PLDT Inc. (PHTCF)

Executive Summary / Key Takeaways

• PLDT Inc. is strategically transforming into a digital services powerhouse, leveraging its extensive network infrastructure and innovative fintech ecosystem, Maya, to drive growth and enhance profitability. The company's first half of 2025 results demonstrate stable service revenue growth, robust EBITDA, and a significant turnaround in Maya's profitability.
• Technological differentiation, particularly through its AI-ready VITRO Santa Rosa data center and advanced 5G network, is central to PLDT's competitive strategy, enabling new revenue streams and positioning the Philippines as a regional digital hub.
• Disciplined capital allocation and proactive asset monetization are key to strengthening PLDT's financial position, with a revised full-year 2025 CapEx guidance of PHP 63 billion and targets to achieve positive free cash flow by 2026 and a net debt-to-EBITDA ratio of 2.0x.
• The company faces regulatory challenges, notably the Konektadong Pinoy Bill, which could disincentivize infrastructure investment, and must navigate competitive pressures while continuing to migrate legacy services.
• PLDT's commitment to stable shareholder returns is evident in its 60% Telco Core income payout policy, supported by a 12-month trailing dividend yield of approximately 8% as of June 30, 2025.

PLDT's Strategic Evolution: Powering the Philippines' Digital Future

PLDT Inc., originally established in 1928 as Philippine Long Distance Telephone Company, has undergone a profound transformation, evolving from a traditional telecommunications provider into a diversified digital services leader in the Philippines. This strategic pivot, formalized with its name change in 2016, underpins its current market positioning across wireless, fixed-line, and burgeoning fintech segments. The company's overarching strategy is to capitalize on the nation's accelerating digital adoption by investing heavily in next-generation infrastructure, fostering innovation, and expanding its integrated ecosystem.

In a competitive landscape featuring major players like Globe Telecom (GLBE), fiber-optic specialist Converge ICT Solutions (CNVR), and newer entrant DITO Telecommunity (DITO), PLDT distinguishes itself through its comprehensive service portfolio and extensive network. While Globe focuses on digital ecosystems and DITO on aggressive 5G expansion, PLDT's strength lies in its integrated fixed and wireless network, offering end-to-end solutions that span connectivity, enterprise ICT, and digital financial services. This diversification provides a robust foundation for revenue generation and operational resilience, allowing PLDT to maintain a significant market presence.

Technological Edge and Innovation Driving Growth

PLDT's competitive moat is significantly bolstered by its technological advancements and strategic infrastructure investments. A cornerstone of this strategy is VITRO Santa Rosa, the Philippines' first operational AI-ready hyperscale data center, inaugurated in April 2025. This mega facility boasts a substantial 50 megawatts of power capacity and houses over 4,500 racks, built to meet stringent requirements for enterprises, hyperscalers, and AI workloads. It is uniquely positioned to support immense compute demands, with IT cabinets planned to support up to 100 kilowatts per rack, enabling ePLDT to offer "GPU as a service" using live NVIDIA (NVDA) GPUs. This provides Philippine enterprises with on-demand, high-performance AI computing without heavy capital costs, positioning PLDT as the country's first true AI enabler. Management anticipates this facility could generate between PHP 600 million to PHP 1.5 billion in additional revenues within 18 months of its October opening. Furthermore, PLDT is committed to running its data centers on at least 40% renewable energy by 2030, underscoring a dedication to sustainability.

In mobile, PLDT's 5G network expansion is a critical differentiator. The company's strategy focuses on "home-work-play seamlessness" rather than just pure reach, aiming to deliver a more meaningful 5G experience. This approach has yielded tangible benefits, including a reported 20% ARPU lift in areas like BGC following 5G introduction. In the first half of 2025, 5G traffic surged 84% year-on-year, and 5G-enabled devices now constitute 17% of its mobile base, up from 11% a year ago. The company launched KiQ, an app-based mobile service targeting Gen Z, offering personalized digital telco experiences to capture this influential demographic. Fixed wireless revenues, leveraging the strength and reliability of the 5G network, grew 12% year-on-year in the first half of 2025.

PLDT Home has also introduced the "Always On" service, a global first that seamlessly integrates fiber and mobile networks to ensure uninterrupted home connectivity. This innovation leverages PLDT's extensive XGS PON network and mobile infrastructure, providing customers with enhanced reliability. In the enterprise space, PLDT is designing 5G mobile private networks for large-scale operations and utilizing 5G slicing for specialized use cases like public safety. The company also achieved GSMA Open Gateway certification for its number verification API, enabling mobile applications to securely authenticate users without one-time pins, opening new revenue potential through network APIs. These technological advancements collectively strengthen PLDT's competitive position, drive new revenue streams, and enhance operational efficiency, forming a robust foundation for future growth.

Financial Performance and Operational Strength

PLDT's financial performance in the first half of 2025 reflects a resilient business model driven by strategic investments and disciplined cost management. Service revenues, net of interconnection costs, reached PHP 97.1 billion, a slight year-on-year increase. Consolidated EBITDA grew 3% to PHP 55.5 billion, maintaining a steady EBITDA margin of 52%, supported by fiber growth and cost control. Cash operating expenses, subsidies, and provisions decreased by 3% to PHP 41.6 billion, primarily due to an 8% decline in compensation and benefits, a 22% reduction in selling and promotions, and a 21% drop in subsidies. However, repairs and maintenance costs rose 4% to PHP 15.6 billion, reflecting ongoing network expansion.

Telco core income for the first half of 2025 was PHP 17.2 billion, down 4% year-on-year, mainly due to higher depreciation and financing costs from network investments. However, consolidated core income, including the significant contribution from Maya, rose 1% to PHP 17.6 billion. Maya's core earnings contributed PHP 406 million in the first half of 2025, marking its first profitable semester and a substantial PHP 1.1 billion turnaround from a PHP 693 million loss in the prior year. Maya posted PHP 582 million in net income in Q2 2025, a 60% increase over Q1 2025, driven by robust growth in deposits, lending, and payments volume. Maya's deposits surged 54% year-on-year to PHP 50.4 billion by June 2025, with Q2 2025 loan disbursements hitting PHP 32 billion, a 147% year-on-year increase. Its outstanding loans grew to PHP 25 billion, boosting the loan-to-deposit ratio (LDR) to 49% and net interest margin (NIM) to 20.2%. Maya has also issued over 230,000 credit cards since August 2024, differentiating it as the only digital bank in the Philippines to do so.

Segment-wise, Home revenues grew 4% year-on-year to PHP 30.4 billion in H1 2025, with fiber revenues increasing 7% to PHP 29.5 billion, now comprising 97% of the segment. Net fiber adds reached 169,000, over three times higher than the previous year, with ARPU holding steady at PHP 1,485—the highest in the industry. Enterprise revenues were slightly lower by 1% at PHP 23.5 billion, impacted by legacy business declines and lost POGO connectivity. However, ICT revenues within Enterprise grew 15% to PHP 3.2 billion, with data center colocation up 36% and cybersecurity services up 24%. Individual revenues saw a 1% decline to PHP 42.3 billion, primarily due to legacy services, though mobile data remained stable at PHP 37.4 billion, accounting for 89% of the segment. Excluding legacy services, total net service revenues rose by 3% in the first half of 2025, underscoring the successful shift towards data-driven and digital offerings.

Capital Allocation and Liquidity Management

PLDT maintains a disciplined approach to capital allocation and liquidity management, aiming to optimize its financial structure while funding strategic growth initiatives. CapEx for the first half of 2025 stood at PHP 27.4 billion. The company has revised its full-year CapEx guidance downwards to approximately PHP 63 billion, from an original range of PHP 68 billion to PHP 73 billion. This reduction is attributed to more favorable pricing and negotiated terms with vendors, rather than a scaling back of efforts, demonstrating a commitment to efficient capital deployment. CapEx intensity for H1 2025 declined to 26%, aligning with plans to improve free cash flow.

As of June 2025, net debt was PHP 282.6 billion, resulting in a net debt-to-EBITDA ratio of 2.57x. PLDT aims to reduce this to 2.0x over the medium term and return to positive free cash flow by 2026. The company's debt profile is well-managed, with 55% maturing beyond 2030 and only 5% in 2025. U.S. dollar-denominated debt is modest at 13%, with only 5% unhedged. PLDT maintains investment-grade credit ratings from S&P and Moody's, reflecting confidence in its financial fundamentals. The Board declared an interim cash dividend of PHP 0.48 per share, consistent with its 60% Telco Core income payout policy, offering a 12-month trailing yield of approximately 8% as of June 30, 2025. Strategic asset monetization, including copper mining, consolidation of central offices, and seeking a strategic partner for its data center business, is a key focus to enhance financial flexibility.

Strategic Outlook and Growth Drivers

PLDT's outlook for the second half of 2025 and beyond is characterized by continued strategic execution and a focus on high-growth areas. Management anticipates delayed Enterprise public sector deal awards to be booked in the second half of 2025, providing an uplift to that segment. Mobile revenues are also expected to bounce back in the second half, driven by product innovations and sustained 5G adoption. The Home segment is projected to sustain its growth momentum, fueled by increasing fiber penetration and new product launches, including a "no frills" brand targeting emerging markets.

Maya is expected to continue its "steady and gradual margin improvement," with NPLs stabilizing within a year as its portfolio matures. Its integrated ecosystem, focusing on mass affluent and Gen Z customers, is seen as a sustainable growth engine for PLDT's core income. PLDT is also actively sunsetting lower-generation mobile technologies to facilitate migration to higher-ARPU 4G and 5G networks. The company's commitment to sustainability, including sourcing additional renewable energy and achieving high ESG scores, further strengthens its long-term viability and appeal to responsible investors.

Risks and Regulatory Headwinds

Despite a clear strategic direction, PLDT faces several pertinent risks. The "Konektadong Pinoy Bill" poses a significant regulatory challenge. PLDT's Chief Legal Counsel, Joan A. De Venecia-Fabul, has highlighted several "unconstitutional issues" within the bill, including discriminatory treatment favoring data transmission and satellite providers by allowing them to use spectrum without a franchise. The bill is also deemed unconstitutional for containing more than one subject and is viewed as "almost confiscatory" because it mandates access to PLDT's assets without fair negotiation or an obligation for data transmission providers to build their own infrastructure. This could act as a "disincentive to build further improvements" to telco infrastructure. Furthermore, the bill's allowance for satellite providers to operate without a franchise could compromise national security by depriving the state of the power to take over facilities in times of national interest.

Other risks include the inherent uncertainties in forward-looking statements and the potential for market softness, which Chairman Manuel V. Pangilinan noted as a concern across various sectors. While Maya's NPLs have inched up to 5.2% with new product introductions, management expects them to stabilize. In the Home segment, the strategic introduction of prepaid fiber offerings requires careful management to avoid "cannibalizing postpaid" customers and diluting ARPU or profitability. The ongoing migration from legacy services, while strategic, also presents operational complexities and potential revenue drag until fully completed.

Conclusion

PLDT Inc. stands at a pivotal juncture, strategically transforming into a digitally-driven powerhouse in the Philippines. Its robust investments in AI-ready data centers, advanced 5G networks, and the burgeoning fintech ecosystem of Maya are not merely operational upgrades but foundational pillars for sustained growth and competitive differentiation. The company's first half of 2025 results, marked by stable revenue, strong EBITDA, and Maya's significant turnaround, underscore the effectiveness of its strategic pivot. While navigating regulatory challenges like the Konektadong Pinoy Bill and managing competitive dynamics, PLDT's disciplined capital allocation, proactive asset monetization, and commitment to technological leadership position it favorably for long-term value creation. The focus on enhancing customer experience, expanding digital services, and maintaining a strong financial profile, coupled with a consistent dividend policy, presents a compelling investment thesis for discerning investors seeking exposure to the Philippines' digital future.