This document is PLDT's 2012 annual report. It discusses PLDT's financial performance for 2012, which reflected transitional dynamics from the acquisition of Digitel. While core income declined 4% from 2011, total service revenues increased 10% and core income in the second half of 2012 was up 4% compared to the previous year. To maintain growth, the report emphasizes the need for excellent execution of synergy programs from the Digitel acquisition and innovation, particularly in developing new data and multimedia services.
This document is PLDT's 2012 annual report. It discusses PLDT's financial performance for 2012, which reflected transitional dynamics from the acquisition of Digitel. While core income declined 4% from 2011, total service revenues increased 10% and core income in the second half of 2012 was up 4% compared to the previous year. To maintain growth, the report emphasizes the need for excellent execution of synergy programs from the Digitel acquisition and innovation, particularly in developing new data and multimedia services.
This document is PLDT's 2012 annual report. It discusses PLDT's financial performance for 2012, which reflected transitional dynamics from the acquisition of Digitel. While core income declined 4% from 2011, total service revenues increased 10% and core income in the second half of 2012 was up 4% compared to the previous year. To maintain growth, the report emphasizes the need for excellent execution of synergy programs from the Digitel acquisition and innovation, particularly in developing new data and multimedia services.
This document is PLDT's 2012 annual report. It discusses PLDT's financial performance for 2012, which reflected transitional dynamics from the acquisition of Digitel. While core income declined 4% from 2011, total service revenues increased 10% and core income in the second half of 2012 was up 4% compared to the previous year. To maintain growth, the report emphasizes the need for excellent execution of synergy programs from the Digitel acquisition and innovation, particularly in developing new data and multimedia services.
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THE FUTURE IS IN OUR FIBER.
2012 ANNA| REPORT
CONTENTS 2 Comparative Highlights 3 Consolidated Financial Performance Highlights 4 A Message from the Chairman 8 A Letter from the President and CEO 13 PLDT Group Corporate Milestones 21 PLDT Group CSR Report 26 Corporate Governance Report 41 Enterprise Risk Management 42 Board of Directors 46 Key Offcers and Advisors 50 PLDT Offcers 51 Financial Review 106 Audit Committee Report 107 Statement of Managements Responsibility for Consolidated Financial Statements 108 Independent Auditors Report 109 Consolidated Statements of Financial Position 111 Consolidated Income Statements 112 Consolidated Statements of Comprehensive Income 113 Consolidated Statements of Changes in Equity 114 Consolidated Statements of Cash Flows 116 Notes to Consolidated Financial Statements Picture a community where homes and enterprises enjoy excellent reception for telephone, video, audio, or television, and just about any other kind of digital data service. Envision that for all the major cities and towns throughout the country and you see a progressive Philippines. We, at PLDT, are committed to that vision as we bring in fber optic technology, which allows us to simultaneously deliver voice, video, and data services at much faster speed and larger capacity to residences and buildings. With energy fowing through hair-thin strands of pure light, life looks good. And the future is bright. Mission/Vision PLDT will be the preferred full service provider of voice, video and data at the most attractive levels of price, service quality, content and coverage, thereby br|ng|ng max|mum beneft to the Companys stakeholders. Values ACCOUNTABILITY We take full responsibility for our actions and decisions. INTEGRITY We do the right thing. FAIRNESS We uphold justice and fair play. TRANSPARENCY We disclose accurate and prompt information. Subsidiaries WIRELESS Smart Communications, Inc. and Subsidiaries Smart Broadband, Inc. and Subsidiaries Chikka Holdings Limited and Subsidiaries Digitel Mobile Philippines, Inc. FIXED LINE PLDT Clark Telecom, Inc. PLDT Subic Telecom, Inc. PLDT Global Corporation and Subsidiaries PLDT-Philcom, Inc. and Subsidiaries PLDT-Maratel, Inc. Digital Telecommunications Philippines, Inc. ePLDT, Inc. and Subsidiaries Pilipinas Global Network Limited BPO* SPi Technologies, Inc. and Subsidiaries SPi CRM, Inc. OTHERS PLDT Communications and Energy Ventures, Inc. . PLDT is the leading telecommunications service provider in the Philippines. Through its four bus|ness segments-w|re|ess, fxed ||ne as we|| as business process outsourcing (BPO) and others PLDT offers the largest and most d|vers|fed range of te|ecommun|cat|ons serv|ces across the Ph|||pp|nes` most extens|ve fber opt|c backbone and w|re|ess, fxed ||ne, broadband and satellite networks. PLDT is listed on the Philippine Stock Exchange (PSE:TEL) and its American Depositary Shares are listed on the New York Stock Exchange (NYSE:PHI). In 2012, PLDT was one of the largest Philippine-listed companies in terms of market capitalization. 2012 ANNUAL REPORT 1 75.3m SUBSCRIBER BASE TOTAL SERVICE REVENUES P169.3b CORE NET INCOME P37.3b P23.7b BROADBAND SERVICE REVENUES * On December 4, 2012, our Board of Directors authorized the sale of our BPO segment, thus, it was classified as a disposal group held-for- sale and discontinued operations as at December 31, 2012. comparative highlights 2008 2009 2010 2011 2012 FINANCIAL INFORMATION (in million pesos, except cash dividends declared per common share) Revenues Service Revenues 149,334 151,706 148,597 145,834 160,189 Non-Service Revenues 2,709 2,426 2,217 2,645 3,295 152,043 154,132 150,814 148,479 163,484 Expenses Depreciation and Amortization 24,151 25,159 25,881 27,539 32,354 Oompensat|on and Emp|oyee Benefts 15,204 17,654 19,148 15,089 23,042 Repairs and Maintenance 8,216 8,261 9,087 10,053 12,604 Interconnection Costs 14,655 14,030 13,928 12,586 11,556 Selling and Promotions 5,561 5,705 5,244 7,807 9,708 Cost of Sales 5,252 5,432 4,771 5,443 8,747 Professional and Other Contracted Services 4,014 3,898 4,462 5,143 5,361 Asset Impairment 3,118 5,008 1,420 10,200 5,286 Others 10,822 11,024 10,735 12,242 15,365 90,993 96,171 94,676 106,102 124,023 Net Income (Loss) for the Year 35,298 40,095 40,259 31,637 35,401 Continuing Operations 37,215 40,676 40,744 30,806 34,741 Discontinued Operations (1,917) (581) (485) 831 660 Core Income 38,079 41,138 42,028 39,035 37,333 Continuing Operations 38,923 41,701 41,486 38,282 36,665 Discontinued Operations (844) (563) 542 753 668 EBITDA 87,741 86,194 83,717 79,959 77,258 Continuing Operations 87,155 85,575 82,660 78,547 75,632 Discontinued Operations 586 619 1,057 1,412 1,626 Property, Plant and Equipment 377,220 390,692 416,390 481,647 481,033 Accumulated Depreciation, Amortization and Impairment 216,894 229,436 253,206 281,505 280,955 Carrying Value 160,326 161,256 163,184 200,142 200,078 Capital Expenditures 25,203 28,069 28,766 31,207 36,396 Short and Long-Term Debts 73,911 98,729 89,646 117,275 115,792 Net Debts 33,557 56,586 52,299 70,660 78,057 Equity Attributable to Equity Holders of PLDT 105,531 98,575 97,069 151,833 149,060 Cash Dividends Declared per Common Share Out of Earnings for the Year 200 218 222 189 172 OPERATING INFORMATION Number of Cellular Subscribers 35,224,604 41,328,641 45,636,008 63,696,629 69,866,458 Number of Fixed Line Subscribers 1,782,356 1,816,541 1,822,105 2,166,295 2,063,794 Number of Broadband Subscribers 995,916 1,614,407 2,021,004 2,928,369 3,262,884 Wireless 547,090 1,037,720 1,355,977 2,068,409 2,359,024 Fixed Line 448,826 576,687 665,027 859,960 903,860 Number of Stockholders 2,183,666 2,183,194 2,182,391 2,181,823 12,169 Number of Employees 29,904 29,035 28,770 34,116 36,740 Wireless 5,602 5,507 5,165 8,043 8,513 Fixed Line 7,813 7,947 9,572 11,409 10,462 BPO 16,489 15,581 14,033 14,664 17,765 2 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 7|e 200c-2011 |es0||s |a.e oee| ad|0s|ed |o |e/ec| ||e d|sco||||0ed ooe|a||o|s a|d ||e s|a|eme|| o/ /|a|c|a| oos|||o| as a| Decemoe| 31, 2011 |a.e oee| ad|0s|ed |o |e/ec| ||e ad|0s|me|| made |o ||e o|o.|s|o|a| amo0||s 0sed || ||e o0|c|ase o||ce || |e|a||o| |o ||e acq0|s|||o| o/ D|||e|. consolidated financial performance highlights 08 09 10 11 12 38.0 44.7 41.3 49.4 45.6 68.8 63.7 75.3 69.9 SUBSCRIBER BASE (in millions) 80 70 60 50 40 30 20 10 0 75.3m Broadband Fixed Wireless 1.6 2.0 2.9 3.3 35.2 1.8 1.0 08 09 10 11 12 149.3 151.7 101.5 148.6 99.1 145.8 96.5 160.2 108.9 SERVICE REVENUES (Php in billions) 200 150 100 50 0 160.2b Fixed Wireless 49.5 49.3 100.8 48.5 50.2 51.3 EBITDA (Php in billions) 90 50 70 30 80 40 60 20 10 0 08 09 10 11 12 87.7 86.2 83.2 80.0 77.3 77.3b 08 09 10 11 12 78.3 74.4 77.3 79.2 80.4 80.4b CORE INCOME (Php in billions) 50 40 30 20 10 0 08 09 10 11 12 38.1 41.1 42.0 39.0 37.3 37.3b 600 500 400 300 200 100 0 08 09 10 11 12 396.5 489.4 477.0 545.1 546.6 546.6b CASH FLOW FROM OPERATIONS (Php in billions) MARKET CAPITALIZATION (Year-end, Php in billions) 2012 ANNUAL REPORT 3 100 80 60 40 20 0 1.8 1.8 2.2 2.1 We are not looking forward to simply restoring past levels of revenue. Our aim is to reboot growth on a future-friendly basis by pursuing great synergies and |mproved effc|enc|es throughout the now expanded PLDT Group and by developing innovative data and multimedia services which can thrive in an increasingly disruptive digital, social media- driven world. A message from the chairman 4 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY THE FUTURE IS IN OUR FIBER TRANSITIONAL DYNAMICS Our fnanc|a| resu|ts refect the |mpact of those trans|t|ona| dynamics. In line with our guidance, consolidated core net income reached Php37.4 billion, which was 4% below the fgure for 2011. Reported net |ncome, on the other hand, was up 12% at Php35.5 billion. Moreover, total service revenues rose 10% to Php160.2 billion, after two years of decline. What is worth noting, though, is that the 2012 second semester core net income of Php18.7 billion was 4% higher from the second semester of the previous year. Th|s g|ves us confdence that we sha|| atta|n our gu|dance core net income for 2013 of Php38.3 billion, a gain of about one billion pesos after two years of decline. EXECUTION AND INNOVATION To maintain our growth momentum, we need to focus on execution and innovation. Excellent execution is the key to implementing synergy programs that we have developed to capitalize on the Digitel acquisition. We have already realized some of these gains, such as capital expenditures (capex) savings by harmonizing network investments. Moving on into such fe|ds as market|ng and sa|es, however, requ|res an unprecedented degree of coordination among PLDT, ePLDT, Digitel, Smart, and Sun Cellular. This is no small task given the divergent histories, cultures and dynamics of the various organizations within the Group. But this is absolutely necessary if we are to combine the strengths of the various companies and move forward as one Group. To their credit, the leaders of the Groups various business units have approached this process with an openness of mind and fex|b|||ty. lt |s cr|t|ca| that the d|fferent compan|es deve|op a common culture along with processes and practices to back up that cu|ture of putt|ng the customer frst. Execution is also critical in taking advantage of the huge competitive advantage that PLDT has acquired by completing its network transformation far ahead of the competition. Our accelerated capex program in 2011 and 2012 enab|ed P|DT to extend |ts fber opt|c transm|ss|on network to over 54,000 kilometers and we are now in AFTER PATIENT, STEADY EFFORTS WHICH STARTED AS FAR BACK AS 2010, YOUR COMPANY IS NOW READY FOR RENEWED GROWTH IN 2013 AND BEYOND. We are not looking forward to simply restoring past levels of revenue. Our aim is to reboot growth on a future- friendly basis by pursuing great synergies and improved effc|enc|es throughout the now expanded P|DT Group and by developing innovative data and multimedia services which can thrive in an increasingly disruptive digital, social media-driven world. We have reached this juncture by pursuing major transformation activities within the Group. PURSUING TRANSFORMATION First, we completed our massive Php67.4 billion network transformat|on program for our fxed and mob||e networks. This has enabled us to extend and improve our basic services as well as commence offering cutting-edge broadband serv|ces such as fber-to-the-home (FTTH} on our fxed ||ne network and |ong-Term Evo|ut|on (|TE} on our mobile networks. These high-speed access techno|og|es are underp|nned by P|DT`s extens|ve fber optic network, which is the countrys most extensive, robust and resilient. Second, we have reconfgured our organ|zat|on to address more effectively our key markets Home, Individual and Enterprise. PLDT, ePLDT, Digitel, Smart and Cellular (Sun) have put in place a mesh of collaborative mechanisms that allow these organizations to work cohesively in serving our various customers whether they be large corporations at home or Filipino workers overseas. Third, we have methodically pursued synergies within the Group to ensure that we serve our customers in the most cost-effc|ent and effect|ve ways. Th|s has |nvo|ved taking major decisions such as migrating Digitels landline subscribers to PLDT because the formers landline network was nearing its end-of-life stage and would be progress|ve|y d|ffcu|t to operate. As I indicated in my message last year, 2012 was a d|ffcu|t per|od represent|ng our Year for A||gnment. We took on the cha||eng|ng process of rea||z|ng the benefts of the Digitel acquisition even as we contended with intense competition from other telcos but also, and perhaps more strategically, from over the top players of the internet world. 2012 ANNUAL REPORT 5 6 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY HARVEST OF AWARDS Thankfully, your Companys efforts in business innovation, corporate governance and community service have won recognition here and abroad. PLDT won the Best CEO awards from Finance Asia (for the undersigned) and Corporate Governance Asia (for Napoleon L. Nazareno), both prestigious regional pub||cat|ons |n the|r respect|ve fe|ds. The two pub||cat|ons also named PLDT Best in Corporate Governance in the Philippines while the Institute of Corporate Directors of the Philippines cited PLDT as a Platinum Plus Awardee in Corporate Governance. PLDT was also cited as the Carrier Ethernet Service Provider of the Year for Asia Pac|fc by the 2012 Metro Ethernet Forum (MEF} he|d |n Shanghai, China. Smart bagged awards for Operator of the Year and Telecom CEO of the Year (for Napoleon L. Nazareno) at the 15th Telecom Asia Awards held in Bangkok, Thailand. It also won the Operator of the Year and Innovation Award for the Smart Netphone at the 2nd Asia Communications Award held in Singapore, and The Most Innovative Company Award at the Asia CEO Awards held in Manila. Its mHealth program, Secured Health Information Network and Exchange (SHINE), won two international awards and was also named as one of the countrys Top 10 health program by Health Market Innovations at the 2nd Galing Likha-Kalusugan Awards held in Manila. Moreover, Smart was cited as the Company of the Year at the 11th Philippine Quill Awards for winning a record- setting 14 Excellence Awards at the annual competition held by the International Association of Business Communicators Philippines. It also garnered 14 awards at the 48th Anvil Awards, the second year in a row that it topped the trophy count at the annual event of the Public Relations Society of the Philippines. the process of laying down 5,000 kilometers more. We have fort|fed our |nternat|ona| fber ||nks, |ncreased our 3G population coverage to over 70%, grown the reach of our FTTH facilities and expanded the coverage of our LTE service. PLDT is, thus, well-positioned to grow its data bus|nesses, both fxed and mob||e. W|th smartphone penetration rapidly growing and social media driving usage, mobile data promises to be a key source of growth in the coming years. But exce||ent execut|on a|one w||| not suffce. We need to become much more pro||fc and focused |n our innovations as we transform PLDT into a communications and multimedia services Group in an environment where the telco, media and internet worlds are merging at an accelerating pace. We have taken steps to pos|t|on P|DT to proft from that trend. Our investment via Philippine Depository Receipts (PDRs) in CignalTV places us at the cutting edge of opportunities arising from the convergence of access and content. At the same time, we are nurturing innovation through out-of-the-box approaches both inside and outside our organization. Our wireless subsidiary Smart, for example, has set up a new business unit that has been given the mandate and the means to develop new business ideas that can be adopted by other units within the Group. We are also fostering the development of innovative businesses through the IdeaSpace Foundation which provides incubator and accelerator support for small tech start ups selected through a national competition. The frst ten w|nn|ng tech start ups are a|ready be|ng assisted in turning their ideas into commercial products and services. 54,000km FIBER OPTIC NETWORK 14 EXCELLENCE AWARDS 11TH PHILIPPINE QUILL AWARDS over 500 PUBLIC SCHOOL TEACHER SCHOLARSHIPS P100m RAISED BY TULONG KAPATID over70% 3G POPULATION COVERAGE P67.4b NETWORK TRANSFORMATION PROGRAM 2012 ANNUAL REPORT 7 Finally, Sun was recognized as the Philippines Mobile Service Provider of the Year for 2012 by Frost & Sullivan As|a Pac|fc Best Pract|ces Awards, the second stra|ght year that Sun received that distinction from the global research and consu|tancy frm. CONSORTIUM FOR CORPORATE ACTION In 2012, we raised the level of our community service programs establishing stronger partnerships with our kindred companies. This was particularly true in two areas: disaster preparedness and response, and entrepreneurship. ln November 2012, P|DT jo|ned hands w|th Metro Pac|fc Investments Corporation (MPIC), Manila Electric Company (Meralco), Maynilad Water Services, Inc. (Maynilad) and other aff||ated compan|es |n form|ng 70|o| |aoa||d as our coordinated disaster preparedness and response program. The following month, on December 5, 7,o|oo| Pablo struck southeastern M|ndanao and |nf|cted horr|fc death and destruction in the provinces of Davao Oriental and Compostela Valley. What followed has provided PLDT and its allied companies a template for working together in dealing with calamities. 70|o| |aoa||d raised more than Php100 million via a telethon on ABC Associated Broadcasting Company Development Corporation (TV5). Working together, TV5, Smart, PLDT and Meralco distributed relief goods, ready-to-eat food and water to several tens of thousands of displaced residents of the two hard-hit provinces over several weeks. Maynilad deployed its mob||e water f|trat|on stat|on. Doctors and nurses from the Davao Doctors Hospital and Makati Medical Center staged medical missions that served several thousands of people in New Bataan and Compostela Poblacion in Compostela Valley. Smart set up free call stations for typhoon victims and, working with Telecoms Sans Frontieres and Vodafone Foundation, also installed an lnstant Network, using a portab|e ce|| s|te that fts |nto four su|t cases, to prov|de mob||e phone service to relief agencies in Davao Oriental. Meralco deployed 38 linemen to help the local electric cooperative restore power in the towns of Cateel and Banganga. In partnership with the Davao Oriental provincial government and the National Housing Authority (NHA). 70|o| |aoa||d is now building about 300 homes in Banganga for families displaced by the typhoon. In entrepreneurship, PLDT, working once more with its aff||ated compan|es, |aunched the |argest pr|vate sector initiative to promote tech startups in the country. As I noted earlier, IdeaSpace Foundation held a nationwide contest to se|ect the frst ten tech start ups that w||| each receive funding of up to Php5 million plus mentoring, logistics and legal assistance to translate their innovative ideas into commercial reality. In the same vein, PLDT launched Project Pagsulong, a Php1 million national competition among young Filipinos to develop innovative business ideas that provide real- life solutions to poverty. The three winning teams have received cash grants, and pre- and post-project coaching and mentoring from partner institutions. In education, PLDTs Gabay Guro continued to expand its reach, providing scholarships to over 500 public school teachers in state universities and colleges all over the country. It now plans to further extend its support for public school teachers by working with local governments and over 30 partner state colleges and universities. The target |s to eventua||y have fve scho|ars per year per prov|nce. Our other education programs are evolving in the direction of going increasingly digital and online. PLDTs Infoteach Outreach Program (Infoteach) is strengthening its partnership with the University of the Philippines Open University (UPOU) to provide advanced online training for teachers from its partner public schools. The Smart Schools Program is placing greater emphasis on multimedia content generation through its Doon Po Sa Amin Program. The Smart Wireless Engineering Education Program (SWEEP) has introduced mobile applications development in its annual innovation competition. Finally, in sports, PLDT continued to support Philippine sports vigorously, particularly basketball, football, boxing and taekwondo. We are preparing well for the FIBA Asia Championship that will be held in Manila in August 2013. The reorganized Smart Gilas National Basketball Team has trained strenuously for this competition that will hopefully pave the way for Philippine participation in the FIBA World Cup in Spain in 2014. OUTLOOK Through its investments and transformation initiatives, the PLDT Group has positioned itself well in the emerging digital and multimedia world. We shall maintain and strengthen our leadership by embracing both incremental and disruptive changes. Attaining these goals requires far-sighted leadership, an ag||e and fex|b|e organ|zat|on and a s|ng|e-m|nded focus on delivering the best possible service at the most affordable prices to our customers. The road ahead is long and steep, but the challenges are exciting. In closing, I wish to thank our shareholders for their support and the Board of Directors for their determination and dedication in building a new future for PLDT. MANUEL V. PANGILINAN Chairman of the Board 8 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY We are fully aware that PLDT is pursuing growth within a very dynamic industry environment. As the world of telecoms, the internet and media come together, we are constantly monitoring and evaluating how these changes may impact our business. Our strategy is to embrace change and to get ahead of the curve. The repositioning of our portfolio and our greater involvement in the media/content business is part of a far- reaching transformation that aims to strengthen PLDTs leadership in the emerging digital world. A letter from the president & CEO 8 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 2012 ANNUAL REPORT 9 2013: RETURN TO GROWTH Partners. This transaction was completed at the end of April 2013. As such, for 2012, the BPO segment has s|nce been c|ass|fed as d|scont|nued operat|ons. Exc|ud|ng discontinued operations, consolidated service revenues stood at Php160.2 billion, and EBITDA at Php75.6 billion. Free cash fow for 2012 of Php37.8 b||||on rema|ned robust, although was lower than previous year, primarily due to the higher capex for 2012 as we completed our two-year network transformation program. For the sixth consecutive year, PLDT declared 100% of its 2012 core earnings as dividends. Total dividends per share amounted to Php172 consisting of Php120 of regular dividends and Php52 of special dividends representing 70% and 30% of core earnings per share, respectively. NETWORK TRANSFORMATION With the completion of the two-year Php67.4 billion network transformat|on program |n 2012, the P|DT Group fort|fed its market leadership and competitive advantage. Our base stations are now 100% equipped with single radio access network (RAN) facilities that are simpler, less costly to operate and are easily upgradeable to fourth-generation LTE technology. Our transmission network is far superior to compet|t|on w|th 54,000 k||ometers of fber prov|d|ng high-bandwidth connections to our home and enterprise customers and to our mobile base stations. To complement our domest|c fber network, we a|so have robust |nternat|ona| fber ||nks des|gned to ensure re||ab|||ty and redundancy. As a result, the PLDT Group network remains unmatched in its ability to provide high-quality voice, data and multimedia services to our customers. Reported net income rose by 12% to Php35.4 billion. As anticipated, core income, excluding exceptional items, was lower at Php37.3 billion from Php39 billion in 2011 largely refect|ng the |mpact of the compet|t|ve |ntens|ty |n the wireless business including our response to that, as well as the cost of integrating Digitel and Sun into the group. Consolidated service revenues rose by 10% or Php15.3 billion to Php169.3 billion in 2012 with year-on-year increases in revenues from our domestic voice, short messaging services (SMS), data/broadband and BPO services. International voice revenues, contributing 14% to total service revenues, were lower by 2% at Php23.1 billion due to the combined effect of the peso appreciation, lower international termination rates, and a decline in call volumes with the increasing adoption of alternative modes of communicating such as voice over internet protocol (VoIP) calling. Consolidated EBITDA dipped by 3%, or Php2.7 billion, to Php77.3 billion at the end of 2012. EBITDA margin reduced to 46% from 52% |n 2011 refect|ng the |mpact of the change in revenue mix from high-margin legacy revenues such as international long distance (ILD) and SMS, to relatively lower-margin broadband services. We also booked expenses arising from a manpower rightsizing program (MRP) amounting to Php3.8 billion during the year, excluding which, EBITDA would have been Php1.1 billion higher year-on-year and margin would have been 48%. In February 2013, as part of the rationalization of our portfolio, we announced our intention to sell our BPO business to Asia Outsourcing Gamma Ltd. (AOGL), a company controlled by the private equity fund, CVC Capital DEAR FELLOW SHAREHOLDERS: THE YEAR 2012 WAS A YEAR OF TRANSITION FOR PLDT. WE UNDERTOOK THE STEP-BY-STEP PROCESS OF ASSIMILATING DIGITEL AND SUN CELLULAR INTO THE GROUP. WE COMPLETED AHEAD OF SCHEDULE OUR NETWORK TRANSFORMATION PROGRAM, ENABLING US TO DEPLOY HIGH-SPEED BROADBAND IN BOTH PLDTS FIXED NETWORK AND SMARTS CELLULAR NETWORK. FACED WITH INTENSE COMPETITION, THE GROUP STRENGTHENED ITS POSITION IN THE MOBILE BUSINESS. WE RATIONALIZED OUR BUSINESS PORTFOLIO, LEADING TO THE SALE OF OUR OUTSOURCING BUSINESS AND MOVED TOWARDS GREATER INVOLVEMENT IN THE MULTIMEDIA SPACE. OUR FINANCIAL AND OPERATING RESULTS FOR 2012 WERE SHAPED BY THIS TRANSITION PROCESS. 2012 ANNUAL REPORT 9 10 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY We are beg|nn|ng to see the benefts from the acqu|s|t|on of Digitel Group as part of our efforts to bring growth back to the business. We successfully defended our revenue market share in the wireless business which held steady throughout 2012. In addition to this, we undertook various initiatives that aimed to grow revenues such as higher-denomination, longer-duration offers, a greater push to grow our postpaid business, and efforts to clearly differentiate and leverage the strong brand equities of Smart, Talk N Text and Sun Cellular. FIXED LINE Fixed line service revenues for 2012 rose by 4% from the end of 2011 to Php61.3 billion as increases in revenues from DSL and corporate data and other network services offset declines in international and national long distance revenues. Fixed line EBITDA dipped by 10% to Php20.3 billion in 2012 following higher cash expenses which included a Php3.0 billion charge in connection with the MRP implemented during the year. EBITDA margin was lower at 33%. Excluding the impact of the MRP expenses, EBITDA would have been higher year-on-year by Php0.6 billion and EBITDA margin would have been 38% compared with 39% in 2011. Growth momentum |n fxed ||ne serv|ce revenues w||| be further fuelled by initiatives that are focused on the Home market, including FTTH, connected screens, triple-play offers w|th content de||vered over fber; as we|| as the Enterprise market through various business solutions customized for large corporates, BPOs, small-and-medium enterprises (SMEs) and micro businesses. All these are enab|ed by P|DT`s s|gn|fcant capex |nvestments that |nc|ude upgrades of our fxed ||ne to fber and to next generat|on network (NGN). BPO The strengthening of the peso during the year impacted the whole BPO industry whose revenues are largely dollar- denominated. Nevertheless, service revenues from our BPO business registered a 15% year-on-year increase to Php9.9 b||||on |n 2012 refect|ng the cont|nued benefts from bu||d|ng up the sales and marketing organization for the business and the full year impact of the acquisition of a high-margin business in education publishing. BPO EBITDA grew by 33% to Php2.1 billion and EBITDA margin improved to 21% from 18% in 2011 as a result of initiatives that focused on increasing revenues and improving effc|enc|es and proftab|||ty. Following the sale of the BPO business and the subsequent |nvestment |n 20% of AOG|, P|DT w||| no |onger refect BPO as a separate segment |n |ts 2013 fnanc|a|s, but w||| |nstead equity account the earnings from its BPO investment. SUBSCRIBER BASE At the end of 2012, PLDTs total customer base grew to over 75 million from 69 million at the end of 2011. The PLDT Group has close to 70 million cellular subscribers, 3.3 million broadband subscr|bers, and 2.1 m||||on fxed ||ne subscr|bers, maintaining strong market leadership in all business segments. BROADBAND Oomb|ned fxed and w|re|ess broadband serv|ce revenues improved by 26% year-on-year to Php23.7 billion in 2012, now accounting for 13% of total group service revenues. In addition to Php3.2 billion contributed by Digitel/Sun, PLDT DSL revenues were higher by 12% at Php10.6 billion fo||ow|ng a 5% |ncrease |n subscr|bers; w|re|ess broadband revenues were up by 4% to Php6.7 billion with a 7% rise in subscr|bers; wh||e mob||e |nternet revenues c||mbed by 56% to Php2.6 b||||on refect|ng the grow|ng use of the serv|ce. Broadband remains the bright spot for the business as usage continues to grow strongly given a young, literate Philippine population with increasing purchasing power. Although most of usage today is by shared access or at internet cafes, we anticipate that this will shift to mobile and to homes as the cost of access devices such as smartphones, smart TVs, laptops and the like becomes more affordable by a broader market. PLDTs investments in the network have given it not only an early lead, but a distinct competitive network advantage over competition in the groups ability to consistently provide our customers with quality of experience on a w|de range of fxed and mob||e dev|ces. The PLDT group is well positioned to offer and deliver a suite of broadband services with varied speeds and price points, over multiple platforms to both retail and corporate customers. These products include FTTH, as well as bundled products such as WiFi service outside the home for DSL subscribers, direct-to-home (DTH)/content packages |n add|t|on to our fxed ||ne serv|ce. WIRELESS BUSINESS Revenues from our wireless business registered a 15% year-on-year increase to Php117.4 billion in 2012, mainly due to the contribution of Php20.9 billion from Sun Cellular. Competitive pressures impacted the wireless business which saw SMS revenues dip despite increase in the number of messages sent, and lower voice revenues arising from lower voice minutes registered. These revenue declines were partly offset by higher revenues from wireless broadband and mobile internet browsing. Wireless EBITDA of Php54.4 billion was a 2% reduction versus the pr|or year refect|ng the comb|ned |mpact of lower revenues and increases in subsidies and expenses arising from the MRP undertaken during the year as part of the inclusion of Sun Cellular into the group. EBITDA margin declined to 46%, in part due to the lower margin of Digitel, and the MRP expenses. 2012 ANNUAL REPORT 11 Meralco registered another banner year in 2012 with a 9% year-on-year rise in core income to Php16.3 billion arising from increases in electricity sales volumes, an expanded customer base, and |mproved operat|ng effc|enc|es. Approximately 70% of 2012 core earnings, equivalent to Php10.10 per share, were paid out as dividends. The value of PLDTs investment in Meralco continues to grow. The outlook for Meralco is enhanced by its entry into power generation, complementing the anticipated continued growth in its main distribution utility business. In March 2013, Meralco announced an investment in GMR Energy (Singapore) Pte. |td. a 2x400 MW ||qu|fed Natura| Gas (LNG)-fred combined cycle facility in Singapore, where Meralco has an effective 28% equity interest. This is one of the pipeline of investments in power generation lined up by Meralco. DEBT POSITION Despite a modest increase in debt levels, PLDTs consolidated fnanc|a| pos|t|on rema|ned robust |n 2012. Oonso||dated gross debt increased to US$2.9 billion with the inclusion of US$0.5 billion of debt from Digitel, while net debt rose to US$1.9 billion. Net debt to EBITDA stood at 1.05x, within optimum gearing levels. PLDTs US$145 million 2012 bond matured in May 2012. The remaining debt maturities continue to be well spread out. ln 2012, P|DT became the frst Ph|||pp|ne corporate accorded investment grade status with the upgrade of its foreign and local credit ratings by Fitch Ratings, Moodys, and Standard and Poors. 2013: RETURN TO GROWTH The huge investment we made in Digitel in 2011 required us to focus on alignment and adjustment in 2012. At the same time, we completed our network transformation program which also involved hefty infrastructure investments. Not surprisingly, these moves had a dampening effect on our fnanc|a| performance |n 2012. Mov|ng forward, our mandate |s c|ear. We are confdent that we have steered PLDT back into the growth path and will see a steady r|se |n proftab|||ty. We are fully aware that PLDT is pursuing growth within a very dynamic industry environment. As the world of telecoms, the internet and media come together, we are constantly monitoring and evaluating how these changes may impact our business. Our strategy is to embrace change and to get ahead of the curve. The repositioning of our portfolio and our greater involvement in the media/content business is part of a far-reaching transformation that aims to strengthen PLDTs leadership in the emerging digital world. On behalf of your Management Team, let me assure you of our collective commitment to build a new future for PLDT. NAPOLEON L. NAZARENO Pres|dent and Oh|ef Execut|ve Offcer EVOLVING INTO A MULTIMEDIA ORGANIZATION PLDTs strategic direction is to transform itself into a multimedia organization as the telecommunications industry evolves within a more complex, digital, multimedia environment. Other telcos worldwide have begun to move in a similar direction. Historically, MediaQuest Holdings, Inc. (MediaQuest), a who||y-owned ent|ty of the P|DT Benefc|a| Trust Fund, has made investments using internal funds principally into TV5 and O|gna|Tv. S|nce start of the|r operat|ons, s|gn|fcant improvements in audience market share and subscriber base have been achieved by TV5 and CignalTV, respectively. In 2012, PLDT announced its intention to invest Php6 billion in MediaQuest PDRs for an effective 40% economic interest in Mediascape, Inc. (Mediascape), which operates a DTH Pay-TV business under the brand name CignalTV. PLDT also recently announced its intention to make an additional investment of Php3.6 billion in the CignalTV business, that will increase its effective economic interest to 64%. PLDT is very optimistic about the potentials of the pay TV industry in the Philippines, and CignalTVs competitive advantages that can give it a strong position in the market. Pay TV penetration is low as the industry is fragmented, and is still in transition from analog to digital. The market leader operates a cable business with its reach largely limited to Metro Manila. Being a DTH service, CignalTV can expand its nationwide footprint faster. Its access to the PLDT Groups prepaid platform and distribution network allows it to easily offer prepaid pay TV services. Unlike the competition, CignalTV is already fully digital, and offers the most number of h|gh-defn|t|on channe|s |n the Ph|||pp|nes. In 2012, CignalTV had over 441,000 subscribers. We are now working on making CignalTVs content available to customers of our FTTH offer, Fibr. Moving forward, we are very excited by the unparalleled opportunities for the PLDT Group to offer combinations of voice, high-speed internet, and content over multi-screens including the mobile phone, TV, tablets and laptops. In line with its efforts to acquire access to news content, PLDT also announced its intention to invest Php1.95 billion in MediaQuest PDRs for economic interest in Hasting Holdings, Inc., which holds print-related investments including minority positions in the three leading broadsheets: The Philippine 5|a|, ||e |||||oo||e Da||, ||q0||e|, a|d S0s||essHo||d. MERALCO The PLDT Group continues to own a strategic stake in Meralco through PLDT Communications and Energy Ventures, Inc. (PCEV, formerl y Pi l tel ), whi ch together wi th MPIC co-owns Beacon Electric Asset Holdings, Inc. Beacon remains the largest shareholder of Meralco with a 48% equity interest. 12 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY PLDT PROVIDES THE STRONGEST CONNECTIONS TO FAMILIES IN THE DIGITAL AGE. AT HOME, POPULAR GADGETS LIKE THE SMARTPHONE, INTERNET TV AND TELPAD CAN BE USED IN SYNC BY FAMILY MEMBERS WITH THE HELP OF A POWERFUL INTERNET CONNECTION THAT RUNS ON FIBER OPTICS TECHNOLOGY. FIBER TO THE HOME 2012 ANNUAL REPORT 13 Complementing the expansion of its domestic infrastructure, PLDT also strengthened its international data linkages. In 2012, PLDT launched the Asia Submarine Cable Express (ASE), the only active underwater cable system in the countrys east coast. W|th 7,200 k||ometers of fber opt|c cab|e, the ASE ||nks the Philippines with Japan, Hong Kong, Singapore and Malaysia, while interconnecting with other major cable systems onward to the United States, Europe and the Middle East. Two aspects of this program stood out: First, the expansion and fort|fcat|on of P|DT`s domest|c fber opt|c cab|e network. Second, the transformation of Smarts mobile network into one ready for the deployment of LTE, the fourth generation of mobile data technologies. Working double-time, PLDT and its wireless subsidiary Smart completed ahead of schedule the Groups two-year Php67.4 billion (US$1.6 billion) network transformation program an initiative designed to boost service quality and reliability and more than triple voice and data capacity of the network. Of the current six international submarine cable systems in the country, the ASE is the largest in capacity, utilizing 40Gbps technology which can be further enhanced to 100Gbps. The ASE that lands in Camarines Norte is the frst and on|y underwater cab|e system that bypasses the earthquake-prone Taiwan corridor, enabling PLDT to transport traffc d|rect|y to Japan and then onwards to the United States with the shortest latency and least points of failure. It also complements PLDTs three other landing stations in Batangas, Cavite and La Union. PLDT GROUP CORPORATE MILESTONES PLDT MADE MAJOR STRIDES IN 2012 IN DELIVERING ENHANCED BROADBAND DATA SERVICES TO ITS CUSTOMERS AS IT PURSUED MAJOR INITIATIVES TO TRANSFORM ITSELF INTO AN INTEGRATED MULTIMEDIA COMMUNICATIONS GROUP. ALL ABOUT FIBER 14 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY ln m|d-2012, P|DT |aunched the country`s frst FTTH broadband serv|ce on |ts fxed network. W|th speeds of up to 100 Mbps, the service allows family members to enjoy seamless, simultaneous h|gh-defn|t|on, 3D, and |nteract|ve v|deo stream|ng, simultaneous and high-speed web browsing. In another pioneering move, Smart introduced the country`s frst commerc|a| |TE serv|ce, |n|t|a||y in Metro Manila and gradually to more and more areas nationwide. By April 1, 2013, Smarts LTE coverage had reached 46 cities and 40 municipalities. In early 2012, Smart introduced LTE Plug-It and Pocket WiFi devices to give subscribers an initial experience of the much faster data speeds available on LTE. Late in the year, it brought in several LTE handsets including those from Apple, Sony and Huawei. The Company relaunched the TELPAD, tripling the number of subscribers using the device from a year ago. TELPAD strategically provides a platform for offering a growing number of value-added services at home. INNOVATIVE PRODUCTS AND SERVICES Its network transformation enabled the PLDT Group to improve its basic services and offer advanced broadband services to better address the needs of its clients be they in a residential, commercial, or enterprise setting whether they are residents or Filipinos working overseas. 2012 ANNUAL REPORT 15 PLDT launched SIP Trunks service or session initiation protocol trunk line solution to serve the growing use of IP-PBX or IP-based corporate phone systems in the enterprise market. PLDT SIP Trunk runs over PLDTs robust next generation IP network offering quality of service to corporations expanding and complex voice applications. PLDT ALPHA Enterprise and ePLDT expanded their network of world-class data centers with the launch of VITRO Data Centers in Mandaue, Cebu and in Subic, Zambales. The new facilities now serve as the primary data centers of customers in the Visayas- Mindanao region and for businesses north of Luzon. The Subic facility also functions as a secondary or back-up site for Luzon- based enterprise co-locators. The data center facilities are capable of concurrent maintainability, a major criterion of a Tier 3 data center, and part of a network of data centers together with VITRO Pasig. PLDT SME Nation launched the Productivity Solutions Suitea trio of high-tech solutions for todays businesses including CheckOut, a web-based POS system; Watcher, a v|deo-mon|tor|ng system; and Fastrack, a vehicle and asset-tracking service. Smart a|so |ntroduced the country`s frst ||| De/||||o| (HD) Voice service. Similar to hearing the difference between AM and FM radio stations, HD Voice makes it easier for callers to recognize commonly misheard sounds. HD Voice is initially available in select areas in Makati City and Bonifacio Global City in Taguig City and can be enjoyed on smartphones running on 3G which are capable of Adaptive Multi-Rate Wideband (AMR-WB). PLDT brought into the market PLDT Cloud, a suite of solutions that makes use of PLDTs new public cloud infrastructure to provide companies with all the benefts of c|oud comput|ng, such as sca|ab|||ty, secur|ty, and cost-effc|ency. PLDT launched myBro with the rebranding of Canopy and WiMax services of Smart Bro, leading to 17,000 gross activations, the highest since 2009 and up 71% from 2011. Smart launched a new marketing campaign with the catch phrase Live More which enabled it to reposition Smart as the premium cellular brand that delivers the countrys best mobile phone and mobile internet service. The Live More message delivered through a series of humorous ads is that you can make the most out of life if you have the best mobile phone service. And that conversely, you lose a part of your life if you dont. For its prepaid subscribers, Smart launched a string of what it called the ultimate unlimited services, the frst |n the country to comb|ne 'tr|-net` ca|| and text services with data. The Tri-Net Unli series for example, allows the user to make unli calls and texts to any Smart, Talk N Text, or Sun Cellular subscriber for as low as just Php40 a day. With unlimited SMS to all networks, Mega 250 is valid for 30 days and loaded with 180 minutes of calls to Smart, Sun and Talk N Text as well as 100 mb of mobile internet. Smart launched the Smart Postpaid Freedom Plan, wh|ch carr|es no fxed month|y fees, |ock-|n per|ods, and obligations, thus enabling subscribers to pay only for what they use. A|so, Smart |ntroduced |ts lnfn|ty Plan 3500, a variation of the telcos premium offering and dubbed as the entry-|eve| lnfn|ty p|an wh|ch treated its users to the same topnotch perks available to a|| other lnfn|ty p|anho|ders. DEMOCRATIZING ACCESS As the PLDT Groups network and services improved, it offered packaged solutions that would make its services accessible to a greater number of the population. 16 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 2012 ANNUAL REPORT 17 Also during the year, Sun Cellular launched new products for corporate 2G postpaid: Sun Plan 599 with unlimited Sun calls, unlimited texts to all networks and a choice of various free handsets such as Nokia 200, Nokia 202, Alcatel Glory X918N, Alcatel OT903 or Alcatel Glory 2 under a 24-month ho|d|ng per|od; and Sun Fixed Load Plan 500 with unlimited Sun calls and texts, 1,250 texts to Smart, one hour of calls to Smart and a free Alcatel Glory smartphone. Sun Cellular introduced new offerings for corporate 3G postpaid: Sun Business Mobile WiFi Kit for transport companies. Powered by Sun Broadband, this offers unlimited Internet connection of up to 7.2 Mbps, along with a free mobile WiFi router and WiFi sticker. This aims to give transport companies more advertising leverage through the added customer perk of installing WiFi service in their vehicles. Sun Oe||u|ar |ntroduced the frst-|n-the-market SunDroid Rush Plan 600 which offers a free Android Alcatel smartphone and Alcatel tablet with unlimited Sun calls and texts, 350 texts to other networks and Php250 consumable for other services. It also made available the lowest-priced broadband plan in the market called Sun Broadband Plan 250 with 35 hours of internet per month to replace the earlier released Plan 299 with 30 hours of internet. Smart also launched various new mobile data plans such as the Smart FlexiSurf Plans, a set of worry-free postpaid broadband packages that come in various combinations and price points. These are the Php299 per month SIM-only plan, the Power Plug- It Plan 499, and the Pocket Wi-Fi Plan 599. FlexiSurf plans may also be bundled with a netbook or a tablet of their choice, for an amortized and discounted amount. 2012 ANNUAL REPORT 17 For its part, Sun Cellular was recognized for the second year in a row as the Philippines Mobile Service Provider of the Year for 2012 by Frost & Sullivan, a global research and consu|tancy frm. Smart was recogn|zed as Operator of the Year at the As|a Oommun|cat|on Awards |n S|ngapore, Best Emerg|ng Market Oarr|er at the 2012 Te|ecoms As|a Awards he|d |n Bangkok, and Most lnnovat|ve Oompany at the 2012 As|a OEO Awards |n Man||a. The Netphone - the wor|d`s frst smartphone backed by an operator-managed p|atform - rece|ved the Best lnnovat|on Award at the 2012 As|a Oommun|cat|ons Awards |n S|ngapore. Smart won awards for Operator of the Year and Te|ecom OEO of the Year for Smart Pres|dent and OEO Napo|eon |. Nazareno at the 15th Te|ecom As|a Awards |n Bangkok, Tha||and. lt a|so bagged the Operator of the Year and lnnovat|on Award for Smart Netphone at the 2nd As|a Oommun|cat|ons Awards |n S|ngapore, and The Most lnnovat|ve Oompany Award at the As|a OEO Awards he|d |n Man||a. P|DT rece|ved the Serv|ce Prov|der of the Year award and the Best |n Market|ng award dur|ng the 2012 MEF Oarr|er Ethernet Serv|ce Prov|der Awards for As|a Pac|fc he|d |n Shangha|, Oh|na. P|DT was a|so one of the s|x fna||sts for the Oarr|er Ethernet Bus|ness App||cat|ons Award. P|DT Oha|rman Manue| v. Pang|||nan p|aced frst among the roster of the Ph|||pp|nes` |ead|ng OEOs |n the 12th Annua| Po|| of As|a`s top compan|es by F|nanceAs|a, a |ead|ng pub||cat|on |n As|a. AWARDS AND RECOGNITION In recognition of its various innovative initiatives, the PLDT Group received numerous awards during the year. 18 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY 2012 ANNuAL REPORT 19 Smart was cited as the Company of the Year at the 11th Philippine Quill Awards after clinching a record-setting 14 Excellence Awards at the annual competition held by the International Association of Business Communicators Philippines. Smarts electronic medical records and referral system called Secured Health Information Network and Exchange (SHINE) was likewise recognized as Best Community Telecom Project at Telecom Asia held in Bangkok, Thailand and as Best Emerging Market Initiative at the 2012 Asia Communication Awards. SHINE was also cited as one of the countrys Top 10 health programs by Health Market Innovations in the Philippines. PLDT and Smart clinched the award for Best Telecommunications Conference atthefrstAsianConferenceSummitandAwardsheldinSingaporeforits7th Asian Carriers Conference (ACC). An annual event, the ACC is attended by almost 1,000 delegates from 45 countries. It was cited for providing a venue for leadersaroundtheworldfromthewholesalefxedandmobiletelecomcarriers to meet and engage with delegates from telecoms network and infrastructure providers, applications and service developers, handset and equipment manufacturers, and entertainment and content producers and distributors. PLDT, through its wholly-owned subsidiary ePLDT, Inc., has gained the MicrosoftSilverCertifedPartnerstatusforMessagingandHosting, thefrstPhilippinecompanytoreceivethisdistinction.Thisdirectly upgrades the Companys hosted Microsoft offerings, particularly Hosted Exchange, which is the leading enterprise email platform providing business-class email, calendar and contacts on computers, phonesandwebbrowsers.MicrosoftSilverCertifedPartnersbeneft from exclusive support and resources directly provided by Microsoft. SPi global Holdings, Inc. (SPi global) won the Best BPO Award for the 2nd time in Vietnam during the 2012 Sao Khue Awards given by the Vietnam Software Association (VINASA), which recognized the Vietnam operations of SPi global for its Outstanding BPO Service involving the companys Conversion Solutions for scanning and digitizing over 30 million pages of scholarly materials in just 18 months. 3_PLDTar12 _rev.indd 19 5/9/13 12:52 PM 20 PhiliPPine long distance telePhone comPany FIBER TO ThE cOmmunITy More Than jusT brIDGInG PeoPLe, PLDT has been coMMITTeD In eMPowerInG LocaL coMMunITIes wITh TechnoLoGy anD InforMaTIon TooLs for DeveLoPMenT In LIne wITh The coMPanys GoaL TowarDs naTIon-buILDInG. 3_PLDTar12 _rev.indd 20 5/9/13 11:57 PM 2012 AnnuAl RepoRt 21 In the post-disaster, rehabilitation phase, Tulong Kapatid is working with the davao oriental provincial government, the nhA and the philippine contractors Association to build houses for around 300 families in Banganga.
in cooperation with the corporate network for disaster Response (CNDR), Smart also enabled the ood-prone barangays in metro manila, cagayan de oro, Bacolod, and Dumaguete to develop community ood preparedness plans and conduct ood drills that involved residents, the local government, law enforcers, public schools and volunteer groups. smart and sun cellular agreed to support the efforts of the department of science and technology (dost) to set up the national operational Assessment of hazards and Risks (noAh), a major government program to improve the countrys weather monitoring and ood warning system. smart and sun committed to host the dosts automated rain gauges in 600 of its cell sites all over the country. smar t al so hel ped devel op and launch the project noAh mobile App for Android devices to enable smartphone users to quickly access the weather information and alerts available on the dosts project noAh website. pldt group csr r e p o r t BRIDGE DURING DISASTERS in november 2012, pldt together with smart, sun, and PLDT-Smart Foundation (PSF) joined hands with affliated companies under the Metro Pacifc Investment Corporation to form Tulong Kapatid, the consolidated disaster preparedness and response effort of the group. The newly-established consortium faced its frst major test just a month later, when Typhoon Pablo slammed into mindanao, which caused massive death and destruction in an area of the country that hardly ever experienced such weather disturbances. under the banner of Tulong Kapatid, tV5 staged a telethon that raised over php100 million in contributions for relief and post-disaster rehabilitation efforts in the provinces of davao oriental and compostela Valley, which had borne the brunt of Typhoon Pablo. using these resources, pldt, smart, tV5 and meralco delivered food, water, and relief goods to affected communities in the two provinces. maynilad deployed a mobile water purifer to produce potable water. Meralco dispatched 38 linemen to help restore power in davao oriental. smart set up Libreng Tawag or free call stations to enable typhoon victims to call their families for assistance. smart engineers also worked double time to restore damaged cell towers. in collaboration with Telecoms Sans Frontieres and Vodafone Foundation, smart set up an instant cellsite in Banganga and cateel, davao oriental using equipment that ft into four suit cases. This facility provided vital communications support for government and international relief agencies at the frontlines. GUIDED BY THE VIEW THAT BUSINESS MUST HAVE A SOCIAL PURPOSE, THE PLDT GROUP TOOK ON VARIOUS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES TO HELP OUR PEOPLE IMPROVE THEIR LIVES THROUGH DISASTER PREPAREDNESS AND RESPONSE, SUSTAINABLE LIVELIHOOD, ENVIRONMENTAL PROTECTION, DIGITAL LITERACY, BETTER QUALITY EDUCATION, AND HEALTHCARE. FOR US, IT IS ESSENTIAL THAT BUSINESSES TAKE ON A SOCIAL DIMENSION WERE REALLY HERE BECAUSE WE WANT TO I MPROVE LI VES, PLDT CHAI RMAN MANUEL V. PANGI LI NAN SAI D. FIBER TO THE COMMUNITY MORE THAN JUST BRIDGING PEOPLE, PLDT HAS BEEN COMMITTED IN EMPOWERING LOCAL COMMUNITIES WITH TECHNOLOGY AND INFORMATION TOOLS FOR DEVELOPMENT IN LINE WITH THE COMPANYS GOAL TOWARDS NATION-BUILDING. 3_PLDTar12 _rev.indd 21 5/9/13 9:23 PM 22 PhiliPPine long distance telePhone comPany Creating livelihood, Caring for the environment Pldts initiatives to preserve the environment and improve the peoples quality of life have also produced other benefts such as new sources of livelihood. at the center for Rural technology and development of the Philippine Business for social Progress (PBsP), some of the 80 members of farmer organization Kanlungan received a training on vermi-compost production with the assistance of Pldt. aside from being a source of income, the vermi- compost production promotes solid waste management and provides farmers with low-cost organic fertilizers. to limit the use of plastic bags and promote the so-called eco-bags, Pldt donated four high-speed sewing machines to KILOS, a womens organization in gumian, infanta, Quezon. the sewing machines were used to recycle plastic bags sold cheaply at the community market in the province. the vermi-compost and eco-bag projects were supported by the local government of infanta through the municipal Environment Natural Resources Offce. In the case of the fve year-old PLDT TELEpuno project, the objective was to rehabilitate the infanta-Real Watershed Forest Reserve in the boundaries of infanta and Real in Quezon province by planting trees in the area. But a collateral effect was an alternative livelihood project for its partner communities within the watershed forest reserve in cooperation with PBsP. on July 14, 2012, in time for mVPs birthday celebration, Pldt launched the 66K m.V.P. (movement for Volunteerism and Partnership) trees project aimed at planting 66,000 trees until July 14, 2013. Under Peoples lives depend on trees environmental greening project, other mVP-led companies participated in the areas of Benguet, Pampanga, Bulacan, marikina, iloilo, cebu and davao. In late 2012, PLDT constructed a fsh nursery and provided 5,500 fries to the Samahan ng Magbubukid at Mangingisda sa Barangay Cawayan, a farmer organization that served as a partner in the fsh production project. smart continued to spearhead the marikina Watershed initiative, a broad-based multi-sectoral cooperation initiated by the Philippine disaster Recovery Foundation (PdRF) that seeks to help save and restore the marikina Watershed. the denuded state of the marikina Watershed had contributed to the massive fooding in Metro Manila during Typhoon ondoy in late 2009. in 2012, smart conducted reforestation activities and various projects as part of a comprehensive rehabilitation program for the vital watershed. another major csR initiative in 2012 for Pldt was its support for the Philippine international River summit in iloilo city. co-presented by Pldt and smart, the summit drew participants from various countries including canada, czech Republic, and indonesia to discuss ways of saving vital waterways from pollution. the holding of the summit complemented the ongoing projects of smart and sun Cellular to develop a food monitoring and water system in 18 of the countrys major river basins, including Iloilo, under Project noah. smart also partnered with Gawad Kalinga (GK) in providing sustainable livelihood for its community in sooc, iloilo by upcycling tarpaulins used for smarts merchandising Top: PLDT launched its 66K M.V.P. Trees Movement for volunteerism and partnership that aims to plant 66,000 trees for a year up to July 14, 2013. The areas covered by the project are Benguet, Pampanga, Bulacan, Marikina, Iloilo, Cebu, and Davao. Left: KILOS, another partner womens organization with 30 members, from Barangay Gumian, Infanta, Quezon, was provided with four high-speed electric sewing machines as a support to their Eco-Bag Project. Besides giving alternative income to the members, the project also supports the No Plastic-Use Policy of Infanta, Quezon, providing reused and recycled bag materials sold cheaply at the community market. 66,000 trees being planted 3_PLDTar12 _rev.indd 22 5/9/13 12:55 PM 2012 annUal RePoRt 23 activities. called Project Zero, GK residents were trained in designing, creating and marketing handcrafted high- value designer bags through the help of fashion designer PJ aranador. a follow-up project Silya is also preparing gK communities to expand their tarpaulin upcycling business to include furniture and other accessories. Pldt, meanwhile, donated sewing machines to the gK community to support livelihood projects. in partnership with PBsP and motolite, Pldt donated used lead-acid batteries (UlaBs) for recycling. the Balik Baterya program made possible the proper disposal of hazardous waste from the batteries while generating funds through the production of new automotive and industrial batteries. since the program began in 2006, Pldt has donated 964 tons of UlaBs worth Php20.12 million, making it the biggest contributor of the program. in 2012, Pldt donated 144 tons of UlaBs amounting to Php3.12 million. the funds generated by the program that year funded the reforestation of 13 hectares of the montalban-Wawa sub-Watersheds in Rizal province and helped build classrooms for Bangkerohan and nenita elementary schools in northern samar. other livelihood programs were the training in micro businesses given such as sale of Pldt-smart cards, soap making, and personal grooming services for poor communities in muntinlupa and malabon through the catmon elementary school Parents and teachers association, and Quezon typhoon victims. Pldt also donated old directories to be used in making baskets, decors and gift items by women inmates in camp Karingal and Quezon city jails. leading in digital literaCy the Pldt managers club, inc. (mci) in partnership with PsF expanded its Gabay Guro program by providing scholarships to over 500 public school teachers in state universities and colleges all over the country. it is now gearing up to broaden its support for public school teachers by collaborating with local governments and over 30 partner state colleges and universities in different parts of the country. Gabay Guro hopes to eventually assist fve teacher scholars per year per province. in a grand celebration in november 2012, some 15,000 teachers were treated to a day of festivities and entertainment where a public school teacher from cavite was honored as teacher of the year and another educator from makati won a house and lot in the grand raffe sponsored by Vista Land. to promote digital education in the Philippines, Pldt provided training to 1,000 teachers and students through its infoteach in collaboration with the department of education (deped), intel Philippines, Philippine community ecenter network and the UPoU. extending its reach to include marikina, tondo, isabela, legaspi, cebu, iloilo, Bacolod, general santos, davao, and Zamboanga, infoteach offered its top teacher graduates scholarships to pursue advanced courses in UPoU. Pldt also donated computer units and facilitated internet access for the establishment of a community e-center. this was in support of the elearning Ville Program, a multi- sectoral program seeking to create a learning hub through technology. Under the Philippine digital literacy for Women campaign, Pldt mobilized the resources needed to train Left: Project Zero, a project launched by Smart and its GK partners, is an upcycling project that trains GK residents to design, create and market handcrafted designer bags. Lower left: Benefciaries of GabayGuro one of PLDT-Smart Foundations landmark programs are all smiles as they listen to a tribute to the societys unsung heroes. The Gabay Guro seeks to enhance education in the country through scholarship grants and English profciency and computer literacy training programs for teachers. Lower right: PLDT, together with Smart, recently co-presented the frst-ever Philippine International River Summit in Iloilo City. A well-attended three-day summit which Philippine President Benigno Aquino III graced, it discussed the important environmental issues of the country and the current state of its rivers. This signifcant endeavor was made possible through the support of both telco giants. 3_PLDTar12 _rev.indd 23 5/9/13 12:55 PM 24 PhiliPPine long distance telePhone comPany 10,000 women in grassroots communities. this activity was also in partnership with UPoU, Philippine community ecenter network, and intel Philippines. For its teachers development Program, Pldt donated computers to 44 public schools in Quezon province. the program in partnership with UPoU, deped and the Quezon province local government aims to upgrade teachers skills and knowledge of science, math and language through enrolment at UPoU. Pldt also donated a two-story building with six classrooms and a computer laboratory at catmon elementary school in Malabon that benefted 827 students. The program dubbed Paaralang Laan sa Dunong at Talino was in partnership with PBsP. as part of the Balik Eskwela program, Pldt also donated paint and school supplies and helped in the cleaning and gardening of Putatan elementary school in muntinlupa, catmon elementary school in malabon, and luyang elementary school in cebu. Promoting innovation in eduCation and arts Working with PsF, smart has strengthened its partnership with the central Visayan institute Foundation (cViF) to promote the dynamic learning Program (dlP), a teaching method proven to signifcantly improve student performance despite the lack of qualifed teachers, textbooks, and facilities. smart and PsF assisted cViF in bringing dlP to three more deped school divisions in sagay city, negros oriental, Basilan, and lamitan, Basilan in addition to cagayan de oro, which adopted dlP in 2011. to make it easier to propagate dlP, smart created several videos from three minutes to over an hour long for use as introductory materials for the program. smart also reoriented two of its major education programs: the sWeeP for colleges and universities offering electronics engineering courses and the smart schools Program for public high schools. sWeePs annual excellence and innovation competition was expanded to include mobile applications which have grown in importance because of the soaring popularity of smartphones. more importantly, winners of the sWeeP awards are being given the the opportunity to develop their innovations into commercial services. For example, sWeeP winners are being assisted to join the national competition of the ideaspace Foundation to select tech startups that will be given funding, logistics, legal and mentoring support. Providing aspiring artists the opportunity to turn trash into one-of-a-kind works of art, Pldt conducted the Sining Buhay Para sa Kalikasan a collage art-making workshop using recyclable materials in partnership with earth day network Philippines (EDNP), participated in by 85 young budding artists from cRiBs Foundation, Persons with disability - Valenzuela, las Pias, makati, and Quezon city chapters, and smokey mountains Sandiwaan learning center. as for the smart schools Program, smart shifted emphasis to online content generation under the principle of learning by doing. in 2012, smart expanded its program of promoting online content development through the Doon Po Sa Amin program, a crowd-sourcing that collects local stories from various places in the country. Building a healthy nation in partnership with the Philippine childrens medical center (Pcmc) and the Philippine national Red cross, Pldt launched Dugong Alay, Katumbas ay Buhay Bloodletting Program that mobilized employees to donate blood. during 2003-2012, the number of blood donors reached 1,270, benefting poor cancer patients from PCMC and as well as Pldt and smart employees and their relatives. to promote good nutrition among the poorer families in urban communities and in calamity areas, Pldt held feeding programs in eight areas: cebu city, iloilo city, Zamboanga, laguna, Pampanga, Quezon city, cotabato and Bacolod city. For operation smiles 30th anniversary, smart supported the international ngos medical and surgical missions for children born with cleft lip or palate. in addition to the companys fnancial, connectivity and technical support, smart also encouraged its subscribers to raise funds for operation smile through a christmas campaign promoting its text-to-donate facility. Pldt also continued to provide free medical and dental services as well as free medicines to victims of calamities, poor communities and indigenous groups. 1,270 blOOd dOnOrs 1,000 teachers & students trained thrOugh infOteach 44 public schOOls partnered fOr teacher develOpment prOgram 964 tOns Of ulabs dOnated tO-date 3_PLDTar12 _rev.indd 24 5/9/13 12:56 PM 2012 annUal RePoRt 25 Lower left: For Operation Smiles 30th Anniversary, Smart entered into an agreement with the international NGO with roots in the Philippines to support medical and surgical missions for children born with cleft lip or palate. In addition to the Companys fnancial, connectivity and technical support (through the mobile app), Smart also encouraged its subscribers to raise funds for Operation Smile through a Christmas campaign promoting its Text-to-Donate facility. Upper right: PLDT, in partnership with EDNP, held a collage art-making workshop using recyclable materials. The one-day workshop dubbed Sining Buhay Para sa Kalikasan provided young aspiring artists from CRIBS Foundation, Persons with Disability Valenzuela, Las Pias, Makati and Quezon City chapters, and Smokey Mountains Sandiwaan Learning Center an opportunity to turn trash into one-of-a-kind works of art. Middle: PLDT employees continuously support the Companys Dugong Alay, Katumbas ay Buhay bloodletting program. Upper left: Also part of MVPs 66th birthday celebration were the granting of Php3.5 million to MVP-chaired Kapampangan Development Foundation (KDF) from MVP himself and PSF for the Pampanga midwives birthing clinics, KDFs donation of wheelchairs, walkers and prosthetics to underprivileged recipients. Lower right: Sun Cellular also provides Libreng Tawag to disaster victims in calling their relatives free of charge. 3_PLDTar12 _rev.indd 25 5/9/13 12:57 PM pldt remains committed to the highest standards of corporate governance as articulated in our Articles of Incorporation, By- laws, manual on corporate governance (cg manual), code of Business conduct and ethics (code of ethics), and pertinent laws, rules and regulations. As a publicly-listed Philippine corporation, pldt is covered by corporate governance rules and regulations of the philippine securities and exchange commission (philippine sec) and the philippine stock exchange (pse). At the same time, pldt has voluntarily complied with the corporate governance standards of the united states since its American depositary shares are listed and traded in the new york stock exchange (nyse). pldt as an associated company of First Pacifc Company Ltd. (First Pacifc), which is listed in the hong Kong stock exchange (hKse), also looks to the corporate governance standards of hong Kong for guidance and benchmarking purposes. By committing to high standards of corporate governance, pldt accepts the challenge of the demanding regulatory environment in which it fnds itself in.
pldt also knows that beyond the boundaries of regulations and compliance lie palpable gains and benefts for companies that sincerely place emphasis on corporate governance, and seek to establish corporate cultures anchored on the values of accountability, integrity, fairness and transparency. pldt requires loyalty to these values in order to animate and inspire its governance policies, processes and practices, as these are rightfully indispensable in creating value for its shareholders, fulflling obligations to stakeholders and serving the ends of good business judgment and sustained proftability. our structures Board of Directors Working and serving pursuant to the mandate given by the companys shareholders, our Board has the principal responsibility of planning, directing, monitoring and improving our governance policies, processes and practices. our Board has the task of navigating the company through its toughest challenges while remaining true to our values. under the stewardship of the Board, pldt commits to maintain the highest standards of governance and demands the utmost in performance and results from its personnel for the beneft of all its shareholders and stakeholders. Board Structure and Composition At the end of 2012, our Board had 12 qualifed and competent members, each highly regarded in their respective felds and/ or industry, who bring together complementary skills and expertise, and the requisite independence, probity and diligence in the exercise of their fduciary duties. Our Board had three independent directors in Rev. Fr. Bienvenido F. nebres, s.J., 1 mr. pedro e. Roxas and mr. Alfred V. ty who were selected on the basis of specifc independence criteria set out under applicable laws and rules, in our By-Laws and in our CG Manual. Our CG Manual defnes an independent director as a person who is independent of management and who, apart from his fees and shareholdings, is free from any business or other relationship with the company which could or reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director of the company. More specifc independence criteria are enumerated in Annex A of our cg manual. r e p o r t corporate governance The PLDT Manual on Corporate Governance provides for the following as regards the Board of Directors: thecompositionoftheBoardaswellasthequalifcationsand groundsfordisqualifcationfordirectorship; therequirementthatatleast20%ofthemembershipofthe BoardofDirectors,andinnocaselessthantwomembers, mustbeindependentdirectorsandthestandards/criteriafor thedeterminationofindependentdirectors; thedutiesandresponsibilitiesoftheBoardandtheindividual directors; themannerofconductofBoardmeetingsincludingthe requirementtohaveanindependentdirectorpresentinevery meetingtopromotetransparencyandtheneedtohave anexecutivesessionfornon-executiveandindependent directors; theestablishmentofboardcommittees,specifcally,the AuditCommittee,ExecutiveCompensationCommittee andGovernanceandNominationCommitteeincludingthe compositionandtheprincipaldutiesandresponsibilitiesof suchcommittees,aswellastherequirementforeachBoard Committeetohaveitsowncharter;and theroleoftheChairmanastheleaderoftheBoardandasthe primemoverinensuringcompliancewith,andtheperformance of,corporategovernancepoliciesandpractices. 1 Rev. Fr. Bienvenido F. Nebres, S.J. resigned from the Board of Directors on September 25, 2012. 3_PLDTar12 _rev.indd 26 5/9/13 9:24 PM 26 philippine long distAnce telephone compAny 2012 annUal RePoRt 27 only three members of our Board are, at the same time, executives of the company. the rest of the members are non- executive directors of which three are independent directors. our directors do not receive any form of compensation such as stock options, performance incentives and bonuses from the company for their services. they are, however, entitled to a reasonable per diem for attendance in Board and Board committee meetings. the position of chairman of the Board is separate from that of the Chief Executive Offcer (CEO). PLDT Chairman Manuel V. Pangilinan and Pldt President and ceo napoleon l. nazareno nonetheless share the responsibility of elevating good corporate governance and principled performance to a high strategic priority for the Company. This also refects the Companys desire to adhere to best practices and its recognition of the benefts that such a separation of the said positions bring. board responsibilities at the start of the service of a new director, the chairman, chief Financial Offcer, Corporate Secretary and Chief Governance Offcer give a newly appointed director a briefng on the companys structure, business and the responsibilities of the Board and its committees and how each operates. the new director is also furnished with copies of all relevant information about the company and policies applicable to the directors, including the companys articles, By-laws, annual Report, cg manual, code of ethics, and the charters of the Board committees. Updates on business and governance policies and requirements principally from the Philippine sec, Pse, United states securities and exchange commission (U.s. sec) and nyse, and new laws applicable or relevant to the company and its business, particularly on fnancial reporting and disclosures and corporate governance, are presented in Board meetings or furnished to the directors. our cg manual assures that our directors, both new and currently serving, have access to independent professional advice, at the companys expense, as well as access to management as they may deem necessary to carry out their duties. Pldt holds annual corporate governance enhancement sessions for its directors which provide an opportunity for our leadership to interact with international experts and keep abreast with global developments and best practices in corporate governance and ethics. the governance and nomination committee (gnc) recommends the content and speakers for these sessions. all of the current directors have undergone corporate governance orientation and a majority of the Board has attended at least one of the six corporate governance enhancement sessions organized since 2007. Our directors are also updated on the latest technology trends and developments that have an impact on the companys strategy through technology briefngs organized by the Technology strategy committee (tsc). to perform its mandate, our Board holds monthly meetings, the schedule of which is determined at the beginning of the year. at least one meeting is devoted to discussions with senior management on the strategic plans and budget, and the enterprise risk report prepared by senior management through the group enterprise Risk management department, which has the responsibility to promulgate, encourage and practice an integrated risk management framework for the organization, focusing on ensuring that critical risks are identifed, evaluated, treated and monitored across all functions and units within the Pldt group. once every quarter, our Board reviews the quarterly fnancial reports. Our Board also periodically reviews reports of Board committees, business operations updates from the heads of our three business segments and network and technology strategic plans. our Board is committed to ensure the continuity of executive leadership as a critical factor in sustaining the success of the Pldt group. to this end, a succession planning process referred to as leadership succession Planning and development has been established. this enterprise-wide process covers senior management positions, including the President and CEO. Refecting the signifcance that the Chairman of the Board of directors attaches to succession planning, the First Pacifc Leadership Academy was reorganized to facilitate the succession planning process within the Pldt group and other companies affliated with First Pacifc. The Boards involvement in leadership succession Planning and development is performed through its executive compensation committee (ecc), which reviews and updates the criteria for employment and promotion, as well as any training and development plans for senior management, keeps track of their performance and development, and reviews their potential career paths. in 2012, our Board held 15 meetings. the chairman of the Board, the President and CEO, and fve other directors attended all Board meetings. at least one independent director was present in all the meetings. the chairman of the audit committee 2 was present in the annual stockholders meeting as well as in the special stockholders meeting on march 22. except for one director, all of the other directors each attended more than 75% of the meetings. The total amount of per diem provided for the Board of directors in 2012 was Php28.6 million 3 . 2 Rev. Fr. Bienvenido F. Nebres, S.J. was the chairman of the Audit Committee at the time that these two stockholders meetings were held. 3 Per diem for each director is Php 200,000 per meeting. 3_PLDTar12 _rev.indd 27 5/9/13 12:59 PM 28 PhiliPPine long distance telePhone comPany Name of Director Jan 9 ** Jan 31 Mar 6 Mar 22 ** Mar 22 *** May 8 Jun 14 Jun 14 **** Jun 14 ***** Jul 3 Aug 7 Sept 25 Oct 12 ** Nov 6 Dec 4 Totals %age Manuel V. Pangilinan 15/15 100% Napoleon L. Nazareno 15/15 100% Helen Y. Dee X X X X 11/15 73.3% Ray C. Espinosa 15/15 100% James L. Go 15/15 100% Setsuya Kimura 15/15 100% Bienvenido F. Nebres, S.J.* - - - - 11/11 100% Hideaki Ozaki X 14/15 93.3% Ma. Lourdes C. Rausa-Chan 15/15 100% Pedro E. Roxas* X 14/15 93.3% Juan B. Santos X 14/15 93.3% Tony Tan Caktiong X X X 12/15 80.0% Alfred V. Ty* X X 13/15 86.7% * Independent Director ** Special Board Meeting *** Special Stockholders Meeting **** Annual Meeting of Stockholders ***** Organizational Meeting of the Board BOARD OF DIRECTORS 2012 MEETINGS ATTENDANCE PERFORMANCE 3_PLDTar12 _rev.indd 28 5/9/13 9:27 PM 2012 annual RePoRt 29 Jan 9 * Jan 31 Mar 6 Mar 22 * Mar 22 ** May 8 Jun 14 Jun 14 *** Jun 14 **** Jul 5 Aug 7 Sept 25 Oct 12 * Nov 6 Dec 4 Total Artemio V. Panganiban 15/15 Oscar S. Reyes 15/15 Roberto R. Romulo x x 13/15 Benny S. Santoso x x 13/15 Washington Z. SyCip x x x x x x 9/15 Orlando B. Vea 15/15 Christopher H. Young x 14/15 Board Committees Advisory Committee our Board is ably assisted by an advisory committee. the diversity of the expertise, knowledge and experience of these advisors serves to complement that of the Board. the advisory committee provides guidance and suggestions, as necessary, on matters deliberated upon during Board meetings. the total per diem given to the members of the advisory committee in 2012 was Php15.8 million 4 . to assist in the performance of the Boards responsibilities and aid in ensuring compliance with the principles of good corporate governance, our Board is supported by four standing committees namely, the audit committee, the governance and nomination committee, the executive compensation committee, and the Technology Strategy Committee, whose specifc responsibilities and functions are set forth in their respective written charters. Audit Committee The integrity of the Companys accounting and fnancial reporting principles and policies, and system of internal controls, including the integrity of the Companys fnancial statements and the independent audit thereof are essential components of Pldts corporate governance, and are matters within the Boards oversight responsibilities. the audit committee assists the Board in this key task and provides support to the Board in discharging its oversight responsibilities over the companys compliance with legal and regulatory requirements, its assessment and management of enterprise risks, its audit process, and the performance of the companys internal audit organization and external auditor (including the external auditors qualifcations and independence). The Audit Committee is composed of three independent directors 5 , and four advisors. Each Audit Committee member is fnancially literate and one of the advisors is a certifed public accountant with fnancial management expertise. the charter of the audit committee may be viewed and downloaded from the Pldt website through the following link: http://www.pldt.com.ph/about/management/Documents/ Audit%20Committee%20Charter.pdf the audit committees activities in 2012 with respect to our external auditor, SyCip, Gorres, Velayo & Co. (SGV & Co.), included discussions on sgV & co.s report on the results of the integrated audit of PLDTs and its subsidiaries 2011 fnancial statements prepared in accordance with the Philippine Financial Reporting Standards (PFRS) and International Financial Reporting Standards (IFRS) and the internal controls over fnancial reporting (ICFR), as well as the results of internal and external quality reviews required of sgV & co. also discussed were sgV & co.s required communications to the audit committee, as well as their independence from Pldt, within the meaning of the securities act of the Philippine sec and us sec. the audit committee also reviewed and approved the following: SGV & Co.s engagements in International Standard on Assurance Engagements (ISAE) No. 3402, Assurance Reports on controls at a service organization, type B service audit of ePldts Vitro data center, as required by the latters customer, Accenture, and fnancial statements audit of Connectivity Unlimited Resource Enterprise (CURE) as of and for the period ended June 30, 2012, in connection with ntcs requirements relating to the divestment plan for cuRe as committed by Pldt in its acquisition of digital telecommunications Phils., inc.; engagement of e&y australia to perform consulting service regarding support on customer needs-Based segmentation Project for smart, and the engagement of e&y singapore to perform tax services for smarts subsidiaries; and Engagement of Pricewaterhouse Coopers (PwC) member frm, Isla Lipana & Co., to perform Business Process alignment Project, and provide manpower services for Sarbanes-Oxley Act Section 404 (SOX 404) Compliance Process documentation for digitel mobile Phils., inc. * Special Board Meeting. ** Special Stockholders Meeting. ***Annual Meeting of Stockholders. **** Organizational Meeting of the Board. 4 Per diem for each advisory board member is Php200,000 per meeting. 5 With the resignation of Rev. Fr. Bienvenido F. Nebres, S.J., on September 25, 2012, the Audit Committees voting members have been momentarily reduced to two independent directors. ADVISORY COMMITTEE 2012 MEETINGS ATTENDANCE PERFORMANCE 3_PLDTar12 _rev.indd 29 5/9/13 9:27 PM 30 PhiliPPine long distance telePhone comPany the audit committee conducted an evaluation of sgV & co.s performance for 2011, resolved to re-appoint sgV & co. as Pldts external auditors for the year 2012, and reviewed SGV & Co.s integrated plan for the audit of the 2012 fnancial statements and review of icFR of Pldt and its subsidiaries. as regards the internal auditor, the audit committee reviewed, noted or approved the internal audit and Fraud Risk management group (iaFRmg)s performance report for the year 2011, the internal audit Plan for 2012 (original and updated) and its alignment with business risks, iaFRmg heads statement of compliance with the international standards for the Professional Practice of internal auditing (isPPia), and required confrmation of the organizational independence of the Internal audit organization, and resolved to retain the existing Pldt internal audit charter. the audit committee also discussed the internal audits report on Pldt groups soX 404 compliance managements overall assessment and conclusions as of december 31, 2011, the periodic status reports submitted by internal audit regarding Pldt groups soX 404 readiness and compliance as of year-end 2011 and as of year-end 2012, and the major internal audit and fraud risk management activities and accomplishments, including the internal audit organizational updates. With regard to fnancial reporting and controls, the Audit Committee, together with PLDT Finance offcers and SGV & Co., conducted a review of PLDTs audited fnancial statements for 2011 prepared in accordance with PFRS and IFRS, and the fnal results and report of sgV & co. on its integrated audit of 2011 PFRs and iFRs fnancial statements and ICFR. The Audit Committee reviewed and approved the PLDT Groups 2011 Annual Report on Form 17-A and Form 20-F for Philippine and US SEC fling, respectively. It also reviewed and discussed with Finance offcers, PLDTs unaudited consolidated fnancial results and reports for the three months ended march 31, 2012, the six months ended June 30, 2012 and the nine months ended september 30, 2012. With regard to governance, general internal controls and risk management, the audit committee reviewed and approved the 2011 Pldt audit committee Report for inclusion in the annual Report and conducted a self-evaluation of the audit committees performance for the year 2011. it reviewed and discussed with the corporate secretary, chief legal counsel and chief Governance Offcer the status of the Companys compliance with regulations and applicable laws and updates on signifcant legal matters, the periodic status reports on whistleblowing complaints received by Corporate Governance Offce (CGO), as well as cgos report on the statistics and effectiveness of, and identifed system improvements to the existing Whistleblowing Policy and Procedure. the audit committee also discussed with the President and ceo the Pldt groups top enterprise risks from the ceos perspective, and the corresponding mitigation measures to address these key enterprise risks, and reviewed the Group Enterprise Risk Management Offcers periodic status reports on the Pldt groups enterprise risk management activities. discussions with relevant Pldt business and operational unit heads were also conducted on the following matters: updates on Information Technology (IT) Group transformation and directions; major hR-related risks and the corresponding measures taken to address such risks; updates on service delivery process, quality of service, and actions taken on outstanding audit issues; updates on relevant tax rulings; and updates on results of customer experience surveys and related activities. the audit committee likewise reviewed and approved the Pldt Disclosure on SEC Form 17-C in connection with the Philippine sec memorandum no. 4-2012, sec guidelines in the Performance assessment of audit committees, reviewed and resolved to retain the existing Pldt audit committee charter, reviewed and approved the Pldt audit committees semi- annual reports of activities during 2012 and issued periodic written updates to the Audit Committee of First Pacifc regarding signifcant items discussed during PLDT Audit Committee meetings in 2012. the audit committee had nine meetings for the year 2012 and a total of Php4.20 million was paid as per diem to its members and advisors who attended the meetings 6 . 6 Php75,000 for each meeting attended. 3_PLDTar12 _rev.indd 30 5/9/13 1:01 PM 2012 annUal RePoRt 31 Governance and Nomination Committee the gnc oversees the development and implementation of corporate governance principles and policies as part of its governance function. it also provides assistance to the Board in making an assessment of the Boards effectiveness in the process of replacing or appointing new members of the Board and/or Board Committees, and in developing and implementing the Boards performance evaluation process. as part of its nomination function, it reviews and evaluates the qualifcations of the persons nominated to the Board as well as those nominated to other positions requiring appointment by the Board. In addition to this, it identifes persons potentially qualifed to become members of the Board and/or the Board committees. The GNC is composed of fve voting members, three of whom are independent directors and the other two are non-executive directors 7 . the gnc also has three non-voting members composed of an independent member of the advisory committee, the human Resources group head and the chief Governance Offcer of the Company. The Charter of the GNC may be accessed and downloaded from the Pldt website through the following link: http://www.pldt.com.ph/about/management/Documents/ Governance%20and%20Nomination%20Committee%20 Charter.pdf In 2012, the GNC screened and identifed nominees for election as directors/independent directors at the PLDT annual stockholders meeting. It also reviewed the list and qualifcations of PLDT offcers for re-appointment at the organizational meeting of the Board of directors. in the performance of its governance function, the gnc discussed and evaluated the results of the Board assessment for 2011 and the GNC Evaluation/Self-Assessment. The consolidated results of the Board assessment, along with the recommended actions, the gnc self-assessment results and Report on activities for 2011 were submitted to and noted by the Board. the gnc also reviewed and monitored the status of whistleblowing reports, disclosures to regulators, updates on regulatory developments and other reports of the cgo. it had an opportunity to hear from the corporate governance offcers from PLDT subsidiaries and affliates about the adoption and implementation of, and innovations in, corporate governance practices by these companies. the gnc also received and discussed reports pertaining to results of corporate governance ratings from domestic and international rating agencies. the gnc guided the development of Pldts guidelines on Related Party transactions which was issued on may 24, 2012 as Administrative Order No. 2137-12. The GNC also discussed Pldts general Practice (gP) no. gP-12-002 on stakeholder engagement that was issued on may 16, 2012, which embodies the companys modes of engagement with various stakeholders, including customers, shareholders/investment community, employees, suppliers, government/regulators, media, industry and communities. the gP on stakeholder engagement is in line with Pldts commitment to deal with stakeholders in accordance with its core business principles of integrity, transparency, fairness, and accountability. Finally, the gnc continues to support efforts at ethical culture building in the company and it took a direct hand in the determination of content and selection of the speaker for the CG Enhancement Sessions for Directors and Offcers for 2012, and selecting themes and designs for internal communication materials for 2013. the gnc held three meetings in 2012 and a total of Php1.65 million was paid as per diem to its members who attended the meetings 8 . Jan 30 Mar 5 Mar 22 May 7 Jun 14 Aug 6 Sept 25 Nov 6 Dec 4 Totals ac members BienvenidoF.Nebres (Chairman)* 1 x 6/7 PedroE.Roxas* 9/9 AlfredV.Ty* x x 7/9 ac advisors CorazonS.DelaPaz- Bernardo 2 9/9 RobertoR.Romulo x x 7/9 JamesL.Go 9/9 SetsuyaKimura 9/9 * Independent Director. 1 Resigned effective September 25, 2012. 2 Member with accounting and fnancial expertise. 7 With the resignation of Rev. Fr. Bienvenido F. Nebres, S.J., on September 25, 2012, the GNCs voting members temporarily consist of two independent directors and two non-executive directors. 8 Php 75,000 per meeting attended. AuDIT COMMITTEE 2012 MEETINGS ATTENDANCE PERFORMANCE 3_PLDTar12 _rev.indd 31 5/9/13 1:02 PM 32 PhiliPPine long distance telePhone comPany Mar 22 July 27 Oct 24 Totals voting members ManuelV.Pangilinan (Chairman) 3/3 PedroE.Roxas* 3/3 AlfredV.Ty* x 2/3 BienvenidoF.Nebres,S.J.* 1 - 2/2 SetsuyaKimura 3/3 non-voting members ArtemioV.Panganiban 3/3 MenardoG.Jimenez,Jr. 3/3 Ma.LourdesC.Rausa-Chan 3/3 * Independent Director. * Resigned effective September 25, 2012. Executive Compensation Committee the ecc provides guidance and assistance to the Board with respect to the development of a compensation philosophy consistent with the culture, strategy and control environment of the company. it also oversees the development and administration of the companys executive compensation programs and assists the Board in the areas of performance evaluation, succession planning and the professional development programs for offcers. The ECC is composed of fve voting members, three of whom are independent directors, and the other two are non-executive directors 9 . the ecc also has one non-voting member, who is the head of the human Resources group of the company. the charter of the ecc may be viewed and downloaded from the Pldt website through the following link: http://www.pldt.com.ph/about/management/Documents/ Executive%20Compensation%20Committee%20Charter.pdf in 2012, the ecc discussed and approved the discretionary pay for offcers and executives for 2011 performance (in lieu of the 2011 variable pay), the 2012 variable pay targets and the corresponding variable pay payout levels, and the cancellation of the 2010-2012 long-term incentive Plan (ltiP). a discretionary payout was instead approved and paid in 2012. the ecc also discussed and approved the continuation of the 2010-2012 ltiP of Pldt subsidiary sPi and to revisit the 2010-2012 ltiP of ePldt and Pldt global corporation (Pldt global). Finally, the ecc discussed and approved the presentation of the new 2012-2014 ltiP to the Board for the latters approval and the 2012 merit increase for offcers and executives. the ecc held two meetings in 2012 and a total of Php0.83 million was paid as per diem to its members who attended the said meetings 10 . Mar 5 Oct 3 Totals voting members ManuelV.Pangilinan (Chairman) 2/2 BienvenidoF.Nebres,S.J.* 1 - 1/1 PedroE.Roxas* 2/2 AlfredV.Ty* 2/2 SetsuyaKimura 2/2 non-voting member MenardoG.Jimenez,Jr. 2/2 * Independent Director. 1 Resigned effective September 25, 2012. Technology Strategy Committee the tsc assists the Board in reviewing and approving the strategic vision for the role of technology in the companys overall business strategy, fulflling its oversight responsibilities for the companys effective execution of its technology-related strategies, and ensuring the optimized use and contribution of technology to the companys strategic objectives and growth targets. the tsc is composed of six voting members and one non-voting member. Under the charter of the tsc, at least one member of the tsc must have at least a general knowledge or understanding of the technologies relevant to the companys line of business. a copy of the charter of the tsc may be viewed and downloaded from the Pldt website through the following link: http://www.pldt.com.ph/about/management/Documents/ Technology%20Strategy%20Committee%20Charter.pdf The TSC had two meetings in 2012. The frst meeting was on prospects and plans regarding 3g and long-term evolution (or 4g) technologies, over the top Providers (ottP), location- based services and cloud computing. in the second meeting, the tsc discussed updates on the Pldt technology Roadmap and the Pldt groups cloud deployment. the gains from synergies with digitel and sun cellular were also discussed in the second meeting. a total of Php1.05 million was given as per diem to its members who attended the meetings 11 . 9 With the resignation of Rev. Fr. Bienvenido F. Nebres, S.J. on September 25, 2012, the ECCs voting members temporarily consist of two independent directors and two non-executive directors. 10 Php75,000 per meeting attended. 11 Php75,000 per meeting attended. GOVERNANCE AND NOMINATION COMMITTEE 2012 MEETINGS ATTENDANCE PERFORMANCE EXECuTIVE COMPENSATION COMMITTEE 2012 MEETINGS ATTENDANCE PERFORMANCE 3_PLDTar12 _rev.indd 32 5/9/13 1:02 PM 2012 annUal RePoRt 33 Aug 6 Oct 23 Totals voting members ManuelV.Pangilinan (Chairman) 2/2 NapoleonL.Nazareno 2/2 RayC.Espinosa 2/2 SetsuyaKimura 2/2 OscarS.Reyes 2/2 JamesL.Go 2/2 non-voting member OrlandoB.Vea 2/2 executive implementation our Board exercises oversight on management in accordance with the standards set forth in our cg manual. President and Chief Executive Offcer the President and ceo provides leadership for management in developing and implementing business strategies, plans and budgets. he ensures that the business and affairs of the company are managed in a sound and prudent manner and that operational, fnancial and internal controls are adequate and effective to ensure reliability and integrity of fnancial and operational information, effectiveness and effciency of operations, safeguarding of assets and compliance with laws, rules, regulations and contracts. the President and ceo, with the assistance of the rest of Pldts management, also has the responsibility to provide the Board with a balanced, understandable and accurate account of the companys performance, fnancial condition, results of operations and prospects, on a regular basis. Internal Audit Organization
Pldt has an internal audit organization that determines whether our structure of risk management, control and governance processes, as designed and represented by management, are adequate and functioning to ensure that: 1. Risks are appropriately identifed, managed and/or reported; 2. Signifcant fnancial, managerial and operating information are accurate, reliable and timely; 3. employees actions are in compliance with policies, standards, procedures, and applicable laws and regulations; 4. Resources are acquired economically, used effciently and adequately protected; 5. Programs, plans and objectives are achieved; 6. Quality and continuous improvement are fostered in our control processes; and 7. Signifcant legislative or regulatory issues impacting us are recognized and addressed appropriately. to provide for the independence of the internal audit organization, its personnel report to the head of the internal audit organization, being the Chief Audit Offcer/Internal Audit Head, who reports functionally to the audit committee and administratively to the President and CEO. The Chief Audit Offcer is accountable to management and the audit committee in the discharge of his duties and is required to:
1. Provide annually an assessment on the adequacy and effectiveness of our processes for controlling our activities and managing our risks; 2. Report signifcant issues related to the processes of controlling our activities, including potential improvements to those processes, and provide information concerning such issues; and 3. Periodically provide information on the status and results of the annual internal audit plan and the suffciency of our internal audit organizations resources. the companys internal audit organization has a charter approved by the audit committee that complies with the international standards for the Professional Practice of internal auditing of the institute of internal auditors, in the discharge of its scope of work and responsibilities. External Audit the external auditor is appointed by the audit committee which reviews its qualifcations, performance and independence. To ensure objectivity in the performance of its duties, the external auditor is subject to the rules on rotation and change (every fve years); general prohibitions on hiring of staff of the external auditor; and full and appropriate disclosure and prior approval by the audit committee of all audit and non-audit services and related fees for such services. approval of non-audit work by the external auditor is principally tested against the standard of whether such work will confict with its role as an independent auditor or would compromise its objectivity or independence as such. Enterprise Risk Management also working in coordination with our internal audit organization and audit committee is the Pldt enterprise Risk management department. the complex and dynamic business environment that the Pldt group operates gives rise to a variety of risks. the enterprise Risk management department is in charge of managing an integrated risk management program with the goal of identifying, analyzing and managing the Pldt groups risks to an acceptable level, so as to enhance opportunities, reduce threats, and thus sustain competitive advantage. TECHNOLOGY STRATEGY COMMITTEE 2012 MEETINGS ATTENDANCE PERFORMANCE 3_PLDTar12 _rev.indd 33 5/9/13 1:03 PM 34 PhiliPPine long distance telePhone comPany Chief Governance Offcer the cg compliance system established in the cg manual includes the designation by the Board of a Chief Governance Offcer who reports to the chairman of the Board and the gnc. the primary responsibilities of the Chief Governance Offcer include monitoring compliance with the provisions and requirements of corporate governance laws, rules and regulations, reporting violations and recommending the imposition of disciplinary actions, and adopting measures to prevent the repetition of such violations. In addition, the Chief Governance Offcer assists the Board and the gnc in the performance of their governance functions, including their duties to oversee the formulation or review and implementation of the corporate governance structure and policies of the company, the establishment of an evaluation system to verify and measure compliance with the cg manual in relation to related laws, rules and regulations, and to oversee the conduct of a self-assessment of the performance and effectiveness of the Board, the Board committees, and individual Board members in carrying out their functions. Corporate Governance Offce the cgo is responsible for the continuing development, drafting, issuance and review of appropriate corporate governance policies, attending to reports received through the whistleblowing facility, addressing queries and providing opinions or guidance on corporate governance matters to operating units, initiating enforcement actions to ensure compliance with corporate governance policies, and maintaining a corporate governance education and communication program that sees to the development of the proper knowledge, skills, attitudes and habits that would promote voluntary observance of corporate governance policies. the Pldt cg manual is the basis for the establishment of and provides operational guidance to all Pldt corporate governance structures as shown in the chart below. Shareholders BoardofDirectors BoardCommittees Election Report Accountability Report Assurance Appointment CommitteeCharter Designation Appointment Appointment Information AnnualAudit Audit Report Report Report Report Guidance Guidance Oversight Oversight Guidance Oversight Guidance Appointment Oversight Report Accountability Oversight Guidance Report Report Audit Committee External Auditor Internal Audit ERM Department Corporate Governance Offce CEO Management Executive Compensation Committee Technology Strategy Committee Governance& Nomination Committee 3_PLDTar12 _rev.indd 34 5/9/13 1:04 PM 2012 annUal RePoRt 35 Our Policies, Processes and Practices if our cg manual provides the framework and structure of our corporate governance program, it is our code of ethics that animates the way we relate to our shareholders and stakeholders. it is through the code of ethics that Pldt commits itself to observe the values of accountability, integrity, fairness and transparency and aims to promote a culture of good corporate governance. it provides standards that govern and guide all business relationships of Pldt, its directors, offcers and employees. as part of Board oversight, the companys corporate governance policies and their effectiveness are reviewed every two years to ensure that they continue to be compliant, appropriate and effective. the review of the code of ethics was conducted and reported to the gnc in october 2012. Other Policies the company also has other policies adopted by the Board to provide both general and specifc guidelines that complement the code of ethics. Confict of Interest Policy (approved on October 24, 2005) this policy aims to ensure that work-related actions of Pldts directors, offcers, employees and consultants are based on sound business principles and judgment devoid of bias or partiality. it enjoins all employees to be aware of the possibility of such bias and partiality in dealings with various entities or individuals in the course of or in relation to their work. the policy likewise mandates that employees who fnd themselves in a possible confict of interest situation should promptly disclose the matter to the relevant authorities. if warranted, the employee concerned should also obtain appropriate approvals and inhibit himself from any action, transaction or decision involving an existing or potential confict of interest. Policy on Gifts, Entertainment and Sponsored Travel (approved on January 31, 2006) this policy provides safeguards so that the custom of giving gifts is handled in accordance with the values of accountability, integrity, fairness and transparency. it aims to prevent the occurrence of situations or actions that could signifcantly affect objective, independent or effective performance of an employees duties. Specifcally, it prohibits the solicitation of gifts, sponsored travel, and entertainment from third parties. Receipt and acceptance of gifts voluntarily given by such third parties are handled according to this policy as well. Supplier/Contractor Relations Policy (approved on January 31, 2006) this policy seeks to ensure that the company upholds the highest professional standards in business practices and ethics in its dealings with suppliers and contractors in the procurement of goods and services. the policy also seeks to maintain Pldts reputation for equal opportunity and honest Key standards articulated in the Pldt Code of ethics Compliancewithapplicablelaws,rulesandregulations; Ethicalhandlingofconfictsofinterest,corporate opportunitiesandconfdentialinformation; Protectionandproperuseofcompanyassets; Fairdealingwithemployees,customers,serviceproviders, suppliersandcompetitors; Compliancewithreportinganddisclosureobligationsto therelevantregulatorsandtoinvestors; Compliancewithdisclosureandfnancialreporting controlsandprocedures; Assessmentandmanagementofrisksinvolvedin businessendeavors;and Adoptionofinternationalbestpracticesofgoodcorporate governanceintheconductoftheCompanysbusiness. 3_PLDTar12 _rev.indd 35 5/9/13 1:05 PM 36 PhiliPPine long distance telePhone comPany treatment of suppliers in all business transactions. it establishes clear rules for an arms-length transactions and fair treatment of prospective and existing suppliers with the objective of always obtaining the best value for the Company. The policy specifcally adopts the processes of vendor accreditation and competitive bidding as the general rule and established practices to ensure that contracts are awarded only to qualifed and duly-accredited suppliers and vendors who offer the best value for money for Pldts requirements. Policy on Employee Disclosure on Violations of the Corporate Governance Rules, Questionable Accounting or Auditing Matters, and Offenses covered by PLDTs Table of Penalties (or the Expanded Whistleblowing Policy, approved on May 9, 2006) this policy provides guidelines on handling employee disclosure or complaints of violation of rules pertaining to the aforestated matters, protects whistleblowers from retaliation and ensures confdentiality and fairness in the handling of a disclosure or complaint. the Policy on gifts, entertainment and sponsored travel, the Supplier/Contractor Relations Policy, and the Expanded Whistleblowing Policy, including their implementation, were reviewed and the results thereof reported to the gnc in 2011. detailed implementing guidelines are likewise issued for the said policies to ensure their wide observance. all these policies and rules (cg Rules) are periodically reviewed to ensure that they are appropriate for Pldt, keep pace with comparable and applicable global best practices, and are compliant with the requirements of the Philippine sec and U.s. sec, nyse and hKse corporate governance rules, as may be appropriate and applicable. to access the code of ethics, the cg manual or information on how Pldts corporate governance practices and those required of U.s. listed companies under nyse section 303a.11 differ, please refer to: http://www.pldt.com.ph/governance/about/Documents/ 27623c20007849698da4df57179ec70dPLDT_Code_of_ Business_Conduct_and_Ethics.pdf http://www.pldt.com.ph/governance/about/Documents/223 36f71c88c495793d15575c2addffcpldtcorpgov_manual.pdf http://www.pldt.com.ph/governance/about/Documents/ f7933d17962d4b2c942e50ba4980f21bpldtdisclosure.pdf
Pldts subsidiaries and their respective subsidiaries have also adopted corporate governance rules and policies similar in substance and form to Pldts cg Rules and suited to their particular business environments and contexts, as well as appointed their respective corporate governance offcers. Pursuant to the Confict of Interest Policy, PLDT offcers, executives and employees are required to submit Confict of Interest Disclosures. If a transaction is affected by confict of interest, it is subject to approval by the appropriate approving authorities and the conficted director, offcer, executive or employee is prohibited from participating in any activity related to the said transaction. Pldts suppliers, vendors and contractors are also required to make prompt disclosures with respect to relationships and affliations that they or their personnel may have with respect to PLDT directors, offcers, executives and employees. 3_PLDTar12 _rev.indd 36 5/9/13 1:06 PM 2012 annUal RePoRt 37 Pldts expanded Whistleblowing Policy facilitates the anonymous reporting of violations of cg Rules, accounting and auditing rules and regulations or the Pldt Personnel manual. Pldt maintains a Whistleblowing hotline and other reporting facilities, such as a dedicated electronic mailbox, post offce box, and facsimile transmission system. all employees and stakeholders who come forward in good faith to report any of the violations mentioned above or any act that may be considered as contrary to the companys values may submit a complaint or disclosure on such violations to the cgo. anonymous complaints are allowed and are duly processed. Upon receipt of a report, complaint or disclosure by the cgo, a preliminary evaluation is conducted to determine the veracity and plausibility of the allegations contained in the complaint or report, as well as determine the appropriate investigating unit to which the case shall be assigned for further action. the cgo monitors the developments in the cases reported and ensures appropriate reporting to the audit committee, the gnc, or any other relevant committee, body or authority on the results of the investigations and the prompt referrals of fndings to the units concerned. in all processes and activities related to a whistleblowing complaint or disclosure, utmost confdentiality is observed in order to ensure the integrity of the process and/or protect the parties, employees or offces who may be involved. in line with all of these, Pldt has incorporated corporate governance standards in the performance evaluation of employees and has included violations of cg Rules as cause for disqualifcation in being awarded incentives and rewards in its Policy on Employee Qualifcation for Incentives and Rewards, including the ltiP. to make sure that relations between the company and its business partners are imbued with shared standards on good corporate governance, the company has developed written corporate governance guidelines for suppliers and contractors to which the companys suppliers and contractors are expected to consent in writing, thereby ensuring that they understand and accept these standards as indispensable in doing business with PLDT. The Company also conducts suppliers/contractors briefngs and communicates to its business partners, including suppliers, the companys commitment to, as well as expectations on, good corporate governance. as part of its education and communication program, Pldt provides continuous training for its Board, senior management and employees, which includes an annual enhancement session conducted by internationally-known experts to share their insights and interact with Pldts Board and senior management. Pldt has organized and conducted six (6) annual enhancement sessions since 2007. in november 2012, dr. thomas donaldson, the mark o. Winkelman Professor and the director of the Zicklin center for Business ethics Research, the Wharton school University of Pennsylvania, spoke before the Pldt Board of directors, as well as other directors from First Pacifc affliates in the Philippines. dr. donaldsons session, entitled Navigating the New World of Business discussed how companies operate in these turbulent times and navigate issues of reputational risk, governance and integrity. he spoke about major failures in the areas of governance and risk management and the dangerous patterns of rewards and cultural weakness. he emphasized that compliance is important, but that it should be augmented by right leadership, proper systems and a culture guided by the right values, such as integrity, responsibility and fairness. dr. donaldson conducted a similar session for Pldts senior management on november 20, 2012. also, present at the session were senior executives from the other First Pacifc affliate companies in the Philippines. Pldt not only trains to get the right tone at the top but also applies efforts to shape the middle. Pldt regularly provides corporate governance training for its middle management. in 2012, a special session for its executives was conducted by mr. Keith darcy, executive director of the ethics and compliance Offcer Association (ECOA) based in Waltham, Massachusetts, Usa. mr. darcy discussed Corporate Responsibility in the Changing Global Landscape. he emphasized that in the changing global landscape, companies that have ethical, self-regulating cultures will be able to withstand the many upheavals that business will face. close to 400 delegates from Pldt, smart, ePldt, sPi global, Pldt global, digitel, sun, meralco, mPic, asian hospital and medical center, maynilad, mediaQuest, mediascape and tV5 were present at the session. in addition, newly-promoted or hired executives are required to undergo a half-day workshop on ethical decision making as part of their competency development as managers. the highly interactive course provides personnel in the middle manager category an opportunity to discuss and develop approaches to ethical dilemmas that confront them at the workplace. to strengthen middle managements management and implementation of internal controls in Pldt, a workshop entitled Managing from a Position of Control was developed and launched in 2012. the course was developed through the joint efforts of the internal audit, corporate governance, fnance and human resource offces of PLDT. The course seeks to empower concerned personnel in understanding, observing and implementing internal controls within their respective spheres of authority. it provides detailed discussions on the rationale for internal controls, responsibilities of personnel and procedures for observance. a pilot course and one regular run of the workshop were conducted in 2012. other Pldt executives and key supervisory personnel will take the course in 2013. Pldt requires all newly-hired employees and executives to undergo a corporate governance orientation. in addition to face-to-face training, Pldt has an online training modules for its employees. Pldt executives with the rank of manager, senior manager and assistant vice president are required to access and complete an online training course on the Pldt expanded Whistleblowing Policy. supervisory and rank-and-fle employees, on the other hand, are required to take and complete a module on the PLDT Confict of Interest Policy. 3_PLDTar12 _rev.indd 37 5/9/13 1:07 PM 38 PhiliPPine long distance telePhone comPany education and training is supplemented by the production and dissemination of relevant corporate governance communication materials, including thematic posters, calendars and newsletters. Directors and certain offcers and executives of PLDT are also provided with weekly corporate governance newsbriefs, which contain summaries of news articles from global online sources. the Board of directors is also provided with CG Updates of articles on relevant topics written by noted authors and/or authorities. the company also issues periodic advisories on corporate governance. Our stakeholders the structures, processes, programs and principles set out in the cg manual, code of ethics and cg Rules are meaningless unless they fnd expression in our relationships with our various stakeholders. Pldt remains committed to establishing and maintaining a corporate culture anchored on performance and responsibility in fulflling obligations to our stakeholders. PLDT knows that the welfare of its stakeholders is a critical indicator of whether or not a company is truly serious about the way it conducts its business and observes its core values. Pldt understands that proper governance should create a company that has a well-founded and proven reputation for being a safe haven for investments, a trustworthy business partner, a fair and concerned employer and a responsible corporate citizen. Investors Pursuant to our cg manual, it is the duty of the Board to promote and uphold stockholders rights such as the right to vote, pre-emptive right, the right to inspect corporate books and records, right to timely receive relevant information, right to dividends, and the appraisal right. it is likewise, the Boards function to explore and implement steps to reduce excessive or unnecessary costs that impede stockholders participation and to act with transparency and fairness at the annual and special stockholders meetings. the Board shall likewise ensure that the company remains faithful to its undertaking to make timely disclosures of material information and transactions that could potentially affect the market price of the companys shares and such other information which are required to be disclosed pursuant to the securities Regulation code (sRc) and its implementing Rules and Regulations including, without limitation, earnings results, acquisition or disposal of signifcant assets, off balance-sheet transactions, related party transactions, Board membership changes, shareholdings of Directors and Offcers and any changes thereto, and remuneration of directors and Offcers. The Company fles with the Philippine SEC and the PSE all written disclosures or reports on material information and transactions in accordance with the sRc and its implementing Rules and Regulations and the established procedures of the Philippine sec and the Pse regarding such matters. shareholders who wish to raise matters or concerns relating to the business of the company may elevate such matters to the corporate secretary, the investor relations offcer, concerned units of Pldts management or the Board of directors. PLDTs Code of Ethics prohibits directors, offcers and employees from dealing in the companys shares when in possession of material non-public information about and involving the Company. Directors, offcers and employees are enjoined to report to the company their dealings in the companys shares, regardless of whether such dealings were effected during or outside the blackout period, within three trading days from the date of the transaction, to enable the fling of the required disclosures to the Philippine sec and the Pse. during blackout periods, dealing in Company shares by directors, offcers or employees is not allowed and in any exceptional case, prior notice to the company should be made of any such dealing in company shares, in accordance with the companys policy on Blackout Period/Restriction on Trading of Shares. in addition, the companys guidelines on the Proper handling of Related Party transactions provides the procedures for the review, approval and disclosure of related party transactions in order to ensure that these, if any, are fair, on an arms- length terms, and in the best interest of the company and its shareholders, as a whole. material related party transactions are reviewed by the audit committee and subject to approval by the Board or, as applicable, the shareholders. PLDT takes pride in its multi-awarded investor relations offce. Pldt has also been recognized several times as the company most committed to a strong dividend policy. it is an encouraging proof that sound corporate governance, concern for investors/ shareholders, and proftability go hand-in-hand. Customers it is Pldts privilege to serve a broad range of customers from residential customers, smes, corporate customers covering large local and international companies, organizations and government. Pldt continually strives to satisfy its customers expectations and concerns regarding quality of service, pricing, application process, service provisioning process, repair and restoration service and the billing process. We continuously engage with our customers through various touchpoints with the end in view of knowing and understanding our customers communication products and service needs, promptly addressing their concerns and identifying areas where we could further enhance customer experience. Employees Pldt recognizes the myriad concerns of its employees. Pldt respects the rights of its personnel, chief among these are the right to self-organization, safe working conditions, rest and leisure, and work-life balance. it also provides opportunities for skills, leadership and competency training as well as career development. Pldt provides adequate opportunity for career 3_PLDTar12 _rev.indd 38 5/9/13 1:07 PM 2012 annUal RePoRt 39 advancement on a merit-based system. compensation and incentives are likewise determined on the basis of performance and accomplishment. dedicated staff and facilities are made available for the training and development programs of the company. the company organizes programs that support the well-being of employees, allows them to participate in Pldts corporate social Responsibility (csR) activities and obtains their feedback on company concerns. organization and employee opinion survey is conducted at regular intervals to gauge employee engagement as well as feel the pulse of Pldt employees across the organization at different levels and positions concerning topics and issues which are prioritized and addressed in the various people programs of the company. in accordance with the companys Personnel manual, the Company provides medical and dental benefts for our employees, which include hospitalization, doctor consultation, medicines and laboratory tests. the company monitors and submits reports on employee health and safety in accordance with applicable regulations. Communities Pldt operates all over the Philippines and inevitably relates to local residents, non-governmental organizations and other sectors in the communities where we do business. We are aware that these communities are concerned about Pldts products and services and the impact of its operations on such communities. no less than our cg manual mandates that Pldt, through the Board of directors, shall ensure that there exists a program for communicating with the sectors in the communities where the company operates or those who are affected by its operations. as a telecommunications service provider, Pldt serves communities and the people that live in them by providing products and services that offer various options for people to connect with each other. as a corporation, Pldt creates wider opportunities for employment, entrepreneurship and greater well-being. as a corporate citizen, Pldt actively engages with the communities, including the sectors directly affected by its operations, through csR projects in education, health, community, environment, livelihood development, youth development and sports, and disaster relief operations. Suppliers PLDT aspires to maintain mutually benefcial relationships only with like-principled suppliers that uphold Pldts core values of accountability, integrity, fairness, and transparency in their own businesses. Pldt has over 1,500 active suppliers which serve the requirements of the Pldt group, ranging from capital expenditures to operating expenditure items, as well as services. The Companys Supplier/Contractor Relations Policy provides for the general principles to be followed in vendor selection. suppliers are required to undergo an accreditation process before they engage in business with Pldt. among the criteria for accreditation are fnancial capability, technical capability, compliance with applicable laws, including those pertaining to industrial relations, environment, health and safety and intellectual property rights. the companys purchases, as a general rule, are made on the basis of competitive bidding of accredited and qualifed suppliers, in accordance with the aforementioned policy. Creditors in accordance with our code of ethics, we protect the rights of our creditors by publicly disclosing all material information, such as earnings results and risk exposures relating to loan covenants. our disclosure controls and procedures also include periodic reports to our creditors such as our latest certifed Financial Statements, No Default Certifcation, and Certifcation on compliance with fnancial ratio limits. Environment Pldt is committed to do its part in addressing the pressing need to preserve and protect our environment. as such, Pldt ensures compliance with the rules and regulations from local government regulatory offces such as the Department of environment and natural Resources (denR) environmental management Bureau, the laguna lake development authority and other similar agencies and offces. Furthermore, projects to reduce waste and the companys carbon footprint are also being implemented. the company regularly monitors relevant global Reporting initiative (gRi) indicators such as direct energy consumption, energy saved, initiatives to reduce energy consumption, total water withdrawn by source, direct and indirect greenhouse gasses emission by weight, total weight of waste by type and disposal method, and total environmental expenditures and investment. 3_PLDTar12 _rev.indd 39 5/9/13 1:08 PM Advocacy and Networking Pldt is actively engaged in the advocacy for better governance and ethics in business. this engagement is founded in the companys policy against corruption and bribery as set forth in its Code of Ethics, and further reinforced in specifc policies, such as the Policy on gifts, entertainment and sponsored travel, supplier/contractor Relations Policy and corporate governance guidelines for suppliers, which likewise prohibit bribery involving third parties in business dealings with the company. these policies are implemented through anti-corruption programs and measures such as internal controls, training and communication, our whistleblowing system, third party due diligence, and support for and participation in multi-sectoral anti-corruption initiatives to eliminate graft and corruption. Pldt reaches out to like-minded institutions and organizations in its advocacy efforts. the Pldt group is an active sponsoring partner member of the ecoa based in Waltham, massachusetts, Usa. Pldt is an active participant in the ecoas annual ethics and compliance conferences 12 . in 2012, PLDT and wireless subsidiary Smart, participated in the frst ecoa asian symposium 13 . our membership at the ecoa gives Pldt access to its vast online library on cg and related topics, opportunities to interact with other corporate governance and ethics professionals around the world, and benchmark our governance practices against those of leading companies. locally, Pldt is a member organization of the good governance advocates and Practitioners of the Philippines (ggaPP), an association of corporate governance, ethics and compliance professionals from private corporations, the public sector, the academe and other organizations interested in advancing the cause of good corporate governance. Pldt also participates in the activities of the institute of corporate directors such as its roundtable discussions and working sessions. as a telecommunications company, Pldt is naturally interested in connections. its job is to connect people to each other, and now, increasingly to data and information. Pldt has learned that to do its job means connecting the performance and results of the present, to a future of sustained proftability and growth that in turn, requires adherence to the highest standards and principles of corporate governance. Pldts efforts at ensuring adherence to these standards and principles means connecting company personnel to its vision exhibiting to each and every person that his or her efforts, when put together with that of the others in the company, create a synergy that builds the Companys future. More importantly, it means fnding the nexus between proftability and the Companys core values ensuring that performance, results, and the very culture of the company do not compromise long-term goals for quick gains in the present. the company remains steadfast in its pursuit of these connections as it learns its lessons, celebrates its gains and looks forward to the challenges of the coming years. 12 The latest conference was held on October 2-5, 2012 at St. Louis Missouri, USA. 13 Held in Shanghai, China on January 17-18, 2012. 3_PLDTar12 _rev.indd 40 5/9/13 8:02 PM 40 PhiliPPine long distance telePhone comPany 2012 AnnuAl RepoRt 41 the plDt Group has long recognized enterprise Risk Management (eRM) as essential to the achievement of business goals and objectives. the organization acknowledges eRMs role in the promotion of a comprehensive understanding of risks and its effect on performance. this commitment to the proactive management of existing and emerging risks is reinforced by the Group enterprise Risk Management Department (GRMD). The Group Enterprise Risk Management Department Created in 2010, the GRMD assumed all responsibilities previously held by the eRM Committee. In accordance with its mandate, the GRMD identifed key elements needed to successfully cultivate a risk-conscious culture within the plDt Group. The Enterprise Risk Management Framework and Process the GRMD promulgates and encourages the use of an integrated risk management framework centered on the need to properly identify, analyze, evaluate, treat and monitor risks that may affect the achievement of business objectives. the eRM process implemented is based on the Draft International Standard of ISo 31000. the implementation of the eRM process ensures that high- priority risks are well understood and effectively managed across all functions and units within the plDt Group. PLDT Group Top Risks In 2012, the GRMD continued the implementation of the organizations standard risk management process in critical operational units such as network, Marketing and Finance. A risk assessment exercise was also undertaken by the Joint executive Committee to identify and prioritize the most important risks affecting the plDt Group in 2013. these top risks are: 1. evolving Business Model 2. Market Dynamics 3. Regulatory and political Challenges 4. Media and Related Investments 5. Fast pace of technological Change 6. potential points of Failure (network Quality and It Systems Reliability) 7. Vendor-related Issues 8. Hazards 9. people 10. Information Security and privacy 11. lack of new Growth Areas the plDt Group is committed to intently pursuing measures to ensure all these risks are effectively managed. treatment strategies have been developed, and mitigation initiatives put in place. Risk management activities are continuously monitored and reviewed to ensure that critical risks are appropriately addressed across the organization. Imperatives of Enterprise Risk Management Status Involvement of the Board of Directors The Board of Directors defnes the strategic direction of the organization, and sets the PLDT Groups risk appetite in line with the direction. The Board of Directors has general oversight of risk management activities of the Company. In 2010, the PLDT Group Risk Management Philosophy Statement was drafted and approved to embody the Groups commitment to managing risk. In 2011, the PLDT Group Risk Management Policy Manual was approved. The policy aims to help the organization integrate risk management into strategic planning and business processes. The Board of Directors periodically evaluates the effectiveness of this policy. Creation of a central risk function In 2010, the Board of Directors formed the GRMD and issued a mandate. Establishment of a common defnition of risk A standard defnition for risk has been defned. It is continuously cascaded throughout the organization. Adoption of a standard risk evaluation process The risk evaluation process implemented throughout the PLDT Group is based on the Draft International Standard of ISO 31000 (discussed below). The process is documented in the Risk Management Policy Manual. Creation of an Enterprise Risk Management Knowledge Warehouse This tool is being developed and it shall enable sharing of information on identifed risks. EsTabLish ThE conTExT iDEnTiFy Risks anaLyzE Risks c o M M u n i c a T E
a n D
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a s s E s s M E n T EvaLuaTE Risks TREaT Risks m a n a g e m e n t enterprise risk 3_PLDTar12 _rev.indd 41 5/9/13 10:46 PM Board of directors ManuEL v. PanGiLinan 66, Filipino director of Pldt since november 24, 1998. he was appointed as chairman of the Pldt Board after serving as President and ceo from november 1998 to February 2004. he is the chairman of the governance and nomination, executive compensation and technology strategy committees of the Pldt Board of directors. he also serves as chairman of meralco, Smart, Metro Pacifc Investments Corp., Landco Pacifc Corp., Philex Mining Corp., Manila North tollways corp., tV5, makati medical center, cardinal santos medical center, asian hospital, inc., Riverside medical center, davao doctors hospital, and our lady of lourdes hospital. He founded First Pacifc Company Ltd. in 1981 and served as managing director until 1999. he was appointed as executive chairman until June 2003, when he was named as ceo and managing director. he also holds the position of President commissioner of P.t. indofood sukses makmur tbk, the largest food company in Indonesia. Outside the First Pacifc Group, he is the chairman of the Board of trustees of san Beda college, Pldt-smart Foundation, inc.,and the Philippine Business for social Progress, Philippine disaster Recovery Foundation, inc. and the hongkong Bayanihan trust, a non-stock, non-proft foundation that provides vocational, social and cultural activities for hongkongs foreign domestic helpers, Vice-chairman of the Foundation for crime Prevention, a private sector group organized to assist the government with crime prevention, and a member of the Board of trustees of caritas manila and Radio Veritas- global Broadcasting systems, inc. he is a co- chairman of the newly-organized Us-Philippines Society, a non-proft society that seeks to broaden the relationship between the United states and the Philippines in the areas of trade, investment, education, foreign and security policies and culture. naPoLEon L. nazaREno 63, Filipino director of Pldt since november 24, 1998 and is a member of the technology strategy committee of the Board of directors of Pldt. he has served as President and chief executive Offcer of PLDT since his appointment on February 19, 2004 and is concurrently the President and Chief Executive Offcer of Smart since January 2000. he also serves as chairman of several subsidiaries of smart including Pldt communications and energy Ventures, inc. (PceV), Wolfpac mobile, inc., smart Broadband, inc. and i-contacts corporation. his other directorships include digitel, digitel mobile Phils, inc., sPi global holdings, inc., sPi technologies, inc., sPi cRm, inc., mabuhay satellite corporation, aces Philippines cellular satellite corporation, Pldt global corporation, ePLDT, Inc., Philweb Corporation and Rufno Pacifc Tower Condominium Corporation. He is a non-executive director of First Pacifc Company limited. nazarenos business experience spans several countries in over 39 years and his exposure cuts across a broad range of industries, namely, packaging, bottling, petrochemicals, real estate and, in the last 13 years, telecommunications and information technology. in 1981, he started a successful career in the international frm Akerlund & Rausing, occupying senior management to top level positions and, in 1989, became the President and chief Executive Offcer of Akerlund & Rausing (Phils.), Inc. In August 1995, he moved to Metro Pacifc corporation where he served as President and Chief Executive Offcer until December 1999. hELEn y. DEE 69, Filipino director of Pldt since June 18, 1986. she is the chairperson, Vice chairperson or a director of several companies engaged in banking, insurance and real property businesses. aTTy. Ray c. EsPinosa 57, Filipino director of Pldt since november 24, 1998 and is a member of the technology strategy committee of the Board of directors of Pldt. he is the head of the Regulatory affairs and Policies group of Pldt since march 2008. he also serves as the President and chief executive Offcer of MediaQuest Holdings, Inc., ABC development corporation, mediascape, inc., nation Broadcasting corporation and other subsidiaries of mediaQuest holdings, inc., the Vice chairman of the Board of trustees of the PLDT Benefcial Trust Fund, the Vice Chairman of Philweb corporation, a director and the general counsel of meralco, a director and the chairman of the audit committee of the Board of directors of lepanto consolidated mining company and a director of several companies engaged in public utility, media and infrastructure businesses. atty. espinosa served as President and chief executive Offcer of ePLDT from August 21, 2000 until April 15, 2010. Prior to joining Pldt, he was a partner and member of the executive committee of the law frm Sycip Salazar Hernandez & Gatmaitan until June 2000. 2 3 1 1 2 3 4 42 PhiliPPine long distance telePhone comPany 3_PLDTar12 _rev.indd 42 5/9/13 8:04 PM Board of directors JaMEs L. Go 74, Filipino director of Pldt since november 3, 2011. he is a member of the technology strategy committee and advisor of the audit committee of the Board of directors of Pldt. he is currently the Chairman and Chief Executive Offcer of JG summit holdings, inc., Robinsons, inc., oriental Petroleum and minerals corporation, Robinsons supermarket, inc. and Robinsons handyman, inc. he is the chairman of Universal Robina corporation, Robinsons land corporation, Jg summit Petrochemical corporation and Jg Summit Olefns Corporation and a director of Cebu air, inc., cFc corporation, Robinsons holdings, inc., singapore land, ltd., marina center holdings, inc., United industrial corporation and hotel marina city Private limited. he is also the President and trustee of the gokongwei Brothers Foundation. he was the chairman, President and Chief Executive Offcer of Digitel Mobile and the Vice chairman, President and chief executive Offcer of Digitel, until October 26, 2011. sETsuya kiMuRa 56, Japanese director of Pldt since July 5, 2011. he is a member of the governance and nomination, executive compensation and technology strategy committees, and advisor of the audit committee of the Board of directors of Pldt. he is the director of network department of ntt docomo, Inc. He also served as Regional CEO, Asia Pacifc of NTT Communications and President & CEO of ntt singapore Pte ltd from 2007 to 2009, and as President & CEO of NTT Communications (thailand) co. ltd from 2003 to 2007. Prior to that, he occupied various management positions in nippon telephone and telegraph company. hiDEaki ozaki 48, Japanese director of Pldt since december 6, 2011. he is the Vice President of Planning, global Business of ntt communications corporation (ntt com), a company which provides telecommunication service and ict services such as global network, data centre, cloud services inside and outside of Japan. Prior to that, he served as Vice President of global strategy, global Business division of ntt com since 2006 and as director of legal and internal audit department of ntt com from 2003 to 2006. he also served as Vice President of sales and corporate Planning of ntt communications (thailand) co., ltd. from 1999 to 2003 and as manager of overseas Business Planning, global service division of nippon telegraph and telephone corporation from 1995 to 1999. Ma. LouRDEs c. Rausa-chan 60, Filipino director of Pldt since march 29, 2011. she has been serving as corporate secretary, corporate affairs and legal services head and Chief Governance Offcer of PLDT since november 1998, January 1999 and march 2008, respectively. she is a director of PceV and ePldt and also serves as corporate secretary of PceV and ePldt and several subsidiaries of Pldt. Prior to joining Pldt, she was the group Vice President for Legal Affairs of Metro Pacifc corporation and the corporate secretary of some of its subsidiaries. 5 8 6 9 4 7 5 6 8 7 8 2012 annUal RePoRt 43 3_PLDTar12 _rev.indd 43 5/9/13 8:06 PM Board of directors PEDRo E. Roxas 57, Filipino Director of plDt since March 1, 2001 and qualifed as an independent director since 2002. He serves as a member of the Audit, Governance and nomination and executive Compensation Committees of the Board of Directors of plDt. He is the Chairman of Roxas Holdings, Inc. and Roxas and Company, Inc., holding and investment companies, as well as of several companies engaged in agri-business, sugar manufacturing and real estate development, namely, Central Azucarera Don pedro, Inc., Central Azucarera de la Carlota, Inc., Hawaiian philippine Sugar Company, Roxol Bioenergy Corporation, Roxaco land Corporation, and Fuego land Corporation. He is also an independent director of Meralco and BDo private Bank, a director of Brightnote Assets Corporation, and a member of the Board of Trustees of the PLDT Benefcial Trust Fund, philippine Business for Social progress and Fundacion Santiago (where he is also the president). Juan b. sanTos 74, Filipino Director of plDt since January 25, 2011. He is the Chairman of Social Security Commission/ Social Security System, a member of the Board of Directors of Alaska Milk Corporation, First philippine Holdings Corporation, Sun life Grepa Financials, Inc. philex Mining Corporation and Zuellig Group, Inc., a member of the Board of Advisors of Coca Cola Bottlers phils., Inc. and east-West Seeds Co., Inc., a trustee of St. lukes Medical Center and Ramon Magsaysay Award Foundation, and a consultant of the Marsman- Drysdale Group of Companies. Santos retired as Chief Executive Offcer of Nestle Philippines, Inc. (npI) in 2003 and continued to serve as Chairman of npI until 2005. prior to his appointment as president and Ceo of npI, he was Ceo of the nestle Group of Companies in thailand and Singapore. He served as Secretary of trade and Industry from February to July 2005 and was designated as a member of the Governance Advisory Council, and private Sector Representative for the public-private Sector task Force for the Development of Globally Competitive philippine Service Industries. Tony Tan cakTionG 60, Filipino Director of plDt since July 8, 2008. He is the Chairman and Chief Executive Offcer of Jollibee Foods Corporation, a leader in the fastfood business, which owns and operates a chain of restaurants nationwide and abroad. He is an independent director of First Gen Corporation, a member of the Board of trustees of St. lukes Medical Center, a director of temasek Foundation and the Chairman of Jollibee Foundation. aLFRED v. Ty 45, Filipino Independent director of plDt since June 13, 2006. He serves as a member of the Audit, Governance and nomination and executive Compensation Committees of the Board of Directors of plDt. He is the Vice Chairman of toyota Motor philippines Corporation and Gt Capital Holdings, Inc., the president of Federal Land, Inc.,, the Chairman of Asia Pacifc Top Management International Resources Corp. (Marco polo plaza Cebu), a director of Global Business power Corp., the Corporate Secretary of Metropolitan Bank and trust Company, the Chairman of lexus Manila, Inc., a trustee of Metrobank Foundation, Inc. and an independent director of Digitel. 11 12 10 9 10 11 12 44 pHIlIppIne lonG DIStAnCe telepHone CoMpAny 3_PLDTar12 _rev.indd 44 5/9/13 10:47 PM Board of directors advisory board 14 18 15 19 16 17 oscaR s. REyEs 14 washinGTon z. syciP 17 aRTEMio v. PanGaniban* 13 RobERTo R. RoMuLo 15 bEnny s. sanToso 16 oRLanDo b. vEa 18 chRisToPhER h. younG 19 13 2012 annUal RePoRt 45 * Elected as Independent Director effective April 23, 2013. 3_PLDTar12 _rev.indd 45 5/9/13 8:10 PM ERnEsTo R. aLbERTo 52, Filipino appointed as enterprise and international and carrier Business head in september 2011. Prior to that, he was the customer sales and marketing group head since February 2008. he leads all revenue generation relationship initiatives of the enterprise and international and carrier Business, including product/market development, product management, marketing, sales and distribution, and customer relationship management. he is the chairman, President or director of Pldt subic telecom, inc., Pldt clark telecom, inc., Pldt-Philcom, inc., Pldt- maratel, inc., telesat, inc., sBi-cruztelco, Bonifacio communications corporation, mabuhay satellite corporation, smart ntt multi-media, ntt communications Phils., acasia and asean telecom holdings. he has over 20 years of work experience in the areas of corporate banking, relationship management and business development and, prior to joining Pldt in 2003, was a Vice President and head of the national corporate group of citibank n.a., manila from 1996 to may 2003. he previously served as Vice President and head of the Relationship management group of citytrust Banking corporation. REnE G. baEz 58, Filipino supply chain, asset Protection and management group head. he was the chief governance Offcer of PLDT from October 2004 to March 3, 2008 and the support services and tax management group head of Pldt from January 1999 to January 2001. he is the President of Pacifc Global Aviation Company. he served as commissioner of the Philippine Bureau of internal Revenue from February 2001 to august 2002. Prior to joining Pldt, he was the group Vice President for tax affairs of Metro Pacifc Corporation for three years until december 1998. he holds directorships in some subsidiaries of Pldt. JunE chERyL a. cabaL-REviLLa 39, Filipino controller and Financial Reporting and controllership head, is also a director and the chief fnancial offcer/treasurer of ePLDT and subsidiaries, clarktel, subictel, maratel, Philcom and subsidiaries, digitel, mediascape, Inc., Pacifc Global One Aviation Company, inc., Pilipinas global network limited, First Pacifc Learning Academy Foundation and the Pldt-smart Foundation, inc. she is also the Chief Finance Offcer of the Philippine disaster Recovery Foundation and the President of tahanan mutual Building and loan association. Prior to joining Pldt in June 2000 as an executive trainee in the Finance group, she was a senior associate in the business audit and advisory group of sycip Gorres Velayo & Co. She was the 2008 Young achievers awardee for commerce and industry conferred by the Philippine Institute of Certifed Public accountants. in march 2010, she was appointed as a member of the Financial Reporting standards council of the Philippines. aLEJanDRo o. caEG 52, Filipino President and Chief Executive Offcer of Pldt global corporation and concurrently the Head of PLDT and Smart International & carrier Business. he is smarts representative to the conexus mobile alliance (one of asias largest cellular roaming alliances), where he was also designated as its deputy chairman since 2010. Prior to joining Pldt in 2009, he worked in Pt smart telecom (indonesia) as its Chief Commercial Strategy Offcer from July 2008 to december 2008 and as chief Commercial Offcer from January 2006 to June 2008. he also held various sales, marketing and customer service-related positions in smart including that of group head of sales and distribution (2003-2005), group head of customer care and national Wireless centers (1998-2001) and marketing head of international gateway Facilities and local exchange carrier (1997-1998). he also served as President and Chief Executive Offcer of telecommunications distributors specialist, inc. in 2002 and as chief operations adviser of i-contacts corporation (smarts call center subsidiary) from 2001 to 2002. pldt offi cers & advi sors 2 3 key officers & advisors FROM LEFT: Napoleon L. Nazareno, Ernesto R. Alberto, Ariel P. Fermin, Rene G. Baez. Alejandro O. Caeg, Anabelle L. Chua 1 46 PhiliPPine long distance telePhone comPany 3_PLDTar12 _rev.indd 46 5/9/13 8:10 PM ANABELLE L. CHUA 52, Filipino Treasurer and Corporate Finance and Treasury Head, concurrently holds the position of Chief Financial Ofcer of Smart since 2006. She holds directorships in Philippine Telecommunications Investment Corporation, Smart and several subsidiaries of PLDT and Smart including ePLDT, Digitel, SPi Global Holdings, Inc., SPi Technologies, Inc., SPi CRM, Inc., Aces Philippines Cellular Satellite Corp., PCEV, Wolfpac Mobile, Inc., Smart Broadband, Inc., Connectivity Unlimited Resources, Inc., Airborne Access Corporation, Smart Hub, Inc. and Chikka Holdings Limited. She is a member of the Board of Directors of Philippine Stock Exchange, Board of Trustees of the PLDT Benecial Trust Fund and PLDT-Smart Foundation. She has over 20 years of experience in the areas of corporate nance, treasury, nancial control and credit risk management and was a Vice President at Citibank, N.A. where she worked for 10 years prior to joining PLDT in 1998. ARIEL P. FERMIN 45, Filipino Designated on January 1, 2012 as the Head for Home Business segment. He has over 20 years of solid marketing, sales and entrepreneurial experience gained from leading Fast Moving Consumer Group companies locally and globally. Prior to joining the PLDT Group, he was the President of Greenwich Food Corporation and Chowking Food Corporation of the Jollibee Food Corporation from 2008 to 2011. He also served as Country Director of Nike Philippines from 2006 to 2008 and handled various posts in Unilever-Bestfoods California Manufacturing Company from 1998 to 2005 and senior executive for sales, marketing, media and innovation process management.
JUN R. FLORENCIO 57, Filipino As Internal Audit and Fraud Risk Management Head, he handles the overall coordination of the internal audit function of the PLDT group of companies and in-charge of the fraud risk management function of the PLDT xed business. He has over 25 years of work experience in the areas of external and internal audit, revenue assurance, credit management, information technology, nancial management, and controllership. He was the Financial Controller of Smart for four years before he joined PLDT in April 1999 as Head of Financial Management Sector. He held various positions in the nance organization of another telecommunications company prior to joining Smart. MENARDO G. JIMENEZ, JR. 50, Filipino Human Resources Group Head and concurrently Business Transformation Ofce Head. He was Revenue Team Head of the Business Transformation Ofce from January 2008 to July 2010, the Retail Business Head of PLDT from June 2004 to December 31, 2007 and, prior to that, the Corporate Communications and Public Affairs Head. He had a stint at GMA Network, Inc., where he served as head of a creative services and network promotions. He won the rst CEO Excel Awards (Communications Excellence in Organizations) given by the International Association of Business Communicators mainly for effectively using communications strategies in managing the PLDT retail business team to meet its targets and achieve new heights in the landline business. In 2006, his further achievements in handling the retail business of PLDT and his stint in Smart as ofcer-in-charge for marketing were recognized by the Agora Awards which chose him as its Marketing Man of the Year. GEORGE N. LIM 60, Filipino Network Services Assurance Head and concurrently Network Team Head of Business Transformation Ofce. He has over 30 years of work experience in telecommunications management. He was the Network Services Head from February 2003 to December 2007, Network Development and Provisioning Head from February 1999 to January 2003 and Marketing Head from December 1993 to February 1999. Mr. Lim holds directorships in some subsidiaries of PLDT. CHRISTOPHER H. YOUNG 55, British PLDTs Chief Financial Advisor. He worked in PricewaterhouseCoopers in London and Hong Kong from 1979 until 1987, at which time he joined First Pacic in Hong Kong as Group Financial Controller. He joined Metro Pacic Corporation in 1995 as Finance Director, a position he held until he joined PLDT in November 1998. Ray C. Espinosa, Jun R. Florencio, Menardo G. Jimenez, Jr., George N. Lim, Christopher H. Young, Ma. Lourdes C. Rausa-Chan, June Cheryl A.Cabal-Revilla 2012 ANNUAL REPORT 47 3_PLDTar12 _rev P47.indd 47 5/10/13 12:23 PM 1 FROM LEFT: Napoleon L. Nazareno, Orlando B. Vea, Anabelle L. Chua, Emmanuel Ramon C. Lorenzana, Rolando G. Pea, Rene G. Baez, Mario G. Tamayo 1 key officers & advisors FROM LEFT: Orlando B. Vea, Charles A. Lim, Danny Y. Yu, Ricky P. Pea, Michelle C. Curran, Richard Zawila, Susan O. Ligeralde, Joel S. Lumalan, Carla G. Lanza 48 PhiliPPine long distance telePhone comPany 3_PLDTar12 _rev.indd 48 5/9/13 8:13 PM Jovan C. Barac, Martin T. Backstrom, Lawrence Goh FROM LEFT: June Cheryl A. Cabal-Revilla, Nerisse S. Ramos, Ernesto A. Alberto FROM LEFT: Orlando B. Vea, Ariel P. Fermin, June Cheryl A. Cabal-Revilla FROM LEFT: Maulik R. Parekh, Maria Cecilia C. Ampeloquio key officers & advisors 2012 annUal RePoRt 49 3_PLDTar12 _rev.indd 49 5/9/13 8:14 PM 50 pHIlIppIne lonG DIStAnCe telepHone CoMpAny MANUEL V. PANGILINAN Chairman of the Board NAPOLEON L. NAZARENO President and Chief Executive Offcer ERNESTO R. ALBERTO eVp, enterprise, International and Carrier Business (eICB) ARIEL P. FERMIN eVp, Home Business REN G. BAEZ SVp, Supply Chain, Asset protection and Management ALEJANDRO O. CAEG SVp, International and Carrier Business ANABELLE L. CHUA SVp, Corporate Finance and treasury Corporate treasurer RAY C. ESPINOSA SVP, Regulatory Affairs and Policies Offce JUN R. FLORENCIO SVp, Internal Audit and Fraud Risk Management MENARDO G. JIMENEZ, JR. SVp, Human Resources Business Transformation Offce network team MA. LOURDES C. RAUSA-CHAN SVp, Corporate Affairs and legal Services Chief Governance Offcer Corporate Secretary KATRINA L. ABELARDE 1 FVp, Small and Medium enterprise ANNA ISABEL V. BENGZON 1 FVP, Offce of the Finance Group Head ALFREDO B. CARRERA FVp, Regulatory Strategy and Support CESAR M. ENRIQUEZ FVp, eICB Revenue and operations Support JUAN VICTOR I. HERNANDEZ 1 FVp, Corporate Business FLORENTINO D. MABASA, JR. FVp, legal Services LEO I. POSADAS FVp, treasury JUNE CHERYL A. CABAL-REVILLA FVp, Financial Reporting and Controllership RICARDO M. SISON FVp, Consumer Credit and Business System Management EMILIANO R. TANCHICO, JR. FVp, Human Resources Management and Development MELISSA V. VERGEL DE DIOS 1 FVp, Investor Relations MIGUELA F. VILLANUEVA FVp, Cost and Valuation DANNY Y. YU FVp, seconded to Digitel RAUL S. ALVAREZ 2 Vp, Home Marketing Support JOSE A. APELO Vp, operations engineering and network Support RAFAEL M. BEJAR Vp, Medical Services MARCO ALEJANDRO T. BORLONGAN Vp, Customer Service operations and Support Management RENATO L. CASTAEDA Vp, Corporate Relationship Management C REBECCA JEANINE R. DE GUZMAN Vp, Home Sales and Distribution ALONA S. DINGLE Vp, Financial Reporting MARGARITO G. DUJALI, JR. Vp, Home Data Solutions GIL SAMSON D. GARCIA Vp, Revenue and Cash Accounting ELISA B. GESALTA Vp, network Services project Management MA. JOSEFINA T. GORRES Vp, enterprise Billing and Credit Management MA. CRISELDA B. GUHIT Vp, tax Management EMERALDO L. HERNANDEZ Vp, Core network operations MARVEN S. JARDIEL Vp, enterprise operations Support and Readiness ALEXANDER S. KIBANOFF Vp, training, Development and Career Management JOSEPH NELSON M. LADABAN Vp, Consumer Credit and Collection Management JAVIER C. LAGDAMEO Vp, Corporate Relationship Management A JOSELITO S. LIMJAP 1 Vp, ICt Research and Development ALBERT MITCHEL L. LOCSIN Vp, Corporate Relationship Management B LUIS IGNACIO A. LOPA Vp, enterprise Subsidiaries Account Management MA. CARMELA F. LUQUE 1 Vp, Financial and Corporate Audit OLIVER CARLOS G. ODULIO Vp, Asset protection and Risk Management Center LILIBETH F. PASA Vp, HoMe Market Development and Business Analytics MARTIN T. RIO 2 Vp, property and Facilities Management RICARDO C. RODRIGUEZ Vp, Compensation and Rewards planning and Management GENARO C. SANCHEZ Vp, network planning and engineering ANA MARIA A. SOTTO VP, Business Transformation Offce JULIETA S. TAECA Vp, Consumer Business System Management JESUS M. TAEDO Vp, VisMin Customer Service District PATRICK S. TANG Vp, Home Voice Solutions VICTOR Y. TRIA Vp, Corporate Business Solutions 1 Promoted effective March 5, 2013. 2 Appointed effective October 22, 2012. PLDT OFFICERS 3_PLDTar12 _rev.indd 50 5/9/13 10:48 PM 2012 annual RePoRt 249 ShareholderServices (for inquiries on dividends, stock certicates, and related matters) PLDTShareholderServices Telephone: (632) 843-1285 or 1-800-10-8300411 (Toll Free) Fax: (632) 813-2292 Email Address: pldtshareholderservices@pldt.com.ph RegistrarsandTransferAgents COMMONSTOCK 1 ANDVOTINGPREFEREDSTOCK PhilippineRegistrarandTransferAgent THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED HSBC Stock Transfer Unit 7/F HSBC Centre, 3058 Fifth Avenue West Bonifacio Global City Taguig City 1634, Philippines Telephone: (632) 581-7598 (632) 581-7519 (632) 581-7594 Fax: (632) 755-5548 Email address : stkmnl@hsbc.com.ph NON-VOTINGSERIALPREFERREDSTOCK 10%CUMULATIVECONVERTIBLEPREFERREDSTOCK SeriesHHandII 2 SERIESIVCUMULATIVENON-CONVERTIBLEREDEEMABLE PREFERREDSTOCK RIZAL COMMERCIAL BANKING CORPORATION G/F West Wing, 221 GPL (Grepalife) Building, Sen. Gil Puyat Avenue, Makati City, Philippines Telephone: (632) 892-0426 (632) 892-4156 (632) 553-6933 (632) 894-9017 Contact Center: (632) 894-9577 Fax: (632) 892-3139 Email address: wrbriones@rcbc.com joscruz@rcbc.com jpmodina@rcbc.com lldeguzman@rcbc.com DepositaryofAmericanDepositaryShares AMERICANDEPOSITARYRECEIPTFACILITY 3 JPMorgan Chase Bank, N.A. P.O. Box 64504 St. Paul, MN 55164-0504 U.S. Domestic Toll Free: (1-800) 990-1135 International Telephone No.: (1-651) 453-2128 Email address: jpmorgan.adr@wellsfargo.com Website: www.adr.com InvestorRelations (for nancial and operating information on PLDT) PLDT INVESTOR RELATIONS CENTER 12/F, Ramon Cojuangco Building Makati Avenue, Makati City, Philippines Telephone: 632) 816-8024 Facsimile: (632) 810-7138 Email address: pldt_ir_center@pldt.com.ph CorporateGovernance CORPORATE GOVERNANCE OFFICE Email address: corpgov@pldt.com.ph PLDTs Corporate Governance Manual, Code of Ethics and NYSE Section 303A.11 Disclosure, which summarizes the difference between PLDTs corporate governance practices and those required of U.S. companies listed on the NYSE, may be downloaded from: Corporate Governance Manual http://www.pldt.com.ph/governance/about/Documents/22336f71 c88c495793d15575c2addffcpldtcorpgov_manual.pdf Code of Ethics http://www.pldt.com.ph/governance/about/Documents/27623c2 0007849698da4df57179ec70dPLDT_Code_of_Business_ Conduct_and_Ethics.pdf NYSE 303A.11 Disclosure http://www.pldt.com.ph/governance/about/Documents f7933d17962d4b2c942e50ba4980f21bpldtdisclosure.pdf CustomerCareServices (for service-related concerns) PLDT CUSTOMER CARE Telephone: (632) 8888-171 Email address: customercare@pldt.com Internet users can access information about PLDT and its products and services at: www.pldt.com.ph SupplyChain,AssetProtectionand Management (for product offers, property-related matters, and asset protection/ security concerns) Telephone: (632) 816-8533 Fax: (632) 860-6586 or (632) 811-4677 Email address: SCAPMG@pldt.com.ph VendorManagement (for inquiries on vendor accreditation) Telephone: (632) 891-6304 or (632) 856-9506 Fax: (632) 860-6551 Email address: vmo@pldt.com.ph or vendorrelationmgnt@pldt.com.ph Recruitment Hotline: (632) 8-PLDTHR or (632) 8-753847 Email address: PLDTHR@pldt.com.ph 1 The shares of Common Capital Stock of PLDT are listed on the Philippine Stock Exchange (ticker: TEL). 2 The Series HH and II 10% Cumulative Convertible Preferred Stock of PLDT are listed on the Philippine Stock Exchange. On January 19, 2012, all of the outstanding shares of 10% Cumulative Convertible Preferred Stock Series A to Series FF were redeemed and retired. On August 30, 2012, all the outstanding shares of 10% Cumulative Convertible Preferred Stock Series GG were also redeemed and retired. 3 PLDT has established an American Depositary Receipt facility under which American Depositary Shares (ticker: PHI) representing shares of Common Capital Stock are listed and traded on the New York Stock Exchange. The American Depositary Shares are evidenced by American Depositary Receipts issued by the Depositary. CONTACT INFORMATION WWW.PLDT.COM.PH