Operating Segment Information

12 Months Ended

Dec. 31, 2019

Disclosure Of Operating Segments [Abstract]

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, SubicTel, Philcom Group, Maratel, BCC, PLDT Global and certain subsidiaries, and Digitel, all of which together account for approximately 1% of our consolidated fixed line subscribers; data center, cloud, cyber security services, managed information technology services and resellership through ePLDT, IPCDSI Group, AGS Group, Curo and ePDS; full service customer rewards and loyalty programs provided by MRSI; and distribution of Filipino channels and content through PGNL and its subsidiaries; and

•

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

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

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 Adjusted EBITDA; Adjusted EBITDA margin; and core income. Net income for the period is measured consistent with net income in our consolidated financial statements.

Adjusted 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.

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

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.

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

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.

Adjusted EBITDA, Adjusted EBITDA margin, core income and core EPS are non-IFRS 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 IFRS.

The segment revenues, net income, and other segment information of our reportable operating segments as at and for the years ended December 31, 2019, 2018 and 2017 are as follows:

	Wireless			Fixed Line			Others			Inter- segment Transactions			Consolidated
	(in million pesos, except for EBITDA margin)
December 31, 2019
Revenues
External customers		94,488			74,699			—			—			169,187
Service revenues		88,243			73,112			—			—			161,355
Non-service revenues		6,245			1,587			—			—			7,832
Inter-segment transactions		2,418			14,707			—			(17,125	)		—
Service revenues		2,418			14,707			—			(17,125	)		—
Non-service revenues		—			—			—			—			—
Total revenues		96,906			89,406			—			(17,125	)		169,187

Results
Depreciation and amortization		29,484			16,141			—			(5,969	)		39,656
Asset impairment		1,133			3,699			1			—			4,833
Interest income		703			680			362			—			1,745
Equity share in net earnings (losses) of associates and joint ventures		—			568			(2,103	)		—			(1,535	)
Financing costs – net		6,422			5,078			—			(2,947	)		8,553
Provision for (benefit from) income tax		4,423			5,341			(444	)		230			9,550
Net income (loss) / Segment profit (loss)		13,101			11,421			(1,769	)		33			22,786
Adjusted EBITDA		52,789			33,162			(101	)		(6,035	)		79,815
Adjusted EBITDA margin		58	%		38	%		—			—			49	%
Core income (loss)		13,685			12,531			(1,151	)		46			25,111

Assets and liabilities
Operating assets		287,059			198,468			7,943			(45,929	)		447,541
Investments in associates and joint ventures		10			73,386			9,897			(29,430	)		53,863
Deferred income tax assets – net		13,102			11,791			(711	)		(559	)		23,623
Total assets		300,171			283,645			17,129			(75,918	)		525,027
Operating liabilities		221,755			229,855			833			(46,289	)		406,154
Deferred income tax liabilities		1,986			384			252			(39	)		2,583
Total liabilities		223,741			230,239			1,085			(46,328	)		408,737

Other segment information
Capital expenditures, including capitalized interest (Note 9)		30,718			42,153			—			—			72,871

December 31, 2018
Revenues
External customers		87,193			74,593			1,128			—			162,914
Service revenues		80,265			71,020			1,084			—			152,369
Non-service revenues		6,928			3,573			44			—			10,545
Inter-segment transactions		2,736			10,629			10			(13,375	)		—
Service revenues		2,736			10,628			10			(13,374	)		—
Non-service revenues		—			1			—			(1	)		—
Total revenues		89,929			85,222			1,138			(13,375	)		162,914

Results
Depreciation and amortization		24,778			22,303			159			—			47,240
Asset impairment		3,319			4,746			—			—			8,065
Equity share in net earnings (losses) of associates and joint ventures		62			171			(320	)		—			(87	)
Interest income		719			812			536			(124	)		1,943
Financing costs – net		1,865			5,195			131			(124	)		7,067
Provision for income tax		1,333			1,336			1,173			—			3,842
Net income (loss) / Segment profit (loss)		5,725			6,059			7,971			(782	)		18,973
Adjusted EBITDA		34,235			30,875			(2,688	)		1,605			64,027
Adjusted EBITDA margin		41	%		38	%		—			—			42	%
Core income (loss)		9,760			6,925			9,952			(782	)		25,855

Assets and liabilities
Operating assets		230,182			199,557			30,962			(61,075	)		399,626
Investments in associates and joint ventures		—			43,426			12,001			—			55,427
Deferred income tax assets – net		16,879			12,479			(1,119	)		(542	)		27,697
Total assets		247,061			255,462			41,844			(61,617	)		482,750
Operating liabilities		168,837			206,812			16,773			(29,319	)		363,103
Deferred income tax liabilities		2,321			482			367			(189	)		2,981
Total liabilities		171,158			207,294			17,140			(29,508	)		366,084

Other segment information
Capital expenditures, including capitalized interest (Note 9)		32,248			26,242			—			—			58,490

December 31, 2017
Revenues
External customers		91,311			66,396			1,226			—			158,933
Service revenues		86,128			62,818			1,226			—			150,172
Non-service revenues		5,183			3,578			—			—			8,761
Inter-segment transactions		1,301			11,945			13			(13,259	)		—
Service revenues		1,301			11,939			13			(13,253	)		—
Non-service revenues		—			6			—			(6	)		—
Total revenues		92,612			78,341			1,239			(13,259	)		158,933

Results
Depreciation and amortization		36,776			15,001			138			—			51,915
Asset impairment		6,104			2,098			56			—			8,258
Equity share in net earnings (losses) of associates and joint ventures		(129	)		44			2,991			—			2,906
Interest income		305			695			655			(243	)		1,412
Financing costs – net		2,247			5,106			214			(197	)		7,370
Provision for (benefit from) income tax		(2,787	)		3,680			210			—			1,103
Net income (loss) / Segment profit (loss)		(2,215	)		7,474			8,825			(618	)		13,466
Adjusted EBITDA		36,395			29,478			(1,307	)		1,608			66,174
Adjusted EBITDA margin		42	%		39	%		—			—			44	%
Core income (loss)		9,812			8,846			9,628			(618	)		27,668

Assets and liabilities
Operating assets		211,983			174,217			34,504			(37,856	)		382,848
Investments in associates and joint ventures		—			44,867			1,263			—			46,130
Deferred income tax assets – net		18,826			11,994			—			(354	)		30,466
Total assets		230,809			231,078			35,767			(38,210	)		459,444
Operating liabilities		153,622			196,451			13,624			(18,802	)		344,895
Deferred income tax liabilities		2,656			286			424			—			3,366
Total liabilities		156,278			196,737			14,048			(18,802	)		348,261

Other segment information
Capital expenditures, including capitalized interest (Note 9)		27,305			12,994			—			—			40,299

The following table shows the reconciliation of our consolidated net income to our consolidated adjusted EBITDA for the years ended December 31, 2019, 2018 and 2017:

	2019			2018			2017
	(in million pesos)
Consolidated net income		22,786			18,973			13,466
Add (deduct) adjustments:
Depreciation and amortization		39,656			47,240			51,915
Provision for income tax (Note 7)		9,550			3,842			1,103
Financing costs – net (Note 5)		8,553			7,067			7,370
Equity share in net losses (earnings) of associates and joint ventures (Note 11)		1,535			87			(2,906	)
Amortization of intangible assets (Note 15)		758			892			835
Losses (gains) on derivative financial instruments – net (Note 28)		284			(1,086	)		(533	)
Impairment of investments (Note 11)		34			172			2,562
Foreign exchange losses (gains) – net (Note 5)		(424	)		771			411
Interest income (Note 5)		(1,745	)		(1,943	)		(1,412	)
Noncurrent asset impairment		—			2,122			3,913
Other income – net		(1,172	)		(14,110	)		(10,550	)
Total adjustments		57,029			45,054			52,708
Consolidated Adjusted EBITDA		79,815			64,027			66,174

The following table shows the reconciliation of our consolidated net income to our consolidated core income for the years ended December 31, 2019, 2018 and 2017:

	2019			2018			2017
	(in million pesos)
Consolidated net income		22,786			18,973			13,466
Add (deduct) adjustments:
Manpower rightsizing program, or MRP (Note 5)		3,296			1,703			—
Unrealized losses in fair value of investments		675			1,154			—
Losses (gains) on derivative financial instruments – net, excluding hedge costs (Note 28)		233			(1,135	)		(724	)
Impairment of investments (Note 11)		34			172			2,562
Core income adjustment on equity share in net losses (earnings) of associates and joint ventures		(226	)		23			60
Net income attributable to noncontrolling interests		(265	)		(57	)		(95	)
Foreign exchange losses (gains) – net (Note 5)		(424	)		771			411
Depreciation due to shortened life of property and equipment		—			4,564			12,816
Noncurrent asset impairment		—			2,122			3,913
Investment written-off		—			362			—
Nonrecurring income		—			(1,018	)		—
Net tax effect of aforementioned adjustments		(998	)		(1,779	)		(4,741	)
Total adjustments		2,325			6,882			14,202
Consolidated core income		25,111			25,855			27,668

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 years ended December 31, 2019, 2018 and 2017:

	2019						2018						2017
	Basic			Diluted			Basic			Diluted			Basic			Diluted
Consolidated core EPS		115.95			115.95			119.39			119.39			127.79			127.79
Add (deduct) adjustments:
Foreign exchange gains (losses) – net		1.73			1.73			(3.57	)		(3.57	)		(1.74	)		(1.74	)
Core income adjustment on equity share in net earnings (losses) of associates and joint ventures		1.05			1.05			(0.11	)		(0.11	)		(0.28	)		(0.28	)
Impairment of investments		(0.16	)		(0.16	)		(0.80	)		(0.80	)		(11.86	)		(11.86	)
Gains (losses) on derivative financial instruments – net, excluding hedge costs		(0.75	)		(0.75	)		4.08			4.08			2.34			2.34
Unrealized losses in fair value of investments		(3.12	)		(3.12	)		(5.34	)		(5.34	)		—			—
MRP		(10.73	)		(10.73	)		(5.52	)		(5.52	)		—			—
Investment written-off		—			—			(1.68	)		(1.68	)		—			—
Noncurrent asset impairment		—			—			(9.82	)		(9.82	)		(13.12	)		(13.12	)
Depreciation due to shortened life of property and equipment		—			—			(14.06	)		(14.06	)		(41.52	)		(41.52	)
Others		—			—			4.71			4.71			—			—
Total adjustments		(11.98	)		(11.98	)		(32.11	)		(32.11	)		(66.18	)		(66.18	)
Consolidated EPS attributable to common equity holders of PLDT (Note 8)		103.97			103.97			87.28			87.28			61.61			61.61

The following table presents our revenues from external customers by category of products and services for the years ended December 31, 2019, 2018 and 2017:

	2019		2018		2017
	(in million pesos)
Wireless services
Service revenues:
Mobile		87,823		79,904		83,166
Home broadband		85		155		2,547
MVNO and others		335		206		415
		88,243		80,265		86,128
Non-service revenues:
Sale of mobile handsets and broadband data modems		6,245		6,928		5,183
Total wireless revenues		94,488		87,193		91,311
Fixed line services
Service revenues:
Voice		19,890		21,148		24,303
Data		52,787		49,504		37,445
Miscellaneous		435		368		1,070
		73,112		71,020		62,818
Non-service revenues:
Sale of computers, phone units and SIM cards		1,193		3,056		2,706
Point-product-sales		394		517		872
		1,587		3,573		3,578
Total fixed line revenues		74,699		74,593		66,396
Other services		—		1,128		1,226
Total revenues		169,187		162,914		158,933

Disclosure of the geographical distribution of our revenues from external customers and the geographical location of our total assets are not provided since the majority of our consolidated revenues are derived from our operations within the Philippines.

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 years ended December 31, 2019, 2018 and 2017.