PSE Circular for Brokers No. 985-99

May 5, 1999 PSE CIRCULAR FOR BROKERS NO. 985-99 PRESS RELEASE "PILTEL POSTS FIRST QUARTER LOSS" The Pilipino Telephone Corporation ("Piltel") released its 1999 first quarter results today showing a net loss of P698.5 million. This represents a decline of more than 700% from the loss of P86.4 million for the same period in 1998. The loss is a result of declining revenues and higher operating expenses. Net operating revenues posted a decrease of 11.7%, from P1.12 billion for the first quarter of 1998 to P987 million for the first quarter of 1999. On the other hand, operating expenses increased by 35%, from P1.01 billion in 1998 to P1.36 billion for the same period in 1999. Cdphil The Company's total subscriber base at the end of the first quarter was 514,000 which comprised 390,000 cellular subscribers 77,000 landline subscribers and 47,000 paging subscribers. The composition of the Company's cellular subscriber base has changed dramatically however with pre-paid subscriber accounting for 58% of the total. With these pre-paid subscribers having a lower average revenue per subscriber, the Company's cellular revenues dropped by 13% from P821.7 million as of 31 March 1998 to P714 million as of 31 March 1999. Although the current initiatives of the Company are expected to gain favorable results in a long-term, they have resulted in higher operating expenses for the meantime due to: Increased depreciation and network-related expenses following completion of cell sites and business offices. Depreciation alone nearly doubled from P351 million in the first quarter of 1998 to P690 million in the first quarter of 1999, representing 97% of the increase in operating expenses. Higher compensation and benefits due to retroactive CBA salary adjustment. The Company had 1,804 employees at the end of the period compared to 1,879 for the same period in 1998 or a reduction of 4%. Higher provisioning for doubtful accounts as a result of changes in the provisioning policy. The Company is continuing its efforts to improve operations and streamline costs. Consistent with this thrust, the Company has announced a retrenchment program aimed at reducing its workforce by 20%. The program is in the process of being implemented and will take full effect by June 30, 1999 by which time the Company expects its headcount to be approximately 1,500. Piltel's CEO and President, Napoleon L. Nazareno, stated: "In anticipation of this need, the Company made a significant provision for this program in 1998. We wanted to make sure that we adequately compensated the employees who would leave Piltel as a result of this painful but necessary decision. As I said in our stockholders' meeting last Friday, we expect more difficult times ahead and we need to significantly reduce costs if we are to move forward."