PSE Circular for Brokers No. 372-99

March 1, 1999 PSE CIRCULAR FOR BROKERS NO. 372-99 26 February 1999 SECURITIES AND EXCHANGE COMMISSION SEC FORM 11-C CURRENT REPORT UNDER SECTION 11 OF THE REVISED SECURITIES ACT (RSA) AND RSA RULE 11(a)-1(b)(3) THEREUNDER 1. 25 February 1999 (Date of earliest event reported) 2. SEC Identification Number 35815 3. BIR Tax Identification No. 000-489-462 4. PILIPINO TELEPHONE CORPORATION Exact name of registrant as specified in its charter 5. PHILIPPINES Province, country or other jurisdiction of Incorporation 6. _________(SEC Use Only) Industry Classification Code 7. 9th Floor Bankers' Centre 1200 6764 Ayala Avenue Postal Code Makati City Address of principal office 8. (632) 891-3888 Registrant's telephone number, including area code 9. N. A. Former name or former address, if changed since last report 10. Securities registered pursuant to Sections 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock Licensed and Amount of Debt Outstanding Common Shares 1,688,088,793 common shares Long Term Commercial Papers P1,000,000,000.00 shares 11. Indicate the item numbers reported herein: Item 9 Please refer to the attached Press Release captioned "PILTEL REPORTS 1998 LOSS OF P4.1 B, REFLECTING OPERATING LOSSES AND PROVISIONING." SIGNATURES Pursuant to the requirements of the Revised Securities Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized. LLphil PILIPINO TELEPHONE CORPORATION (SGD.) MA. LOURDES C. RAUSA-CHAN Corporate Secretary ANNEX PILTEL REPORTS 1998 LOSS OF P4 . 1 B, REFLECTING OPERATING LOSSES AND PROVISIONING Pilipino Telephone Corporation (Piltel) announced today that it recorded a loss of P4.1 billion in 1998 compared with a loss of P620 million in 1997, reflecting a net operating loss during the year of P2.0 billion and adjustments in charges for depreciation and amortization, as well as provisions for inventory losses and bad debts, of P2.1 billion. In the face of difficult operating conditions, the Company's net operating revenues dropped by 9 per cent to P4.5 billion in 1998 from P4.9 billion in 1997, while operating expenses rose by 14 per cent, from P5.7 billion for 1997 to P6.5 billion in 1998. Piltel's cellular subscriber base rose 53 per cent to 377,000 at year-end 1998 from 247,000 in 1997, bolstered by the number of prepaid card customers growing 376 per cent to 177,000 from 47,000 at the start of the year. Subscribers to its paging network increased 7 per cent to 52,000 at year-end 1998 from, 48,000 at year-end 1997, while fixed-line customers rose 11 per cent to 76,000 in 1998 from 68,500 in 1997. Some 23,000 of its fixed-line subscribers are in the Company's service area in Mindanao and the balance are distributed amongst its other regional exchanges. The Mindanao operations were launched in the second quarter of 1998 under the Build/Transfer contract with Marubeni Corporation. Despite PLDT's injection of P3.3 billion into Piltel in 1998, following its initial injection of P700 million the previous year, the Company's indebtedness stood at P21.8 billion at year-end 1998, down from P22.9 billion at year-end 1997. With a further US$280 million (approximately P11 billion) due in January 1999, related to the Build/Transfer contract with Marubeni Corporation its fixed-line network in Mindanao, it became clear that the Company would be unable to meet certain of its obligations as they fell due. On 6th January 1999, Piltel's Board of Directors directed management to undertake a comprehensive review of its operational and financial position, including discussions with creditors and other parties regarding debt-repayment plans. In this regard Piltel appointed Lehman Brothers as financial advisor, and the firms of Linklaters and Alliances, as well as Romulo, Mabanta, Buenaventura, Sayoc and De Los Angeles as legal advisors. The Company also subsequently appointed Buenaventura Filamor and Echauz as local financial advisors. On 19th February after a series of meetings, the, Company presented its creditors with various proposals for its business recovery and financial restructuring. LibLex Napoleon Nazareno, who was appointed Piltel's President and CEO in late November 1998, said: "Now we have Presented our business and restructuring plans, we hope to be able to come to an agreement with our creditors as soon as practicable, so that we can move forward with rehabilitating the Company. In the meantime, Piltel continues to operate as a going concern, without disruption of service to its many valued customers." For further information, please contact Debbie Tan at 891-3998. Footnotes 1. This excludes the subscription of Philippine Global Communications, Inc. (Philcom) to 258, 237,558 common shares.