1,745
Deferred credits and other noncurrent liabilities (Notes 5 and 21)		9,750		9,501
Total Noncurrent Liabilities		281,306		263,199
Current Liabilities
Accounts payable (Note 22)		84,691		105,187
Accrued expenses and other current liabilities (Notes 23 and 26)		89,216		93,545
Current portion of interest-bearing financial liabilities (Note 20)		33,446		32,292
Current portion of lease liabilities (Note 10)		10,250		10,477
Dividends payable (Note 19)		1,762		1,821
Current portion of derivative financial liabilities (Note 27)		481		960
Income tax payable		1,369		982
		221,215		245,264
Liabilities associated with assets classified as held-for-sale (Note 10)		3,095		1,738
Total Current Liabilities		224,310		247,002
TOTAL LIABILITIES		505,616		510,201
TOTAL EQUITY AND LIABILITIES		624,627		624,162

See accompanying Notes to Consolidated Financial Statements.

F-3

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

For the Six Months Ended June 30, 2023 and 2022

(in million pesos, except earnings per common share amounts which are in pesos)

	For the Six Months Ended						For the Three Months Ended
	June 30,						June 30,
	2023			2022(1)			2023			2022(1)
	(Unaudited)						(Unaudited)
REVENUES FROM CONTRACTS WITH CUSTOMERS
Service revenues (Note 5)		99,251			96,500			49,525			48,849
Non-service revenues (Note 5)		4,787			4,287			2,151			2,113
		104,038			100,787			51,676			50,962
EXPENSES
Selling, general and administrative expenses (Note 5)		39,833			44,803			19,582			21,444
Depreciation and amortization (Notes 9 and 10)		23,950			40,694			12,271			28,151
Cost of sales and services (Note 5)		7,690			6,405			3,643			3,286
Interconnection costs		4,720			2,848			2,101			1,252
Asset impairment (Note 5)		2,147			2,345			1,045			1,269
		78,340			97,095			38,642			55,402
		25,698			3,692			13,034			(4,440	)
OTHER INCOME (EXPENSES) – NET (Note 5)		(924	)		17,980			(482	)		14,185
INCOME BEFORE INCOME TAX FROM CONTINUING    OPERATIONS		24,774			21,672			12,552			9,745
PROVISION FOR INCOME TAX (Note 7)		6,238			4,634			3,090			1,881
NET INCOME FROM CONTINUING OPERATIONS (Note 4)		18,536			17,038			9,462			7,864
NET LOSS FROM DISCONTINUED OPERATIONS    (Notes 2, 4 and 8)		(29	)		(61	)		(4	)		(41	)
NET INCOME (Note 4)		18,507			16,977			9,458			7,823
ATTRIBUTABLE TO:
Equity holders of PLDT (Note 8)		18,451			16,786			9,436			7,707
Noncontrolling interests		56			191			22			116
		18,507			16,977			9,458			7,823
Earnings Per Share Attributable to Common Equity Holders    of PLDT (Notes 4 and 8)
Basic		85.27			77.56			43.61			35.61
Diluted		85.27			77.56			43.61			35.61
Earnings Per Share from Continuing Operations Attributable to    Common Equity Holders of PLDT (Notes 4 and 8)
Basic		85.40			77.84			43.63			35.80
Diluted		85.40			77.84			43.63			35.80

(1)Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PLDT Global One Aviation Company, Inc., or PG1, effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 – Summary of Significant Accounting Policies – Discontinued Operations and Note 11 – Investments in Associates and Joint Ventures - Investments in Associates - Investment in PG1 for further discussion.
See accompanying Notes to Consolidated Financial Statements.

F-4

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2023 and 2022

(in million pesos)

	For the Six Months Ended						For the Three Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(Unaudited)
NET INCOME		18,507			16,977			9,458			7,823
OTHER COMPREHENSIVE INCOME (LOSS) – NET OF TAX    (Note 6)
Foreign currency translation differences of subsidiaries		90			137			106			100
Net transactions on cash flow hedges:		(740	)		(1,255	)		(543	)		(867	)
Net fair value losses on cash flow hedges (Note 27)		(987	)		(1,670	)		(670	)		(1,154	)
Income tax related to fair value adjustments charged directly    to equity (Note 7)		247			415			127			287
Net other comprehensive loss to be reclassified to profit or loss    in subsequent periods		(650	)		(1,118	)		(437	)		(767	)
Actuarial gains on defined benefit obligations:		88			112			87			3
Remeasurement in actuarial gains on defined benefit obligations    (Note 25)		88			148			86			30
Income tax related to remeasurement adjustments (Note 7)		—			(36	)		1			(27	)
Share in the other comprehensive loss of associates and joint ventures    accounted for using the equity method (Note 11)		—			(1	)		—			—
Net other comprehensive income not to be reclassified to profit    or loss in subsequent periods		88			111			87			3
Total Other Comprehensive Loss – Net of Tax		(562	)		(1,007	)		(350	)		(764	)
TOTAL COMPREHENSIVE INCOME		17,945			15,970			9,108			7,059
ATTRIBUTABLE TO:
Equity holders of PLDT		17,894			15,788			9,085			6,953
Noncontrolling interests		51			182			23			106
		17,945			15,970			9,108			7,059

See accompanying Notes to Consolidated Financial Statements.

F-1

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Six Months Ended June 30, 2023 and 2022

(in million pesos)

	Preferred Stock		Common Stock		Treasury Stock			Capital in Excess of Par Value		Retained Earnings			Other Comprehensive Loss			Total Equity Attributable to Equity Holders of PLDT			Noncontrolling Interests			Total Equity
Balances as at January 1, 2023		510		1,093		(6,505	)		130,312		18,799			(35,482	)		108,727			5,234			113,961
Cash dividends (Note 19)		—		—		—			—		(12,777	)		—			(12,777	)		—			(12,777	)
Total comprehensive income (loss):		—		—		—			—		18,451			(557	)		17,894			51			17,945
Net income (Note 8)		—		—		—			—		18,451			—			18,451			56			18,507
Other comprehensive loss (Note 6)		—		—		—			—		—			(557	)		(557	)		(5	)		(562	)
Distribution charges on perpetual notes    (Note 19)		—		—		—			—		—			—			—			(118	)		(118	)
Balances as at June 30, 2023 (Unaudited)		510		1,093		(6,505	)		130,312		24,473			(36,039	)		113,844			5,167			119,011
Balances as at January 1, 2022		510		1,093		(6,505	)		130,312		34,243			(36,437	)		123,216			4,249			127,465
Restatement in beginning balances		—		—		—			—		(83	)		—			(83	)		—			(83	)
Balances as at January 1, 2022 (as restated)		510		1,093		(6,505	)		130,312		34,160			(36,437	)		123,133			4,249			127,382
Cash dividends (Note 19)		—		—		—			—		(9,104	)		—			(9,104	)		—			(9,104	)
Total comprehensive income (loss):		—		—		—			—		16,786			(998	)		15,788			182			15,970
Net income (Note 8)		—		—		—			—		16,786			—			16,786			191			16,977
Other comprehensive loss (Note 6)		—		—		—			—		—			(998	)		(998	)		(9	)		(1,007	)
Distribution charges on perpetual notes    (Note 19)		—		—		—			—		—			—			—			(118	)		(118	)
Acquisition and dilution of noncontrolling interests		—		—		—			—		395			—			395			171			566
Balances as at June 30, 2022 (Unaudited)		510		1,093		(6,505	)		130,312		42,237			(37,435	)		130,212			4,484			134,696

See accompanying Notes to Consolidated Financial Statements.

F-2

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2023 and 2022

(in million pesos)

	June 30,
	2023			2022
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax and noncontrolling interest from continuing operations		24,774			21,672
Income before income tax and noncontrolling interest    from discontinued operations (Note 2)		(29	)		(54	)
Income before income tax (Note 4)		24,745			21,618
Adjustments for:
Depreciation and amortization (Notes 9 and 10)		23,966			40,736
Interest on loans and other related items – net (Note 5)		4,734			4,441
Asset impairment (Note 5)		2,147			2,350
Accretion on lease liabilities (Notes 5, 10 and 28)		1,586			661
Equity share in net losses of associates and joint ventures (Notes 5 and 11)		1,325			1,400
Pension benefit costs		606			910
Incentive plan (Notes 5 and 25)		463			679
Accretion on financial liabilities (Notes 5 and 20)		179			176
Amortization of intangible assets (Notes 5 and 14)		110			100
Impairment of investments (Note 11)		70			50
Gains on dilution of shares (Note 11)		—			(572	)
Income from prescription of preferred redemption liability (Note 19)		—			(7,839	)
Gains on disposal of property and equipment (Notes 5 and 9)		(346	)		(170	)
Interest income (Note 5)		(487	)		(269	)
Foreign exchange (gains) losses – net (Notes 5 and 27)		(554	)		4,282
Gains on derivative financial instruments – net (Notes 5 and 27)		(727	)		(2,184	)
Gain on sale and leaseback of telecom towers (Note 9)		(3,640	)		(17,443	)
Others		(1,407	)		(948	)
Operating income before changes in assets and liabilities		52,770			47,978
Decrease (increase) in:
Prepayments		7,356			(763	)
Contract assets		(5	)		(71	)
Trade and other receivables		(1,071	)		3,207
Other financial and non-financial assets		121			(1,474	)
Inventories and supplies		1,779			117
Increase (decrease) in:
Customer's deposits		(70	)		7
Pension and other employee benefits		(2,476	)		(7,956	)
Other noncurrent liabilities		(31	)		(155	)
Accounts payable		(10,230	)		(5,016	)
Accrued expenses and other current liabilities		(3,866	)		4,015
Net cash flows generated from operations		44,277			39,889
Income taxes paid		(1,372	)		(2,153	)
Net cash flows from operating activities		42,905			37,736

See accompanying Notes to Consolidated Financial Statements.

F-3

PLDT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the Six Months Ended June 30, 2023 and 2022

(in million pesos)

	June 30,
	2023			2022
	(Unaudited)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Proceeds from:
Disposal of property and equipment (Note 9)		9,673			39,490
Maturity of short-term investments		440			2,775
Disposal of investments in associates and joint ventures (Note 11)		—			32
Interest received		471			262
Payments for:
Purchase of investment in debt securities (Note 12)		—			(175	)
Acquisition of investments in associates and joint ventures (Note 11)		(71	)		(3,303	)
Purchase of short-term investments		(324	)		(6,767	)
Interest capitalized to property and equipment (Notes 5 and 9)		(988	)		(945	)
Purchase of property and equipment (Note 9)		(55,556	)		(48,099	)
Increase in other financial and non-financial assets		(248	)		(53	)
Net cash flows used in investing activities		(46,603	)		(16,783	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from:
Availments of long-term debt (Notes 20 and 28)		25,500			5,000
Availments of short-term debt (Notes 20 and 28)		—			10,000
Return of preferred shares redemption fund (Note 19)		—			7,839
Collections from derivative financial instruments (Notes 27 and 28)		—			157
Payments for:
Distribution charges on perpetual notes (Note 19)		(118	)		(118	)
Debt issuance costs (Notes 20 and 28)		(142	)		(52	)
Settlements of derivative financial instruments (Notes 27 and 28)		(800	)		—
Long-term debt (Notes 20 and 28)		(2,687	)		(11,896	)
Short-term debt (Notes 20 and 28)		(4,000	)		—
Interest – net of capitalized portion (Notes 5, 20 and 28)		(4,479	)		(4,430	)
Obligations under lease liabilities (Notes 10 and 28)		(5,570	)		(3,743	)
Cash dividends (Notes 19 and 28)		(12,736	)		(9,064	)
Net cash flows used in financing activities		(5,032	)		(6,307	)
NET EFFECT OF FOREIGN EXCHANGE RATE CHANGES    ON CASH AND CASH EQUIVALENTS		(296	)		384
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(9,026	)		15,030
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD (Note 15)		25,211			23,833
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (Note 15)		16,185			38,863

See accompanying Notes to Consolidated Financial Statements.

F-4

PLDT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Corporate Information

PLDT Inc. (formerly Philippine Long Distance Telephone Company), which we refer to as PLDT, the Parent Company, or the Company, was incorporated under the old Corporation Law of the Philippines (Act 1459, as amended) on November 28, 1928, following the merger of four telephone companies under common U.S. ownership. PLDT has a perpetual corporate term pursuant to Section 11 of the Revised Corporation Code of the Philippines (Republic Act No. 11232), which entitles existing corporations to have a perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority of its outstanding capital stock, notifies the Philippine Securities and Exchange Commission, or Philippine SEC,that the corporation elects to retain its specific corporate term pursuant to its articles of incorporation. While PLDT’s amended Articles of Incorporation states that its corporate term is limited to 50 years from the date of incorporation on November 28, 1928, and another term of 50 years from November 28, 1978, PLDT has not elected to retain such specific corporate term. In 1967, effective control of PLDT was sold by the General Telephone and Electronics Corporation, then a major shareholder since PLDT’s incorporation, to a group of Filipino businessmen. In 1981, in furtherance of the then existing policy of the Philippine government to integrate the Philippine telecommunications industry, PLDT purchased substantially all of the assets and liabilities of the Republic Telephone Company, which at that time was the second largest telephone company in the Philippines. In 1998, certain subsidiaries of First Pacific Company Limited, or First Pacific, and its Philippine affiliates (collectively the First Pacific Group and its Philippine affiliates), acquired a significant interest in PLDT. On March 24, 2000, NTT Communications Corporation, or NTT Communications, through its wholly-owned subsidiary NTT Communications Capital (UK) Ltd., became PLDT’s strategic partner with approximately 15% economic and voting interest in the issued and outstanding common stock of PLDT at that time. Simultaneous with NTT Communications’ investment in PLDT, the latter acquired 100% of Smart Communications, Inc., or Smart. On March 14, 2006, NTT DOCOMO, Inc., or NTT DOCOMO, acquired from NTT Communications approximately 7% of PLDT’s then outstanding common shares held by NTT Communications with NTT Communications retaining ownership of approximately 7% of PLDT’s common shares. Since March 14, 2006, NTT DOCOMO has made additional purchases of shares of PLDT, and together with NTT Communications beneficially owned approximately 20% of PLDT’s outstanding common stock as at June 30, 2023. NTT Communications and NTT DOCOMO are part of the group of companies of Nippon Telegraph and Telephone Corporation. On February 28, 2007, Metro Pacific Asset Holdings, Inc., a Philippine affiliate of First Pacific, completed the acquisition of an approximately 46% interest in Philippine Telecommunications Investment Corporation, or PTIC, a shareholder of PLDT. This investment in PTIC represented an attributable interest of approximately 6% of the then outstanding common shares of PLDT and thereby raised First Pacific Group’s and its Philippine affiliates’ beneficial ownership to approximately 28% of PLDT’s outstanding common stock as at that date. Since then, First Pacific Group’s beneficial ownership interest in PLDT decreased by approximately 2%, mainly due to the holders of Exchangeable Notes, which were issued in 2005 by a subsidiary of First Pacific and exchangeable into PLDT shares owned by First Pacific Group, who fully exchanged their notes. First Pacific Group and its Philippine affiliates had beneficial ownership of approximately 26% in PLDT’s outstanding common stock as at June 30, 2023. On October 26, 2011, PLDT completed the acquisition of a controlling interest in Digital Telecommunications Phils., Inc., or Digitel, from JG Summit Holdings, Inc., or JGSHI, and its affiliates, or JG Summit Group. As payment for the assets acquired from JGSHI, PLDT issued approximately 27.7 million common shares. In November 2011, JGSHI sold 5.81 million and 4.56 million PLDT shares to a Philippine affiliate of First Pacific and NTT DOCOMO, respectively, pursuant to separate option agreements that JGSHI had entered into with a Philippine affiliate of First Pacific and NTT DOCOMO, respectively. As at June 30, 2023, the JG Summit Group beneficially owned approximately 11% of PLDT’s outstanding common shares.

F-5

On October 16, 2012, BTF Holdings, Inc., or BTFHI, a wholly-owned company of the Board of Trustees for the Account of the Beneficial Trust Fund, or PLDT Beneficial Trust Fund, created pursuant to PLDT’s Benefit Plan, subscribed to 150 million newly issued shares of Voting Preferred Stock of PLDT, or Voting Preferred Shares, at a subscription price of Php1.00 per share for a total subscription price of Php150 million pursuant to a subscription agreement between BTFHI and PLDT dated October 15, 2012. As a result of the issuance of Voting Preferred Shares, the voting power of the NTT Group (NTT DOCOMO and NTT Communications), First Pacific Group and its Philippine affiliates, and JG Summit Group was reduced to 12%, 15% and 7%, respectively, as at June 30, 2023. See Note 19 – Equity – Preferred Stock – Voting Preferred Stock.

The common shares of PLDT are listed and traded on the Philippine Stock Exchange, Inc., or PSE. On October 19, 1994, an American Depositary Receipt, or ADR, facility was established, pursuant to which Citibank N.A., as the depositary, issued American Depositary Shares, or ADSs, with each ADS representing one PLDT common share with a par value of Php5.00 per share. Effective February 10, 2003, PLDT appointed JP Morgan Chase Bank as successor depositary for PLDT’s ADR facility. The ADSs are listed on the New York Stock Exchange, or NYSE, in the United States and are traded on the NYSE under the symbol “PHI”. There were approximately 15.5 million ADSs outstanding as at June 30, 2023.

PLDT and our Philippine-based fixed line and wireless subsidiaries operate under the jurisdiction of the Philippine National Telecommunications Commission, or NTC, which jurisdiction extends, among other things, to approving major services offered and certain rates charged to customers.

We are the largest and most diversified telecommunications company in the Philippines which delivers data and multi-media services nationwide. We have organized our business into business units based on our products and services and have three reportable operating segments which serve as the bases for management’s decision to allocate resources and evaluate operating performance. Our principal activities are discussed in Note 4 – Operating Segment Information.

Our registered office address is Ramon Cojuangco Building, Makati Avenue, Makati City, Philippines. Information on our structure is provided in Note 2 – Summary of Significant Accounting Policies – Basis of Consolidation. Information on other related party relationships of the PLDT Group is provided in Note 24 – Related Party Transactions.

Our consolidated financial statements as at June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022 were approved and authorized for issuance by the Board of Directors on August 3, 2023, as reviewed by the Audit Committee on July 31, 2023.

Amendments to the By-Laws of PLDT

On March 25, 2021, the Board of Directors approved the amendments to the By-Laws of PLDT to conform with the provision of Republic Act No. 11232, known as the Revised Corporation Code of the Philippines. On September 9, 2022, the Amended By-Laws of PLDT was approved by the Philippine SEC.

2.Summary of Significant Accounting Policies

Basis of Preparation

Our consolidated financial statements have been prepared in accordance with Philippine Financial Reporting Standards, or PFRSs, as issued by the Philippine Financial and Sustainability Reporting Standards Council, or FSRSC.

Our consolidated financial statements have been prepared under the historical cost basis, except for financial instruments at fair value through profit or loss, or FVPL, and investment properties that are measured at fair values.

Our consolidated financial statements include adjustments consisting only of normal recurring adjustments, necessary to present fairly the results of operations for the interim periods. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the full year.

F-6

Our consolidated financial statements are presented in Philippine Peso, PLDT’s functional currency, and all values are rounded to the nearest million, except when otherwise indicated.

Our consolidated financial statements provide comparative information in respect of the previous period.

F-7

Basis of Consolidation

Our consolidated financial statements include the financial statements of PLDT and the following subsidiaries (collectively, the “PLDT Group”) as at June 30, 2023 and December 31, 2022:

			June 30, 2023				December 31, 2022
			(Unaudited)				(Audited)
	Place of		Percentage of Ownership
Name of Subsidiary	Incorporation	Principal Business Activity	Direct		Indirect		Direct		Indirect
Wireless
Smart:	Philippines	Cellular mobile services		100.0		—		100.0		—
Smart Broadband, Inc., or SBI, and Subsidiary	Philippines	Internet broadband distribution services		—		100.0		—		100.0
Primeworld Digital Systems, Inc., or PDSI	Philippines	Internet broadband distribution services		—		100.0		—		100.0
I-Contacts Corporation	Philippines	Operations support servicing business		—		100.0		—		100.0
Far East Capital Limited, or FECL(a)	Cayman Islands	Cost effective offshore financing and risk    management activities for Smart		—		100.0		—		100.0
PH Communications Holdings Corporation	Philippines	Investment company		—		100.0		—		100.0
Connectivity Unlimited Resource Enterprise, Inc.	Philippines	Cellular mobile services		—		100.0		—		100.0
Francom Holdings, Inc.	Philippines	Investment company		—		100.0		—		100.0
Chikka Holdings Limited, or Chikka, and Subsidiaries,    or Chikka Group(a)	British Virgin Islands	Content provider, mobile applications development and services		—		100.0		—		100.0
Wifun, Inc.	Philippines	Software developer and selling of WiFi access equipment		—		100.0		—		100.0
PLDT Global, Inc.	Philippines	Cross-border digital platforms and other allied services		100.0		—		100.0		—
ACeS Philippines Cellular Satellite Corporation, or ACeS Philippines(a)	Philippines	Satellite information and messaging services		88.5		11.5		88.5		11.5
Digitel Mobile Philippines, Inc., or DMPI,    (a wholly-owned subsidiary of Digitel)	Philippines	Cellular mobile services		—		99.6		—		99.6
Fixed Line
PLDT Clark Telecom, Inc., or ClarkTel	Philippines	Telecommunications services		100.0		—		100.0		—
PLDT Subic Telecom, Inc., or SubicTel	Philippines	Telecommunications services		100.0		—		100.0		—
PLDT Global Corporation, or PLDT Global, and Subsidiaries	British Virgin Islands	Telecommunications services		100.0		—		100.0		—
Smart-NTT Multimedia, Inc.(a)	Philippines	Data and network services		100.0		—		100.0		—
PLDT-Philcom, Inc., or Philcom, and Subsidiaries, or Philcom Group	Philippines	Telecommunications services		100.0		—		100.0		—
Talas Data Intelligence, Inc.	Philippines	Business infrastructure and solutions; intelligent data    processing and implementation services and data    analytics insight generation		100.0		—		100.0		—
Multisys Technologies Corporation, or Multisys(b)	Philippines	Software development and IT solutions services		—		50.7		—		50.7

(a)Ceased commercial operations.

(b)On July 29, 2022, PLDT Global Investments Holdings, Inc., or PGIH, acquired additional 227 common shares of Multisys, thereby increasing its ownership from 45.73% to 50.72%.

F-8

			June 30, 2023				December 31, 2022
			(Unaudited)				(Audited)
	Place of		Percentage of Ownership
Name of Subsidiary	Incorporation	Principal Business Activity	Direct		Indirect		Direct		Indirect
ePLDT, Inc., or ePLDT:	Philippines	Information and communications infrastructure for    internet-based services, e-commerce, customer    relationship management and IT related services		100.0		—		100.0		—
IP Converge Data Services, Inc., or IPCDSI, and Subsidiary,    or IPCDSI Group	Philippines	Information and communications infrastructure for    internet-based services, e-commerce, customer    relationship management and IT related services		—		100.0		—		100.0
Curo Teknika, Inc., or Curo	Philippines	Managed IT outsourcing		—		100.0		—		100.0
ABM Global Solutions, Inc., or AGS, and Subsidiaries,    or AGS Group(a)	Philippines	Internet-based purchasing, IT consulting and professional services		—		100.0		—		100.0
ePDS, Inc., or ePDS(a)	Philippines	Bills printing and other related value-added services, or VAS		—		100.0		—		100.0
netGames, Inc.(a)	Philippines	Gaming support services		—		57.5		—		57.5
MVP Rewards Loyalty Solutions, Inc., or MRSI(a)	Philippines	Full-services customer rewards and loyalty programs		—		100.0		—		100.0
VITRO, Inc., or Vitro(c)	Philippines	Information and communications infrastructure for    internet-based services, e-commerce, customer    relationship management and IT related services		—		100.0		—		100.0
Digitel	Philippines	Telecommunications services		99.6		—		99.6		—
Digitel Information Technology Services, Inc.(a)	Philippines	Internet services		—		99.6		—		99.6
PLDT-Maratel, Inc., or Maratel	Philippines	Telecommunications services		98.0		—		98.0		—
Bonifacio Communications Corporation, or BCC	Philippines	Telecommunications, infrastructure and related VAS		75.0		—		75.0		—
Pilipinas Global Network Limited, or PGNL, and Subsidiaries	British Virgin Islands	International distributor of Filipino channels and content		64.6		—		64.6		—
Others
PGIH	Philippines	Investment company		100.0		—		100.0		—
PLDT Digital Investments Pte. Ltd., or PLDT Digital, and Subsidiaries	Singapore	Investment company		100.0		—		100.0		—
Mabuhay Investments Corporation, or MIC(d)	Philippines	Investment company		67.0		—		67.0		—
PLDT Communications and Energy Ventures, Inc., or PCEV	Philippines	Investment company		—		99.9		—		99.9

(a)Ceased commercial operations.

(c) On February 2, 2022, the Philippine SEC approved the incorporation of Vitro, a wholly-owned subsidiary of ePLDT.

(d) Ceased commercial operations. On August 9, 2022, the Philippine SEC approved MIC's application for amendment of its Articles of Incorporation to shorten its corporate term until
September 30, 2023.

F-9

Subsidiaries are fully consolidated from the date of acquisition, being the date on which PLDT obtains control, and continue to be consolidated until the date that such control ceases. We control an investee when we are exposed, or have rights, to variable returnsfrom our involvement with the investee and when we have the ability to affect those returns through our power over the investee.

The financial statements of our subsidiaries are prepared for the same reporting period as PLDT. We prepare our consolidated financial statements using uniform accounting policies for like transactions and other events with similar circumstances.

Profit or loss and each component of other comprehensive income are attributed to the equity holders of PLDT and to the noncontrolling interests, even if this results in the noncontrolling interests having a deficit balance.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction and impact is presented as part of other equity reserves.

If PLDT loses control over a subsidiary, it: (a) derecognizes the assets (including goodwill) and liabilities of the subsidiary; (b) derecognizes the carrying amount of any noncontrolling interest; (c) derecognizes the cumulative translation differences recorded in equity; (d) recognizes the fair value of the consideration received; (e) recognizes the fair value of any investment retained; (f) recognizes any surplus or deficit in profit or loss; and (g) reclassifies the Parent Company’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate.

Corona Virus, or COVID-19, Pandemic

On March 8, 2020, Presidential Proclamation No. 922 was issued, declaring a State of Public Health Emergency throughout the Philippines due to COVID-19. In a move to contain the COVID-19 pandemic, on March 12, 2020, the Office of the President of the Philippines issued a memorandum directive to impose stringent social distancing measures in the National Capital Region, or NCR, effective March 15, 2020. On March 16, 2020, Presidential Proclamation No. 929 was issued, declaring a State of Calamity throughout the Philippines for a period of six months from March 17, 2020 (at midnight), and imposed an enhanced community quarantine, or ECQ, throughout the island of Luzon until April 12, 2020. On March 24, 2020, Republic Act No. 11469, otherwise known as the “Bayanihan to Heal As One Act”, was signed into law, declaring a state of national emergency over the entire country, and authorizing the President of the Philippines to exercise certain powers necessary to address the COVID-19 pandemic. On April 7, 2020, the Office of the President of the Philippines released a memorandum extending the ECQ over the entire Luzon island until April 30, 2020. On May 1, 2020, the Government further extended the ECQ over, among others, certain portions of Luzon, including Metro Manila, until May 15, 2020, while easing restrictions in other parts of the country. On May 11, 2020, the Inter-Agency Task Force for the Management of Emerging Infectious Diseases, or IATF, placed high-risk local government units under modified ECQ, or MECQ, from May 16, 2020 until May 31, 2020, where certain industries were allowed to operate under strict compliance with minimum safety standards and protocols.

For the duration of the pandemic, the government placed certain provinces, Highly Urbanized Cities, or HUCs, and independent component cities, or ICCs, on varying levels of community quarantine (i.e. ECQ, MECQ, generral community quarantine).

On September 15, 2020, Republic Act No. 11494 or the “Bayanihan to Recover As One Act” took effect, providing for COVID-19 response and recovery interventions and providing mechanisms to accelerate the recovery and bolster the resiliency of the Philippine economy, providing funds therefore and for other purposes. Apart from authorizing the President to exercise powers necessary to undertake certain COVID-19 response and recovery interventions, Republic Act No. 11494 also affirmed the existence of a continuing national emergency, in view of unabated spread of the COVID-19 virus and the ensuing economic disruption therefrom.

On September 16, 2020, Presidential Proclamation No. 1021 was issued, extending the State of Calamity throughout the Philippines due to COVID-19 for a period of one-year effective September 13, 2020 to September 12, 2021.

On September 3, 2021, the IATF approved the shift in the policy in classifying provinces, HUCs, and ICCs for

F-10

purposes of community quarantine, wherein the new classification framework focuses on the imposition of granular lockdown measures and having an alert-level system (alert level 1 to 4), with each alert level limiting restrictions only to identified high-risk activities. The National Capital Region was designated as the pilot area of implementation, effective September 16, 2021. Effective October 20, 2021, the pilot area of implementation of the alert level systems was expanded to selected provinces, HUCs and ICCs outside of NCR. On November 11, 2021, the President issued Executive Order No. 151, Series of 2021, approving the nationwide implementation of the Alert Level System for COVID-19 Response. On March 24, 2022, the IATF, through IATF Resolution No. 165, Series of 2022, adopted the policy of including component cities and municipalities in the Alert Level System for purposes of alert level classification.

On September 12, 2022, President Ferdinand Marcos, Jr. issued Proclamation No. 57, Series of 2022, further extending the declared state of calamity due to COVID-19 throughout the Philippines, effective September 13, 2022 to December 31, 2022. On the same date, the Office of the President of the Philippines, through the Executive Secretary, issued Executive Order No. 3, Series of 2022, which, allowed the voluntary wearing of face masks in open spaces and non-crowded outdoor areas with good ventilation provided that not-fully vaccinated individuals, senior citizens and immunocompromised individuals are highly encouraged to wear their masks, and physical distancing will be observed at all times. Said Executive Order also provided that face masks shall continue to be worn in indoor private or public establishments, including in public transportation by land, air, or sea, and in outdoor settings where physical distancing cannot be maintained.

On October 28, 2022, Executive Order No. 7, Series of 2022, was issued, repealing Executive Order No. 3, Series of 2022. Executive Order No. 7, Series of 2022, provided that the wearing of face masks in indoor and outdoor settings shall be voluntary except in certain settings and that mask wearing was still encouraged for certain individuals. It also provided that the minimum public health standards to effectively prevent and minimize the spread of COVID-19 in the country shall continue to be implemented.

These and other measures have affected and caused disruption to businesses and economic activities, and their impacts on businesses continue to evolve. See Note 2 – Summary of Significant Accounting Policies – Leases – COVID-19 Related Rent Concessions, Note 3 – Estimating allowance for expected credit losses, Note 5 – Income and expenses – Contract balances and Note 10 – Leases.

Precautionary measures at our stores such as provision for foot bath, regular sanitization and disinfection, temperature check, wearing of face masks, installation of commercial-grade air filters, and other observance of social distancing are in place. PLDT Home rolled out Call to Apply service, a virtual and convenient way to apply for a PLDT Home service, transact and talk to any PLDT Sales and Service Centers representatives, as well as theQR codes that directed customers to an online service application platform. In cases where our service teams need to enter customers’ homes or business premises, we have equipped them with protective gear such as face masks and gloves. Members of our service teams have also been trained in the proper health protocols for before, during, and after site visits, including maintaining proper social distances with customers at all times.

We have taken steps to minimize the risk of exposure of our employees to the COVID-19 disease. We have also rolled-out the vaccination program, which also covers booster doses, for our employees and their dependents and household members who were enrolled in the program.

On July 21, 2023, Proclamation No. 297, Series of 2023, was signed, lifting the State of Public Health Emergency throughout the Philippines due to COVID-19. All prior Orders, Memoranda, and issuances that were effective only during the State of Public Health Emergency are deemed withdrawn, revoked or cancelled and no longer in effect.

Total expenses related to our COVID-19 measures amounted to nil and Php354 million for the six months ended June 30, 2023 and 2022, respectively.

F-11

Sun Prepaid Rebranding to Smart Prepaid

On October 21, 2020, Smart and DMPI entered into a Rebranding Agreement wherein Sun Prepaid subscribers were rebranded as Smart Prepaid subscribers. The brand consolidation under Smart aims to capitalize on Smart’s robust mobile data network to provide superior mobile data experience to all Sun subscribers and achieve cost efficiency in brand management. As a result of the rebranding, PLDT reassessed the useful life of the Sun Trademark arising from the acquisition of Digitel in 2011 amounting to Php4,505 million. The Sun Trademark, which had been previously projected to be of continued use and accordingly estimated to be with indefinite life, was fully amortized as at July 2021.

Post-rebranding, the ownership of Sun Prepaid subscribers remains under DMPI. Under the terms of the agreement, Smart will settle a fixed fee representing DMPI’s proportionate share on the distributed subscriber revenues. This transaction was eliminated in our consolidated financial statements.

On April 25, 2022, the Sun Postpaid subscribers were also rebranded to Smart Postpaid subscribers. This aims to provide a better postpaid experience, access to the fastest mobile data network, bigger packages and the latest devices to all Sun subscribers.

See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Estimating useful lives of intangible assets with finite lives.

Loss of Control of PLDT over PG1

On February 28, 2022, PLDT signed a of Deed of Assignment under which investors led by Philex Mining Corporation, Metro Pacific Corporation, or MPIC, and Roxas Holdings, Inc. separately acquired a total of Php44.7 million worth of equity interest of PG1 from PLDT. In addition, PG1 appointed a new director bringing the total number of directors to nine. As a result, PLDT’s ownership was diluted from 65.3% to 47.6% and retained four out of nine total board seats which resulted in a loss of control. Consequently, PLDT accounted for its remaining interest in PG1 as an investment in associate. A gain on deconsolidation amounting to Php376.7 million was recognized as part of "Other Income (Expenses) – Net" in our consolidated income statement for the year ended December 31, 2022. See Note 11 – Investments in Associates and Joint Ventures – Investments in Associates – Investment in PG1.

Investment of PGIH in PCEV

On March 22, 2022, the PGIH Board of Directors approved the investment of US$20 million in the common stock of PCEV at a subscription price of Php13 thousand per share to participate in the growth of the Voyager business.

On April 11, 2022, PGIH remitted US$20 million, or Php1,031 million, to PCEV as deposit for future subscription pending the application of PCEV for capital increase with the Philippine SEC.

Investment in Class C Convertible Preference Shares in Voyager Innovations Holdings Pte. Ltd., or VIH

On April 7, 2022, PCEV participated in the new round of fundraise for VIH amounting to US$62 million. Leading the round was the new investor SIG Venture Capital. Also participating in the round were the other existing shareholders Kohlberg Krans Roberts & Co., Inc., or KKR, Tencent Holdings Limited, or Tencent, International Finance Corporation, or IFC, IFC EAF and IFC Financial Institutions Growth Fund, as well as new investors including Singapore-based global investor EDBI and investment holding company, First Pacific. Thereafter, PCEV’s ownership in VIH was diluted from 38.45% to 36.82%.

VIH raised US$210 million in new funds propelling VIH’s valuation to nearly US$1.4 billion. VIH used the fresh funds to support the launch and acceleration of digital banking services powered by Maya Bank and other new services such as crypto, to be seamlessly integrated and offered across Maya’s consumer and enterprise platforms.

F-12

On August 12, 2022, a new investor signed a subscription agreement with VIH resulting in further dilution of PCEV's equity interest from 36.82% to 36.63%. See related disclosures on gain on dilution on Note 5 – Other Income (Expenses).

Smart Broadband, Inc.’s Franchise Extended for another 25 Years

On April 8, 2022, the Philippine President approved Republic Act No. 11678, an act renewing for another 25 years the franchise granted to SBI. This allows SBI to continue constructing, installing, establishing, maintaining, leasing and operating wire and/or wireless telecommunication systems throughout the Philippines. SBI’s original franchise under Republic Act No. 8337 expired on November 11, 2022, and the renewal for another 25 years will expire on November 11, 2047.

Acquisition of Additional Interest in Multisys Technologies Corporation, or Multisys

On July 29, 2022, PGIH acquired additional 227 common shares of Multisys from the existing holder, representing a 4.99% interest, for a total consideration of Php248 million, of which Php100 million was paid on the same day. In August 2022, PGIH paid Php136 million of the balance of consideration. The remaining balance of Php12 million is still outstanding as at June 30, 2023. As of and following this acquisition, PGIH owns 2,307 common shares representing 50.72% equity interest in Multisys, which is considered a controlling interest, and in accordance with the Restated Shareholders’ Agreement that the parties signed on the same date, PGIH is entitled to nominate three out of the five directors in Multisys who shall manage and control the operation of Mutisys. Consequently, the results of operations and financial position of Multisys are consolidated with the PLDT Group starting in the fourth quarter of 2022.

See Note 11 – Investments in Associates and Joint Ventures – Investments in Associates – Acquisition of Additional Interest in Multisys/Business Combination.

Proposed Acquisition of Sky Cable Corporation, or Sky Cable

On March 16, 2023, PLDT entered into a Sale and Purchase Agreement with Sky Vision Corporation, ABS-CBN Corporation and Lopez, Inc. for the proposed acquisition by PLDT of 100% of Sky Cable Corporations’ total issued and outstanding capital stock, for the aggregate purchase price of Php6,750 million subject for any adjustment in accordance with the provisions in the Sale and Purchase Agreement. The closing of the transaction shall be subject to compliance with certain conditions precedent which include, among others, the termination or cessation of operations by Sky Cable of its PayTV and cable business, obtaining all applicable government approvals and clearances, obtaining all required consents and corporate actions. On closing, PLDT will pay the purchase price for 100% of Sky Cable's shares.

On March 28, 2023, PLDT filed a notice with the Philippine Competition Commission, or PCC, regarding the purchase of Sky Cable’s broadband business.

Discontinued Operations

In 2022, ePLDT was in discussion to wind down certain of its subsidiaries. For the business exit plan, a cross functional team was created composed of employees and leaders from ePLDT and subsidiaries. The winding down of the business started in 2022 and is expected to be completed in 2023. Consequently, the operations of the discontinued ePLDT subsidiaries were classified as discontinued operations.

The results of the operations of the discontinued ePLDT subsidiaries, net of intercompany transactions, for the six months ended June 30, 2023 and 2022 are as follows:

F-13

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Revenues		99			579
Expenses:
Compensation and employee benefits		116			249
Depreciation and amortization (Notes 3, 9 and 10)		16			42
Repairs and maintenance		10			40
Taxes and licenses		5			8
Professional and other contracted services		4			8
Cost of services		3			258
Insurance and security services		3			6
Communication, training and travel		2			6
Selling and promotions		—			9
Asset impairment		—			5
Rent		—			(6	)
Miscellaneous operating income (expenses)		(5	)		4
		154			629
Net operating loss		(55	)		(50	)
Other income (expenses):
Foreign exchange gains – net		3			1
Interest income		1			—
Financing costs		(1	)		(6	)
Others		23			1
		26			(4	)
Loss before income tax from discontinued operations		(29	)		(54	)
Provision for income tax (Notes 3 and 7)		—			(7	)
Loss after tax from discontinued operations (Note 8)		(29	)		(61	)
Loss per share (Note 8):
Basic – Income from discontinued operations		(0.13	)		(0.28	)
Diluted – Income from discontinued operations		(0.13	)		(0.28	)

ePLDT is in the process of determining the disposal of the remaining assets of the discontinued ePLDT subsidiaries, whether to repurpose the assets or to dispose by sale. As at June 30, 2023 and December 31, 2022, below are the assets and liabilities of the discontinued ePLDT subsidiaries, net of intercompany transactions, which are included in our consolidated statements of financial position:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Assets:
Property and equipment (Notes 3 and 10)		5		11
Right-of-use assets (Notes 3 and 10)		62		77
Deferred income tax assets – net (Note 7)		1		1
Goodwill and intangible assets		56		56
Other financial assets – net of current portion		17		15
Cash and cash equivalents		210		240
Short-term investments		9		9
Other assets		175		326
		535		735
Liabilities
Lease liabilities – net of current portion (Notes 3 and 10)		3		32
Accounts payable		86		108
Accrued expenses and other current liabilities		317		498
Current portion of lease liabilities		57		78
Other liabilities		4		24
Income tax payable		4		4
		471		744
Net assets (liabilities) directly associated with disposal group		64		(9	)

F-14

The net cash flows generated by the discontinued ePLDT subsidiaries, net of intercompany transactions for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Operating activities		(20	)		(70	)
Investing activities		14			(5	)
Financing activities		(31	)		(34	)
Net effect of foreign exchange rate changes on cash and cash equivalents		7			1
Net cash outflow		(30	)		(108	)

Amended Standards

The accounting policies adopted are consistent with those of the previous financial year, except that we have adopted the following amended standards starting January 1, 2023.

•Amendments to Presentation of Financial Statements and PFRS Practice Statement 2, Making Materiality Judgements, Disclosure of Accounting Policies

The amendments provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by:

a.Replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies; and

b.Adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.

We are currently assessing the impact of the amendments to our disclosures on accounting policies.

•Amendments to PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, Definition of Accounting Estimates

The amendments introduce a new definition of accounting estimates and clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, the amendments clarify that the effects on an accounting estimate of a change in an input or a change in a measurement technique are changes in accounting estimates if they do not result from the correction of prior period errors.

The amendments will have no significant impact on our consolidated financial statements.

•Amendments to PAS 12, Income Taxes, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

The amendments narrow the scope of the initial recognition exception under PAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.

The amendments also clarify that where payments that settle a liability are deductible for tax purposes, it is a matter of judgement (having considered the applicable tax law) whether such deductions are attributable for tax purposes to the liability recognized in the financial statements (and interest expense) or to the related asset component (and interest expense).

The amendments will have no impact on our consolidated financial statements.

F-15

Summary of Significant Accounting Policies

The following is the summary of significant accounting policies we applied in preparing our consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any noncontrolling interest in the acquiree. For each business combination, we elect whether to measure the components of the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in selling, general and administrative expenses.

When we acquire a business, we assess the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in profit or loss. The fair value of previously held equity interest is then included in the amount of total consideration transferred.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument within the scope of PFRS 9 is measured at fair value with the changes in fair value recognized in profit or loss. In accordance with PFRS 9, other contingent consideration that is not within the scope of PFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for noncontrolling interests and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, we reassess whether we correctly identified all of the assets acquired and all of the liabilities assumed and review the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain on a bargain purchase is recognized in profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, we report in our consolidated financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, which is no longer than one year from the acquisition date, the provisional amounts recognized at acquisition date are retrospectively adjusted to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, we also recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of our cash-generating units, or CGUs, that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill acquired in a business combination has yet to be allocated to identifiable CGUs because the initial accounting is incomplete, such provisional goodwill is not tested for impairment unless indicators of impairment exist and we can reliably allocate the carrying amount of goodwill to a CGU or group of CGUs that are expected to benefit from the synergies of the business combination.

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Where goodwill has been allocated to a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the disposed operation and the portion of the CGU retained.

Investments in Associates

An associate is an entity in which we have significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. The existence of significant influence is presumed to exist when we hold 20% or more, but less than 50% of the voting power of another entity. Significant influence is also exemplified when we have one or more of the following: (a) a representation on the board of directors or the equivalent governing body of the investee; (b) participation in policy-making processes, including participation in decisions about dividends or other distributions; (c) material transactions with the investee; (d) interchange of managerial personnel with the investee; or (e) provision of essential technical information.

Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The cost of the investments includes directly attributable transaction costs. The details of our investments in associates are disclosed in Note 11 – Investments in Associates and Joint Ventures – Investments in Associates.

Under the equity method, an investment in an associate is carried at cost plus post acquisition changes in our share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortized nor individually tested for impairment. Our consolidated income statements reflect our share in the financial performance of our associates. Where there has been a change recognized directly in the equity of the associate, we recognize our share in such change and disclose this, when applicable, in our consolidated statement of comprehensive income and consolidated statement of changes in equity. Unrealized gains and losses resulting from our transactions with and among our associates are eliminated to the extent of our interests in those associates.

Our share in the profits or losses of our associates is included under “Other income (expenses)” in our consolidated income statement. This is the profit or loss attributable to equity holders of the associate and therefore is profit or loss after tax and net of noncontrolling interest in the subsidiaries of the associate.

When our share of losses exceeds our interest in an associate, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that we have an obligation or have made payments on behalf of the investee.

Our reporting dates and that of our associates are identical and our associates’ accounting policies conform to those used by us for like transactions and events in similar circumstances. When necessary, adjustments are made to bring such accounting policies in line with our policies.

After application of the equity method, we determine whether it is necessary to recognize an additional impairment loss on our investments in associates. We determine at the end of each reporting period whether there is any objective evidence that our investment in associate is impaired. If this is the case, we calculate the amount of impairment as the difference between the recoverable amount of our investment in the associate and its carrying value and recognize the amount in our consolidated income statements.

Upon loss of significant influence over the associate, we measure and recognize any retained investment at its fair value. Any difference between the carrying amounts of our investment in the associate upon loss of significant influence and the fair value of the remaining investment and proceeds from disposal is recognized in our consolidated financial statements.

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Joint Arrangements

Joint arrangements are arrangements with respect to which we have joint control, established by contracts requiring unanimous consent from the parties sharing control for decisions about the activities that significantly affect the arrangements’ returns. They are classified and accounted for as follows:

•Joint operation – when we have rights to the assets, and obligations for the liabilities, relating to an arrangement, we account for each of our assets, liabilities and transactions, including our share of those held or incurred jointly, in relation to the joint operation in accordance with the PFRS applicable to the particular assets, liabilities and transactions.

•Joint venture – when we have rights only to the net assets of the arrangements, we account for our interest using the equity method, the same as our accounting for investments in associates.

The financial statements of the joint venture are prepared for the same reporting period as our consolidated financial statements. Where necessary, adjustments are made to bring the accounting policies of the joint venture in line with our policies. The details of our investments in joint ventures are disclosed in Note 11 – Investments in Associates and Joint Ventures – Investments in Joint Ventures.

Adjustments are made in our consolidated financial statements to eliminate our share of unrealized gains and losses on transactions between us and our joint venture. Our investment in the joint venture is carried at equity method until the date on which we cease to have joint control over the joint venture.

Upon loss of joint control over the joint venture, we measure and recognize our retained investment at fair value. Any difference between the carrying amount of the former joint venture upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is recognized in profit or loss. When the remaining investment constitutes significant influence, it is accounted for as an investment in an associate with no remeasurement.

Current Versus Noncurrent Classifications

We present assets and liabilities in our consolidated statements of financial position based on current or noncurrent classification.

An asset is current when it is:

•Expected to be realized or intended to be sold or consumed in the normal operating cycle;

•Held primarily for the purpose of trading;

•Expected to be realized within twelve months after the reporting period; or

•Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as noncurrent.

A liability is current when:

•It is expected to be settled in the normal operating cycle;

•It is held primarily for the purpose of trading;

•It is due to be settled within twelve months after the reporting period; or

•There is no unconditional right to defer the settlement of the liability for at least twelve months after the period.

The terms of the liquidity that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as noncurrent.

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Deferred income tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.

Foreign Currency Transactions and Translations

Our consolidated financial statements are presented in Philippine Peso, which is also the Parent Company’s functional currency. The Philippine Peso is the currency of the primary economic environment in which we operate. This is also the currency that mainly influences the revenue from and cost of rendering products and services. Each entity in our Group determines its own functional currency and items included in the separate financial statements of each entity are measured using that functional currency.

The functional and presentation currency of the entities under the PLDT Group (except for the subsidiaries discussed below) is the Philippine Peso.

Transactions in foreign currencies are initially recorded by entities under our Group at the respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rate of exchange prevailing at the end of the reporting period. All differences arising on settlement or translation of monetary items are recognized in our consolidated income statement except for foreign exchange differences that qualify as capitalizable borrowing costs for qualifying assets. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The gain or loss arising from transactions of non-monetary items measured at fair value is treated in line with the recognition of this gain or loss on the change in fair value of the items (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive income or profit or loss are also recognized in other comprehensive income or profit or loss, respectively).

The functional currency of the FECL Group, PLDT Global and certain of its subsidiaries, PGNL and certain of its subsidiaries and Chikka and certain of its subsidiaries is the U.S. Dollar; the functional currency of Chikka Pte. Ltd., or CPL, and ABM Global Solutions Pte. Ltd., or AGSPL, is the Singaporean Dollar; the functional currency of PT Advance Business Microsystems Global Solutions, or AGS Indonesia, is the Indonesian Rupiah; and the functional currency of PLDT Malaysia Sdn Bhd is the Malaysian Ringgit. As at the reporting date, the assets and liabilities of these subsidiaries are translated into Philippine Peso at the rate of exchange prevailing at the end of the reporting period, and income and expenses of these subsidiaries are translated monthly using the weighted average exchange rate for the month. The exchange differences arising on translation are recognized as a separate component of other comprehensive income as cumulative translation adjustments. Upon disposal of these subsidiaries, the amount of deferred cumulative translation adjustments recognized in other comprehensive income relating to subsidiaries is recognized in our consolidated income statement.

When there is a change in an entity’s functional currency, the entity applies the translation procedures applicable to the new functional currency prospectively from the date of the change. The entity translates all assets and liabilities into the new functional currency using the exchange rate at the date of the change. The resulting translated amounts for non-monetary items are treated as the new historical cost. Exchange differences arising from the translation of a foreign operation previously recognized in other comprehensive income are not reclassified from equity to profit or loss until the disposal of the operation.

Foreign exchange gains or losses of the Parent Company and our Philippine-based subsidiaries are treated as taxable income or deductible expenses in the period such exchange gains or losses are realized.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate as at reporting date.

Assets Classified as Held-for-Sale

We classify assets as held-for-sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Assets classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

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The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification.

Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held -or-sale.

Assets and liabilities classified as held for sale are presented separately as current items in the consolidated statement of financial position.

Additional disclosures are provided in Note 9 – Property and Equipment – Sale and Leaseback of Telecom Towers and Note 10 – Leases. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.

Financial Instruments

Financial Instruments – Initial recognition and subsequent measurement

Classification of financial assets

Financial assets are classified in their entirety based on the contractual cash flows characteristics of the financial assets and our business model for managing the financial assets. We classify our financial assets into the following measurement categories:

•Financial assets measured at amortized cost;

•Financial assets measured at FVPL;

•Financial assets measured at financial instruments at fair value through other comprehensive income, or FVOCI, where cumulative gains or losses previously recognized are reclassified to profit or loss; and

•Financial assets measured at FVOCI, where cumulative gains or losses previously recognized are not reclassified to profit or loss.

Contractual cash flows characteristics

In order for us to identify the measurement of our debt financial assets, a solely payments of principal and interest, or SPPI, test needs to be initially performed in order to determine whether the contractual terms of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Once a debt financial asset passed the SPPI test, business model assessment, which identifies our objective of holding the financial assets – hold to collect or hold to collect and sell, will be performed. Otherwise, if the debt financial asset failed the test, such will be measured at FVPL.

In making the assessment, we determine whether the contractual cash flows are consistent with a basic lending arrangement, i.e., interest includes consideration only for the time value of money, credit risk and other basic lending risks and costs associated with holding the financial asset for a particular period of time. In addition, interest can include a profit margin that is consistent with a basic lending arrangement. The assessment as to whether the cash flows meet the SPPI test is made in the currency in which the financial asset is denominated. Any other contractual terms that introduce exposure to risks or volatility in the contractual cash flows that is unrelated to a basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.

Business model

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Our business model is determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. Our business model does not depend on management’s intentions for an individual instrument.

Our business model refers to how we manage our financial assets in order to generate cash flows. Our business model determines whether cash flows will result from collecting contractual cash flows, collecting contractual cash flows and selling financial assets or neither.

Financial assets at amortized cost

A financial asset is measured at amortized cost if: (i) it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These financial assets are initially recognized at fair value plus directly attributable transaction costs and subsequently measured at amortized cost using the effective interest rate, or EIR, method, less any impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in ‘Other income (expenses) – net’ in our consolidated income statements and is calculated by applying the EIR to the gross carrying amount of the financial asset, except for (i) purchased or originated credit-impaired financial assets and (ii) financial assets that have subsequently become credit-impaired, where, in both cases, the EIR is applied to the amortized cost of the financial asset. Losses arising from impairment are recognized in ‘Asset impairment’ in our consolidated income statements.

Our financial assets at amortized cost include debt instruments at amortized cost, cash and cash equivalents, portions of short-term investments, trade and other receivables, and portions of other financial assets as at June 30, 2023 and December 31, 2022. See Note 12 – Debt Instruments at Amortized Cost, Note 15 – Cash and Cash Equivalents, Note 16 – Trade and Other Receivables and Note 27 – Financial Assets and Liabilities.

Financial assets at FVOCI (debt instruments)

A financial asset is measured at FVOCI if: (i) it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and (ii) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These financial assets are initially recognized at fair value plus directly attributable transaction costs and subsequently measured at fair value. Gains and losses arising from changes in fair value are included in other comprehensive income within a separate component of equity. Impairment losses or reversals, interest income and foreign exchange gains and losses are recognized in profit and loss. Upon derecognition, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. This reflects the gain or loss that would have been recognized in profit or loss upon derecognition if the financial asset had been measured at amortized cost. Impairment is measured based on the expected credit loss, or ECL, model.

As at June 30, 2023 and December 31, 2022, there were no financial assets at FVOCI (debt instruments) with recycling of cumulative gains or losses.

Financial assets at FVPL

Financial assets at FVPL are measured at fair value. Included in this classification are derivative financial assets, equity investments held for trading and debt instruments with contractual terms that do not represent solely payments of principal and interest. Financial assets held at FVPL are initially recognized at fair value, with transaction costs recognized in our consolidated income statements as incurred. Subsequently, they are measured at fair value and any gains or losses are recognized in our consolidated income statements.

Additionally, even if the asset meets the amortized cost or the FVOCI criteria, we may choose at initial recognition to designate the financial asset at FVPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (an accounting mismatch) that would otherwise arise from measuring financial assets on a different basis.

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Trading gains or losses are calculated based on the results arising from trading activities of the PLDT Group, including all gains and losses from changes in fair value for financial assets and financial liabilities at FVPL, and the gains or losses from disposal of financial investments.

Our financial assets at FVPL include portions of short-term investments, derivative financial assets, equity investments and redemption trust fund as at June 30, 2023 and December 31, 2022. See Note 27 – Financial Assets and Liabilities.

Classification of financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

Financial liabilities are subsequently measured at amortized cost, except for the following:

•Financial liabilities measured at FVPL;

•Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when we retain continuing involvement;

•Financial guarantee contracts;

•Commitments to provide a loan at a below-market interest rate; and

•Contingent consideration recognized by an acquirer in accordance with PFRS 3.

A financial liability may be designated at FVPL if it eliminates or significantly reduces a measurement or recognition inconsistency (an accounting mismatch) or:

•If a host contract contains one or more embedded derivatives; or

•If a group of financial liabilities or financial assets and liabilities is managed and its performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Where a financial liability is designated at FVPL, the movement in fair value attributable to changes in our own credit quality is calculated by determining the changes in credit spreads above observable market interest rates and is presented separately in other comprehensive income.

Our financial liabilities at FVPL include derivative financial liabilities and liability from redemption of preferred stock as at June 30, 2023 and December 31, 2022. See Note 19 – Equity – Redemption of Preferred Stock, Note 23 – Accrued Expenses and Other Current Liabilities and Note 27 – Financial Assets and Liabilities.

Our other financial liabilities include interest-bearing financial liabilities, lease liabilities, customers’ deposits, dividends payable, certain accounts payable and certain accrued expenses and other current liabilities and certain deferred credits and other noncurrent liabilities, (except for statutory payables) as at June 30, 2023 and December 31, 2022. See Note 10 – Leases, Note 20 – Interest-bearing Financial Liabilities, Note 21 – Deferred Credits and Other Noncurrent Liabilities, Note 22 – Accounts Payable, Note 23 – Accrued Expenses and Other Current Liabilities and Note 27 – Financial Assets and Liabilities.

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Reclassifications of financial instruments

We reclassify our financial assets when, and only when, there is a change in the business model for managing the financial assets. Reclassifications shall be applied prospectively and any previously recognized gains, losses or interest shall not be restated. We do not reclassify our financial liabilities.

We do not reclassify our financial assets when:

•A financial asset that was previously a designated and effective hedging instrument in a cash flow hedge or net investment hedge no longer qualifies as such;

•A financial asset becomes a designated and effective hedging instrument in a cash flow hedge or net investment hedge; and

•There is a change in measurement on credit exposures measured at FVPL.

Offsetting of Financial Instruments

Financial assets and liabilities are offset, and the net amount is reported in the consolidated statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts; and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. We assess that it has a currently enforceable right of offset if the right is not contingent on a future event and is legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Group and all of the counterparties.

Impairment of Financial Assets

We recognize ECL for debt instruments that are measured at amortized cost and FVOCI.

No ECL is recognized on financial assets at FVPL.

ECLs are measured in a way that reflects the following:

•An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

•The time value of money; and

•Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Financial assets migrate through the following three stages based on the change in credit quality since initial recognition:

Stage 1: 12-month ECL – not credit impaired

For credit exposures where there have not been significant increases in credit risk since initial recognition and that are not credit-impaired upon origination, the portion of lifetime ECLs that represent the ECLs that result from default events that are possible within the 12-months after the reporting date are recognized.

Stage 2: Lifetime ECL – not credit-impaired

For credit exposures where there have been significant increases in credit risk since initial recognition on an individual or collective basis but are not credit-impaired, lifetime ECLs representing the ECLs that result from all possible default events over the expected life of the financial asset are recognized.

Stage 3: Lifetime ECL – credit-impaired

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Financial assets are credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of those financial assets have occurred. For these credit exposures, lifetime ECLs are recognized and interest revenue is calculated by applying the credit-adjusted EIR to the amortized cost of the financial asset.

Loss Allowances

Loss allowances are recognized based on 12-month ECL for debt instruments that are assessed to have low credit risk at the reporting date. A financial asset is considered to have low credit risk if:

•The financial instrument has a low risk of default;

•The counterparty has a strong capacity to meet its contractual cash flow obligations in the near term; and

•Adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the counterparty to fulfill its contractual cash flow obligations.

We consider a debt instrument to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’, or when the exposure is less than 30 days past due.

The loss allowances recognized in the period is impacted by a variety of factors, as described below:

•Transfers between Stage 1 and Stage 2 and 3 due to the financial instruments experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and lifetime ECL;

•Additional allowances for new financial instruments recognized during the period, as well as releases for financial instruments derecognized in the period;

•Impact on the measurement of ECL due to changes in probability of defaults, or PDs, loss given defaults, or LGDs, and exposure at defaults, or EADs, in the period, arising from regular refreshing of inputs to models;

•Impacts on the measurement of ECL due to changes made to models and assumptions;

•Unwinding of discount within ECL due to passage of time, as ECL is measured on a present value basis; and

•Financial assets derecognized during the period and write-offs of allowances related to assets that were written off during the period.

Write-off Policy

We write-off a financial asset measured at amortized cost, in whole or in part, when the asset is considered uncollectible, and we have exhausted all practical recovery efforts and concluded that we have no reasonable expectations of recovering the financial asset in its entirety or a portion thereof. We write-off an account when all of the following conditions are met:

•The asset is in past due for over 90 days, or is already an item-in-litigation with any of the following:

a)No properties of the counterparty could be attached

b)The whereabouts of the client cannot be located

c)It would be more expensive for the Group to follow-up and collect the amount, hence we have ceased enforcement activity, and

d)Collections can no longer be made due to insolvency or bankruptcy of the counterparty;

•Expanded credit arrangement is no longer possible;

•Filing of legal case is not possible; and

•The account has been classified as ‘Loss’.

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Simplified Approach

The simplified approach, where changes in credit risk are not tracked and loss allowances are measured at amounts equal to lifetime ECL, is applied to ‘Trade and other receivables’ and ‘Contract assets’. We have established a provision matrix for billed trade receivables and a vintage analysis for contract assets and unbilled trade receivables that is based on historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Derecognition of Financial Assets and Liabilities

Financial assets

A financial asset (or where applicable as part of a financial asset or part of a group of similar financial assets) is primarily derecognized when: (1) the right to receive cash flows from the asset has expired; or (2) we have transferred the right to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either: (a) we have transferred substantially all the risks and rewards of the asset; or (b) we have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.

When we have transferred the right to receive cash flows from an asset or have entered into a “pass-through” arrangement and have neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, a new asset is recognized to the extent of our continuing involvement in the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that we could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of our continuing involvement is the amount of the transferred asset that we may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of our continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in consolidated income statement.

The financial liability is also derecognized when equity instruments are issued to extinguish all or part of the financial liability. The equity instruments issued are recognized at fair value if it can be reliably measured, otherwise, it is recognized at the fair value of the financial liability extinguished. Any difference between the fair value of the equity instruments issued and the carrying value of the financial liability extinguished is recognized in consolidated income statement.

Derivative Financial Instruments and Hedge Accounting

Initial recognition and subsequent measurement

We use derivative financial instruments, such as long-term currency swaps, foreign currency options, forward currency contracts and interest rate swaps to hedge our risks associated with foreign currency fluctuations and

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interest rates. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of long-term currency swaps, foreign currency options, forward currency contracts and interest rate swap contracts is determined using applicable valuation techniques. See Note 27 – Financial Assets and Liabilities.

Any gains or losses arising from changes in fair value on derivatives during the period that do not qualify for hedge accounting are taken directly to the “Other income (expense) – Gains (losses) on derivative financial instruments – net” in our consolidated income statements.

For the purpose of hedge accounting, hedges are classified as: (1) fair value hedges when hedging the exposure to changes in the fair value of a recognized financial asset or liability or an unrecognized firm commitment (except for foreign currency risk); or (2) cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized financial asset or liability, a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment; or (3) hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, we formally designate and document the hedge relationship to which we wish to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how we will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an on-going basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated. In a situation when that hedged item is a forecast transaction, we assess whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect our consolidated income statements.

Hedges which meet the criteria for hedge accounting are accounted for as follows:

Fair value hedges

The change in the fair value of a hedging instrument is recognized in our consolidated income statements as financing cost. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in our consolidated income statements.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value is amortized through profit or loss over the remaining term of the hedge using the EIR method. EIR amortization may begin as soon as adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

If the hedged item is derecognized, the unamortized fair value is recognized immediately in our consolidated income statements.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in our consolidated income statements.

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. See Note 27 – Financial Assets and Liabilities for more details.

Amounts taken to other comprehensive income are transferred to our consolidated income statement when the hedged transaction affects our consolidated income statement, such as when the hedged financial income or

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financial expense is recognized or when a forecast transaction occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken to other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in other comprehensive income are transferred to our consolidated income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in other comprehensive income remain in other comprehensive income until the forecast transaction or firm commitment occurs.

We use an interest rate swap agreement to hedge our interest rate exposure and a long-term principal only-currency swap, and long-term foreign currency options agreement to hedge our foreign exchange exposure on certain outstanding loan balances. See Note 27 – Financial Assets and Liabilities.

Current versus noncurrent classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or noncurrent or separated into a current and noncurrent portion based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).

Where we expect to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the reporting date, the derivative is classified as noncurrent (or separated into current and noncurrent portions) consistent with the classification of the underlying item.

Embedded derivatives that are not closely related to the host contract are classified consistent with the cash flows of the host contract.

Derivative instruments that are designated as effective hedging instruments are classified consistently with the classification of the underlying hedged item. The derivative instrument is separated into a current portion and a noncurrent portion only if a reliable allocation can be made.

We recognize transfers into and transfers out of fair value hierarchy levels as at the date of the event or change in circumstances that caused the transfer.

Property and Equipment

Property and equipment, except for land, is stated at cost less accumulated depreciation and amortization and any accumulated impairment losses. Land is stated at cost less any impairment in value. The initial cost of property and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the property and equipment to its working condition and location for its intended use. Such cost includes the cost of replacing component parts of the property and equipment when the cost is incurred, if the recognition criteria are met. When significant parts of property and equipment are required to be replaced at intervals, we recognize such parts as individual assets with specific useful lives and depreciate them accordingly. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the property and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognized as expense as incurred. The present value of the expected cost for the decommissioning of the asset after use is included in the cost of the asset if the recognition criteria for a provision are met.

Depreciation and amortization commence once the property and equipment are available for their intended use and are calculated on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives used in depreciating our property and equipment are disclosed in Note 9 – Property and Equipment.

The residual values, estimated useful lives, and methods of depreciation and amortization are reviewed at least at each financial year-end and adjusted prospectively, if appropriate.

An item of property and equipment and any significant part initially recognized are derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on

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derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in consolidated income statement when the asset is derecognized.

Property under construction is stated at cost less any impairment in value. This includes cost of construction, plant and equipment, capitalizable borrowing costs and other direct costs associated to construction. Property under construction is not depreciated until such time that the relevant assets are completed and available for its intended use.

Property under construction is transferred to the related property and equipment when the construction or installation and related activities necessary to prepare the property and equipment for their intended use have been completed, and the property and equipment are ready for operational use.

Borrowing Costs

Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Capitalization of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Capitalization of borrowing costs shall be suspended during extended periods in which it suspends active development of a qualifying asset. Borrowing costs are capitalized until the assets are substantially completed for their intended use or sale.

All other borrowing costs are expensed as incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Asset Retirement Obligations

We are legally required under various lease agreements to dismantle the installation in leased sites and restore such sites to their original condition at the end of the lease contract term. We recognize the liability measured at the present value of the estimated costs of these obligations and capitalize such costs as part of the balance of the related item of property and equipment. The amount of asset retirement obligations is accreted and such accretion is recognized as interest expense. See Note 10 – Leases and Note 21 – Deferred Credits and Other Noncurrent Liabilities.

Investment Properties

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in our consolidated income statement in the period in which they arise, including the corresponding tax effect. Fair values are determined based on an amount evaluation performed by a Philippine SEC accredited external independent valuer applying a valuation model recommended by the International Valuation Standards Committee.

Investment properties are derecognized when they are disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. Any gain or loss on the retirement or disposal of an investment property is recognized in our consolidated income statement in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, we account for such property in accordance with the policy stated under property and equipment up to the date of change in use. The difference between the carrying amount of the owner-occupied property and its fair value at the date of change is accounted for as revaluation increment recognized in other comprehensive income. On subsequent disposal of the investment property, the revaluation increment recognized in other comprehensive income is transferred to retained earnings.

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Intangible Assets

Intangible assets acquired separately are measured at cost on initial recognition. The cost of intangible assets acquired from business combinations is initially recognized at fair value on the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. The useful lives of intangible assets are assessed at the individual asset level as either finite or indefinite.

Intangible assets with finite lives are amortized over the economic useful life using the straight-line method and assessed for impairment whenever there is an indication that the intangible assets may be impaired. At the minimum, the amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in our consolidated income statements.

Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually either individually or at the CGU level. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

The estimated useful lives used in amortizing our intangible assets are disclosed in Note 14 – Goodwill and Intangible Assets.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in our consolidated income statements when the asset is derecognized.

Internally generated intangibles are not capitalized, and the related expenditures are charged against operations in the period in which the expenditures are incurred.

Inventories and Supplies

Inventories and supplies, which include cellular and landline phone units, materials, spare parts, terminal units and accessories, are valued at the lower of cost and net realizable value.

Costs incurred in bringing inventories and supplies to its present location and condition are accounted for using the weighted average cost method. Net realizable value is determined by either estimating the selling price in the ordinary course of business, less the estimated cost to sell or determining the prevailing replacement costs.

Impairment of Non-Financial Assets

We assess at each reporting period whether there is an indication that an asset may be impaired. If any indication exists, or when the annual impairment testing for an asset is required, we make an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use, or VIU. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent from those of other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing the VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining the fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses are recognized in our consolidated income statements.

For assets, excluding goodwill and intangible assets with indefinite useful life, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, we make an estimate of the recoverable amount. A

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previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in our consolidated income statements. After such reversal, the depreciation and amortization charges are adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining economic useful life.

The following assets have specific characteristics for impairment testing:

Property and equipment, right-of-use, or ROU, assets, and intangible assets with finite useful lives

For property and equipmentand ROU assets, we assess for impairment on the basis of impairment indicators such as evidence of internal obsolescence or physical damage. For intangible assets with finite useful lives, we assess for impairment whenever there is an indication that the intangible assets may be impaired. See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Impairment of non-financial assets, Note 9 – Property and Equipment, Note 10 – Leases and Note 14 – Goodwill and Intangible Assets for further disclosures relating to impairment of non-financial assets.

Investments in associates and joint ventures

We determine at the end of each reporting period whether there is any objective evidence that our investments in associates and joint ventures are impaired. If this is the case, the amount of impairment is calculated as the difference between the recoverable amount of the investments in associates and joint ventures, and its carrying amount. The amount of impairment loss is recognized in our consolidated income statements. See Note 11 – Investments in Associates and Joint Ventures for further disclosures relating to impairment of non-financial assets.

Goodwill

Goodwill is tested for impairment annually as at December 31 and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU, or group of CGUs, to which the goodwill relates. When the recoverable amount of the CGU, or group of CGUs, is less than the carrying amount of the CGU, or group of CGUs, to which goodwill has been allocated, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Impairment of non-financial assets and Note 14 – Goodwill and Intangible Assets for further disclosures relating to impairment of non-financial assets.

Intangible asset with indefinite useful life

Intangible asset with indefinite useful life is not amortized but is tested for impairment annually either individually or at the CGU level, as appropriate. We calculate the amount of impairment as being the difference between the recoverable amount of the intangible asset or the CGU, and its carrying amount and recognize the amount of impairment in our consolidated income statements. Impairment losses relating to intangible assets can be reversed in future periods.

See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Impairment of non-financial assets and Note 14 – Goodwill and Intangible Assets for further disclosures relating to impairment of non-financial assets.

Debt Instruments at Amortized Cost

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Debt instruments at amortized cost includes investment in debt securities that consists of time deposits and government securities which are carried at amortized cost using the EIR method. Interest earned from these securities is recognized under “Other income (expenses) – net – Interest income” in our consolidated income statements.

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents, which include temporary cash investments, are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less from the date of acquisition, and for which there is an insignificant risk of change in value.

Short-term Investments

Short-term investments are money market placements, which are highly liquid with maturities of more than three months but less than one year from the date of acquisition.

Fair Value Measurement

We measure financial instruments such as derivatives, financial assets at FVPL, assets classified as held-for-sale and non-financial assets such as investment properties and pension plan assets, at fair value at each reporting date. The fair values of investment properties are disclosed in Note 13 – Investment Properties. The fair values of the pension plan assets are disclosed in Note 25 – Pension and Other Employee Benefits. The fair values of financial instruments measured at amortized cost are disclosed in Note 27 – Financial Assets and Liabilities.

Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: (i) in the principal market for the asset or liability; or (ii) in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to us.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

We use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in our consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: (i) Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities; (ii) Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and (iii) Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in our consolidated financial statements on a recurring basis, we determine whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

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We determine the policies and procedures for both recurring fair value measurement, such as investment properties and unquoted FVPL financial assets, and for non-recurring measurement, such as assets held for distribution in discontinued operation.

External valuers are involved for valuation of significant assets, such as investment properties. Involvement of external valuers is decided upon annually. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. At each reporting date, we analyze the movements in the values of assets and liabilities which are required to be remeasured or reassessed as per our accounting policies. For this analysis, we verify the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

We, in conjunction with our external valuers, also compare the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. This includes a discussion of the major assumptions used in the valuations. For the purpose of fair value disclosures, we have determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Revenues from contracts with customers

Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which we expect to be entitled to in exchange for those goods or services. IFRS 15 prescribes a five-step model to be followed in the recognition of revenue, wherein we take into consideration the performance obligations which we need to perform in the agreements we have entered into with our customers. Revenue is measured by allocating the transaction price, which includes variable considerations, to each performance obligation on a relative stand-alone selling price basis, taking into account contractually defined terms of payment and excluding value-added tax, or VAT, or overseas communication tax, or OCT, where applicable. Transaction prices are adjusted for the effects of a significant financing component if we expect, at contract inception, that the period between the transfer of the promised goods or services to the customer and when the customer pays for that good or service will be more than one year.

When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price may relate to service performance obligations which were not satisfied or are partially satisfied as of end of the reporting period. In determining the transaction price allocated, we do not include nonrecurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of one year or less.

When determining our performance obligations, we assess our revenue arrangements against specific criteria to determine if we are acting as principal or agent. We consider both the legal form and the substance of our agreement, to determine each party’s respective roles in the agreement. We are a principal and record revenue on a gross basis if we control the promised goods or services before transferring them or rendering those to the customer. However, if our role is only to arrange for another entity to provide the goods or services, then we are an agent and will need to record revenue at the net amount that we retain for our agency services.

The disclosures of significant accounting judgments, estimates and assumptions relating to revenues from contracts with customers are provided in Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Identifying performance obligations.

Our revenues are principally derived from providing the following telecommunications services: cellular voice and data services in the wireless business; and local exchange, international and national long distance, data and other network, and information and communications services in the fixed line business.

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Services may be rendered separately or bundled with goods or other services. The specific recognition criteria are as follows:

i.Single Performance Obligation (POB) Contracts

Postpaid service arrangements include fixed monthly charges (including excess of consumable fixed monthly service fees) generated from cellular voice, short messaging services, or SMS, and data services through the postpaid plans of Smart Signature, and Infinity brands, from local exchange services primarily through landline and related services, and from fixed line and other network services primarily through broadband and leased line services, which we recognize on a straight-line basis over the customer’s subscription period. Services provided to postpaid subscribers are billed throughout the month according to the billing cycles of subscribers. Services availed by subscribers in addition to these fixed fee arrangements are charged separately at their stand-alone selling prices and recognized as the additional service is provided or as availed by the subscribers.

Our prepaid service revenues arise from the usage of airtime load from channels and prepaid cards provided from Prepaid Home WiFi, Sulit Talk, Landline Plus products, Smart, TNT and SmartBro. Proceeds from over-the-air reloading channels and prepaid cards are initially recognized as contract liability and realized upon actual usage of the airtime value for voice, SMS, mobile data and other VAS, prepaid unlimited and bucket-priced SMS and call subscriptions, net of bonus credits from load packages purchased, such as free additional call minutes, SMS, data allocation or airtime load, or upon expiration, whichever comes earlier.

We also consider recognizing revenue from the expected expiry of airtime load in proportion to the pattern of rights exercised by the customer if we expect to be entitled to that expired amount. If we do not expect to be entitled to an expired amount based on historical experience with the customers, then we recognize the expected expired amount as revenue when the likelihood of the prepaid customer exercising its remaining rights becomes remote.

Interconnection fees and charges arising from the actual usage of airtime value or subscriptions are recorded as incurred.

Revenue from international and national long-distance calls carried via our network is generally based on rates which vary with distance and type of service (direct dial or operator-assisted, paid or collect, etc.). Revenue from both wireless and fixed line long distance calls is recognized as the service is provided. In general, non-refundable upfront fees, such as activation fees, that do not relate to the transfer of a promised good or service, are deferred and recognized as revenue throughout the estimated average length of the customer relationship, and the related incremental costs incurred are similarly deferred and recognized as expense over the same period, if such costs generate or enhance resources of the entity and are expected to be recovered.

Activation fees for both voice and data services are also considered as a single performance obligation together with monthly service fees, recognized over the customer subscription period. Activation fees for both voice and data services are also considered as a single performance obligation together with monthly services fees, recognized over the customer subscription period.

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ii.Bundled Contracts

In revenue arrangements, which involve bundled sales of mobile devices and accessories (non-service component), and telecommunication services (service component), the total transaction price is allocated based on the relative stand-alone selling prices of each distinct performance obligation. Stand-alone selling price is the price at which we sell the good or service separately to a customer. However, if goods or services are not currently offered separately, we use the adjusted market or cost-plus margin method to determine the stand-alone selling price to be used in the transaction price allocation. We adjust the transaction price for the effects of the time value of money if the timing of the payment and delivery of goods or services do not coincide, effects of which are considered as containing a significant financing component.

Activation services and installation services for voice and data services that are not a distinct performance obligation are considered together with monthly voice and data services as a single performance obligation, recognized over the customer subscription period since the subscriber cannot benefit from the installation services on its own or together with other resources that are readily available to the subscriber. The related incremental costs are recognized in the same manner in our consolidated income statements, if such costs are expected to be recovered. On the other hand, custom built installation services provided to data services subscribers are considered a distinct separate performance obligation and is recognized when services are rendered.

Revenues from the sale of non-service component are recognized at the point in time when the goods are delivered while revenues from telecommunication services component are recognized over on a straight-line basis over the contract period when the services are provided to subscribers.

Significant Financing Component

The non-service component included in contracts with customers have significant financing component considering the period between the time of the transfer of control over the mobile device and the customer’s payment of the price of the mobile device, which is more than one year.

The transaction price for such contracts is determined by discounting the amount of promised consideration using the appropriate discount rate. We concluded that there is a significant financing component for those contracts where the customer elects to pay in arrears considering the length of time between the transfer of mobile device to the customer and the customer’s payment, as well as the prevailing interest rates in the market adjusted with customer credit spread.

Customer Loyalty Program

We launched a new customer loyalty program called Giga Points. Points are earned through subscription of promo, purchase of load, and payment of bill for postpaid subscribers. Points are also earned through other activities such as daily login in the Giga App. These points can be used to redeem items such as giga promos, bill rebates, content subscription, discounts, exclusive tickets, and more.

Our contract with customer for revenue-related activity includes a promise to provide future telco services or rights to third party services in the form of earning points. We consider this revenue-related earning as performance obligation and the transaction price is allocated to each performance obligation. For earnings on non-revenue activity, we recognize a financial liability upon redemption of the points from third party partners.

iii.International and Domestic Long Distance Contracts

Interconnection revenues for call termination, call transit and network usages are recognized in the period in which the traffic occurs. Revenues related to local, long distance, network-to-network, roaming and international call connection services are recognized when the call is placed, or connection is provided, and the equivalent amounts charged to us by other carriers are recorded under interconnection costs in our consolidated income statements. Inbound revenue and outbound charges are based on agreed transit and termination rates with other foreign and local carriers.

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Variable consideration

We assessed that a variable consideration exists in certain interconnection agreements where there is a monthly aggregation period and the rates applied for the total monthly traffic will depend on the total traffic for the month. We also consider whether contracts with carriers contain volume commitment or tiering arrangement whereby the rate being charged will change upon meeting certain volume of traffic. We estimate the amount of variable consideration to which we are entitled and include in the transaction price some or all of the amount of variable consideration estimated arising from these agreements, unless the impact is not material.

iv.Others

Revenues from VAS include streaming and downloading of games, music, video contents, loan services, messaging services, applications and other digital services which are only arranged for by us on behalf of third-party content providers. The amount of revenue recognized is net of content provider’s share in revenue. Revenue is recognized at a point in time upon service availment. We act as an agent for certain VAS arrangements.

Revenue from server hosting, co-location services and customer support services are recognized over the period that the services are performed.

Contract Balances

Contract assets

A contract asset is recognized when a performance obligation is satisfied, but the payment is conditional not only on the passage of time. The other conditions attached to realizing that recognized contract asset usually relate to the entity’s fulfillment of other performance obligations in the contract. Refer to accounting policies on impairment of financial assets in section Financial instruments – initial recognition and subsequent measurement.

Trade receivables

A receivable is recognized if an amount of consideration that is unconditional is due from the customer (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies on impairment of financial assets in section Financial instruments – initial recognition and subsequent measurement.

Contract liabilities and unearned revenues

A contract liability is the obligation to transfer goods or services to a customer for which we have received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before we transfer goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities and unearned revenues are recognized as revenue when we perform under the contract.

Incremental costs to obtain contracts

We often give commissions and incentives to sales agents for meeting certain volumes of new connections and corresponding value of plans contracted. These costs are incremental costs to obtain a contract as we would have not incurred these costs if the contract had not been obtained. These costs are capitalized as an asset if these are expected to be recovered. Any capitalized incremental costs to obtain would be amortized and recognized as expense over customer subscription period. The capitalized incremental costs are subject to regular impairment assessment.

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Interest income

Interest income is recognized as it accrues on a time proportion basis taking into account the principal amount outstanding and the EIR.

Dividend income

Revenue is recognized when our right to receive the payment is identified.

Expenses

Expenses are recognized as incurred.

Provisions

We recognize a provision when we have a present obligation, legal or constructive, as a result of a past event, and when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When we expect some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain to be received if the entity settles the obligation. The expense relating to any provision is presented in our consolidated income statements, net of any reimbursements. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as interest expense in our consolidated income statements.

Retirement Benefits

PLDT and certain of its subsidiaries are covered under Republic Act No. 7641 otherwise known as “The Philippine Retirement Law”.

Defined benefit pension plans

PLDT has separate and distinct retirement plans for itself and majority of its Philippine-based operating subsidiaries, administered by the respective Funds’ Trustees, covering permanent employees. Retirement costs are separately determined using the projected unit credit method. This method reflects services rendered by employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries.

Retirement costs consist of the following:

•Service cost;

•Net interest on the net defined benefit asset or obligation; and

•Remeasurements of net defined benefit asset or obligation.

Service cost (which includes current service costs, past service costs and gains or losses on curtailments and non-routine settlements) is recognized as part of “Selling, general and administrative expenses – Compensation and employee benefits” account in our consolidated income statements. These amounts are calculated periodically by an independent qualified actuary.

Net interest on the net defined benefit asset or obligation is the change during the period in the net defined benefit asset or obligation that arises from the passage of time which is determined by applying the discount rate based on the government bonds to the net defined benefit asset or obligation. Net defined benefit asset is recognized as part of “Advances and other noncurrent assets” and net defined benefit obligation is recognized as part of “Pension and other employee benefits” in our consolidated statements of financial position.

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Remeasurements, comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit obligation) are recognized immediately in other comprehensive income in the period in which they occur. Remeasurements are not classified to profit or loss in subsequent periods.

The net defined benefit asset or obligation comprises the present value of the defined benefit obligation (using a discount rate based on government bonds, as explained in Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Estimating pension benefit costs and other employee benefits), net of the fair value of plan assets out of which the obligations are to be settled directly. Plan assets are assets held by a long-term employee benefit fund or qualifying insurance policies and are not available to our creditors nor can they be paid directly to us. Fair value is based on market price information and in the case of quoted securities, the published bid price and in the case of unquoted securities, the discounted cash flow using the income approach. The value of any defined benefit asset recognized is restricted to the asset ceiling which is the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. See Note 25 – Pension and Other Employee Benefits – Defined Benefit Pension Plans for more details.

Defined contribution plans

Smart maintains a defined contribution plan that covers all regular full-time employees under which it pays fixed contributions based on the employees’ monthly salaries and provides for qualified employees to receive a defined benefit minimum guarantee. The defined benefit minimum guarantee is equivalent to a certain percentage of the monthly salary payable to an employee at normal retirement age with the required credited years of service based on the provisions of Republic Act No. 7641.

Accordingly, Smart accounts for its obligation under the higher of the defined benefit obligation related to the minimum guarantee and the obligation arising from the defined contribution plan.

For the defined benefit minimum guarantee plan, the liability is determined based on the present value of the excess of the projected defined benefit obligation over the projected defined contribution obligation at the end of the reporting period. The defined benefit obligation is calculated annually by a qualified independent actuary using the projected unit credit method. Smart and certain of its subsidiaries determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense (income) and other expenses (income) related to the defined benefit plan are recognized in our consolidated income statement.

The defined contribution liability, on the other hand, is measured at the fair value of the defined contribution assets upon which the defined contribution benefits depend, with an adjustment for margin on asset returns, if any, where this is reflected in the defined contribution benefits.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in our other comprehensive income.

When the benefits of the plan are changed or when the plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in our profit or loss. Gains or losses on the settlement of the defined benefit plan are recognized when the settlement occurs. See Note 25 – Pension and Other Employee Benefits – Defined Contribution Plans for more details.

Employee benefit costs include current service cost, net interest on the net defined benefit obligation, and remeasurements of the net defined benefit obligation. Past service costs and actuarial gains and losses are recognized immediately in our consolidated income statement.

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The long-term employee benefit liability comprises the present value of the defined benefit obligation (using a discount rate based on government bonds) at the end of the reporting period and is determined using the projected unit credit method. See Note 25 – Pension and Other Employee Benefits – Other Long-term Employee Benefits for more details.

Other Long-term Employee Benefits

Transformation Incentive Plan, or TIP

In 2017, the Board of Directors of PLDT approved the TIP which intended to provide incentive compensation to key officers, executives and other eligible participants who are consistent performers and contributors to our strategic and financial goals, based on the achievement of telco core income targets. The program was divided into two cycles. Cycle 1 covered the performance period from 2017 to 2019, was in the form of PLDT common shares of stocks and later modified to a mix of equity shares and cash grants, and was released in three annual grants. Cycle 2 covered the performance period from 2020 to 2021, was settled in cash and was released in 2022. TIP was administered by the Executive Compensation Committee, or ECC.

Long-term Incentive Plan, or LTIP

On December 23, 2021, the ECC approved the LTIP covering the years 2022 to 2026, covering two cycles, based on the achievement of telco core income targets, with additional performance metrics on Customer Experience and Sustainability to impact the LTIP pay-out. Cycle 1 covers performance period from 2022 to 2024. Payout will be based on the achievement of performance targets. Cycle 2 covers performance period from 2025 and 2026, and is subject to the ECC’s further evaluation and approval of the final terms.

This other long-term employee benefit liability was recognized and measured using the projected unit credit method and was amortized on a straight-line basis over the vesting period.

Please see Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Estimating pension benefit cost and other employee benefits.

Leases

We assess at contract inception whether the contract is, or contains, a lease that is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration.

As a Lessee. We apply a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. We recognize lease liabilities to make lease payments and ROU assets representing the right to use assets to the underlying assets.

•ROU assets

We recognize ROU assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). ROU assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless it is reasonably certain that we obtain ownership of the leased asset at the end of the lease term, the recognized ROU assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. ROU assets are subject to impairment. Refer to the accounting policies in impairment of non-financial assets section.

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•Lease liabilities

At the commencement date of the lease, we recognize lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised and payments of penalties for terminating a lease, if the lease term reflects exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, we use the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

•Short-term leases and leases of low-value assets

We apply the short-term lease recognition exemption to our short-term leases of machinery and equipment (i.e., those leases that have a lease term ending within 12 months or less from the commencement date and do not contain a purchase option). We also apply the lease of low-value assets recognition exemption to leases that are considered of low value (i.e., below Php250 thousand). Lease payments on short-term leases and leases of low-value assets are recognized as expense in our consolidated income statement on a straight-line basis over the lease term.

•COVID-19 Related Rent Concessions

Beginning April 1, 2021, we applied the practical expedient where rent concessions as a result of the COVID-19 pandemic that meets all of the criteria below shall not be considered as a lease modification and accounted for any change in lease payments resulting from the COVID-19 related rent concession in the same way we would account for a change that is not a lease modification, i.e., as a variable lease payment. We continued to apply this for rent concessions beyond June 30, 2021.

a)The rent concession is a direct consequence of COVID-19;

b)The change in lease payments results in a revised lease consideration that is substantially the same as, or less than, the lease consideration immediately preceding the change;

c)Any reduction in lease payments affects only payments originally due on or before June 30, 2022; and

d)There is no substantive change to other terms and conditions of the lease.

Lessors have granted forgiveness on lease payments as an effect of the COVID-19 pandemic. The rent concessions for PLDT amounted to nil and Php131 thousand for the six months ended June 30, 2023 and 2022, respectively. The rent concessions for Smart and DMPI amounted to nil for the six months ended June 30, 2023 and 2022.

As a Lessor. Leases in which we do not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income is accounted for on a straight-line basis over the lease term and is included in revenue in our consolidated income statements due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the bases as rental income.

Sale and Leaseback. If we transfer an asset to another entity (the buyer-lessor) and leases that asset back from the buyer-lessor, we account for the transfer contract and the lease by applying the requirements of PFRS 16. We first apply the requirements for determining when a performance obligation is satisfied in PFRS 15 to determine whether the transfer of an asset is accounted for as a sale of that asset.

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For transfer of an asset that satisfies the requirements of PFRS 15 to be accounted for as a sale of the asset, we measure the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by us. Accordingly, we recognize only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor.

If the transfer of an asset does not satisfy the requirements of PFRS 15 to be accounted for as a sale of the asset, we continue to recognize the transferred asset and recognize a financial liability equal to the transfer proceeds. We account for the financial liability applying PFRS 9.

Income Taxes

Current income tax

Current income tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted as at the end of the reporting period where we operate and generate taxable income.

Current income tax relating to items recognized directly in equity is recognized in equity and not in our consolidated income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax

Deferred income tax is provided on all temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the end of the reporting period.

Deferred income tax liabilities are recognized for all taxable temporary differences except: (1) when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (2) with respect to taxable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, the carryforward benefits of unused tax credits from excess minimum corporate income tax, or MCIT, over regular corporate income tax, or RCIT, and unused net operating loss carry over, or NOLCO. Deferred income tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carryforward benefits of unused tax credits and unused tax losses can be utilized, except: (1) when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (2) with respect to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will allow the deferred income tax assets to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the end of the reporting period.

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Deferred income tax relating to items recognized in “Other comprehensive income” account is included in our consolidated statements of comprehensive income and not in our consolidated income statements.

Deferred income tax assets and liabilities are offset, if a legally enforceable right exists to offset current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognized subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it is incurred during the measurement period or in our consolidated income statement.

VAT

Revenues, expenses and assets are recognized net of the amount of VAT, if applicable. When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on from purchases of goods or services (input VAT), the excess is recognized as payable in our consolidated statements of financial position. When VAT passed on from purchases of goods or services (input VAT) exceeds VAT from sales of goods and/or services (output VAT), the excess is recognized as an asset in our consolidated statements of financial position to the extent of the recoverable amount.

Contingencies

Contingent liabilities are not recognized in our consolidated financial statements. Unless the possibility of an outflow of resources embodying economic benefits is probable and measurable, they are disclosed in the notes to our consolidated financial statements . On the other hand, contingent assets are not recognized in our consolidated financial statements but are disclosed in the notes to our consolidated financial statements when an inflow of economic benefits is probable.

Segment Information

PLDT and its subsidiaries are organized into three business segments. Such business segments are the bases upon which we report our primary segment information. Financial information on business segments is presented in Note 4 – Operating Segment Information.

Events After the End of the Reporting Period

Post reporting period events up to the date of approval of the Board of Directors that provide additional information about our financial position at the end of the reporting period (adjusting events) are reflected in our consolidated financial statements. Post reporting period events that are not adjusting events are disclosed in the notes to our consolidated financial statements when material.

Equity

Preferred and common stocks are measured at par value for all shares issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax. Proceeds and/or fair value of considerations received in excess of par value are recognized as capital in excess of par value in our consolidated statement of changes in equity and consolidated statements of financial position.

Treasury stocks are our own equity instruments which are reacquired and recognized at cost and presented as reduction in equity. No gain or loss is recognized in our consolidated income statements on the purchase, sale, reissuance or cancellation of our own equity instruments. Any difference between the carrying amount and the consideration upon reissuance or cancellation of shares is recognized as capital in excess of par value in our consolidated statement of changes in equity and consolidated statements of financial position.

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Change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction and any impact is presented as part of capital in excess of par value in our consolidated statement of changes in equity.

Retained earnings represent our net accumulated earnings less cumulative dividends declared.

Other comprehensive income comprises of income and expense, including reclassification adjustments that are not recognized in our consolidated income statement as required or permitted by PFRS.

Standards Issued But Not Yet Effective

The standards that are issued, but not yet effective, up to the date of issuance of the consolidated financial statements are listed below. We will adopt these standards and amendments to existing standards which are relevant to us when these become effective.

Effective beginning on or after January 1, 2024

•Amendments to PAS 1, Classification of Liabilities as Current or Noncurrent

The amendments clarify:

a.That only covenants with which an entity must comply on or before reporting date will affect a liability's classification as current or non-current;

b.That classification is unaffected by the likelihood that an entity will exercise its deferral right; and

c.That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification

The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and must be applied retrospectively. We are currently assessing the impact the amendments will have on current practice.

•Amendments to PFRS 16, Lease Liability in a Sale and Leaseback

The amendments specify how a seller-lessee measures the lease liability arising in a sale and leaseback transaction in a way that it does not recognize any amount of the gain or loss that relates to the right of use retained.

The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and must be applied retrospectively. Earlier adoption is permitted and that fact must be disclosed.

The amendments will have no significant impact on our consolidated financial statements.

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Effective beginning on or after January 1, 2025

•PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, PFRS17 will replace PFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types of insurance contracts (i.e., life, non-life, direct insurance and reinsurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply.

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are largely based on grandfathering previous local accounting policies, PFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of PFRS 17 is the general model, supplemented by:

1.A specific adaptation for contracts with participation features (the variable fee approach); and

2.A simplified approach (the premium allocation approach) mainly for short-duration contracts.

On December 15, 2021, the FSRSC amended the mandatory effective date of PFRS 17 from January 1, 2023 to January 1, 2025. This is consistent with Circular Letter No. 2020-62 issued by the Insurance Commission which deferred the implementation of PFRS 17 by two years after its effective date as decided by the FSRSC.

PFRS 17 is effective for reporting periods beginning on or after January 1, 2025, with comparative figures required. Early application is permitted.

The standard will have no significant impact on our consolidated financial statements.

3.Management’s Use of Accounting Judgments, Estimates and Assumptions

The preparation of our consolidated financial statements in conformity with PFRS requires us to make judgments, estimates and assumptions that affect the reported amounts of our revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the end of each reporting period. The uncertainties inherent in these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the assets or liabilities affected in the future years.

Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Judgments, key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period are consistent with those applied in the most recent annual financial statements. Selected critical judgments and estimates applied in the preparation of the consolidated financial statements are discussed below:

Judgments

In the process of applying our accounting policies, management has made judgments, apart from those involving estimations which have the most significant effect on the amounts recognized in our consolidated financial statements.

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Revenue Recognition

Identifying performance obligations

We identify performance obligations by considering whether the promised goods or services in the contract are distinct goods or services. A good or service is distinct when the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer and our promise to transfer the good or service to the customer is separately identifiable from the other promises in the contract.

Revenues earned from multiple element arrangements offered by our fixed line and wireless businesses are split into separately identifiable performance obligations based on their relative stand-alone selling price in order to reflect the substance of the transaction. The transaction price represents the best evidence of stand-alone selling price for the services we offer since this is the observable price we charge if our services are sold separately. We account for customer contracts in accordance with PFRS 15 and have concluded that the service (telecommunication service) and non-service components (handset or equipment) may be accounted for as separate performance obligations. The handset or equipment is delivered first, followed by the telecommunication service (which is provided over the contract/lock-in period of generally two years). Revenue attributable to the separate performance obligations are based on the allocation of the transaction price relative to the stand-alone selling price.

Installation fees for voice and data services that are not custom built for the subscribers are considered as a single performance obligation together with monthly service fees, recognized over the customer subscription period since the subscriber cannot benefit from the installation services on its own or together with other resources that are readily available to the subscriber. On the other hand, installation fees of data services that are custom built for the subscribers are considered as a separate performance obligation and is recognized upon completion of the installation services. Activation fees for both voice and data services are also considered as a single performance obligation together with monthly service fees, recognized over the customer subscription period.

Principal versus agent consideration

We enter into contracts with our customers involving multiple deliverable arrangements. We determined that we control the goods before they are transferred to customers, and we have the ability to direct the use of the inventory. The following factors indicate that we control the goods before they are being transferred to customers.

•We are primarily responsible for fulfilling the promise to provide the specified equipment;

•We bear inventory risk on our inventory before it has been transferred to the customer;

•We have discretion in establishing the prices for the other party’s goods or services and, therefore, the benefit that we can receive from those goods or services is not limited. It is incumbent upon us to establish the price of our services to be offered to our subscribers; and

•Our consideration in these contracts is the entire consideration billed to the service provider.

Based on the foregoing, we are considered the principal in our contracts with other service providers except for certain VAS arrangements. We have the primary obligation to provide the services to the subscriber.

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Timing of revenue recognition

We recognize revenues from contracts with customers over time or at a point in time depending on our evaluation of when the customer obtains control of the promised goods or services and based on the extent of progress towards completion of the performance obligation. For the telecommunication service which is provided over the contract period of two or more years, revenue is recognized monthly as we provide the service because control is transferred over time. For the device which is sold at the inception of the contract, revenue is recognized at the time of delivery because control is transferred at a point in time.

Identifying methods for measuring progress of revenue recognized over time

We determine the appropriate method of measuring progress which is either through the use of input or output methods. Input method recognizes revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation while output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date.

Revenue from telecommunication services is recognized through the use of input method wherein recognition is over time based on the customer subscription period since the customer simultaneously receives and consumes the benefits as the seller renders the services.

Significant financing component

We concluded that the handset component included in contracts with customers has a significant financing component considering the period between the time of the transfer of control over the handset and the customer’s payment of the price of the handset, which is more than one year.

In determining the interest to be applied to the amount of consideration, we concluded that the interest rate is the market interest rate adjusted with credit spread to reflect the customer credit risk that is commensurate with the rate that would be reflected in a separate financing transaction between us and our customer at contract inception.

Estimation of stand-alone selling price

We assessed that the service and non-service components represent separate performance obligations and thus, the amount of revenues should be recognized based on the allocation of the transaction price to the different performance obligations based on their stand-alone selling prices. The stand-alone selling price is the price at which we sell the good or service separately to a customer. However, if goods or services are not currently offered separately, we use the adjusted market or cost-plus margin method to determine the stand-alone selling price to be used in the revenue allocation.

In terms of allocation of transaction price between performance obligations, we assessed that allocating the transaction price using the stand-alone selling prices of the services and handset will result in more revenue allocated to non-service component. The stand-alone selling price is based on the price in which we regularly sell the non-service and service component in a separate transaction.

Financial Instruments

Evaluation of business models in managing financial instruments

We determine our business model at the level that best reflects how we manage groups of financial assets to achieve our business objective. Our business model is not assessed on an instrument-by-instrument basis, but a higher level of aggregated portfolios and is based on observable factors such as:

a.How the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity’s key management personnel;

b.The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed; and

c.The expected frequency, value and timing of sales are also important aspects of our assessment.

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The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are realized in a way that is different from our original expectations, we do not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.

We have determined that for cash and cash equivalents, short-term investments, investment in debt securities and other long-term investments, and trade and other receivables, the business model is to collect the contractual cash flows until maturity.

PFRS 9, however, emphasizes that if more than an infrequent number of sales are made out of a portfolio and those sales are more than insignificant in value, of financial assets carried at amortized cost, we should assess whether and how such sales are consistent with the objective of collecting contractual cash flows.

Definition of default and credit-impaired financial assets

We define a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when it meets one or more of the following criteria:

•Quantitative criteria

For trade receivables and all other financial assets subject to impairment, default occurs when the receivable becomes 90 days past due, except for trade receivables from Corporate subscribers, which are determined to be in default when the receivables become 120 days past due.

•Qualitative criteria

The counterparty meets unlikeliness to pay criteria, which indicates the counterparty is in significant financial difficulty. These are instances where:

a.The counterparty is experiencing financial difficulty or is insolvent;

b.The counterparty is in breach of financial covenant(s);

c.An active market for that financial assets has disappeared because of financial difficulties;

d.Concessions have been granted by us, for economic or contractual reasons relating to the counterparty’s financial difficulty;

e.It is becoming probable that the counterparty will enter bankruptcy or other financial reorganization; and

f.Financial assets are purchased or originated at a deep discount that reflects the incurred credit losses.

The criteria above have been applied to all financial instruments, except FVPL, held by us and are consistent with the definition of default used for internal credit risk management purposes. The default definition has been applied consistently to the ECL models throughout our expected loss calculation.

Significant increase in credit risk

At each reporting date, we assess whether there has been a significant increase in credit risk for financial assets since initial recognition by comparing the risk of default occurring over the expected life between the reporting date and the date of initial recognition. We consider reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and forward-looking analysis.

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An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the loss allowance measurement reverts from lifetime ECL to 12-month ECL.

Using our judgment and, where possible, relevant historical experience, we may determine that an exposure has undergone a significant increase in credit risk based on particular qualitative indicators that we consider are indicative of such and whose effect may not otherwise be fully reflected in its quantitative analysis on a timely basis.

As a backstop, we consider that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not been received. Due dates are determined without considering any grace period that might be available to the counterparty.

Exposures that have not deteriorated significantly since origination, or where the deterioration remains within our investment grade criteria, or which are less than 30 days past due, are considered to have a low credit risk. The provision for credit losses for these financial assets is based on a 12-month ECL. The low credit risk exemption has been applied on debt investments that meet the investment grade criteria of the PLDT Group.

Determination of functional currency

The functional currencies of the entities under the PLDT Group are the currency of the primary economic environment in which each entity operates. It is the currency that mainly influences the revenue from and cost of rendering products and services.

The presentation currency of the PLDT Group is the Philippine Peso. Based on the economic substance of the underlying circumstances relevant to the PLDT Group, the functional currency of all entities under the PLDT Group is the Philippine Peso, except for (a) FECL Group, PLDT Global and certain of its subsidiaries, PGNL and certain of its subsidiaries and Chikka and certain of its subsidiaries, which use the U.S. Dollar; (b) CPL and AGSPL, which use the Singaporean Dollar; (c) AGS Indonesia, which uses the Indonesian Rupiah; and (d) PLDT Malaysia Sdn Bhd, which use the Malaysian Ringgit.

Determining the lease term of contracts with renewal and termination options – Company as a Lessee

Upon adoption of PFRS 16, we applied a single recognition and measurement approach for all leases, except for short-term leases and leases of ‘low-value’ assets. See Section Leases for the accounting policy.

We determine the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

We, as the lessee, have the option, under some of our lease agreements to lease the assets for additional terms. We apply judgment in evaluating whether it is reasonably certain to exercise the option to renew. That is, we consider all relevant factors that create an economic incentive for us to exercise the renewal. After the commencement date, we reassess the lease term if there is a significant event or change in circumstances that is within our control and affects our ability to exercise or not to exercise the option to renew or to terminate (e.g., a change in business strategy).

We included the renewal period as part of the lease term for leases such as poles and leased circuits due to the significance of these assets to our operations. These leases have a non-cancellable period (i.e., one to 30 years) and there will be a significant negative effect on our provision of services if a replacement is not readily available. Furthermore, the periods covered by termination options are included as part of these lease term only when they are reasonably certain not to be exercised.

See Note 10 – Leases for information on potential future payments relating to periods following the exercise date of extension and termination options that are not included in the lease term.

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Total depreciation of ROU assets from continuing operations recognized in our consolidated income statements amounted to Php3,111 million and Php2,679 million for the six months ended June 30, 2023 and 2022, respectively, while that from discontinued operations amounted to Php14 million and Php29million for the six months ended June 30, 2023 and 2022, respectively. Total lease liabilities amounted to Php42,519 million and Php42,435 million as at June 30, 2023 and December 31, 2022, respectively. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations, Note 10 – Leases and Note 27 – Financial Assets and Liabilities.

Sale and Leaseback of Telecom Towers

The accounting for sale and leaseback transaction depends on whether the transfer of the asset qualifies as a sale. We applied judgment to determine whether the transfer of asset is accounted for as a sale based on the requirements for determining when a performance obligation is satisfied in PFRS 15. We also applied estimates and judgment in determining many aspects, among others, the passive telecom assets and land lease as unit of accounts, the fair value of the towers sold, the measurement of the ROU assets retained by us and determining an appropriate discount rate to calculate the present value of the minimum lease payments.

Assets classified as held-for-sale

The criteria for held-for-sale classification is regarded as met only when the sale is highly probable, and the asset is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn.

Smart and DMPI entered into sale and purchase agreements with certain tower companies in connection with the sale of telecom towers and related passive telecom infrastructure. The closing of the agreements will be on a staggered basis depending on the satisfaction of closing conditions based on the number of towers transferred and is expected to be completed in 2023. With this agreement, we believe that certain conditions were met that qualified the related assets to be reclassified as held-for-sale.

Accounting for investments in MediaQuest Holdings, Inc., or MediaQuest, through Philippine Depositary Receipts, or PDRs

ePLDT made various investments in PDRs issued by MediaQuest in relation to its direct interest in Satventures, Inc., or Satventures, and indirect interest in Cignal TV, Inc., or Cignal TV.

Based on our judgment, at the PLDT Group level, ePLDT’s investments in PDRs gives ePLDT a significant influence over Satventures and Cignal TV as evidenced by provision of essential technical information and material transactions among PLDT, Smart, Satventures and Cignal TV, and thus are accounted for as investments in associates using the equity method.

See related discussion on Note 11 – Investments in Associates and Joint Ventures – Investments in Associates – Investment of ePLDT in MediaQuest PDRs.

Accounting for investment of PCEV in Maya Bank, Inc., or Maya Bank

The shareholders’ agreement of Voyager Finserve Corporation, or VFC, and Paymaya Finserve Corporation, or PFC, (collectively known as the Bank HoldCos) requires affirmative vote of at least one director nominated by both PCEV and VIH to direct the relevant activities of the Bank HoldCos. The Bank HoldCos were incorporated for the sole purpose of holding shares or equity investments in Maya Bank. Because of the contractual arrangement between the parties, the investments in the Bank HoldCos are accounted as joint venture.

See Note 11 – Investments in Associates and Joint Ventures – Investments in Associates – Investment of PCEV in Maya Bank.

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Assessment of loss of control over PG1

PLDT assesses the consequences of changes in the ownership interest in a subsidiary that may result in a loss of control as well as the consequence of losing control of a subsidiary during the reporting period. Whether or not PLDT retains control over the subsidiary depends on an evaluation of a number of factors that indicate if there are changes to one or more of the three elements of control. When PLDT has less than majority of the voting rights or similar rights to an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including, among others, representation on its board of directors, voting rights, and other rights of other investors, including their participation in significant decisions made in the ordinary course of business.

As a result of the acquired equity interest of Philex Mining Corporation, MPIC, and Roxas Holdings, Inc. in PG1, PLDT’s ownership interest was diluted to 47.6%. In addition, PG1 appointed a new director bringing the total number of PG1 directors to nine. PLDT retained four out of nine total board seats. Consequently, as at February 28, 2022, PLDT lost its control over PG1 and accounted for its remaining interest as investment in associate. See Note 11 – Investments in Associates and Joint Ventures – Investments in Associates – Investment of PLDT in PG1.

As at June 30, 2023 and December 31, 2022, PLDT holds 47.6% interest over PG1.

Accounting for investments in Vega Telecom Inc., or VTI, Bow Arken Holdings Company, or Bow Arken, and Brightshare Holdings, Inc., or Brightshare

On May 30, 2016, PLDT acquired a 50% equity interest in each of VTI, Bow Arken and Brightshare. See related discussion on Note 11 – Investments in Associates and Joint Ventures – Investments in Joint Ventures. Based on the Memorandum of Agreement, PLDT and Globe Telecom, Inc., or Globe, each has the right to appoint half the members of the Board of Directors of each of VTI, Bow Arken and Brightshare, as well as the (i) co-Chairman of the Board; (ii) co-Chief Executive Officer and President; and (iii) co-Controller where any matter requiring their approval shall be deemed passed or approved if the consents of both co-officers holding the same position are obtained. All decisions of each Board of Directors may only be approved if at least one director nominated by each of PLDT and Globe votes in favor of it.

Based on these rights, PLDT and Globe have joint control over VTI, Bow Arken and Brightshare, which is defined in PFRS 11, Joint Arrangements, as a contractually agreed sharing of control of an arrangement and exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Consequently, PLDT and Globe classified the joint arrangement as a joint venture in accordance with PFRS 11 given that PLDT and Globe each has the right to 50% of the net assets of VTI, Bow Arken and Brightshare and their respective subsidiaries.

Accordingly, PLDT accounted for the investment in VTI, Bow Arken and Brightshare using the equity method of accounting in accordance with PAS 28. Under the equity method of accounting, the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. See Note 11 – Investments in Associates and Joint Ventures – Investment in Joint Ventures – Investments of PLDT in VTI, Bow Arken and Brightshare.

Material partly-owned subsidiaries

Our consolidated financial statements include additional information about subsidiaries that have noncontrolling interest, or NCI, that are material to us, see Note 6 – Components of Other Comprehensive Loss. We determined material partly-owned subsidiaries as those with balance of NCI greater than 5% of the total equity as at June 30, 2023 and December 31, 2022.

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Material associates and joint ventures

Our consolidated financial statements include additional information about associates and joint ventures that are material to us. See Note 11 – Investments in Associates and Joint Ventures. We determined material associates and joint ventures as those investees where our carrying amount of investments is greater than 5% of the total investments in associates and joint ventures as at June 30, 2023 and December 31, 2022.

Determining Taxable Profit, Tax Bases, Unused Tax Losses, Unused Tax Credits and Tax Rates

We assess whether we have any uncertain tax position and applies significant judgment in identifying uncertainties over our income tax treatments. We determined based on our assessment that it is probable that our income tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities.

Estimates and Assumptions

The key estimates and assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities recognized in our consolidated financial statements within the next financial year are discussed below. We based our estimates and assumptions on parameters available when our consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond our control. Such changes are reflected in the assumptions when they occur.

Leases – Estimating the incremental borrowing rate, or IBR

In calculating the present value of lease payments, we use the IBR at the lease commencement date if the interest rate implicit in the lease is not readily determinable. IBR is the rate of interest that a lessee would have to pay to borrow over a similar term, similar security, the funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic environment.

We use benchmark rates from partner banks based on the tenor of our loan borrowings plus a spread adjustment based on our credit worthiness.

Our lease liabilities amounted to Php42,519 million and Php42,435 million as at June 30, 2023 and December 31, 2022, respectively. See Note 10 – Leases.

Loss of control over VIH – Fair value measurement of interest retained

A deemed disposal occurs where the proportionate interest of PLDT in a subsidiary is reduced other than by an actual disposal, for example, by the issuance of shares to a third-party investor by the subsidiary. When PLDT no longer has control, the remaining interest is measured at fair value as at the date the control was lost. In determining the fair value of PLDT’s retained interest in VIH, we take into account recent transactions and all the facts and circumstances surrounding the transactions such as timing, transaction size, transaction frequency, and motivations of the investors. We carefully assess the accounting implications of the stipulation in the shareholders’ agreements and consider whether such a transaction has been made at arm’s length. See Note 11 – Investments in Associates and Joint Ventures – Investments in Associates – Investment of PCEV in VIH.

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Impairment of non-financial assets

PFRS requires that an impairment review be performed when certain impairment indicators are present. In the case of goodwill and intangible assets with indefinite useful life, at a minimum, such assets are subject to an impairment test annually and whenever there is an indication that such assets may be impaired. This requires an estimation of the VIU of the CGUs to which these assets are allocated. The VIU calculation requires us to make an estimate of the expected future cash flows from the CGU and to choose a suitable discount rate in order to calculate the present value of those cash flows. See Note 14 – Goodwill and Intangible Assets – Impairment Testing of Goodwill for the key assumptions used to determine the VIU of the relevant CGUs.

Determining the recoverable amount of property and equipment, ROU assets, investments in associates and joint ventures, goodwill and intangible assets, prepayments and other noncurrent assets, requires us to make estimates and assumptions in the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets. Future events could cause us to conclude that property and equipment, ROU assets, investments in associates and joint ventures, intangible assets and other noncurrent assets associated with an acquired business are impaired. Any resulting impairment loss could have a material adverse impact on our financial position and financial performance.

The preparation of estimated future cash flows involves significant estimations and assumptions of future market conditions. While we believe that our assumptions are appropriate and reasonable, significant changes in our assumptions may materially affect our assessment of recoverable values and may lead to future impairment charges under PFRS.

See Note 4 – Operating Segment Information, Note 5 – Income and Expenses – Asset Impairment, and Note 9 – Property and Equipment.

The carrying values of our property and equipment, ROU assets, investments in associates and joint ventures, investment properties, goodwill and intangible assets, and prepayments are separately disclosed in Note 9 – Property and Equipment, Note 10 – Leases, Note 11 – Investments in Associates and Joint Ventures, Note 13 – Investment Properties, Note 14 – Goodwill and Intangible Assets and Note 18 – Prepayments, respectively.

Estimating useful lives of property and equipment

We estimate the useful lives of each item of our property and equipment based on the periods over which our assets are expected to be available for use. Our estimation of the useful lives of our property and equipment is also based on our collective assessment of industry practice, internal technical evaluation and experience with similar assets. The estimated useful lives of each asset are reviewed every year-end and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of our assets. It is possible, however, that future results of operations could be materially affected by changes in our estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of our property and equipment would increase our recorded depreciation and decrease the carrying amount of our property and equipment.

In 2019, Smart shortened its estimated useful lives of certain network, technology and other equipment, the most significant of which were the 2G technology-related equipment in preparation for the shutdown of said technology. The shutdown was part of our strategy to address increasing demand for data and data centric applications by moving to faster speed long-term evolution, or LTE, and 5G technologies. As a result, Smart recognized additional depreciation expense of Php87 million, Php1,397 million and Php1,458 million for the years ended December 31, 2022, 2021 and 2020, respectively.

In 2020, Smart shortened its estimated useful lives of certain network, technology and other equipment, the most significant of which are the 3G technology-related equipment in preparation for the shutdown of said technology. The shutdown is the next phase of our strategy to migrate to faster speed LTE and 5G technologies. Smart also shortened the estimated useful lives of certain network equipment as a result of transformation and cost re-engineering initiatives. The management re-evaluated these 3G technology-related equipment in May 2022, and it was determined that the number of 3G devices in the market continued to decline resulting to low 3G traffic. Furthermore, the demands of the subscribers are shifting to LTE and 5G which offers faster high-speed data services. The remaining number of the 3G subscribers are negligible and

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will not result to further re-assessment of the EUL for the 3G technology assets. As a result, Smart recognized additional depreciation expense of Php9,421 million, Php1,406 million and Php3,035 million for the years ended December 31, 2022, 2021 and 2020, respectively.

In 2022, Smart conducted an enterprise-wide network asset physical verification activity wherein certain assets have been identified, which are expected not to be utilized moving forward. As a result, Smart recognized additional depreciation expense of Php3,044 million.

In 2022, certain software and related services were upgraded as a result of IT system updates for the data link repository program of the data transformation. These replaced software and services that are due to expire to support various projects like e-load, rating and charging Online Charging System, System Application Products, value-added services and software and services related to Trident. As a result, we recognized additional depreciation expense of Php2,122 million.

In 2022, PLDT embarked on the redevelopment of its Makati Offices to transform both Ramon Cojuangco Building and Makati General Office into a modern, ecologically sustainable, and open campus-type headquarters. Part of the renovation is the moveout and modernization of network equipment. As a result, PLDT and Smart recognized additional depreciation expense of Php1,798 million and Php46 million, respectively, in the second quarter of 2022.

In addition, PLDT accelerated the depreciation of certain network equipment as a result of technology transformation and modernization program to continuously enable the delivery and fulfillment of more advanced, more resilient and much more intelligent network to provide best quality of customer experience and continuously meet the intensified demands on infrastructure and is expected to grow exponentially in the future. The following are the 2022 PLDT initiatives:

•PLDT stopped selling copper facilities to subscribers and stopped investing on infrastructure to Vectored Very High-Speed Digital Subscribers, or VVDSL, and migrating to Fiber Optic facilities as new offering to new subscribers. As a result, PLDT recognized additional depreciation expense amounting to Php9,711 million in 2022.

•PLDT continued network upgrades, and fortification of fiber optic cables to utilize better physical routes to increase the reach, capacity and network compatibility with higher bandwidth transport equipment by replacing the old existing aerial and underground fiber cables that are no longer viable as they cannot deliver and meet service requirements for our subscribers. As a result, PLDT recognized additional depreciation expense amounting to Php3,215 million in 2022.

•PLDT replaced the legacy Optical Line Terminal, or OLT, which delivers internet connectivity to our subscriber with OLT that has more advanced and much higher capacity fiber access equipment. As a result, PLDT recognized additional depreciation expense amounting to Php786 million in 2022.

•Both PLDT and Smart carried out the modernization of some key core network equipment and facilities through significant upgrades and expansion of hardware for more flexibility and better equipped for other functionalities. As a result, PLDT and Smart recognized additional depreciation expenses amounting to Php525 million and Php1,334 million, respectively, in 2022.

•Furthermore, both PLDT and Smart laid out the Transport Network Transformation, a new system ready to serve the traffic of existing and incoming subscribers of fixed and wireless business with enhanced reliability, footprint and operational simplicity. This replaced the legacy network system that resulted in PLDT and Smart recognizing additional depreciation expenses amounting to Php14,128 million and Php5,074 million, respectively, in 2022.

The total depreciation and amortization of property and equipment from continuing operations amounted to Php20,839 million and Php38,015 million for the six months ended June 30, 2023 and 2022, respectively, while that from discontinued operations amounted to Php2 million and Php13 million for the six months ended June 30, 2023 and 2022, respectively. Total carrying values of property and equipment, net of accumulated depreciation and amortization, amounted to Php313,415 million and Php292,745 million as at June 30, 2023 and December 31, 2022, respectively. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations, Note 4 – Operating Segment Information and Note 9 – Property and Equipment.

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Estimating useful lives of intangible assets with finite lives

Intangible assets with finite lives are amortized over their expected useful lives using the straight-line method of amortization. At a minimum, the amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in our consolidated income statements.

The total amortization of intangible assets with finite lives amounted to Php110 million and Php100 million for the six months ended June 30, 2023 and 2022, respectively. Total carrying values of intangible assets with finite lives amounted to Php1,284 million and Php1,388 million as at June 30, 2023 and December 31, 2022, respectively. See Note 4 – Operating Segment Information, Note 5 – Income and Expenses – Selling, General and Administrative Expenses and Note 14 - Goodwill and Intangible Assets.

Investment Properties

We carry our investment properties at fair value, with changes in fair value being recognized in the consolidated income statement. Investment properties have been determined based on appraisal performed by an independent firm of appraisers, an industry specialist in valuing these types of investment properties.

The valuation for land was based on a market approach valuation technique while the valuation for building and land improvements was based on a cost approach valuation technique using current material and labor costs for improvements based on external and independent reviewers. See Note 13 – Investment Properties.

Recognition of deferred income tax assets

We review the carrying amounts of deferred income tax assets at the end of each reporting period and reduce these to the extent that these are no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax assets to be utilized. Our assessment on the recognition of deferred income tax assets on deductible temporary differences is based on the level and timing of forecasted taxable income of the subsequent reporting years. This forecast is based on our past results and future expectations on revenues and expenses as well as future tax planning strategies. Based on this, management expects that we will generate sufficient taxable income to allow all or part of our deferred income tax assets to be utilized.

Based on the above assessment, our consolidated unrecognized deferred income tax assets amounted to Php637 million and Php748 million as at June 30, 2023 and December 31, 2022, respectively. Total consolidated provision for deferred income tax amounted to Php3,551 million while total consolidated benefit from deferred income tax amounted to Php649 million for the six months ended June 30, 2023 and 2022, respectively. Total consolidated recognized net deferred income tax assets amounted to Php14,240 million and Php17,636 million as at June 30, 2023 and December 31, 2022, respectively. See Note 4 – Operating Segment Information and Note 7 – Income Taxes.

Estimating allowance for ECLs

a.Measurement of ECLs

ECLs are derived from unbiased and probability-weighted estimates of expected loss, and are measured as follows:

•Financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls over the expected life of the financial asset discounted by the EIR. The cash shortfall is the difference between the cash flows due to us in accordance with the contract and the cash flows that we expect to receive; and

•Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows discounted by the EIR.

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We leverage existing risk management indicators (e.g. internal credit risk classification and restructuring triggers), credit risk rating changes and reasonable and supportable information which allow us to identify whether the credit risk of financial assets has significantly increased.

b.Inputs, assumptions and estimation techniques

•General approach for cash in bank, short-term investments, debt securities, financial assets at FVOCI and advances and other noncurrent assets

The ECL is measured on either a 12-month or lifetime basis depending on whether a significant increase in credit risk has occurred since initial recognition. We consider the probability of our counterparty to default its obligation and the expected loss at default after considering the effects of collateral, any potential value when realized and time value of money. We consider the impact of the COVID-19 pandemic on the operations and financial standing of the counterparties during our assessment on significant increase in credit risk. Based on our assessment, there is no significant increase in credit risk and the ECL for these financial assets under general approach are measured on a 12-month basis.

The assumptions underlying the ECL calculation are monitored and reviewed on a quarterly basis.

•Simplified approach for trade and other receivables and contract assets

The simplified approach does not require the tracking of changes in credit risk, but instead requires the recognition of lifetime ECL. For trade receivables and contract assets, we use the simplified approach for calculating ECL. We have considered similarities in underlying credit risk characteristics and behavior in determining the groupings of various customer segments.

We used historically observed default rates and adjusted these historical credit loss experience with forward-looking information. At every reporting date, the historical default rates are updated and changes in the forward-looking estimates are analyzed.

There have been no significant changes in the estimation techniques used for calculating ECL on trade and other receivables and contract assets.

•Incorporation of forward-looking information

We incorporated forward-looking information into both our assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and our measurement of ECL.

To do this, management considered a range of relevant forward-looking macro-economic assumptions and probability weights for the determination of unbiased general industry adjustments and any related specific industry adjustments that support the calculation of ECLs.

The macro-economic factors are aligned with information used by us for other purposes such as strategic planning and budgeting.

The probability weights used in the calculation of ECLs cover a range of possible outcomes and consider the severity of the impact of COVID-19 and the expected timing/duration of the recovery from the pandemic.

We have identified and documented key drivers of credit risk and credit losses of each portfolio of financial instruments and, using an analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses.

Predicted relationship between the key indicators and default and loss rates on various portfolios of financial assets have been developed based on analyzing historical data over the past three to eight years. The methodologies and assumptions including any forecasts of future economic conditions are reviewed regularly.

We have not identified any uncertain event that it has assessed to be relevant to the risk of default occurring but where we are not able to estimate the impact on ECL due to lack of reasonable and supportable information.

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Total provision for expected credit losses on trade and other receivables from continuing operations amounted to Php1,945 million and Php1,565 million for the six months ended June 30, 2023 and 2022, respectively, while that from discontinued operations amounted to nil and Php5 million for the six months ended June 30, 2023 and 2022, respectively. Trade and other receivables, net of allowance for expected credit losses, amounted to Php25,095 million and Php26,255 million as at June 30, 2023 and December 31, 2022, respectively. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations, Note 5 – Income and Expenses and Note 16 – Trade and Other Receivables.

Total impairment losses for contract assets amounted to Php131 million and Php99 million for the six months ended June 30, 2023 and 2022, respectively. Contract assets, net of allowance for expected credit losses, amounted to Php2,118 million and Php2,233 million as at June 30, 2023 and December 31, 2022, respectively. See Note 5 – Income and Expenses – Contract Balances.

•Grouping of instruments for losses measured on collective basis

A broad range of forward-looking information were considered as economic inputs such as the gross domestic product, or GDP, inflation rate, unemployment rates, export rates, G20 GDP and G20 inflation rates. For expected credit loss provisions modelled on a collective basis, grouping of exposures is performed on the basis of shared risk characteristics, such that risk exposures within a group are homogeneous. In performing this grouping, there must be sufficient information for the PLDT Group to be statistically acceptable. Where sufficient information is not available internally, then we have considered benchmarking internal/external supplementary data to use for modelling purposes. The characteristics and any supplementary data used to determine groupings are outlined below.

Trade receivables – Groupings for collective measurement

a.Retail subscribers;

b.Corporate subscribers;

c.Foreign administrations and domestic carriers; and

d.Dealers, agents and others

The following credit exposures are assessed individually:

•All stage 3 assets, regardless of the class of financial assets; and

•The cash and cash equivalents, investment in debt securities and financial assets at FVOCI, and other financial assets.

Estimating pension benefit costs and other employee benefits

The cost of defined benefit and present value of the pension obligation are determined using the projected unit credit method. An actuarial valuation includes making various assumptions which consists, among other things, discount rates, rates of compensation increases and mortality rates. Further, our accrued benefit cost is affected by the fair value of the plan assets. Key assumptions used to estimate fair value of the unlisted equity investments included in the plan assets consist of revenue growth rate, direct costs, capital expenditures, discount rates and terminal growth rates. See Note 25 – Pension and Other Employee Benefits. Due to complexity of valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in assumptions. While we believe that our assumptions are reasonable and appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our cost for pension and other retirement obligations. All assumptions are reviewed every year-end.

The net consolidated pension benefit costs from continuing operations amounted to Php602 million and Php899 million for the six months ended June 30, 2023 and 2022, respectively, while that from discontinued operations amounted to Php4 million and Php11 million for the six months ended June 30, 2023 and 2022, respectively. The prepaid benefit costs amounted to Php3,522 million and Php1,598 million as at June 30, 2023 and December 31, 2022, respectively. The accrued benefit costs amounted to Php457 million and Php482 million

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as at June 30, 2023 and December 31, 2022, respectively. See Note 5 – Income and Expenses – Compensation and Employee Benefits, Note 18 – Prepayments and Note 25 – Pension and Other Employee Benefits.

TIP

In 2017, the Board of Directors of PLDT approved the TIP which intended to provide incentive compensation to key officers, executives and other eligible participants who are consistent performers and contributors to our strategic and financial goals, based on the achievement of telco core income targets. The program was divided into two cycles. Cycle 1 covered the performance period from 2017 to 2019, was in the form of PLDT common shares of stocks and later modified to a mix of equity shares and cash grants, and was released in three annual grants. Cycle 2 covered the performance period from 2020 to 2021, was settled in cash and was released in 2022. TIP was administered by the ECC.

LTIP

On December 23, 2021, the ECC approved the LTIP covering the years 2022 to 2026, covering two cycles, based on the achievement of telco core income targets, with additional performance metrics on Customer Experience and Sustainability to impact the LTIP pay-out. Cycle 1 covers performance period from 2022 to 2024. Payout will be based on the achievement of performance targets. Cycle 2 covers performance period from 2025 and 2026, and is subject to the ECC’s further evaluation and approval of the final of the terms.

This other long-term employee benefit liability was recognized and measured using the projected unit credit method and was amortized on a straight-line basis over the vesting period.

The expense accrued for the LTIP amounted to Php463 million and Php679 million for the six months ended June 30, 2023 and 2022, respectively.

The accrued incentive payable amounted to Php1,761 million and Php1,294 million as at June 30, 2023 and December 31, 2022, respectively. See Note 5 – Income and Expenses – Compensation and Employee Benefits and Note 25 – Pension and Other Employee Benefits – Other Long-term Employee Benefits.

Provision for asset retirement obligations

Provision for asset retirement obligations is recognized in the period in which this is incurred if a reasonable estimate can be made. This requires an estimation of the cost to restore or dismantle on a per square meter basis, depending on the location, and is based on the best estimate of the expenditure required to settle the obligation at the future restoration or dismantlement date, discounted using a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risk specific to the liability. Total provision for asset retirement obligations amounted to Php1,314 million and Php1,514 million as at June 30, 2023 and December 31, 2022, respectively. See Note 21 – Deferred Credits and Other Noncurrent Liabilities.

Provision for legal contingencies and tax assessments

We are currently involved in various legal proceedings and tax assessments. Our estimates of the probable costs for the resolution of these claims have been developed in consultation with our counsel handling the defense in these matters and are based upon our analysis of potential results. We currently do not believe these proceedings could materially reduce our revenues and profitability. It is possible, however, that future financial position and performance could be materially affected by changes in our estimates or effectiveness of our strategies relating to these proceedings and assessments. See Note 26 – Provisions and Contingencies.

Based on management’s assessment, appropriate provisions were made; however, management has decided not to disclose further details of these provisions as they may prejudice our position in certain legal proceedings.

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Determination of fair values of financial assets and financial liabilities

When the fair value of financial assets and financial liabilities recorded in our consolidated statements of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Other than those whose carrying amounts are reasonable approximations of fair values, total fair values of noncurrent financial assets and noncurrent financial liabilities as at June 30, 2023 amounted to Php3,887 million and Php222,916 million, respectively, while the total fair values of noncurrent financial assets and noncurrent financial liabilities as at December 31, 2022 amounted to Php3,851 million and Php203,459 million, respectively. See Note 27 – Financial Assets and Liabilities.

4.Operating Segment Information

Operating segments are components of the PLDT Group that engage in business activities from which they may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of PLDT Group). The operating results of these operating segments are regularly reviewed by the Management Committee to make decisions about how resources are to be allocated to each of the segments and to assess their performances, and for which discrete financial information is available.

For management purposes, we are organized into business units based on our products and services. We have three reportable operating segments as follows:

•Wireless – mobile telecommunications services provided by Smart and DMPI, our mobile service providers; SBI and PDSI, our wireless broadband service providers; and certain subsidiaries of PLDT Global, our mobile virtual network operations, or MVNO, provider;

•Fixed Line – fixed line telecommunications services primarily provided by PLDT. We also provide fixed line services through PLDT’s subsidiaries, namely, ClarkTel, BCC and PLDT Global and certain subsidiaries; data center, cloud, cyber security services, managed information technology services and resellership through ePLDT and its subsidiaries; distribution of Filipino channels and content through PGNL and its subsidiaries; andsoftware development and IT solutions provided by Multisys; and

•Others – PCEV, PGIH, PLDT Digital and its subsidiaries, our investment companies.

See Note 2 – Summary of Significant Accounting Policies for further discussion.

The chief operating decision maker, which we refer to as the Management Committee monitors the operating results of each business unit separately for purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on net income for the period; earnings before interest, taxes, and depreciation and amortization, or EBITDA; EBITDA margin; core income and telco core income. Net income for the period is measured consistent with net income in our consolidated financial statements.

EBITDA for the period is measured as net income excluding depreciation and amortization, amortization of intangible assets, asset impairment on noncurrent assets, financing costs – net, interest income, equity share in net earnings (losses) of associates and joint ventures, foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net, provision for (benefit from) income tax and other income (expenses) – net.

EBITDA margin for the period is measured as EBITDA divided by service revenues.

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Core income for the period is measured as net income attributable to equity holders of PLDT (net income less net income attributable to noncontrolling interests), excluding foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net (excluding hedge costs), asset impairment on noncurrent assets, other non-recurring gains (losses), net of tax effect of aforementioned adjustments, as applicable, and similar adjustments to equity share in net earnings (losses) of associates and joint ventures. Core income results are monitored by management for each business unit separately for purposes of making decisions about resource allocation and performance assessment.

Telco core income for the period is measured as net income attributable to equity holders of PLDT (net income less net income attributable to noncontrolling interests), excluding foreign exchange gains (losses) – net, gains (losses) on derivative financial instruments – net (excluding hedge costs), asset impairment on noncurrent assets, non-recurring gains (losses), net of tax effect of aforementioned adjustments, as applicable, and similar adjustments to equity share in net earnings (losses) of associates and joint ventures, adjusted for the effect of the share in VIH losses, asset sales, and accelerated depreciation. Telco core income is used by the management as a basis for determining the level of dividend payouts to shareholders and one of the bases for granting incentives to employees.

Segment revenues, segment expenses and segment results include transfers between business segments. These transfers are eliminated in full upon consolidation.

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Core earnings per common share, or core EPS, for the period is measured as core income divided by the weighted average number of outstanding common shares. See Note 8 – Earnings Per Common Share for the weighted average number of common shares.

EBITDA, EBITDA margin, core income, telco core income and core EPS are non-PFRS measures.

The amounts of segment assets and liabilities and segment profit or loss are based on measurement principles that are similar to those used in measuring the assets and liabilities and profit or loss in our consolidated financial statements, which is in accordance with PFRS. The segment revenues, net income, and other segment information of our reportable operating segments for the six months ended June 30, 2023 and 2022, and as at June 30, 2023 and December 31, 2022 are as follows:

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	Wireless			Fixed Line			Others			Inter- segment Transactions			Consolidated
	(in million pesos, except for EBITDA margin)
June 30, 2023 (Unaudited)
Revenues
External customers		51,245			52,793			—			—			104,038
Service revenues		46,678			52,573			—			—			99,251
Non-service revenues		4,567			220			—			—			4,787
Inter-segment transactions		344			6,813			—			(7,157	)		—
Service revenues		344			6,813			—			(7,157	)		—
Non-service revenues		—			—			—			—			—
Total revenues		51,589			59,606			—			(7,157	)		104,038
Results
Depreciation and amortization		15,368			13,560			—			(4,978	)		23,950
Asset impairment		476			1,671			—			—			2,147
Interest income		335			165			4			(18	)		486
Equity share in net losses of associates and joint ventures		—			(110	)		(1,215	)		—			(1,325	)
Financing costs – net		4,404			3,258			—			(1,110	)		6,552
Provision for (benefit from) income tax		2,764			3,481			1			(8	)		6,238
Net income (loss) / Segment profit (loss)		8,968			10,769			(1,286	)		85			18,507
Continuing operations		8,968			10,769			(1,286	)		85			18,536
Discontinued operations (Notes 2 and 8)		—			—			—			—			(29	)
EBITDA		25,803			28,896			(7	)		(4,934	)		49,719
Continuing operations		25,803			28,896			(7	)		(4,934	)		49,758
Discontinued operations		—			—			—			—			(39	)
EBITDA margin		55	%		49	%		—			—			50	%
Core income (loss)		6,535			11,238			(1,159	)		14			16,599
Continuing operations		6,535			11,238			(1,159	)		14			16,628
Discontinued operations		—			—			—			—			(29	)
Telco core income		6,535			11,008			5			14			17,562
Assets and liabilities
Operating assets		299,219			259,514			13,774			(12,368	)		560,139
Investments in associates and joint ventures		41			43,219			6,988			—			50,248
Deferred income tax assets – net		6,396			6,353			53			1,438			14,240
Total assets		305,656			309,086			20,815			(10,930	)		624,627
Operating liabilities		236,516			273,533			1,329			(5,933	)		505,445
Deferred income tax liabilities		—			171			—			—			171
Total liabilities		236,516			273,704			1,329			(5,933	)		505,616
Other segment information
Capital expenditures, including capitalized interest (Note 9)(1)		20,821			19,981			—			—			40,802

(1) Net of additions subject to sale and leaseback from tower companies.

F-60

	Wireless			Fixed Line			Others			Inter- segment Transactions			Consolidated
	(in million pesos, except for EBITDA margin)
June 30, 2022 (Unaudited)(2)
Revenues
External customers		51,593			49,194			—			—			100,787
Service revenues		47,521			48,979			—			—			96,500
Non-service revenues		4,072			215			—			—			4,287
Inter-segment transactions		419			21,252			—			(21,671	)		—
Service revenues		419			21,252			—			(21,671	)		—
Non-service revenues		—			—			—			—			—
Total revenues		52,012			70,446			—			(21,671	)		100,787
Results
Depreciation and amortization		27,762			19,993			—			(7,061	)		40,694
Asset impairment		851			1,494			—			—			2,345
Interest income		184			78			7			—			269
Equity share in net gains (losses) of associates and joint ventures		—			99			(1,499	)		—			(1,400	)
Financing costs – net		4,501			2,973			—			(2,056	)		5,418
Provision for (benefit from) income tax		2,138			2,442			(78	)		132			4,634
Net income (loss) / Segment profit (loss)		8,560			21,123			(740	)		(11,905	)		16,977
Continuing operations		8,560			21,123			(740	)		(11,905	)		17,038
Discontinued operations (Notes 2 and 8)		—			—			—			—			(61	)
EBITDA		25,640			26,555			(8	)		(7,443	)		44,736
Continuing operations		25,640			26,555			(8	)		(7,443	)		44,744
Discontinued operations (Notes 2 and 8)		—			—			—			—			(8	)
EBITDA margin		53	%		38	%		—			—			46	%
Core income (loss)		3,758			25,436			(1,004	)		(12,087	)		16,042
Continuing operations		3,758			25,436			(1,004	)		(12,087	)		16,103
Discontinued operations (Notes 2 and 8)		—			—			—			—			(61	)
Telco core income (loss)		3,758			25,335			103			(12,087	)		17,109
December 31, 2022 (Audited)
Assets and liabilities
Operating assets		310,549			257,976			10,768			(24,313	)		554,980
Investments in associates and joint ventures		40			43,304			8,202			—			51,546
Deferred income tax assets – net		6,871			9,280			53			1,432			17,636
Total assets		317,460			310,560			19,023			(22,881	)		624,162
Operating liabilities		246,170			272,489			1,630			(10,292	)		509,997
Deferred income tax liabilities		—			204			—			—			204
Total liabilities		246,170			272,693			1,630			(10,292	)		510,201
June 30, 2022 (Unaudited)
Other segment information
Capital expenditures, including capitalized interest (Note 9)		18,450			27,504			—			—			45,954

F-61

(2) Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1 effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations and Note 11 - Investments in Associates and Joint Ventures - Investments in Associates - Investment in PG1 for further discussion.

F-62

The following table shows the reconciliation of our consolidated net income to our consolidated EBITDA for the six months ended June 30, 2023 and 2022:

	June 30,
	2023			2022(1)
	(Unaudited)
	(in million pesos)
Net income from continuing operations		18,536			17,038
Net loss from discontinued operations		(29	)		(61	)
Consolidated net income		18,507			16,977
Add (deduct) adjustments to continuing operations:
Depreciation and amortization (Notes 9 and 10)		23,950			40,694
Financing costs – net (Note 5)		6,552			5,418
Provision for income tax (Note 7)		6,238			4,634
Equity share in net losses of associates and joint ventures (Note 11)		1,325			1,400
Amortization of intangible assets (Note 14)		110			100
Other non-recurring expenses		—			258
Interest income (Note 5)		(486	)		(269	)
Foreign exchange losses (gains) – net (Notes 5 and 27)		(551	)		4,283
Gains on derivative financial instruments – net (Note 27)		(727	)		(2,184	)
Other expenses – net		(5,189	)		(26,628	)
Net loss on debt modification (Note 5)		—			294
Gain on dilution in VIH		—			(572	)
Income from prescription of preferred shares redemption liability (Note 19)		—			(7,839	)
Gain on sale and leaseback of telecom towers – gross of expenses (Note 9)		(3,640	)		(17,443	)
Others		(1,549	)		(1,068	)
Total adjustments		31,222			27,706
EBITDA from continuing operations		49,758			44,744
EBITDA from discontinued operations		(39	)		(8	)
Consolidated EBITDA		49,719			44,736

(1) Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1
effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations and Note 11 - Investments in Associates and Joint Ventures - Investments in Associates - Investment in PG1 for further discussion.

F-63

The following table shows the reconciliation of our consolidated net income to our consolidated core income and telco core income for the six months ended June 30, 2023 and 2022:

	June 30,
	2023			2022(1)
	(Unaudited)
	(in million pesos)
Net income from continuing operations		18,536			17,038
Net loss from discontinued operations		(29	)		(61	)
Consolidated net income		18,507			16,977
Add (deduct) adjustments to continuing operations:
Manpower rightsizing program, or MRP (Note 5)		1,767			4,830
Net loss on debt modification – net of amortization of debt discount/premium		89			383
Core loss (income) adjustment on equity share in net earnings (losses)    of associates and joint ventures		73			(216	)
Impairment of investments (Note 11)		70			50
Accelerated depreciation		—			16,487
Other non-recurring expenses		—			258
Income from prescription of preferred shares redemption liability (Note 19)		—			(7,839	)
Net income attributable to noncontrolling interests		(56	)		(191	)
Foreign exchange losses (gains) – net (Notes 5 and 27)		(555	)		4,282
Gains on derivative financial instruments – net, excluding hedge costs    (Note 27)		(847	)		(2,311	)
Gain on sale and leaseback of telecom towers – net of expenses (Note 9)		(3,037	)		(16,537	)
Net tax effect of aforementioned adjustments		588			(131	)
Total adjustments		(1,908	)		(935	)
Core income from continuing operations		16,628			16,103
Core loss from discontinued operations		(29	)		(61	)
Consolidated core income		16,599			16,042
Core income from continuing operations		16,628			16,103
Add (deduct) adjustments:
Share in VIH losses		1,164			1,594
Gain on dilution in VIH		—			(487	)
Gain on asset sales – net of tax (Note 5)		(230	)		(101	)
Total adjustments		934			1,006
Telco core income		17,562			17,109

(1) Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1
effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations and Note 11 - Investments in Associates and Joint Ventures - Investments in Associates - Investment in PG1 for further discussion.

F-64

The following table shows the reconciliation of our consolidated basic and diluted core EPS to our consolidated basic and diluted EPS attributable to common equity holder of PLDT for the six months ended June 30, 2023 and 2022:

	June 30,
	2023						2022(1)
	Basic			Diluted			Basic			Diluted
	(Unaudited)
Core EPS from continuing operations		76.82			76.82			74.40			74.40
Core EPS from discontinued operations		(0.13	)		(0.13	)		(0.28	)		(0.28	)
Consolidated core EPS		76.69			76.69			74.12			74.12
Add (deduct) adjustments to continuing operations:
Gain on sale and leaseback of telecom towers – net of expenses		10.81			10.81			58.53			58.53
Gains on derivative financial instruments –    net, excluding hedge costs		2.94			2.94			8.02			8.02
Foreign exchange losses (gains) – net		1.93			1.93			(14.86	)		(14.86	)
Income from prescription of preferred redemption liability		—			—			27.21			27.21
Other nonrecurring expenses		—			—			(0.90	)		(0.90	)
Accelerated depreciation		—			—			(57.23	)		(57.23	)
Net loss on debt modification – net of amortization of debt    discount/premium		(0.31	)		(0.31	)		(1.33	)		(1.33	)
Impairment of investments		(0.32	)		(0.32	)		(0.23	)		(0.23	)
Core loss (income) adjustment on equity share in net earnings    (losses) of associates and joint ventures		(0.34	)		(0.34	)		1.00			1.00
MRP		(6.13	)		(6.13	)		(16.77	)		(16.77	)
Total adjustments		8.58			8.58			3.44			3.44
EPS from continuing operations attributable to common equity    holders of PLDT (Note 8)		85.40			85.40			77.84			77.84
EPS from discontinued operations attributable to common    equity holders of PLDT (Note 8)		(0.13	)		(0.13	)		(0.28	)		(0.28	)
Consolidated EPS attributable to common equity holders of PLDT    (Note 8)		85.27			85.27			77.56			77.56

(1) Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1
effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations and Note 11 - Investments in Associates and Joint Ventures - Investments in Associates - Investment in PG1 for further discussion.

The following table presents our revenues from external customers by category of products and services for the six months ended June 30, 2023 and 2022:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Wireless services
Service revenues:
Mobile		45,841		46,421
Home broadband		837		1,100
MVNO and others		—		—
		46,678		47,521
Non-service revenues:
Sale of mobile handsets and broadband data modems		4,567		4,072
Total wireless revenues		51,245		51,593
Fixed line services
Service revenues:
Voice		12,226		11,208
Data		40,297		37,701
Miscellaneous		50		70
		52,573		48,979
Non-service revenues:
Sale of computers, phone units and SIM cards		218		159
Point-product-sales		2		56
		220		215
Total fixed line revenues		52,793		49,194
Total revenues		104,038		100,787

Disclosure of the geographical distribution of our revenues from external customers and the geographical location of our total assets are not provided since majority of our consolidated revenues are derived from our operations within the Philippines.

F-65

There is no revenue transaction with a single external customer that accounted for 10% or more of our consolidated revenues from external customers for the six months ended June 30, 2023 and 2022.

5.Income and Expenses

Revenues from Contracts with Customers

Disaggregation of Revenue

We derived our revenue from the transfer of goods and services over time and at a point in time in the following major product lines. This is consistent with the revenue information that is disclosed for each reportable segment under PFRS 8, Operating Segments. See Note 4 – Operating Segment Information.

Set out is the disaggregation of PLDT Group’s revenues from contracts with customers from our continuing operations for the six months ended June 30, 2023 and 2022:

Revenue Streams	Wireless		Fixed Line		Others		Inter- segment Transactions			Consolidated
	(in million pesos)
June 30, 2023 (Unaudited)
Type of good or service
Service revenue		47,022		59,386		—		(7,157	)		99,251
Non-service revenue		4,567		220		—		—			4,787
Total revenues from contracts with customers		51,589		59,606		—		(7,157	)		104,038
Timing of revenue recognition
Transferred over time		47,022		59,386		—		(7,157	)		99,251
Transferred at a point time		4,567		220		—		—			4,787
Total revenues from contracts with customers		51,589		59,606		—		(7,157	)		104,038
June 30, 2022 (Unaudited)
Type of good or service
Service revenue		47,940		70,231		—		(21,671	)		96,500
Non-service revenue		4,072		215		—		—			4,287
Total revenues from contracts with customers		52,012		70,446		—		(21,671	)		100,787
Timing of revenue recognition
Transferred over time		47,940		70,231		—		(21,671	)		96,500
Transferred at a point time		4,072		215		—		—			4,287
Total revenues from contracts with customers		52,012		70,446		—		(21,671	)		100,787

Remaining performance obligations are associated with our wireless and fixed line subscription contracts. As at June 30, 2023, excluding the performance obligations for contracts with original expected duration of less than one year, the aggregate amount of the transaction price allocated to remaining performance obligations was Php38,632 million, of which we expect to recognize approximately 29% in 2023 and 71% in 2024 and onwards. As at December 31, 2022, excluding the performance obligations for contracts with original expected duration of less than one year, the aggregate amount of the transaction price allocated to remaining performance obligations was Php47,049 million, of which we recognized approximately 55% in 2023 and expect to recognize 45% in 2024 and onwards.

Contract Balances

Contract balances as at June 30, 2023 and December 31, 2022 consists of the following:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Trade and other receivables (Note 16)		40,587		39,916
Contract assets		2,176		2,278
Contract liabilities and unearned revenues (Notes 21 and 23)		17,950		17,114

F-66

The increase in gross trade and other receivables of Php671 million as at June 30, 2023 was primarily due to lower group collection rate.

The decrease of Php102 million in contract assets as at June 30, 2023 was due to more subscribers availing devices with cash out or amortization resulting to a lower PFRS adjustment.

The increase of Php836 million in contract liabilities and unearned revenues as at June 30, 2023 was mainly due to installation fees charged for new contracts.

Set out below is the movement in the allowance for expected credit losses of contracts assets for the six months ended June 30, 2023 and for the year ended December 31, 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Balances at beginning of the period		45		55
Provisions		13		4
Reclassification		—		(14	)
Balances at end of the period		58		45

Changes in the contract liabilities and unearned revenues accounts for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Balances at beginning of the period		17,114			13,621
Deferred during the period		73,734			123,218
Recognized as revenue during the period		(72,898	)		(119,725	)
Balances at end of the period		17,950			17,114

The contract liabilities and unearned revenues accounts as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Unearned revenues from prepaid contracts		5,959		5,842
Leased facilities		5,055		4,938
Short-term advances for installation services		4,724		4,180
Advance monthly service fees		2,185		2,136
Long-term advances from equipment		27		18
Total contract liabilities and unearned revenues		17,950		17,114
Contract liabilities:
Noncurrent (Note 21)		279		204
Current (Note 23)		20		5
Unearned revenues:
Noncurrent (Note 21)		7,961		7,411
Current (Note 23)		9,690		9,494

Unearned revenues on leased circuits pertain to prepayments for various leased circuit contracts. See Note 24 – Related Party Transactions.

As at June 30, 2023, the noncurrent and current portion of contract liabilities and unearned revenues amounted to Php8,240 million and Php9,710 million, respectively, while as at December 31, 2022, the noncurrent and current portion of contract liabilities and unearned revenues amounted to Php7,615 million and Php9,499 million, respectively.

F-67

Incremental Costs to Obtain Contracts

As at June 30, 2023, the noncurrent and current portion of capitalized commissions amounted to Php5,194 million and Php1,221 million, respectively, while as at December 31, 2022, the noncurrent and current portion of capitalized commissions amounted to Php5,125 million and Php1,161 million, respectively. See Note 18 – Prepayments. The amortization of capitalized commissions amounted to Php605 million and Php3 million for the six months ended June 30, 2023 and 2022, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses from our continuing operations for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Repairs and maintenance (Notes 13, 17 and 24)		14,563		13,618
Compensation and employee benefits		13,429		17,909
Professional and other contracted services (Note 24)		3,967		4,531
Selling and promotions (Note 24)		2,706		3,121
Taxes and licenses		2,514		2,342
Rent (Notes 10 and 24)		1,032		1,110
Insurance and security services (Note 24)		622		848
Communication, training and travel (Note 24)		558		567
Amortization of intangible assets (Note 14)		110		100
Other expenses		332		657
Total selling, general and administrative expenses		39,833		44,803

Compensation and Employee Benefits

Compensation and employee benefits for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Salaries and other employee benefits		10,597		11,501
MRP		1,767		4,830
Pension benefit costs (Note 25)		602		899
Incentive plan (Note 25)		463		679
Total compensation and employee benefits		13,429		17,909

Over the past several years, we have been implementing the MRP in line with our continuing efforts to reduce the cost base of our businesses. The decision to implement the MRP was a result of challenges faced by our businesses as significant changes in technology, increasing competition, and shifting market preferences have reshaped the future of our businesses. The MRP is being implemented in compliance with the Labor Code of the Philippines and all other relevant labor laws and regulations in the Philippines.

Cost of Sales and Services

Cost of sales and services for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Cost of computers, mobile handsets and broadband data modems (Note 17)		5,444		4,515
Cost of services (Note 17)		2,055		1,181
Cost of point-product-sales (Note 17)		191		709
Total cost of sales and services		7,690		6,405

F-68

Asset Impairment

Asset impairment for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Trade and other receivables (Note 16)		1,945		1,565
Contract assets		131		99
Inventories and supplies (Note 17)		71		503
Property and equipment (Note 9)		—		178
Total asset impairment		2,147		2,345

Other Income (Expenses) – Net

Other income (expenses) – net for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Gain on sale and leaseback of telecom towers – gross of expenses (Note 9)		3,640			17,443
Gains on derivative financial instruments – net (Note 27)		727			2,184
Foreign exchange gains (losses) – net (Note 27)		551			(4,283	)
Interest income		486			269
Gain on sale of property and equipment (Note 9)		346			170
Income from prescription of preferred shares redemption liability (Note 21)		—			7,839
Loss on debt modification(1)		—			294
Equity share in net losses of associates and joint ventures (Note 11)		(1,325	)		(1,400	)
Financing costs – net		(6,552	)		(5,418	)
Others – net (Notes 11 and 13)		1,203			882
Total other income (expenses) – net		(924	)		17,980

(1) PLDT and Smart renegotiated terms of selected outstanding Philippine Peso loans in 2022. Under PFRS 9, the difference of the current carrying value and the present value of the modified cash flows of the loan should be recognized as a gain or loss on debt modification.

Interest Income

Interest income for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Interest income on cash and cash equivalents (Note 15)		237		85
Interest income arising from revenue contracts with customers		215		137
Interest income on financial instruments at amortized cost (Note 12)		24		28
Interest income on financial instruments at FVPL		6		7
Interest income – others		5		12
Total interest income		486		269

F-69

Financing Costs – Net

Financing costs – net for the six months ended June 30, 2023 and 2022 consist of the following:

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Interest on loans and other related items (Notes 20 and 27)		5,722			5,386
Accretion on lease liabilities (Note 10)		1,585			655
Accretion on financial liabilities		179			176
Financing charges		54			146
Capitalized interest (Notes 9 and 28)		(988	)		(945	)
Total financing costs – net		6,552			5,418

F-70

6. Components of Other Comprehensive Loss

Changes in other comprehensive loss under equity of our consolidated statements of financial position for the six months ended June 30, 2023 and 2022 are as follows:

	Foreign currency translation differences of subsidiaries		Net loss on financial assets at FVPL – net of tax			Net transactions on cash flow hedges – net of tax			Revaluation increment on investment properties – net of tax		Actuarial gains (losses) on defined benefit plans – net of tax			Share in the other comprehensive loss of associates and joint ventures accounted for using the equity method			Fair value changes of financial instrument at FVOCI			Total other comprehensive loss attributable to equity holders of PLDT			Share of noncontrolling interests			Total other comprehensive loss – net of tax
	(in million pesos)
Balances as at January 1, 2023		149		(9	)		(3,287	)		544		(32,856	)		(20	)		(3	)		(35,482	)		25			(35,457	)
Other comprehensive income    (loss)		95		—			(740	)		—		88			-			—			(557	)		(5	)		(562	)
Balances as at June 30, 2023    (Unaudited)		244		(9	)		(4,027	)		544		(32,768	)		(20	)		(3	)		(36,039	)		20			(36,019	)
Balances as at January 1, 2022		366		(9	)		(1,965	)		544		(35,356	)		(14	)		(3	)		(36,437	)		15			(36,422	)
Other comprehensive income    (loss)		146		—			(1,255	)		—		112			(1	)		—			(998	)		(9	)		(1,007	)
Balances as at June 30, 2022    (Unaudited)		512		(9	)		(3,220	)		544		(35,244	)		(15	)		(3	)		(37,435	)		6			(37,429	)

Revaluation increment on investment properties pertains to the difference between the carrying value and fair value of property and equipment transferred to investment property at the time of change in classification.

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7.Income Taxes

Corporate Income Tax

The major components of consolidated net deferred income tax assets and liabilities recognized in our consolidated statements of financial position as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Net deferred income tax assets		14,240		17,636
Net deferred income tax liabilities		171		204

The components of our consolidated net deferred income tax assets and liabilities as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Net deferred income tax assets:
Unearned revenues		4,059			6,305
Lease liability over ROU assets under PFRS 16		3,975			3,693
Accumulated provision for expected credit losses		3,300			2,814
Unamortized past service pension costs		2,428			3,229
Unrealized foreign exchange gains		1,247			1,509
NOLCO		907			165
Pension and other employee benefits		643			1,304
Accumulated write-down of inventories to net realizable values		479			544
Excess MCIT over RCIT		273			103
Derivative financial instruments		113			248
Fixed asset impairment/depreciation due to shortened life of property and equipment		105			115
Taxes and duties capitalized		(147	)		(129	)
Customer list and trademark		(251	)		(197	)
Capitalized charges and others		(2,891	)		(2,067	)
Total deferred income tax assets – net		14,240			17,636
Net deferred income tax liabilities:
Investment property		240			240
Unrealized foreign exchange gains		4			10
Others		(73	)		(46	)
Total deferred income tax liabilities		171			204

Changes in our consolidated net deferred income tax assets (liabilities) as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Net deferred income tax assets – balances at beginning of the period		17,636			13,385
Net deferred income tax liabilities – balances at beginning of the period		(204	)		(169	)
Net balances at beginning of the period		17,432			13,216
Movement charged directly to other comprehensive income (loss)		210			(148	)
Benefit from (provision for) deferred income tax		(3,551	)		4,175
Others		(22	)		189
Net balances at end of the period		14,069			17,432
Net deferred income tax assets – balances at end of the period		14,240			17,636
Net deferred income tax liabilities – balances at end of the period		(171	)		(204	)

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The impact of the change in tax rates in our deferred income tax assets and liabilities under the CREATE law is included in the deferred income tax assets charged directly to other comprehensive income and provision for deferred income tax.

The analysis of our consolidated net deferred income tax assets as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Deferred income tax assets:
Deferred income tax assets to be recovered after 12 months		8,775		15,336
Deferred income tax assets to be recovered within 12 months		5,465		2,300
Net deferred income tax assets		14,240		17,636

The analysis of our consolidated net deferred income tax liabilities as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Deferred income tax liabilities:
Deferred income tax liabilities to be settled after 12 months		(178	)		(221	)
Deferred income tax liabilities to be settled within 12 months		7			17
Net deferred income tax liabilities		(171	)		(204	)

Provision for (benefit from) income tax for the six months ended June 30, 2023 and 2022 consist of:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Current		2,687		5,283
Deferred (Note 3)		3,551		(649	)
		6,238		4,634

The impact of the application of MCIT amounting to nil and Php5 million for the six months ended June 30, 2023 and 2022, respectively, was considered in the provisions for current and deferred income taxes.

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The reconciliation between the provision for income tax at the applicable statutory tax rate and the actual provision for corporate income tax for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Provision for (benefit from) income tax at the applicable statutory tax rate:
Continuing operations		6,193			5,418
Discontinued operations (Note 2)		(7	)		(27	)
		6,186			5,391
Tax effects of:
Equity share in net loss of associates and joint ventures		331			80
Nondeductible expenses		37			18
Loss not subject to income tax		11			19
Special deductible items and income subject to lower tax rate		(45	)		(78	)
Income subject to final tax		(124	)		(77	)
Difference between Optional Standard Deduction, OSD, and itemized deductions		(238	)		(446	)
Net movement in unrecognized deferred income tax assets and other adjustments		80			(266	)
		6,238			4,641
Actual provision for income tax:
Continuing operations		6,238			4,634
Discontinued operations (Note 2)		—			7
		6,238			4,641

The breakdown of our consolidated deductible temporary differences, carryforward benefits of unused tax credits from excess of MCIT over RCIT, and NOLCO (excluding those not recognized due to the adoption of the OSD method) for which no deferred income tax assets were recognized and the equivalent amount of unrecognized deferred income tax assets as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
NOLCO		1,113			592
Accumulated provision for expected credit losses		1,111			1,042
Fixed asset impairment		175			1,271
Pension and other employee benefits		50			101
Provisions		33			(114	)
Accumulated write-down of inventories to net realizable values		20			13
Unearned revenues		18			16
Excess MCIT over RCIT		15			15
Lease liability over ROU assets under PFRS 16		3			38
Unrealized foreign exchange losses		(32	)		(25	)
		2,506			2,949
Unrecognized deferred income tax assets		637			748

DMPI and ePLDT availed of the OSD method in computing their taxable income. This assessment is based on projected taxable profits at a level where it is favorable to use OSD method. These companies are also expected to avail of the OSD method in the foreseeable future. Thus, certain deferred income tax assets of DMPI and ePLDT amounting to Php56 million and Php135 million as at June 30, 2023 and December 31, 2022, respectively, were not recognized.

Our consolidated deferred income tax assets have been recorded to the extent that such consolidated deferred income tax assets are expected to be utilized against sufficient future taxable profit. Deferred income tax assets shown in the preceding table were not recognized as we believe that future taxable profit will not be sufficient to realize these deductible temporary differences and carryforward benefits of unused tax credits from excess of MCIT over RCIT, and NOLCO in the future.

F-74

The breakdown of our consolidated excess MCIT and NOLCO as at June 30, 2023 are as follows:

Date Incurred	Expiry Date	MCIT			NOLCO
		(in million pesos)
December 31, 2020	December 31, 2023		14			—
December 31, 2021	December 31, 2024		1			—
December 31, 2021	December 31, 2026		—			81
December 31, 2022	December 31, 2025		103			1,015
June 30, 2023	December 31, 2026		170			3,621
			288			4,717
NOLCO incurred by foreign affiliates which can be    carried over indefinitely			—			26
			288			4,743
Consolidated tax benefits			288			1,186
Consolidated unrecognized deferred income tax assets			(15	)		(279	)
Consolidated recognized deferred income tax assets			273			907

The excess MCIT totaling Php288 million as at June 30, 2023 can be deducted against future RCIT liability. The excess MCIT that was deducted against RCIT amounted to nil and Php5 million for the six months ended June 30, 2023 and 2022, respectively. No excess MCIT expired for the six months ended June 30, 2023 and 2022.

NOLCO totaling Php4,743 million as at June 30, 2023 can be claimed as deduction against future taxable income. The NOLCO claimed as deduction against taxable income amounted to Php129 million and Php217 million for the six months ended June 30, 2023 and 2022, respectively. No excess NOLCO expired for the six months ended June 30, 2023 and 2022.

Republic Act No. 11494 Bayanihan to Recover as One Act, or Bayanihan II

Republic Act No. 11494, otherwise known as the Bayanihan to Recover as One Act, or Bayanihan II, was signed by the President on September 11, 2020. It contains the government’s second wave of relief measures to address the health and economic crises stemming from the COVID-19 outbreak.

As part of mitigating the costs and losses stemming from the disruption of economic activities, Bayanihan II extends the carry-over of the NOLCO incurred in 2021 as deductions from gross income for the next five consecutive taxable years immediately following the year of the loss. Hence, NOLCO incurred in 2021 amounting to Php81 million, which ordinarily can be carried over until December 31, 2024, is extended until December 31, 2026.

Registration with Clark Special Economic Zone

ClarkTel is registered with Clark Special Economic Zone, or Economic Zones, under Republic Act No. 7227 otherwise known as the Bases Conversion and Development Act of 1992. As registrant, ClarkTel is entitled to all the rights, privileges and benefits established thereunder including tax and duty-free importation of capital equipment and a special income tax rate of 5% of gross income, as defined in Republic Act No. 7227.

Our consolidated income derived from non-registered activities within the Economic Zones is subject to the RCIT rate at the end of the reporting period. See Note 19 – Equity.

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8. Earnings Per Common Share

The following table presents information necessary to calculate the EPS for the six months ended June 30, 2023 and 2022:

	June 30,
	2023						2022(1)
	Basic			Diluted			Basic			Basic
	(Unaudited)
	(in million pesos)
Net income attributable to equity holders of PLDT from:
Continuing operations		18,480			18,480			16,847			16,847
Discontinued operations (Notes 2 and 4)		(29	)		(29	)		(61	)		(61	)
Consolidated net income attributable to common shares (Note 4)		18,451			18,451			16,786			16,786
Dividends on preferred shares (Note 19)		(30	)		(30	)		(29	)		(29	)
Consolidated net income attributable to common equity holders    of PLDT		18,421			18,421			16,757			16,757
	(in thousands, except per share amounts which are in pesos)
Outstanding common shares at beginning of period		216,056			216,056			216,056			216,056
Weighted average number of common shares		216,056			216,056			216,056			216,056
EPS from continuing operations (Note 4)		85.40			85.40			77.84			77.84
EPS from discontinued operations (Notes 2 and 4)		(0.13	)		(0.13	)		(0.28	)		(0.28	)
EPS attributable to common equity holders of PLDT (Note 5)		85.27			85.27			77.56			77.56

(1) Certain amounts for the six months ended June 30, 2022 were adjusted to reflect the loss of control of PG1
effective February 28, 2022, and the discontinued operations of certain ePLDT subsidiaries. See Note 2 - Summary of Significant Accounting Policies - Discontinued Operations and Note 11 - Investments in Associates and Joint Ventures - Investments in Associates - Investment in PG1 for further discussion.

Basic EPS amounts are calculated by dividing our consolidated net income for the period attributable to common equity holders of PLDT (consolidated net income adjusted for dividends on all series of preferred shares, except for dividends on preferred stock subject to mandatory redemption) by the weighted average number of common shares issued and outstanding during the year.

Diluted EPS amounts are calculated in the same manner assuming that, at the beginning of the year or at the time of issuance during the year, all outstanding options are exercised, and convertible preferred shares are converted to common shares, and appropriate adjustments to our consolidated net income are effected for the related income and expenses on preferred shares. Outstanding stock options will have a dilutive effect only when the average market price of the underlying common share during the year exceeds the exercise price of the stock option.

Convertible preferred shares are deemed dilutive when required dividends declared on each series of convertible preferred shares divided by the number of equivalent common shares, assuming such convertible preferred shares are converted to common shares, decreases the basic EPS. As such, the diluted EPS is calculated by dividing our consolidated net income attributable to common shareholders (consolidated net income, adding back any dividends and/or other charges recognized for the year related to the dilutive convertible preferred shares classified as liability, less dividends on non-dilutive preferred shares except for dividends on preferred stock subject to mandatory redemption) by the weighted average number of common shares excluding the weighted average number of common shares held as treasury shares, and including the common shares equivalent arising from the conversion of the dilutive convertible preferred shares and from the mandatory tender offer for all remaining Digitel shares.

Where the effect of the assumed conversion of the preferred shares and the exercise of all outstanding options have an anti-dilutive effect, basic and diluted EPS are stated at the same amount.

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9.Property and Equipment

Changes in property and equipment account for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

F-77

	Cable and wire facilities			Central equipment			Network facilities			Buildings			Vehicles, furniture and other network equipment			Information origination and termination equipment			Land improvements			IT systems and platforms			Security platforms			Property under construction			Total
	(in million pesos)
As at December 31, 2021 (Audited)
Cost		229,160			5,896			327,195			26,838			40,586			62,595			4,451			27,099			355			56,510			780,685
Accumulated depreciation, impairment and    amortization		(157,627	)		(3,144	)		(208,606	)		(19,422	)		(35,347	)		(34,745	)		(288	)		(18,593	)		(177	)		—			(477,949	)
Net book value		71,533			2,752			118,589			7,416			5,239			27,850			4,163			8,506			178			56,510			302,736
Year Ended December 31, 2022 (Audited)
Net book value at beginning of the year		71,533			2,752			118,589			7,416			5,239			27,850			4,163			8,506			178			56,510			302,736
Additions (Note 4)		194			265			3,656			31			731			6,389			28			8			—			85,508			96,810
Telecom assets additions subject to subsequent    sale and leaseback from tower companies		—			—			16,841			—			—			—			—			—			—			—			16,841
Disposals/Retirements		(5	)		—			(6,529	)		(1	)		(158	)		—			(7	)		(20	)		—			(7,976	)		(14,696	)
Reclassifications		11			—			—			—			—			—			—			—			—			(11	)		—
Reclassifications to assets classified as held-for-sale		—			—			(12,372	)		—			—			—			—			—			—			(3,641	)		(16,013	)
Impairment losses recognized during the year    from continuing operations (Note 5)		(112	)		—			(66	)		—			(104	)		—			—			—			—			—			(282	)
Impairment losses recognized during the year    from discontinued operations (Note 5)		—			—			—			—			(27	)		—			—			—			—			—			(27	)
Transfers and others		32,323			666			24,155			724			412			8,445			120			8,092			21			(74,958	)		—
Translation differences charged directly    to cumulative translation adjustments		—			—			—			—			1			—			—			1			—			—			2
Adjustments		7			512			—			(2	)		(240	)		—			—			—			—			(5	)		272
Acquisition through business combinations		—			—			—			23			77			—			—			—			—			—			100
Depreciation and amortization from    continuing operations (Note 3)		(32,994	)		(580	)		(42,311	)		(1,544	)		(1,756	)		(7,898	)		(32	)		(5,789	)		(66	)		—			(92,970	)
Depreciation and amortization from    discontinued operations (Note 3)		—			(9	)		—			(1	)		(18	)		—			—			—			—			—			(28	)
Net book value at end of the year		70,957			3,606			101,963			6,646			4,157			34,786			4,272			10,798			133			55,427			292,745
As at December 31, 2022 (Audited)
Cost		261,429			7,338			328,729			26,788			40,572			77,429			4,591			35,095			377			55,427			837,775
Accumulated depreciation, impairment and amortization		(190,472	)		(3,732	)		(226,766	)		(20,142	)		(36,415	)		(42,643	)		(319	)		(24,297	)		(244	)		—			(545,030	)
Net book value		70,957			3,606			101,963			6,646			4,157			34,786			4,272			10,798			133			55,427			292,745
Six Months Ended June 30, 2023    (Unaudited)
Net book value at beginning of the period		70,957			3,606			101,963			6,646			4,157			34,786			4,272			10,798			133			55,427			292,745
Additions (Note 4)		7,976			90			3,530			12			214			3,742			8			68			—			25,162			40,802
Telecom assets additions subject to subsequent    sale and leaseback from tower companies		—			—			—			—			—			—			—			—			—			10,962			10,962
Disposals/Retirements		—			—			(48	)		—			(67	)		—			(221	)		(6	)		—			—			(342	)
Reclassifications		—			—			—			3			2			—			—			—			—			—			5
Reclassifications to assets classified as held-for-sale		—			—			—			—			—			—			—			—			—			(11,535	)		(11,535	)
Transfers and others		841			1,454			11,789			1,787			91			204			68			2,012			10			(18,256	)		—
Translation differences charged directly    to cumulative translation adjustments		1			—			—			—			—			—			—			—			—			—			1
Adjustments		1			—			—			—			2			—			—			—			—			1,615			1,618
Depreciation and amortization from    continuing operations (Notes 2, 3 and 5)		(4,484	)		(347	)		(8,158	)		(528	)		(714	)		(4,359	)		(27	)		(2,157	)		(65	)		—			(20,839	)
Depreciation and amortization from    discontinued operations (Notes 2, 3 and 5)		—			—			—			—			(2	)		—			—			—			—			—			(2	)
Net book value at end of the period		75,292			4,803			109,076			7,920			3,683			34,373			4,100			10,715			78			63,375			313,415
As at June 30, 2023 (Unaudited)
Cost		269,909			8,848			343,805			28,576			40,426			81,375			4,447			37,201			387			63,375			878,349

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Accumulated depreciation, impairment and amortization	(194,617	)	(4,045	)	(234,729	)	(20,656	)	(36,743	)	(47,002	)	(347	)	(26,486	)	(309	)	—	(564,934	)
Net book value	75,292		4,803		109,076		7,920		3,683		34,373		4,100		10,715		78		63,375	313,415

F-79

Interest capitalized to property and equipment that qualified as borrowing costs amounted to Php988 million and Php945 million for the six months ended June 30, 2023 and 2022, respectively. See Note 5 – Income and Expenses – Financing Costs – Net. The average interest capitalization rate used was approximately 4% for each of the six months ended June 30, 2023 and 2022.

Our net foreign exchange differences, which qualified as borrowing costs, amounted to Php7 million and Php297 million for the six months ended June 30, 2023 and 2022, respectively.

The cost of fully depreciated property and equipment that are still being used in the PLDT Group’s operations amounted to Php90,860 million and Php83,055 million as at June 30, 2023 and December 31, 2022, respectively.

As at June 30, 2023, the estimated useful lives of our property and equipment are as follows:

Cable and wire facilities	5 – 15 years
Central equipment	3 – 15 years
Network facilities	3 – 15 years
Buildings	25 – 50 years
Vehicles, furniture and other network equipment	3 – 15 years
Information origination and termination equipment	5 – 15 years
Land improvements	10 years
IT systems and platforms	3 – 5 years
Security platforms	3 – 5 years
Leasehold improvements	3 – 10 years or the term of the lease, whichever is shorter

See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Estimating useful lives of property and equipment.

Sale and Leaseback of Telecom Towers

On April 19, 2022, Smart and DMPI signed Sale and Purchase Agreements with a subsidiary of Edotco Group and a subsidiary of EdgePoint, or the TowerCos, in connection with the sale of 5,907 telecom towers and related passive telecommunication infrastructure for Php77 billion. Out of the total towers, 2,973 towers located primarily in Luzon, Visayas and Mindanao were acquired by Edotco Towers, Inc., a subsidiary of Edotco Group, and 2,934 towers located in Luzon were acquired by Comworks Infratech Corp., subsidiary of EdgePoint.

Concurrent with the execution of the Sale and Purchase Agreements, Smart also entered into Master Service Agreements, or MSAs, with the TowerCos wherein Smart agreed to leaseback the towers sold in the transaction for a period of 10 years. In addition to space, the TowerCos are responsible for providing operations and maintenance services, as well as power to the sites. The sale and leaseback with the TowerCos is complemented by a commitment to place service orders for a total of 1,000 Build-To-Suit, or BTS, sites before December 31, 2025 and 50 committed BTS sites each year for five years starting January 1, 2026, or another total of 500 BTS sites. Thus, total committed BTS sites with the TowerCos is 1,500. The closing of the agreements are on a staggered basis depending on the satisfaction of closing conditions based on the number of towers transferred. The first closing commenced in June 2022, with the final closing in 2023.

On the same day that the telecom towers were sold, the MSAs covering the leaseback arrangements for those towers became effective. As at December 31, 2022, we have completed the sale of 4,665 telecom towers representing 79% of the towers portfolio subject to the sale. As a result, we received total proceeds of Php60,492 million, and recognized gain on sale and leaseback amounting to Php25,234 million.

In 2023, we completed additional sale of 517 telecom towers for a total consideration of Php7,094 million. We recognized gain on sale and leaseback for these transactions totaling to Php3,018 million. The total completed sale and leaseback transaction to date is at 88% of the towers portfolio subject to the sale of Edotco and Comworks.

Meanwhile, on December 15, 2022 and March 16, 2023, Smart and DMPI signed a new set of Sale and Purchase Agreements, with Unity Digital Infrastructure, or Unity, and Frontier Tower Associates Philippines Inc., or Frontier, respectively, in connection with the sale of 1,662 telecom towers and related passive telecom

F-80

infrastructure for a total of Php21,309 million. Out of the total towers, 650 towers located primarily in Visayas and Mindanao were acquired by Unity and 1,012 towers located in Luzon were acquired by Frontier.

Concurrent with the execution of the Sale and Purchase Agreements, Smart also entered into MSAs with Unity and Frontier wherein Smart has agreed to leaseback the towers sold in the transaction for a period of 10 years. In addition to space, Unity and Frontier will also be responsible for providing operations and maintenance services, as well as power to the sites. The sale and leaseback with Unity is complemented by a commitment to place service orders for a total of 220 BTS sites within the next two to four years. Meanwhile, the sale and leaseback with Frontier includes a commitment to place service orders for 550 points of service within the next three to four years, of which 400 are co-locations and the balance for new BTS sites. With these additional sites from Unity and Frontier, total commitment with all TowerCos is for 2,270 sites. The closing of the agreements are on a staggered basis depending on the satisfaction of closing conditions based on the number of towers transferred.

On May 15, 2023, we completed the first sale of 135 telecom towers to Unity for a consideration of Php1,903 million (excluding taxes), with net book value of Php1,180 million. We recognized gain on sale and leaseback for this transaction, amounting to Php622 million.

The following summarizes the completed sale of Smart and DMPI telecom towers as at 2023:

Closing Date	Number of Tower Assets Sold		Cash Consideration (excluding taxes)		Net Book Value of Tower Assets
			(in million pesos)
June 1, 2022		3,012		39,228		12,937
August 1, 2022		1,013		13,190		5,253
September 1, 2022		151		1,801		1,606
October 3, 2022		259		3,529		1,377
December 9, 2022		230		2,744		1,701
February 10, 2023		287		4,054		1,348
March 15, 2023		95		1,133		513
April 18, 2023		135		1,907		888
May 15, 2023		135		1,903		1,180
		5,317		69,489		26,803

The remaining telecom towers with net book value of Php13,145 and Php7,125 million, subject to sale and purchase agreement until 2023, were reclassified from “Property and equipment” to “Assets classified as held-for-sale” under current assets in our consolidated statement of financial position as at June 30, 2023 and December 31, 2022, respectively.

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10.Leases

Group as a Lessee

We have lease contracts for various items of sites, buildings, leased circuits and poles used in our operations. We considered in the lease term the non-cancellable period of the lease together with the periods covered by an option to extend and option to terminate the lease.

Our consolidated estimated useful lives of ROU assets as at June 30, 2023 are as follows:

Sites	1 – 30 years
International leased circuits(1)	1 – 20 years
Poles(2)	3 – 12 years
Domestic leased circuits	1 – 10 years
Office buildings	1 – 25 years
Co-located sites(3)	3 – 11 years

(1)As at December 31, 2022, the estimated useful life ranges from 1-11 years.

(2)As at December 31, 2022, the estimated useful life ranges from 2-12 years.

(3)As at December 31, 2022, the estimated useful life ranges from 3-7 years.

F-82

Our consolidated rollforward analysis of ROU assets as at June 30, 2023 and December 31, 2022 are as follows:

F-83

	Sites			International Leased Circuits			Poles			Domestic Leased Circuits			Office Buildings			Co-located Sites			Sale and Leaseback Adjustment			Total
	(in million pesos)
December 31, 2022 (Audited)
Costs:
Balances at beginning of the year		23,093			4,257			3,631			1,732			1,669			10			—			34,392
Additions (Note 28)		32,735			402			116			851			165			5			—			34,274
Business combination		90			—			—			—			—			—			—			90
Currency translation		—			—			—			—			1			—			—			1
Disposals		—			—			—			—			(5	)		—			—			(5	)
Asset retirement obligation		(1,412	)		—			—			—			(95	)		—			—			(1,507	)
Modifications		(7	)		(106	)		432			(8	)		1			—			(12,776	)		(12,464	)
Terminations		(12,196	)		(294	)		—			(139	)		(316	)		—			—			(12,945	)
Balances at end of the year		42,303			4,259			4,179			2,436			1,420			15			(12,776	)		41,836
Accumulated depreciation and amortization:
Balances at beginning of the year		(8,666	)		(2,014	)		(1,629	)		(966	)		(1,030	)		(6	)		—			(14,311	)
Terminations		4,931			150			—			71			293			—			—			5,445
Charge from asset retirement obligation		1,545			—			—			—			103			—			—			1,648
Disposals		—			—			—			—			5			—			—			5
Currency translation		—			—			—			—			(1	)		—			—			(1	)
Modifications		—			—			—			—			(10	)		—			—			(10	)
Business combination		(33	)		—			—			—			—			—			—			(33	)
Depreciation from continuing operations (Notes 2, 3 and 5)		(3,803	)		(832	)		(875	)		(475	)		(313	)		(3	)		640			(5,661	)
Depreciation from discontinued operations (Notes 2, 3 and 5)		(21	)		—			—			—			(34	)		—			—			(55	)
Balances at end of the year		(6,047	)		(2,696	)		(2,504	)		(1,370	)		(987	)		(9	)		640			(12,973	)
Net book value as at December 31, 2022 (Audited)		36,256			1,563			1,675			1,066			433			6			(12,136	)		28,863
June 30, 2023 (Unaudited)
Costs:
Balances at beginning of the period		42,303			4,259			4,179			2,436			1,420			15			(12,776	)		41,836
Additions (Note 28)		6,438			137			55			18			158			31			—			6,837
Asset retirement obligation		99			—			—			—			(9	)		—			—			90
Disposals		—			—			—			—			(14	)		—			—			(14	)
Modifications		(54	)		(29	)		(584	)		(64	)		(3	)		—			—			(734	)
Terminations		455			(4	)		(30	)		—			(111	)		—			(1,375	)		(1,065	)
Reclassification to ROU assets classified as held-for-sale		(4,194	)		—			—			—			—			—			—			(4,194	)
Balances at end of the period		45,047			4,363			3,620			2,390			1,441			46			(14,151	)		42,756
Accumulated depreciation and amortization:
Balances at beginning of the period		(6,047	)		(2,696	)		(2,504	)		(1,370	)		(987	)		(9	)		640			(12,973	)
Reclassification to ROU assets classified as held-for-sale		1,394			—			—			—			—			—			—			1,394
Modifications		(7	)		76			3			—			3			—			—			75
Terminations		84			—			10			—			106			—			(145	)		55
Charge from asset retirement obligation		3			—			—			—			17			—			—			20
Disposals		—			—			—			—			11			—			—			11
Depreciation from continuing operations (Notes 2 and 3)		(2,503	)		(427	)		(465	)		(269	)		(167	)		(4	)		724			(3,111	)
Depreciation from discontinued operations (Notes 2 and 3)		—			—			—			—			(14	)		—			—			(14	)
Balances at end of the period		(7,076	)		(3,047	)		(2,956	)		(1,639	)		(1,031	)		(13	)		1,219			(14,543	)
Net book value as at June 30, 2023 (Unaudited)		37,971			1,316			664			751			410			33			(12,932	)		28,213

F-84

The following amounts are recognized in our consolidated income statements for the six months ended June 30, 2023 and 2022:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Depreciation expense of ROU assets from continuing operations		3,111		2,679
Depreciation expense of ROU assets from discontinued operations (Notes 2 and 3)		14		29
Interest expenses on lease liabilities from continuing operations		1,585		655
Interest expenses on lease liabilities from discontinued operations		1		6
Variable lease payments (included in general and administrative expenses)    from continuing operations		321		424
Variable lease payments (included in general and administrative expenses)    from discontinued operations (Notes 2 and 3)		—		(6	)
Expenses relating to short-term leases    (included in general and administrative expenses) (Note 5)		710		686
Expenses relating to leases of low-value assets    (included in general and administrative expenses) (Note 5)		1		1
Total amount recognized in consolidated income statements		5,743		4,474

Our consolidated rollforward analysis of lease liabilities as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Balances at beginning of the period		42,435			21,686
Additions (Note 28)		6,931			34,277
Accretion on lease liabilities from continuing operations (Notes 2, 3 and 5)		1,585			2,057
Accretion on lease liabilities from discontinued operations (Notes 2, 3 and 5)		1			7
Business combination		—			46
Reclassification to lease liabilities classified as held-for-sale		—			(1,668	)
Foreign exchange gains (losses) – net		(15	)		215
Lease modifications		(834	)		317
Termination		(2,014	)		(6,171	)
Settlement of obligations		(5,570	)		(8,331	)
Balances at end of the period (Notes 3 and 28)		42,519			42,435
Less current portion of lease liabilities (Note 27)		10,250			10,477
Noncurrent portion of lease liabilities (Note 27)		32,269			31,958

We had total cash outflows for leases of Php5,570 million and Php3,743 million for the six months ended June 30, 2023 and 2022, respectively. We also had non-cash additions to ROU assets of Php6,837 million and Php34,274 million as at June 30, 2023 and December 31, 2022, respectively. We had non-cash additions to lease liabilities of Php6,931 million and Php34,277 million as at June 30, 2023 and December 31, 2022, respectively. The future cash outflows relating to leases that have not yet commenced are disclosed in Note 28 – Notes to the Statements of Cash Flows.

We have entered into several lease contracts that include automatic extension and termination options. These options are negotiated by us to provide flexibility in managing the leased-asset portfolio and align with our business needs. However, in some of these lease contracts, we did not impute the renewal period in our assessment of the lease terms of these contracts since said renewal period is not yet reasonably estimable at the time of transition or commencement date of the lease, see Note 3 – Managements Use of Accounting Judgments, Estimates and Assumptions – Determining the lease term of contracts with renewal and termination options – Company as a Lessee.

As disclosed in Note 9 – Property and Equipment, on the sale and leaseback of telecom towers, Smart and DMPI signed Sale and Purchase Agreements with the TowerCos in connection with the sale of 7,569 telecom towers and related passive telecom infrastructure, with the concurrent execution of MSAs with the TowerCos where Smart has agreed to leaseback the towers sold in the transaction for a period of 10 years.

F-85

In 2022 and in the first half of 2023, the MSAs covering the leaseback arrangements of 4,665 and 652 telecom towers, respectively, became effective. As a result, we recognized cumulative lease liability of Php31,745 million as at June 30, 2023. We also recognized cumulative ROU assets of Php17,454 million as at June 30, 2023. The difference between lease liability and ROU assets represents the rights retained by the PLDT Group over the telecom assets leased back from the tower companies.

Including the related accounts on Unity and Frontier, the ROU assets relating to leasehold land with net book value of Php3,008 million and Php1,646 million, and the related lease liabilities amounting to Php3,095 million and Php1,738 million were respectively reclassified as “Assets classified as held-for-sale” under current assets and “Liabilities associated with assets classified as held-for-sale” under current liabilities in our consolidated statement of financial position as at June 30, 2023 and December 31, 2022, respectively.

Common Tower Pilot, or CTP, Program

In January 2020, Smart partnered with several TowerCos duly-accredited by the Department of Information and Communications Technology and launched the CTP Program with the objective of faster new site roll-outs and reduced upfront CAPEX spending.

In the same year, Smart entered into MSAs with these TowerCos. Under the agreement, the TowerCos will handle site acquisition and permitting, site development works, construction and permanent electrification of the towers. Effective 30 days after the sites are Ready For Telecommunication Installation, or RFTI, Smart will be liable to settle a monthly fixed fee covering rental and maintenance costs for a contract term of 15 years. The monthly fee will be subject to agreed escalation rates with the TowerCos. As anchor tenant, Smart will also be entitled to colocation discounts when additional tenants come on board.

Upon launching of the program, the original CTP commitment covered 200 sites. This was later on increased to 936 BTS sites. As at December 31, 2022, Smart has issued service orders, or SOs, corresponding to 464 BTS sites.

As at June 30, 2023, a total of 307 BTS sites are classified as RFTI, out of which 110 BTS sites are ready for service.

Group as a Lessor

We have entered into operating leases on our investment property portfolio consisting of certain office buildings and business offices. See Note 13 – Investment Properties. These leases have term of five years. All leases include a clause to enable upward revision of the rental charge on annual basis according to prevailing market conditions. The lessee is also required to provide a residual guarantee on the properties. Rental income recognized by us amounted to Php28 million and Php26 million for the six months ended June 30, 2023 and 2022, respectively.

Future minimum rentals receivable under non-cancellable operating leases expected within one year amounted to Php28 million and Php57 million as at June 30, 2023 and December 31, 2022, respectively.

F-86

11.Investments in Associates and Joint Ventures

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Carrying value of investments in associates:
MediaQuest PDRs		9,736		9,855
VIH		6,724		7,959
Appcard, Inc., or Appcard		114		108
PG1		34		—
Asia Outsourcing Beta Limited, or Beta		—		—
AF Payments, Inc., or AFPI		—		—
		16,608		17,922
Carrying value of investments in joint ventures:
VTI, Bow Arken and Brightshare		33,599		33,584
Telecommunications Connectivity, Inc., or TCI		41		40
PFC		—		—
VFC		—		—
		33,640		33,624
Total carrying value of investments in associates and joint ventures		50,248		51,546

Changes in the cost of investments for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Balances at beginning of the period		63,020			61,986
Additions during the period		73			3,514
Disposals		—			(2,421	)
Translation and other adjustments		(3	)		(59	)
Balances at end of the period		63,090			63,020

Changes in the accumulated impairment losses for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Balances at beginning of the period		2,805		2,755
Additions during the period (Note 4)		70		50
Balances at end of the period		2,875		2,805

F-87

Changes in the accumulated equity share in net earnings (losses) of associates and joint ventures as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Balances at beginning of the period		(8,669	)		(5,867	)
Share in the other comprehensive loss of associates and joint ventures    accounted for using the equity method		—			(6	)
Disposals		—			(37	)
Equity share in net earnings (losses) of associates and joint ventures:		(1,325	)		(3,304	)
VTI, Bow Arken and Brightshare		15			74
PG1		8			(124	)
Appcard		6			(2	)
TCI		—			1
VFC		—			(1	)
Multisys		—			(95	)
PFC		(1	)		(2	)
MediaQuest PDRs		(118	)		(129	)
VIH		(1,235	)		(3,026	)
Translation and other adjustments		27			545
Balances at end of the period		(9,967	)		(8,669	)

Investments in Associates

Investment of ePLDT in MediaQuest PDRs

In 2012, ePLDT made deposits totaling Php6 billion to MediaQuest, an entity wholly-owned by the PLDT Beneficial Trust Fund, for the issuance of PDRs by MediaQuest in relation to its indirect interest in Cignal TV. Cignal TV is a wholly-owned subsidiary of Satventures, which is a wholly-owned subsidiary of MediaQuest incorporated in the Philippines. The Cignal TV PDRs confer an economic interest in common shares of Cignal TV indirectly owned by MediaQuest, and when issued, will provide ePLDT with a 40% economic interest in Cignal TV.

Cignal TV operates a direct-to-home, or DTH, Pay-TV business under the brand name “Cignal TV”, which is the largest DTH Pay-TV operator in the Philippines.

In June 2013, ePLDT’s Board of Directors approved additional Php3.6 billion investment by ePLDT in PDRs to be issued by MediaQuest in relation to its interest in Satventures. The Satventures PDRs confer an economic interest in common shares of Satventures owned by MediaQuest and provide ePLDT with a 40% economic interest in Satventures.

The PLDT Group’s financial investment in PDRs of MediaQuest is part of the PLDT Group’s overall strategy of broadening its distribution platforms and increasing the PLDT Group’s ability to deliver multimedia content to its customers across the PLDT Group’s broadband and mobile networks.

ePLDT’s aggregate value of investment in MediaQuest PDRs amounted to Php9,736 million and Php9,855 million as at June 30, 2023 and December 31, 2022, respectively. See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Accounting for investment in MediaQuest through PDRs.

F-88

The table below presents the summarized financial information of Satventures and subsidiaries as at June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Statements of Financial Position:
Noncurrent assets		21,955		21,910
Current assets		8,406		8,612
Noncurrent liabilities		2,012		2,418
Current liabilities		12,137		11,706
Equity(1)		16,212		16,398
Carrying amount of interest in Satventures		9,736		9,855
Additional Information:
Cash and cash equivalents		674		688
Current financial liabilities(2)		2,150		986
Noncurrent financial liabilities(2)		806		1,148

(1)Including Php1 billion deposit for preferred stock subscriptions by MediaQuest in 2021.

(2)Excluding trade, other payables and provisions.

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Income Statements:
Revenues		4,199			5,910
Depreciation and amortization		645			691
Interest income		(22	)		—
Interest expense		128			103
Provision for (benefit from) income tax		(102	)		29
Net income (loss) / Total comprehensive income (loss)		(185	)		107
Equity share in net earnings (losses) of Satventures		(118	)		68

Investment of PCEV in VIH

Consolidation of the Digital Investments of Smart under PCEV

On February 27, 2018, the Board of Directors of PCEV approved the consolidation of the various Digital Investments under PCEV, which was carried out through the following transactions:

(i)PCEV entered into a Share Purchase Agreement with Voyager Innovations, Inc., or Voyager, to purchase 53.4 million ordinary shares of VIH representing 100% of the issued and outstanding ordinary shares of VIH, for a total consideration of Php465 million;

(ii)VIH entered into a Share Purchase Agreement with Smart to purchase all of its 170 million common shares of Voyager for a total consideration of Php3,527 million; and

(iii)PCEV entered into a Subscription Agreement with VIH to subscribe to additional 95.9 million ordinary shares of VIH, with a par value of SG$1.00 per ordinary share, for a total subscription price of SG$96 million, or Php3,806 million, which was settled on April 13, 2018.

Loss of Control over VIH

In 2018, PLDT, as the ultimate Parent Company of PCEV, VIH, Vision Investment Holdings Pte. Ltd., or Vision, an entity indirectly controlled by KKR, Cerulean Investment Limited, or Cerulean, an entity indirectly owned and controlled by Tencent, International Finance Corporation, or IFC, and IFC Emerging Asia Fund, or IFC EAF, a fund managed by IFC Asset Management Company, or IFC AMC, entered into subscription agreements to subscribe VIH’s Convertible Class A preferred shares with a total subscription price amounting to US$215 million. As a result, PCEV’s ownership was diluted to 48.74% and retained two out of five BOD seats in VIH, which resulted in a loss of control. Consequently, PCEV accounted for its remaining interest in VIH as an investment in an associate.

F-89

On June 17, 2020, VIH appointed a new director, representing IFC, bringing the total number of BOD seats in VIH to six. PCEV still holds two out of the six BOD seats after the appointment of the new director.

Investment in Class B Convertible Preference Shares

On June 11, 2021, PCEV, KKR, Tencent, and IFC Financial Institutions Growth Fund, a fund managed by IFC AMC, entered into a new subscription agreement with VIH to subscribe to US$120.8 million Class B convertible preferred shares of VIH. PCEV paid a total consideration of US$25 million or Php1,218 million for 15.6 million VIH convertible preferred shares and resulting to another equity interest dilution from 41.87% to 38.45%.

Investment in Class C Convertible Preference Shares

On April 7, 2022, PCEV participated in the new round of fundraise for VIH amounting to US$62 million. Leading the round was the new investor SIG Venture Capital. Also participating in the round were the other existing shareholders KKR, Tencent, IFC, IFC EAF and IFC Financial Institutions Growth Fund, as well as new investors including Singapore-based global investor EDBI and investment holding company, First Pacific. Thereafter, PCEV’s ownership in VIH was diluted from 38.45% to 36.82%.

On August 12, 2022, a new investor signed a subscription agreement with VIH resulting in further dilution of PCEV's equity interest from 36.82% to 36.63%. See related disclosures on gain on dilution on Note 5 – Other Income (Expenses).

The following summarizes the subscription agreements entered into by PCEV with VIH:

Date	Number of Shares Sold	Number of Shares		Total Consideration		PCEV's Equity Interest
		(in millions)		(in million pesos)
March 14, 2018	Acquisition of Ordinary Shares		53.4		465		100	%
March 14, 2018	Subscription of Ordinary Shares		95.9		3,806		100	%
December 31, 2020	Conversion of notes to Class A2 preference shares		7.9		544		44	%
March 12, 2021	Exercise of warrants to subscribe Class A2 preference shares		6.7		447		42	%
June 11, 2021	Subscription to Class B convertible preferred shares		15.6		1,218		38	%
April 7, 2022	Subscription to Class C convertible preferred shares		27.2		3,252		37	%

PCEV’s percentage equity interest in VIH stood at 36.63% each as at June 30, 2023 and December 31, 2022.

The summarized financial information of VIH as at June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022 is shown below:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Statements of Financial Position:
Noncurrent assets		4,056		3,514
Current assets		12,353		18,599
Noncurrent liabilities		502		252
Current liabilities		8,044		10,850
Equity		7,863		11,011
Carrying amount of interest in VIH		6,724		7,959
Additional Information:
Cash and cash equivalents		5,536		6,410
Current financial liabilities(1)		7,997		10,740

(1) Excluding statutory payables and accrued taxes.

F-90

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Income Statements:
Revenues		4,481			3,765
Depreciation and amortization		163			123
Interest income		71			35
Provision for income tax		—			—
Net loss / Total comprehensive loss		(3,372	)		(3,807	)
Equity share in net losses of VIH(1)		(1,235	)		(1,465	)

(1) 2023 and 2022 amounts include impact of 2022 and 2021 audit adjusting entries, respectively.

The carrying value of PCEV’s investment in VIH as at June 30, 2023 and December 31, 2022 are as follows.

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
VIH Equity(1)		6,342			9,714
PCEV's noncontrolling interests		36.63	%		36.63	%
Share in net assets of VIH		2,323			3,558
Goodwill arising from acquisition		4,401			4,401
Carrying amount of interest in VIH		6,724			7,959

(i)VIH Equity is net of Php1,521 million and Php1,297 million Stock Option in 2023 and 2022, respectively.

Investment of PLDT Capital Pte. Ltd., or PLDT Capital, in AppCard

On October 9, 2015, PLDT Capital entered into a Convertible Preferred Stock Purchase Agreement with AppCard for US$5 million. AppCard, a Delaware Corporation, is engaged in the business of developing, marketing, selling and servicing digital loyalty program platforms.

Investment of PLDT Capital in Beta

On February 5, 2013, PLDT entered into a Subscription and Shareholders’ Agreement with Asia Outsourcing Alpha Limited, or Alpha, wherein PLDT, through its indirect subsidiary PGIC, acquired from Alpha approximately 20% equity interest in Beta for a total cost of approximately US$40 million, which consists of preferred shares of US$39.8 million and ordinary shares of US$0.2 million. On various dates in 2013 and 2014, PGIC has bought and transferred-in a net in total of 27 ordinary shares and 9,643 preferred shares to certain employees of Beta for a total net payment of US$51 thousand. In 2014, Beta has divested its healthcare BPO business. PGIC received a total cash distribution of US$41.8 million from Beta through redemption of 35.3 million preferred shares and repayment of loan from PGIC. The equity interest of PGIC in Beta remained at 20% after the transfer with economic interest of 18.32%.

Alpha and Beta are both exempted limited liability companies incorporated under the laws of Cayman Islands and are both controlled by CVC Capital Partners. Beta has been designated to be the ultimate holding company of the SPi Technologies, Inc. and Subsidiaries.

On July 22, 2016, Asia Outsourcing Gamma Limited, or AOGL, entered into a Sale and Purchase Agreement with Relia, Inc., one of the largest BPO companies in Japan, relating to the acquisition of AOGL’s Customer Relationship Management, or CRM, business under the legal entity SPi CRM, Inc. and Infocom Technologies, Inc., wholly-owned subsidiaries of SPi Technologies, Inc., for a total purchase consideration of US$190.9 million. AOGL is a wholly-owned subsidiary of Beta and the direct holding company of SPi Technologies, Inc. and Subsidiaries. The transaction was completed on September 30, 2016. As a result of the sale, PGIC received a cash distribution of US$11.2 million from Beta through redemption of its preferred shares and portion of its ordinary shares.

F-91

On May 19, 2017, AOGL entered into a Sale and Purchase Agreements with Partners Group, a global private markets investment manager, relating to the acquisition of SPi Global, a wholly-owned subsidiary of AOGL, for an enterprise value of US$330 million. The transaction was completed on August 25, 2017. As a result of the sale, PGIC received a total cash distribution of US$57.05 million from Beta on various dates in 2017 and 2018 through redemption of a portion of its ordinary shares.

On May 14, 2021, PGIC entered into an Instrument of Transfer with its affiliate, PLDT Capital, relating to the acquisition of PGIC’s 554 ordinary shares (or 18.32% full economic interest) in Beta for a purchase consideration of US$0.68 million. PGIC received the cash consideration from PLDT Capital also on May 14, 2021.

The transfer of shares to PLDT Capital was completed on May 25, 2021.

On May 17, 2022, PLDT Capital received a cash distribution of US$1.2 million from Beta through redemption of all its ordinary shares, resulting in the full divestment of the investment in Beta.

Investment in PG1

On February 28, 2022, PLDT signed a Deed of Assignment under which investors led by Philex Mining Corporation, Metro Pacific Corporation, or MPIC, and Roxas Holdings, Inc. separately acquired a total of Php44.7 million worth of equity interest in PG1 from PLDT. In addition, PG1 appointed a new director bringing the total number of directors to nine. As a result, PLDT’s ownership was diluted from 65.3% to 47.6% and retained four out of nine total board seats which resulted in a loss of control. Consequently, PLDT accounted for its remaining interest in PG1 as an investment in associate. See the related discussion on Note 2 – Summary of Significant Accounting Policies - Loss of Control of PLDT over PG1.

The carrying value of investment in PG1 amounted to Php34 million as at June 30, 2023, while nil as at December 31, 2022, as the equity share in net losses of PG1 is recognized only up to the extent of its carrying value. The excess of the equity share in net losses over its carrying value amounted to nil and Php3 million as at June 30, 2023 and December 31, 2022, respectively.

The summarized financial information of PG1 as at June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022 is shown below:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Statements of Financial Position:
Noncurrent assets		3,198			3,283
Current assets		97			123
Noncurrent liabilities		3,146			3,146
Current liabilities		990			847
Deficit		841			587
	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Income Statements:
Revenues		29			50
Depreciation and amortization		112			107
Net loss / Total comprehensive loss		(232	)		(117	)
Equity share in net losses of PG1		(110	)		(56	)

Investment of Smart in AFPI

In 2013, Smart, along with other conglomerates MPIC and Ayala Corporation, or Ayala, embarked on a venture to bid for the Automated Fare Collection System, or AFCS, a project of the Department of Transportation and Communications, or DOTC, and Light Rail Transit Authority, to upgrade the Light Rail Transit 1 and 2, and Metro Rail Transit ticketing systems.

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In 2014, AFPI, the joint venture company, was incorporated in the Philippines and registered with the Philippine SEC. Smart initially subscribed to Php503 million equivalent to 503 million shares at a subscription price of Php1.00 per share representing 20% equity interest, and participated in subsequent capital calls, thereafter. MPIC and Ayala Group signed a ten-year concession agreement with the DOTC to build and implement the AFCS project.

Smart infused additional capital for the following years:

Date	Number of Shares Acquired	Subscription Price		Subscription Price
		(in million pesos)
March 29, 2019	70 Preferred Shares		1.00		70
March 11, 2020	60 Preferred Shares		1.00		60
March 30, 2021	60 Preferred Shares		1.00		60
March 29, 2022	50 Preferred Shares		1.00		50
February 15, 2023	70 Preferred Shares		1.00		70

Smart retained its 20% equity interest in AFPI as at June 30, 2023 and December 31, 2022.

The summary of investments in AFPI made by Smart as at June 30, 2023 and December 31, 2022 is shown below:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Common shares	625.7		625.7
Preferred shares		434.2		364.2

Smart’s investment in AFPI has been fully impaired as at June 30, 2023. Share in net cumulative losses were not recognized as it does not have any legal or constructive obligation to pay for such losses and have not made any payments on behalf of AFPI.

No dividends were received from our associates for the six months ended June 30, 2023 and 2022.

We have no outstanding contingent liabilities or capital commitments with our associates as at June 30, 2023 and December 31, 2022.

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Investments in Joint Ventures

Investments of PLDT in VTI, Bow Arken and Brightshare

On May 30, 2016, the PLDT Board approved the Company’s acquisition of 50% equity interest, including outstanding advances and assumed liabilities, in the telecommunications business of San Miguel Corporation, or SMC, with Globe acquiring the other 50% interest. On the same date, PLDT and Globe executed: (i) a Share Purchase Agreement with SMC to acquire the entire outstanding capital, including outstanding advances and assumed liabilities, in VTI (and the other subsidiaries of VTI), which holds SMC’s telecommunications assets through its subsidiaries, or the VTI Transaction; and (ii) separate Share Purchase Agreements with the owners of two other entities, Bow Arken (the parent company of New Century Telecoms, Inc.) and Brightshare (the parent company of eTelco, Inc.), which separately hold additional spectrum frequencies through their respective subsidiaries, or the Bow Arken Transaction and Brightshare Transaction, respectively. We refer to the VTI Transaction, Bow Arken Transaction and Brightshare Transaction collectively as the SMC Transactions.

The consideration in the amount of Php52.8 billion representing the purchase price for the equity interest and assigned advances of previous owners to VTI, Bow Arken and Brightshare was paid in three tranches: 50% upon signing of the Share Purchase Agreements on May 30, 2016, 25% on December 1, 2016 and the final 25% on May 30, 2017. The Share Purchase Agreements also provide that PLDT and Globe, through VTI, Bow Arken and Brightshare, would assume liabilities amounting to Php17.2 billion from May 30, 2016. In addition, the Share Purchase Agreements contain a price adjustment mechanism based on the variance in these assumed liabilities to be agreed among PLDT, Globe and previous owners on the results of the confirmatory due diligence procedures jointly performed by PLDT and Globe. On May 29, 2017, PLDT and Globe paid the previous owners the net amount of Php2.6 billion in relation to the aforementioned price adjustment based on the result of the confirmatory due diligence. See Note 27 – Financial Assets and Liabilities – Commercial Commitments.

As part of the SMC Transactions, PLDT and Globe acquired certain outstanding advances made by the former owners of VTI, Bow Arken and Brightshare to VTI, Bow Arken and Brightshare or their respective subsidiaries. The largest amounts of the advances outstanding to PLDT since the date of assignment to PLDT amounted to Php11,359 million: (i) Php11,038 million from VTI and its subsidiaries; (ii) Php238 million from Bow Arken and its subsidiaries; and (iii) Php83 million from Brightshare and its subsidiaries.

On February 28, 2017, PLDT and Globe each subscribed to 2.8 million new preferred shares to be issued out of the unissued portion of the existing authorized capital stock of VTI, at a subscription price of Php4 thousand per subscribed share (inclusive of a premium over par of Php3 thousand per subscribed share) or a total subscription price for each of Php11,040 million (inclusive of a premium over par of Php8,280 million). PLDT and Globe’s assigned advances from SMC which were subsequently reclassified to deposit for future subscription of each amounting to Php11,040 million were applied as full subscription payment for the subscribed shares.

Also, on the same date, PLDT and Globe each subscribed to 800 thousand new preferred shares of the authorized capital stock of VTI, at a subscription price of Php4 thousand per subscribed share (inclusive of a premium over par of Php3 thousand per subscribed share), or a total subscription price for each Php3,200 million (inclusive of a premium over par of Php2,400 million). PLDT and Globe each paid Php148 million in cash for the subscribed shares upon execution of the relevant agreement. The remaining balance of the subscription price of PLDT and Globe were fully paid as at December 29, 2017.

On December 15, 2017, PLDT and Globe each subscribed to 600 thousand new preferred shares of the authorized capital stock of VTI, at a subscription price of Php5 thousand per subscribed share (inclusive of a premium over par of Php4 thousand per subscribed share), for a total subscription price of Php3,000 million (inclusive of a premium over par of Php2,400 million). PLDT and Globe each paid Php10 million in cash for the subscribed shares upon execution of the agreement. The remaining balance of the subscription price was paid via conversion of advances amounting to Php2,990 million as at December 31, 2017.

The amount of the advances outstanding of PLDT, to cover for the assumed liabilities and working capital requirements of the acquired companies, amounted to Php69 million each as at June 30, 2023 and December 31, 2022.

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Purchase Price Allocation

PLDT has engaged an independent valuer to determine the fair value adjustments relating to the acquisition. As at May 30, 2016, our share in the fair value of the intangible assets, which includes spectrum, amounted to Php18,885 million and goodwill of Php17,824 million has been determined based on the results of an independent valuation. Goodwill arising from this acquisition and carrying amount of the identifiable assets and liabilities, including deferred tax liability, and the related amortization through equity in net earnings were retrospectively adjusted accordingly.

The table below presents the summarized financial information of VTI, Bow Arken and Brightshare as at June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Statements of Financial Position:
Noncurrent assets		78,325		77,543
Current assets		4,159		4,617
Noncurrent liabilities		9,229		9,264
Current liabilities		2,297		2,260
Equity		70,958		70,636
Carrying amount of assets in VTI, Bow Arken and Brightshare		35,479		35,318
Additional Information:
Cash and cash equivalents		2,360		2,733
Current financial liabilities(1)		56		142

(1) Excluding trade, other payables and provisions.

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Income Statements:
Revenues		2,084		1,949
Depreciation and amortization		818		564
Interest income		52		9
Provision for (benefit from) income tax		67		148
Net income / Total comprehensive income		31		239
Equity share in net income of VTI, Bow Arken and Brightshare		15		43

The carrying value of PLDT’s investment in VTI, Bow Arken and Brightshare as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
VTI, Bow Arken and Brightshare equity		70,958			70,636
PLDT's share		50	%		50	%
Share in net assets of VTI, Bow Arken and Brightshare		35,479			35,318
Share in adjustment based on liability and ETPI net cash balance		442			442
Reimbursements		(236	)		(230	)
Share in SMC's advances in VTI, Bow Arken and Brightshare		(840	)		(840	)
Noncontrolling interests		(1,028	)		(952	)
Others		(218	)		(154	)
Carrying amount of interest in VTI, Bow Arken and Brightshare		33,599			33,584

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Notice of Transaction filed with the PCC

On May 30, 2016, prior to closing the transaction, each of PLDT, Globe and SMC submitted notices of the VTI, Bow Arken and Brightshare Transaction (respectively, the VTI Notice, the Bow Arken Notice and the Brightshare Notice and collectively, the Notices) to the PCC pursuant to the Philippine Competition Act, or PCA, and Circular No. 16-001 and Circular No. 16-002 issued by the PCC, or the Circulars. As stated in the Circulars, upon receipt by the PCC of the requisite notices, each of the said transactions shall be deemed approved in accordance with the Circulars.

Subsequently, on June 7, 2016, PLDT and the other parties to the said transactions received separate letters dated June 6 and 7, 2016 from the PCC which essentially stated, that: (a) with respect to VTI Transaction, the VTI Notice is deficient and defective in form and substance, therefore, the VTI Transaction is not “deemed approved” by the PCC, and that the missing key terms of the transaction are critical since the PCC considers certain agreements as prohibited and illegal; and (b) with respect to the Bow Arken and Brightshare Transactions, the compulsory notification under the Circulars does not apply and that even assuming that the Circulars apply, the Bow Arken Notice and the Brightshare Notice are deficient and defective in form and substance.

On June 10, 2016, PLDT submitted its response to the PCC’s letter articulating its position that the VTI Notice is adequate, complete and sufficient and compliant with the requirement under the Circulars and does not contain false material information; as such, the VTI Transaction enjoys the benefit of Section 23 of the PCA. Therefore, the VTI Transaction is deemed approved and cannot be subject to retroactive review by the PCC. Moreover, the parties have taken all necessary steps, including the relinquishment/return of certain frequencies and co-use of the remaining frequencies by Smart and Belltel and Globe and Belltel as discussed above, to ensure that the VTI Transaction will not substantially prevent, restrict or lessen competition to violate the PCA. Nevertheless, in the spirit of cooperation and for transparency, the parties voluntarily submitted to the PCC, among others, copies of the Sale and Purchase Agreements for the PCC’s information and reference.

In a letter dated June 17, 2016, the PCC required the parties to further submit additional documents relevant to the co-use arrangement and the frequencies subject thereto, as well as other definitive agreements relating to the VTI Transaction. It also disregarded the deemed approved status of the VTI Transaction in violation of the Circulars which the PCC itself issued, and insisted that it will conduct a full review, if not investigation of the said transaction under the different operative provisions of the PCA.

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In the Matter of the Petition against the PCC

On July 12, 2016, PLDT filed before the Court of Appeals, or CA, a Petition for Certiorari and Prohibition (With Urgent Application for the Issuance of a Temporary Restraining Order, or TRO, and/or Writ of Preliminary Injunction), or the Petition, against the PCC. The Petition sought to enjoin the PCC from proceeding with the review of the acquisition by PLDT and Globe of equity interest, including outstanding advances and assumed liabilities, in the telecommunications business of SMC, or the SMC Transactions, and performing any act which challenges or assails the “deemed approved” status of the SMC Transactions. On July 19, 2016, the 12th Division of the CA, issued a Resolution directing the PCC through the Office of the Solicitor General, or the OSG, to file its Comment within a non-extendible period of 10 days from notice and show cause why the Petition should not be granted. On August 11, 2016, the PCC through the OSG, filed its Comment to the Petition (With Opposition to Petitioner’s Application for a Writ of Preliminary Injunction).

On August 19, 2016, PLDT filed its Reply to Respondent PCC’s Comment. On August 26, 2016, the CA issued a Writ of Preliminary Injunction enjoining and directing the respondent PCC, their officials and agents, or persons acting for and in their behalf, to cease and desist from conducting further proceedings for the pre-acquisition review and/or investigation of the SMC Transactions based on its Letters dated June 7, 2016 and June 17, 2016 during the pendency of the case and until further orders are issued by the CA. On September 14, 2016, the PCC filed a Motion for Reconsideration of the CA’s Resolution. During this time, Globe moved to have its Petition consolidated with the PLDT Petition. In a Resolution promulgated on October 19, 2016, the CA, or the First CA Resolution: (i) accepted the consolidation of Globe’s petition versus the PCC (CA G.R. SP No. 146538) into PLDT’s petition versus the PCC (CA G.R. SP No. 146528) with the right of replacement; (ii) admitted the Comment dated October 4, 2016 filed by the PCC; (iii) referred to the PCC for Comment (within 10 days from receipt of notice) PLDT’s Urgent Motion for the Issuance of a Gag Order dated September 30, 2016 and to cite the PCC for indirect contempt; and (iv) ordered all parties to submit simultaneous memoranda within a non-extendible period of 15 days from notice. On November 11, 2016, PLDT filed its Memorandum in compliance with the CA’s Resolution.

On February 17, 2017, the CA issued a Resolution, or the Second CA Resolution, denying PCC’s Motion for Reconsideration dated September 14, 2016, for lack of merit. The CA denied PLDT’s Motion to Cite the PCC for indirect Contempt for being premature. In the same Resolution, as well as in a separate Gag Order attached to the Resolution, the CA granted PLDT’s Urgent Motion for the Issuance of a Gag Order and directed PCC to remove immediately from its website its preliminary statement of concern and submit its compliance within five days from receipt thereof. All the parties were ordered to refrain, cease and desist from issuing public comments and statements that would violate the sub judice rule and subject them to indirect contempt of court. The parties were also required to comment within ten days from receipt of the Second CA Resolution, on the Motion for Leave to Intervene and to Admit the Petition-in-Intervention dated February 7, 2017 filed by Citizenwatch, a non-stock and non-profit association.

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On April 18, 2017, the PCC filed before the Supreme Court a Petition to Annul the Writ of Preliminary Injunction issued by the CA’s 12th Division on August 26, 2016 restraining PCC’s review of the SMC Transactions. In compliance with the Supreme Court’s Resolution issued on April 25, 2017, PLDT on July 3, 2017 filed its Comment dated July 1, 2017 to the PCC’s Petition. The Supreme Court issued a Resolution dated July 18, 2017 noting PLDT’s Comment and requiring the PCC to file its Consolidated Reply. The PCC filed a Motion for Extension of Time and prayed that it be granted until October 23, 2017 to file its Consolidated Reply. The PCC filed its Consolidated Reply to the: (1) Comment filed by PLDT; and (2) Motion to Dismiss filed by Globe on November 7, 2017. The same was noted by Supreme Court in a Resolution dated November 28, 2017.

During the intervening period, the CA rendered its Decision on October 18, 2017, granting the Petitions filed by PLDT and Globe. In its Decision, the CA: (i) permanently enjoined the PCC from conducting further proceedings for the pre-acquisition review and/or investigation of the SMC Transactions based on its Letters dated June 7, 2016 and June 17, 2016; (ii) annulled and set aside the Letters dated June 7, 2016 and June 17, 2016; (iii) precluded the PCC from conducting a full review and/or investigation of the SMC Transactions; (iv) compelled the PCC to recognize the SMC Transactions as deemed approved by operation of law; and (v) denied the PCC’s Motion for Partial Reconsideration dated March 6, 2017, and directed the PCC to permanently comply with the CA’s Resolution dated February 17, 2017 requiring PCC to remove its preliminary statement of concern from its website. The CA clarified that the deemed approved status of the SMC Transactions does not, however, remove the power of PCC to conduct post-acquisition review to ensure that no anti-competitive conduct is committed by the parties.

On November 7, 2017, PCC filed a Motion for Additional Time to file a Petition for Review on Certiorari before the Supreme Court. The Supreme Court granted PCC’s motion in its Resolution dated November 28, 2017.

On December 13, 2017, PLDT, through counsel, received the PCC’s Petition for Review on Certiorari filed before the Supreme Court assailing the CA’s Decision dated October 18, 2017. In this Petition, the PCC raised procedural and substantive issues for resolution. Particularly, the PCC assailed the issuance of the writs of certiorari, prohibition, and mandamus considering that the determination of the sufficiency of the Notice pursuant to the Transitory Rules involves the exercise of administrative and discretionary prerogatives of the PCC. On the substantive aspect, the PCC argued that the CA committed grave abuse of discretion in ruling that the SMC Transactions should be accorded the deemed approved status under the Transitory Rules. The PCC maintained that the Notice of the SMC Transactions was defective because it failed to provide the key terms thereof.

In the Supreme Court Resolution dated November 28, 2017, which was received by PLDT on December 27, 2017, the Supreme Court decided to consolidate the PCC’s Petition to Annul the Writ of Preliminary Injunction issued by the CA’s 12th Division with that of its Petition for Review on Certiorari assailing the decision of the CA on the merits.

On February 13, 2018, PLDT received Globe’s Motion for Leave to File and Admit the Attached Rejoinder, which was denied by the Supreme Court in a Resolution dated March 13, 2018. On February 27, 2018, PLDT received notice of the Supreme Court’s Resolution dated January 30, 2018 directing PLDT and Globe to file their respective Comments to the Petition for Review on Certiorari without giving due course to the same.

On April 5, 2018, PLDT filed its Comment on the Petition for Review on Certiorari. On April 11, 2018, PLDT received Globe’s Comment/Opposition [Re: Petition for Review on Certiorari dated December 11, 2017] dated March 4, 2018. On April 24, 2018, PLDT received the PCC’s Motion to Expunge [Respondent PLDT’s Comment on the Petition for Review on Certiorari] dated April 18, 2018. On May 9, 2018, PLDT filed a Motion for Leave to File and Admit the Attached Comment on the Petition for Review on Certiorari dated May 9, 2018.

On June 5, 2018, PLDT received the Supreme Court’s Resolution dated April 24, 2018 granting the motion for extension of PLDT and noting its Comment on the Petition for Review on Certiorari filed in compliance with the Supreme Court’s Resolution dated January 30, 2018 and requiring the PCC to file a Consolidated Reply to the comments within ten days from notice. On June 20, 2018, PLDT, through counsel, received PCC’s Urgent Omnibus Motion for: (1) Partial Reconsideration of the Resolution dated April 24, 2018; and (2) Additional Time dated June 11, 2018.

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PCC filed its Consolidated Reply Ad Cautelam dated July 16, 2018, which was received on July 19, 2018. On July 26, 2018, PLDT received a Resolution dated June 19, 2018 where the Supreme Court resolved to grant PLDT’s Motion for Leave to File and Admit the Attached Comment, and PCC’s Motion for Extension to file a Comment/Opposition on/to PLDT’s Motion for Leave to File and Admit the Attached Comment.

On August 14, 2018, PLDT received a Resolution dated July 3, 2018 where the Supreme Court resolved to deny the PCC’s motion to reconsider the Resolution dated April 24, 2018 and grant its motion for extension of time to file its reply to PLDT’s and Globe’s Comments, with a warning that no further extension will be given. On August 16, 2018, PLDT received a Resolution dated June 5, 2018 where the Supreme Court noted without action the Motion to Expunge by PCC in view of the Resolution dated April 24, 2018 granting the motion for extension of time to file a comment on the petition in G.R. No. 234969.

On October 4, 2018, PLDT received a Resolution dated August 7, 2018 where the Supreme Court noted the PCC’s Consolidated Reply Ad Cautelam.

On July 2, 2020, PLDT received a Resolution dated March 3, 2020 requiring petitioners in G.R. No. 242352 (Atty. Joseph Lemuel Baligod Baquiran and Ferdinand C. Tecson v. NTC, et al.,) to file a Consolidated Reply to the comments on the petition within 10 days from notice.

On September 2, 2020, PLDT received a Resolution dated June 30, 2020 where the Supreme Court resolved to Await the Consolidated Reply of the petitioners in G.R. No. 242352 as required in the resolution dated March 3, 2020.

On November 16, 2020, PLDT received a Resolution of the Supreme Court dated October 6, 2020 which granted the motions filed by the petitioners in G.R. No. 242352 to extend the filing of the Consolidated Reply until September 29, 2020.

On February 8, 2021, PLDT received a Resolution where the Supreme Court noted the Consolidated Reply dated September 29, 2020 filed by the Petitioners in G.R. 242352.

The consolidated petitions remain pending as of the date of this report.

VTI’s Tender Offer for the Minority Stockholders’ Shares in Liberty Telecom Holdings, Inc., or LIB

On August 18, 2016, the Board of Directors of VTI approved the voluntary tender offer to acquire the common shares of LIB, a subsidiary of VTI, which are held by the remaining minority shareholders, and the intention to delist the shares of LIB from the PSE.

On August 24, 2016, VTI, owner of 87.12% of the outstanding common shares of LIB, undertook the tender offer to purchase up to 165.88 million common shares owned by the remaining minority shareholders, representing 12.82% of LIB’s common stock, at a price of Php2.20 per share. The tender offer period ended on October 20, 2016, the extended expiration date, with over 107 million shares tendered, representing approximately 8.3% of LIB’s issued and outstanding common shares. The tendered shares were crossed at the PSE on November 4, 2016, with the settlement on November 9, 2016.

The tender offer was undertaken in compliance with the PSE’s requirements for the voluntary delisting of LIB common shares from the PSE. The voluntary delisting of LIB was approved by the PSE effective November 21, 2016.

Following the conclusion of the tender offer, VTI now owns more than 95% of the issued and outstanding common shares, and 99.1% of the total issued and outstanding capital stock, of LIB.

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Investment of Smart in TCI

On February 8, 2019, the R.A. 11202 or the “Mobile Number Portability, or MNP, Act” was enacted into a law. This act allows subscribers to change their subscription plans or service providers while allowing the subscribers to retain their current mobile numbers. In addition, no interconnection fee or charge shall be imposed for mobile domestic calls and SMS made by a subscriber. The act shall take effect fifteen days after its publication in the Official Gazette or in any newspaper of general circulation. Within 90 days from the effectivity of the act, the NTC, as the government entity mandated to implement nationwide MNP, shall coordinate with the Department of Information and Communications Technology, The National Privacy Commission, the Philippine Competition Commission, and other concerned agencies, and promulgate rules and regulations and other issuances to ensure the effective implementation of the Act.

Subsequently, Smart, along with Globe and Dito Telecommunity, Inc., or DITO, entered into an agreement to form a joint venture that will address the requirements of the MNP Act. The joint venture company, TCI was incorporated in the Philippines on December 26, 2019 and registered with the Philippine SEC on January 17, 2020. The primary purpose of the joint venture is to serve as a clearing house for MNP. TCI would ensure smooth implementation of mobile number porting services. On December 23, 2019, Smart subscribed Php10 million representing 33.3% equity interest in TCI, which is equivalent to 10 million shares at a subscription price of Php1.00 per share.

In December 2020, Smart subscribed to additional 30 million shares, at a subscription price of Php1.00 per share, representing its 33.33% equity interest. The subscription price of Php30 million was settled in July 2021, upon TCI’s capital call.

The core services of MNP was made available by TCI on September 30, 2021.This allows subscribers to change their subscription plans or service providers while allowing the subscribers to retain their current mobile numbers.

Smart’s investment in TCI is recorded under investment in joint venture and is carried in the PLDT’s consolidated financial statements at equity method. The investment in TCI amounted to Php40 million each as at June 30, 2023 and December 31, 2022.

Investment of PGIH in Multisys

On November 8, 2018, the PLDT Board of Directors approved the investment of Php2,150 million in Multisys for a 45.73% equity interest through its wholly-owned subsidiary, PGIH. Multisys is a Philippine software development and IT solutions provider engaged in designing, developing, implementing business system solutions and services covering courseware, webpage development and designing user-defined system programming. PGIH’s investment involves the acquisition of new and existing shares.

On December 3, 2018, PGIH completed the closing of its investment in Multisys. Out of the Php550 million total consideration for the acquisition of existing shares, PGIH paid Php523 million to the owners of Multisys. On June 3, 2019, the balance of the acquisition consideration amounting to Php27 million was fully paid. Further, PGIH invested Php800 million into Multisys as a deposit for future stock subscription pending the approval by the Philippine SEC of the capital increase of Multisys, and a balance of another Php800 million subscription payable was outstanding. On February 1, 2019, the Philippine SEC approved the capital increase of Multisys.

PLDT has engaged an independent appraiser to determine the fair value adjustments relating to the acquisition. As at December 3, 2018, our share in the fair value of the identifiable net assets and liabilities, which include technologies and customer relationships, amounted to Php1,357 million. Goodwill of Php1,031 million has been determined based on the final results of the independent valuation. Goodwill arising from this acquisition and carrying amount of the identifiable net assets and liabilities, including deferred tax liability, and the related amortization through equity in net earnings were retrospectively adjusted accordingly.

Based on its 2019 performance, the owners of Multisys are entitled to Php170 million out of the total Php230 million contingent consideration. Subsequently on April 6, 2020 and December 1, 2020, PGIH paid the owners Php153 million and Php17 million, respectively. The difference of the lower payout and the original contingent consideration amounting to Php60 million was closed to profit and loss.

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On October 6, 2021, PGIH paid Php180 million of the subscription payable to Multisys.

On various dates in 2022, PGIH partially paid Php359 million, out of Php620 million, of the subscription payable to Multisys.

In the first quarter of 2023, PGIH partially paid Php210 million, out of Php261 million, of the subscription payable to Multisys.

On April 4, 2023, the remaining balance of subscription payable to Multisys amounting to Php51 million was fully paid for by PGIH.

The subscription payable of PGIH to Multisys amounted to nil and Php261 million as at June 30, 2023 and December 31, 2022, respectively.

Acquisition of Additional Interest in Multisys/Business Combination

On July 29, 2022, PGIH acquired additional 227 common shares of Multisys from the existing holder, representing a 4.99% interest, for a total consideration of Php248 million, of which Php100 million was paid on the same day. In August 2022, PGIH paid Php136 million of the balance of consideration. The remaining balance of Php12 million is still outstanding as at June 30, 2023. As of and following this acquisition, PGIH owns 2,307 common shares representing 50.72% equity interest in Multisys which is considered a controlling interest, and in accordance with the Restated Shareholders’ Agreement that the parties signed on the same date, PGIH is entitled to nominate three out of the five directors in Multisys who shall manage and control the operations of Multisys. Consequently, the results of operations and financial position of Multisys were consolidated with the PLDT Group starting in the fourth quarter of 2022.

The fair values of the identifiable assets and liabilities of Multisys at the date of acquisition are as follows:

	Fair Values Recognized on Acquisition
	(in million pesos)
Assets:
Property and equipment		100
Right-of-use assets		57
Intangible assets – net
Technologies		449
Customer contracts and relationships		220
Deferred tax assets – net		217
Work-in-progress		77
Other current assets		247
Cash and cash equivalents		55
Trade and other receivables – net		261
Total assets		1,684
Liabilities:
Trade and other payables		242
Deferred tax liability		96
Lease liability		46
Retirement benefit obligation		7
Total liabilities		391
		1,293
Goodwill from the acquisition (Note 14)		1,565
Total identifiable assets acquired		2,858
Noncontrolling interest		633
Purchase consideration transferred		2,225
Cash paid		248
Fair value of previous interest		1,977
		2,225

The goodwill of Php1,565 million pertains to the difference between the total consideration and the fair value of the net assets acquired and can be attributed to financial and operational synergies. The fair value and net

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amount of trade and other receivables amounted to Php261 million and it is expected that the full contractual amounts can be collected. See Note 14 – Goodwill and Intangible Assets.

Our consolidated net income would have decreased by Php776 million for the year ended December 31, 2022 had the acquisition of Multisys actually taken place on January 1, 2022. Total revenues and net loss of Multisys included in our consolidated income statement from July 29, 2022 to December 31, 2022 amounted to Php155 million and Php569 million, respectively.

Investment of PCEV in Maya Bank

Pursuant to the Investment Agreement dated September 21, 2021, PCEV, VIH and Voyager have agreed to invest in Maya Bank, to be carried out through the following transactions:

(i)PCEV and VIH to subscribe to VFC shares and PFC shares (collectively, the Bank HoldCos shares);

(ii)VFC and PFC (collectively, the Bank HoldCos) and Voyager to subscribe to Maya Bank shares;

(iii)VIH to subscribe to convertible bonds to be issued by the Bank HoldCos, which are convertible to common shares of the Bank HoldCos; and

(iv)VIH to subscribe to exchangeable bonds to be issued by the Bank HoldCos, which are exchangeable to common shares of Maya Bank held by the Bank HoldCos.

On September 24, 2021, PCEV entered into separate subscription agreements with VFC and PFC to subscribe to 8.9 million Common B shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

Based on the assessment and accounting principles of control as a basis of financial consolidation provided in PFRS 10, PCEV cannot demonstrate control over the Bank HoldCos requiring consolidation. PCEV will account for these investments as joint venture in accordance with PFRS 11 and PAS 28. See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions.

On January 20, 2022, PCEV entered into another subscription agreements with VFC and PFC to subscribe to 6.2 million Common B shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

On July 29, 2022, PCEV entered into another subscription agreements with VFC and PFC to subscribe to 2.7 million Common B shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

On February 17, 2023, PCEV entered into another subscription agreements with VFC and PFC to subscribe to 8.0 million Common B Shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

On May 30, 2023, PCEV entered into another subscription agreements with VFC and PFC to subscribe to 5.3 million Common B Shares each at a subscription price of Php0.10 per share, representing 60% voting rights and 1.48% economic interest in the Bank HoldCos.

PCEV’s investment in Bank HoldCos are recorded under investment in joint venture and are carried in the PLDT’s consolidated financial statements at equity method. As at June 30, 2023 and December 31, 2022, PCEV’s investment in each of the Bank HoldCos amounted to nil.

F-102

12.Debt Instruments at Amortized Cost

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Retail Treasury Bonds		440		440
BDO Asean Bonds		100		100
Fixed Rate Treasury Notes, or FXTN		55		56
Time deposits		—		—
		595		596
Less: Current portion of debt instrument at amortized cost (Note 27)		200		—
Noncurrent portion of debt instrument at amortized cost (Note 27)		395		596

Retail Treasury Bonds

On March 9, 2021, Smart purchased at par a three-year Retail Treasury Bond Tranche 25 with face value of Php100 million maturing on March 9, 2024. The bond has a gross coupon rate of 2.375% payable on a quarterly basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php950 thousand and Php945 thousand for the six months ended June 30, 2023 and 2022, respectively. The carrying value of this investment amounted to Php100 million each as at June 30, 2023 and December 31, 2022.

On December 2, 2021, PLDT and Smart purchased at par a 5.5-year Retail Treasury Bond Tranche 26 with face value of Php300 million maturing on June 2, 2027. The bond has a gross coupon rate of 4.6250% payable on a quarterly basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php5 million for each of the six months ended June 30, 2023 and 2022. The carrying value of this investment amounted to Php300 million each as at June 30, 2023 and December 31, 2022.

On March 4, 2022, PLDT and Smart purchased at par a five-year Retail Treasury Bond Tranche 27 with face value of Php40 million maturing on March 4, 2027. The bond has a gross coupon rate of 4.8750% payable on a quarterly basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php780 thousand and Php507 thousand for the six months ended June 30, 2023 and 2022, respectively. The carrying value of this investment amounted to Php40 million each as at June 30, 2023 and December 31, 2022.

On September 29, 2022, Smart purchased at premium a three-month Retail Treasury Bond 05-11 with face value of Php5 million which matured on December 4, 2022 at a gross coupon rate of 4.6250%. The bond was classified as debt instrument at amortized cost.

BDO ASEAN Sustainable Bond

On January 28, 2022, PLDT and Smart purchased at par a two-year BDO Fixed Rate ASEAN Sustainability Bond Due 2024 with face value of Php100 million maturing on January 28, 2024. The bond has a gross coupon rate of 2.90% payable on a quarterly basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php1 million and Php952 thousand for the six months ended June 30, 2023 and 2022, respectively. The carrying value of this investment amounted to Php100 million each as at June 30, 2023 and December 31, 2022.

F-103

FXTN

On June 3, 2022, Smart purchased at a discount a three-year FXTN 03-27 with face value of Php25 million maturing on April 7, 2025. The bond has a gross coupon rate of 4.25% payable on a semi-annual basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php423 thousand and Php333 thousand for the six months ended June 30, 2023 and 2022, respectively. The carrying value of this investment amounted to Php25 million each as at June 30, 2023 and December 31, 2022.

On June 16, 2022, Smart purchased at a premium a seven-year FXTN 0une 16, 20227-67 with face value of Php10 million maturing on May 19, 2029. The bond has a gross coupon rate of 6.5% payable on a semi-annual basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php260 thousand and Php101 thousand for the six months ended June 30, 2023 and 2022, respectively. The carrying value of this investment amounted to Php10 million each as at June 30, 2023 and December 31, 2022.

On July 7, 2022, PLDT and Smart purchased at a premium a four-year FXTN 07-62 with face value of Php20 million maturing on February 14, 2026. The bond has a gross coupon rate of 6.25% payable on a semi-annual basis. The bond is classified as debt instrument at amortized cost. Interest income, net of withholding tax, recognized on this investment amounted to Php492 thousand for the six months ended June 30, 2023. The carrying value of this investment amounted to Php20 million each as at June 30, 2023 and December 31, 2022.

Time Deposits

In July 2020, PLDT and Smart invested US$2.0 million each in a two-year time deposit with Landbank of the Philippines, or LBP, which matured on July 29, 2022 and August 1, 2022, respectively, at a gross coupon rate of 2.00%. These long-term fixed rate time deposits paid interest on a yearly basis or an estimate of 360 days. Interest income, net of withholding tax, recognized on this investment amounted to nil, and US$34 thousand, or Php2 million, for the six months ended June 30, 2023 and 2022, respectively. The carrying value of this investment amounted to nil as at June 30, 2023 and December 31, 2022.

13.Investment Properties

Changes in investment properties account for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

	Land			Land Improvements			Building			Total
	(in million pesos)
June 30, 2023 (Unaudited)
Balances at beginning and end of the period		858			2			155			1,015
Net losses from fair value adjustments charged to profit or loss		—			—			(2	)		(2	)
Transfers to property and equipment		—			—			(5	)		(5	)
Balances at end of the period		858			2			148			1,008
December 31, 2022 (Audited)
Balances at beginning and end of the year		771			3			155			929
Net gains (losses) from fair value adjustments charged to profit or loss		96			(1	)		2			97
Transfers from (to) property and equipment		2			—			(2	)		—
Disposals during the year		(11	)		—			—			(11	)
Balances at end of the year		858			2			155			1,015

Investment properties, which consist of land, land improvements and building, are stated at fair values, which have been determined based on appraisal performed by an independent firm of appraisers, an industry specialist in valuing these types of investment properties.

The valuation for land was based on a market approach valuation technique using price per square meter ranging from Php50 to Php36 thousand. The valuation for building and land improvements was based on a cost approach valuation technique using current material and labor costs for improvements based on external and independent reviewers.

F-104

We have determined that the highest and best use of some of the idle or vacant land properties at the measurement date would be to convert the properties for residential or commercial development. The properties are not being used for strategic reasons.

We have no restrictions on the realizability of our investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

Repairs and maintenance expenses related to investment properties that do not generate rental income amounted to Php59 million and Php45 million for the six months ended June 30, 2023 and 2022, respectively.

Rental income relating to investment properties that are being leased and included as part of revenues amounted to Php28 million and Php26 million for the six months ended June 30, 2023 and 2022, respectively. See Note 10 – Leases.

The above investment properties were categorized under Level 2 and Level 3 of the fair value hierarchy. There were no transfers in and out of Level 2 and Level 3 of the fair value hierarchy.

Significant increases (decreases) in price per square meter for land, current material and labor costs of improvements would result in a significantly higher (lower) fair value measurement.

F-105

14.Goodwill and Intangible Assets

Changes in goodwill and intangible assets account for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

	Intangible Assets with		Intangible Assets with Finite Life													Total Intangible Assets with				Total								Total Goodwill and
	Indefinite Life		Trademark		Franchise		Licenses		Customer List		Spectrum		Others			Finite Life				Intangible Assets				Goodwill				Intangible Assets
			(in million pesos)
June 30, 2023 (Unaudited)
Costs:
Balances at beginning and end of the    period		220		4,505		3,016		135		4,703		1,205		1,320			14,884				15,104				63,595				78,699
Accumulated amortization and    impairment:
Balances at beginning of the period		—		4,505		2,078		135		4,703		1,205		870			13,496				13,496				654				14,150
Amortization during the period    (Notes 4 and 5)		—		—		93		—		—		—		17			110				110				—				110
Translation and other adjustments		—		—		—		—		—		—		(6	)		(6	)			(6	)			—				(6	)
Balances at end of the period		—		4,505		2,171		135		4,703		1,205		881			13,600				13,600				654				14,254
Net balances at end of the period		220		—		845		—		—		—		439			1,284				1,504				62,941				64,445
Estimated useful lives (in years)		—		—		16		—		—		—	5-10				—				—				—				—
Remaining useful lives (in years)		—		—		5		—		—		—	4-9				—				—				—				—
December 31, 2022 (Audited)
Costs:
Balances at beginning and end of the    year		—		4,505		3,016		135		4,703		1,205		799			14,363				14,363				62,033				76,396
Additions during the year		220		—		—		—		—		—		521			521				741				1,565				2,306
Disposals		—		—		—		—		—		—		—											(3	)			(3	)
Balances at end of the year		220		4,505		3,016		135		4,703		1,205		1,320			14,884		—		15,104		—		63,595		—		78,699
Accumulated amortization and    impairment:
Balances at beginning of the year		—		4,505		1,892		131		4,703		1,205		771			13,207				13,207				654				13,861
Amortization during the year    (Notes 4 and 5)		—		—		186		4		—		—		38			228				228				—				228
Business combinations		—		—		—		—		—		—		71			71				71				—				71
Translation and other adjustments		—		—		—		—		—		—		(10	)		(10	)			(10	)			—				(10	)
Balances at end of the year		—		4,505		2,078		135		4,703		1,205		870			13,496				13,496				654				14,150
Net balances at end of the year		220		—		938		—		—		—		450			1,388				1,608				62,941				64,549
Estimated useful lives (in years)		—		—		16		—		—		—	5-10				—				—				—				—
Remaining useful lives (in years)		—		—		5		—		—		—	4-9				—				—				—				—

F-106

The consolidated goodwill and intangible assets of our reportable segments as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023 (Unaudited)						December 31, 2022 (Audited)
	Wireless		Fixed Line		Total		Wireless		Fixed Line		Total
	(in million pesos)
Franchise		845		—		845		938		—		938
Customer list		—		220		220		—		220		220
Others		—		439		439		—		450		450
Total intangible assets		845		659		1,504		938		670		1,608
Goodwill		56,571		6,370		62,941		56,571		6,370		62,941
Total goodwill and intangible assets		57,416		7,029		64,445		57,509		7,040		64,549

The consolidated future amortization of intangible assets as at June 30, 2023 are as follows:

Year	(in million pesos)
2023(1)		172
2024		276
2025		276
2026		277
2027 and onwards		283
		1,284

(1)July 1, 2023 through December 31, 2023.

Impairment Testing of Goodwill

The organizational structure of PLDT and its subsidiaries is designed to monitor financial operations based on fixed line and wireless segmentation. Management provides guidelines and decisions on resource allocation, such as continuing or disposing of asset and operations by evaluating the performance of each segment through review and analysis of available financial information on the fixed line and wireless segments. As at June 30, 2023, the PLDT Group’s goodwill comprised of goodwill resulting from PGIH’s acquisition of Multisys in 2022, ePLDT’s acquisition of IPCDSI in 2012, PLDT’s acquisition of Digitel in 2011, ePLDT’s acquisition of ePDS in 2011, Smart’s acquisition of PDSI and Chikka in 2009, SBI’s acquisition of Airborne Access Corporation in 2008, and Smart’s acquisition of SBI in 2004.

Although revenue streams may be segregated among the companies within the PLDT Group, cash inflows are not considered coming from independent group of assets on a per Company basis due largely to the significant portion of shared and commonly used network/platform that generates related revenue. On the other hand, PLDT has the largest fixed line network in the Philippines. PLDT’s transport facilities are installed nationwide to cover both domestic and international IP backbone to route and transmit IP traffic generated by the customers. In the same manner, PLDT has the most Internet Gateway facilities which are composed of high-capacity IP routers and switches that serve as the main gateway of the Philippines to the Internet connecting to the World Wide Web. With PLDT’s network coverage, other fixed line subsidiaries share the same facilities to leverage on a Group perspective.

Because of the significant common use of network facilities among fixed line and wireless companies within the Group, management deems that the Wireless and Fixed Line units are the lowest CGUs to which goodwill is to be allocated and tested for impairment given that the Fixed Line and Wireless operations generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

The recoverable amount of the Wireless and Fixed Line CGUs have been determined using the value- in-use approach calculated using cash flow projections based on the financial budgets approved by the Board of Directors. The post-tax discount rates applied to cash flow projections are 7.38% for the Wireless and Fixed Line CGUs. Cash flows beyond the projection period of three years are determined using a 2% growth rate for the Wireless and Fixed Line CGUs, which is the same as the long-term average growth rate for the telecommunications industry. Other key assumptions used in the cash flow projections include revenue growth rate and capital expenditures.

Based on the assessment of the VIU of the Wireless and Fixed Line CGUs, the recoverable amount of the Wireless and Fixed Line CGUs exceeded their carrying amounts, hence, no impairment was recognized in relation to goodwill as at June 30, 2023 and December 31, 2022.

F-107

The accumulated impairment balance as at June 30, 2023 and December 31, 2022 both comprised of Php438 million from PLDT’s acquisition of Digitel and Php216 million from ePLDT’s acquisition of AGS.

F-108

15.Cash and Cash Equivalents

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Cash on hand and in banks (Note 27)		7,510		16,533
Temporary cash investments (Note 27)		8,675		8,678
		16,185		25,211

Cash in banks earn interest at prevailing bank deposit rates. Temporary cash investments are made for varying periods of up to three months depending on our immediate cash requirements and earn interest at the prevailing temporary cash investment rates. Due to the short-term nature of such transactions, the carrying value approximates the fair value of our temporary cash investments. See Note 27 – Financial Assets and Liabilities.

Interest income earned from cash in banks and temporary cash investments amounted to Php237 million and Php85 million for the six months ended June 30, 2023 and 2022, respectively. See Note 5 – Income and Expenses.

F-109

16. Trade and Other Receivables

As at June 30, 2023 and December 31, 2022, this account consists of receivables from:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Retail subscribers (Note 27)		18,454		17,216
Corporate subscribers (Note 27)		14,331		15,151
Foreign administrations (Note 27)		1,108		1,058
Domestic carriers (Note 27)		267		296
Dealers, agents and others (Note 27)		6,427		6,195
		40,587		39,916
Less: Allowance for expected credit losses		15,492		13,661
		25,095		26,255

Receivables from foreign administrations and domestic carriers represent receivables based on interconnection agreements with other telecommunications carriers. The aforementioned amounts of receivables are shown net of related payables to the same telecommunications carriers where a legal right of offset exists and settlement is facilitated on a net basis.

Receivables from dealers, agents and others consist mainly of receivables from credit card companies, dealers and distributors having collection arrangements with the PLDT Group, dividend receivables and advances to affiliates.

Trade and other receivables are non-interest bearing and generally have settlement terms of 30 to 180 days.

For terms and conditions relating to related party receivables, see Note 24 – Related Party Transactions.

See Note 27 – Financial Assets and Liabilities on credit risk of trade receivables to understand how we manage and measure credit quality of trade receivables that are neither past due nor impaired.

F-110

The following table explains the changes in the allowance for expected credit losses as at June 30, 2023 and December 31, 2022:

	Retail Subscribers								Corporate Subscribers								Foreign Administrations					Domestic Carriers					Dealers, Agents and Others						Total
	Stage 1		Stage 2			Stage 3			Stage 1		Stage 2			Stage 3			Stage 2		Stage 3			Stage 2		Stage 3			Stage 2			Stage 3			Stage 1		Stage 2			Stage 3
			Lifetime ECL								Lifetime ECL						Lifetime ECL					Lifetime ECL					Lifetime ECL								Lifetime ECL						Total
	(in million pesos)
June 30, 2023 (Unaudited)
Balances at beginning    of the period		—		1,866			5,023			—		1,717			3,382			1		133			—		1			652			886			—		4,236			9,425			13,661
Provisions and other    adjustments from    continuing operations    (Notes 2, 3 and 5)		—		(288	)		1,847			—		296			66			10		7			1		—			—			6			—		19			1,926			1,945
Translation adjustments		—		—			—			—		(4	)		(3	)		—		—			—		—			—			—			—		(4	)		(3	)		(7	)
Reclassifications and reversals		—		(164	)		129			—		(28	)		98			—		(6	)		—		—			(128	)		(8	)		—		(320	)		213			(107	)
Balances at end of the period		—		1,414			6,999			—		1,981			3,543			11		134			1		1			524			884			—		3,931			11,561			15,492
December 31, 2022 (Audited)
Balances at beginning    of the year		—		1,573			6,466			—		1,378			3,330			—		121			—		14			87			866			—		3,038			10,797			13,835
Provisions and other    adjustments from    continuing operations    (Notes 2, 3 and 5)		—		782			3,420			—		397			489			1		33			—		(13	)		3			14			—		1,183			3,943			5,126
Provisions and other    adjustments from    discontinued operations    (Notes 2, 3 and 5)		—		—			—			—		30			—			—		—			—		—			—			—			—		30			—			30
Reclassifications and reversals		—		(489	)		578			—		(129	)		(27	)		—		—			—		—			562			6			—		(56	)		557			501
Translation adjustments		—		—			—			—		41			24			—		—			—		—			—			—			—		41			24			65
Write-offs		—		—			(5,441	)		—		—			(434	)		—		(21	)		—		—			—			—			—		—			(5,896	)		(5,896	)
Balances at end of the year		—		1,866			5,023			—		1,717			3,382			1		133			—		1			652			886			—		4,236			9,425			13,661

The significant changes in the balances of trade and other receivables and contract assets are disclosed in Note 5 – Income and Expenses, while the information about the credit exposures are disclosed in Note 27 – Financial Assets and Liabilities.

F-111

17.Inventories and Supplies

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Commercial:
At net realizable value(1)		1,885		2,110
At cost		2,220		2,455
Network:
At net realizable value(1)		508		577
At cost		1,617		1,727
Others:
At net realizable value(1)		598		881
At cost		1,107		1,604
Total inventories and supplies at the lower of cost or net realizable value		2,991		3,568

(1) Amounts are net of allowance for inventory obsolescence and write-downs.

The cost of inventories and supplies recognized as expense for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Cost of sales		5,521		5,007
Repairs and maintenance		214		429
Provisions (Note 5)		71		503
Selling and promotions		—		4
		5,806		5,943

Changes in the allowance for inventory obsolescence and write-down for the six months ended June 30, 2023 and for the year ended December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Balances at beginning of the period		2,218			2,688
Reclassification		938			282
Provisions (Note 5)		71			414
Translation revaluation		—			2
Reversals		(39	)		(136	)
Cost of sales		(1,235	)		(1,032	)
Balances at end of the period		1,953			2,218

F-112

18.Prepayments

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Advances to suppliers and contractors		57,425		69,326
Prepaid taxes		12,513		14,911
Prepaid benefit costs (Note 25)		3,522		1,598
Prepaid fees and licenses		2,281		1,983
Prepaid repairs and maintenance		670		542
Prepaid rent		337		528
Prepaid insurance (Note 24)		108		120
Other prepayments		6,867		6,741
		83,723		95,749
Less current portion of prepayments		14,045		14,696
Noncurrent portion of prepayments		69,678		81,053

Advances to suppliers and contractors are non-interest bearing and are to be applied to contractors’ subsequent progress billings for projects.

Prepaid taxes include creditable withholding taxes and input VAT.

Prepaid benefit costs represent excess of fair value of plan assets over present value of defined benefit obligations recognized in our consolidated statements of financial position. See Note 25 – Pension and Other Employee Benefits.

Other prepayments include capitalized commission amounting to Php6,433 million and Php6,286 million as at June 30, 2023 and December 31, 2022, respectively. See Note 5 - Income and Expenses.

F-113

19.Equity

PLDT’s number of shares of subscribed and outstanding capital stock as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million)
Authorized
Non-Voting Serial Preferred Stock		388		388
Voting Preferred Stock		150		150
Common Stock		234		234
Subscribed
Non-Voting Serial Preferred Stock(1)		300		300
Voting Preferred Stock		150		150
Common Stock		219		219
Outstanding
Non-Voting Serial Preferred Stock(1)		300		300
Voting Preferred Stock		150		150
Common Stock		216		216
Treasury Stock
Common Stock		3		3

(1)300 million shares of Series IV Cumulative Non-Convertible Redeemable Preferred Stock subscribed for Php3 billion,
of which Php360 million has been paid.

There were no changes in PLDT’s capital account for the six months ended June 30, 2023 and 2022.

Preferred Stock

Non-Voting Serial Preferred Stock

On November 5, 2013, the Board of Directors designated 50,000 shares of Non-Voting Serial Preferred Stock as Series JJ 10% Cumulative Convertible Preferred Stock to be issued from January 1, 2013 to December 31, 2015, pursuant to the PLDT Subscriber Investment Plan, or SIP. On June 8, 2015, PLDT issued 870 shares of Series JJ 10% Cumulative Convertible Preferred Stock.

On January 26, 2016, the Board of Directors designated 20,000 shares of Non-Voting Serial Preferred Stock as Series KK 10% Cumulative Convertible Preferred Stock to be issued from January 1, 2016 to December 31, 2020, pursuant to the SIP.

The Series JJ and KK 10% Cumulative Convertible Preferred Stock, or SIP shares, earns cumulative dividends at an annual rate of 10%. After the lapse of one year from the last day of the year of issuance of a particular Series of 10% Cumulative Convertible Preferred Stock, any holder of such series may convert all or any of the shares of 10% Cumulative Convertible Preferred Stock held by him into fully paid and non-assessable shares of Common Stock of PLDT, at a conversion price equivalent to 10% below the average of the high and low daily sales price of a share of Common Stock of PLDT on the PSE, or if there have been no such sales on the PSE on any day, the average of the bid and the ask prices of a share of Common Stock of PLDT at the end of such day on such Exchange, in each case averaged over a period of 30 consecutive trading days prior to the conversion date, but in no case shall the conversion price be less than the par value per share of Common Stock. The number of shares of Common Stock issuable at any time upon conversion of 10% Cumulative Convertible Preferred Stock is determined by dividing Php10.00 by the then applicable conversion price.

F-114

In case the shares of Common Stock outstanding are at any time subdivided into a greater or consolidated into a lesser number of shares, then the minimum conversion price per share of Common Stock will be proportionately decreased or increased, as the case may be, and in the case of a stock dividend, such price will be proportionately decreased, provided, however, that in every case the minimum conversion price shall not be less than the par value per share of Common Stock. In the event the relevant effective date for any such subdivision or consolidation of shares of stock dividend occurs during the period of 30 trading days preceding the presentation of any shares of 10% Cumulative Convertible Preferred Stock for conversion, a similar adjustment will be made in the sales prices applicable to the trading days prior to such effective date utilized in calculating the conversion price of the shares presented for conversion.

In case of any other reclassification or change of outstanding shares of Common Stock, or in case of any consolidation or merger of PLDT with or into another corporation, the Board of Directors shall make such provisions, if any, for adjustment of the minimum conversion price and the sale price utilized in calculating the conversion price as the Board of Directors, in its sole discretion, shall deem appropriate.

At PLDT’s option, the Series JJ and KK 10% Cumulative Convertible Preferred Stock are redeemable at par value plus accrued dividends five years after the year of issuance.

The Series IV Cumulative Non-Convertible Redeemable Preferred Stock earns cumulative dividends at an annual rate of 13.5% based on the paid-up subscription price. It is redeemable at the option of PLDT at any time one year after subscription and at the actual amount paid for such stock, plus accrued dividends.

The Non-Voting Serial Preferred Stocks are non-voting, except as specifically provided by law, and are preferred as to liquidation.

All preferred stocks limit the ability of PLDT to pay cash dividends unless all dividends on such preferred stock for all past dividend payment periods have been paid and or declared and set apart and provision has been made for the currently payable dividends.

Voting Preferred Stock

On June 5, 2012, the Philippine SEC approved the amendments to the Seventh Article of PLDT’s Articles of Incorporation consisting of the sub-classification of its authorized Preferred Capital Stock into: 150 million shares of Voting Preferred Stock with a par value of Php1.00 each, and 807.5 million shares of Non-Voting Serial Preferred Stock with a par value of Php10.00 each, and other conforming amendments, or the Amendments. The shares of Voting Preferred Stock may be issued, owned, or transferred only to or by: (a) a citizen of the Philippines or a domestic partnership or association wholly-owned by citizens of the Philippines; (b) a corporation organized under the laws of the Philippines of which at least 60% of the capital stock entitled to vote is owned and held by citizens of the Philippines and at least 60% of the board of directors of such corporation are citizens of the Philippines; and (c) a trustee of funds for pension or other employee retirement or separation benefits, where the trustee qualifies under paragraphs (a) and (b) above and at least 60% of the funds accrue to the benefit of citizens of the Philippines, or Qualified Owners. The holders of Voting Preferred Stock will have voting rights at any meeting of the stockholders of PLDT for the election of directors and for all other purposes, with one vote in respect of each share of Voting Preferred Stock. The Amendments were approved by the Board of Directors and stockholders of PLDT on July 5, 2011 and March 22, 2012, respectively.

On October 12, 2012, the Board of Directors, pursuant to the authority granted to it in the Seventh Article of PLDT’s Articles of Incorporation, determined the following specific rights, terms and features of the Voting Preferred Stock: (a) entitled to receive cash dividends at the rate of 6.5% per annum, payable before any dividends are paid to the holders of Common Stock; (b) in the event of dissolution or liquidation or winding up of PLDT, holders will be entitled to be paid in full, or pro-rata insofar as the assets of PLDT will permit, the par value of such shares of Voting Preferred Stock and any accrued or unpaid dividends thereon before any distribution shall be made to the holders of shares of Common Stock; (c) redeemable at the option of PLDT; (d) not convertible to Common Stock or to any shares of stock of PLDT of any class; (e) voting rights at any meeting of the stockholders of PLDT for the election of directors and all other matters to be voted upon by the stockholders in any such meetings, with one vote in respect of each Voting Preferred Share; and (f) holders will have no pre-emptive right to subscribe for or purchase any shares of stock of any class, securities or warrants issued, sold or disposed by PLDT.

F-115

On October 16, 2012, BTFHI subscribed to 150 million newly issued shares of Voting Preferred Stock of PLDT, at a subscription price of Php1.00 per share for a total subscription price of Php150 million pursuant to a subscription agreement between BTFHI and PLDT dated October 15, 2012. As a result of the issuance of Voting Preferred Shares, the voting power of the NTT Group (NTT DOCOMO and NTT Communications), First Pacific Group and its Philippine affiliates, and JG Summit Group was reduced to 12%, 15% and 7%, respectively, as at December 31, 2022. See Note 1 – Corporate Information.

Redemption of Preferred Stock

On September 23, 2011, the Board of Directors approved the redemption, or the Redemption, of all outstanding shares of PLDT’s Series A to FF 10% Cumulative Convertible Preferred Stock, or the Series A to FF Shares, from holders of record as of October 10, 2011, and all such shares were redeemed and retired effective on January 19, 2012. In accordance with the terms and conditions of the Series A to FF Shares, the holders of Series A to FF Shares as at January 19, 2012 are entitled to payment of the redemption price in an amount equal to the par value of such shares, plus accrued and unpaid dividends thereon up to January 19, 2012, or the Redemption Price of Series A to FF Shares.

PLDT set aside Php4,029 million (the amount required to fund the redemption price for the Series A to FF Shares) in addition to Php4,143 million for unclaimed dividends on Series A to FF Shares, or a total amount of Php8,172 million, to fund the redemption of the Series A to FF Shares, or the Redemption Trust Fund, in a trust account, or the Trust Account, in the name of RCBC, as Trustee. Pursuant to the terms of the Trust Account, the Trustee will continue to hold the Redemption Trust Fund or any balance thereof, in trust, for the benefit of holders of Series A to FF Shares, for a period of ten years from January 19, 2012 until January 19, 2022. After the said date, any and all remaining balance in the Trust Account shall be returned to PLDT and revert to its general funds. Any interests on the Redemption Trust Fund shall accrue for the benefit of, and be paid from time to time, to PLDT.

On May 8, 2012, the Board of Directors approved the redemption of all outstanding shares of PLDT’s Series GG 10% Cumulative Convertible Preferred Stock, or the Series GG Shares, from the holders of record as of May 22, 2012, and all such shares were redeemed and retired effective August 30, 2012. In accordance with the terms and conditions of the Series GG Shares, the holders of the Series GG Shares as at May 22, 2012 are entitled to the payment of the redemption price in an amount equal to the par value of such shares, plus accrued and unpaid dividends thereon up to August 30, 2012, or the Redemption Price of Series GG Shares.

PLDT set aside Php236 thousand (the amount required to fund the redemption price for the Series GG Shares) in addition to Php74 thousand for unclaimed dividends on Series GG Shares, or a total amount of Php310 thousand, to fund the redemption price of the Series GG Shares, or the Redemption Trust Fund for Series GG Shares, which forms an integral part of the Redemption Trust Fund previously set aside in the Trust Account with RCBC, as Trustee. Pursuant to the terms of the Trust Account, the Trustee will continue to hold the Redemption Trust Fund for Series GG Shares or any balance thereof, in trust, for the benefit of holders of Series GG Shares, for a period of ten years from August 30, 2012, or until August 30, 2022. After the said date, any and all remaining balance in the Redemption Trust Fund for Series GG Shares shall be returned to PLDT and revert to its general funds. Any interests on the Redemption Trust Fund for Series GG Shares shall accrue for the benefit of, and be paid from time to time, to PLDT.

On January 29, 2013, the Board of Directors approved the redemption of all outstanding shares of PLDT’s Series HH 10% Cumulative Convertible Preferred Stock which were issued in 2007, or the Series HH Shares issued in 2007, from the holders of record as of February 14, 2013 and all such shares were redeemed and retired effective May 16, 2013. In accordance with the terms and conditions of the Series HH Shares issued in 2007, the holders of the Series HH Shares issued in 2007 as at February 14, 2013 are entitled to the payment of the redemption price in an amount equal to the par value of such shares, plus accrued and unpaid dividends thereon up to May 16, 2013, or the Redemption Price of Series HH Shares issued in 2007.

F-116

PLDT set aside Php24 thousand (the amount required to fund the redemption price for the Series HH Shares issued in 2007) in addition to Php6 thousand for unclaimed dividends on Series HH Shares issued in 2007, or a total amount of Php30 thousand, to fund the redemption price of the Series HH Shares issued in 2007, or the Redemption Trust Fund for Series HH Shares issued in 2007, which forms an integral part of the Redemption Trust Funds previously set aside in the Trust Account with RCBC, as Trustee. Pursuant to the terms of the Trust Account, the Trustee will continue to hold the Redemption Trust Fund for Series HH Shares issued in 2007 or any balance thereof, in trust, for the benefit of holders of Series HH Shares issued in 2007, for a period of ten years from May 16, 2013, or until May 16, 2023. After the said date, any and all remaining balance in the Redemption Trust Fund for Series HH Shares issued in 2007 shall be returned to PLDT and revert to its general funds. Any interests on the Redemption Trust Fund for Series HH Shares issued in 2007 shall accrue for the benefit of, and be paid from time to time, to PLDT.

On January 28, 2014, the Board of Directors approved the redemption of all outstanding shares of PLDT’s Series HH 10% Cumulative Convertible Preferred Stock which were issued in 2008, or the Series HH Shares issued in 2008, from the holders of record as of February 14, 2014 and all such shares were redeemed and retired effective May 16, 2014. In accordance with the terms and conditions of the Series HH Shares issued in 2008, the holders of the Series HH Shares issued in 2008 as at February 14, 2014 are entitled to the payment of the redemption price in an amount equal to the par value of such shares, plus accrued and unpaid dividends thereon up to May 16, 2014, or the Redemption Price of Series HH Shares issued in 2008.

PLDT set aside Php2 thousand (the amount required to fund the redemption price of Series HH Shares issued in 2008) in addition to Php1 thousand for unclaimed dividends on Series HH Shares issued in 2008, or a total amount of Php3 thousand, to fund the redemption of the Series HH Shares issued in 2008, or the Redemption Trust Fund for Series HH Shares issued in 2008, which forms an integral part of the Redemption Trust Funds previously set aside in the Trust Account with RCBC, as Trustee. Pursuant to the terms of the Trust Account, the Trustee will continue to hold the Redemption Trust Fund for Series HH Shares issued in 2008 or any balance thereof, in trust, for the benefit of holders of Series HH Shares issued in 2008, for a period of ten years from May 16, 2014, or until May 16, 2024. After the said date, any and all remaining balance in the Redemption Trust Fund for Series HH Shares issued in 2008 shall be returned to PLDT and revert to its general funds. Any interests on the Redemption Trust Fund for Series HH Shares issued in 2008 shall accrue for the benefit of, and be paid from time to time, to PLDT.

On January 26, 2016, the Board of Directors approved the redemption of all outstanding shares of PLDT’s Series II 10% Cumulative Convertible Preferred Stock, or the Series II Shares, from the holder of record as of February 10, 2016, and all such shares were redeemed and retired effective May 11, 2016. In accordance with the terms and conditions of the Series II Shares, the holder of the Series II Shares as at February 10, 2016 is entitled to the payment of the redemption price in an amount equal to the par value of such shares, plus accrued and unpaid dividends thereon up to May 11, 2016, or the Redemption Price of Series II Shares.

PLDT set aside Php4 thousand to fund the redemption price of Series II Shares, or the Redemption Trust Fund for Series II Shares, which forms an integral part of the Redemption Trust Funds previously set aside in the Trust Account with RCBC, as Trustee. Pursuant to the terms of the Trust Account, the Trustee will continue to hold the Redemption Trust Fund for Series II Shares or any balance thereof, in trust, for the benefit of holder of Series II Shares, for a period of ten years from May 11, 2016, or until May 11, 2026. After the said date, any and all remaining balance in the Redemption Trust Fund for Series II Shares shall be returned to PLDT and revert to its general funds. Any interests on the Redemption Trust Fund for Series II Shares shall accrue for the benefit of, and be paid from time to time, to PLDT.

As at January 19, 2012, August 30, 2012, May 16, 2013, May 16, 2014 and May 11, 2016, notwithstanding that any stock certificate representing the Series A to FF Shares, Series GG Shares, Series HH Shares issued in 2007, Series HH Shares issued in 2008 and Series II Shares, respectively, were not surrendered for cancellation, the Series A to II Shares were no longer deemed outstanding and the right of the holders of such shares to receive dividends thereon ceased to accrue and all rights with respect to such shares ceased and terminated, except only the right to receive the Redemption Price of such shares, but without interest thereon.

On January 28, 2020, the Board of Directors authorized and approved, the retirement of shares of PLDT’s Series JJ 10% Cumulative Convertible Preferred Stock, or SIP Shares, effective May 12, 2020. The record date for the determination of the holders of outstanding SIP Shares available for redemption was February 11, 2020.

F-117

On January 20, 2022, RCBC returned to PLDT the remaining unclaimed balance of the Trust Account for the Series A to FF, amounting to Php7,839 million. PLDT’s obligations to pay the trust amounts for Series A to FF had also prescribed, resulting in the recognition of income in 2022 for the same amount as the unclaimed Trust Account that RCBC returned to PLDT.

PLDT has withdrawn nil million and Php3 million from the Trust Account, representing total payments on redemption for the six months ended June 30, 2023 and 2022, respectively. The balance of the Trust Account of Php367 thousand was presented as part of “Current portion of other financial assets” as at June 30, 2023 and December 31, 2022 and the related redemption liability were presented as part of “Accrued expenses and other current liabilities” in our consolidated statements of financial position. See related disclosures below under Perpetual Notesand Note 27 – Financial Assets and Liabilities.

Common Stock/Treasury Stock

The Board of Directors approved a share buyback program of up to five million shares of PLDT’s common stock, representing approximately 3% of PLDT’s then total outstanding shares of common stock in 2008. Under the share buyback program, PLDT reacquired shares on an opportunistic basis, directly from the open market through the trading facilities of the PSE and NYSE.

As at November 2010, we had acquired a total of approximately 2.72 million shares of PLDT’s common stock at a weighted average price of Php2,388 per share for a total consideration of Php6,505 million in accordance with the share buyback program. There were no further buyback transactions subsequent to November 2010.

Dividends Declared

Our dividends declared for the six months ended June 30, 2023 and 2022 are detailed as follows:

June 30, 2023 (Unaudited)

	Date			Amount
Class	Approved	Record	Payable	Per Share		Total
				(in million pesos, except per share amounts)
Cumulative Non-Convertible    Redeemable Preferred Stock
Series IV(1)	January 31, 2023	February 27, 2023	March 15, 2023		—		12
	May 4, 2023	May 19, 2023	June 15, 2023		—		12
							24
Voting Preferred Stock	March 2, 2023	March 17, 2023	April 15, 2023		—		3
	June 13, 2023	June 28, 2023	July 15, 2023		—		3
							6
Common Stock
Regular Dividend	March 23, 2023	April 11, 2023	April 24, 2023		45.00		9,722
Special Dividend	March 23, 2023	April 11, 2023	April 24, 2023		14.00		3,025
							12,747
Charged to retained earnings							12,777

(1) Dividends were declared based on total amount paid up.

June 30, 2022 (Unaudited)

	Date			Amount
Class	Approved	Record	Payable	Per Share		Total
				(in million pesos, except per share amounts)
Cumulative Non-Convertible    Redeemable Preferred Stock
Series IV(1)	January 25, 2022	February 21, 2022	March 15, 2022		—		12
	May 5, 2022	May 20, 2022	June 15, 2022		—		13
							25
Voting Preferred Stock	March 3, 2022	March 23, 2022	April 15, 2022		—		2
	June14, 2022	June 30, 2022	July 15, 2022		—		2
							4
Common Stock
Regular Dividend	March 3, 2022	March 17, 2022	April 4, 2022		42.00		9,075
Charged to retained earnings							9,104

(1) Dividends were declared based on total amount paid up.

F-118

Our dividends declared after June 30, 2023 are detailed as follows:

	Date			Amount
Class	Approved	Record	Payable	Per Share		Total
				(in million pesos, except per share amounts)
Cumulative Non-Convertible     Redeemable Preferred Stock
Series IV(1)	August 3, 2023	August 18, 2023	September 15, 2023		—		12
Common Stock
Regular Dividend	August 3, 2023	August 17, 2023	September 1, 2023		49.00		10,587
Charged to retained earnings							10,599

(1) Dividends were declared based on total amount paid up.

Noncontrolling Interests – Perpetual Notes

Smart issued Php2,610 million and Php1,590 million perpetual notes on March 3, 2017 and March 6, 2017, respectively, under two Notes Facility Agreements dated March 1, 2017 and March 2, 2017, respectively. The transaction costs amounting to Php35 million were accounted as a deduction from the perpetual notes. Smart paid distributions amounting to Php118 million and Php236 million as at June 30, 2023 and December 31, 2022, respectively.

On July 18, 2017, Smart issued Php1,100 million perpetual notes, to RCBC, Trustee of PLDT’s Redemption Trust Fund, under the Notes Facility Agreement dated July 18, 2017. The transaction costs amounting to Php5 million were accounted as a deduction from the perpetual notes. Smart paid distributions amounting to Php14 million as at December 31, 2022. On January 18, 2022, Smart redeemed the Php1,100 million perpetual notes issued to RCBC at the relevant Redemption Price. This transaction was eliminated in our consolidated financial statements.

On September 19, 2019, Smart issued Php4,700 million perpetual notes to DMPI under the Notes Facility Agreement dated September 16, 2019. The transaction cost amounting to Php35 million was accounted as a deduction from the perpetual notes. Smart paid distributions amounting to Php96 million and Php258 million as at June 30, 2023 and December 31, 2022, respectively. On September 19, 2022, Smart made a partial redemption amounting to Php1,500 million at an optional redemption price of 101.2% of the principal amount of the Perpetual Notes redeemed, which incurred a penalty fee of Php18 million. This transaction was eliminated in our consolidated financial statements.

Proceeds from the issuance of these notes were used to finance capital expenditures. The notes have no fixed redemption dates. However, Smart may, at its sole option, redeem the notes. The notes are subordinated to and rank junior to all senior loans of Smart. In accordance with PAS 32, Financial Instruments: Presentation, the notes are classified as part of Smart’s equity and recorded as noncontrolling interests in PLDT’s consolidated financial statements.

F-119

20.Interest-bearing Financial Liabilities

As at June 30, 2023 and December 31, 2022, this account consists of the following:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Long-term portion of interest-bearing financial liabilities:
Long-term debt (Notes 27 and 28)		234,623		217,288
Current portion of interest-bearing financial liabilities:
Long-term and short-term debt maturing within one year (Notes 27 and 28)		33,446		32,292
		268,069		249,580

Unamortized debt discount, representing debt premium, debt issuance costs and any difference between the fair value of consideration given or received at initial recognition, included in our financial liabilities amounted to Php2,240 million and Php2,279 million as at June 30, 2023 and December 31, 2022, respectively. See Note 27 – Financial Assets and Liabilities.

The following table describes all changes to unamortized debt discount for the six months ended June 30, 2023 and for the year ended December 31, 2022:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Unamortized debt discount at beginning of the period		2,279			2,857
Additions during the period		142			(243	)
Revaluations during the period		(2	)		20
Accretion during the period included as part of financing costs – net		(179	)		(355	)
Unamortized debt discount at end of the period		2,240			2,279

Long-term Debt

As at June 30, 2023 and December 31, 2022, long-term debt consists of:

		June 30, 2023				December 31, 2022
		(Unaudited)				(Audited)
Description	Interest Rates	U.S. Dollar		Php		U.S. Dollar		Php
		(in millions)
U.S. Dollar Debts:
Fixed Rate Notes	2.5000% to 3.4500% in 2023 and 2022		590		32,643		589		32,892
Term Loans:
Others	US$LIBOR + 1.0500% in 2023 and 2.8850% and US$ LIBOR + 0.7900% to 1.0500% in 2022		129		7,164		161		9,002
			719		39,807		750		41,894
Philippine Peso Debts:
Fixed Rate Retail Bonds	5.2813% in 2023 and 2022				2,598				2,596
Term Loans:
Unsecured Term Loans	3.9500% to 5.3500%; PHP BVAL + 0.5000% to 1.0000% (floor rate 4.5000% to 4.6250%) in 2023 and 3.9000% to 5.5660%; PHP BVAL + 0.5000% to 1.0000% (floor rate 3.9000% to 4.6250%) and TDF + 0.2500% in 2022				219,664				195,090
					222,262				197,686
Total long-term debt (Notes 27 and 28)					262,069				239,580
Less portion maturing within one year (Note 27)					27,446				22,292
Noncurrent portion of long-term debt (Note 27)					234,623				217,288

F-120

The scheduled maturities of our consolidated outstanding long-term and short-term debt at nominal values as at June 30, 2023 are as follows:

	U.S. Dollar Debt				Php Debt		Total
Year	U.S. Dollar		Php		Php		Php
	(in millions)
2023(1)		7		388		25,531		25,919
2024		39		2,159		9,720		11,879
2025		14		775		22,275		23,050
2026		14		775		14,460		15,235
2027		14		775		26,080		26,855
2028 and onwards		642		35,546		131,825		167,371
Total long-term debt (Note 27)		730		40,418		229,891		270,309

(1)July 1, 2023 through December 31, 2023.

F-121

										Outstanding Amounts
										June 30, 2023						December 31, 2022
				Repurchase Amount						(Unaudited)						(Audited)
Loan Amount	Issuance Date	Trustee	Terms	Php		Dates		Paid in full on		U.S. Dollar			Php			U.S. Dollar			Php
				(in millions)						(in millions)
Fixed Rate Notes(1)
PLDT
US$300M	June 23, 2020	The Bank of New York Mellon, London Branch	Non-amortizing, payable in full upon maturity on January 23, 2031		—		—		—		296	(2)		16,371	(2)		295	(2)		16,490	(2)
PLDT
US$300M	June 23, 2020	The Bank of New York Mellon, London Branch	Non-amortizing, payable in full upon maturity on June 23, 2050		—		—		—		294	(2)		16,272	(2)		294	(2)		16,402	(2)
											590			32,643			589			32,892

(1)The purpose of this loan is to refinance the existing loan obligations, prepay outstanding loans and partially finance capital expenditures.

(2)Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023						December 31, 2022
					Amount		Amount				(Unaudited)						(Audited)
Loan Amount	Date of Loan Agreement	Lender(s)	Terms	Dates Drawn	U.S. Dollar				Paid in full on		U.S. Dollar			Php			U.S. Dollar			Php
					(in millions)						(in millions)
U.S. Dollar Debts
Other Term Loans(1)
PLDT
US$200M    Tranche A:    US$150M;    Tranche B:    US$50M	February 26, 2015	MUFG Bank, Ltd.	Commencing 36 months after loan date, with semi-annual amortization of 23.75% of the loan amount on the first and second repayment dates and seven semi-annual amortizations of 7.5% starting on the third repayment date, with final installment on February 25, 2022	Various dates in 2015		200		—	February 24, 2022			—			—			—			—
Smart
US$100M	December 7, 2015	Mizuho Bank Ltd.	13 equal semi-annual installments commencing on the date which falls 12 months after the loan date, with final installment on December 7, 2022	Various dates in 2016	100			—	December 7, 2022			—			—			—			—
PLDT
US$25M	March 22, 2016	NTT TC Leasing Co., Ltd., or NTT TC Leasing	Non-amortizing, payable upon maturity on March 30, 2023	March 30, 2016		25		—	March 30, 2023			—			—			25	(2)		1,395	(2)
PLDT
US$25M	January 31, 2017	NTT TC Leasing	Non-amortizing, payable upon maturity on March 27, 2024	March 30, 2017		25		—		—		25	(2)		1,383	(2)		25	(2)		1,393	(2)
Smart
US$140M	March 4, 2020	PNB	Quarterly amortization rates equivalent to: (a) 2.5% of the total amount drawn payable on the first interest payment date up to the 28th interest payment date; (b) 5% of the total amount drawn payable on the 29th interest payment date up to the 32nd interest payment date; and (3) 2.5% of the total amount drawn payable on the 37th interest payment date up to maturity on December 13, 2030	December 14, 2020		140		—		—		104	(2)		5,781	(2)		111	(2)		6,214	(2)
												129			7,164			161			9,002

(1)The purpose of this loan is to finance the capital expenditures and/or to refinance existing loan obligations which were utilized for network expansion and improvement programs.

(2)Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-122

Outstanding Amounts

Date of

Payments

June 30, 2023

December 31, 2022

Issuance/

Amount

(Unaudited)

(Audited)

Loan Amount

Agreement

Paying Agent

Terms

Drawdown

Php

Date

Php

Php

(in millions)

(in millions)

Fixed Rate Retail Bonds(1)

PLDT

Php15,000M

January 22, 2014

Philippine Depositary Trust Corp.

Php12.4B – non-amortizing, payable in full upon maturity on February 6, 2021; Php2.6B – non-amortizing payable in full on February 6, 2024

February 6, 2014

12,400

February 8, 2021

2,598

(2)

2,596

(2)

(1)The purpose of this loan is to finance the capital expenditures and/or refinance existing loan obligations which were utilized for network expansion and improvement programs.

(2)Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

Outstanding Amounts

Drawn

Cancelled / Undrawn

June 30, 2023

December 31, 2022

Date of Loan

Amount

Amount

Paid in

(Unaudited)

(Audited)

Loan Amount

Agreement

Lender(s)

Terms

Dates Drawn

Php

Php

full on

Php

Php

(in millions)

(in millions)

Term Loans

Unsecured Term Loans(1)

PLDT

Php2,000M

March 20, 2012

RCBC

Annual amortization rate of 1% on the fifth-year up to the ninth-year from the initial drawdown date and the balance payable upon maturity on April 12, 2022

April 12, 2012

2,000

—

January 12, 2022

—

—

PLDT

Php1,500M

April 2, 2014

AIA Life

Payable in full upon maturity on April 4, 2024

April 4, 2014

1,500

—

January 31, 2022

—

—

PLDT

Php1,000M

May 23, 2014

AIA Life

Payable in full upon maturity on May 28, 2024

May 28, 2014

1,000

—

February 28, 2022

—

—

PLDT

Php1,000M

June 9, 2014

LBP

Annual amortization rate of 1% on the first-year up to the ninth-year from initial drawdown date and the balance payable upon maturity on June 13, 2024

June 13, 2014

1,000

—

June 13, 2022

—

—

PLDT

Php1,500M

July 28, 2014

Union Bank

Annual amortization rate of 1% on the first-year up to the ninth-year from initial drawdown date and the balance payable upon maturity on July 31, 2024

July 31, 2014

1,500

—

—

1,380

1,380

PLDT

Php2,000M

February 25, 2015

BPI

Annual amortization rate of 1% on the first-year up to the ninth-year from initial drawdown date and the balance payable upon maturity on March 24, 2025

March 24, 2015

2,000

—

—

1,801

(2)

1,811

(2)

PLDT

Php3,000M

June 26, 2015

BPI

Annual amortization rate of 1% on the first-year up to the ninth-year from initial drawdown date and the balance payable upon maturity on June 30, 2025

June 30, 2015

3,000

—

—

2,760

2,790

PLDT

Php5,000M

August 3, 2015

Metrobank

Annual amortization rate of 1% on the first-year up to the ninth-year from initial drawdown date and the balance payable upon maturity on September 23, 2025

Various dates in 2015

5,000

—

—

4,650

4,650

10,591

10,631

(1)The purpose of this loan is to finance the capital expenditures and/or refinance existing loan obligations, which were utilized for service improvements and expansion programs.

(2)Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-123

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan				Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Php		Php		full on		Php			Php
					(in millions)						(in millions)
Smart
Php5,000M	August 11, 2015	Metrobank	Annual amortization rate of 1% of the principal amount on the first-year up to the ninth-year commencing on the first-year anniversary of the initial drawdown date and the balance payable upon maturity on September 1, 2025	September 1, 2015		5,000		—		—		4,644	(2)		4,642	(2)
Smart
Php5,000M	December 11, 2015	BPI	Annual amortization rate of 1% of the principal amount on the first-year up to the ninth-year commencing on the first-year anniversary of the initial drawdown date and the balance payable upon maturity on December 21, 2025	December 21, 2015		5,000		—		—		4,643	(2)		4,642	(2)
Smart
Php5,000M	December 16, 2015	Metrobank	Annual amortization rate of 1% of the principal amount up to the tenth-year commencing on the first-year anniversary of the initial drawdown and the balance payable upon maturity on June 29, 2026	December 28, 2015		5,000		—		—		4,642	(2)		4,641	(2)
Smart
Php7,000M	December 18, 2015	China Banking Corporation, or CBC	Annual amortization rate of 1% of the principal amount on the third-year up to the sixth-year from the initial drawdown date, with balance payable upon maturity on December 28, 2022	December 28, 2015 and February 24, 2016		7,000		—	June 28, 2022			—			—
PLDT
Php3,000M	July 1, 2016	Metrobank	Annual amortization rate of 1% on the first-year up to the ninth-year from initial drawdown date and the balance payable upon maturity on February 22, 2027	February 20, 2017		3,000		—		—		2,814	(2)		2,843	(2)
PLDT
Php6,000M	July 1, 2016	Metrobank	Annual amortization rate of 1% on the first-year up to the sixth-year from initial drawdown date and the balance payable upon maturity on August 30, 2023	August 30, 2016 and November 10, 2016		6,000		—		—		5,639	(2)		5,637	(2)
												22,382			22,405

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-124

Outstanding Amounts

Drawn

Cancelled / Undrawn

June 30, 2023

December 31, 2022

Date of Loan

Amount

Amount

Paid in

(Unaudited)

(Audited)

Loan Amount

Agreement

Lender(s)

Terms

Dates Drawn

Php

Php

full on

Php

Php

(in millions)

(in millions)

PLDT

Php8,000M

July 14, 2016

Security Bank

Annual amortization rate of 1% of the total amount drawn payable semi-annually starting from the end of the first-year after the initial drawdown date until the ninth-year and the balance payable on maturity on March 1, 2027

February 27, 2017

8,000

—

—

7,104

(2)

7,182

(2)

PLDT

Php6,500M

September 20, 2016

BPI

Annual amortization rate of 1% on the first- year up to the sixth-year from initial drawdown date and the balance payable upon maturity on November 2, 2023

November 2, 2016 and December 19, 2016

6,500

—

—

6,107

(2)

6,105

(2)

Smart

Php3,000M

September 28, 2016

BDO

Annual amortization rate of 1% of the principal amount on the first-year up to the ninth-year commencing on the first-year anniversary of the initial drawdown date and the balance payable upon maturity on October 5, 2026

October 5, 2016

3,000

—

—

2,820

2,820

Smart

Php5,400M

September 28, 2016

Union Bank

Annual amortization rate of 1% of the principal amount on the first-year up to the sixth-year commencing on the first-year anniversary of the initial drawdown date and the balance payable upon maturity on October 24, 2023

October 24, 2016 and November 21, 2016

5,400

—

—

5,075

(2)

5,074

(2)

PLDT

Php5,300M(1)

October 14, 2016

BPI

Annual amortization rate of 1% on the first-year up to the sixth-year from initial drawdown date and the balance payable upon maturity on December 19, 2023

December 19, 2016

5,300

—

—

982

(2)

981

(2)

22,088

22,162

(1)The amounts of Php1,500 million and Php2,500 million were prepaid on September 19, 2022 and December 19, 2022, respectively.

(2)Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-125

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan				Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Php		Php		full on		Php			Php
					(in millions)						(in millions)
Smart
Php4,000M	October 28, 2016	Security Bank	Semi-annual amortization rate of 1% of the total amount drawn from first-year up to the ninth-year and the balance payable upon maturity on April 5, 2027	April 5, 2017		4,000		—		—		1,872	(2)		1,881	(2)
Smart
Php1,000M	December 16, 2016	PNB	Annual amortization rate of 1% of the amount drawn starting on the first anniversary of the advance up to the ninth anniversary of the advance and the balance payable upon maturity on December 7, 2027	December 7, 2017		1,000		—		—		923	(2)		920	(2)
Smart
Php2,000M	December 22, 2016	LBP	Annual amortization rate of 1% of the amount drawn starting on the first anniversary of the advance up to the ninth anniversary of the advance and the balance payable upon maturity on January 21, 2028	January 22, 2018		2,000		—		—		1,862	(2)		1,878	(2)
PLDT
Php3,500M	December 23, 2016	LBP	Annual amortization rate of 1% on the first-year up to the ninth-year after the drawdown date and the balance payable upon maturity on April 5, 2027	April 5, 2017		3,500		—		—		3,282	(2)		3,317	(2)
Smart
Php1,500M	April 18, 2017	PNB	Annual amortization rate of 1% of the amount drawn starting on the first anniversary of the advance up to the sixth-year anniversary of the advance and the balance payable upon maturity on January 3, 2025	January 3, 2018		1,500		—		—		1,408	(2)		1,418	(2)
PLDT
Php2,000M	May 24, 2017	Security Bank	Semi-annual amortization rate of Php10 million starting on October 5, 2017 and every six months thereafter with the balance payable upon maturity on April 5, 2027	May 29, 2017		2,000		—		—		1,880			1,890
												11,227			11,304

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-126

Outstanding Amounts

Drawn

Cancelled / Undrawn

June 30, 2023

December 31, 2022

Date of Loan

Amount

Amount

Paid in

(Unaudited)

(Audited)

Loan Amount

Agreement

Lender(s)

Terms

Dates Drawn

Php

Php

full on

Php

Php

(in millions)

(in millions)

PLDT

Php3,500M

July 5, 2017

LBP

Annual amortization rate of 1% on the first- year up to the ninth-year after the drawdown date and the balance payable upon maturity on July 12, 2027

July 10, 2017

3,500

—

—

3,325

3,325

PLDT

Php1,500M

August 29, 2017

LBP

Annual amortization rate equivalent to 1% of the total loan payable on the first-year up to the ninth-year after the drawdown date and the balance payable upon maturity on April 3, 2028

April 2, 2018

1,500

—

—

1,428

(2)

1,443

(2)

PLDT

Php2,000M

April 19, 2018

LBP

Annual amortization rate equivalent to 1% of the total loan payable on the first-year up to the ninth-year after the drawdown date and the balance payable upon maturity on April 25, 2028

April 25, 2018

2,000

—

—

1,763

(2)

1,770

(2)

PLDT

Php1,000M

April 20, 2018

LBP

Annual amortization rate equivalent to 1% of the total loan payable on the first-year up to the ninth-year after the drawdown date and the balance payable upon maturity on May 3, 2028

May 3, 2018

1,000

—

—

874

(2)

879

(2)

PLDT

Php2,000M

May 9, 2018

BPI

Annual amortization rate equivalent to 1% of the amount drawn starting on the first- year anniversary of the advance up to the ninth-year anniversary of the advance and the balance payable upon maturity on May 10, 2028

May 10, 2018

2,000

—

—

1,763

(2)

1,773

(2)

9,153

9,190

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-127

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan				Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Php		Php		full on		Php			Php
					(in millions)						(in millions)
Smart
Php2,000M	May 25, 2018	BPI	Annual amortization rate equivalent to 1% of the amount drawn starting on the first- year anniversary of the advance up to the fifth-year anniversary of the advance and the balance payable upon maturity on May 28, 2024	May 28, 2018		2,000		—		—		1,897	(2)		1,916	(2)
Smart
Php1,500M	June 27, 2018	Development Bank of the Philippines, or DBP	Annual amortization rate equivalent to 1% of the amount drawn starting on the third- year anniversary of the advance up to the fifth-year anniversary of the advance and the balance payable upon maturity on June 28, 2024	June 28, 2018		1,500		—	September 28, 2022			—			—
Smart
Php3,000M	July 31, 2018	BPI	Annual amortization rate equivalent to 1% of the  amount drawn starting on the first-year anniversary of the advance up to the ninth-year anniversary of the advance and the balance payable upon maturity on May 10, 2028	August 10, 2018		3,000		—		—		2,838	(2)		2,867	(2)
Smart
Php5,000M	January 11, 2019	DBP	Annual amortization rate equivalent to 1% of the amount drawn starting on the third-year anniversary of the advance up to the ninth-year anniversary of the advance and the balance payable upon maturity on May 6, 2029	May 6, 2019 September 2, 2019	2,000 3,000			—		—		4,789	(2)		4,830	(2)
PLDT
Php8,000M	February 18, 2019	Union Bank	Annual amortization rate equivalent to 1% of the amount drawn starting on the first-year anniversary up to the ninth-year anniversary of the initial drawdown date and the balance payable upon maturity on July 11, 2029	July 11, 2019 September 6, 2019 October 1, 2019 November 5, 2019	3,000 2,000 1,000 2,000			—		—		8,033	(2)		8,053	(2)
Smart
Php4,000M	February 21, 2019	PNB	Annual amortization rate equivalent to 1% of the amount drawn starting on the first-year anniversary up to the seventh-year anniversary of the initial drawdown date and the balance payable upon maturity on March 11, 2027	March 11, 2019		4,000		—		—		3,683	(2)		3,704	(2)
												21,240			21,370

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-128

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan				Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Php		Php		full on		Php			Php
					(in millions)						(in millions)
PLDT
Php2,000M	April 11, 2019	Bank of China (Hong Kong) Limited, Manila Branch	Annual amortization rate equivalent to 1% of the amount of loan payable on the first-year anniversary up to the sixth-year anniversary of the initial drawdown date and the balance payable upon maturity on September 7, 2026	September 6, 2019		2,000		—		—		1,933	(2)		1,931	(2)
PLDT
Php2,000M	July 1, 2019	PNB	Annual amortization rate equivalent to 1% of the total amount drawn from the facility on the first-year anniversary up to the sixth-year anniversary of the initial drawdown date and the balance payable upon maturity on September 7, 2026	September 6, 2019		2,000		—		—		1,933	(2)		1,931	(2)
Smart
Php8,000M	September 25, 2019	CBC	Annual amortization rate equivalent to 10% of the total amount drawn starting on the third-year anniversary up to the ninth-year anniversary of the initial drawdown date and the balance payable upon maturity on October 2, 2029	October 2, 2019		8,000		—		—		6,934	(2)		6,901	(2)
Smart
Php4,000M	December 9, 2019	DBP	Annual amortization rate equivalent to 1% of the total amount drawn starting on the third-year anniversary up to the ninth-year anniversary of the initial drawdown date and the balance payable upon maturity on December 12, 2029	December 12, 2019		4,000		—		—		3,939	(2)		3,938	(2)
PLDT
Php4,500M	December 12, 2019	BPI	Annual amortization rate equivalent to 1% of the advance on the first year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on December 18, 2029	December 15, 2019		4,500		—		—		4,342	(2)		4,340	(2)
Smart
Php3,000M	January 20, 2020	BDO	Annual amortization rate equivalent to 1% of the total amount drawn starting on the first-year anniversary up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on January 24, 2030	January 24, 2020		3,000		—		—		2,845	(2)		2,871	(2)
												21,926			21,912

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-129

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan				Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Php		Php		full on		Php			Php
					(in millions)						(in millions)
PLDT
Php5,000M	January 29, 2020	BDO	Annual amortization rate equivalent to 1% of the total amount drawn starting on the first-year anniversary up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on January 31, 2030	January 31, 2020		5,000		—		—		4,769	(2)		4,814	(2)
PLDT
Php4,000M	March 24, 2020	RCBC	Annual amortization rate equivalent to 1% of the advance starting on the first-year anniversary of the drawdown date and the balance payable upon maturity on March 27, 2028	March 26, 2020		4,000		—		—		3,767	(2)		3,800	(2)
PLDT
Php2,500M	March 30, 2020	MUFG Bank, Ltd.	Amortization rate equivalent to: (1) 20% of the amount drawn payable on the 30th, 48th, 54th and 72nd month from the drawdown date; (2) 0.50% of the amount drawn payable on the 36th, 42nd, 60th and 66th month from the drawdown date; and (3) 18% of the amount drawn payable upon maturity on October 2, 2026	April 2, 2020		2,500		—		—		1,981	(2)		1,992	(2)
PLDT
Php3,000M	May 20, 2020	LBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on May 28, 2030	May 28, 2020		3,000		—		—		2,894	(2)		2,923	(2)
Smart
Php4,000M	May 20, 2020	LBP	Annual amortization rate equivalent to 1% of principal amount of the loan starting on the first-year up to the ninth-year anniversary of the initial advance and the balance payable upon maturity on November 20, 2030	November 20, 2020		4,000		—		—		3,897	(2)		3,895	(2)
PLDT
Php3,000M	May 21, 2020	LBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on December 18, 2030	December 18, 2020		3,000		—		—		2,922	(2)		2,921	(2)
												20,230			20,345

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-130

											Outstanding Amounts
					Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan				Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Php		Php		full on		Php			Php
					(in millions)						(in millions)
PLDT
Php5,000M	February 9, 2021	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on February 16, 2032	February 15, 2021		5,000		—		—		4,870	(2)		4,918	(2)
Smart
Php3,000M	March 4, 2021	LBP	Annual amortization rate equivalent to 1% of the  advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on March 9, 2031	March 9, 2021		3,000		—		—		2,922	(2)		2,951	(2)
Smart
Php3,000M	March 5, 2021	LBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on May 25, 2031	May 25, 2021		3,000		—		—		2,922	(2)		2,951	(2)
Smart
Php4,000M	March 8, 2021	LBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on March 30, 2031	March 30, 2021		4,000		—		—		3,896	(2)		3,935	(2)
PLDT
Php3,000M	March 31, 2021	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on April 14, 2032	April 14, 2021		3,000		—		—		2,921	(2)		2,950	(2)
PLDT
Php2,000M	March 31, 2021	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on April 29, 2032	April 29, 2021		2,000		—		—		1,960			1,980
												19,491			19,685

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-131

											Outstanding Amounts
	Date of Loan				Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn	Amount		Amount		Paid in		(Unaudited)			(Audited)
					Php		Php		full on		Php			Php
Smart
Php4,000M	April 14, 2021	Metrobank	Annual amortization rate equivalent to 1% of the advance starting on the second-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on June 8, 2032	June 8, 2021		4,000		—		—		3,935	(2)		3,974	(2)
Smart
Php3,000M	April 15, 2021	Metrobank	Annual amortization rate equivalent to 1% of the advance starting on the second-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on September 1, 2032	September 1, 2021		3,000		—		—		2,981	(2)		2,980	(2)
PLDT
Php3,000M	April 30, 2021	Metrobank	Annual amortization rate equivalent to 1% of the advance starting on the second-year up to the tenth-year from drawdown date and the balance of 91% payable upon maturity on June 21, 2032	June 21, 2021		3,000		—		—		2,951	(2)		2,980	(2)
PLDT
Php3,000M	June 14, 2021	RCBC	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the eighth-year and tenth-year from drawdown date and equal amortization equivalent to 45.5% of the advance on the ninth-year and upon maturity on July 15, 2032	July 15, 2021		3,000		—		—		2,952	(2)		2,951	(2)
PLDT
Php4,000M	June 14, 2021	RCBC	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the eighth-year and tenth-year from drawdown date and equal amortization equivalent to 45.5% of the advance on the ninth-year and upon maturity on September 1, 2032	September 1, 2021		4,000		—		—		3,935	(2)		3,934	(2)
Smart
Php1,000M	September 28, 2021	BDO	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year from the drawdown date and the balance of 91% payable upon maturity on October 15, 2031	October 15, 2021		1,000		—		—		990			990
Smart
Php3,000M	November 17, 2021	BDO	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the sixth-year from the drawdown date and the balance of 94% payable upon maturity on November 22, 2028	November 22, 2021		3,000		—		—		2,952	(2)		2,951	(2)
PLDT
Php1,000M	November 24, 2021	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on March 1, 2033	December 1, 2021		1,000		—		—		990			990
PLDT
Php3,000M	November 24, 2021	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the tenth- year anniversary of the drawdown date and the balance payable upon maturity on March 17, 2033	December 17, 2021		3,000		—		—		2,950	(2)		2,949	(2)
												24,636			24,699

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

F-132

												Outstanding Amounts
						Drawn		Cancelled / Undrawn				June 30, 2023			December 31, 2022
	Date of Loan					Amount		Amount		Paid in		(Unaudited)			(Audited)
Loan Amount	Agreement	Lender(s)	Terms	Dates Drawn		Php		Php		full on		Php			Php
						(in millions)						(in millions)
PLDT
Php4,000M	November 24, 2021	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the tenth-year anniversary of the drawdown date and the balance payable upon maturity on March 17, 2033	December 17, 2021			4,000		—		—		3,934	(2)		3,932	(2)
PLDT
Php2,500M	December 10, 2021	LBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on December 17, 2031	December 17, 2021			2,500		—		—		2,475			2,475
Smart
Php3,000M	December 14, 2021	DBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the seventh-year from the drawdown date and the balance of 93% payable upon maturity on January 21, 2030	January 20, 2022			3,000		—		—		2,951	(2)		2,980	(2)
Smart
Php2,000M	December 14, 2021	DBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the eight-year from the drawdown date and the balance of 92% payable upon maturity on January 20, 2031	January 20, 2022			2,000		—		—		1,980			2,000
PLDT
Php10,000M	January 31, 2023	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the initial drawdown date and the balance payable upon maturity on April 19, 2033	April 19, 2023 May 26, 2023		7,500 2,500			—		—		9,945	(2)		—
PLDT
Php5,500M	February 27, 2023	LBP	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity on April 19, 2033	April 19, 2023			5,500		—		—		5,459	(2)		—
ePLDT
Php8,000M	March 10, 2023	BPI	Semi-annual amortizations equivalent to 1% of the advance starting on the 1st year up to 5th year after drawdown date, 5% of the advance on the 6th to 9th year after drawdown date, and the balance of 75% payable on maturity date on March 24, 2033	March 24, 2023			3,000		—		—		2,978	(2)		—
PLDT
Php2,000M	March 22, 2023	BPI	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity		—		—		—		—		—			—
PLDT
Php4,000M	April 14, 2023	RCBC	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary of the drawdown date and the balance payable upon maturity		—		—		—		—		—			—
Smart
Php10,500M	May 8, 2023	CBC	Annual amortization rate equivalent to 1% of the advance starting on the first-year up to the ninth-year anniversary from the initial drawdown date and the balance of 91% payable upon maturity on May 11, 2033	May 11, 2023 June 2, 2023 June 5, 2023		3,000 2,000 2,000			—		—		6,978	(2)		—
													36,700			11,387
													219,664			195,090

(2) Amounts are net of unamortized debt discount/premium and/or debt issuance cost.

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Short-term Debt

In March and April 2022, PLDT and Smart availed unsecured short-term debt from various banks amounting to Php6,000 million and Php4,000 million, respectively, with an interest rate of 2.60%. In July 2022, PLDT prepaid its outstanding short-term debt amounting to Php2,000 million. In October 2022, Smart paid its outstanding short-term debt amounting to Php4,000 million. In November 2022, PLDT and Smart availed unsecured short-term debt amounting to Php4,000 million and Php2,000 million, respectively, with an interest rate of 5.16%. In March 2023, PLDT paid its outstanding short-term debt amounting to Php4,000 million. As at June 30, 2023 and December 31, 2022, the total outstanding balance of short-term debt amounted to Php6,000 million and Php10,000 million, respectively.

U.S. Dollar Fixed Rate Notes

On June 23, 2020, PLDT issued US$300 million 10-year and US$300 million 30-year senior unsecured fixed-rate notes with coupon of 2.50% and 3.45%, respectively. Proceeds from the issuance of these notes have been used to refinance maturing debt obligations, prepay outstanding loans and partially finance capital expenditures. The 2031 Notes will mature on January 23, 2031 and the 2050 Notes will mature on June 23, 2050.

Compliance with Debt Covenants

PLDT’s debt instruments contain restrictive covenants, including covenants that require us to comply with specified financial ratios tests, such as total debt to EBITDA and interest cover ratio, at relevant measurement dates, principally at the end of each quarterly period. We have complied with all of our maintenance financial ratios as required under our loan covenants and other debt instruments.

The principal factors that could negatively affect our ability to comply with these financial ratio covenants and other financial tests are poor operating performance of PLDT and its subsidiaries, depreciation of the Philippine Peso relative to the U.S. Dollar, impairment or similar charges in respect of investments or other long-lived assets that may be recognized by PLDT and its subsidiaries, and increases in our interest expense. Interest expense may increase as a result of various factors including issuance of new debt, the refinancing of lower cost indebtedness by higher cost indebtedness, depreciation of the Philippine Peso relative to the U.S. Dollar, the lowering of PLDT’s credit ratings or the credit ratings of the Philippines, increase in reference interest rates, and general market conditions. Of our total consolidated debts (net of consolidated debt discount), approximately 15% and 17% were denominated in U.S. Dollars as at June 30, 2023 and December 31, 2022, respectively. Considering our consolidated outstanding hedges, the unhedged portion of the PLDT’s net debt amounts was approximately 6% (or 5%, net of our consolidated U.S. Dollar cash balances allocated for debt) as at June 30, 2023 and 7% (or 5%, net of our consolidated U.S. Dollar cash balances allocated for debt) as at December 31, 2022. Therefore, the financial ratio and other tests are expected to be negatively affected by any weakening of the Philippine Peso relative to the U.S. Dollar. See Note 27 – Financial Assets and Liabilities – Foreign Currency Exchange Risk.

PLDT’s debt instruments contain a number of other negative covenants that, subject to certain exceptions and qualifications, restrict PLDT’s ability to take certain actions without lenders’ approval, including: (a) making or permitting any material change in the character of its business; (b) selling, leasing, transferring or disposing of all or substantially all of its assets or any significant portion thereof other than in the ordinary course of business; (c) creating any lien or security interest; (d) permitting set-off against amounts owed to PLDT; (e) merging or consolidating with any other company; and (f) making or permitting any preference or priority in respect of any other relevant indebtedness of PLDT.

PLDT’s debt instruments also contain customary and other default provisions that permit the lender to accelerate amounts due or terminate their commitments to extend additional funds under the debt instruments. These default provisions include: (a) cross-defaults that will be triggered only if the principal amount of the defaulted indebtedness exceeds a threshold amount specified in these debt instruments; (b) failure by PLDT to meet certain financial ratio covenants referred to above; (c) the occurrence of any material adverse change in circumstances that a lender reasonably believes materially impairs PLDT’s ability to perform its obligations under its debt instrument with the lender; (d) the revocation, termination or amendment of any of the permits or

F-134

franchises of PLDT in any manner unacceptable to the lender; (e) the nationalization or sustained discontinuance of all or a substantial portion of PLDT’s business; and (f) other typical events of default, including the commencement of bankruptcy, insolvency, liquidation or winding up proceedings by PLDT.

Smart’s debt instruments contain certain restrictive covenants that require Smart to comply with specified financial ratios and other financial tests at semi-annual measurement dates. Smart’s loan agreements include compliance with financial tests such as Smart’s consolidated debt to consolidated EBITDA and interest coverage ratio. The agreements also contain customary and other default provisions that permit the lender to accelerate amounts due under the loans or terminate their commitments to extend additional funds under the loans. These default provisions include: (a) cross-defaults and cross-accelerations that permit a lender to declare a default if Smart is in default under another loan agreement. These cross-default provisions are triggered upon a payment or other default permitting the acceleration of Smart debt, whether or not the defaulted debt is accelerated; (b) failure by Smart to comply with certain financial ratio covenants; and (c) the occurrence of any material adverse change in circumstances that the lender reasonably believes materially impairs Smart’s ability to perform its obligations or impair the guarantors’ ability to perform their obligations under its loan agreements.

The loan agreements with banks (foreign and local alike) and other financial institutions provide for certain restrictions and requirements with respect to, among others, maintenance of percentage of ownership of specific shareholders, incurrence of additional long-term indebtedness or guarantees and creation of property encumbrances.

As at June 30, 2023 and December 31, 2022, we were in compliance with all of our debt covenants. See Note 27 – Financial Assets and Liabilities – Derivative Financial Instruments.

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21.Deferred Credits and Other Noncurrent Liabilities

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Contract liabilities and unearned revenues (Note 5)		8,240		7,615
Provision for asset retirement obligations		1,314		1,514
Accrual of capital expenditures under long-term financing		129		316
Others		67		56
		9,750		9,501

The following table summarizes the changes to provision for asset retirement obligations for the six months ended June 30, 2023 and for the year ended December 31, 2022:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Provision for asset retirement obligations at beginning of the period		1,514			2,121
Capitalized to ROU assets during the period		132			65
Accretion expenses		30			54
Revaluation due to change in IBR		—			442
Settlement of obligations and others		(1	)		(1	)
Change in assumptions		(25	)		(935	)
Reclassification to liabilities associated with assets classified as held-for-sale		(336	)		(232	)
Provision for asset retirement obligations at end of the period		1,314			1,514

Accrual of capital expenditures under long-term financing represents expenditures related to the expansion and upgrade of our network facilities which are not due to be settled within one year. Such accruals are settled through refinancing from long-term loans obtained from the banks. See Note 20 – Interest-bearing Financial Liabilities.

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22.Accounts Payable

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Suppliers and contractors (Note 27)		73,232		80,725
Taxes (Note 26)		3,492		4,052
Carriers and other customers (Note 27)		1,239		1,745
Related parties (Notes 24 and 27)		332		270
Others		6,396		18,395
		84,691		105,187

Accounts payable are non-interest bearing and are normally settled within 180 days.

In 2022, four of our major suppliers entered into Trade Financing Arrangements, or TFAs, to sell a portion of their Philippine Peso receivables from the Parent Company amounting to Php7,049 million and from Smart amounting to Php10,882 million. Under the terms of the TFA, the Purchaser will have exclusive ownership of the purchased receivables and all of its rights, title and interest.

In 2023, one of our major suppliers entered into TFA to sell a portion of their Philippine Peso receivables from Smart amounting to Php3,280 million. Under the terms of the TFA, the Purchaser will have exclusive ownership of the purchased receivables and all of its rights, title and interest.

The balance of the amount reclassified from “Accounts Payable – Suppliers and contractors” to “Accounts Payable – Others” amounted to Php5,870 million and Php17,931 million as at June 30, 2023 and December 31, 2022, respectively. There were no changes in the payment terms.

For terms and conditions pertaining to the payables to related parties, see Note 24 – Related Party Transactions.

For detailed discussion on the PLDT Group’s liquidity risk management processes, see Note 27 – Financial Assets and Liabilities – Liquidity Risk.

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23.Accrued Expenses and Other Current Liabilities

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Accrued utilities and related expenses (Notes 24 and 27)		61,175		63,731
Contract liabilities and unearned revenues (Note 5)		9,710		9,499
Accrued taxes and related expenses (Note 26)		7,051		9,445
Accrued employee benefits and other provisions (Note 27)		5,644		6,615
Accrued interests and other related costs (Note 28)		2,117		1,868
Others		3,519		2,387
		89,216		93,545

Accrued utilities and related expenses pertain to costs incurred for electricity and water consumption, repairs and maintenance, selling and promotions, professional and other contracted services, rent, insurance and security services and other operational related expenses pending receipt of billings and statement of accounts from suppliers. These liabilities are non-interest bearing and are normally settled within a year.

Contract liabilities and unearned revenues represent advance payments for leased lines, installation fees, monthly service fees and unused and/or unexpired portion of prepaid loads.

Accrued taxes and related expenses pertain to licenses, permits and other related business taxes, which are normally settled within a year.

Accrued employee benefits and other provisions pertain to accrued salaries, wages and bonuses, and other employee benefits that are normally settled within a year.

Accrued interests and other related costs are non-interest bearing and are normally settled within a year. This pertains to other costs incurred for operations-related expenses pending receipt of invoice and statement of accounts from suppliers.

Other accrued expenses and other current liabilities are non-interest bearing and are normally settled within a year. This pertains to accrued interest on loans and other costs incurred for operations-related expenses pending receipt of invoice and statement of accounts from suppliers.

F-138

24.Related Party Transactions

Parties are considered to be related if one party has the ability, directly and indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. Transactions with related parties are on an arm’s length basis, similar to transactions with third parties.

Settlement of outstanding balances of related party transactions at year-end are expected to be settled with cash.

The following table provides the summary of outstanding balances as at June 30, 2023 and December 31, 2022, and transactions for the six months ended June 30, 2023 and 2022 that have been entered into with related parties:

Statement of

June 30,

December 31,

June 30,

Financial

2023

2022

Income

2023

2022

Company Name

Particulars

Terms

Conditions

Position  Classification

(Unaudited)

(Audited)

Statement Classification

(Unaudited)

(in million pesos)

(in million pesos)

Indirect investment in joint ventures through PCEV:

Manila Electric Company, or Meralco

Electricity services to PLDT and certain subsidiaries’ offices within Meralco's franchise area

Immediately upon receipt of invoice

Unsecured

Accounts payable and accrued expenses and other current liabilities (Notes 22 and 23)

482

527

Repairs and maintenance

1,474

1,441

Upon depreciation or expiration of lease

Unsecured

ROU assets (Note 10)

2,177

2,775

Depreciation and amortization

1,875

302

2023 – due after June 30, 2024; 2022 – due after December 31, 2023

Unsecured

Lease liabilities - net of current portion (Note 10)

2

727

2023– due on or before June 30, 2024; 2022 – due on or before December 31, 2023

Unsecured

Current portion of lease liabilities (Note 10)

1

642

Meralco Industrial Engineering Services Corporation, or    MIESCOR

Customer line installation, repair, rehabilitation and maintenance activities

30 days upon receipt of invoice

Unsecured

Accrued expenses and other current liabilities (Note 23)

3

5

F-139

Statement of

June 30,

December 31,

June 30,

Financial

2023

2022

Income

2023

2022

Company Name

Particulars

Terms

Conditions

Position  Classification

(Unaudited)

(Audited)

Statement Classification

(Unaudited)

(in million pesos)

(in million pesos)

Transactions with major stockholders, directors and officers:

NTT TC Leasing

PLDT signed a US$25 million term loan facility agreement on March 22, 2016

Non-amortizing, payable upon maturity on March 30, 2023

Unsecured

Interest-bearing financial liabilities (Note 20)

—

1,396

Financing costs – net

19

14

PLDT signed a US$25 million term loan facility agreement on January 31, 2017

Non-amortizing, payable upon maturity on March 27, 2024

Unsecured

Interest-bearing financial liabilities (Note 20)

1,384

1,395

Financing costs – net

43

13

NTT World Engineering Marine Corporation

On February 1, 2008, PLDT entered into a service agreement, wherein NTT World Engineering Marine Corporation provides offshore submarine cable repair and other allied services for the maintenance of PLDT’s domestic fiber optic network submerged plant.

1st month of each quarter; non-interest bearing

Unsecured

Accounts payable and accrued expenses and other current liabilities (Notes 22 and 23)

282

318

Repairs and maintenance

22

15

NTT Communications

On March 24, 2000, PLDT entered into an advisory service agreement (as amended on March 31, 2003, March 31, 2005 and June 16, 2006), under which NTT Communications provides PLDT with technical, marketing and other consulting services for various business areas of PLDT starting April 1, 2000.

30 days upon receipt of invoice; non-interest bearing

Unsecured

Accrued expenses and other current liabilities (Note 23)

20

18

Professional and other contracted services

40

39

On March 24, 2000, PLDT entered into an agreement with NTT Communications under which PLDT and NTT Communications agreed to cooperative arrangements for conventional international telecommunications services to enhance their respective international businesses.

30 days upon receipt of invoice; non-interest bearing

Unsecured

Accounts payable (Note 22)

3

3

NTT Worldwide Telecommunications Corporation

On March 24, 2000, PLDT entered into an agreement under which PLDT markets, and manages data and other services under NTT Communications’ “Arcstar” brand to its corporate customers in the Philippines.

30 days upon receipt of invoice; non-interest bearing

Unsecured

Accounts payable (Note 22)

6

6

Selling and promotions

1

1

F-140

PLDT also entered into a Trade Name and Trademark Agreement with NTT Communications under which PLDT has been given the right to use the trade name “Arcstar” and its related trademark, logo and symbols, solely for the purpose of PLDT’s marketing, promotional and sales activities for the Arcstar services within the Philippines.

F-141

Statement of

June 30,

December 31,

June 30,

Financial

2023

2022

Income

2023

2022

Company Name

Particulars

Terms

Conditions

Position  Classification

(Unaudited)

(Audited)

Statement Classification

(Unaudited)

(in million pesos)

(in million pesos)

Transactions with major stockholders, directors and officers:

NTT DOCOMO

On June 5, 2006, in accordance with the Cooperation Agreement dated January 31, 2006, an Advisory Services Agreement was entered into by NTT DOCOMO and PLDT. Pursuant to the Advisory Services Agreement, NTT DOCOMO will provide the services of certain key personnel in connection with certain aspects of the business of PLDT and Smart. Also, this agreement governs the terms and conditions of the appointments of such key personnel and the corresponding fees related thereto.

30 days upon receipt of invoice; non-interest bearing

Unsecured

Accrued expenses and other current liabilities (Note 23)

20

14

Professional and other contracted services

48

51

JGSHI and Subsidiaries

PLDT and certain of its subsidiaries have existing agreements with Universal Robina Corporation and Robinsons Land Corporation for office and business office rental.

1st month of each quarter; 30 days upon receipt of invoice; non-interest bearing

Unsecured

Accounts payable and accrued expenses and other current liabilities (Notes 22 and 23)

12

17

Rent

153

150

Upon depreciation or expiration of lease

Unsecured

ROU assets (Note 10)

41

59

Depreciation and amortization

—

14

2023 – due after June 30, 2024; 2022 – due after December 31, 2023

Unsecured

Lease liabilities - net of current portion (Note 10)

52

35

2023 – due on or before June 30, 2024 2022 – due on or before December 31, 2023

Unsecured

Current portion of lease liabilities (Note 10)

—

28

PLDT group's other transactions with JGSHI and subsidiaries

30 days upon receipt of invoice; non-interest bearing

Unsecured

Accrued expenses and other current liabilities (Note 23)

45

45

Repairs and maintenance

2

14

Communication, training and travel

—

2

Financing costs – net

—

2

F-142

Statement of

June 30,

December 31,

June 30,

Financial

2023

2022

Income

2023

2022

Company Name

Particulars

Terms

Conditions

Position  Classification

(Unaudited)

(Audited)

Statement Classification

(Unaudited)

(in million pesos)

(in million pesos)

Transactions with major stockholders, directors and officers:

Malayan Insurance Co., Inc., or Malayan

PLDT and certain of its subsidiaries have insurance policies with Malayan covering directors, officers, liability to employees and material damages for buildings, building improvements, equipment and motor vehicles. The premiums are directly paid to Malayan.

Immediately upon receipt of invoice

Unsecured

Accounts payable and accrued expenses and other current liabilities (Notes 22 and 23)

8

10

Insurance and security services

97

113

Immediately upon receipt of invoice

Unsecured

Prepayments (Note 18)

16

27

Gotuaco del Rosario and Associates, or Gotuaco

Gotuaco acts as the broker for certain insurance companies to cover certain insurable properties of the PLDT Group. Insurance premiums are remitted to Gotuaco and the broker’s fees are settled between Gotuaco and the insurance companies.

Immediately upon receipt of invoice

Unsecured

Accounts payable and accrued expenses and other current liabilities (Notes 22 and 23)

1

—

Insurance and security services

72

82

First Pacific Investment Management Limited, or FPIML

On March 1, 2018, Smart entered into an Advisory Services Agreement with FPIML effective for a period of one-year subject to a 12-month automatic renewal unless either party notifies the other party of its intent not to renew the agreement. FPIML provides advisory and related services in connection with the operation of Smart’s business of providing mobile communications services, high-speed internet connectivity, and access to digital services and content. The agreement provides that Smart shall pay monthly service fee of US$$250 thousand and any additional fee shall be mutually agreed upon by both parties on a monthly basis. On March 26, 2020, Smart and FPIML

–

Unsecured

Prepayments (Note 18)

—

—

Professional and other contracted services

49

58

F-143

mutually agreed to reduce the monthly service fee to US$100 thousand in consideration of the services provided under this agreement, effective April 1, 2020. Starting April 2021, the fee has been increased to $220k per month.

Statement of

June 30,

December 31,

June 30,

Financial

2023

2022

Income

2023

2022

Company Name

Particulars

Terms

Conditions

Position  Classification

(Unaudited)

(Audited)

Statement Classification

(Unaudited)

(in million pesos)

(in million pesos)

Other related parties:

Various

PLDT and certain of its subsidiaries provide telephone, data communication and other services to various related parties.

30 days upon receipt of invoice

Unsecured

Trade and other receivables (Note 16)

4,070

3,155

Revenues

1,241

1,240

2023 – due after June 30, 2024; 2022 – due after December 31, 2023

Unsecured

Lease liabilities - net of current portion (Note 10)

4

384

Expenses

1,774

6,309

2023 – due on or before June 30, 2024; 2022 – due on or before December 31, 2023

Unsecured

Current portion of lease liabilities (Note 10)

13

229

Upon depreciation or expiration of lease

Unsecured

ROU assets (Note 10)

618

1,404

30 days upon receipt of billing; non-interest bearing

Unsecured

Accounts payable (Note 22)

773

947

Immediately upon receipt of billing

Unsecured

Accrued expenses and other current liabilities (Note 23)

1

57

F-144

Compensation of Key Officers of the PLDT Group

The compensation of key officers of the PLDT Group by benefit type for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Short-term employee benefits		257		144
Other long-term employee benefits (Note 25)		126		356
Post-employment benefits (Note 25)		13		6
Total compensation paid to key officers of the PLDT Group		396		506

The amounts disclosed in the table above are the amounts recognized as expenses during the period related to key management personnel.

Effective January 2014, each of the directors, including the members of the advisory board of PLDT, was entitled to a director’s fee in the amount of Php250 thousand for each board meeting attended. Each of the members or advisors of the audit, governance, nomination and sustainability, executive compensation, technology strategy, and risk and data privacy and information security committees was entitled to a fee in the amount of Php125 thousand for each committee meeting attended.

Total fees paid for board meetings and board committee meetings amounted to Php48 million and Php45 million for the six months ended June 30, 2023 and 2022, respectively.

Except for the fees mentioned above, the directors are not compensated, directly or indirectly, for their services as such directors.

There are no agreements between PLDT Group and any of its key management personnel providing for benefits upon termination of employment, except for such benefits to which they may be entitled under PLDT Group’s retirement and incentive plans.

F-145

25.Pension and Other Employee Benefits

Pension

Defined Benefit Pension Plans

PLDT has defined benefit pension plans, operating under the legal name “The Board of Trustees for the account of the Beneficial Trust Fund created pursuant to the Benefit Plan of PLDT Co.” and covering all of our permanent and regular employees, in which case, benefits are computed based on R.A. 7641 (Retirement Pay Law) or the minimum mandated benefit by the law. For the purpose of complying with Revised PAS 19, Employee Benefits, pension benefit expense has been actuarially computed based on defined benefit plan.

PLDT’s actuarial valuation is performed every year-end. There is no significant change in the fair value of plan assets from December 31, 2022 to June 30, 2023. Based on the latest actuarial valuation, the actual present value of accrued (prepaid) benefit costs as at June 30, 2023 and December 31, 2022, and net periodic benefit costs and average assumptions used in developing the valuation as at and for the six months ended June 30, 2023 and 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Changes in the present value of defined benefit obligations:
Present value of defined benefit obligations at beginning of the period		15,883			22,298
Service costs		464			1,093
Interest costs on benefit obligation		325			1,173
Actuarial losses on obligations – experience		—			78
Actuarial gains on obligations – economic assumptions		—			(3,972	)
Actual benefits paid/settlements		(2,399	)		(102	)
Curtailment and others		—			(4,685	)
Present value of defined benefit obligations at end of the period		14,273			15,883
Changes in fair value of plan assets:
Fair value of plan assets at beginning of the period		16,291			14,683
Actual contributions		2,248			6,359
Interest income on plan assets		428			983
Actual gain on plan assets		—			(421	)
Actual benefits paid/settlements		(2,337	)		(5,313	)
Fair value of plan assets at end of the period		16,630			16,291
Overfunded status – net		2,357			408
Accrued benefit costs		457			482
Prepaid benefit costs (Note 18)		2,814			890

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Components of net periodic benefit costs:
Service costs		464			656
Interest costs – net		(103	)		97
Curtailment/settlement losses and other adjustments		96			—
Net periodic benefit costs		457			753

Actual net loss on plan assets amounted to Php428 million and Php385 million for the six months ended June 30, 2023 and 2022, respectively.

Based on the latest actuarial valuation, our expected contribution to the defined benefit plan in 2023 will amount to Php4,613 million.

F-146

The following table sets forth the expected future settlements by the Plan of maturing defined benefit obligation as at June 30, 2023:

	(in million pesos)
2023(1)		261
2024		317
2025		433
2026		826
2027		1,077
2028 to 2032		11,904

(i)July 1, 2023 through December 31, 2023.

The average duration of the defined benefit obligation at the end of the reporting period is 10.91 years.

The weighted average assumptions used to determine pension benefits for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023		2022
	(Unaudited)
	(in percentage)
Rate of increase in compensation		5.7		5.7
Discount rate		7.3		5.3

The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit obligation as at June 30, 2023 and December 31, 2022, assuming if all other assumptions were held constant:

	Increase (Decrease)
	(in percentage)			(in million pesos)
Discount rate		1			(14,223	)
		(1	)		17,579
Future salary increases		1			17,587
		(1	)		(4,189	)

PLDT’s Retirement Plan

The Board of Trustees, which manages the beneficial trust fund, is composed of: (i) a member of the Board of Directors of PLDT, who is not a beneficiary of the Plan; (ii) a member of the Board of Directors or a senior officer of PLDT, who is a beneficiary of the Plan; (iii) a senior member of the executive staff of PLDT; and (iv) two persons who are not executives nor employees of PLDT.

Benefits are payable in the event of termination of employment due to: (i) compulsory, optional, or deferred retirement; (ii) death while in active service; (iii) physical disability; (iv) voluntary resignation; or (v) involuntary separation from service. For a plan member with less than 15 years of credited services, retirement benefit is equal to 100% of final compensation for every year of service. For those with at least 15 years of service, retirement benefit is equal to 125% of final compensation for every year of service, with such percentage to be increased by an additional 5% for each completed year of service in excess of 15 years, but not to exceed a maximum of 200%. In case of voluntary resignation after attainment of age 40 and completion of at least 15 years of credited service, benefit is equal to a percentage of his vested retirement benefit, in accordance with percentages prescribed in the retirement plan.

The Board of Trustees of the beneficial trust fund uses an investment approach with the objective of maximizing the long-term expected return of plan assets.

The majority of the Plan’s investment portfolio consists of listed and unlisted equity securities while the remaining portion consists of passive investments like temporary cash investments and fixed income investments.

The plan assets are primarily exposed to financial risks such as liquidity risk and price risk.

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Liquidity risk pertains to the plan’s ability to meet its obligation to the employees upon retirement. To effectively manage liquidity risk, the Board of Trustees invests at least the equivalent amount of actuarially computed expected compulsory retirement benefit payments for the year to liquid/semi-liquid assets such as government securities, savings and time deposits with commercial banks.

Price risk pertains mainly to fluctuations in market prices of equity securities listed in the PSE. In order to effectively manage price risk, the Board of Trustees continuously assesses these risks by closely monitoring the market value of the securities and implementing prudent investment strategies.

The following table sets forth the fair values, which are equal to the carrying values, of PLDT’s plan assets recognized as at June 30, 2023 and December 31, 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Noncurrent Financial Assets
Investments in:
Unquoted equity investments		13,532		13,509
Shares of stock		1,933		1,913
Corporate bonds		235		318
Mutual funds		176		129
Government securities		10		7
Total noncurrent financial assets		15,886		15,876
Current Financial Assets
Cash and cash equivalents		422		410
Receivables		7		8
Total current financial assets		429		418
Total PLDT’s Plan Assets		16,315		16,294
Subsidiaries Plan Assets		315		(3	)
Total Plan Assets of Defined Benefit Pension Plans		16,630		16,291

Investment in shares of stocks is valued using the latest bid price at the reporting date. Investments in corporate bonds, mutual funds and government securities are valued using the quoted market prices at reporting date.

Unquoted Equity Investments

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)		(Unaudited)		(Audited)
	(Percentage of Ownership)				(in million pesos)
MediaQuest		100		100		12,634		12,634
Tahanan Mutual Building and Loan Association, Inc.,    or TMBLA, (net of subscriptions payable of    Php32 million)		100		100		643		625
BTFHI		100		100		255		250
						13,532		13,509

Investments in MediaQuest

MediaQuest was registered with the Philippine SEC on June 29, 1999 primarily to purchase, subscribe for or otherwise acquire and own, hold, use, manage, sell, assign, transfer, mortgage, pledge, exchange, or otherwise dispose of real and personal property or every kind and description, and to pay thereof in whole or in part, in cash or by exchanging, stocks, bonds and other evidences of indebtedness or securities of this any other corporation. Its investments include common shares of stocks of various communication, broadcasting and media entities.

Investments in MediaQuest are carried at fair value. The VIU calculations were derived from cash flow projections over a period of five years based on the 2022 financial budgets approved by the MediaQuest’s Board of Directors and calculated terminal value. Other key assumptions used in the cash flow projections

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include revenue growth rate, direct costs and capital expenditures. The post-tax discount rates applied to cash flow projections range from 14.9% to 15.0%. Cash flows beyond the five-year period are determined using 0.0% to 4.8% growth rates.

On May 8, 2012, the Board of Trustees of the PLDT Beneficial Trust Fund approved the issuance by MediaQuest of PDRs amounting to Php6 billion. The underlying shares of these PDRs are the shares of stocks of Cignal TV held by MediaQuest through Satventures (Cignal TV PDRs). On the same date, MediaQuest Board of Directors approved the investment in Cignal TV PDRs by ePLDT, which gave ePLDT a 40% economic interest in Cignal TV. In June 2012, MediaQuest received a deposit for future PDRs subscription of Php4 billion from ePLDT. Additional deposits of Php1 billion each were received on July 6, 2012 and August 9, 2012.

On January 25, 2013, the Board of Trustees of the PLDT Beneficial Trust Fund and the MediaQuest Board of Directors approved the issuance of additional MediaQuest PDRs amounting to Php3.6 billion. The underlying shares of these additional PDRs are the shares of Satventures held by MediaQuest (Satventures PDRs), the holder of which will have a 40% economic interest in Satventures. Satventures is a wholly-owned subsidiary of MediaQuest and the investment vehicle for Cignal TV. From March to August 2013, MediaQuest received from ePLDT an amount aggregating to Php3.6 billion representing deposits for future PDRs subscription. The Satventures PDRs and Cignal TV PDRs were subsequently issued on September 27, 2013, providing ePLDT an effective 64% economic interest in Cignal TV.

Also, on January 25, 2013, the Board of Trustees of the PLDT Beneficial Trust Fund and the MediaQuest Board of Directors approved the issuance of additional MediaQuest PDRs amounting to Php1.95 billion. The underlying shares of these additional PDRs are the shares of stocks of Hastings held by MediaQuest (Hastings PDRs). Hastings is a wholly-owned subsidiary of MediaQuest, which holds all the print-related investments of MediaQuest, including equity interests in the three leading newspapers: The Philippine Star, Philippine Daily Inquirer, and Business World. From June 2013 to October 2013, MediaQuest received from ePLDT an amount aggregating to Php1.95 billion representing deposits for future PDRs subscription.

On February 19, 2014, ePLDT’s Board of Directors approved an additional Php500 million investment in Hastings PDRs. On March 11, 2014, MediaQuest received from ePLDT an amount aggregating to Php300 million representing deposits for future PDRs subscription. As at December 31, 2014, total deposit for PDRs subscription amounted to Php2,250 million.

On May 21, 2015, ePLDT’s Board of Directors approved an additional Php800 million investment in Hastings PDRs and settlement of the Php200 million balance of the Php500 million Hastings PDR investment in 2014. Subsequently, on May 30, 2015, the Board of Trustees of the PLDT Beneficial Trust Fund and the Board of Directors of MediaQuest approved the issuance of Php3,250 million Hastings PDRs. This provided ePLDT with 70% economic interest in Hastings. In February 2018, ePLDT entered into a Deed of Assignment with the Board of Trustees of the PLDT Beneficial Trust Fund transferring the Hastings PDRs for Php1,664 million.

In 2019 and 2020, the Board of Trustees of the PLDT Beneficial Trust Fund approved additional investment in MediaQuest amounting to Php3,100 million and Php1,400 million, respectively, to fund MediaQuest’s investment requirements. The full amounts were fully drawn by MediaQuest during 2019 and 2020.

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In 2021 and 2022, the Board of Trustees of the PLDT Beneficial Trust Fund approved the additional investment in MediaQuest to fund its cash requirements amounting to Php2,000 million and Php1,000 million, respectively. As at December 31, 2022, both investments were already fully drawn by MediaQuest.

Investment in TMBLA

TMBLA was incorporated for the primary purpose of accumulating the savings of its stockholders and lending funds to them for housing programs. The beneficial trust fund’s total investment into TMBLA amounted to Php119 million consisting of initial direct subscription in shares of stocks of TMBLA in the amount of Php20 million (net of unpaid subscription amounting to Php32 million) and subsequently via a Deed of Pledge amounting to Php99 million. The cumulative change in the fair market values of this investment amounted to Php524 million and Php506 million as at June 30, 2023 and December 31, 2022, respectively.

Investment in BTFHI

BTFHI was incorporated for the primary purpose of acquiring voting preferred shares in PLDT and while the owner, holder of possessor thereof, to exercise all the rights, powers, and privileges of ownership or any other interest therein.

On October 26, 2012, BTFHI subscribed to a total of 150 million shares of Voting Preferred Stock of PLDT at a subscription price of Php1.00 per share for a total subscription price of Php150 million. Total cash dividend income amounted to Php4 million for each of the six months ended June 30, 2023 and 2022. Dividend receivables amounted to Php2 million each as at June 30, 2023 and December 31, 2022.

Shares of Stocks

As at June 30, 2023 and December 31, 2022, this account consists of:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Common shares
PSE		1,054		1,054
PLDT		35		35
Others		484		464
Preferred shares		360		360
		1,933		1,913

Dividends earned on PLDT common shares amounted to Php2 million and Php1 million for the six months ended June 30, 2023 and 2022, respectively.

Preferred shares represent 300 million unlisted preferred shares of PLDT at Php10 par value, net of subscription payable of Php2,640 million as at June 30, 2023 and December 31, 2022. These shares, which bear dividend of 13.5% per annum based on the paid-up subscription price, are cumulative, non-convertible and redeemable at par value at the option of PLDT. Dividends earned on this investment amounted to Php25 million for each of the six months ended June 30, 2023 and 2022.

Mutual Funds

Investment in mutual funds includes UITF, bond and equity funds, which aims to out-perform benchmarks in various indices as part of its investment strategy.

Corporate Bonds

Investment in corporate bonds includes various long-term peso and dollar denominated bonds with maturities ranging from June 2024 to June 2030 and fixed interest rates from 4.38% to 6.80% per annum.

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Government Securities

Investments in government securities includes Retail Treasury Bonds and FXTN bearing an interest rates of 4.6% and 4.8% per annum. These securities are fully guaranteed by the government of the Republic of the Philippines.

The allocation of the fair value of the assets for the PLDT pension plan as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in percentage)
Investments in listed and unlisted equity securities		95		95
Temporary cash investments		3		2
Debt and fixed income securities		1		2
Mutual funds		1		1
		100		100

Defined Contribution Plans

Smart’s and certain of its subsidiaries’ contributions to the plan are made based on the employees’ years of tenure and range from 5% to 10% of the employee’s monthly salary. Additionally, an employee has an option to make a personal contribution to the fund, at an amount not exceeding 10% of his monthly salary. The employer then provides an additional contribution to the fund ranging from 10% to 50% of the employee’s contribution based on the employee’s years of tenure. Although the plan has a defined contribution format, Smart and certain of its subsidiaries regularly monitor their compliance with Republic Act No. 7641. As at June 30, 2023 and December 31, 2022, Smart and certain of its subsidiaries were in compliance with the requirements of Republic Act No. 7641.

Smart’s and certain of its subsidiaries’ actuarial valuation is performed every year-end. There is no significant change in the fair value of plan assets from December 31, 2022 to June 30, 2023. Based on the latest actuarial valuation, the actual present value of prepaid benefit costs as at June 30, 2023 and December 31, 2022, and the net periodic benefit costs and average assumptions used in developing the valuation for the six months ended June 30, 2023 and 2022 are as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Changes in the present value of defined benefit obligations:
Present value of defined benefit obligations at beginning of the period		2,777			3,264
Service costs		149			262
Interest costs on benefit obligation		—			156
Actuarial gains – economic assumptions		—			(20	)
Actuarial gains – experience		—			(216	)
Actual benefits paid/settlements		—			(396	)
Curtailment and others		(85	)		(273	)
Present value of defined benefit obligations at end of the period		2,841			2,777
Changes in fair value of plan assets:
Fair value of plan assets at beginning of the period		3,485			4,137
Actual contributions		160			299
Interest income on plan assets		—			213
Return on plan assets (excluding amount included in net interest)		—			(322	)
Actual benefits paid/settlements		(96	)		(842	)
Fair value of plan assets at end of the period		3,549			3,485
Funded status – net		708			708
Prepaid benefit costs (Note 18)		708			708

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	June 30,
	2023		2022
	(Unaudited)
	(in million pesos)
Components of net periodic benefit costs:
Service costs		149		157
Interest costs – net		—		—
Net periodic benefit costs		149		157

Actual net loss on plan assets amounted to nil for the six months ended June 30, 2023 and 2022.

Based on the latest actuarial valuation, Smart and certain of its subsidiaries expect to contribute the amount of approximately Php309 million to the plan in 2023.

The following table sets forth the expected future settlements by the Plan of maturing defined benefit obligation as at June 30, 2023:

	(in million pesos)
2023(1)		41
2024		143
2025		143
2026		210
2027		216
2028 to 2061		2,163

(i)July 1, 2023 through December 31, 2023.

The average duration of the defined benefit obligation at the end of the reporting period is 10 years.

The weighted average assumptions used to determine pension benefits for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023		2022
	(Unaudited)
	(in percentage)
Rate of increase in compensation		5.0		5.0
Discount rate		7.3		5.0

The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit obligation as at June 30, 2023 and December 31, 2021, assuming if all other assumptions were held constant:

	Increase (Decrease)
	(in percentage)			(in million pesos)
Discount rate		(0.3	)		(9	)
		0.6			18
Future salary increases		0.6			17
		(0.3	)		(9	)

Smart’s Retirement Plan

The fund is being managed and invested by BPI Asset Management and Trust Corporation, as Trustee, pursuant to an amended trust agreement dated February 21, 2012.

The plan’s investment portfolio seeks to achieve regular income, long-term capital growth and consistent performance over its own portfolio benchmark. In order to attain this objective, the Trustee’s mandate is to invest in a diversified portfolio of bonds and equities, both domestic and international. The portfolio mix is kept at 81% and 19% for fixed income securities and equity securities, respectively.

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The following table sets forth the fair values, which are equal to the carrying values, of Smart’s plan assets recognized as at June 30, 2023 and December 31, 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Noncurrent Financial Assets
Investments in:
Domestic fixed income		1,919		2,152
Philippine foreign currency bonds		849		220
Domestic equities		614		676
International equities		426		—
International fixed income		314		222
Total noncurrent financial assets		4,122		3,270
Current Financial Assets
Cash and cash equivalents		788		1,411
Total current financial assets		788		1,411
Total plan assets		4,910		4,681
Less: Employee’s share, forfeitures and mandatory reserve account		1,361		1,196
Total Plan Assets of Defined Contribution Plans		3,549		3,485

Domestic Fixed Income

Investments in domestic fixed income include Philippine Peso denominated bonds, such as government securities and corporate debt securities, with fixed interest rates from 3.00% to 10.13% per annum.

Philippine Foreign Currency Bonds

Investments in Philippine foreign currency bonds include U.S. Dollar denominated fixed income instruments issued by the Philippine government and local corporations with fixed interest rates from 2.38% to 10.63% per annum.

Domestic Equities

Investments in domestic equities include direct equity investments in common shares listed in the PSE. These investments earn on stock price appreciation and dividend payments. This includes investment in PLDT shares with fair value of Php29 million and Php21 million as at June 30, 2023 and December 31, 2022, respectively.

International Equities

Investments in international equities include iShares exchange traded funds.

International Fixed Income

Investments in international fixed income include iShares exchange traded funds.

Cash and Cash Equivalents

This pertains to the fund’s excess liquidity in Philippine Peso and U.S. Dollars including investments in time deposits, money market funds and other deposit products of banks with duration or tenor less than a year.

The asset allocation of the Plan is set and reviewed from time to time by the Plan Trustees taking into account the membership profile, the liquidity requirements of the Plan and risk appetite of the Plan sponsor. This considers the expected benefit cash flows to be matched with asset durations.

The plan assets are primarily exposed to financial risks such as liquidity risk and price risk.

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Liquidity risk pertains to the plan’s ability to meet its obligation to the employees upon retirement. To effectively manage liquidity risk, the Plan Trustees invest a portion of the fund in readily tradeable and liquid investments which can be sold at any given time to fund liquidity requirements.

Price risk pertains mainly to fluctuations in market prices of equity securities listed in the PSE. In order to effectively manage price risk, the Plan Trustees continuously assess these risks by closely monitoring the market value of the securities and implementing prudent investment strategies.

The allocation of the fair value of Smart and certain of its subsidiaries pension plan assets as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in percentage)
Investments in debt and fixed income securities and others		79		86
Investments in listed and unlisted equity securities		21		14
		100		100

Other Long-term Employee Benefits

TIP

In 2017, the Board of Directors of PLDT approved the TIP which intended to provide incentive compensation to key officers, executives and other eligible participants who are consistent performers and contributors to our strategic and financial goals, based on the achievement of telco core income targets. The program was divided into two cycles. Cycle 1 covered the performance period from 2017 to 2019, was in the form of PLDT common shares of stocks and later modified to a mix of equity shares and cash grants, and was released in three annual grants. Cycle 2 covered the performance period from 2020 to 2021, was settled in cash and was released in 2022. TIP was administered by the ECC.

LTIP

On December 23, 2021, the ECC approved the LTIP covering the years 2022 to 2026, covering two cycles, based on the achievement of telco core income targets, with additional performance metrics on Customer Experience and Sustainability to impact the LTIP pay-out. Cycle 1 covers performance period from 2022 to 2024. Payout will be based on the achievement of performance targets. Cycle 2 covers performance period from 2025 and 2026, and is subject to the ECC’s further evaluation and approval of the final terms.

The expense accrued for the LTIP amounted to Php463 million and Php679 million for the six months ended June 30, 2023 and 2022, respectively.

The accrued incentive payable amounted to Php1,761 million and Php1,294 million as at June 30, 2023 and December 31, 2022, respectively. See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Estimating Pension Benefit Costs and Other Employee Benefits and Note 5 – Income and Expenses – Compensation and Employee Benefits.

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26.Provisions and Contingencies

PLDT’s Local Business and Franchise Tax Assessments

As at June 30, 2023, PLDT has no contested LGU assessments for franchise taxes based on gross receipts received or collected for services within its respective territorial jurisdiction.

Smart’s Local Business and Franchise Tax Assessments

Province of Cagayan

In 2016, the Province of Cagayan (Province) issued a tax assessment against Smart for alleged local franchise tax covering years 2011 to 2015. Smart appealed the assessment to the Regional Trial Court, or RTC, on the ground that Smart cannot be held liable for local franchise tax mainly because it has no sales office within the Province pursuant to Section 137 of the Local Government Code (Republic Act No. 7160). On November 29, 2021, the RTC rendered its Decision dismissing the appeal of Smart for lack of jurisdiction without prejudice. Subsequently, a motion for reconsideration was filed by the Province. On April 25, 2023, the RTC ruled in favor of Cagayan Province and denied Smart's subsequent Motion for Reconsideration. On May 24, 2023, Smart filed its Petition for Review before the Court of Tax Appeals. On June 27, 2023, the Second Division of the CTA, in a resolution, ordered Cagayan to file their Comment to the Petition for Review filed by Smart. Case is pending as of date of this report.

City of Makati

The City of Makati sent letters to Smart and SBI for alleged franchise tax liability, which Smart and SBI refuted through respective protest letters and judicial actions on the ground that Makati City is imposing tax on revenues outside its jurisdiction. After several court proceedings, on March 2, 2023, the City of Makati, Smart and SBI, mutually agreed to execute respective Compromise Agreements to abbreviate the long and protracted court cases. Pursuant thereto, the involved RTC rendered judgments approving the Compromise Agreements for SBI and Smart on March 16, 2023 and March 17, 2023, respectively, which eventually ended the cases. On April 27, 2023, the City of Makati issued the Business Permits of Smart and SBI.

Digitel’s Local Government Unit, or LGU, Assessments

Digitel is discussing with various LGUs, as to the settlement of its local taxes.

DMPI vs. City of Trece Martires

In 2010, DMPI petitioned to declare void the City of Trece Martires ordinance of imposing tower fee of Php150 thousand for each cell site every year. Application for the issuance of a preliminary injunction by DMPI is pending resolution as of date.

ACeS Philippines’ Withholding Tax Assessments

ACeS Philippines had a case filed with the Supreme Court (ACeS Philippines Satellite Corporation vs. Commissioner of Internal Revenue Supreme Court G.R. No. 226680) for alleged 2006 deficiency withholding tax. On July 23, 2014, the CTA Second Division affirmed the assessment of the Commissioner of Internal Revenue for deficiency basic withholding tax, surcharge plus deficiency interest, and delinquency interest amounting to Php87 million. On November 18, 2014, ACeS Philippines filed a Petition for Review with the CTA En Banc. On August 16, 2016, the CTA En Banc also affirmed the assessment with finality. On October 19, 2016, ACeS Philippines filed a petition before the Supreme Court assailing the decision of the CTA. On February 23, 2017 and March 15, 2017, respectively, ACeS Philippines paid a compromise settlement amounting to Php27 million and filed a formal request for compromise of tax liabilities before the Bureau of Internal Revenue, or BIR, while the case was pending before the Supreme Court.

On February 19, 2021, ACeS Philippines entered into an amicable settlement with the BIR pursuant to the provisions of the Civil Code of the Philippines and paid an additional compromise settlement amounting to Php20 million. On April 18, 2021, the Commissioner of Internal Revenue signed the judicial compromise

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agreement. The corresponding Certificate of Availment (Compromise Settlement) was issued by the BIR. On July 21, 2022, Parties filed with the Supreme Court a Joint Motion for Judgment based on Judicial Compromise Agreement. On January 31, 2023, ACeS Philippines received the Decision of the Supreme Court dated August 30, 2022 affirming the decision of the CTA En Banc. On February 15, 2023, ACes Philippines filed its Motion for Reconsideration praying to consider the Joint Motion for Judgment based on Judicial Compromise Agreement filed on July 21, 2022. In a Notice dated February 21, 2023, the Supreme Court required the BIR to comment on the Motion for Reconsideration (on the Decision dated August 30, 2022). The BIR filed its Comment dated March 13, 2023 submitting that the Judicial Compromise Agreement executed by and between the parties be considered and judgment be rendered based thereon.

In a Notice received on June 29, 2023, the Supreme Court issued a Resolution dated April 25, 2023 resolving to deny ACeS Philippines’ Motion for Reconsideration with finality. While the Supreme Court did not mention the Judicial Compromise Agreement, the BIR – National Evaluation Board approved ACeS Philippines’ application and payment for compromise settlement and issued the Certificate of Availment.

Arbitration with Eastern Telecommunications Philippines, Inc., or ETPI

Since 1990 up to the present, PLDT and ETPI have been engaged in legal proceedings involving a number of issues in connection with their business relationship. Among PLDT’s claims against ETPI are ETPI’s alleged uncompensated bypass of PLDT’s systems from July 1, 1998 to November 28, 2003; unpaid access charges from July 1, 1999 to November 28, 2003; and non-payment of applicable rates for Off-Net and On-Net traffic from January 1, 1999 to November 28, 2003 arising from ETPI’s unilateral reduction of its rates for the Philippines-Hong Kong traffic stream through Hong Kong REACH-ETPI circuits. ETPI’s claims against PLDT, on the other hand, involve an alleged Philippines-Hong Kong traffic shortfall for the period July 1, 1998 to November 28, 2003; unpaid share of revenues generated from PLDT’s activation of additional growth circuits in the Philippines-Singapore traffic stream for the period July 1, 1999 to November 28, 2003; under reporting of ETPI share of revenues under the terms of a Compromise Agreement for the period January 1, 1999 to November 28, 2003 (which ETPI is seeking to retroact to February 6, 1990); lost revenues arising from PLDT’s blocking of incoming traffic from Hong Kong from November 1, 2001 up to November 2003; and lost revenues arising from PLDT’s circuit migration from January 1, 2001 up to December 31, 2001.

While the parties have entered into Compromise Agreements in the past (one in February 1990 and another in March 1999), said agreements have not put to rest the issues between them. To avoid protracted litigation and to preserve their business relationship, PLDT and ETPI agreed to submit their differences and issues to voluntary arbitration. On April 16, 2008, PLDT and ETPI signed an Arbitration Settlement Agreement and submitted their respective Statement of Claims and Answers. Subsequent to such submissions, PLDT and ETPI agreed to suspend the arbitration proceedings. ETPI’s total claim against PLDT is about Php2.9 billion while PLDT’s total claim against ETPI is about Php2.8 billion.

In an agreement, PLDT and Globe have agreed that they shall cause ETPI, within a reasonable time after May 30, 2016, to dismiss Civil Case No. 17694 entitled Eastern Telecommunications Philippines, Inc. vs. Philippine Long Distance Telephone Company, and all related or incidental proceedings (including the voluntary arbitration between ETPI and PLDT), and PLDT, in turn, simultaneously, shall withdraw its counterclaims against ETPI in the same entitled case, all with prejudice. As of date of this report, there are no changes on the status of the case.

Department of Labor and Employment, or DOLE, Compliance Order, or Order, to PLDT

In a series of orders including a Compliance Order issued by the DOLE Regional Office on July 3, 2017, which was partly affirmed by DOLE Secretary Silvestre Bello, III, or DOLE Secretary, in his resolutions dated January 10, 2018 and April 24, 2018, the DOLE had previously ordered PLDT to regularize 7,344 workers from 38 of PLDT’s third party service contractors. PLDT questioned these “regularization orders” before the CA, which led to the July 31, 2018 Decision of the CA.

In sum, the CA: (i) granted PLDT’s prayer for an injunction against the regularization orders; (ii) set aside the regularization orders insofar as they declared that there was labor-only contracting of the following functions: (a) janitorial services, messengerial and clerical services; (b) information technology, or IT, firms and services; (c) IT support services, both hardware and software, and applications development; (d) back office support and office operations; (e) business process outsourcing or call centers; (f) sales; and (g) medical, dental engineering

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and other professional services; and (iii) remanded to the DOLE for further proceedings, the matters of: (a) determining which contractors, and which individuals deployed by these contractors, are performing installation, repair and maintenance, or IRM, of PLDT lines which individuals will be covered by the regularization orders because they are performing the core functions of PLDT; and (b) properly computing monetary awards for benefits such as unpaid overtime or 13th month pay, which in the regularization orders amounted to Php51.8 million.

The CA agreed with PLDT’s contention that the DOLE Secretary’s regularization order was “tainted with grave abuse of discretion” because it did not meet the “substantial evidence” standards set out by the Supreme Court in landmark jurisprudence. The Court also said that the DOLE’s appreciation of evidence leaned in favor of the contractor workers, and that the DOLE Secretary had “lost sight” of distinctions involving the labor law concepts of “control over means and methods,” and “control over results.”

On August 20, 2018, PLDT filed a motion seeking a partial reconsideration of that part of the CA decision, which ordered a remand to the Office of the Regional Director of the DOLE-National Capital Region of the matter of the regularization of individuals performing installation, repair and maintenance, or IRM, services. In its motion, PLDT argued that the fact-finding process contemplated by the Court’s remand order is actually not part of the visitorial power of the DOLE (i.e., the evidence that will need to be assessed cannot be gleaned in the ‘normal course’ of a labor inspection) and is therefore, outside the jurisdiction of the DOLE Secretary.

PLDT also questioned that part of the CA ruling which seems to conclude that all IRM jobs are “regular or core functions of PLDT.” It argued that the law recognizes that some work of this nature can be project-based or seasonal in nature. Instead of the DOLE, PLDT suggested that the National Labor Relations Commission – a tribunal with better fact-finding powers – take over from the DOLE to determine whether the jobs are in fact IRM, and if so, whether they are “regular” or can be considered project-based or seasonal.

Both adverse parties, the PLDT rank-and-file labor union Manggagawa sa Komunikasyon ng Pilipinas, or MKP, and the DOLE filed Motions for Reconsideration.

On February 14, 2019, the CA issued a Resolution denying all Motions for Reconsideration and upheld its July 31, 2018 Decision. After filing a Motion for Extension of Time on March 7, 2019, PLDT filed on April 5, 2019 a Petition for Review with the Supreme Court, questioning only one aspect of the CA decision i.e. its order remanding to the DOLE the determination of which jobs fall within the scope of “installation, repair and maintenance,” without however a qualification as to the “project” or “seasonal” nature of those engagements. The Supreme Court has consolidated PLDT’s Petition with the separate Petitions for Review filed by the DOLE and MKP. On February 17, 2020, PLDT submitted its Comment on the Petitions for Review filed by the DOLE Secretary and MKP. PLDT also received the Comment filed by MKP and the DOLE Secretary dated January 13, 2020 and September 3, 2020, respectively. On September 10, 2020, PLDT filed a Motion for Leave and for Time to File a Consolidated Reply (re: MKP’s Comment dated January 13, 2020 and DOLE Secretary’s Comment dated September 3, 2020). On December 23, 2020, PLDT filed its Reply to the Comment submitted by MKP and the DOLE Secretary. On March 11, 2021, PLDT received DOLE’s Reply dated March 2, 2021. To date, the consolidated petitions filed by PLDT, DOLE and MKP are pending resolution with the Supreme Court.

Attys. Baquiran and Tecson vs. NTC, et al.

This is a Petition for Mandamus filed on October 23, 2018 byAttys. Joseph Lemuel Baligod Baquiran and Ferdinand C. Tecson against the Respondents NTC, the PCC, Liberty, BellTel, Globe, PLDT and Smart. Briefly, the case involves the 700 MHz frequency, among others, or Subject Frequencies, that was originally assigned to Liberty and which eventually became subject of the Co-Use Agreement between Globe, on the one hand, and PLDT and Smart, on the other, or the Co-Use Agreement.

The Petition prayed that: (a) a Temporary Restraining Order, or TRO, /Writ of Preliminary Injunction, or WPI, be issued to enjoin and restrain Globe, PLDT and Smart from utilizing and monopolizing the Subject Frequencies and the NTC from bidding out or awarding the frequencies returned by PLDT, Smart and Globe; (b) the NTC’s conditional assignment of the Subject Frequencies be declared unconstitutional, illegal and void; (c) alternatively, Liberty and its successors-in-interest be divested of the Subject Frequencies and the same be reverted to the State; (d) Liberty be declared to have transgressed Section 11 (1), Article XVI of the Constitution; (e) Liberty and its parent company be declared to have contravened paragraph 2 of Section 10,

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Article XII of the 1987 Constitution; (f) Liberty’s assignment of the Subject Frequencies to BellTel be declared illegal and void; (g) the Co-Use Agreement be declared invalid; (h) the NTC be found to have unlawfully neglected the performance of its positive duties; (i) the PCC be found to have unlawfully neglected the performance of its positive duties; (j) a Writ of Mandamus be issued commanding the NTC to revoke the Co-Use Agreement, recall the Subject Frequencies in favor of the State, and make the same available to the best qualified telecommunication players; (k) a Writ of Mandamus be issued commanding the PCC to conduct a full review of PLDT’s and Globe’s acquisition of all issued and outstanding shares of Vega Telecom; (l) an Investigation of NTC be ordered for possible violation of Section 3 (e) of Republic Act No. 3019 and other applicable laws; and (m) the said TRO/WPI be made permanent.

Essentially, petitioners contend that the NTC’s assignments of the Subject Frequencies of Liberty were void for failing to comply with Section 4 (c) of Republic Act No. 7925 which essentially states that “the radio frequency spectrum is a scarce public resource xxx.” Even assuming the assignments were valid, Liberty should be deemed divested of the same by operation of law (with the Subject Frequencies reverted to the State), considering that it underutilized or never utilized the Subject Frequencies in violation of the terms and conditions of the assignments. Assuming further that the NTC’s assignments of the Subject Frequencies were valid and that Liberty was not divested of the same by operation of law, still, Liberty did not validly assign the Subject Frequencies to BellTel because of the absence of Congressional approval. Petitioners conclude that since the assignments of the Subject Frequencies from the NTC to Liberty, and from Liberty to BellTel, were all illegal and void, it follows that the Subject Frequencies could not serve as the object of the Co-Use Agreement between PLDT, Smart and Globe.

On November 23, 2018, PLDT filed an Entry of Appearance on behalf of PLDT and Smart. On January 17, 2019, PLDT and Smart filed their Comment. Essentially, the Comment raised the following arguments: first, that the requisites for judicial review and for a mandamus petition are lacking; second, that there was no need for Liberty to obtain prior Congressional approval before it assigned the Subject Frequencies to BellTel; and third, that the Co-Use Agreement is valid and approved by the NTC, and did not violate the Constitution or any laws.

On January 15, 2019, PLDT received a copy of BellTel’s Comment/Opposition dated January 10, 2019. On February 12, 2019, PLDT received a copy of Globe Telecom, Inc.’s, or Globe’s Comment/Opposition dated January 21, 2019. In a Resolution dated March 19, 2019, the Supreme Court noted the aforesaid filings. As at the date of the report, however, PLDT has not received any pleadings from the OSG on behalf of the public respondents.

On June 18, 2019, the Supreme Court issued a Resolution consolidating this case with G.R. No. 230798 (PCC vs. CA [Twelfth Division] and PLDT; Globe, intervenor) and G.R. No. 234969 (PCC vs. PLDT and Globe). The consolidated cases were assigned to the Supreme Court Division in charge of G.R. No. 230798, the case with the lowest docket number.

Notice of Material Breach and Demand for Payment on DITO

In February 2021, PLDT and DITO entered into an agreement for the construction of a transmission facility that served as the point of interconnection for their subscribers. Under the agreement, PLDT established and managed the interconnection facility that operated as the primary physical interface for both companies. The planned facility was completed in March 2021. On October 6, 2022, PLDT served a Notice of Material Breach and Demand for Payment on DITO which refused to pay the outstanding balance of Php430 million for contracted services provided by PLDT in relation to the building and provisioning of transmission facilities used by DITO to deliver telecommunication services to its subscribers.

Meanwhile, on September 22, 2021, DITO filed a petition with the NTC seeking the latter’s intervention in directing Smart to grant DITO’s request for additional capacity for interconnection. In response, Smart filed an answer on October 4, 2021 stating that the petition should be denied for DITO’s failure to prevent, detect, or block International Simple Resale, or ISR,/Bypass Traffic emanating from its network and DITO’s failure to set up an effective fraud management system; and requesting for compensation for losses incurred due to these ISR/ bypass activities, in violation of its Interconnection Agreement with Smart, the provisions of R.A. No. 7925, and NTC MC No. 14-07-2000. The NTC facilitated mediation conferences on November 5, 2021, November 18, 2021, February 4, 2022, and February 16, 2022. The case remains pending with the NTC.

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Following news reports on August 8, 2022 that DITO had filed a complaint with the PCC against Globe and Smart involving the same issue pending with the NTC on ISR, Smart received a subpoena duces tecum dated December 7, 2022 ("December Subpoena") from the PCC Competition Enforcement Office in relation to an ongoing full administrative investigation involving the telecommunications industry. The subpoena notified Smart that it was the subject of ongoing investigation pursuant to Section 2.9 of the 2017 PCC Rules of Procedure, involving allegations of violations by Smart of Section 14(b)(1), 15(b), 15(c) and 15(i) of the Philippine Competition Act. Smart was directed to submit its corporate documents, documents and information pertaining to its operations as a PTE and its relationship with other PTEs, and documents and information on ISR. to the PCC on January 23, 2023, followed by the submission of a supplemental submission on January 27, 2023. On May 26, 2023, Smart received a subpoena ad testificandum from the PCC directing duly authorized representative(s) knowledgeable on: (i) Smart’s operations, including but not limited to interconnection with other public telecommunications entities, products and services offered, and corporate structure; and (ii) submitted documents in relation to the December Subpoena, to appear before the PCC Enforcement Office on June 8, 2023. Accordingly, Smart representatives appeared before the PCC on said date for the clarificatory hearing. On July 4, 2023, Smart received a PCC Resolution setting another hearing and requiring representatives from the Consumer Business group, Marketing Department, Network Department, and Carrier Relations of Smart to appear and address pending matters on competitor information, market distinction between postpaid and prepaid services, network coverage, interconnection agreements, clarificatory questions on documents already submitted, and other related matters.

Class Action Suit Against PLDT

On February 6, 2023, plaintiff Sophia Olsson filed a putative class action in the United States District Court for the Central District of California (the “Court”) against PLDT and certain current and former directors and officers (“U.S. Class Action”). On April 7, 2023, Ms. Olsson and another individual, Kevin Douglas, each represented by a different law firm, submitted separate motions to the Court to serve as lead plaintiff in the U.S. Class Action. On May 1, 2023, the Court granted Mr. Douglas’s motion to serve as the lead plaintiff.

On May 8, 2023, Mr. Douglas (“Plaintiff”) filed a joint stipulation and proposed order providing that PLDT accepts service of the complaint and establishing a schedule for Plaintiff to file an amended complaint and for PLDT to move to dismiss or otherwise respond to the amended complaint. The schedule provides that: (i) Plaintiff will amend the complaint by July 7, 2023; (ii) PLDT will move to dismiss or otherwise respond to the amended complaint by September 5, 2023; (iii) Plaintiff will file an opposition to any motion to dismiss by November 6, 2023; and (iv) PLDT will file a reply brief in further support of any motion to dismiss by December 6, 2023.

On July 7, 2023, Plaintiff filed an amended complaint. The amended complaint alleges that PLDT and certain of its current and former directors and officers (collectively, the “Defendants”) made materially false and misleading statements regarding PLDT’s capital expenditures and internal controls during the period April 23, 2020 through December 19, 2022. The amended complaint asserts claims under Sections 10(b) and 20(a) of the United States Securities and Exchange Act of 1934 (and related rules) but does not specify the amount of the purported damages.

Due to the early stage of this matter, uncertainties related to the potential amounts to be claimed by Plaintiff, and the inherent unpredictability of litigation, PLDT is unable to determine if any liability will arise or provide an estimate of any potential liability. The Company will continue to vigorously defend itself against the allegations in the amended complaint.

Other disclosures required by PAS 37, Provisions, Contingent Liabilities and Contingent Assets, were not provided as it may prejudice our position in on-going claims, litigations and assessments. See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Provision for legal contingencies and tax assessments.

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27.Financial Assets and Liabilities

We have various financial assets such as trade and non-trade receivables, cash and short-term deposits. Our principal financial liabilities, other than derivatives, comprise of bank loans, lease liabilities, trade and non-trade payables. The main purpose of these financial liabilities is to finance our operations. We also enter into derivative transactions, primarily principal only-currency swap agreements, interest rate swaps and forward foreign exchange contracts and options to manage the currency and interest rate risks arising from our operations and sources of financing. Our accounting policies in relation to derivatives are set out in Note 2 – Summary of Significant Accounting Policies – Financial Instruments.

The following table sets forth our consolidated financial assets and financial liabilities as at June 30, 2023 and December 31, 2022:

	Financial instruments at amortized cost				Financial instruments at FVPL			Total financial instruments
	(in million pesos)
Assets as at June 30, 2023 (Unaudited)
Noncurrent:
Financial assets at fair value through profit or loss		—				491			491
Debt instruments at amortized cost – net of current portion		395				—			395
Derivative financial assets – net of current portion		—				27			27
Other financial assets – net of current portion		3,741		(1)		—			3,741
Current:
Cash and cash equivalents		16,185				—			16,185
Short-term investments		9				258	(2)		267
Trade and other receivables		25,095				—			25,095
Current portion of derivative financial assets		—				4			4
Current portion of debt instruments at amortized cost		200				—			200
Current portion of other financial assets		308		(1)		—	(3)		308
Total assets		45,933				780			46,713
Liabilities as at June 30, 2023 (Unaudited)
Noncurrent:
Interest-bearing financial liabilities – net of current portion		234,623				—			234,623
Lease liabilities – net of current portion		32,269				—			32,269
Derivative financial liabilities – net of current portion		—				78			78
Customers' deposits		2,243				—			2,243
Deferred credits and other noncurrent liabilities		188				—			188
Current:
Accounts payable		81,169				—			81,169
Accrued expenses and other current liabilities		72,077				—			72,077
Current portion of interest-bearing financial liabilities		33,446				—			33,446
Current portion of lease liabilities		10,250				—			10,250
Dividends payable		1,762				—			1,762
Current portion of derivative financial liabilities		—				481			481
Liabilities associated with assets classified as held-for-sale		3,095				—			3,095
Total liabilities		471,122				559			471,681
Net assets (liabilities)		(425,189	)			221			(424,968	)

(1)Includes refundable deposits and notes receivables.

(2)Includes investments in the funds of Credit Suisse and Julius Baer. In 2021, PLDT withdrew US$6.6 million from the Supply Chain Finance fund of Credit Suisse and impaired the remaining fund value of US$3.4 million. In November 2021, Smart invested US$5.0 million in the Focus Fixed Income Asia Defensive fund of Julius Baer. As at June 30, 2023 and December 31, 2022, the fund’s value amounted to US$4.66 million and US$4.5 million, respectively.

(3)Includes RCBC Redemption Trust Account. See Note 19 – Equity – Redemption of Preferred Stock.

F-160

	Financial instruments at amortized cost				Financial instruments at FVPL				Total financial instruments
	(in million pesos)
Assets as at December 31, 2022 (Audited)
Noncurrent:
Financial assets at fair value through profit or loss		—				432				432
Debt instruments at amortized cost – net of current portion		596				—				596
Derivative financial assets – net of current portion		—				81				81
Other financial assets – net of current portion		3,489		(1)		—				3,489
Current:
Cash and cash equivalents		25,211				—				25,211
Short-term investments		129				254		(2)		383
Trade and other receivables		26,255				—				26,255
Current portion of other financial assets		206		(1)		—		(3)		206
Total assets		55,886				767				56,653
Liabilities as at December 31, 2022 (Audited)
Noncurrent:
Interest-bearing financial liabilities – net of current portion		217,288				—				217,288
Lease liabilities – net of current portion		31,958				—				31,958
Derivative financial liabilities – net of current portion		—				190				190
Customers' deposits		2,313				—				2,313
Deferred credits and other noncurrent liabilities		363				—				363
Current:
Accounts payable		101,107				—				101,107
Accrued expenses and other current liabilities		74,227				—				74,227
Current portion of interest-bearing financial liabilities		32,292				—				32,292
Current portion of lease liabilities		10,477				—				10,477
Dividends payable		1,821				—				1,821
Current portion of derivative financial liabilities		—				960				960
Liabilities associated with assets classified as held-for-sale		1,738				—				1,738
Total liabilities		473,584				1,150				474,734
Net assets (liabilities)		(417,698	)			(383	)			(418,081	)

42,3

(1)Includes refundable deposits and notes receivables.

(2)Includes investments in the funds of Credit Suisse and Julius Baer. PLDT withdrew US$6.6 million from the Supply Chain Finance fund of Credit Suisse in 2021. As at December 31, 2021, the fund’s value is US$3.4 million which was fully impaired as at year-end. In November 2021, Smart invested US$5.0 million in the Focus Fixed Income Asia Defensive fund of Julius Baer. As at December 31, 2021, the fund’s value is US$5.02 million.

(3)Includes RCBC Redemption Trust Account. See Note 19 – Equity – Redemption of Preferred Stock.

F-161

The following table sets forth our consolidated offsetting of financial assets and liabilities recognized as at June 30, 2023 and December 31, 2022:

	Gross amounts of recognized financial assets and liabilities		Gross amounts of recognized financial assets and liabilities set-off in the consolidated  statements of financial position		Net amount presented in the consolidated statements of financial position
	(in million pesos)
June 30, 2023 (Unaudited)
Current Financial Assets
Trade and other receivables
Foreign administrations		4,378		3,415		963
Domestic carriers		431		166		265
Total		4,809		3,581		1,228
Current Financial Liabilities
Accounts payable
Suppliers and contractors		73,240		8		73,232
Carriers and other customers		12,422		4,787		7,635
Total		85,662		4,795		80,867
December 31, 2022 (Audited)
Current Financial Assets
Trade and other receivables
Foreign administrations		5,160		4,236		924
Domestic carriers		492		197		295
Total		5,652		4,433		1,219
Current Financial Liabilities
Accounts payable
Suppliers and contractors		80,769		44		80,725
Carriers and other customers		22,660		2,548		20,112
Total		103,429		2,592		100,837

There are no financial instruments subject to an enforceable master netting arrangement as at June 30, 2023 and December 31, 2022.

The following table sets forth our consolidated carrying values and estimated fair values of our financial assets and liabilities recognized as at June 30, 2023 and December 31, 2022 other than those whose carrying amounts are reasonable approximations of fair values:

	Carrying Value				Fair Value
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)		(Unaudited)		(Audited)
	(in million pesos)
Noncurrent Financial Assets
Debt instruments at amortized cost		395		596		383		573
Other financial assets – net of current portion		3,741		3,489		3,504		3,278
Total		4,136		4,085		3,887		3,851
Noncurrent Financial Liabilities
Interest-bearing financial liabilities:
Long-term debt – net of current portion		234,623		217,288		221,302		201,703
Customers' deposits		2,243		2,313		1,436		1,449
Deferred credits and other noncurrent liabilities		188		363		178		307
Total		237,054		219,964		222,916		203,459

F-162

Below is the list of our consolidated financial assets and liabilities carried at fair value that are classified using a fair value hierarchy as required for our complete sets of consolidated financial statements as at June 30, 2023 and December 31, 2022. This classification provides a reasonable basis to illustrate the nature and extent of risks associated with those financial statements.

	June 30, 2023								December 31, 2022
	(Unaudited)								(Audited)
	Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)		Total
	(in million pesos)
Noncurrent Financial Assets
Financial assets at FVPL		—		488		3		491		—		407		25		432
Derivative financial assets    – net of current portion		—		27		—		27		—		81		—		81
Current Financial Assets
Short-term investments		—		258		—		258		—		254		—		254
Current portion of derivative    financial assets		—		4		—		4		—		—		—		—
Total		—		777		3		780		—		742		25		767
Noncurrent Financial    Liabilities
Derivative financial liabilities    – net of current portion		—		78		—		78		—		190		—		190
Current Financial Liabilities
Current portion of derivative    financial liabilities		—		481		—		481		—		960		—		960
Total		—		559		—		559		—		1,150		—		1,150

(1)Fair values determined using observable market inputs that reflect quoted prices in active markets for identical assets or liabilities.

(2)Fair values determined using inputs other than quoted market prices that are either directly or indirectly observable for the assets or liabilities.

(3)Fair values determined using discounted values of future cash flows for the assets or liabilities.

As at June 30, 2023 and December 31, 2022, there were no transfers into and out of Level 3 fair value measurements.

As at June 30, 2023 and December 31, 2022, there were no transfers between Level 1 and Level 2 fair value measurements.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Long-term financial assets and liabilities:

Fair value is based on the following:

Type	Fair Value Assumptions	Fair Value Hierarchy
Noncurrent portion of advances and    other noncurrent assets	Estimated fair value is based on the discounted values of future cash flows using the applicable zero-coupon rates plus counterparties’ credit spread.	Level 3
Fixed rate loans: U.S. Dollar notes	Quoted market price.	Level 1
Investment in debt securities	Fair values were determined using quoted prices. For non-quoted securities, fair values were determined using discounted cash flow based on market observable rates.	Level 1 Level 2
Other loans in all other currencies	Estimated fair value is based on the discounted value of future cash flows using the applicable Commercial Interest Reference Rate and BVAL rates for similar types of loans plus PLDT’s credit spread.	Level 3
Variable rate loans	The carrying value approximates fair value because of recent and regular repricing based on market conditions.	Level 2

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Derivative Financial Instruments

Forward foreign exchange contracts, foreign currency swaps, foreign currency options and interest rate swaps: The fair values were computed as the present value of estimated future cash flows using market U.S. Dollar and Philippine Peso interest rates as at valuation date.

The valuation techniques considered various inputs including the credit quality of counterparties.

Due to the short-term nature of the transactions, the fair value of cash and cash equivalents, short-term investments, trade and other receivables, accounts payable, accrued expenses and other current liabilities and dividends payable approximate their carrying values as at the end of the reporting period.

Our derivative financial instruments are accounted for as either cash flow hedges or transactions not designated as hedges. Cash flow hedges refer to those transactions that hedge our exposure to variability in cash flows attributable to a particular risk associated with a recognized financial asset or liability and exposures arising from forecast transactions. Changes in the fair value of these instruments representing effective hedges are recognized directly in other comprehensive income until the hedged item is recognized in our consolidated income statement. For transactions that are not designated as hedges, any gains or losses arising from the changes in fair value are recognized directly to income for the period.

As at June 30, 2023 and December 31, 2022, we have taken into account the counterparties’ credit risks (for derivative assets) and our own non-performance risk (for derivative liabilities) and have included a credit or debit valuation adjustment, as appropriate, by assessing the maximum credit exposure and taking into account market-based inputs which considers the risk of default occurring and corresponding losses once the default event occurs. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

F-164

The table below sets out the information about our consolidated derivative financial instruments as at June 30, 2023 and December 31, 2022:

									June 30, 2023					December 31, 2022
									(Unaudited)					(Audited)
	Original Notional Amount	Trade Date	Underlying Transaction in U.S. Dollar	Termination Date	Weighted Average Hedge Cost		Weighted Average Foreign Exchange Rate		Notional Amount		Net Mark-to- market Gains (Losses) in Php			Notional Amount		Net Mark-to- market Gains (Losses) in Php
	(in millions)		(in millions)						(in millions)
Transactions not designated as hedges:
PLDT
Forward foreign exchange contracts	US$321	Various dates in May 2022 to June 2023	U.S. Dollar Liabilities	Various dates in July to August 2023		—	Php55.04		US$321			(207	)	US$257			(353	)
	US$141	Various dates in May to June 2023	U.S. Dollar Liabilities	Various dates in July to August 2023		—	Php55.03			—		—			—		—
Forward exchange options    capped forward	US$6	Various dates in October 2021	U.S. Dollar Liabilities	Various dates in April and May 2022		—	Php50.80			—		—			—		—
Foreign exchange options seagull(a)	US$7	June 10, 2022	U.S. Dollar Liabilities	January 9, 2023		—	Php52.64			—		—			7		(7	)
						—	Php52.96			—		—			—		—
						—	Php54.00			—		—			—		—
												(207	)				(360	)
Smart
Forward foreign exchange contracts	US$362	Various dates in January 2023 to July 2023	U.S. Dollar Liabilities	Various dates in July 2023 to February 2024		—	Php55.94		US$362			(196	)	US$369			(481	)
	US$148	Various dates in January 2023 to July 2023	U.S. Dollar Liabilities	Various dates in July 2023 to February 2024		—	Php55.87			—		—			—		—
Subsidized forwards(b)	US$52	Various dates in November 2021	U.S. Dollar Liabilities	Various dates in April and May 2022		—	Php50.38			—		—			—		—
Foreign exchange options seagull(c)	US$15	Various dates in June 2023	U.S. Dollar Liabilities	Various dates in February 2024		—	Php55.17			—		—			—		—
						—	Php55.85			—		—			—		—
						—	Php56.87		US$15			4		US$37			(40	)
												(192	)				(521	)
												(399	)				(881	)
Transactions designated as hedges:
PLDT
Interest rate swaps(d)	US$150	April and June 2015	200 Term Loan	February 25, 2022	2.70%			—		—		—			—		—
Long-term currency swaps(e)	US$27	November 2018 to August 2020	200 MUFG Bank, Ltd.	February 25, 2022	2.15%		Php50.78			—		—			—		—
Long-term foreign currency options(f)	US$290	Various dates in July 2020 and February to March 2021	300M Notes 2031	January 23, 2031	1.20%		Php49.61 Php55.28		US$290			(153	)	US$290			(265	)
												(153	)				(265	)
Smart
Long-term foreign currency options(g)	US$109	February to April 2021	140 PNB	December 13, 2030	1.63%		Php48.00 Php53.34		US$85			24		US$88			77
												24					77
												(129	)				(188	)
												(528	)				(1,069	)

F-165

(a)If the Philippine Peso to U.S. dollar spot exchange rate on fixing date settles between Php52.96 to Php54.00, PLDT will purchase the U.S. Dollar for Php52.96. However, if on maturity, the exchange rate settles above Php54.00, PLDT will purchase the U.S. Dollar for Php52.96 plus the excess above Php54.00, and if the exchange rate is lower than Php52.96, PLDT will purchase the U.S. Dollar at the prevailing Philippine peso to U.S. Dollar spot exchange rate, subject to a floor of Php52.64.

(b)If the Philippine Peso to U.S. Dollar spot exchange rate on fixing date settles above Php51.65, Smart will purchase the U.S. Dollar for Php50.38 plus the excess above Php51.65, and if the exchange rate is at or lower than Php51.65, Smart will purchase the U.S. Dollar at Php50.38.

(c)If the Philippine Peso to U.S. Dollar spot exchange rate on fixing date settles between Php55.85 to Php56.87, Smart will purchase the U.S. Dollar for Php55.85. However, if on maturity, the exchange rate settles above Php56.87, Smart will purchase the U.S. Dollar for Php55.85 plus the excess above Php56.87, and if the exchange rate is lower than Php55.85, Smart will purchase the U.S. Dollar at the prevailing Philippine Peso to U.S. Dollar spot exchange rate, subject to a floor of Php55.17.

(d)PLDT’s interest rate swap agreements outstanding as at June 30, 2023 and December 31, 2022 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The mark-to-market losses amounting to nil was recognized in our consolidated statements of other comprehensive income as at June 30, 2023 and December 31, 2022. Interest accrual on the interest rate swaps amounting to nil was recognized as at June 30, 2023 and December 31, 2022. There were no ineffective portion in the fair value recognized in our consolidated income statements for the six months ended June 30, 2023 and 2022.

(e)PLDT’s long-term principal only-currency swap agreements outstanding as at June 30, 2023 and December 31, 2022 were designated as cash flow hedges, wherein effective portion of the movements in the fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The mark-to-market gains amounting to nil was recognized in our consolidated statements of other comprehensive income as at June 30, 2023 and December 31, 2022. Hedge cost accrual on the long-term principal only-currency swaps amounting to nil was recognized as at June 30, 2023 and December 31, 2022. The amounts recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portion of the movements in the fair value amounting to nil was recognized in our consolidated income statements for the six months ended June 30, 2023 and 2022.

(f)PLDT’s long-term foreign currency option agreements outstanding as at June 30, 2023 and December 31, 2022 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. Settlement of the foreign currency option agreements will depend on the spot exchange rate on the fixing date. If the Philippine peso to U.S. dollar spot exchange rate on fixing date is between Php49.61 and Php55.28, PLDT will purchase the U.S. dollar at Php49.61. However, if on fixing date, the exchange rate is beyond Php55.28, PLDT will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate minus a subsidy of Php5.67, and if the exchange rate is lower than Php49.61, PLDT will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate. The mark-to-market losses amounting to Php78 million and Php190 million were recognized in our consolidated statement of other comprehensive income as at June 30, 2023 and December 31, 2022, respectively. Hedge cost accrual on the long-term foreign currency option agreements amounting to Php75 million was recognized each as at June 30, 2023 and December 31, 2022. The intrinsic value of the long-term foreign currency options recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portion of the movements in the fair value amounting to Php75 million and Php7 million were recognized in our consolidated income statement for the six months ended June 30, 2023 and 2022, respectively.

F-166

(g)Smart’s long-term foreign currency option agreements outstanding as at June 30, 2023 and December 31, 2022 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. Settlement of the foreign currency option agreements will depend on the spot exchange rate on the fixing date. If the Philippine Peso to U.S. Dollar spot exchange rate on fixing date is between Php48.00 and Php53.34, Smart will purchase the U.S. Dollar at Php48.00. However, if on fixing date the exchange rate is beyond Php53.34, Smart will purchase the U.S. Dollar at the prevailing Philippine Peso to U.S. Dollar spot exchange rate minus a subsidy of Php5.34, and if the exchange rate is lower than Php48.00, Smart will purchase the U.S. Dollar at the prevailing Philippine Peso to U.S. Dollar spot exchange rate. The mark-to-market gains amounting to Php27 million and Php81 million were recognized in our consolidated statement of other comprehensive income as at June 30, 2023 and December 31, 2022, respectively. Hedge cost accrual on the long-term foreign currency option agreements amounting to Php3 million was recognized each as at June 30, 2023 and December 31, 2022. The intrinsic value of the long-term foreign currency options recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portion of the movements in the fair value amounting to Php3 million and Php2 million were recognized in our consolidated income statement for the six months ended June 30, 2023 and 2022, respectively.

Our derivative financial instruments as at June 30, 2023 and December 31, 2022 are presented in the statements of financial position as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Noncurrent assets		27			81
Current assets		4			—
Noncurrent liabilities (Note 28)		(78	)		(190	)
Current liabilities (Note 28)		(481	)		(960	)
Net liabilities		(528	)		(1,069	)

Movements of our consolidated mark-to-market gains (losses) for the six months ended June 30, 2023 and for the year ended December 31, 2022 are summarized as follows:

	June 30, 2023			December 31, 2022
	(Unaudited)			(Audited)
	(in million pesos)
Net mark-to-market losses at beginning of the period		(1,069	)		(74	)
Gains on derivative financial instruments (Note 4)		847			2,572
Settlements and interest expense		800			1,135
Effective portion recognized in the profit or loss for the cash flow hedges		(33	)		(77	)
Net fair value losses on cash flow hedges charged to other comprehensive income		(987	)		(3,228	)
Others		(86	)		(1,397	)
Net mark-to-market losses at end of the period		(528	)		(1,069	)

Our consolidated analysis of gains on derivative financial instruments for the six months ended June 30, 2023 and 2022 are as follows:

	June 30,
	2023			2022
	(Unaudited)
	(in million pesos)
Gains on derivative financial instruments (Note 4)		847			2,311
Hedge costs		(120	)		(127	)
Net gains on derivative financial instruments (Notes 4 and 5)		727			2,184

F-167

Financial Risk Management Objectives and Policies

The main risks arising from our financial instruments are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk. The importance of managing those risks has significantly increased in light of the considerable change and volatility in both the Philippine and international financial markets. Our Board of Directors reviews and approves policies for managing each of these risks, which are summarized below. We also monitor the market price risk arising from all financial instruments.

Liquidity Risk

Our exposure to liquidity risk refers to the risk that our financial requirements, working capital requirements and planned capital expenditures will not be met.

We manage our liquidity profile to be able to finance our operations and capital expenditures, service our maturing debts and meet our other financial obligations. To cover our financing requirements, we use internally generated funds and proceeds from debt and equity issues and sales of certain assets.

As part of our liquidity risk management program, we regularly evaluate our projected and actual cash flows, including our loan maturity profiles, and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, export credit agency-guaranteed facilities, debt capital and equity market issues.

Any excess funds are primarily invested in short-term and principal-protected bank products that provide flexibility of withdrawing the funds anytime. We also allocate a portion of our cash in longer tenor investments such as fixed income securities issued or guaranteed by the Republic of the Philippines, and Philippine banks and corporates and managed funds. We regularly evaluate available financial products and monitor market conditions for opportunities to enhance yields at acceptable risk levels. Our investments are also subject to certain restrictions contained in our debt covenants. Our funding arrangements are designed to keep an appropriate balance between equity and debt and to provide financing flexibility while enhancing our businesses.

Our cash position remains sufficient to support our planned capital expenditure requirements and service our debt and financing obligations; however, we may be required to finance a portion of our future capital expenditures from external financing sources. We have cash and cash equivalents, and short-term investments amounting to Php16,185 million and Php267 million, respectively, as at June 30, 2023, which we can use to meet our short-term liquidity needs. See Note 15 – Cash and Cash Equivalents.

F-168

The following table summarizes the maturity profile of our financial assets based on our consolidated undiscounted claims outstanding as at June 30, 2023 and December 31, 2022:

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in million pesos)
June 30, 2023 (Unaudited)
Financial instruments at amortized cost:		54,197		49,779		3,608		727		83
Debt instruments at amortized cost		595		200		45		340		10
Other financial assets		4,331		308		3,563		387		73
Temporary cash investments		8,675		8,675		—		—		—
Short-term investments		9		9		—		—		—
Retail subscribers		18,454		18,454		—		—		—
Corporate subscribers		14,331		14,331		—		—		—
Foreign administrations		1,108		1,108		—		—		—
Domestic carriers		267		267		—		—		—
Dealers, agents and others		6,427		6,427		—		—		—
Financial instruments at FVPL:		923		432		—		—		491
Financial assets at fair value through profit or loss		491		—		—		—		491
Short-term investments		432		432		—		—		—
Total		55,120		50,211		3,608		727		574
December 31, 2022 (Audited)
Financial instruments at amortized cost:		53,604		48,929		3,740		852		83
Debt instruments at amortized cost		596		—		225		361		10
Other financial assets		4,285		206		3,515		491		73
Temporary cash investments		8,678		8,678		—		—		—
Short-term investments		129		129		—		—		—
Retail subscribers		17,216		17,216		—		—		—
Corporate subscribers		15,151		15,151		—		—		—
Foreign administrations		1,058		1,058		—		—		—
Domestic carriers		296		296		—		—		—
Dealers, agents and others		6,195		6,195		—		—		—
Financial instruments at FVPL:		860		428		—		—		432
Financial assets at fair value through profit or loss		432		—		—		—		432
Short-term investments		428		428		—		—		—
Total		54,464		49,357		3,740		852		515

F-169

The following table summarizes the maturity profile of our financial liabilities based on our consolidated contractual undiscounted obligations outstanding as at June 30, 2023 and December 31, 2022:

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in million pesos)
June 30, 2023 (Unaudited)
Debt(1):		351,047		30,428		68,999		67,976		183,644
Principal		270,309		29,692		37,623		51,303		151,691
Interest		80,738		736		31,376		16,673		31,953
Lease obligations		104,960		24,844		31,858		22,172		26,086
Various trade and other obligations:		156,677		154,185		345		121		2,026
Suppliers and contractors		73,361		73,232		38		91		—
Utilities and related expenses		62,155		62,093		59		3		—
Employee benefits		5,644		5,644		—		—		—
Customers’ deposits		2,243		—		190		27		2,026
Dividends		1,762		1,762		—		—		—
Carriers and other customers		1,239		1,239		—		—		—
Others		10,273		10,215		58		—		—
Total contractual obligations		612,684		209,457		101,202		90,269		211,756
December 31, 2022 (Audited)
Debt(1):		320,907		30,001		65,159		55,632		170,115
Principal		251,859		29,203		37,885		41,593		143,178
Interest		69,048		798		27,274		14,039		26,937
Lease obligations		62,216		14,658		13,504		10,591		23,463
Various trade and other obligations:		178,219		175,539		610		38		2,032
Suppliers and contractors		81,041		80,725		307		9		—
Utilities and related expenses		63,613		63,609		4		—		—
Employee benefits		6,615		6,615		—		—		—
Customers’ deposits		2,313		—		252		29		2,032
Carriers and other customers		1,745		1,745		—		—		—
Dividends		1,821		1,821		—		—		—
Others		21,071		21,024		47		—		—
Total contractual obligations		561,342		220,198		79,273		66,261		195,610

(1)Consists of long-term and short-term debts, gross of unamortized debt discount/premium and debt issuance costs.

Debt

See Note 20 – Interest-bearing Financial Liabilities – Long-term Debt for a detailed discussion of our debt.

Our consolidated future minimum lease commitments payable with non-cancellable leases as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Within one year		24,844		14,658
After one year but not more than five years		54,030		24,095
More than five years		26,086		23,463
Total		104,960		62,216

Various Trade and Other Obligations

PLDT Group has various obligations to suppliers for the acquisition of phone and network equipment, contractors for services rendered on various projects, foreign administrations and domestic carriers for the access charges, shareholders for unpaid dividends distributions, employees for benefits and other related obligations, and various business and operational related agreements. Total obligations under these various agreements amounted to approximately Php156,677 million and Php178,219 million as at June 30, 2023 and December 31, 2022, respectively. See Note 22 – Accounts Payable and Note 23 – Accrued Expenses and Other Current Liabilities.

Commercial Commitments

F-170

Major Capital Expenditure Vendors

During the last quarter of 2022 up to the first half of 2023, we have engaged in discussions with the major capital expenditure vendors of PLDT and Smart regarding the status of the capital expenditure commitments and related outstanding balances. These discussions resulted in a number of Settlement and Mutual Release Agreements, or SMRAs, signed between us and the vendors, taking into consideration our program priorities and current business requirements. As a result of the signing of the SMRAs, the remaining significant commitment in respect of major capital expenditure vendors of PLDT and Smart amounted to about Php33,000 million, net of advances, as at March 23, 2023. As at June 30, 2023, the commitment related to the major capital expenditure vendors increased to Php41,300 million, net of advances, owing to new purchase orders issued in the first half of 2023.

Other Capital Expenditure Vendors

For the other capital expenditure vendors, we are currently in on-going negotiations. Any adjustments as a result of these discussions shall be taken up in our consolidated financial statements as they occur.

We have no outstanding commercial commitments, in the form of letters of credit, as at June 30, 2023 and December 31, 2022.

Collateral

There are no pledges as collaterals with respect to our financial liabilities as at June 30, 2023 and December 31, 2022.

Foreign Currency Exchange Risk

Foreign currency exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The revaluation of our foreign currency-denominated financial assets and liabilities as a result of the appreciation or depreciation of the Philippine Peso is recognized as foreign exchange gains or losses as at the end of the reporting period. The extent of foreign exchange gains or losses is largely dependent on the amount of foreign currency denominated financial assets and liabilities. While a certain percentage of our revenues are either linked to or denominated in U.S. Dollars, a substantial portion of our capital expenditures, a portion of our indebtedness and related interest expense and a portion of our operating expenses are denominated in foreign currencies, mostly in U.S. Dollars. As such, a strengthening or weakening of the Philippine Peso against the U.S. Dollar will decrease or increase in Philippine Peso terms both the principal amount of our foreign currency-denominated debts and the related interest expense, our foreign currency-denominated capital expenditures and operating expenses as well as our U.S. Dollar-linked and U.S. Dollar-denominated revenues. In addition, many of our financial ratios and other financial tests are affected by the movements in the Philippine Peso to U.S. Dollar exchange rate.

To manage our foreign exchange risks and to stabilize our cash flows in order to improve investment and cash flow planning, we enter into forward foreign exchange contracts, currency swap contracts, currency option contracts and other hedging products aimed at reducing and/or managing the adverse impact of changes in foreign exchange rates on our operating results and cash flows. Further details of the risk management strategy are recognized in our hedge designation documentation. We use forward foreign exchange purchase contracts, currency swap contracts and currency option contracts to manage the foreign currency risks associated with our foreign currency-denominated financial liabilities. We accounted for these instruments as either cash flow hedges, wherein changes in the fair value are recognized in our consolidated other comprehensive income until the hedged transaction affects our consolidated income statement or transactions not designated as hedges, wherein changes in the fair value are recognized directly as income or expense for the year.

F-171

The impact of the hedging instruments on our consolidated statements of financial position as at June 30, 2023 and December 31, 2022 are as follows:

	Notional Amount		Carrying Amount			Line item in our Consolidated Statements
	(U.S. Dollar)		(Php)			of Financial Position
	(in million pesos)
June 30, 2023 (Unaudited)
Long-term foreign currency options		375		27		Derivative financial assets – net of current portion
		—		(78	)	Derivative financial liabilities – net of current portion
		375		(51	)
December 31, 2022 (Audited)
Long-term foreign currency options		378		81		Derivative financial assets – net of current portion
		—		(190	)	Derivative financial liabilities – net of current portion
		378		(109	)

The impact of the hedged items on our consolidated statements of financial position as at June 30, 2023 and December 31, 2022 are as follows:

		June 30, 2023					December 31, 2022
		(Unaudited)					(Audited)
		Cash flow hedge reserve			Cost of hedging reserve		Cash flow hedge reserve			Cost of hedging reserve
	(in million pesos)
PLDT:
US$300M Notes 2031			(3,977	)		75		(3,288	)		75
			(3,977	)		75		(3,288	)		75
Smart:
US$140M PNB			—			3		28			3
			—			3		28			3

The effect of the cash flow hedge on our consolidated statements of financial position as at June 30, 2023 and December 31, 2022 are as follows:

	Total hedging loss recognized in OCI			Line item in our Consolidated Statements of Financial Position
	(in million pesos)
June 30, 2023 (Unaudited)
Long-term foreign currency options		(3,977	)	Other comprehensive loss
		(3,977	)
December 31, 2022 (Audited)
Long-term foreign currency options		(3,260	)	Other comprehensive loss
		(3,260	)

F-172

The following table shows our consolidated foreign currency-denominated monetary financial assets and liabilities and their Philippine Peso equivalents as at June 30, 2023 and December 31, 2022:

	June 30, 2023				December 31, 2022
	(Unaudited)				(Audited)
	U.S. Dollar		Php(1)		U.S. Dollar		Php(2)
	(in millions)
Noncurrent Financial Assets
Derivative financial assets – net of current portion		1		27		1		81
Other financial assets – net of current portion		—		—		—		1
Total noncurrent financial assets		1		27		1		82
Current Financial Assets
Cash and cash equivalents		104		5,732		287		16,002
Short-term investments		5		258		5		254
Trade and other receivables – net		117		6,478		132		7,385
Current portion of derivative financial assets		1		4		—		—
Current portion of other financial assets		—		—		—		12
Total current financial assets		227		12,472		424		23,653
Total Financial Assets		228		12,499		425		23,735
Noncurrent Financial Liabilities
Interest-bearing financial liabilities – net of current portion		688		38,066		719		40,153
Derivative financial liabilities – net of current portion		1		78		3		190
Other noncurrent liabilities		1		84		—		27
Total noncurrent financial liabilities		690		38,228		723		40,370
Current Financial Liabilities
Accounts payable		1,084		60,041		1,339		74,720
Accrued expenses and other current liabilities		217		12,026		218		12,184
Current portion of interest-bearing financial liabilities		39		2,147		39		2,165
Current portion of derivative financial liabilities		9		481		17		960
Total current financial liabilities		1,349		74,695		1,613		90,029
Total Financial Liabilities		2,039		112,923		2,336		130,399

(1)The exchange rate used to convert the U.S. Dollar amounts into Philippine Peso was Php55.37 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the Bankers Association of the Philippines, or BAP, as at June 30, 2023.

(2)The exchange rate used to convert the U.S. Dollar amounts into Philippine Peso was Php55.82 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the BAP as at December 31, 2022.

As at August 2, 2023, the Philippine Peso-U.S. Dollar exchange rate was Php54.99 to US$1.00. Using this exchange rate, our consolidated net foreign currency-denominated financial liabilities would have decreased in Philippine Peso terms by Php688 million as at June 30, 2023.

Approximately 15% and 17% of our total consolidated debts (net of consolidated debt discount) were denominated in U.S. Dollars as at June 30, 2023 and December 31, 2022, respectively. Our consolidated foreign currency-denominated debt decreased to Php39,807 million as at June 30, 2023 from Php41,894 million as at December 31, 2022. See Note 20 – Interest-bearing Financial Liabilities. The aggregate notional amount of our consolidated outstanding long-term foreign currency options and short-term forwards allocated for debt were US$449 million and US$441 million as at June 30, 2023 and December 31, 2022, respectively. Consequently, the unhedged portion of our consolidated debt amounts were approximately 6% (or 5%, net of consolidated U.S. Dollar cash balances allocated for debt) as at June 30, 2023 and 7% (or 5%, net of consolidated U.S. Dollar cash balances allocated for debt) as at December 31, 2022.

Approximately 14% and 16% of our consolidated revenues were denominated in U.S. Dollars and/or were linked to U.S. Dollars for the six months ended June 30, 2023 and 2022, respectively. Approximately 7% and 5% of our consolidated expenses were denominated in U.S. Dollars and/or linked to the U.S. Dollar for the six months ended June 30, 2023 and 2022, respectively. In this respect, the higher weighted average exchange rate of the Philippine Peso against the U.S. Dollar increased our revenues and expenses, and consequently, affects our cash flow from operations in Philippine Peso terms. In view of the anticipated continued decline in dollar-denominated/dollar-linked revenues, which provide a natural hedge against our foreign currency exposure, we are progressively refinancing our dollar-denominated debts in Philippine Pesos.

F-173

The Philippine Peso appreciated 0.81% against the U.S. Dollar to Php55.37 to US$1.00 as at June 30, 2023 from Php55.82 to US$1.00 as at December 31, 2022. As a result of our consolidated foreign exchange movements, as well as the amount of our consolidated outstanding net foreign currency financial assets and liabilities, we recognized net consolidated foreign exchange gains of Php554 million and net foreign exchange losses of Php4,282 million for the six months ended June 30, 2023 and 2022, respectively.

Management conducted a survey among our banks to determine the outlook of the Philippine Peso-U.S. Dollar exchange rate until September 30, 2023. Our outlook is that the Philippine Peso-U.S. Dollar exchange rate may weaken/strengthen by 1.23% as compared to the exchange rate of Php55.37 as at June 30, 2023. If the Philippine Peso-U.S. Dollar exchange rate had weakened/strengthened by 1.23% as at June 30, 2023, with all other variables held constant, consolidated profit after tax for the six months ended June 30, 2023 and stockholders’ equity as at June 30, 2023 would have been approximately Php762 million and Php740 million, respectively, lower/higher, mainly as a result of consolidated foreign exchange gains and losses on conversion of U.S. Dollar-denominated net assets/liabilities and mark-to-market valuation of derivative financial instruments.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Our exposure to the risk of changes in market interest rates relates primarily to our long-term debt obligations with floating interest rates.

Our policy is to manage interest cost through a mix of fixed and variable rate debts. We evaluate the fixed to floating ratio of our loans in line with movements of relevant interest rates in the financial markets. Based on our assessment, new financing will be priced either on a fixed or floating rate basis. We enter into interest rate swap agreements in order to manage our exposure to interest rate fluctuations. Further details of the risk management strategy are recognized in our hedge designation documentation. We make use of hedging instruments and structures solely for reducing or managing financial risk associated with our debt obligations and not for trading purposes.

The hedging instruments have no impact on our consolidated statements of financial position as at June 30, 2023 and December 31, 2022.

The hedged items on our consolidated statements of financial position has no impact as at June 30, 2023 and December 31, 2022.

The cash flow hedge on our consolidated statements of financial position has no impact as at June 30, 2023 and December 31, 2022.

F-174

The following tables set out the carrying amounts, by maturity, of our financial instruments that are expected to have exposure on interest rate risk as at June 30, 2023 and December 31, 2022. Financial instruments that are not subject to interest rate risk were not included in the table.

As at June 30, 2023 (Unaudited)

F-175

	In U.S. Dollars																				Fair Value
	Below 1 year			1-2 years		2-3 years		3-5 years		Over 5 years			Total		In Php		Discount/ Debt Issuance Cost In Php		Carrying Value In Php		In U.S. Dollar		In Php
																	(in millions)
Assets:
Debt Instruments at Amortized Cost
Philippine Peso		4			—		—		6		—			10		595		—		595		11		583
Interest rate	2.3750% to 2.9000%			4.2500% to 5.6000%		4.8750% to 6.2500%		4.6250% to 4.8750%			6.5000	%		—		—		—		—		—		—
Cash in Bank
U.S. Dollar		9			—		—		—		—			9		489		—		489		9		489
Interest rate	0.0500% to 0.1000%				—		—		—		—			—		—		—		—		—		—
Philippine Peso		86			—		—		—		—			86		4,783		—		4,783		86		4,783
Interest rate	0.1500% to 0.5000%				—		—		—		—			—		—		—		—		—		—
Temporary Cash Investments
U.S. Dollar		60			—		—		—		—			60		3,304		—		3,304		60		3,304
Interest rate	0.2500% to 6.0000%				—		—		—		—			—		—		—		—		—		—
Philippine Peso		97			—		—		—		—			97		5,371		—		5,371		97		5,371
Interest rate	0.2500% to 6.0000%				—		—		—		—			—		—		—		—		—		—
Short-term Investments
Philippine Peso		—			—		—		—		—			—		9		—		9		—		9
Interest rate	0.5000%				—		—		—		—			—		—		—		—		—		—
		256			—		—		6		—			262		14,551		—		14,551		263		14,539
Liabilities:
Long-term Debt
Fixed Rate
U.S. Dollar Notes		—			—		—		—		600			600		33,220		577		32,643		450		24,909
Interest rate		—			—		—		—	2.5000% to 3.4500%				—		—		—		—		—		—
Philippine Peso		369			159		351		692		335			1,906		105,506		835		104,671		1,775		98,256
Interest rate	3.9500% to 5.2813%			4.0000% to 5.3500%		4.0000% to 5.3500%		4.0000% to 5.3500%		4.0000% to 5.1560%				—		—		—		—		—		—
Variable Rate
U.S. Dollar Loans		25			28		14		35		28			130		7,198		34		7,164		130		7,198
Interest rate	LIBOR + 1.0500%			LIBOR + 1.0500%		LIBOR + 1.0500%		LIBOR + 1.0500%		LIBOR + 1.0500%				—		—		—		—		—		—
Philippine Peso		34			94		34		200		1,776			2,138		118,385		794		117,591		2,138		118,385
Interest rate	0.5000% over PHP BVAL			0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 0.9000% over PHP BVAL (floor rate 4.5000% to 4.6250%)				—		—		—		—		—		—
Short-term Debt
Notes Payable
Philippine Peso		108			—		—		—		—			108		6,000		—		6,000		108		6,000
Interest rate		5.1600	%		—		—		—		—			—		—		—		—		—		—

F-176

536 281 399 927 2,739 4,882 270,309 2,240 268,069 4,601 254,748

F-177

As at December 31, 2022 (Audited)

F-178

	In U.S. Dollars																				Fair Value
	Below 1 year		1-2 years		2-3 years			3-5 years		Over 5 years			Total		In Php		Discount/ Debt Issuance Cost In Php		Carrying Value In Php		In U.S. Dollar		In Php
																	(in millions)
Assets:
Debt Instruments at Amortized Cost
Philippine Peso		—		4		1			6		—			11		596		—		596		10		573
Interest rate		—	2.3750% to 2.9000%			4.2500	%	4.6250% to 6.2500%			6.5000	%		—		—		—		—		—		—
Cash in Bank
U.S. Dollar		23		—		—			—		—			23		1,264		—		1,264		23		1,264
Interest rate	0.0500% to 1.0000%			—		—			—		—			—	0
Philippine Peso		123		—		—			—		—			123		6,863		—		6,863		123		6,863
Interest rate	0.0500% to 1.5000%			—		—			—		—			—		—		—		—		—		—
Temporary Cash Investments
U.S. Dollar		127		—		—			—		—			127		7,092		—		7,092		127		7,092
Interest rate	3.5000% to 4.7500%			—		—			—		—			—		—
Philippine Peso		28		—		—			—		—			28		1,586		—		1,586		28		1,586
Interest rate	2.8000% to 5.0000%			—		—			—		—			—		—		—		—		—		—
Short-term Investments
Philippine Peso		2		—		—			—		—			2		129		—		129		2		129
Interest rate	0.5000% to 2.0000%			—		—			—		—			—		—
		303		4		1			6		—			314		17,530		—		17,530		313		17,507
Liabilities:
Long-term Debt
Fixed Rate
U.S. Dollar Notes		—		—		—			—		600			600		33,489		597		32,892		435		24,316
Interest rate		—		—		—			—	2.5000% to 3.4500%				—		—		—		—		—		—
Philippine Peso		319		124		340			576		540			1,899		106,018		919		105,099		1,744		97,327
Interest rate	3.9500% to 4.0000%		3.9500% to 5.1560%		4.0000% to 5.3500%			4.0000% to 5.3500%		4.0000% to 5.2000%				—		—		—		—		—		—
Variable Rate
U.S. Dollar Loans		25		53		14			28		42			162		9,042		40		9,002		162		9,042
Interest rate	LIBOR + 1.0500%		LIBOR + 1.0500%		LIBOR + 1.0500%			LIBOR + 1.0500%		LIBOR + 1.0500%				—		—		—		—		—		—
Philippine Peso		—		93		55			141		1,383			1,672		93,310		723		92,587		1,672		93,310
Interest rate		—	0.5000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)			0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)				—		—		—		—		—		—
Short-term Debt
Notes Payable
Philippine Peso		179		—		—			—		—			179		10,000		—		10,000		179		10,000

F-179

Interest rate	2.6000 to 5.1600%		—	—	—	—	—	—	—	—	—	—
		523	270	409	745	2,565	4,512	251,859	2,279	249,580	4,192	233,995

F-180

Fixed rate financial instruments are subject to fair value interest rate risk while floating rate financial instruments are subject to cash flow interest rate risk.

Repricing of floating rate financial instruments is done on intervals of three months or up to five years. Interest on fixed rate financial instruments is fixed until maturity of the particular instrument.

Approximately 47% and 41% of our consolidated debts (net of consolidated debt discount) were variable rate debts as at June 30, 2023 and December 31, 2022, respectively. Our consolidated variable rate debt increased to Php124,755 million as at June 30, 2023 from Php101,590 million as at December 31, 2022. Considering the aggregate notional amount of our consolidated outstanding long-term interest rate swap contracts of nil as at June 30, 2023 and December 31, 2022, respectively, approximately 53% and 59% of our consolidated debts were fixed as at June 30, 2023 and December 31, 2022, respectively.

Management conducted a survey among our banks to determine the outlook of the U.S. Dollar and Philippine Peso interest rates until September 30, 2023. Our outlook is that the U.S. Dollar and Philippine Peso interest rates may move 35 basis points, or bps, and 5 bps higher/lower, respectively, as compared to levels as at June 30, 2023. If the U.S. Dollar interest rates had been 35 bps higher/lower as compared to market levels as at June 30, 2023, with all other variables held constant, consolidated profit after tax for the six months ended June 30, 2023 and stockholders’ equity as at June 30, 2023 would have been approximately Php2 million and Php38 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions. If the Philippine Peso interest rates had been 5 bps higher/lower as compared to market levels as at June 30, 2023, with all other variables held constant, consolidated profit after tax for the six months ended June 30, 2023 and stockholders’ equity as at June 30, 2023 would have been approximately Php2 million and Php3 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions.

Credit Risk

Credit risk is the risk that we will incur a loss arising from our customers, clients or counterparties that fail to discharge their contracted obligations. We manage and control credit risk by setting limits on the amount of risk we are willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

We trade only with recognized and creditworthy third parties. It is our policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis to reduce our exposure to bad debts.

We established a credit quality review process to provide regular identification of changes in the creditworthiness of counterparties. Counterparty limits are established and reviewed periodically based on latest available financial data on our counterparties’ credit ratings, capitalization, asset quality and liquidity. Our credit quality review process allows us to assess the potential loss as a result of the risks to which we are exposed and allow us to take corrective actions.

Maximum exposure to credit risk of financial assets not subject to impairment

The gross carrying amount of financial assets not subject to impairment also represents our maximum exposure to credit risk as at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Financial assets at fair value through profit or loss		491		432
Derivative financial assets – net of current portion		27		81
Current portion of derivative financial assets		4		—
Total		522		513

F-181

Maximum exposure to credit risk of financial assets subject to impairment

The table below shows the maximum exposure to credit risk for the components of our consolidated statements of financial position as at June 30, 2023 and December 31, 2022. The maximum exposure is shown gross before both the effect of mitigation through use of master netting and collateral arrangements. The extent to which collateral and other credit enhancements mitigate the maximum exposure to credit risk is described in the footnotes to the table.

For financial assets recognized on our consolidated statements of financial position as at June 30, 2023 and December 31, 2022, the gross exposure to credit risk equal their carrying amount.

For financial guarantees granted, the maximum exposure to credit risk is the maximum amount that we would have to pay if the guarantees are called upon. For loan commitments and other credit related commitments that are irrevocable over the life of the respective facilities, the maximum exposure to credit risk is the full amount of the committed facilities.

	June 30, 2023 (Unaudited)
	Stage 1 12-Month ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
	(in million pesos)
High grade		20,808		12,467		—		33,275
Standard grade		288		4,380		—		4,668
Substandard grade		—		8,248		—		8,248
Default		456		3,931		11,561		15,948
Gross carrying amount		21,552		29,026		11,561		62,139
Less allowance		456		3,931		11,561		15,948
Carrying amount		21,096		25,095		—		46,191
	December 31, 2022 (Audited)
	Stage 1 12-Month ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
	(in million pesos)
High grade		29,582		12,380		—		41,962
Standard grade		303		4,445		—		4,748
Substandard grade		—		9,430		—		9,430
Default		764		4,236		9,425		14,425
Gross carrying amount		30,649		30,491		9,425		70,565
Less allowance		764		4,236		9,425		14,425
Carrying amount		29,885		26,255		—		56,140

Maximum exposure to credit risk after collateral held or other credit enhancements

Collateral held as security for financial assets depends on the nature of the instrument. Debt investment securities are generally unsecured. Estimates of fair value are based on the value of collateral assessed at the time of borrowing and are regularly updated according to internal lending policies and regulatory guidelines. Generally, collateral is not held over loans and advances to us except for reverse repurchase agreements. Collateral usually is not held against investment securities, and no such collateral was held as at June 30, 2023 and December 31, 2022.

Our policies regarding obtaining collateral have not significantly changed during the reporting period and there has been no significant change in the overall quality of the collateral held by us during the year.

We have not identified significant risk concentrations arising from the nature, type or location of collateral and other credit enhancements held against our credit exposures.

F-182

An analysis of the maximum exposure to credit risk for the components of our consolidated statements of financial position, including derivative financial instruments as at June 30, 2023 and December 31, 2022:

	June 30, 2023 (Unaudited)
	Gross Maximum Exposure		Collateral and Other Credit Enhancements*		Net Maximum Exposure
	(in million pesos)
Financial instruments at amortized cost:		45,933		472		45,461
Debt instruments at amortized cost		595		—		595
Other financial assets		4,049		—		4,049
Cash and cash equivalents		16,185		82		16,103
Short-term investments		9		—		9
Corporate subscribers		8,807		342		8,465
Retail subscribers		10,041		48		9,993
Foreign administrations		963		—		963
Domestic carriers		265		—		265
Dealers, agents and others		5,019		—		5,019
Financial instruments at FVPL:		780		—		780
Financial assets at FVPL		491		—		491
Forward foreign exchange contracts		4		—		4
Long-term foreign currency options		27		—		27
Short-term investments		258		—		258
Total		46,713		472		46,241

* Includes bank insurance, security deposits and customer deposits. We have no collateral held as at June 30, 2023.

	December 31, 2022 (Audited)
	Gross Maximum Exposure		Collateral and Other Credit Enhancements*		Net Maximum Exposure
	(in million pesos)
Financial instruments at amortized cost:		55,886		505		55,381
Debt instruments at amortized cost		596		—		596
Other financial assets		3,695		—		3,695
Cash and cash equivalents		25,211		105		25,106
Short-term investments		129		—		129
Retail subscribers		10,327		46		10,281
Corporate subscribers		10,052		354		9,698
Foreign administrations		924		—		924
Domestic carriers		295		—		295
Dealers, agents and others		4,657		—		4,657
Financial instruments at FVPL:		767		—		767
Financial assets at FVPL		432		—		432
Long-term foreign currency options		81		—		81
Short-term investments		254		—		254
Total		56,653		505		56,148

F-183

* Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31,
2022.

The table below provides information regarding the credit quality by class of our financial assets according to our credit ratings of counterparties as at June 30, 2023 and December 31, 2022:

			Neither past due nor credit impaired				Past due but not
	Total		Class A(1)		Class B(2)		credit impaired		Impaired
	(in million pesos)
June 30, 2023 (Unaudited)
Financial instruments at amortized cost:		61,707		33,017		4,668		8,248		15,774
Debt instruments at amortized cost		595		595		—		—		—
Other financial assets		4,331		4,048		1		—		282
Cash and cash equivalents		16,185		15,898		287		—		—
Short-term investments		9		9		—		—		—
Retail subscribers		18,454		8,104		324		1,613		8,413
Corporate subscribers		14,331		3,688		1,311		3,808		5,524
Foreign administrations		1,108		177		329		457		145
Domestic carriers		267		—		157		108		2
Dealers, agents and others		6,427		498		2,259		2,262		1,408
Financial instruments at FVPL:		954		586		194		—		174
Financial assets at FVPL		491		297		194		—		—
Forward foreign exchange contracts		4		4		—		—		—
Long-term foreign currency options		27		27		—		—		—
Short-term investments		432		258		—		—		174
Total		62,661		33,603		4,862		8,248		15,948

(1)This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts as at report date; and deposits or placements to counterparties with good credit rating or bank standing financial review.

(2)This includes medium risk and average paying customer accounts with no overdue accounts as at report date, and new customer accounts for which sufficient credit history has not been established; and deposits or placements to counterparties not classified as Class A.

			Neither past due nor credit impaired				Past due but not
	Total		Class A(1)		Class B(2)		credit impaired		Impaired
	(in million pesos)
December 31, 2022 (Audited)
Financial instruments at amortized cost:		70,137		41,708		4,748		9,430		14,251
Debt instruments at amortized cost		596		596		—		—		—
Other financial assets		4,285		3,694		1		—		590
Cash and cash equivalents		25,211		24,909		302		—		—
Short-term investments		129		129		—		—		—
Retail subscribers		17,216		7,782		458		2,087		6,889
Corporate subscribers		15,151		3,959		1,543		4,550		5,099
Foreign administrations		1,058		289		210		425		134
Domestic carriers		296		111		30		154		1
Dealers, agents and others		6,195		239		2,204		2,214		1,538
Financial instruments at FVPL:		941		604		163		—		174
Financial assets at FVPL		432		269		163		—		—
Long-term foreign currency options		81		81		—		—		—
Short-term investments		428		254		—		—		174
Total		71,078		42,312		4,911		9,430		14,425

(1)This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts as at report date; and deposits or placements to counterparties with good credit rating or bank standing financial review.

(2)This includes medium risk and average paying customer accounts with no overdue accounts as at report date, and new customer accounts for which sufficient credit history has not been established; and deposits or placements to counterparties not classified as Class A.

F-184

The aging analysis of past due but not impaired class of financial assets as at June 30, 2023 and December 31, 2022 are as follows:

						Past due but not credit impaired
	Total			Neither past due nor credit impaired		1-60 days		61-90 days		Over 91 days		Impaired
	(in million pesos)
June 30, 2023 (Unaudited)
Financial instruments at amortized cost:		61,707			37,685		3,421		1,253		3,574		15,774
Debt instruments at amortized cost		595			595		—		—		—		—
Other financial assets		4,331			4,049		—		—		—		282
Cash and cash equivalents		16,185			16,185		—		—		—		—
Short-term investments		9			9		—		—		—		—
Retail subscribers		18,454			8,428		1,357		187		69		8,413
Corporate subscribers		14,331			4,999		1,844		969		995		5,524
Foreign administrations		1,108			506		62		29		366		145
Domestic carriers		267			157		67		10		31		2
Dealers, agents and others		6,427			2,757		91		58		2,113		1,408
Financial instruments at FVPL:		954			780		—		—		—		174
Financial assets at FVPL		491	—		491		—		—		—		—
Forward foreign exchange contracts		4			4		—		—		—		—
Long-term foreign currency options		27			27		—		—		—		—
Short-term investments		432			258		—		—		—		174
Total		62,661			38,465		3,421		1,253		3,574		15,948
December 31, 2022 (Audited)
Financial instruments at amortized cost:		70,137			46,456		3,289		1,709		4,432		14,251
Debt instruments at amortized cost		596			596		—		—		—		—
Other financial assets		4,285			3,695		—		—		—		590
Cash and cash equivalents		25,211			25,211		—		—		—		—
Short-term investments		129			129		—		—		—		—
Retail subscribers		17,216			8,240		1,439		372		276		6,889
Corporate subscribers		15,151			5,502		1,615		1,214		1,721		5,099
Foreign administrations		1,058			499		37		14		374		134
Domestic carriers		296			141		72		26		56		1
Dealers, agents and others		6,195			2,443		126		83		2,005		1,538
Financial instruments at FVPL:		941			767		—		—		—		174
Financial assets at FVPL		432			432		—		—		—		—
Long-term foreign currency options		81			81		—		—		—		—
Short-term investments		428			254		—		—		—		174
Total		71,078			47,223		3,289		1,709		4,432		14,425

F-185

Capital Management Risk

We aim to achieve an optimal capital structure in pursuit of our business objectives which include maintaining healthy capital ratios and strong credit ratings and maximizing shareholder value.

Our approach to capital management focuses on balancing the allocation of cash and the incurrence of debt as we seek new investment opportunities for new businesses and growth areas. On August 5, 2014, the PLDT Board of Directors approved an amendment to our dividend policy, increasing the dividend payout rate to 75% from 70% of our core EPS as regular dividends. However, in view of our elevated capital expenditures to build-out a robust, superior network to support the continued growth of data traffic, plans to invest in new adjacent businesses that will complement the current business and provide future sources of profits and dividends, and management of our cash and gearing levels, the PLDT Board of Directors approved on August 2, 2016, the amendment of our dividend policy, reducing the regular dividend payout to 60% of core EPS. Starting 2019, we based our dividend payout on telco core income. In declaring dividends, we take into consideration the interest of our shareholders, as well as our working capital, capital expenditures and debt servicing requirements. The retention of earnings may be necessary to meet the funding requirements of our business expansion and development programs.

As part of the dividend policy, in the event no investment opportunities arise, we may consider the option of returning additional cash to our shareholders in the form of special dividends or share buybacks. Philippine corporate regulations prescribe, however, that we can only pay out dividends or make capital distribution up to the amount of our unrestricted retained earnings.

Some of our debt instruments contain covenants that impose maximum leverage ratios. In addition, our credit ratings from the international credit ratings agencies are based on our ability to remain within certain leverage ratios.

No changes were made in our objectives, policies or processes for managing capital during the six months ended June 30, 2023 and 2022.

F-186

28.Notes to the Statements of Cash Flows

The following table shows the changes in liabilities arising from financing activities as at June 30, 2023 and December 31, 2022:

	January 1, 2023					Foreign exchange					June 30, 2023
	(Audited)		Cash flows			movement			Others		(Unaudited)
	(in million pesos)
Interest-bearing financial liabilities (Note 20)		249,580		18,671			(361	)		179		268,069
Lease liabilities (Notes 3 and 10)		42,435		(5,570	)		—			5,654		42,519
Derivative financial liabilities		1,150		(800	)		—			209		559
Accrued interests and other related costs (Note 23)		1,868		(4,479	)		—			4,728		2,117
Dividends (Note 19)		1,821		(12,736	)		—			12,677		1,762
		296,854		(4,914	)		(361	)		23,447		315,026
	January 1, 2022					Foreign exchange					December 31, 2022
	(Audited)		Cash flows			movement			Others		(Audited)
	(in million pesos)
Interest-bearing financial liabilities (Note 20)		252,557		(7,405	)		3,778			650		249,580
Lease liabilities (Notes 3 and 10)		21,686		(8,331	)		—			29,080		42,435
Derivative financial liabilities		215		87			—			848		1,150
Accrued interests and other related costs (Note 23)		1,783		(9,013	)		—			9,098		1,868
Dividends (Note 19)		1,708		(25,235	)		—			25,348		1,821
		277,949		(49,897	)		3,778			65,024		296,854

Others include the effect of accretion of long-term borrowings, effect of recognition and accretion of lease liabilities and unrealized mark-to-market losses of derivative financial instruments, effect of accrued but not yet paid interest on interest-bearing loans and borrowings and accrual of dividends that were not yet paid at the end of the period.

Non-cash Investing Activities

The following table shows our significant non-cash investing activities and corresponding transaction amounts as at June 30, 2023 and December 31, 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Acquisition of property and equipment on account		12,149		14,948
Additions to ROU assets (Note 10)		6,837		34,274
Capitalization to property and equipment of:
Inventories		2,116		6,517
Borrowing costs (Notes 5 and 9)		988		1,748
Foreign exchange differences – net (Note 9)		7		351
		22,097		57,838

Non-cash Financing Activities

The following table shows our significant non-cash financing activities and corresponding transaction amounts as at June 30, 2023 and December 31, 2022:

	June 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
	(in million pesos)
Additions to lease liabilities (Note 10)		6,931		34,277

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