PILTEL Reports 1st Half Loss of P1.57 BLN AMID Lower Revenue, Increased Depreciation Costs

August 16, 1999 PSE CIRCULAR FOR BROKERS NO. 2032-99 PILTEL REPORTS 1ST HALF LOSS OF P1 . 57 BLN AMID LOWER REVENUE, INCREASED DEPRECIATION COSTS The Pilipino Telephone Corporation (Piltel) announced today that its net loss widened to P1.569 billion in the year's first six months from P107 million a year earlier, reflecting lower revenue, as well as increased costs due largely to sharply higher depreciation. Piltel's revenue declined 21 per cent to P1.857 billion, despite a 30 per cent increase in subscribers to 538,000 as at 30th June, comprising 415,000 cellular subscribers, 76,000 land-line subscribers and 47,000 paging subscribers. The Company's cellular subscriber base continued its recent trend toward the growing dominance of pre-paid subscribers who now account for 61 per cent of cellular customers compared with 33 per cent a year earlier rather than those subscribing to billed subscription plans which carry higher average revenues. Operating costs rose 35 per cent to P2.807 billion, due largely to an 86 per cent rise in depreciation to P1.468 billion related to the addition of cell sites, bringing the Company's total to 386 (including micro-cells and repeaters), as well as measures to upgrade and enhance the efficiency of its business offices which now number 52. Stripping out depreciation, operating expenses rose only 4 per cent to P1.339 billion. After depreciation, the element in operating costs relating to compensation and benefits grew 11 percent to P334 million, despite the reduction in headcount from 1,841 at year end 1998 to 1,386 in June 1999, due to retroactive salary adjustments as stipulated in collective bargaining agreements Utilities, maintenance, insurance and related security services grew 34 per cent to P204 million due to the payment of prior year's billings, while provisioning for doubtful accounts increased 13 percent to P123 million as a result of more conservative changes in the provisioning policy. However, operating expenses were successfully reduced in such areas as rent, commissions and advertising. Piltel's CEO and President Napoleon Nazareno said: "Despite our losses in the first half, we firmly believe that Piltel is taking the right actions to generate positive, long-term results. We have stabilized the company and right-sized our manpower complement. We have begun new marketing initiatives based on thorough and systematic market research. We are also moving forward in our debt-restructuring negotiations with the Company's banks, bondholders and Marubeni, and a Memorandum of Understanding with the banks is currently being negotiated. For further information, please contact: Deborah Anne Tan (632 )845-6166 Manager, Corporate Communications