Executive Summary / Key Takeaways

• PLDT Inc. ($PHI) is undergoing a profound transformation, shifting from legacy telecommunications to a digitally-driven powerhouse, with fiber, 5G, and its fintech arm, Maya, serving as primary growth engines.
• The company's strategic investments in AI-ready data centers like VITRO Santa Rosa and the Asia Direct Cable are positioning the Philippines as a regional digital and AI innovation hub, driving new revenue streams in the Enterprise segment.
• Maya, PLDT's fintech ecosystem, has achieved significant profitability milestones, contributing PHP 406 million to PLDT's core earnings in H1 2025, demonstrating strong growth in deposits, lending, and payments.
• Despite some near-term market softness and legacy business drags, PLDT maintains a robust financial position with stable EBITDA margins, a commitment to deleveraging, and a target of positive free cash flow by 2026, supported by disciplined CapEx and asset monetization.
• PLDT's competitive edge is fortified by its extensive network infrastructure, industry-leading churn rates in Home fiber, and innovative customer-centric offerings like the KiQ mobile service and integrated home solutions, though it faces challenges in matching the innovation speed of some rivals.

The Philippines' Digital Backbone: PLDT's Strategic Evolution

PLDT Inc. ($PHI), a venerable name in Philippine telecommunications since its incorporation in 1928, is strategically transforming its operations to meet the demands of a rapidly digitizing economy. The company's evolution, marked by its name change in 2016, reflects a deliberate pivot towards data-driven and digital services, moving beyond traditional legacy offerings. This strategic shift is critical in an industry where data has become as essential as water and electricity, as underscored by President Marcos in Q1 2025. PLDT's overarching strategy centers on leveraging its foundational strengths—an extensive network infrastructure and strong brand recognition—to drive growth across its Home, Enterprise, and Individual segments, while aggressively expanding into high-growth areas like fintech and AI-ready digital infrastructure.

The competitive landscape in the Philippines is dynamic, with key players including Globe Telecom (GLO), Dito Telecommunity (DITO), and Converge ICT Solutions (CNVRG). PLDT competes intensely across wireless, broadband, and enterprise segments. While Globe often emphasizes digital innovation and Dito focuses on disrupting with speed and affordability, PLDT differentiates itself through an integrated ecosystem that spans fixed-line, wireless, and emerging digital services. This comprehensive approach, coupled with its long-established presence, provides operational reliability and fosters customer loyalty, which are crucial for sustained financial performance. However, PLDT must continuously enhance its innovation speed to capture market share in rapidly evolving sectors like 5G and specialized broadband, where newer entrants or focused players might exhibit greater agility.

Technological Leadership and Innovation as a Growth Catalyst

PLDT's investment thesis is deeply rooted in its technological differentiation and relentless pursuit of innovation. The company's core technology lies in its extensive fiber optic network, advanced 5G infrastructure, and state-of-the-art data centers.

The fiber network underpins the Home segment's strong performance, with fiber revenues reaching PHP 29.5 billion in H1 2025, up 7% year-on-year, and now comprising 97% of total Home revenues. This robust infrastructure enables PLDT to offer industry-leading ARPU of PHP 1,485 in Home fiber and maintain a low churn rate, a testament to network reliability and brand strength. A significant innovation is the "Always On" service, launched in late 2024, which seamlessly integrates PLDT's fiber and mobile networks to ensure uninterrupted home connectivity—a global first. This leverages the company's dual network strength, providing tangible benefits in service reliability and customer satisfaction, which directly translates to sustained revenue and customer loyalty.

In the wireless domain, PLDT is aggressively expanding its 5G footprint, propagating "5G cities" in provinces like Iloilo, coinciding with the sunsetting of its 3G spectrum. This strategic rollout is not merely about reach but about delivering a "home-work-play seamlessness" experience. The financial implications are clear: 5G ARPU stands at PHP 300, significantly higher than LTE ARPU of PHP 101, indicating a substantial revenue lift. 5G traffic surged 84% in H1 2025, with 5G devices now constituting 17% of the mobile base, up from 11% a year ago. This rapid adoption, supported by affordable 5G device offers, enhances network efficiency and frees up LTE capacity, improving overall customer experience and monetization potential.

A cornerstone of PLDT's technological leadership is its AI-ready digital infrastructure. The inauguration of VITRO Santa Rosa in April 2025 marks a pivotal moment. This facility, the country's first operational AI-ready hyperscale data center, delivers 50 megawatts of power capacity and houses over 4,500 racks. It is designed to meet the stringent requirements of enterprises, hyperscalers, and AI workloads, hosting live NVIDIA (NVDA) GPUs for ePLDT's AI solutions. This offers Philippine enterprises on-demand, high-performance AI computing without heavy capital costs, providing low latency and crucial computing capabilities for innovation. Colocation revenues from VITRO were up 36% in H1 2025, driven by a 19% increase in rack deployments. The Asia Direct Cable (ADC), launched in Q1 2025 with a substantial 27 terabits per second capacity, further enhances international connectivity and network resilience, serving as a core enabler for future revenue growth and market leadership, particularly for hyperscalers and carriers.

PLDT is also embedding AI across its operations. Smart is evolving into an "AI-native organization," utilizing AI in its self-optimizing network for load sharing, AI-driven analytics, and geo-targeted advertising to enhance monetization and reduce costs. PLDT Home has successfully deployed AI in collections, yielding "very, very promising results" and enabling outreach in diverse local languages, alongside using AI for cross-selling and upselling to improve efficiency and customer engagement. These AI initiatives are designed to optimize operational spend and drive revenue growth in key areas like fiber, mobile data, enterprise ICT, and digital innovations.

New product innovations, such as the KiQ app-based mobile service launched in September 2025, target the Gen Z market with personalized digital telco experiences, offering "complete freedom and flexibility to personalize and control their mobile journey on their own terms." This reflects PLDT's commitment to customer-centricity and adapting to evolving consumer preferences.

Robust Financial Performance and Strategic Capital Management

PLDT's financial performance in the first half of 2025 demonstrates resilience amidst a dynamic market. Service revenues, net of interconnection costs, were "a touch higher year-on-year," reaching PHP 97.1 billion. Consolidated EBITDA grew 3% to PHP 55.5 billion, maintaining a steady EBITDA margin of 52%, supported by fiber growth and disciplined cost management. Cash OpEx, subsidies, and provisions decreased by 3%, reflecting "continued spending discipline."

While Telco core income saw a 4% dip to PHP 17.2 billion, primarily due to higher depreciation and financing costs associated with network investments, consolidated core income rose 1% to PHP 17.6 billion. This uplift was "lifted by Maya's positive earnings," highlighting the growing contribution of its fintech arm. Mobile data, fiber, corporate data, and ICT now constitute 90% of total revenues, effectively "more than offsetting legacy declines." Excluding legacy services, total net service revenues increased by 3% in H1 2025.

Maya, PLDT's fintech ecosystem, has been a significant bright spot. It achieved its "first profitable semester" in H1 2025, contributing PHP 406 million to PLDT's core earnings—a PHP 1.1 billion turnaround from a loss in the prior year. Maya posted its "second consecutive quarter of sustainable profitability with PHP 582 million in net income" in Q2 2025, a 60% growth over Q1. Deposits surged 54% year-on-year to PHP 50.4 billion by June 2025, and loan disbursements hit PHP 32 billion in Q2 2025, up 147% year-on-year. The Loan-to-Deposit Ratio (LDR) reached 49%, boosting the net interest margin to 20.2%. While NPLs "inch up to 5.2% with new products and services," they "remain healthy" and are "expected to stabilize as the portfolio matures." Maya's robust growth and profitability underscore its position as the Philippines' leading digital bank and merchant acquirer, materially contributing to PLDT's bottom line.

PLDT is also actively managing its capital structure and liquidity. CapEx for the full year 2025 is guided at approximately PHP 63 billion, a reduction from the original guidance of PHP 68 billion to PHP 73 billion. This decrease is attributed to "more favorable pricing and negotiated terms with vendors and suppliers," rather than a scaling back of strategic investments. CapEx intensity declined to 26% in H1 2025, aligning with the plan to reduce the ratio and support stronger free cash flow.

As of June 2025, net debt stood at PHP 282.6 billion, with a net debt-to-EBITDA ratio of 2.57x. The company aims to return to positive free cash flow by 2026 and achieve a net debt-to-EBITDA ratio of 2.0x over the medium term. PLDT maintains investment-grade credit ratings from S&P (SPGI) and Moody's (MCO), reflecting confidence in its financial fundamentals. The Board declared an interim cash dividend of PHP 0.48 per share in Q2 2025, consistent with its 60% Telco Core income payout policy, offering a 12-month trailing yield of about 8% as of June 30, 2025.

Strategic Outlook and Mitigating Risks

PLDT's outlook is characterized by a continued focus on expanding its digital ecosystem and monetizing its robust infrastructure. The company expects additional upside in the second half of 2025 from enterprise deal closures and new product launches, particularly in the Enterprise segment where delayed public sector awards are anticipated to be booked. The strategic propagation of 5G in the provinces, coupled with innovations like KiQ, is expected to drive mobile revenue growth. For the Home segment, prepaid fiber offerings are a strategic entry point to expand market reach without cannibalizing postpaid, further supported by integrated smart home and IoT initiatives.

Asset monetization remains a key strategic pillar. PLDT is pursuing a "robust program to be able to monetize all our legacy assets," starting with copper, which is currently "under negotiations." This includes selling 3G equipment as 3G networks are sunsetted and divesting non-core properties. Discussions are also ongoing with potential investors for the data center business, involving a partial sale of existing shares in VITRO and new share issuance to fund expansion, ensuring VITRO's growth without immediate reliance on external debt. These initiatives are crucial for optimizing capital structure and funding future growth.

However, PLDT faces several risks. The "Konektadong Pinoy Bill" poses a significant regulatory challenge. PLDT's Chief Legal Counsel highlighted "several unconstitutional issues," including discriminatory treatment favoring data transmission and satellite providers, and a broad open access standard that could be "almost confiscatory" by allowing access to telco assets without an obligation to build infrastructure. This could create a "disincentive to build further improvements to the infrastructure of telcos in the Philippines." PLDT hopes the President will veto the bill and is prepared to challenge it legally if enacted.

Market softness, observed across the telco and power sectors in late 2024 and early 2025, also presents a challenge, impacting revenue growth. The Enterprise segment experienced a slowdown due to customers being more deliberate with IT decisions and the impact of global trends and cyber threats. Mobile revenues saw a dip in Q2 2025 due to limited customer mobility from school holidays and high heat index. While management expects a bounce back in Q3, these factors underscore the need for agility and diversified revenue streams.

Conclusion

PLDT Inc. is executing a compelling transformation, strategically leveraging its extensive fiber and 5G networks, pioneering AI-ready data centers, and a rapidly growing fintech ecosystem to solidify its position as the Philippines' premier digital services provider. The company's commitment to technological innovation, exemplified by VITRO Santa Rosa and the KiQ mobile service, is not merely about adopting new trends but about creating tangible competitive advantages and new revenue streams. Maya's ascent to profitability is a testament to PLDT's successful diversification strategy, significantly contributing to core earnings and demonstrating the power of an integrated financial platform.

While facing competitive pressures and regulatory uncertainties, PLDT's disciplined financial management, including proactive CapEx optimization and a robust asset monetization program, underpins its path to deleveraging and positive free cash flow by 2026. The company's ability to maintain industry-leading churn rates and ARPU in key segments, coupled with its strategic investments in next-generation infrastructure, positions it favorably for long-term growth. Investors should watch for continued execution on asset monetization, the resolution of regulatory challenges, and the sustained growth trajectory of its digital and fintech segments, as these will be critical indicators of PLDT's ongoing success in shaping the digital future of the Philippines.