##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 For the transition period from  to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 
 Date of event requiring this shell company report
 Commission file number 1-03006
 Philippine Long Distance Telephone Company
  Republic of the Philippines
 Ramon Cojuangco Building
Makati Avenue
Makati City, Philippines
 Atty. Ma. Lourdes C. Rausa-Chan, telephone: +(632) 816-8556; lrchan@pldt.com.ph ;
Ramon Cojuangco Bldg., Makati Avenue, Makati City, Philippines
  Title of each class
    
    Name of each exchange
on which registeredCommon Capital Stock, Par Value Five Philippine Pesos Per Share
    
    New York Stock Exchange*American Depositary Shares, evidenced by American Depositary Receipts, each
representing one share of Common Capital Stock
    
    New York Stock Exchange
 *
    
    Registered on the New York Stock Exchange not for trading but only in connection with the
registration of American Depositary Shares pursuant to the requirements of such stock exchange.        As at December 31, 2008:187,483,837 shares of Common Capital Stock, Par Value Five Philippine Pesos Per Share441,480,512 shares of Serial Preferred Stock, Par Value Ten Philippine Pesos Per Share
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    Non-Accelerated Filer o
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TABLE OF CONTENTS
 CERTAIN CONVENTIONS AND TERMS USED IN THIS REPORT
    
    
    3FORWARD-LOOKING STATEMENTS
    
    
    5PRESENTATION OF FINANCIAL INFORMATION
    
    
    6PART I
    
    
    6Item 1. Identity of Directors, Senior Management and Advisors
    
    
    6Item 2. Offer Statistics and Expected Timetable
    
    
    6Item 3. Key Information
    
    
    6Selected Financial Data
    
    
    6Capital Stock
    
    
    9Dividends Declared
    
    
    9Dividends Paid
    
    
    10Exchange Rates
    
    
    10Risk Factors
    
    
    11Item 4. Information on the Company
    
    
    21Overview
    
    
    21Historical Background and Development
    
    
    21Recent Developments
    
    
    22Organization
    
    
    23Strengths
    
    
    26Strategy
    
    
    27Business
    
    
    27Infrastructure
    
    
    37Interconnection Agreements
    
    
    40Licenses and Regulation
    
    
    40Competition
    
    
    43Environmental Matters
    
    
    46Intellectual Property Rights
    
    
    46Properties
    
    
    46Item 4A. Unresolved Staff Comments
    
    
    47Item 5. Operating and Financial Review and Prospects
    
    
    47Overview
    
    
    47Critical Accounting Policies
    
    
    48New Accounting Pronouncements Effective Subsequent to 2008
    
    
    53Results of Operations
    
    
    54Plans and Prospects
    
    
    88Liquidity and Capital Resources
    
    
    89Impact of Inflation and Changing Prices
    
    
    95Item 6. Directors, Senior Management and Employees
    
    
    96Directors, Key Officers and Advisors
    
    
    96Terms of Office
    
    
    103Family Relationships
    
    
    103Compensation of Key Management Personnel of the PLDT Group
    
    
    103Long-Term Incentive Plan
    
    
    104Executive Stock Option Plan
    
    
    105Share Ownership
    
    
    105Board of Directors  Independent Directors
    
    
    106Audit, Governance and Nomination, Executive Compensation and Technology Strategy Committees
    
    
    106Directors and Officers Involvement in Certain Legal Proceedings
    
    
    109Employees and Labor Relations
    
    
    111Pension and Retirement Benefits
    
    
    111Item 7. Major Shareholders and Related Party Transactions
    
    
    112Related Party Transactions
    
    
    114Item 8. Financial Information
    
    
    114Consolidated Statements and Other Financial Information
    
    
    114Legal Proceedings
    
    
    114Dividend Distribution Policy
    
    
    116
  i




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##### Table of Contents



Item 9. The Offer and Listing
    
    
    116Common Capital Stock and Amercian Depositary Shares
    
    
    116Item 10. Additional Information
    
    
    117Articles of Incorporation and By-Laws
    
    
    117Material Contracts
    
    
    122Exchange Controls and Other Limitations Affecting Securities Holders
    
    
    122Taxation
    
    
    123Documents on Display
    
    
    126Item 11. Quantitative and Qualitative Disclosures About Market Risks
    
    
    127Liquidity Risk
    
    
    127Foreign Currency Exchange Risk
    
    
    127Interest Rate Risk
    
    
    129Credit Risk
    
    
    131Impairment Assessments
    
    
    133Item 12. Description of Securities Other than Equity Securities
    
    
    134PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    134Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    134Item 15. Controls and Procedures
    
    
    134Item 16A. Audit Committee Financial Expert
    
    
    135Item 16B. Code of Business Conduct and Ethics
    
    
    135Item 16C. Principal Accountant Fees and Services
    
    
    141Item 16D. Exemption from the Listing Standards for Audit Committees
    
    
    141Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchaser
    
    
    141Item 16F. Change in Registrants Certifying Accountant
    
    
    142Item 16G. Corporate Governance
    
    
    142PART IIIItem 17. Financial Statements
    
    
    143Item 18. Financial Statements
    
    
    143Item 19. Exhibits
    
    
    144EXHIBIT INDEX
    
    
    146CERTIFICATION
    
    
    151




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CERTAIN CONVENTIONS AND TERMS USED IN THIS REPORT
 Note 2  Summary of Significant Accounting Policies and Practices
   
  
    
    3rd Brand means 3rd Brand Pte. Ltd., an 85%-owned subsidiary
of Smart;
 
    
    ACeS Philippines means ACeS Philippines Cellular Satellite Corporation, our
wholly-owned subsidiary;
 
    
    AIL means ACeS International Limited, a 36.99%-owned associate of ACeS Philippines;
 
    
    Airborne Access means Airborne Access Corporation, a 99.4%-owned subsidiary of
Smart;
 
    
    BayanTrade means BayanTrade Dotcom, Inc., a 45.11%-owned associate of ePLDT;
 
    
    BCC means Bonifacio Communications Corporation, a 75%-owned subsidiary of PLDT;
 
    
    BSP means Bangko Sentral ng Pilipinas;
 
    
    ClarkTel means PLDT Clark Telecom, Inc., a wholly-owned subsidiary of PLDT;
 
    
    CURE means Connectivity Unlimited Resources Enterprises, a wholly-owned subsidiary
of Smart;
 
    
    CyMed means CyMed, Inc., a wholly-owned subsidiary of SPi;
 
    
    DigiPar Thailand means Digital Paradise Thailand, an 87.5%-owned subsidiary of
ePLDT;
 
    
    Digital Paradise means Digital Paradise, Inc., a 75%-owned subsidiary of ePLDT;
 
    
    DSL means digital subscriber line;
 
    
    ePLDT means ePLDT, Inc., a wholly-owned subsidiary of PLDT;
 
    
    ePLDT Ventus means the umbrella brand name for ePLDTs customer interaction
solutions, including Ventus, Vocativ and Parlance;
 
    
    First Pacific means First Pacific Company Limited;
 
    
    First Pacific Group means First Pacific and its Philippine and other affiliates;
 
    
    FHI means Francom Holdings, Inc.;
 
    
    FPHC means First Philippine Holdings Corporation;
 
    
    FPUC means First Philippine Utilities Corporation;
  3




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
    
    GAAP means generally accepted accounting principles;
 
    
    GSM means global system for mobile communications;
 
    
    I-Contacts means I-Contacts Corporation, a wholly-owned subsidiary of Smart;
 
    
    IFRS means International Financial Reporting Standards as issued by the
International Accounting Standards Board;
 
    
    Infocom means Infocom Technologies, Inc., a 99.6%-owned subsidiary of ePLDT;
 
    
    IP means internet protocol;
 
    
    ISP means internet service providers;
 
    
    Level Up! means Level Up!, Inc., a 60%-owned subsidiary of ePLDT;
 
    
    Mabuhay Satellite means Mabuhay Satellite Corporation, a 67%-owned subsidiary of
PLDT;
 
    
    Maratel means PLDT-Maratel, Inc., a 97.5%-owned subsidiary of PLDT;
 
    
    Meralco means Manila Electric Company;
 
    
    netGames means netGames, Inc., an 80%-owned subsidiary of ePLDT;
 
    
    NTC means the National Telecommunications Commission of the Philippines;
 
    
    NTT means Nippon Telegraph and Telephone Corporation;
 
    
    NTT Communications means NTT Communications Corporation, a wholly-owned subsidiary
of NTT;
 
    
    NTT DoCoMo means NTT DoCoMo, Inc., a majority-owned and publicly traded subsidiary
of NTT;
 
    
    NTTC-UK means NTT Communications Capital (UK) Ltd., a wholly-owned subsidiary of NTT
Communications;
 
    
    PAPTELCO means Philippine Association of Private Telephone Companies, Inc.;
 
    
    Parlance means Parlance Systems, Inc., a wholly-owned subsidiary of ePLDT;
 
    
    PFRS means Philippine Financial Reporting Standards;
 
    
    Philcom means Philcom Corporation;
 
    
    PHC means PH Communications Holdings Corporation;
 
    
    Philippine SEC means the Philippine Securities and Exchange Commission;
 
    
    Piltel means Pilipino Telephone Corporation, a 92.5%-owned subsidiary of Smart;
 
    
    PLDT Beneficial Trust Fund means the beneficial trust fund created by PLDT to pay
the benefits under the PLDT Employees Benefit Plan;
 
    
    PLDT Global means PLDT Global Corporation, a wholly-owned subsidiary of PLDT;
 
    
    PSE means the Philippine Stock Exchange;
 
    
    SBI means Smart Broadband, Inc., a wholly-owned subsidiary of Smart;
 
    
    SCH means SmartConnect Holdings Pte. Ltd., a wholly-owned subsidiary of Smart;
 
    
    SGP means SmartConnect Global Pte., Ltd., a wholly-owned subsidiary of Smart;
 
    
    SHI means SmartHub Incorporated, a wholly-owned subsidiary of Smart;
 
    
    SIM means subscriber identification module;
  4




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##### Table of Contents




    
    SMHC means Smart Money Holdings, Inc., a wholly-owned subsidiary of Smart;
 
    
    SMI means Smart Money, Inc., a wholly-owned subsidiary of SMHC;
 
    
    SMS means short messaging service;
 
    
    Smart means Smart Communications, Inc., a wholly-owned subsidiary of PLDT;
 
    
    SNMI means Smart-NTT Multimedia, Inc., a wholly-owned subsidiary of PLDT;
 
    
    SPi means SPi Technologies, Inc., a wholly-owned subsidiary of ePLDT;
 
    
    SPi Group means SPi and its subsidiaries;
 
    
    SubicTel means PLDT Subic Telecom, Inc., a wholly-owned subsidiary of PLDT;
 
    
    TSI means Telecommunications Solutions, Inc., a wholly-owned subsidiary of SMI;
 
    
    U.S. SEC means the U.S. Securities and Exchange Commission;
 
    
    VAS means value-added service;
 
    
    VAT means value-added tax;
 
    
    Ventus means ePLDT Ventus, Inc., a wholly-owned subsidiary of ePLDT;
 
    
    Vocativ means Vocativ Systems, Inc., a wholly-owned subsidiary of ePLDT;
 
    
    WAP means wireless application protocol;
 
    
    WCI means Wireless Card, Inc., a wholly-owned subsidiary of Smart;
 
    
    W-CDMA means wireless-code division multiple access; and
 
    
    Wolfpac means Wolfpac Mobile, Inc., a wholly-owned subsidiary of Smart.
 
 FORWARD-LOOKING STATEMENTS
     5




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##### Table of Contents



PRESENTATION OF FINANCIAL INFORMATION
     
 PART I
 
 Item 1. Identity of Directors, Senior Management and Advisors
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 Selected Financial Data
     6




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Amounts in conformity with IFRS:
 2008(1)
    
    
    2008
    
    
    2007
    
    
    2006(in millions, except earnings per common share amounts, ratio of earningsto fixed charges and dividends declared per common share amounts)Statements of Operating Data:Revenues
    
    US$
    3,061
    
    

    Php
    145,837
    
    
    Php
    138,704
 
    
    Php

    127,508Service revenues
    
    
    2,999
    
    
    
    142,873
    
    
    
    135,478
    
    
    
    124,988Non-service revenues
    
    
    62
    
    
    
    2,964
    
    
    
    3,226
    
    
    
    2,520Expenses
    
    
    1,800
    
    
    
    85,786
    
    
    
    83,587
    
    
    
    82,003Net income(2)
    
    
    734
    
    
    
    34,976
    
    
    
    39,274
    
    
    
    32,581Earnings per common share for the year
attributable to equity holders of PLDTBasic
    
    
    3.78
    
    
    
    179.96
    
    
    
    205.84
    
    
    
    173.10Diluted
    
    
    3.78
    
    
    
    179.95
    
    
    
    204.88
    
    
    
    173.01Balance Sheets Data:Cash and cash equivalents
    
    
    707
    
    
    
    33,684
    
    
    
    17,447
    
    
    
    16,870Total assets
    
    
    5,301
    
    
    
    252,558
    
    
    
    240,158
    
    
    
    241,904Total long-term debt  net of current portion
    
    
    1,236
    
    
    
    58,899
    
    
    
    53,372
    
    
    
    63,769Total debt(3)
    
    
    1,551
    
    
    
    73,911
    
    
    
    60,640
    
    
    
    80,154Total liabilities(4)
    
    
    3,056
    
    
    
    145,589
    
    
    
    127,813
    
    
    
    139,052Total equity(2)
    
    
    2,245
    
    
    
    106,969
    
    
    
    112,345
    
    
    
    102,853Other Data:Depreciation and amortization
    
    
    519
    
    
    
    24,709
    
    
    
    28,613
    
    
    
    31,869Ratio of earnings to fixed charges(5)
    
    
    8.0
    x
    
    
    8.0
    x
    
    
    8.3
    x
    
    
    4.6
    xNet cash provided by operating activities
    
    
    1,643
    
    
    
    78,302
    
    
    
    77,418
    
    
    
    69,211Net cash used in investing activities
    
    
    357
    
    
    
    17,014
    
    
    
    31,319
    
    
    
    35,790Net cash used in financing activities
    
    
    954
    
    
    
    45,464
    
    
    
    44,819
    
    
    
    45,900Dividends declared to common shareholders
    
    
    771
    
    
    
    36,758
    
    
    
    28,299
    
    
    
    14,459Dividends declared per common share
    
    
    4.07
    
    
    
    194.00
    
    
    
    150.00
    
    
    
    78.00
  7




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Amounts in conformity with U.S. GAAP:
 2005
    
    
    2004(in millions, except operating income pershare amounts, earnings per commonshare amounts, ratio of earnings tofixed charges and dividends declaredper common share amounts)Statements of Operating Data:Revenues
    
    Php
    123,335
    
    
    Php
    121,173Service revenues
    
    
    120,348
    
    
    
    114,904Non-service revenues
    
    
    2,987
    
    
    
    6,269Expenses
    
    
    74,821
    
    
    
    72,634Operating income per shareBasic
    
    
    263.81
    
    
    
    266.73Diluted
    
    
    255.15
    
    
    
    252.20Net income
    
    
    40,603
    
    
    
    28,101Earnings per common shareBasic
    
    
    217.84
    
    
    
    146.32Diluted
    
    
    211.93
    
    
    
    145.30Balance Sheets Data:Cash and cash equivalents
    
    
    30,059
    
    
    
    27,321Total assets
    
    
    269,709
    
    
    
    279,041Total long-term debt  net of current portion
    
    
    93,516
    
    
    
    131,377Total debt(3)
    
    
    112,313
    
    
    
    159,455Total liabilities(4)
    
    
    176,980
    
    
    
    215,145Total stockholders equity
    
    
    79,595
    
    
    
    48,079Other Data:Depreciation and amortization
    
    
    27,855
    
    
    
    20,098Ratio of earnings to fixed charges(5)
    
    
    5.9
    x
    
    
    4.1
    xNet cash provided by operating activities
    
    
    66,280
    
    
    
    63,107Net cash used in investing activities
    
    
    13,080
    
    
    
    24,764Net cash used in financing activities
    
    
    49,470
    
    
    
    30,325Dividends declared to common shareholders
    
    
    9,624
    
    
    
    Dividends declared per common share
    
    
    56.00
    
    
    
    
 
 (1)
    
    We maintain our accounts in Philippine pesos. For convenience, the peso financial
information as at and for the year ended December 31, 2008, has been translated into U.S.
dollars at the exchange rate of Php47.647 to US$1.00, the rate quoted through the Philippine
Dealing System as at December 31, 2008. This translation should not be construed as a
representation that the Philippine peso amounts represent, or have been or could be converted
into, U.S. dollars at that rate or any other rate.(2)
    
    Net income and total equity under IFRS includes share of minority interest in consolidated net
income and net assets, respectively.(3)
    
    Total debt represents current portion of long-term debt, long-term debt  net of current
portion and notes payable.(4)
    
    Total liabilities on a consolidated basis in 2008, 2007 and 2006 under IFRS represent the sum
of current and noncurrent liabilities. Total liabilities on a consolidated basis in 2005 and
2004 under U.S. GAAP represent the difference between total assets and minority interest in
consolidated subsidiaries, preferred stock subject to mandatory redemption and stockholders
equity.(5)
    
    For purposes of this ratio, Earnings consist of: (a) pre-tax income from continuing
operations before adjustment for minority interest in consolidated subsidiaries or income or
loss from equity investees, (b) fixed charges, (c) amortization of capitalized interest, (d)
distributed income of equity investees, and (e) share of pre-tax losses of equity investees
for which charges arising from guarantees are included in fixed charges; less the sum of the
following: (1) capitalized interest, (2) preference security dividend requirements of
consolidated subsidiaries, and (3) the minority interest in pre-tax income of subsidiaries
that have not incurred fixed chargesFixed charges consist of interest expensed and capitalized interest, amortized premiums,
discounts and capitalized expenses related to indebtedness, an estimate of interest within
rental expense, and preference security dividend requirements of consolidated subsidiaries.  8




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Capital Stock
  December 31,2008
    
    
    2007(in millions)Serial Preferred Stock10% Cumulative Convertible Preferred StockA to HH
    
    Php
    4,054.81
    
    
    Php
    4,056.50Convertible Preferred Stock Subject to Mandatory RedemptionSeries V(1)
    
    
    0.01
    
    
    
    0.31Series VI(1)
    
    
    0.04
    
    
    
    6.80Cumulative Non-convertible Redeemable Preferred StockSeries IV
    
    
    360.00
    
    
    
    360.00Php
    4,414.86
    
    
    Php
    4,423.61Common Stock
    
    Php
    947.28
    
    
    Php
    943.70
 
 (1)
    
    Preferred stock subject to mandatory redemption in 2008 (see Note 18  Interest-bearing
Financial Liabilities  Preferred Stock Subject to Mandatory Redemption to the accompanying
audited consolidated financial statements in Item 18 for further discussion). 
 Dividends Declared
  Date
    
    
    
    AmountEarnings
    
    Approved
    
    Record
    
    Payable
    
    Per share
    
    
    Total Declared(in millions)2006
    
    August 8, 2006
    
    August 21, 2006
    
    September 21, 2006
    
    Php
    50
    
    
    Php
    9,3792006
    
    March 6, 2007
    
    March 20, 2007
    
    April 20, 2007
    
    
    50
    
    
    
    9,4292006
    
    August 7, 2007
    
    August 24, 2007
    
    September 24, 2007
    
    
    40
    
    
    
    7,548140
    
    
    
    26,3562007
    
    August 7, 2007
    
    August 24, 2007
    
    September 24, 2007
    
    
    60
    
    
    
    11,3222007
    
    March 4, 2008
    
    March 19, 2008
    
    April 21, 2008
    
    
    68
    
    
    
    12,8532007
    
    March 4, 2008
    
    March 19, 2008
    
    April 21, 2008
    
    
    56
    
    
    
    10,585184
    
    
    
    34,7602008
    
    August 5, 2008
    
    August 22, 2008
    
    September 22, 2008
    
    
    70
    
    
    
    13,1402008
    
    March 3, 2009
    
    March 18, 2009
    
    April 21, 2009
    
    
    70
    
    
    
    13,1242008
    
    March 3, 2009
    
    March 18, 2009
    
    April 21, 2009
    
    
    60
    
    
    
    11,249Php
    200
    
    
    Php
    37,513
 Note 17  Equity Note 18  Interest-bearing Financial Liabilities Note 17  Equity
  9




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Dividends Paid
  In Philippine Peso
    
    
    In U.S. Dollars2006
    
    
    78.00
    
    
    
    1.5432007
    
    
    150.00
    
    
    
    3.2642008
    
    
    194.00
    
    
    
    4.474Regular Dividend  April 21, 2008
    
    
    68.00
    
    
    
    1.624Regular Dividend  September 22, 2008
    
    
    70.00
    
    
    
    1.513Special Dividend  April 21, 2008
    
    
    56.00
    
    
    
    1.3372009
    
    
    130.00
    
    
    
    2.728Regular Dividend  March 3, 2009
    
    
    70.00
    
    
    
    1.429Special Dividend  March 3, 2009
    
    
    60.00
    
    
    
    1.226
 Note:
    
    Dividends on PLDTs common stock were declared and paid in Philippine pesos. For the
convenience of the reader, the peso dividends are translated into U.S. dollars based on the
Philippine Dealing System Reference Rate on the respective dates of dividend payments. 
 Exchange Rates
   Year Ended December 31,Period End
    
    
    Average(1)
    
    
    High(2)
    
    
    Low(3)2004
    
    Php
    56.341
    
    
    Php
    56.149
    
    
    Php
    55.142
    
    
    Php
    56.4432005
    
    
    53.062
    
    
    
    55.006
    
    
    
    53.062
    
    
    
    56.3212006
    
    
    49.045
    
    
    
    51.165
    
    
    
    49.045
    
    
    
    53.5872007
    
    
    41.411
    
    
    
    45.879
    
    
    
    41.142
    
    
    
    49.1562008
    
    
    47.647
    
    
    
    44.706
    
    
    
    40.360
    
    
    
    49.9842009 (through March 31, 2009)
    
    
    48.422
    
    
    
    48.141
    
    
    
    46.554
    
    
    
    49.056
 
 Source:
    
    Philippine Dealing System Reference Rate(1)
    
    Calculated by using the average of the exchange rates on the last day of each month during
the period.(2)
    
    Highest exchange rate for the period.(3)
    
    Lowest exchange rate for the period. MonthPeriod End
    
    
    Average(1)
    
    
    High(2)
    
    
    Low(3)2008September
    
    Php
    47.264
    
    
    Php
    46.756
    
    
    
    46.253
    
    
    
    47.270October
    
    
    48.902
    
    
    
    48.100
    
    
    
    46.980
    
    
    
    49.378November
    
    
    48.799
    
    
    
    49.181
    
    
    
    48.078
    
    
    
    49.984December
    
    
    47.647
    
    
    
    48.026
    
    
    
    46.708
    
    
    
    49.4712009January
    
    
    47.340
    
    
    
    47.192
    
    
    
    46.554
    
    
    
    47.591February
    
    
    48.662
    
    
    
    47.651
    
    
    
    46.993
    
    
    
    48.662March (through March 31, 2009)
    
    
    48.422
    
    
    
    48.447
    
    
    
    48.024
    
    
    
    49.056
 
 Source:
    
    Philippine Dealing System Reference Rate(1)
    
    Calculated by using the average of the exchange rates during the month.(2)
    
    Highest exchange rate for the month.(3)
    
    Lowest exchange rate for the month. 
  10




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##### Table of Contents



Risk Factors
 Risks Relating to Us
 We face competition from well-established telecommunications operators and may face competition
from new entrants that may adversely affect our business, results of operations, financial
condition and prospects
   Talk N Text
  The cellular telecommunications industry may not continue to grow
   11




---



##### Table of Contents



Rapid changes in telecommunications technology may adversely affect the economics of our existing
businesses and the value of our assets, increase our required capital expenditures and create new
competition
   Our results of operations and our financial position could be materially and adversely affected if
the Philippine peso significantly fluctuates against the U.S. dollar
     
    
    political and economic developments affecting the Philippines;
    
    global economic and financial trends;
    
    the volatility of regional currencies, particularly the Japanese yen;
    
    any interest rate increases by the Federal Reserve Bank of the United States;
    
    higher demand for U.S. dollars by both banks and domestic businesses to service
their maturing U.S. dollar obligations; and
    
    foreign exchange traders including banks covering their short U.S. dollar positions.
  12




---



##### Table of Contents



Our results of operations have been, and may continue to be, adversely affected by competition in,
and the emergence of new services which may put additional pressure on, our traditional
international and national long distance services
   
    
    increased competition from other domestic and international telecommunications
providers;
 
    
    advances in technology;
 
    
    alternative providers offering internet telephony, also known as Voice over Internet
Protocol, or VoIP, and broadband capacity; and
 
    
    unauthorized traffic termination and bypass routings by international simple resale
operators.
   We may not be successful in our acquisitions of and investments in other companies and businesses,
and may therefore be unable to fully implement our business strategy
  
    
    our ability to identify suitable opportunities for investment or acquisition;
 
    
    our ability to reach an acquisition or investment agreement on terms that are
satisfactory to us or at all;
 
    
    the extent to which we are able to exercise control over the acquired company;
 
    
    the economic, business or other strategic objectives and goals of the acquired
company compared to those of the PLDT Group; and
 
    
    our ability to successfully integrate the acquired company or business with our
existing businesses.
   13




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##### Table of Contents



Our debt instruments contain restrictive covenants which require us to maintain certain financial
tests and our indebtedness could impair our ability to fulfill our financial obligations, service
our other debt and carry out new financings
      Our subsidiaries could be limited in their ability to pay dividends to us due to internal cash
requirements and their creditors having superior claims to their assets and cash flows, which could
materially and adversely affect our financial condition
     14




---



##### Table of Contents



Our businesses require substantial capital investment which we may not be able to finance
   Our businesses depend on the reliability of our network infrastructure which is subject to
physical, technological and other risks
  
    
    physical damage;
 
    
    power loss;
 
    
    capacity limitation;
 
    
    cable theft;
 
    
    software defects; and
 
    
    breaches of security by computer viruses, break-ins or otherwise.
  A significant number of PLDTs shares are held by three shareholders which may not act in the
interests of other shareholders or stakeholders in PLDT
   15




---



##### Table of Contents




    
    capital expenditures in excess of US$50 million;
 
    
    any investments, if the aggregate amount of all investments for the previous 12
months is greater than US$25 million in the case of all investments to any existing
investees and US$100 million in the case of all investments to any new or existing
investees, determined on a rolling monthly basis;
 
    
    any investments in a specific investee, if the cumulative value of all investments
made by us in that investee is greater than US$10 million in the case of an existing
investee and US$50 million in the case of a new investee;
 
    
    issuance of common stock or stock that is convertible into common stock;
 
    
    new business activities other than those we currently engage in; and
 
    
    merger or consolidation.
  
    
    elections of PLDTs directors; and
 
    
    approval of major corporate actions, which require the vote of common stockholders.
  
    
    NTT DoCoMo is entitled to nominate one additional NTT DoCoMo nominee to the board of
directors of each of PLDT and Smart;
 
    
    PLDT must consult NTT DoCoMo no later than 30 days prior to the first submission to
the board of PLDT or certain of its committees of any proposal of investment in an
entity that would primarily engage in a business that would be in direct competition or
substantially the same business opportunities, customer base, products or services with
business carried on by NTT DoCoMo, or which NTT DoCoMo has announced publicly an
intention to carry on;
 
    
    PLDT must procure that Smart does not cease to carry on its business, dispose of all
of its assets, issue common shares, merge or consolidate, or effect winding up or
liquidation without PLDT first consulting with NTT DoCoMo no later than 30 days prior
to the first submission to the board of PLDT or Smart, or certain of its committees;
and
 
    
    PLDT must first consult with NTT DoCoMo no later than 30 days prior to the first
submission to the board of PLDT or certain of its committees for the approval of any
transfer by any member of the PLDT Group of Smart common capital stock to any person
who is not a member of the PLDT Group.
  If a major shareholder sells its interest in PLDT, the transaction may result in an event of
default under certain circumstances
   16




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##### Table of Contents



The franchise of Smart may be revoked due to its failure to conduct a public offering of its shares
 quo warranto
 quo warranto
 Our business is significantly affected by governmental laws and regulations, including regulations
in respect of our franchises, rates and taxes
     17




---



##### Table of Contents



The NTC may implement proposed changes in existing regulations and introduce new regulations which
may result in increased competition and may have negative implications for our revenues and
profitability
  
    
    to bill their subscribers for cellular calls on a six-second pulse basis instead of
the current per minute basis;
 
    
    not to bill calls directed to recorded voice messages; and
 
    
    to extend the expiration date of prepaid cards from the current two months to two
years.
   
    
    a review of market trends deemed to impinge on current and future state of
competition in the sector;
 
    
    an exploration of major policies that may change the balance of market power, hence
the nature and degree of competition;
 
    
    an assessment of the quality of current regulation, identifying major handicaps of
the NTC; and
 
    
    a discussion of the urgent tasks for the NTC to effectively govern a dynamic and
complex industry.
    18




---



##### Table of Contents



(a)
    
    guidelines on the mandatory interconnection of backhaul networks to the cable landing
station, which were issued and became effective on October 7, 2008; and
 (b)
    
    guidelines on the interconnection of local exchange carriers, or LECs, in local calling
areas that eliminate interconnection access charges between LECs within a local calling
area, which were issued and became effective on May 30, 2008.
   If we are unable to install and maintain telecommunications facilities and equipment in a timely
manner, we may not be able to maintain our current market share and the quality of our services,
which may have negative implications for our revenue and
profitability
  
    
    shortages of equipment, materials and labor;
 
    
    work stoppages and labor disputes;
 
    
    interruptions resulting from inclement weather and other natural disasters;
 
    
    unforeseen engineering, environmental and geological problems; and
 
    
    unanticipated cost increases.
  Failure to maintain effective internal control over financial reporting in accordance with Section
404 of the Sarbanes-Oxley Act of 2002 could adversely impact investor confidence and the market
price of our common shares and ADSs
    19




---



##### Table of Contents



Risks Relating to the Philippines
 PLDTs business may be affected by political or social or economic instability in the Philippines
     If foreign exchange controls were to be imposed, our ability to meet our foreign currency payment
obligations could be adversely affected
  
    
    suspend temporarily or restrict sales of foreign exchange;
 
    
    require licensing of foreign exchange transactions; or
 
    
    require the delivery of foreign exchange to the BSP or its designee banks.
  The occurrence of natural catastrophes may materially disrupt our operations
   20




---



##### Table of Contents



Item 4. Information on the Company
 
 Overview
  Vitro TM
   www.pldt.com.ph
 
 Historical Background and Development
   21




---



##### Table of Contents



Recent Developments
 Acquisition of Debt and Equity of Philcom Corporation, or Philcom
  Note 11  Goodwill and Intangible Assets
  Investment by Piltel in Meralco
    22




---



##### Table of Contents



Contemplated Consolidation of Cellular Business under Smart
 Talk N Text Talk N Text
 
 Organization
  Percentage of OwnershipName of Subsidiary
    
    Place of Incorporation
    
    Principal Activity
    
    Direct
    
    
    IndirectWirelessSmart
    
    Philippines
    
    Cellular mobile services
    
    
    100.0
    
    
    
    Smart Broadband, Inc.
    
    Philippines
    
    Internet broadband distribution
    
    
    
    
    
    
    100.0SmartConnect Holdings Pte. Ltd.
    
    Singapore
    
    Investment company
    
    
    
    
    
    
    100.0I-Contacts Corporation
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Wolfpac Mobile, Inc.
    
    Philippines
    
    Mobile applications development and services
    
    
    
    
    
    
    100.0SmartConnect Global Pte. Ltd.
    
    Singapore
    
    International trade of satellites and GSM enabled global telecommunications
    
    
    
    
    
    
    100.0Wireless Card, Inc.
    
    Philippines
    
    Promotion of the sale and/or patronage of debit and/or charge cards
    
    
    
    
    
    
    100.0Smarthub, Incorporated
    
    Philippines
    
    Development and sale of software, maintenance and support services
    
    
    
    
    
    
    100.0Smart Money Holdings Corporation
    
    Cayman Islands
    
    Investment Company
    
    
    
    
    
    
    100.0Smart Money, Inc.
    
    Cayman Islands
    
    Mobile commerce solutions marketing
    
    
    
    
    
    
    100.0Telecoms Solutions, Inc.
    
    Mauritius
    
    Mobile commerce platforms
    
    
    
    
    
    
    100.0Far East Capital Limited
    
    Cayman Islands
    
    Cost effective offshore financing and risk management activities for Smart
    
    
    
    
    
    
    100.0PH Communications Holdings Corporation
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0Francom Holdings, Inc.
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0Connectivity Unlimited Resource Enterprise
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    100.0Airborne Access Corporation
    
    Philippines
    
    Wireless Internet services
    
    
    
    
    
    
    99.4Pilipino Telephone Corporation
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    92.53rd Brand Pte. Ltd.
    
    Singapore
    
    Solutions and systems integration services
    
    
    
    
    
    
    85.0Telesat, Inc.
    
    Philippines
    
    Satellite communications services
    
    
    100.0
    
    
    
    ACeS Philippines Cellular Satellite
Corporation
    
    Philippines
    
    Satellite information and messaging services
    
    
    88.5
    
    
    
    11.5Mabuhay Satellite Corporation
    
    Philippines
    
    Satellite communications services
    
    
    67.0
    
    
    
    Fixed LinePLDT Clark Telecom, Inc.
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT Subic Telecom, Inc.
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    Philcom Corporation
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT Global Corporation
    
    British Virgin Islands
    
    Telecommunications services
    
    
    100.0
    
    
    
    Smart-NTT Multimedia, Inc.
    
    Philippines
    
    Data and network services
    
    
    100.0
    
    
    
    PLDT-Maratel, Inc.
    
    Philippines
    
    Telecommunications services
    
    
    97.5
    
    
    
    Bonifacio Communications Corporation
    
    Philippines
    
    Telecommunications, infrastructure and related value-added services
    
    
    75.0
    
    
    
    
  23




---



##### Table of Contents



Percentage of OwnershipName of Subsidiary
    
    Place of Incorporation
    
    Principal Activity
    
    Direct
    
    
    IndirectInformation and Communications Technology, or ICTePLDT, Inc., or ePLDT
    
    Philippines
    
    Information and communications infrastructure for Internet-based services, e-commerce, customer interaction solutions
and IT-related services
    
    
    100.0
    
    
    
    SPi Technologies, Inc. and Subsidiaries
    
    Philippines
    
    Knowledge processing solutions
    
    
    
    
    
    
    100.0ePLDT Ventus, Inc.
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Vocativ Systems, Inc.
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Parlance Systems, Inc.
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Infocom Technologies, Inc.
    
    Philippines
    
    Internet access services
    
    
    
    
    
    
    99.6Digital Paradise Thailand
    
    Thailand
    
    Internet access services
    
    
    
    
    
    
    87.5netGames, Inc.
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    80.0Digital Paradise, Inc.
    
    Philippines
    
    Internet access services
    
    
    
    
    
    
    75.0Level Up! (Philippines), Inc.
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    60.0
      Note 2  Summary of Significant Accounting Policies and Practices Note 11  Goodwill
and Intangible Assets
 Wireless
   24




---



##### Table of Contents



Fixed Line
    25




---



##### Table of Contents



Information and Communications Technology
 Vitro
 
 Strengths
  
    
    Recognized Brands. PLDT and Smart are strong and widely recognized brand names in
the Philippines. We have built the PLDT brand name for 80 years as the leading
telecommunications provider in the Philippines. Smart is recognized in the Philippines
as an innovative provider of high-quality cellular services. Piltels Talk N Text
brand, which is provided using Smarts network, has also gained significant recognition
as a value for money brand.
 
    
    Leading Market Shares. With approximately 37 million fixed line and cellular
subscribers as at December 31, 2008, we have the leading market positions in both the
fixed line and cellular markets in the Philippines.
 
    
    Diversified Revenue Sources. We derive our revenues from our three business
segments, namely, wireless, fixed line and ICT businesses, with wireless contributing
61%, fixed line 32% and ICT 7% to our consolidated revenues in 2008. Revenue sources of
our wireless business segment include cellular services, which include voice services
and text message-related and VAS, and wireless broadband services. Our fixed line
business derives service revenues from local exchange, international long distance,
national long distance and data and other network services. In our ICT business,
sources of revenue include knowledge processing solutions, customer interaction
solutions and internet and online gaming, broadband and data center services. Fixed
line revenues, which represented 32%, 33% and 36% of our consolidated revenues in 2008,
2007, and 2006, respectively, have been declining over the past years as a share of our
consolidated revenues due to pressures on traditional fixed line voice revenues,
resulting from decreases in our local exchange, international long distance and
national long distance services, and reduced international interconnection rates. We
will continue to identify and develop new revenue sources to further broaden our
diversified revenue base for our wireless, fixed line and ICT businesses.
 
    
    Advanced Integrated Network. With one of the most advanced and extensive
telecommunications networks in the Philippines, we are able to offer a wide array of
communications services. We are enhancing the capabilities of our fixed line and
wireless networks to allow us to better exploit this competitive strength and achieve
higher levels of network efficiency in providing voice and data services. In addition,
we continue our upgrade to NGN and our roll out of 3G and wireless broadband in order
to increase broadband subscribers, and expand our data/broadband capabilities.
 
    
    Innovative Products and Services. We have successfully introduced a number of
innovative and award-winning cellular products and services, including Smart Loadand
Pasa Load. Smart Loadis an over-the-air electronic loading facility designed to
make reloading of air time credits more convenient for, and accessible to consumers.
Pasa Load(the term pasa means transfer), is a derivative service of Smart Load
that allows load transfers to other Smart Buddyand Talk N Textsubscribers.
 
    
    Strong Strategic Relationships. We have important strategic relationships with
First Pacific, NTT DoCoMo and NTT Communications. The technological support,
international experience and management expertise made available to us through these
strategic relationships enhance our market leadership and ability to provide and
cross-sell a more complete range of products and services.
  26




---



##### Table of Contents



Strategy
  
    
    Build on our leading positions in the fixed line and wireless businesses. We plan
to build on our position as the leading provider of fixed line service in the
Philippines by continuing to launch new products and services to increase subscriber
value and utilization of our existing facilities and equipment at reduced cost. We
plan to build on our position as the leading wireless service provider in the
Philippines by continuing to introduce new products and services to increase our
subscribers use of our network for both voice and data, as well as their reliance on
our services. We are currently upgrading our fixed line facilities to NGN, and have
rolled out a 3G network based on a W-CDMA technology as well as expanding our DSL and
wireless broadband facilities. Our operating target is to continue growth in
profitability by increasing our revenues while controlling our costs.
 
    
    Capitalize on our strength as an integrated provider of telecommunications services.
We offer the broadest range of telecommunications services among all operators in the
Philippines. We plan to capitalize on this position to maximize revenue opportunities
by bundling and cross-selling our products and services, and by developing convergent
products that feature the combined benefits of voice and data, fixed line, wireless and
ICT services utilizing our network and business platforms. We are also lowering our
costs by integrating the operations of our different businesses.
 
    
    Strengthen our leading position in the data and broadband market. Leveraging on the
inherent strength of our fixed line and wireless businesses, we are committed to
further develop our fastest growing business segment  broadband, data and other
network services. Consistent with our strategy of introducing innovative products and
services using advanced technology, we have launched various products and services that
address different market needs.
 
    
    Maintain a strong financial position and improve shareholder returns.In recent
years, we have significantly improved our financial position by utilizing our cash
flows principally for debt reduction. Our debt decreased to US$1.6 billion as at
December 31, 2008. As the cash flows generated by our businesses have increased and
our leverage ratios have improved, we have been able to restore the payment of cash
dividends to our common shareholders beginning 2005 and have increased our cash
dividend payout ratio in 2006, 2007 and 2008. We expect that a greater proportion of
our free cash flows in succeeding years will be utilized for the payment of cash
dividends to common shareholders and investments in new growth areas while continuing
to maintain a healthy balance sheet position. As part of our growth strategy, we made
and may continue to make acquisitions and investments in companies or businesses. We
will continue to consider value-accretive investments in related businesses such as
those in the global outsourcing and off-shoring industry.
 
 Business
 Wireless
  Cellular Service
 Overview
 Smart Money Mobile Banking Talk N Text
  27




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006Systemwide cellular subscriber base
    
    
    35,224,604
    
    
    
    30,041,030
    
    
    
    24,175,384Smart
    
    
    20,899,753
    
    
    
    20,339,204
    
    
    
    17,201,005Prepaid
    
    
    20,501,617
    
    
    
    19,997,324
    
    
    
    16,882,442Postpaid
    
    
    398,136
    
    
    
    341,880
    
    
    
    318,563Piltel(1)
    
    
    14,308,493
    
    
    
    9,701,826
    
    
    
    6,974,379CURE
    
    
    16,358
    
    
    
    
    
    
    
    Growth rate of cellular subscribers
    
    
    17
    %
    
    
    24
    %
    
    
    18
    %Smart
    
    
    3
    %
    
    
    18
    %
    
    
    12
    %Piltel(1)
    
    
    47
    %
    
    
    39
    %
    
    
    40
    %CURE
    
    
    100
    %
    
    
    
    
    
    
    Cellular revenues (in millions)
    
    Php
    87,518
    
    
    Php
    82,334
    
    
    Php
    75,617Voice
    
    
    37,287
    
    
    
    36,105
    
    
    
    35,233Data
    
    
    47,792
    
    
    
    44,092
    
    
    
    38,672Others(1)
    
    
    2,439
    
    
    
    2,137
    
    
    
    1,712Percentage of cellular revenues to total wireless service revenues
    
    
    94
    %
    
    
    95
    %
    
    
    96
    %Percentage of cellular revenues to total service revenues
    
    
    57
    %
    
    
    57
    %
    
    
    56
    %
 (1)
    
    Represents Talk N Text, a prepaid service provided by Piltel using Smarts network. Piltels
revenue is net of service fees payable to Smart for using Smarts network. Piltel does not
offer postpaid service. Service Plans Smart Buddy, Smart Gold, addict mobile Smart Infinity. Smart Buddy Smart Gold, addict mobile Smart Infinity Talk N Text,
 Smart 258
  Voice Services.
 Data Services
   28




---



##### Table of Contents




    
    Smart Money,launched in conjunction with MasterCard, enables subscribers to pay for
their purchases by transferring money from their bank accounts to their Smart Money
cards, reload their prepaid cards electronically, as well as download specialized
content such as ringtones, logos, caller ringback tunes and games;
 
    
    Mobile Banking, launched in collaboration with various banks, allows subscribers to
execute banking transactions such as balance inquiries and transfers over their mobile
telephones; and
 
    
    Smart Padala, one of the many innovative initiatives from our Smart Moneyplatform,
is the first cash remittance service through text and is faster and cheaper than
traditional remittance arrangements. It was launched initially as an international
remittance service for overseas Filipino workers but is now available for domestic
remittances as well.
 SmartBro SmartBro SmartBro
  Rates and Discounts
  Smart Buddy Talk N Text Smart Load Smart Loads
  29




---



##### Table of Contents



Smart Load Pasa Load
 Smart Buddy Smart Buddy Talk N
Text Talk
N Text Talk N Text Smart Buddy
    Smart Load Smart Load
   30




---



##### Table of Contents



Wireless Broadband, Satellite and Other Services
 Overview
  SBI
 Smart Bro Smart Bro myDSL
 Airborne Access
  Wolfpac
  PLDT WeRoam
 PLDT WeRoam WeRoam
 Mabuhay Satellite
  ACeS Philippines
 Note 22  Related Party
Transactions Note 24  Contractual Obligations and Commercial Commitments
   31




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##### Table of Contents



Revenues
  Rates
 Smart Bro Smart Bro Plug-It Smart Bro Plug-It
  WeRoam
 WeRoam WeLoad
  Fixed Line
  PLDT Landline Plus PLDT Landline
Plus
 Local Exchange Service
   32




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006Number of local exchange line subscribers
    
    
    1,782,356
    
    
    
    1,724,702
    
    
    
    1,776,647Number of fixed line employees
    
    
    7,813
    
    
    
    8,080
    
    
    
    8,711Number of local exchange line subscribers per employee
    
    
    228
    
    
    
    213
    
    
    
    204Total local exchange service revenues (in millions)
    
    Php
    15,923
    
    
    Php
    16,205
    
    
    Php
    16,965Local exchange service revenues as a percentage of total fixed line service revenues
    
    
    32
    %
    
    
    33
    %
    
    
    34
    %Local exchange service revenues as a percentage of total service revenues
    
    
    10
    %
    
    
    11
    %
    
    
    13
    %
 Rates
  TelePwede TelePwede PLDT Landline Plus
    International Long Distance Service
   33




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006Total call volumes (million minutes)
    
    
    2,024
    
    
    
    2,280
    
    
    
    2,177Inbound call volumes (million minutes)
    
    
    1,786
    
    
    
    2,007
    
    
    
    1,984Outbound call volumes (million minutes)
    
    
    238
    
    
    
    273
    
    
    
    193Inbound-outbound call ratio
    
    
    7.5:1
    
    
    
    7.4:1
    
    
    
    10.3:1Total international long distance service revenues (in millions)
    
    Php
    7,063
    
    
    Php
    8,674
    
    
    Php
    9,933International long distance service revenues as a percentage of total fixed line
service revenues
    
    
    14
    %
    
    
    18
    %
    
    
    20
    %International long distance service revenues as a percentage of total service revenues
    
    
    5
    %
    
    
    6
    %
    
    
    7
    %
    Net Settlement2008
    
    
    2007
    
    
    2006(in millions)United States
    
    US$
    46
    
    
    US$
    55
    
    
    US$
    54Saudi Arabia
    
    
    30
    
    
    
    28
    
    
    
    27United Arab Emirates
    
    
    20
    
    
    
    18
    
    
    
    15Japan
    
    
    14
    
    
    
    12
    
    
    
    12Canada
    
    
    9
    
    
    
    17
    
    
    
    18Taiwan
    
    
    6
    
    
    
    6
    
    
    
    4Ireland
    
    
    6
    
    
    
    5
    
    
    
    2Italy
    
    
    5
    
    
    
    10
    
    
    
    11Singapore
    
    
    5
    
    
    
    3
    
    
    
    1Others
    
    
    33
    
    
    
    42
    
    
    
    41Total
    
    US$
    174
    
    
    US$
    196
    
    
    US$
    185
 Rates
   Budget Card Budget Card Middle East
Edition Budget Card Budget Card Middle East
Edition
  34




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##### Table of Contents



National Long Distance Service
   2008
    
    
    2007
    
    
    2006Total call volumes (million minutes)
    
    
    1,944
    
    
    
    2,183
    
    
    
    2,251Total national long distance service revenues (in millions)
    
    Php
    6,207
    
    
    Php
    6,338
    
    
    Php
    6,921National long distance service revenue as a percentage of total fixed line
service revenues
    
    
    13
    %
    
    
    13
    %
    
    
    14
    %National long distance service revenue as a percentage of total service revenues
    
    
    4
    %
    
    
    4
    %
    
    
    5
    %
  Rates
     Data and Other Network Services
   35




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006Number of DSLbroadband subscribers
    
    
    432,583
    
    
    
    264,291
    
    
    
    133,159Number of PLDT Vibenarrowband subscribers
    
    
    101,411
    
    
    
    230,995
    
    
    
    297,250Total data and other network service revenues (in millions)
    
    Php
    18,607
    
    
    Php
    15,921
    
    
    Php
    13,725Data and
other network service revenues as a percentage of total fixed line service revenues
    
    
    38
    %
    
    
    33
    %
    
    
    28
    %Data and other network service revenues as a percentage of total service revenues
    
    
    12
    %
    
    
    11
    %
    
    
    10
    %
   PLDT DSL myDSL BizDSL PLDT
Vibe
 Shops.work Unplugged
  Information and Communications Technology
 Ventus Vitro
 Knowledge Processing Solutions
   36




---



##### Table of Contents



Customer Interaction Solutions
 ePLDT Ventus Ventus ePLDT
Ventus
 Internet and Online Gaming
 WarpSpeed Speed Tipid Netopia.
 Data Center
 Vitro
 
 Infrastructure
 Wireless Network Infrastructure
 Cellular
     37




---



##### Table of Contents



NanoBTS,
   Wireless Broadband, Satellite and Other Services
    Fixed Line Network Infrastructure
 Domestic
     38




---



##### Table of Contents



International
   Cable System
    
    Countries Being LinkedG-P
    
    Guam and the PhilippinesAsia-Pacific Cable Network
    
    Korea, Japan, Hong Kong, Taiwan, Australia, Philippines, Singapore,
Malaysia, Indonesia and ThailandAsia-Pacific Cable Network 2
    
    Philippines, Hong Kong, Japan, Korea, Malaysia, Singapore, China and
TaiwanTranspacific Cable No. 5
    
    Guam, Japan, Hawaii and the U.S. MainlandSEA-ME-WE-3
    
    Japan, Korea, China, Taiwan, Hong Kong, Macau, Philippines, Vietnam,
Brunei, Malaysia, Singapore, Indonesia, Australia, Thailand,
Myanmar, Sri Lanka, India, Pakistan, United Arab Emirates, Oman,
Djibouti, Saudi Arabia, Egypt, Cyprus, Turkey, Greece, Italy,
Morocco, Portugal, France, UK, Belgium and GermanyAmericas Cable 1
    
    U.S. Mainland, U.S. Virgin Islands, Brazil, Trinidad and VenezuelaChina-U.S. Cable
    
    Japan, China, Taiwan, Korea, Guam and U.S. MainlandColumbus II Cable
    
    U.S. Mainland, Italy, U.S. Virgin Islands, Mexico, Portugal and SpainFLAG Cable
    
    Japan, Korea, China, Hong Kong, Malaysia, Thailand, India, United
Arab Emirates, Saudi Arabia, Egypt, Italy, Spain and UKRJK Cable
    
    Russia, Japan and KoreaSouthern Cross Cable
    
    U.S. Mainland, Hawaii, Fiji, Australia and New ZealandTVH Cable
    
    Thailand, Vietnam and Hong KongEAC Cable
    
    Japan, Hong Kong, Korea, Taiwan, Singapore and the PhilippinesPC-1, Japan-U.S. Cable and TGN
    
    Japan and the U.S.
  39




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##### Table of Contents



Asia-America Gateway, Asia-America Gateway
 
 Interconnection Agreements
       
 Licenses and Regulations
 Licenses
   40




---



##### Table of Contents




    
    begin installation and rollout of its 3G network no later than 18 months from the
date of the award;
    
    start commercial operations no later than 30 months from the date of the award; and
    
    cover at least 80% of provincial capitals and 80% of chartered cities within five
years.
    41




---



##### Table of Contents



Carrier
    
    Spectrum System
    
    Frequency Assignment
    
    BandwidthSmart
    
    ETACS/GSM 900
    
    897.5-905/942.5-950 MHz
    
    7.5 MHzGSM 1800
    
    1725-1730/1820-1825 MHz
    
    5.0 MHz1730-1732.5/1825-1827.5 MHz
    
    2.5 MHz1735-1740/1830-1835 MHz
    
    5.0 MHz1745-1750/1840-1845 MHz
    
    5.0 MHz1780-1782.5/1875-1877.5 MHz
    
    2.5 MHz3G (W-CDMA)
    
    1920-1935/2110-2125 MHz
    
    15.0 MHz825-835/870-880 MHz
    
    10.0 MHzPiltel
    
    AMPS/CDMA
    
    824-825/869-870 MHz
    
    1.0 MHz845-846.5/890-891.5 MHz
    
    1.5 MHzSBI
    
    Wireless broadband
    
    2400-2483.5 MHz *
    
    73 MHz3400-3590 MHz *
    
    94 MHz5470-5850 MHz *
    
    123 MHzCURE
    
    3G
    
    1955-1965/2145-2155 MHz
    
    10.0 MHz
 
 *
    
    SBI frequency assignments on these bands are non-contiguous and are on a per station and
location basis. Material Effects of Regulation on our Business
     42




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##### Table of Contents



quo warranto
  (a)
    
    guidelines on the mandatory interconnection of backhaul networks to the cable landing
station, which were issued and became effective on October 7, 2008; and(b)
    
    guidelines on the interconnection of local exchange carriers, or LECs, in local calling
areas that eliminate interconnection access charges between LECs within a local calling
area, which were issued and became effective on May 30, 2008.
  
 Competition
   43




---



##### Table of Contents



Cellular Service
 Sun Cellular
       Local Exchange Service
   44




---



##### Table of Contents



PLDT Landline Plus PLDT Landline Plus
 International Long Distance Service
    National Long Distance Service
     45




---



##### Table of Contents



Data and Other Network Services
  
 Environmental Matters
  
 Intellectual Property Rights
  
 Properties
   
    
    67% consisted of cable, wire and cellular facilities, including our domestic fiber
optic network, subscriber cable facilities, inter-office trunking and toll cable
facilities and cellular facilities;
    
    16% consisted of central office equipment, including five international gateway
facilities, six pure national toll exchanges and 15 combined local and toll exchanges,
and our communications satellite;
    
    11% consisted of land and improvements and buildings, which we acquired to house our
telecommunications equipment, personnel, inventory and/or fleet;
    
    5% consisted of information origination and termination equipment, including pay
telephones and radio equipment installed for customers use, and cables and wires
installed within customers premises; and
    
    1% consisted of other work equipment.
 Note 8  Property, Plant and Equipment
     46




---



##### Table of Contents



Note 8  Property, Plant and Equipment  SBIs
Acquisition of Cluster 3 Assets from Cruz Telephone Company, Inc., or Cruztelco
 Note 8  Property, Plant and
Equipment  Wholesale Transponder Lease Agreement between Mabuhay Satellite, ProtoStar Ltd., or
ProtoStar, and ProtoStar III Ltd., or ProtoStar III Note
24  Contractual Obligations and
Commercial Commitments
 Note 24  Contractual Obligations and Commercial Commitments
 
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our audited consolidated financial statements (and the related
notes) as at December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006
included elsewhere in this report. This discussion contains forward-looking statements that
reflect our current views with respect to future events and our future financial performance.
These statements involve risks and uncertainties, and our actual results may differ materially from
those anticipated in these forward-looking statements as a result of particular factors such as
those set forth under Forward-Looking Statements and Item 3. Key Information  Risk Factors and
elsewhere in this report. Our audited consolidated financial statements, and the financial
information discussed below, have been prepared in accordance with IFRS. For convenience, certain
peso financial information in the following discussions has been translated to U.S. dollars at the
exchange rate at December 31, 2008 of Php47.647 to US$1.00, as quoted through the Philippine
Dealing System.
 
 Overview
  
    
    Wireless wireless telecommunications services provided by Smart, Piltel and CURE,
our cellular service providers; SBI and Airborne Access, our wireless broadband
providers; Wolfpac, our wireless content operator; Mabuhay Satellite and ACeS
Philippines, our satellite operator;
 
    
    Fixed Line fixed line telecommunications services primarily provided through PLDT.
We also provide fixed line services through PLDTs subsidiaries, namely, ClarkTel,
Subictel, Maratel, Piltel (on June 4, 2008, PLDT acquired the fixed line assets of
Piltel), PLDT Global, and BCC, all of which account for approximately 2% of our
consolidated fixed line subscribers; and
  47




---



##### Table of Contents




    
    Information and Communications Technology information and communications
infrastructure and services for internet applications, IP-based solutions and
multimedia content delivery provided by ePLDT, Inc., or ePLDT; knowledge processing
solutions provided by the SPi Group; customer interaction solutions provided under the
umbrella brand name ePLDT Ventus, through Ventus, Parlance and Vocativ; internet access
and online gaming services provided by Infocom, Digital Paradise, netGames and Level
Up!; and e-commerce, and IT-related services provided by other investees of ePLDT, as
discussed in Note 9  Investments in Associates and Joint Venturesto the accompanying
audited consolidated financial statements in Item 18.
    
 Critical Accounting Policies
 Note 3  Managements Use of Judgments, Estimates
and Assumptions
 Judgments
  Determination of functional currency
   48




---



##### Table of Contents



Leases
 Note 18  Interest-bearing Financial Liabilities,
Note 24  Contractual Obligations and Commercial Commitments Note 26  Financial Assets and
Liabilities
 Legal contingencies
 Note 25  Provisions and Contingencies
 Estimates and Assumptions
  Estimating useful lives of property, plant and equipment
  Note 8  Property, Plant and Equipment Note 26  Financial Assets and
Liabilities
 Determining the fair value of investment properties
   49




---



##### Table of Contents



Note 10  Investment Properties
 Goodwill and intangible assets
 Note 11  Goodwill and Intangible Assets
 Note 11  Goodwill and
Intangible Assets Note 26  Financial Assets and Liabilities
 Realizability of deferred income tax assets
  Note 4  Segment
Information, Note 6  Income Tax Note 26  Financial Assets and Liabilities
 Estimating allowance for doubtful accounts
    50




---



##### Table of Contents



Note 5  Income and Expenses, Note 14  Trade and Other Receivables Note 26  Financial
Assets and Liabilities
 Estimating net realizable value of inventories and supplies
  Note 5 
Income and Expenses Note 15  Inventories and Supplies
 Estimation of pension benefit costs and other retirement benefits
 Note 23  Share-based Payments and Employee Benefits
 Note 5  Income and
Expenses Note 23  Share-based Payments and Employee Benefits
 Share-based payment transactions
 Note 23  Share-based Payments and Employee
Benefits Note 5  Income and Expenses Note 23  Share-based Payments and Employee
Benefits
  51




---



##### Table of Contents



Asset retirement obligations
 Note 8  Property, Plant and Equipment Note 19 
Deferred Credits and Other Noncurrent Liabilities
 Asset impairment
   Note 4  Segment Information Note 5  Income and Expenses Note 11  Goodwill and Other Intangible Assets
  Revenue recognition
     52




---



##### Table of Contents



Determination of fair values of financial assets and liabilities
 Note
26  Financial Assets and Liabilities
 Note 26  Financial Assets and Liabilities
 
 New Accounting Pronouncements Effective Subsequent to 2008
 Note 2  Summary of Significant Accounting Policies and Practices
  53




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##### Table of Contents



Results of Operations
  Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Total(in millions)For the year ended December 31, 2008Revenues
    
    Php
    95,852
    
    
    Php
    49,686
    
    
    Php
    10,983
    
    
    Php
    (10,684
    )
    
    Php
    145,837Expenses
    
    
    47,589
    
    
    
    35,733
    
    
    
    13,267
    
    
    
    (10,803
    )
    
    
    85,786Other expenses
    
    
    2,640
    
    
    
    3,173
    
    
    
    1
    
    
    
    188
    
    
    
    6,002Income (loss) before income tax
    
    
    45,623
    
    
    
    10,780
    
    
    
    (2,285
    )
    
    
    (69
    )
    
    
    54,049Net income (loss)
    
    
    29,499
    
    
    
    7,732
    
    
    
    (2,186
    )
    
    
    (69
    )
    
    
    34,976Net income (loss) attributable
to equity holders of PLDT
    
    
    28,628
    
    
    
    7,727
    
    
    
    (1,969
    )
    
    
    (69
    )
    
    
    34,317For the year ended December 31, 2007Revenues
    
    
    89,299
    
    
    
    48,832
    
    
    
    10,322
    
    
    
    (9,749
    )
    
    
    138,704Expenses
    
    
    44,530
    
    
    
    37,891
    
    
    
    11,005
    
    
    
    (9,839
    )
    
    
    83,587Other income (expenses)
    
    
    2,577
    
    
    
    (64
    )
    
    
    472
    
    
    
    (21
    )
    
    
    2,964Income (loss) before income tax
    
    
    47,346
    
    
    
    10,877
    
    
    
    (211
    )
    
    
    69
    
    
    
    58,081Net income (loss)
    
    
    31,780
    
    
    
    7,519
    
    
    
    (94
    )
    
    
    69
    
    
    
    39,274Net income (loss) attributable
to equity holders of PLDT
    
    
    31,674
    
    
    
    7,516
    
    
    
    30
    
    
    
    69
    
    
    
    39,289For the year ended December 31, 2006Revenues
    
    
    80,405
    
    
    
    49,255
    
    
    
    6,890
    
    
    
    (9,042
    )
    
    
    127,508Expenses
    
    
    42,821
    
    
    
    41,149
    
    
    
    7,175
    
    
    
    (9,142
    )
    
    
    82,003Other expenses
    
    
    1,113
    
    
    
    5,979
    
    
    
    64
    
    
    
    100
    
    
    
    7,256Income (loss) before income tax
    
    
    36,471
    
    
    
    2,127
    
    
    
    (349
    )
    
    
    
    
    
    
    38,249Net income (loss)
    
    
    30,127
    
    
    
    2,766
    
    
    
    (312
    )
    
    
    
    
    
    
    32,581Net income (loss) attributable
to equity holders of PLDT
    
    
    29,854
    
    
    
    2,764
    
    
    
    (233
    )
    
    
    
    
    
    
    32,385
 2008 Compared to 2007
 On a Consolidated Basis
 Revenues
   Change2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    95,852
    
    
    
    66
    
    
    Php
    89,299
    
    
    
    64
    
    
    Php
    6,553
    
    
    
    7Fixed line
    
    
    49,686
    
    
    
    34
    
    
    
    48,832
    
    
    
    35
    
    
    
    854
    
    
    
    2Information and communications technology
    
    
    10,983
    
    
    
    7
    
    
    
    10,322
    
    
    
    8
    
    
    
    661
    
    
    
    6Inter-segment transactions
    
    
    (10,684
    )
    
    
    (7
    )
    
    
    (9,749
    )
    
    
    (7
    )
    
    
    (935
    )
    
    
    (10
    )Total
    
    Php
    145,837
    
    
    
    100
    
    
    Php
    138,704
    
    
    
    100
    
    
    Php
    7,133
    
    
    
    5
 Expenses
   54




---



##### Table of Contents



Change2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    47,589
    
    
    
    55
    
    
    Php
    44,530
    
    
    
    53
    
    
    Php
    3,059
    
    
    
    7Fixed line
    
    
    35,733
    
    
    
    42
    
    
    
    37,891
    
    
    
    45
    
    
    
    (2,158
    )
    
    
    (6
    )Information and communications technology
    
    
    13,267
    
    
    
    16
    
    
    
    11,005
    
    
    
    13
    
    
    
    2,262
    
    
    
    21Inter-segment transactions
    
    
    (10,803
    )
    
    
    (13
    )
    
    
    (9,839
    )
    
    
    (11
    )
    
    
    (964
    )
    
    
    (10
    )Total
    
    Php
    85,786
    
    
    
    100
    
    
    Php
    83,587
    
    
    
    100
    
    
    Php
    2,199
    
    
    
    3
 Other Income (Expenses)
   Change2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    (2,640
    )
    
    
    44
    
    
    Php
    2,577
    
    
    
    87
    
    
    Php
    (5,217
    )
    
    
    (202
    )Fixed line
    
    
    (3,173
    )
    
    
    53
    
    
    
    (64
    )
    
    
    (2
    )
    
    
    (3,109
    )
    
    
    (4,857
    )Information and communications technology
    
    
    (1
    )
    
    
    
    
    
    
    472
    
    
    
    16
    
    
    
    (473
    )
    
    
    (100
    )Inter-segment transactions
    
    
    (188
    )
    
    
    3
    
    
    
    (21
    )
    
    
    (1
    )
    
    
    (167
    )
    
    
    795Total
    
    Php
    (6,002
    )
    
    
    100
    
    
    Php
    2,964
    
    
    
    100
    
    
    Php
    (8,966
    )
    
    
    (302
    )
 Provision for Income Tax
  Net Income
  Change2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    29,499
    
    
    
    84
    
    
    Php
    31,780
    
    
    
    81
    
    
    Php
    (2,281
    )
    
    
    (7
    )Fixed line
    
    
    7,732
    
    
    
    22
    
    
    
    7,519
    
    
    
    19
    
    
    
    213
    
    
    
    3Information and communications technology
    
    
    (2,186
    )
    
    
    (6
    )
    
    
    (94
    )
    
    
    
    
    
    
    (2,092
    )
    
    
    (2,226
    )Inter-segment transactions
    
    
    (69
    )
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    (138
    )
    
    
    (200
    )Total
    
    Php
    34,976
    
    
    
    100
    
    
    Php
    39,274
    
    
    
    100
    
    
    Php
    (4,298
    )
    
    
    (11
    )
  55




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##### Table of Contents



On Business Segment Basis
 Wireless
 Revenues
   Increase (Decrease)2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless Services:Service RevenuesCellular
    
    Php
    87,518
    
    
    
    92
    
    
    Php
    82,334
    
    
    
    92
    
    
    Php
    5,184
    
    
    
    6Wireless broadband, satellite and others
    
    
    6,075
    
    
    
    6
    
    
    
    4,165
    
    
    
    5
    
    
    
    1,910
    
    
    
    4693,593
    
    
    
    98
    
    
    
    86,499
    
    
    
    97
    
    
    
    7,094
    
    
    
    8Non-Service Revenues:Sale of cellular handsets and SIM-packs
    
    
    2,259
    
    
    
    2
    
    
    
    2,800
    
    
    
    3
    
    
    
    (541
    )
    
    
    (19
    )Total Wireless Revenues
    
    Php
    95,852
    
    
    
    100
    
    
    Php
    89,299
    
    
    
    100
    
    
    Php
    6,553
    
    
    
    7
 Service Revenues
  Cellular Service
   Increase2008
    
    
    2007
    
    
    Amount
    
    
    %(in millions)Cellular service revenues
    
    Php
    87,518
    
    
    Php
    82,334
    
    
    Php
    5,184
    
    
    
    6By service type
    
    
    85,079
    
    
    
    80,197
    
    
    
    4,882
    
    
    
    6Prepaid
    
    
    78,743
    
    
    
    74,284
    
    
    
    4,459
    
    
    
    6Postpaid
    
    
    6,336
    
    
    
    5,913
    
    
    
    423
    
    
    
    7By component
    
    
    85,079
    
    
    
    80,197
    
    
    
    4,882
    
    
    
    6Voice
    
    
    37,287
    
    
    
    36,105
    
    
    
    1,182
    
    
    
    3Data
    
    
    47,792
    
    
    
    44,092
    
    
    
    3,700
    
    
    
    8Others(1)
    
    
    2,439
    
    
    
    2,137
    
    
    
    302
    
    
    
    14
 (1)
    
    Refers to other non-subscriber-related revenues consisting primarily of inbound
international roaming fees, revenues from Smarts public calling offices and a small number
of leased line contracts, revenues from Wolfpac and other Smart subsidiaries and revenue
share in PLDTs WeRoam and PLDT Landline Plus services. 
  56




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##### Table of Contents



Increase2008
    
    
    2007
    
    
    Amount
    
    
    %Cellular subscriber base
    
    
    35,224,604
    
    
    
    30,041,030
    
    
    
    5,183,574
    
    
    
    17Prepaid
    
    
    34,826,468
    
    
    
    29,699,150
    
    
    
    5,127,318
    
    
    
    17Smart
    
    
    20,501,617
    
    
    
    19,997,324
    
    
    
    504,293
    
    
    
    3Piltel
    
    
    14,308,493
    
    
    
    9,701,826
    
    
    
    4,606,667
    
    
    
    47CURE (acquired on April 25, 2008)
    
    
    16,358
    
    
    
    
    
    
    
    16,358
    
    
    
    100Postpaid
    
    
    398,136
    
    
    
    341,880
    
    
    
    56,256
    
    
    
    16Systemwide traffic volumes (in millions)Calls (in minutes)
    
    
    6,708
    
    
    
    6,355
    
    
    
    353
    
    
    
    6Domestic  outbound
    
    
    3,810
    
    
    
    3,799
    
    
    
    11
    
    
    
    International
    
    
    2,898
    
    
    
    2,556
    
    
    
    342
    
    
    
    13Inbound
    
    
    2,677
    
    
    
    2,355
    
    
    
    322
    
    
    
    14Outbound
    
    
    221
    
    
    
    201
    
    
    
    20
    
    
    
    10SMS count
    
    
    249,691
    
    
    
    227,028
    
    
    
    22,663
    
    
    
    10Text messages
    
    
    248,051
    
    
    
    225,083
    
    
    
    22,968
    
    
    
    10Domestic
    
    
    247,751
    
    
    
    224,818
    
    
    
    22,933
    
    
    
    10Bucket-Priced
    
    
    223,373
    
    
    
    199,326
    
    
    
    24,047
    
    
    
    12Standard
    
    
    24,378
    
    
    
    25,492
    
    
    
    (1,114
    )
    
    
    (4
    )International
    
    
    300
    
    
    
    265
    
    
    
    35
    
    
    
    13Value-Added Services
    
    
    1,614
    
    
    
    1,903
    
    
    
    (289
    )
    
    
    (15
    )Financial Services
    
    
    26
    
    
    
    42
    
    
    
    (16
    )
    
    
    (38
    )
  Voice Services
   Data Services
   57




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Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    %(in millions)Text messagingDomestic
    
    Php
    43,330
    
    
    Php
    39,430
    
    
    Php
    3,900
    
    
    
    10Bucket-Priced
    
    
    27,245
    
    
    
    20,141
    
    
    
    7,104
    
    
    
    35Standard
    
    
    16,085
    
    
    
    19,289
    
    
    
    (3,204
    )
    
    
    (17
    )International
    
    
    1,877
    
    
    
    1,835
    
    
    
    42
    
    
    
    245,207
    
    
    
    41,265
    
    
    
    3,942
    
    
    
    10Value-added servicesStandard(1)
    
    
    1,469
    
    
    
    1,802
    
    
    
    (333
    )
    
    
    (18
    )Rich Media(2)
    
    
    627
    
    
    
    352
    
    
    
    275
    
    
    
    78Pasa Load
    
    
    444
    
    
    
    594
    
    
    
    (150
    )
    
    
    (25
    )2,540
    
    
    
    2,748
    
    
    
    (208
    )
    
    
    (8
    )Financial servicesSmart Money
    
    
    41
    
    
    
    75
    
    
    
    (34
    )
    
    
    (45
    )Mobile Banking
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    45
    
    
    
    79
    
    
    
    (34
    )
    
    
    (43
    )Total
    
    Php
    47,792
    
    
    Php
    44,092
    
    
    Php
    3,700
    
    
    
    8
 
 (1)
    
    Includes standard services such as info-on demand, ringtone and logo download, etc.(2)
    
    Includes Multimedia Messaging System, or MMS, internet browsing, General Packet Radio
Service, or GPRS, etc.   Pasa Load
 Subscriber Base, ARPU and Churn Rates
   58




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##### Table of Contents



Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    %Prepaid
    
    
    5,127,318
    
    
    
    5,842,329
    
    
    
    (715,011
    )
    
    
    (12
    )Smart
    
    
    504,293
    
    
    
    3,114,882
    
    
    
    (2,610,589
    )
    
    
    (84
    )Piltel
    
    
    4,606,667
    
    
    
    2,727,447
    
    
    
    1,879,220
    
    
    
    69CURE
    
    
    16,358
    
    
    
    
    
    
    
    16,358
    
    
    
    100Postpaid
    
    
    56,256
    
    
    
    23,317
    
    
    
    32,939
    
    
    
    141Total
    
    
    5,183,574
    
    
    
    5,865,646
    
    
    
    (682,072
    )
    
    
    (12
    )
  2008
    
    
    20071Q
    
    
    2Q
    
    
    3Q
    
    
    4Q
    
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4QPrepaid
    
    
    1,533,812
    
    
    
    1,660,040
    
    
    
    917,528
    
    
    
    1,015,938
    
    
    
    1,301,154
    
    
    
    1,615,246
    
    
    
    1,148,283
    
    
    
    1,777,646Smart
    
    
    282,044
    
    
    
    130,697
    
    
    
    111,487
    
    
    
    (3,577
    )
    
    
    880,281
    
    
    
    1,050,678
    
    
    
    763,257
    
    
    
    420,666Piltel
    
    
    1,251,768
    
    
    
    1,529,343
    
    
    
    806,041
    
    
    
    1,019,515
    
    
    
    420,873
    
    
    
    564,568
    
    
    
    385,026
    
    
    
    1,356,980Postpaid
    
    
    1,117
    
    
    
    5,027
    
    
    
    17,816
    
    
    
    32,296
    
    
    
    6,921
    
    
    
    7,403
    
    
    
    5,704
    
    
    
    3,289Total
    
    
    1,534,929
    
    
    
    1,665,067
    
    
    
    935,344
    
    
    
    1,048,234
    
    
    
    1,308,075
    
    
    
    1,622,649
    
    
    
    1,153,987
    
    
    
    1,780,935
    Gross(1)
    
    
    Decrease
    
    
    Net(2)
    
    
    Decrease2008
    
    
    2007
    
    
    Amount
    
    
    %
    
    
    2008
    
    
    2007
    
    
    Amount
    
    
    %PrepaidSmart
    
    Php
    290
    
    
    Php
    312
    
    
    Php
    (22
    )
    
    
    (7
    )
    
    Php
    230
    
    
    Php
    254
    
    
    Php
    (24
    )
    
    
    (9
    )Piltel
    
    
    194
    
    
    
    221
    
    
    
    (27
    )
    
    
    (12
    )
    
    
    158
    
    
    
    184
    
    
    
    (26
    )
    
    
    (14
    )Prepaid  Blended(3)
    
    
    254
    
    
    
    285
    
    
    
    (31
    )
    
    
    (11
    )
    
    
    203
    
    
    
    233
    
    
    
    (30
    )
    
    
    (13
    )Postpaid  Smart
    
    
    2,065
    
    
    
    2,091
    
    
    
    (26
    )
    
    
    (1
    )
    
    
    1,483
    
    
    
    1,485
    
    
    
    (2
    )
    
    
    Prepaid and Postpaid Blended(4)
    
    
    274
    
    
    
    307
    
    
    
    (33
    )
    
    
    (11
    )
    
    
    217
    
    
    
    248
    
    
    
    (31
    )
    
    
    (13
    )
 
 (1)
    
    Gross monthly ARPU is calculated by dividing gross cellular service revenues for the month,
including (i) discounts, (ii) allocated content-provider costs; and (iii) interconnection
income but excluding inbound roaming revenues, by the average number of subscribers in the
month.(2)
    
    Net monthly ARPU is calculated by dividing gross cellular service revenues for the month, net
of (i) discounts, (ii) allocated content-provider costs; and (iii) interconnection income net
of interconnection expense, by the average number of subscribers in the month.(3)
    
    The average monthly ARPU of Smart and Piltel.(4)
    
    The average monthly ARPU of prepaid and postpaid subscribers of Smart
and prepaid subscribers of Piltel.   59




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##### Table of Contents



Prepaid
    
    
    PostpaidSmart
    
    
    Piltel
    
    
    SmartGross(1)
    
    
    Net(2)
    
    
    Gross(1)
    
    
    Net(2)
    
    
    Gross(1)
    
    
    Net(2)2008First Quarter
    
    Php
    292
    
    
    Php
    230
    
    
    Php
    207
    
    
    Php
    163
    
    
    Php
    2,013
    
    
    Php
    1,472Second Quarter
    
    
    294
    
    
    
    232
    
    
    
    199
    
    
    
    159
    
    
    
    2,134
    
    
    
    1,510Third Quarter
    
    
    285
    
    
    
    223
    
    
    
    178
    
    
    
    148
    
    
    
    2,078
    
    
    
    1,505Fourth Quarter
    
    
    291
    
    
    
    234
    
    
    
    192
    
    
    
    162
    
    
    
    2,037
    
    
    
    1,4452007First Quarter
    
    Php
    323
    
    
    Php
    267
    
    
    Php
    228
    
    
    Php
    187
    
    
    Php
    2,045
    
    
    Php
    1,483Second Quarter
    
    
    324
    
    
    
    265
    
    
    
    233
    
    
    
    198
    
    
    
    2,141
    
    
    
    1,526Third Quarter
    
    
    293
    
    
    
    239
    
    
    
    206
    
    
    
    173
    
    
    
    2,073
    
    
    
    1,464Fourth Quarter
    
    
    307
    
    
    
    244
    
    
    
    216
    
    
    
    177
    
    
    
    2,105
    
    
    
    1,467
 
 (1)
    
    Gross quarterly ARPU is calculated by dividing gross cellular service revenues for the quarter,
including (i) discounts, (ii) allocated content-provider costs; and (iii) interconnection
income but excluding inbound roaming revenues for the quarter, by the average number of
subscribers in the quarter.(2)
    
    Net quarterly ARPU is calculated by dividing gross cellular service revenues, net of (i)
discounts,(ii) allocated content-provider costs; and (iii) interconnection income net of
interconnection expense, by the average number of subscribers in the quarter. Wireless Broadband, Satellite and Other Services
   Non-service Revenues
   Expenses
   60




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##### Table of Contents



Increase (Decrease)2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless Services:Depreciation and amortization
    
    Php
    11,975
    
    
    
    25
    
    
    Php
    12,202
    
    
    
    27
    
    
    Php
    (227
    )
    
    
    (2
    )Rent
    
    
    9,267
    
    
    
    20
    
    
    
    8,751
    
    
    
    20
    
    
    
    516
    
    
    
    6Compensation and employee benefits(1)
    
    
    5,433
    
    
    
    11
    
    
    
    4,608
    
    
    
    10
    
    
    
    825
    
    
    
    18Cost of sales
    
    
    4,236
    
    
    
    9
    
    
    
    4,446
    
    
    
    10
    
    
    
    (210
    )
    
    
    (5
    )Repairs and maintenance
    
    
    4,230
    
    
    
    9
    
    
    
    3,634
    
    
    
    8
    
    
    
    596
    
    
    
    16Selling and promotions
    
    
    3,781
    
    
    
    8
    
    
    
    3,803
    
    
    
    9
    
    
    
    (22
    )
    
    
    (1
    )Professional and other contracted services
    
    
    2,529
    
    
    
    5
    
    
    
    2,369
    
    
    
    5
    
    
    
    160
    
    
    
    7Taxes and licenses
    
    
    1,872
    
    
    
    4
    
    
    
    1,348
    
    
    
    3
    
    
    
    524
    
    
    
    39Communication, training and travel
    
    
    1,091
    
    
    
    2
    
    
    
    1,083
    
    
    
    3
    
    
    
    8
    
    
    
    1Asset impairment
    
    
    1,006
    
    
    
    2
    
    
    
    563
    
    
    
    1
    
    
    
    443
    
    
    
    79Provisions
    
    
    897
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    897
    
    
    
    100Insurance and security services
    
    
    722
    
    
    
    2
    
    
    
    783
    
    
    
    2
    
    
    
    (61
    )
    
    
    (8
    )Amortization of intangible assets
    
    
    133
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    (25
    )
    
    
    (16
    )Other expenses
    
    
    417
    
    
    
    1
    
    
    
    782
    
    
    
    2
    
    
    
    (365
    )
    
    
    (47
    )Total
    
    Php
    47,589
    
    
    
    100
    
    
    Php
    44,530
    
    
    
    100
    
    
    Php
    3,059
    
    
    
    7
 
 (1)
    
    Includes salaries and employee benefits, incentive plan, pension and manpower
rightsizing program, or MRP, costs. Note 8  Property, Plant and Equipment
  Note 23  Share-based Payments and
Employee Benefits
      61




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##### Table of Contents



Note 11  Goodwill and
Intangible Assets
 Note 25 
Provisions and Contingencies
    Other Income (Expenses)
  Change2008
    
    
    2007
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses)Interest income
    
    Php
    1,197
    
    
    Php
    1,186
    
    
    Php
    11
    
    
    
    1(Losses) gains on derivative transactions  net
    
    
    (241
    )
    
    
    278
    
    
    
    (519
    )
    
    
    (187
    )Foreign
exchange (losses) gains  net
    
    
    (1,771
    )
    
    
    2,649
    
    
    
    (4,420
    )
    
    
    (167
    )Financing costs
    
    
    (2,029
    )
    
    
    (2,299
    )
    
    
    270
    
    
    
    12Others
    
    
    204
    
    
    
    763
    
    
    
    (559
    )
    
    
    (73
    )Total
    
    Php
    (2,640
    )
    
    Php
    2,577
    
    
    Php
    (5,217
    )
    
    
    (202
    )
  Provision for Income Tax
  Net Income
   62




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##### Table of Contents



Fixed Line
 Revenues
   Increase (Decrease)2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Service RevenuesLocal exchange
    
    Php
    15,923
    
    
    
    32
    
    
    Php
    16,205
    
    
    
    33
    
    
    Php
    (282
    )
    
    
    (2
    )International long distance
    
    
    7,063
    
    
    
    14
    
    
    
    8,674
    
    
    
    18
    
    
    
    (1,611
    )
    
    
    (19
    )National long distance
    
    
    6,207
    
    
    
    13
    
    
    
    6,338
    
    
    
    13
    
    
    
    (131
    )
    
    
    (2
    )Data and other network
    
    
    18,607
    
    
    
    37
    
    
    
    15,921
    
    
    
    32
    
    
    
    2,686
    
    
    
    17Miscellaneous
    
    
    1,466
    
    
    
    3
    
    
    
    1,413
    
    
    
    3
    
    
    
    53
    
    
    
    449,266
    
    
    
    99
    
    
    
    48,551
    
    
    
    99
    
    
    
    715
    
    
    
    1Non-Service Revenues:Sale of computers
    
    
    420
    
    
    
    1
    
    
    
    281
    
    
    
    1
    
    
    
    139
    
    
    
    49Total Fixed Line Revenues
    
    Php
    49,686
    
    
    
    100
    
    
    Php
    48,832
    
    
    
    100
    
    
    Php
    854
    
    
    
    2
 Service Revenues
  Local Exchange Service
   Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    %Total local exchange service revenues (in millions)
    
    Php
    15,923
    
    
    Php
    16,205
    
    
    Php
    (282
    )
    
    
    (2
    )Number of fixed line subscribers
    
    
    1,782,356
    
    
    
    1,724,702
    
    
    
    57,654
    
    
    
    3Postpaid
    
    
    1,533,687
    
    
    
    1,479,647
    
    
    
    54,040
    
    
    
    4Prepaid
    
    
    248,669
    
    
    
    245,055
    
    
    
    3,614
    
    
    
    1Number of fixed line employees
    
    
    7,813
    
    
    
    8,080
    
    
    
    (267
    )
    
    
    (3
    )Number of fixed line subscribers per employee
    
    
    228
    
    
    
    213
    
    
    
    15
    
    
    
    7
 PLDT Landline Plus
  63




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##### Table of Contents



PLDT Landline Plus PLDT
Landline Plus PLDT Landline Plus
 International Long Distance Service
  Decrease2008
    
    
    2007
    
    
    Amount
    
    
    %Total international long distance service revenues (in millions)
    
    Php
    7,063
    
    
    Php
    8,674
    
    
    Php
    (1,611
    )
    
    
    (19
    )Inbound
    
    
    5,667
    
    
    
    7,127
    
    
    
    (1,460
    )
    
    
    (20
    )Outbound
    
    
    1,396
    
    
    
    1,547
    
    
    
    (151
    )
    
    
    (10
    )International call volumes (in million minutes, except call ratio)
    
    
    2,024
    
    
    
    2,280
    
    
    
    (256
    )
    
    
    (11
    )Inbound
    
    
    1,786
    
    
    
    2,007
    
    
    
    (221
    )
    
    
    (11
    )Outbound
    
    
    238
    
    
    
    273
    
    
    
    (35
    )
    
    
    (13
    )Inbound-outbound call ratio
    
    
    7.5:1
    
    
    
    7.4:1
    
    
    
    
    
    
    
    
    National Long Distance Service
  Decrease2008
    
    
    2007
    
    
    Amount
    
    
    %Total national long distance service revenues (in millions)
    
    Php
    6,207
    
    
    Php
    6,338
    
    
    Php
    (131
    )
    
    
    (2
    )National long distance call volumes (in million minutes)
    
    
    1,944
    
    
    
    2,183
    
    
    
    (239
    )
    
    
    (11
    )
   64




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##### Table of Contents



Data and Other Network Services
  Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    %Data and other network service revenues (in millions)
    
    Php
    18,607
    
    
    Php
    15,921
    
    
    Php
    2,686
    
    
    
    17Number of DSLbroadband subscribers
    
    
    432,583
    
    
    
    264,291
    
    
    
    168,292
    
    
    
    64Number of PLDT Vibenarrowband subscribers
    
    
    101,411
    
    
    
    230,995
    
    
    
    (129,584
    )
    
    
    (56
    )
 PLDT Vibe
 PLDT DSL myDSL BizDSL PLDT Vibe PLDT DSL PLDT Vibe,
  PLDT Vibe Vibe PLDT Vibe Vibe Vibe Vibe
 Shops.work
  Miscellaneous
  Non-service Revenues
   65




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##### Table of Contents



Expenses
   Increase (Decrease)2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Depreciation and amortization
    
    Php
    11,901
    
    
    
    33
    
    
    Php
    15,477
    
    
    
    41
    
    
    Php
    (3,576
    )
    
    
    (23
    )Compensation and employee benefits(1)
    
    
    9,093
    
    
    
    25
    
    
    
    10,411
    
    
    
    27
    
    
    
    (1,318
    )
    
    
    (13
    )Repairs and maintenance
    
    
    4,634
    
    
    
    13
    
    
    
    3,772
    
    
    
    10
    
    
    
    862
    
    
    
    23Rent
    
    
    2,492
    
    
    
    7
    
    
    
    1,799
    
    
    
    5
    
    
    
    693
    
    
    
    39Professional and other contracted services
    
    
    2,143
    
    
    
    6
    
    
    
    1,727
    
    
    
    5
    
    
    
    416
    
    
    
    24Selling and promotions
    
    
    1,715
    
    
    
    5
    
    
    
    1,552
    
    
    
    4
    
    
    
    163
    
    
    
    11Asset impairment
    
    
    888
    
    
    
    3
    
    
    
    43
    
    
    
    
    
    
    
    845
    
    
    
    1,965Taxes and licenses
    
    
    769
    
    
    
    2
    
    
    
    877
    
    
    
    2
    
    
    
    (108
    )
    
    
    (12
    )Communication, training and travel
    
    
    608
    
    
    
    2
    
    
    
    466
    
    
    
    1
    
    
    
    142
    
    
    
    30Insurance and security services
    
    
    487
    
    
    
    1
    
    
    
    439
    
    
    
    1
    
    
    
    48
    
    
    
    11Cost of sales
    
    
    356
    
    
    
    1
    
    
    
    300
    
    
    
    1
    
    
    
    56
    
    
    
    19Provisions
    
    
    1
    
    
    
    
    
    
    
    666
    
    
    
    2
    
    
    
    (665
    )
    
    
    (100
    )Other expenses
    
    
    646
    
    
    
    2
    
    
    
    362
    
    
    
    1
    
    
    
    284
    
    
    
    78Total
    
    Php
    35,733
    
    
    
    100
    
    
    Php
    37,891
    
    
    
    100
    
    
    Php
    (2,158
    )
    
    
    (6
    )
 
 (1)
    
    Includes salaries and employee benefits, incentive plan, pension and MRP costs.  Note 23  Share-based Payments and Employee Benefits
    askPLDT
  66




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WeRoam
 Note 25  Provisions and Contingencies
  Other Income (Expenses)
  Change2008
    
    
    2007
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses)Gains (losses) on derivative transactions  net
    
    Php
    3,444
    
    
    Php
    (3,335
    )
    
    Php
    6,779
    
    
    
    203Interest income
    
    
    448
    
    
    
    296
    
    
    
    152
    
    
    
    51Financing costs
    
    
    (3,903
    )
    
    
    (4,657
    )
    
    
    754
    
    
    
    16Foreign exchange (losses) gains  net
    
    
    (4,513
    )
    
    
    5,479
    
    
    
    (9,992
    )
    
    
    (182
    )Others
    
    
    1,351
    
    
    
    2,153
    
    
    
    (802
    )
    
    
    (37
    )Php
    (3,173
    )
    
    Php
    (64
    )
    
    Php
    3,109
    
    
    
    4,858
  Provision for (Benefit from) Income Tax
  Net Income
   67




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##### Table of Contents



Information and Communications Technology
 Revenues
    Increase2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)Service Revenues:Knowledge processing solutions
    
    Php
    5,272
    
    
    
    48
    
    
    Php
    5,261
    
    
    
    51
    
    
    Php
    11
    
    
    
    Customer interaction solutions
    
    
    3,402
    
    
    
    31
    
    
    
    3,262
    
    
    
    32
    
    
    
    140
    
    
    
    4Internet and online gaming
    
    
    976
    
    
    
    9
    
    
    
    937
    
    
    
    9
    
    
    
    39
    
    
    
    4Vitroä data center
    
    
    767
    
    
    
    7
    
    
    
    595
    
    
    
    6
    
    
    
    172
    
    
    
    2910,417
    
    
    
    95
    
    
    
    10,055
    
    
    
    98
    
    
    
    362
    
    
    
    4Non-Service Revenues:Point-product-sales
    
    
    566
    
    
    
    5
    
    
    
    267
    
    
    
    2
    
    
    
    299
    
    
    
    112Total ICT Revenues
    
    Php
    10,983
    
    
    
    100
    
    
    Php
    10,322
    
    
    
    100
    
    
    Php
    661
    
    
    
    6
 Service Revenues
  Knowledge Processing Solutions
  Customer Interaction Solutions
 ePLDT Ventus
 Internet and Online Gaming
   68




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##### Table of Contents



Data Center
 Vitro ä
  Non-service Revenues
  Expenses
   Increase (Decrease)2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    Amount
    
    
    %(in millions)ICT Services:Compensation and employee benefits(1)
    
    Php
    6,131
    
    
    
    46
    
    
    Php
    5,455
    
    
    
    50
    
    
    Php
    676
    
    
    
    12Asset impairment
    
    
    2,286
    
    
    
    17
    
    
    
    711
    
    
    
    6
    
    
    
    1,575
    
    
    
    222Depreciation and amortization
    
    
    833
    
    
    
    6
    
    
    
    934
    
    
    
    8
    
    
    
    (101
    )
    
    
    (11
    )Professional and other contracted services
    
    
    747
    
    
    
    6
    
    
    
    1,129
    
    
    
    10
    
    
    
    (382
    )
    
    
    (34
    )Rent
    
    
    665
    
    
    
    5
    
    
    
    620
    
    
    
    6
    
    
    
    45
    
    
    
    7Cost of sales
    
    
    660
    
    
    
    5
    
    
    
    381
    
    
    
    3
    
    
    
    279
    
    
    
    73Repairs and maintenance
    
    
    573
    
    
    
    4
    
    
    
    504
    
    
    
    5
    
    
    
    69
    
    
    
    14Communication, training and travel
    
    
    573
    
    
    
    4
    
    
    
    523
    
    
    
    5
    
    
    
    50
    
    
    
    10Amortization of intangible assets
    
    
    244
    
    
    
    2
    
    
    
    232
    
    
    
    2
    
    
    
    12
    
    
    
    5Selling and promotions
    
    
    203
    
    
    
    2
    
    
    
    194
    
    
    
    2
    
    
    
    9
    
    
    
    5Taxes and licenses
    
    
    98
    
    
    
    1
    
    
    
    94
    
    
    
    1
    
    
    
    4
    
    
    
    4Insurance and security services
    
    
    61
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    12
    
    
    
    24Other expenses
    
    
    193
    
    
    
    2
    
    
    
    179
    
    
    
    2
    
    
    
    14
    
    
    
    8Total
    
    Php
    13,267
    
    
    
    100
    
    
    Php
    11,005
    
    
    
    100
    
    
    Php
    2,262
    
    
    
    21
 
 (1)
    
    Includes salaries and employee benefits, incentive plan, pension and MRP costs.  Note 11  Goodwill and Intangible Assets
  69




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Note 11  Goodwill and
Intangible Assets
     Other Income (Expenses)
  Change2008
    
    
    2007
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses)Foreign
exchange gains (losses)  net
    
    Php
    93
    
    
    Php
    (138
    )
    
    Php
    231
    
    
    
    167Interest income
    
    
    22
    
    
    
    21
    
    
    
    1
    
    
    
    5(Loss) gains on derivative transactions  net
    
    
    (59
    )
    
    
    138
    
    
    
    (197
    )
    
    
    (143
    )Financing costs
    
    
    (172
    )
    
    
    (132
    )
    
    
    (40
    )
    
    
    (30
    )Others
    
    
    115
    
    
    
    583
    
    
    
    (468
    )
    
    
    (80
    )Total
    
    Php
    (1
    )
    
    Php
    472
    
    
    Php
    (473
    )
    
    
    (100
    )
  70




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##### Table of Contents



Benefit from Income Tax
  Net Loss
  2007 Compared to 2006
 On a Consolidated Basis
 Revenues
   Change2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    89,299
    
    
    
    64
    
    
    Php
    80,405
    
    
    
    63
    
    
    Php
    8,894
    
    
    
    11Fixed line
    
    
    48,832
    
    
    
    35
    
    
    
    49,255
    
    
    
    39
    
    
    
    (423
    )
    
    
    (1
    )Information and communications technology
    
    
    10,322
    
    
    
    8
    
    
    
    6,890
    
    
    
    5
    
    
    
    3,432
    
    
    
    50Inter-segment transactions
    
    
    (9,749
    )
    
    
    (7
    )
    
    
    (9,042
    )
    
    
    (7
    )
    
    
    (707
    )
    
    
    8Total
    
    Php
    138,704
    
    
    
    100
    
    
    Php
    127,508
    
    
    
    100
    
    
    Php
    11,196
    
    
    
    9
 Expenses
   Change2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    44,530
    
    
    
    53
    
    
    Php
    42,821
    
    
    
    52
    
    
    Php
    1,709
    
    
    
    4Fixed line
    
    
    37,891
    
    
    
    45
    
    
    
    41,149
    
    
    
    50
    
    
    
    (3,258
    )
    
    
    (8
    )Information and communications technology
    
    
    11,005
    
    
    
    13
    
    
    
    7,175
    
    
    
    9
    
    
    
    3,830
    
    
    
    53Inter-segment transactions
    
    
    (9,839
    )
    
    
    (11
    )
    
    
    (9,142
    )
    
    
    (11
    )
    
    
    (697
    )
    
    
    (8
    )Total
    
    Php
    83,587
    
    
    
    100
    
    
    Php
    82,003
    
    
    
    100
    
    
    Php
    1,584
    
    
    
    2
  71




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##### Table of Contents



Other Income (Expenses)
   Change2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    2,577
    
    
    
    87
    
    
    Php
    (1,113
    )
    
    
    15
    
    
    Php
    3,690
    
    
    
    332Fixed line
    
    
    (64
    )
    
    
    (2
    )
    
    
    (5,979
    )
    
    
    82
    
    
    
    5,915
    
    
    
    (99
    )Information and communications technology
    
    
    472
    
    
    
    16
    
    
    
    (64
    )
    
    
    1
    
    
    
    536
    
    
    
    838Inter-segment transactions
    
    
    (21
    )
    
    
    (1
    )
    
    
    (100
    )
    
    
    2
    
    
    
    79
    
    
    
    79Total
    
    Php
    2,964
    
    
    
    100
    
    
    Php
    (7,256
    )
    
    
    100
    
    
    Php
    10,220
    
    
    
    141
 Provision for Income Tax
  Net Income
  Change2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    31,780
    
    
    
    81
    
    
    Php
    30,127
    
    
    
    92
    
    
    Php
    1,653
    
    
    
    5Fixed line
    
    
    7,519
    
    
    
    19
    
    
    
    2,766
    
    
    
    9
    
    
    
    4,753
    
    
    
    172Information and communications technology
    
    
    (94
    )
    
    
    
    
    
    
    (312
    )
    
    
    (1
    )
    
    
    218
    
    
    
    (70
    )Inter-segment transactions
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    100Total
    
    Php
    39,274
    
    
    
    100
    
    
    Php
    32,581
    
    
    
    100
    
    
    Php
    6,693
    
    
    
    21
 On Business Segment Basis
 Wireless
 Revenues
   72




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##### Table of Contents



Increase2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless Services:Service RevenuesCellular
    
    Php
    82,334
    
    
    
    92
    
    
    Php
    75,617
    
    
    
    94
    
    
    Php
    6,717
    
    
    
    9Wireless broadband, satellite and others
    
    
    4,165
    
    
    
    5
    
    
    
    2,778
    
    
    
    3
    
    
    
    1,387
    
    
    
    5086,499
    
    
    
    97
    
    
    
    78,395
    
    
    
    97
    
    
    
    8,104
    
    
    
    10Non-Service Revenues:Sale of cellular handsets and SIM-packs
    
    
    2,800
    
    
    
    3
    
    
    
    2,010
    
    
    
    3
    
    
    
    790
    
    
    
    39Total Wireless Revenues
    
    Php
    89,299
    
    
    
    100
    
    
    Php
    80,405
    
    
    
    100
    
    
    Php
    8,894
    
    
    
    11
 Service Revenues
  Cellular Service
   Increase2007
    
    
    2006
    
    
    Amount
    
    
    %(in millions)Cellular service revenues
    
    Php
    82,334
    
    
    Php
    75,617
    
    
    Php
    6,717
    
    
    
    9By service type
    
    
    80,197
    
    
    
    73,905
    
    
    
    6,292
    
    
    
    9Prepaid
    
    
    74,284
    
    
    
    68,846
    
    
    
    5,438
    
    
    
    8Postpaid
    
    
    5,913
    
    
    
    5,059
    
    
    
    854
    
    
    
    17By component
    
    
    80,197
    
    
    
    73,905
    
    
    
    6,292
    
    
    
    9Voice
    
    
    36,105
    
    
    
    35,233
    
    
    
    872
    
    
    
    2Data
    
    
    44,092
    
    
    
    38,672
    
    
    
    5,420
    
    
    
    14Others(1)
    
    
    2,137
    
    
    
    1,712
    
    
    
    425
    
    
    
    25
 
 (1)
    
    Refers to other non-subscriber-related revenues consisting primarily of inbound international
roaming fees, revenues from Smarts public calling offices and a small number of leased line
contracts, revenues from Wolfpac and other Smart subsidiaries and revenue share in PLDTs
WeRoam and PLDT Landline Plus services.  73




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##### Table of Contents



Increase2007
    
    
    2006
    
    
    Amount
    
    
    %Cellular subscriber base
    
    
    30,041,030
    
    
    
    24,175,384
    
    
    
    5,865,646
    
    
    
    24Prepaid
    
    
    29,699,150
    
    
    
    23,856,821
    
    
    
    5,842,329
    
    
    
    24Smart
    
    
    19,997,324
    
    
    
    16,882,442
    
    
    
    3,114,882
    
    
    
    18Piltel
    
    
    9,701,826
    
    
    
    6,974,379
    
    
    
    2,727,447
    
    
    
    39Postpaid
    
    
    341,880
    
    
    
    318,563
    
    
    
    23,317
    
    
    
    7Systemwide traffic volumes (in millions)Calls (in minutes)
    
    
    6,355
    
    
    
    5,667
    
    
    
    688
    
    
    
    12Domestic  outbound
    
    
    3,799
    
    
    
    3,437
    
    
    
    362
    
    
    
    11International
    
    
    2,556
    
    
    
    2,230
    
    
    
    326
    
    
    
    15Inbound
    
    
    2,355
    
    
    
    2,065
    
    
    
    290
    
    
    
    14Outbound
    
    
    201
    
    
    
    165
    
    
    
    36
    
    
    
    22SMS count
    
    
    227,028
    
    
    
    238,362
    
    
    
    (11,334
    )
    
    
    (5
    )Text messages
    
    
    225,083
    
    
    
    235,957
    
    
    
    (10,874
    )
    
    
    (5
    )Domestic
    
    
    224,818
    
    
    
    235,734
    
    
    
    (10,916
    )
    
    
    (5
    )Bucket-Priced
    
    
    199,326
    
    
    
    203,669
    
    
    
    (4,343
    )
    
    
    (2
    )Standard
    
    
    25,492
    
    
    
    32,065
    
    
    
    (6,573
    )
    
    
    (20
    )International
    
    
    265
    
    
    
    223
    
    
    
    42
    
    
    
    19Value-Added Services
    
    
    1,903
    
    
    
    2,370
    
    
    
    (467
    )
    
    
    (20
    )Financial Services
    
    
    42
    
    
    
    35
    
    
    
    7
    
    
    
    20
  Voice Services
   Data Services
   74




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##### Table of Contents



Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %(in millions)Text messagingDomestic
    
    Php
    39,430
    
    
    Php
    32,763
    
    
    Php
    6,667
    
    
    
    20Bucket-Priced
    
    
    20,141
    
    
    
    11,054
    
    
    
    9,087
    
    
    
    82Standard
    
    
    19,289
    
    
    
    21,709
    
    
    
    (2,420
    )
    
    
    (11
    )International
    
    
    1,835
    
    
    
    1,886
    
    
    
    (51
    )
    
    
    (3
    )41,265
    
    
    
    34,649
    
    
    
    6,616
    
    
    
    19Value-added servicesStandard(1)
    
    
    1,802
    
    
    
    2,809
    
    
    
    (1,007
    )
    
    
    (36
    )Rich Media(2)
    
    
    352
    
    
    
    287
    
    
    
    65
    
    
    
    23Pasa Load
    
    
    594
    
    
    
    854
    
    
    
    (260
    )
    
    
    (30
    )2,748
    
    
    
    3,950
    
    
    
    (1,202
    )
    
    
    (30
    )Financial servicesSmart Money
    
    
    75
    
    
    
    68
    
    
    
    7
    
    
    
    10Mobile Banking
    
    
    4
    
    
    
    5
    
    
    
    (1
    )
    
    
    (20
    )79
    
    
    
    73
    
    
    
    6
    
    
    
    8Total
    
    Php
    44,092
    
    
    Php
    38,672
    
    
    Php
    5,420
    
    
    
    14
  Smart 258 Unlimited Text
 Pasa Load
 Subscriber Base, ARPU and Churn Rates
   75




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##### Table of Contents



Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %Prepaid
    
    
    5,842,329
    
    
    
    3,728,278
    
    
    
    2,114,051
    
    
    
    57Smart
    
    
    3,114,882
    
    
    
    1,738,324
    
    
    
    1,376,558
    
    
    
    79Piltel
    
    
    2,727,447
    
    
    
    1,989,954
    
    
    
    737,493
    
    
    
    37Postpaid
    
    
    23,317
    
    
    
    38,485
    
    
    
    (15,168
    )
    
    
    (39
    )Total
    
    
    5,865,646
    
    
    
    3,766,763
    
    
    
    2,098,883
    
    
    
    56
  2007
    
    
    20061Q
    
    
    2Q
    
    
    3Q
    
    
    4Q
    
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4QPrepaid
    
    
    1,301,154
    
    
    
    1,615,246
    
    
    
    1,148,283
    
    
    
    1,777,646
    
    
    
    486,009
    
    
    
    1,553,570
    
    
    
    450,553
    
    
    
    1,238,146Smart
    
    
    880,281
    
    
    
    1,050,678
    
    
    
    763,257
    
    
    
    420,666
    
    
    
    111,987
    
    
    
    851,326
    
    
    
    131,486
    
    
    
    643,525Piltel
    
    
    420,873
    
    
    
    564,568
    
    
    
    385,026
    
    
    
    1,356,980
    
    
    
    374,022
    
    
    
    702,244
    
    
    
    319,067
    
    
    
    594,621Postpaid
    
    
    6,921
    
    
    
    7,403
    
    
    
    5,704
    
    
    
    3,289
    
    
    
    5,001
    
    
    
    11,955
    
    
    
    13,722
    
    
    
    7,807Total
    
    
    1,308,075
    
    
    
    1,622,649
    
    
    
    1,153,987
    
    
    
    1,780,935
    
    
    
    491,010
    
    
    
    1,565,525
    
    
    
    464,275
    
    
    
    1,245,953
    Gross(1)
    
    
    Increase (Decrease)
    
    
    Net(2)
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Amount
    
    
    %PrepaidSmart
    
    Php
    312
    
    
    Php
    339
    
    
    Php
    (27
    )
    
    
    (8
    )
    
    Php
    254
    
    
    Php
    289
    
    
    Php
    (35
    )
    
    
    (12
    )Piltel
    
    
    221
    
    
    
    226
    
    
    
    (5
    )
    
    
    (2
    )
    
    
    184
    
    
    
    194
    
    
    
    (10
    )
    
    
    (5
    )Prepaid  Blended(3)
    
    
    285
    
    
    
    308
    
    
    
    (23
    )
    
    
    (7
    )
    
    
    233
    
    
    
    263
    
    
    
    (30
    )
    
    
    (11
    )Postpaid  Smart
    
    
    2,091
    
    
    
    1,904
    
    
    
    187
    
    
    
    10
    
    
    
    1,485
    
    
    
    1,407
    
    
    
    78
    
    
    
    6Prepaid and Postpaid Blended(4)

    
    307
    
    
    
    330
    
    
    
    (23
    )
    
    
    (7
    )
    
    
    248
    
    
    
    278
    
    
    
    (30
    )
    
    
    (11
    )
 
 (1)
    
    Gross monthly ARPU is calculated by dividing gross cellular service revenues for the
month, including (i) discounts, (ii) allocated content-provider costs; and (iii)
interconnection income but excluding inbound roaming revenues, by the average number of
subscribers in the month.(2)
    
    Net monthly ARPU is calculated by dividing gross cellular service revenues for the
month, net of (i) discounts,(ii) allocated content-provider costs; and (iii) interconnection
income net of interconnection expense, by the average number of subscribers in the month.(3)
    
    The average monthly ARPU of Smart and Piltel.(4)
    
    The average monthly ARPU of prepaid and postpaid
subscribers of Smart and prepaid subscribers of Piltel.   76




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##### Table of Contents



Prepaid
    
    
    PostpaidSmart
    
    
    Piltel
    
    
    SmartGross(1)
    
    
    Net(2)
    
    
    Gross(1)
    
    
    Net(2)
    
    
    Gross(1)
    
    
    Net(2)2007First Quarter
    
    Php
    323
    
    
    Php
    267
    
    
    Php
    228
    
    
    Php
    187
    
    
    Php
    2,045
    
    
    Php
    1,483Second Quarter
    
    
    324
    
    
    
    265
    
    
    
    233
    
    
    
    198
    
    
    
    2,141
    
    
    
    1,526Third Quarter
    
    
    293
    
    
    
    239
    
    
    
    206
    
    
    
    173
    
    
    
    2,073
    
    
    
    1,464Fourth Quarter
    
    
    307
    
    
    
    244
    
    
    
    216
    
    
    
    177
    
    
    
    2,105
    
    
    
    1,4672006First Quarter
    
    Php
    356
    
    
    Php
    294
    
    
    Php
    245
    
    
    Php
    207
    
    
    Php
    1,867
    
    
    Php
    1,386Second Quarter
    
    
    344
    
    
    
    294
    
    
    
    234
    
    
    
    202
    
    
    
    1,920
    
    
    
    1,414Third Quarter
    
    
    323
    
    
    
    280
    
    
    
    213
    
    
    
    184
    
    
    
    1,891
    
    
    
    1,403Fourth Quarter
    
    
    332
    
    
    
    286
    
    
    
    213
    
    
    
    184
    
    
    
    1,939
    
    
    
    1,425
 
 (1)
    
    Gross quarterly ARPU is calculated by dividing gross cellular service revenues for the
quarter, including (i) discounts, (ii) allocated content-provider costs; and (iii)
interconnection income but excluding inbound roaming revenues, by the average number of
subscribers in the quarter.(2)
    
    Net quarterly ARPU is calculated by dividing gross cellular service revenues for the
quarter, net of (i) discounts, (ii) allocated content-provider costs; and (iii)
interconnection income net of interconnection expense, by the average number of subscribers in
the quarter. Wireless Broadband, Satellite and Other Services
   Non-service Revenues
   Expenses
    77




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##### Table of Contents



Increase (Decrease)2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless Services:Depreciation and amortization
    
    Php
    12,202
    
    
    
    27
    
    
    Php
    10,752
    
    
    
    25
    
    
    Php
    1,450
    
    
    
    13Rent
    
    
    8,751
    
    
    
    20
    
    
    
    7,887
    
    
    
    19
    
    
    
    864
    
    
    
    11Compensation and employee benefits(1)

    
    4,608
    
    
    
    10
    
    
    
    5,041
    
    
    
    12
    
    
    
    (433
    )
    
    
    (9
    )Cost of sales
    
    
    4,446
    
    
    
    10
    
    
    
    4,888
    
    
    
    11
    
    
    
    (442
    )
    
    
    (9
    )Selling and promotions
    
    
    3,803
    
    
    
    9
    
    
    
    3,012
    
    
    
    7
    
    
    
    791
    
    
    
    26Repairs and maintenance
    
    
    3,634
    
    
    
    8
    
    
    
    3,646
    
    
    
    9
    
    
    
    (12
    )
    
    
    Professional and other contracted services
    
    
    2,369
    
    
    
    5
    
    
    
    1,779
    
    
    
    4
    
    
    
    590
    
    
    
    33Taxes and licenses
    
    
    1,348
    
    
    
    3
    
    
    
    1,018
    
    
    
    2
    
    
    
    330
    
    
    
    32Communication, training and travel
    
    
    1,083
    
    
    
    3
    
    
    
    891
    
    
    
    2
    
    
    
    192
    
    
    
    22Insurance and security services
    
    
    783
    
    
    
    2
    
    
    
    797
    
    
    
    2
    
    
    
    (14
    )
    
    
    (2
    )Asset Impairment
    
    
    563
    
    
    
    1
    
    
    
    2,220
    
    
    
    5
    
    
    
    (1,657
    )
    
    
    (75
    )Amortization of intangible assets
    
    
    158
    
    
    
    
    
    
    
    312
    
    
    
    1
    
    
    
    (154
    )
    
    
    (49
    )Other expenses
    
    
    782
    
    
    
    2
    
    
    
    578
    
    
    
    1
    
    
    
    204
    
    
    
    35Total
    
    Php
    44,530
    
    
    
    100
    
    
    Php
    42,821
    
    
    
    100
    
    
    Php
    1,709
    
    
    
    4
 
 (1)
    
    Includes salaries and employee benefits, incentive plan, pension and manpower
rightsizing program, or MRP, costs.   Note 23  Share-based Payments and Employee Benefits
        78




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##### Table of Contents



Note 8  Property, Plant and Equipment
   Other Income (Expenses)
  Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses)Foreign exchange gains (losses)  net
    
    Php
    2,649
    
    
    Php
    1,722
    
    
    Php
    927
    
    
    
    54Interest income
    
    
    1,186
    
    
    
    1,197
    
    
    
    (11
    )
    
    
    (1
    )Gains (losses) on derivative transactions  net
    
    
    278
    
    
    
    39
    
    
    
    239
    
    
    
    613Financing costs
    
    
    (2,299
    )
    
    
    (4,658
    )
    
    
    2,359
    
    
    
    (51
    )Others
    
    
    763
    
    
    
    587
    
    
    
    176
    
    
    
    30Total
    
    Php
    2,577
    
    
    Php
    (1,113
    )
    
    Php
    3,690
    
    
    
    332
  Provision for Income Tax
  Net Income
  Fixed Line
 Revenues
   79




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##### Table of Contents



Increase (Decrease)2007
    
    
    %
    
    
    2006(1)
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Service RevenuesLocal exchange
    
    Php
    16,205
    
    
    
    33
    
    
    Php
    16,965
    
    
    
    35
    
    
    Php
    (760
    )
    
    
    (4
    )International long distance
    
    
    8,674
    
    
    
    18
    
    
    
    9,933
    
    
    
    20
    
    
    
    (1,259
    )
    
    
    (13
    )National long distance
    
    
    6,338
    
    
    
    13
    
    
    
    6,921
    
    
    
    14
    
    
    
    (583
    )
    
    
    (8
    )Data and other network
    
    
    15,921
    
    
    
    33
    
    
    
    13,725
    
    
    
    28
    
    
    
    2,196
    
    
    
    16Miscellaneous
    
    
    1,413
    
    
    
    3
    
    
    
    1,632
    
    
    
    3
    
    
    
    (219
    )
    
    
    (13
    )48,551
    
    
    
    100
    
    
    
    49,176
    
    
    
    100
    
    
    
    (625
    )
    
    
    (1
    )Non-Service Revenues:Sale of computers, cellular handsets and SIM-packs
    
    
    281
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    202
    
    
    
    256Total Fixed Line Revenues
    
    Php
    48,832
    
    
    
    100
    
    
    Php
    49,255
    
    
    
    100
    
    
    Php
    (423
    )
    
    
    (1
    )
 Service Revenues
 Local Exchange Service
  Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %Total local exchange service revenues (in millions)
    
    Php
    16,205
    
    
    Php
    16,965
    
    
    Php
    (760
    )
    
    
    (4
    )Number of fixed line subscribers
    
    
    1,724,702
    
    
    
    1,776,647
    
    
    
    (51,945
    )
    
    
    (3
    )Postpaid
    
    
    1,479,647
    
    
    
    1,450,331
    
    
    
    29,316
    
    
    
    2Prepaid
    
    
    245,055
    
    
    
    326,316
    
    
    
    (81,261
    )
    
    
    (25
    )Number of fixed line employees
    
    
    8,080
    
    
    
    8,711
    
    
    
    (631
    )
    
    
    (7
    )Number of fixed line subscribers per employee
    
    
    213
    
    
    
    204
    
    
    
    9
    
    
    
    4
   International Long Distance Service
  Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %Total international long distance service revenues (in millions)
    
    Php
    8,674
    
    
    Php
    9,933
    
    
    Php
    (1,259
    )
    
    
    (13
    )Inbound
    
    
    7,127
    
    
    
    8,378
    
    
    
    (1,251
    )
    
    
    (15
    )Outbound
    
    
    1,547
    
    
    
    1,555
    
    
    
    (8
    )
    
    
    (1
    )International call volumes (in million minutes, except call ratio)
    
    
    2,280
    
    
    
    2,177
    
    
    
    103
    
    
    
    5Inbound
    
    
    2,007
    
    
    
    1,984
    
    
    
    23
    
    
    
    1Outbound
    
    
    273
    
    
    
    193
    
    
    
    80
    
    
    
    41Inbound-outbound call ratio
    
    
    7.4:1
    
    
    
    10.3:1
    
    
    
    
    
    
    
    
   80




---



##### Table of Contents



PLDT
ID-DSL Budget Card
 National Long Distance Service
  Decrease2007
    
    
    2006
    
    
    Amount
    
    
    %Total national long distance service revenues (in millions)
    
    Php
    6,338
    
    
    Php
    6,921
    
    
    Php
    (583
    )
    
    
    (8
    )National long distance call volumes (in million minutes)
    
    
    2,183
    
    
    
    2,251
    
    
    
    (68
    )
    
    
    (3
    )
  Data and Other Network Services
  Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    %Data and other network service revenues
(in millions)
    
    Php
    15,921
    
    
    Php
    13,725
    
    
    Php
    2,196
    
    
    
    16Number of DSLbroadband subscribers
    
    
    264,291
    
    
    
    133,159
    
    
    
    131,132
    
    
    
    98Number of PLDT Vibenarrowband subscribers
    
    
    230,995
    
    
    
    297,250
    
    
    
    (66,255
    )
    
    
    (22
    )
 PLDT DSL myDSL BizDSL PLDT Vibe
 DSL DSL
  81




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##### Table of Contents



PLDT Vibe PLDT Vibe DSL
  Miscellaneous
  Non-service Revenues
  Expenses
   Increase (Decrease)2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Depreciation and amortization
    
    Php
    15,477
    
    
    
    41
    
    
    Php
    20,406
    
    
    
    50
    
    
    Php
    (4,929
    )
    
    
    (24
    )Compensation and employee benefits(1)
    
    
    10,411
    
    
    
    27
    
    
    
    10,298
    
    
    
    25
    
    
    
    113
    
    
    
    1Repairs and maintenance
    
    
    3,772
    
    
    
    10
    
    
    
    3,553
    
    
    
    9
    
    
    
    219
    
    
    
    6Rent
    
    
    1,799
    
    
    
    5
    
    
    
    1,579
    
    
    
    4
    
    
    
    220
    
    
    
    14Professional and other contracted services
    
    
    1,727
    
    
    
    5
    
    
    
    1,082
    
    
    
    3
    
    
    
    645
    
    
    
    60Selling and promotions
    
    
    1,552
    
    
    
    4
    
    
    
    1,733
    
    
    
    4
    
    
    
    (181
    )
    
    
    (10
    )Taxes and licenses
    
    
    877
    
    
    
    2
    
    
    
    659
    
    
    
    2
    
    
    
    218
    
    
    
    33Provisions
    
    
    666
    
    
    
    2
    
    
    
    38
    
    
    
    
    
    
    
    628
    
    
    
    1,653Communication, training and travel
    
    
    466
    
    
    
    1
    
    
    
    507
    
    
    
    1
    
    
    
    (41
    )
    
    
    (8
    )Insurance and security services
    
    
    439
    
    
    
    1
    
    
    
    498
    
    
    
    1
    
    
    
    (59
    )
    
    
    (12
    )Cost of sales
    
    
    300
    
    
    
    1
    
    
    
    162
    
    
    
    
    
    
    
    138
    
    
    
    85Asset impairment
    
    
    43
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    (11
    )
    
    
    (20
    )Other expenses
    
    
    362
    
    
    
    1
    
    
    
    580
    
    
    
    1
    
    
    
    (218
    )
    
    
    (38
    )Total
    
    Php
    37,891
    
    
    
    100
    
    
    Php
    41,149
    
    
    
    100
    
    
    Php
    (3,258
    )
    
    
    (8
    )
 
 (1)
    
    Includes salaries and employee benefits, incentive plan, pension and MRP costs.   82




---



##### Table of Contents



Note 23 
Share-based Payments and Employee Benefits
      Note 25  Provisions and Contingencies
   DSL WeRoam
    83




---



##### Table of Contents



Other Expenses
  Change2007
    
    
    2006
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses)Foreign exchange gains  net
    
    Php
    5,479
    
    
    Php
    3,208
    
    
    Php
    2,271
    
    
    
    71Interest income
    
    
    296
    
    
    
    441
    
    
    
    (145
    )
    
    
    (33
    )(Losses) gains on derivative transactions  net
    
    
    (3,335
    )
    
    
    (8,346
    )
    
    
    5,011
    
    
    
    (60
    )Financing costs
    
    
    (4,657
    )
    
    
    (6,173
    )
    
    
    1,516
    
    
    
    (25
    )Others
    
    
    2,153
    
    
    
    4,891
    
    
    
    (2,738
    )
    
    
    56Total
    
    Php
    (64
    )
    
    Php
    (5,979
    )
    
    Php
    5,915
    
    
    
    99
  Provision for (Benefit from) Income Tax
  Net Income
  Information and Communications Technology
 Revenues
    84




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##### Table of Contents



Increase (Decrease)2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)Service Revenues:Knowledge processing solutions
    
    Php
    5,261
    
    
    
    51
    
    
    Php
    2,374
    
    
    
    34
    
    
    Php
    2,887
    
    
    
    122Customer interaction solutions
    
    
    3,262
    
    
    
    32
    
    
    
    2,624
    
    
    
    38
    
    
    
    638
    
    
    
    24Internet and online gaming
    
    
    937
    
    
    
    9
    
    
    
    796
    
    
    
    12
    
    
    
    141
    
    
    
    18Vitroä data center
    
    
    595
    
    
    
    6
    
    
    
    543
    
    
    
    8
    
    
    
    52
    
    
    
    1010,055
    
    
    
    98
    
    
    
    6,337
    
    
    
    92
    
    
    
    3,718
    
    
    
    59Non-Service Revenues:Point-product-sales
    
    
    267
    
    
    
    2
    
    
    
    553
    
    
    
    8
    
    
    
    (286
    )
    
    
    (52
    )Total ICT Revenues
    
    Php
    10,322
    
    
    
    100
    
    
    Php
    6,890
    
    
    
    100
    
    
    Php
    3,432
    
    
    
    50
 Service Revenues
  Knowledge Processing Solutions
  Customer Interaction Solutions
 ePLDT Ventus ePLDT Ventus
  Internet and Online Gaming
  Data Center
 Vitro ä
  85




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##### Table of Contents



Vitro ä Vitro ä
 Non-service Revenues
  Expenses
   Increase (Decrease)2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    Amount
    
    
    %(in millions)ICT Services:Compensation and employee benefits(1)
    
    Php
    5,455
    
    
    
    50
    
    
    Php
    3,021
    
    
    
    42
    
    
    Php
    2,434
    
    
    
    81Professional and other contracted services
    
    
    1,129
    
    
    
    10
    
    
    
    739
    
    
    
    10
    
    
    
    390
    
    
    
    53Depreciation and amortization
    
    
    934
    
    
    
    8
    
    
    
    711
    
    
    
    10
    
    
    
    223
    
    
    
    31Asset impairment
    
    
    711
    
    
    
    6
    
    
    
    492
    
    
    
    7
    
    
    
    219
    
    
    
    45Rent
    
    
    620
    
    
    
    6
    
    
    
    444
    
    
    
    6
    
    
    
    176
    
    
    
    40Communication, training and travel
    
    
    523
    
    
    
    5
    
    
    
    276
    
    
    
    4
    
    
    
    247
    
    
    
    89Repairs and maintenance
    
    
    504
    
    
    
    5
    
    
    
    368
    
    
    
    5
    
    
    
    136
    
    
    
    37Cost of sales
    
    
    381
    
    
    
    3
    
    
    
    575
    
    
    
    8
    
    
    
    (194
    )
    
    
    (34
    )Amortization of intangible assets
    
    
    232
    
    
    
    2
    
    
    
    138
    
    
    
    2
    
    
    
    94
    
    
    
    68Selling and promotions
    
    
    194
    
    
    
    2
    
    
    
    194
    
    
    
    3
    
    
    
    
    
    
    
    Taxes and licenses
    
    
    94
    
    
    
    1
    
    
    
    70
    
    
    
    1
    
    
    
    24
    
    
    
    34Insurance and security services
    
    
    49
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    14
    
    
    
    40Other expenses
    
    
    179
    
    
    
    2
    
    
    
    112
    
    
    
    2
    
    
    
    67
    
    
    
    60Total
    
    Php
    11,005
    
    
    
    100
    
    
    Php
    7,175
    
    
    
    100
    
    
    Php
    3,830
    
    
    
    53
 
 (1)
    
    Includes salaries and employee benefits, incentive plan, pension and MRP costs.    Note 13  Investment in Debt Securities
  86




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##### Table of Contents



Vitro TM
  Note 11  Goodwill and Intangible Assets
    Other Income (Expenses)
  Change2007
    
    
    2006
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses)Gains on derivative transactions  net
    
    Php
    138
    
    
    Php
    3
    
    
    Php
    135
    
    
    
    4,500Interest income
    
    
    21
    
    
    
    16
    
    
    
    5
    
    
    
    31Financing costs
    
    
    (132
    )
    
    
    (23
    )
    
    
    (109
    )
    
    
    (474
    )Foreign exchange losses  net
    
    
    (138
    )
    
    
    (109
    )
    
    
    (29
    )
    
    
    (27
    )Others
    
    
    583
    
    
    
    49
    
    
    
    534
    
    
    
    1,090Total
    
    Php
    472
    
    
    Php
    (64
    )
    
    Php
    536
    
    
    
    838
   87




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##### Table of Contents



Benefit from Income Tax
  Net Loss
  
 Plans and Prospects
    88




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##### Table of Contents



Liquidity and Capital Resources
  2008
    
    
    2007
    
    
    2006(in millions)Cash FlowsNet cash provided by operating activities
    
    Php
    78,302
    
    
    Php
    77,418
    
    
    Php
    69,211Net cash used in investing activities
    
    
    17,014
    
    
    
    31,319
    
    
    
    35,790Capital expenditures
    
    
    25,203
    
    
    
    24,824
    
    
    
    20,674Net cash used in financing activities
    
    
    45,464
    
    
    
    44,819
    
    
    
    45,900Net increase (decrease) in cash and cash equivalents
    
    
    16,237
    
    
    
    577
    
    
    
    (13,189
    )
 2008
    
    
    2007(in millions)CapitalizationInterest-bearing financial liabilities:Long-term financial liabilities:Long-term debt
    
    Php
    58,899
    
    
    Php
    53,372Obligations under finance lease
    
    
    11
    
    
    
    1558,910
    
    
    
    53,387Current portion of interest-bearing financial liabilities:Notes payable
    
    
    553
    
    
    
    493Long-term debt maturing within one year
    
    
    14,459
    
    
    
    6,775Obligations under finance lease maturing within one year
    
    
    59
    
    
    
    481Preferred stock subject to mandatory redemption
    
    
    9
    
    
    
    1,01515,080
    
    
    
    8,764Total interest-bearing financial liabilities
    
    
    73,990
    
    
    
    62,151Total equity
    
    
    106,969
    
    
    
    112,345Php
    180,959
    
    
    Php
    174,496Other Financial DataTotal assets
    
    Php
    252,558
    
    
    Php
    240,158Property, plant and equipment  net
    
    
    160,326
    
    
    
    159,414Cash and cash equivalents
    
    
    33,684
    
    
    
    17,447Short-term investments
    
    
    6,670
    
    
    
    13,415
   Operating Activities
   89




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##### Table of Contents



Investing Activities
 Note
13Investment in Debt Securities
   90




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##### Table of Contents



Financing Activities
  Debt Financing
      91




---



##### Table of Contents



92




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##### Table of Contents



Note 18  Interest-bearing
Financial Liabilities
 Debt Covenants
  Note 18  Interest-bearing Financial Liabilities
 Financing Requirements
       93




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##### Table of Contents



Note 17  Equity
 Credit Ratings
   Rating Agency
    
    Credit Rating
    
    
    
    OutlookStandard & Poors Ratings Services, or Standard & Poors
    
    Foreign Currency Rating
    
    BB+
    
    StableMoodys Investor Service, or Moodys
    
    Foreign Currency Senior Unsecured Debt Rating
    
    Ba2
    
    PositiveLocal Currency Corporate Family Rating
    
    Baa2
    
    PositiveFitch Ratings, or Fitch
    
    Long-term Foreign Currency Rating
    
    BB+
    
    StableLong-term Local Currency Rating
    
    BB+
    
    StableLong-term Foreign Currency Issuer Default Rating, or IDR
    
    BB+
    
    StableLong-term Local Currency Issuer Default Rating
    
    BBB
    
    StableNational Long-term Rating
    
    AAA(ph1)
    
    Stable
   Off-balance Sheet Arrangements
   94




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##### Table of Contents



Contractual Obligations and Commercial Commitments
 Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 Years
    
    
    5 years(in million pesos)December 31, 2008Long-term debt(1):
    
    
    99,363
    
    
    
    7,649
    
    
    
    31,500
    
    
    
    26,744
    
    
    
    33,470Principal
    
    
    77,934
    
    
    
    7,077
    
    
    
    19,916
    
    
    
    21,978
    
    
    
    28,963Interest
    
    
    21,429
    
    
    
    572
    
    
    
    11,584
    
    
    
    4,766
    
    
    
    4,507Lease obligations:
    
    
    7,235
    
    
    
    2,727
    
    
    
    1,608
    
    
    
    1,265
    
    
    
    1,635Operating lease
    
    
    7,164
    
    
    
    2,667
    
    
    
    1,601
    
    
    
    1,261
    
    
    
    1,635Finance lease
    
    
    71
    
    
    
    60
    
    
    
    7
    
    
    
    4
    
    
    
    Unconditional purchase obligations(2)
    
    
    762
    
    
    
    24
    
    
    
    167
    
    
    
    286
    
    
    
    285Other obligations:
    
    
    51,367
    
    
    
    33,714
    
    
    
    11,630
    
    
    
    1,816
    
    
    
    4,207Mandatory conversion and purchase of shares
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    Derivative financial liabilities(3):
    
    
    6,207
    
    
    
    108
    
    
    
    2,003
    
    
    
    1,768
    
    
    
    2,328Long-term currency swaps
    
    
    6,099
    
    
    
    
    
    
    
    2,003
    
    
    
    1,768
    
    
    
    2,328Forward foreign exchange contracts
    
    
    69
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    Long-term foreign currency options
    
    
    39
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    Various trade and other obligations:
    
    
    45,151
    
    
    
    33,597
    
    
    
    9,627
    
    
    
    48
    
    
    
    1,879Suppliers and contractors
    
    
    22,781
    
    
    
    14,131
    
    
    
    8,650
    
    
    
    
    
    
    
    Utilities and related expenses
    
    
    11,376
    
    
    
    11,346
    
    
    
    27
    
    
    
    1
    
    
    
    2Employee benefits
    
    
    2,925
    
    
    
    2,925
    
    
    
    
    
    
    
    
    
    
    
    Customers deposits
    
    
    2,251
    
    
    
    
    
    
    
    327
    
    
    
    47
    
    
    
    1,877Carriers
    
    
    1,780
    
    
    
    1,780
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    1,379
    
    
    
    1,379
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    2,659
    
    
    
    2,036
    
    
    
    623
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    158,727
    
    
    
    44,114
    
    
    
    44,905
    
    
    
    30,111
    
    
    
    39,597
 
 (1)
    
    Before deducting unamortized debt discount and debt issuance costs.(2)
    
    Based on the Amended ATPA with AIL.(3)
    
    Gross liabilities before any offsetting application. Note 24  Contractual
Obligations and Commercial Commitments
 Commercial Commitments
  
 Impact of Inflation and Changing Prices
    95




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 
 Directors, Key Officers and Advisors
  Name
    
    Age
    
    Period during which individual has served as suchManuel V. Pangilinan
    
    
    62
    
    
    November 24, 1998 to presentNapoleon L. Nazareno
    
    
    59
    
    
    November 24, 1998 to presentHelen Y. Dee
    
    
    64
    
    
    June 18, 1986 to presentRay C. Espinosa
    
    
    52
    
    
    November 24, 1998 to presentTatsu Kono
    
    
    56
    
    
    March 28, 2006 to presentRev. Fr. Bienvenido F. Nebres, S.J.*
    
    
    68
    
    
    November 24, 1998 to presentTakashi Ooi
    
    
    47
    
    
    November 6, 2007 to presentDonald G. Dee(1)
    
    
    62
    
    
    September 30, 2008 to presentOscar S. Reyes*
    
    
    62
    
    
    April 5, 2005 to presentAlbert F. del Rosario
    
    
    69
    
    
    November 24, 1998 to presentPedro E. Roxas*
    
    
    52
    
    
    March 1, 2001 to presentAlfred V. Ty*
    
    
    41
    
    
    June 13, 2006 to presentTony Tan Caktiong(2)
    
    
    56
    
    
    July 8, 2008 to present
 
 *
    
    Independent Director(1)
    
    Elected on September 30, 2008 to replace Corazon de la Paz-Bernardo who resigned as a director
effective on the same date.(2)
    
    Elected on July 8, 2008 to replace Ma. Lourdes C. Rausa-Chan who resigned as a director
effective July 7, 2008.  Period during whichName
    
    Age
    
    Position(s)
    
    individual has served as suchManuel V. Pangilinan
    
    
    62
    
    
    Chairman of the Board
    
    February 19, 2004 to presentNapoleon L. Nazareno
    
    
    59
    
    
    President and Chief Executive Officer
President and Chief Executive Officer of Smart
    
    February 19, 2004 to present
January 2000 to presentErnesto R. Alberto
    
    
    47
    
    
    Senior Vice President
Corporate Business Head
Customer Sales and Marketing Head
    
    May 15, 2003 to present
May 15, 2003 to January 31, 2008
February 1, 2008 to presentRene G. Bañez
    
    
    53
    
    
    Senior Vice President
Chief Governance Officer
Administration and Materials Management Head
    
    January 25, 2005 to present
October 5, 2004 to March 3, 2008
January 1, 2008 to presentAnabelle L. Chua
    
    
    48
    
    
    Senior Vice President
Corporate Finance and
Treasury Head
Treasurer
Chief Financial Officer of Smart
    
    February 26, 2002 to present
March 1, 1998 to present
February 1, 1999 to present
December 1, 2005 to presentJun R. Florencio
    
    
    53
    
    
    Senior Vice President
Audit and Assurance Head
Internal Audit and Fraud Risk Management Head
    
    June 14, 2005 to present
September 1, 2000 to February 15, 2006
February 16, 2006 to presentMenardo G. Jimenez, Jr.
    
    
    45
    
    
    Senior Vice President
Corporate Communications and Public Affairs Head
Retail Business Head
Business Transformation Office Revenue Team
    
    December 9, 2004 to present
December 1, 2001 to June 15, 2004

June 16, 2004 to December 31, 2007
January 1, 2008 to presentGeorge N. Lim
    
    
    56
    
    
    Senior Vice President
Network Services Head
Business Transformation Office Network Team
    
    February 26, 1999 to present
February 1, 2003 to December 31, 2007
January 1, 2008 to presentAlfredo S. Panlilio
    
    
    45
    
    
    Senior Vice President
International and Carrier
Business Head
PLDT Global Corp. President
    
    May 8, 2001 to present
February 1, 2003 to June 15, 2004
June 16, 2004 to present
  96




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##### Table of Contents



Period during whichName
    
    Age
    
    Position(s)
    
    individual has served as suchClaro Carmelo P. Ramirez
    
    
    48
    
    
    Senior Vice President
Retail Business Head
International and Carrier
Business Head
Consumer Affairs Head
Office of the President and CEO
    
    July 1, 1999 to present
February 1, 2003 to June 15, 2004
June 16, 2004 to December 4, 2005
December 5, 2005 to December 31, 2007
January 1, 2008 to presentMa. Lourdes C. Rausa-Chan
    
    
    55
    
    
    Corporate Secretary
Senior Vice President
Corporate Affairs and
Legal Services Head
Chief Governance Officer
    
    November 24, 1998 to present
January 5, 1999 to present
March 4, 2008 to presentVictorico P. Vargas
    
    
    57
    
    
    Senior Vice President
Human Resources Head
International and Carrier
Business Head
Business Transformation
Office Head
    
    February 15, 2000 to present
February 15, 2000 to present
March 1, 2007 to December 31, 2007
January 1, 2008 to presentJune Cheryl A. Cabal
    
    
    35
    
    
    First Vice President
Financial Reporting and
Planning Head
Financial Reporting and
Controllership Head
    
    May 6, 2008 to present
May 1, 2002 to November 15, 2006
November 15, 2006 to presentChristopher H. Young
    
    
    51
    
    
    Chief Financial Advisor
    
    November 24, 1998 to presentRolando G. Peña
    
    
    46
    
    
    Network Services Head of Smart
Customer Service Assurance Head
    
    September 1, 1994 to present
January 1, 2008 to present
    97




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##### Table of Contents



Mr. Manuel V. Pangilinan
     Mr. Napoleon L. Nazareno
     98




---



##### Table of Contents



Mr. Donald G. Dee
 Ms. Helen Y. Dee
 Atty. Ray C. Espinosa
 Mr. Tatsu Kono
 Rev. Fr. Bienvenido F. Nebres, S.J.
 Mr. Takashi Ooi
  99




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##### Table of Contents



Mr. Oscar S. Reyes
 Mr. Albert F. del Rosario
 Mr. Pedro E. Roxas
 Mr. Tony Tan Caktiong
 Mr. Alfred V. Ty
 Mr. Ernesto R. Alberto
 Mr. Rene G. Bañez
  100




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##### Table of Contents



Ms. Anabelle L. Chua
 Mr. Jun R. Florencio,
 Mr. Menardo G. Jimenez, Jr.
 Mr. George N. Lim
 Mr. Alfredo S. Panlilio
 Mr. Claro Carmelo P. Ramirez
 Atty. Ma. Lourdes C. Rausa-Chan
 Mr. Victorico P. Vargas
  101




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##### Table of Contents



Ms. June Cheryl A. Cabal
  Mr. Christopher H. Young
 Atty. Ray C. Espinosa
 Mr. Rolando G. Peña
  Name of CompaniesName of Director
    
    Public
    
    PrivateHelen Y. Dee
    
    EEI Corporation
    
    AY Holdings, Inc.Petro Energy Resources Corporation
    
    Business Harmony Realty, Inc.Rizal Commercial Banking Corporation
    
    Great Life Financial Assurance Corporation(Chairman)Seafront Resources Corporation
    
    Great Pacific Life Assurance Corp.Grepalife Asset Management Corp. (Chairman)Grepalife Fixed Income Fund Corp. (Chairman)Hi-Eisai Pharmaceuticals, Inc. (Chairman)Honda Cars Philippines, Inc.Isuzu Philippines, Inc.La Funeraria Paz, Inc.Landev Corp. (Chairman)Malayan Insurance Company (Chairman)Manila Memorial Park Cemetery, Inc. (Chairman)Mapua Information Technology Center, Inc. (Chairman)MICO Equities, Inc.Pan Malayan Management and Investment Corporation(Vice Chairman)Pan Malayan Realty Corp. (Chairman)RCBC Forex Brokers Corp.RCBC Savings Bank (Chairman)South Western Cement CorporationRay C. Espinosa
    
    Lepanto Consolidated Mining Company
    
    Digital Paradise, Inc. (Chairman)PhilWeb Corporation
    
    ePDS, Inc. (Chairman)ePLDT Ventus, Inc. (Chairman)Infocom Technologies, Inc. (Chairman)Level Up! (Philippines), Inc. (Chairman)netGames, Inc. (Chairman)Parlance Systems, Inc. (Chairman)SPi Technologies, Inc. (Chairman)Vocativ Systems, Inc. (Chairman)
  102




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##### Table of Contents



Name of CompaniesName of Director
    
    Public
    
    PrivateAlbert F. del Rosario
    
    First Philippine Infrastructure, Inc.
    
    Asia Insurance Philippines Corporation (Vice Chairman)Metro Pacific Investments Corporation
    
    Bancholders, Inc.Business World Publishing Corporation (Chairman)Gotuaco del Rosario and Associates, Inc. (Chairman)Infrontier (Philippines), Inc.Landco Pacific CorporationLMG Chemicals CorporationManila North Tollways CorporationMediaQuest Holdings, Inc.MediaScape, Inc.Nation Broadcasting CorporationPhilippine Indocoil Corporation (Chairman)Stratbase, Inc. (Chairman)Oscar S. Reyes
    
    Bank of the Philippine Islands
    
    CEOs Inc.Basic Energy Corporation
    
    First Philippine Electric CompanyManila Water Company, Inc.
    
    In1 Archipelago Minerals, Inc.Pepsi Cola Products Philippines, Inc.
    
    Link Edge, Inc. (Chairman)Mindoro Resources Ltd.MRL Gold Phils. Inc. (Chairman)Petrolift, Inc.Sun Life of Canada Phils. Inc.Sun Life Dollar Advantage & Dollar Abundance Funds, Inc.Sun Life Financial, Inc.
 
 Terms of Office
  
 Family Relationships
  
 Compensation of Key Management Personnel of the PLDT Group
   103




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##### Table of Contents



2007
    
    
    2008
    
    
    2009Actual
    
    
    Estimate(In millions)President and CEO(1)(4) and four most highly compensated key officers:Salary(2)
    
    Php
    36
    
    
    Php
    41
    
    
    Php
    49Bonus(3)
    
    
    9
    
    
    
    8
    
    
    
    10Other compensation(4)
    
    
    252
    
    
    
    46
    
    
    
    48297
    
    
    
    95
    
    
    
    107All other key officers, other officers and directors as a group
(excluding the President and CEO and four most highly compensated key officers):Salary(2)
    
    
    194
    
    
    
    188
    
    
    
    220Bonus(3)
    
    
    50
    
    
    
    48
    
    
    
    60Other compensation(4)
    
    
    1,063
    
    
    
    266
    
    
    
    223Php
    1,307
    
    
    Php
    502
    
    
    Php
    503
 
 (1)
    
    The President and CEO receives compensation from Smart.(2)
    
    Basic monthly salary.(3)
    
    Includes longevity pay, mid-year bonus, 13th month and Christmas bonus.(4)
    
    Includes variable pay, directors fee and other payments. Variable pay is based on an annual
incentive system that encourages and rewards the achievement of corporate objectives. It
covers regular officers and executives of PLDT and is based on a percentage of their
guaranteed annual cash compensation. Also includes LTIP payout in May 2007.   
 Long-Term Incentive Plan
     104




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##### Table of Contents



Note 23 
Share-based Payments and Employee Benefits
 
 Executive Stock Option Plan
     
 Share Ownership
  Shares of
    
    
    Shares ofName of Owner
    
    Common Stock(1)
    
    
    Preferred StockManuel V. Pangilinan
    
    
    221,450
    
    
    
    360Napoleon L. Nazareno
    
    
    13,927
    (2)
    
    
    495Helen Y. Dee
    
    
    22,055
    (3)
    
    
    180Ray C. Espinosa
    
    
    16,243
    (2)
    
    
    Takashi Ooi
    
    
    1
    
    
    
    Tatsu Kono
    
    
    100
    
    
    
    Rev. Fr. Bienvenido F. Nebres, S.J.
    
    
    2
    
    
    
    Donald G. Dee
    
    
    10,931,131
    (4)
    
    
    640Oscar S. Reyes
    
    
    1
    
    
    
    360Albert F. del Rosario
    
    
    140,005
    (5)
    
    
    2,100
  105




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##### Table of Contents



Shares of
    
    
    Shares ofName of Owner
    
    Common Stock(1)
    
    
    Preferred StockPedro E. Roxas
    
    
    1
    
    
    
    540Alfred V. Ty
    
    
    1
    
    
    
    Tony Tan Caktiong
    
    
    1
    
    
    
    50Ma. Lourdes C. Rausa-Chan
    
    
    699
    (2)
    
    
    350Ernesto R. Alberto
    
    
    4,100
    
    
    
    Rene G. Bañez
    
    
    1
    
    
    
    540Anabelle L. Chua
    
    
    13,878
    (2)
    
    
    Jun R. Florencio
    
    
    15
    
    
    
    530Menardo G. Jimenez, Jr.
    
    
    22
    
    
    
    George N. Lim
    
    
    5,356
    (2)
    
    
    360Alfredo S. Panlilio
    
    
    4,531
    
    
    
    Claro Carmelo P. Ramirez
    
    
    11,500
    
    
    
    Victorico P. Vargas
    
    
    2,878
    
    
    
    180June Cheryl A. Cabal
    
    
    
    
    
    
    Christopher H. Young
    
    
    51,813
    (2)
    
    
    Rolando G. Peña
    
    
    
    
    
    
    
 
 (1)
    
    As at December 31, 2008, under PLDTs ESOP, all of the options to purchase shares of common
stock of key officers and directors listed in the table above had been exercised. No options
have been granted to non-executive directors. All outstanding options were exercisable at an
exercise price of Php814 per share and had an expiration date of December 10, 2009. All
outstanding options were fully vested as at December 10, 2004.(2)
    
    Includes PLDT common shares that have been lodged with the Philippine Central Depository,
Inc.(3)
    
    Includes 21,957 PLDT common shares registered in the name of Hydee Management and Resources,
Inc. As chairperson and president of Hydee Management & Resources, Inc., Ms. Dee may exercise
voting rights in respect of and may be considered to have beneficial ownership of these
shares.(4)
    
    Includes 5,024,788 PLDT common shares registered in the name of Social Security System and
5,906,342 PLDT common shares held of record by PCD Nominee Corporation. Mr. Dee, as
Commissioner of the Social Security System, may exercise voting rights in respect of these
shares and may be considered to have beneficial ownership of these shares.(5)
    
    Out of the 140,005 common shares, 15,000 common shares are under the name of Albert F. del
Rosario and/or Margaret Gretchen del Rosario.  
 Board of Directors  Independent Directors
  
 Audit, Governance and Nomination, Executive Compensation and Technology Strategy Committees
   106




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##### Table of Contents



Audit Committee
    
    
    to review and evaluate the qualifications, performance and independence of the
external auditors and the lead partner of the external auditors;
    
    to select and appoint the external auditors and to remove or replace the external
auditors;
    
    to review and approve in consultation with the head of the internal audit
organization and the chief financial advisor the fees charged by the external auditors
for audit and non-audit services;
    
    to pre-approve all audit and non-audit services to be provided by and all fees to be
paid to the external auditors;
    
    to ensure that the external auditors prepare and deliver annually the statement as
to independence, to discuss with the external auditors any relationships or services
disclosed in such statements that may impact the objectivity, independence or quality
of services of said external auditors and to take appropriate action in response to
such statement to satisfy itself of the external auditors independence;
    
    to ensure that the external auditors or the lead partner of the external auditors
having the primary responsibility for the audit of PLDTs accounts is rotated at least
once every five years;
    
    to advise the external auditors that they are expected to provide the committee a
timely analysis of significant/critical financial reporting issues and practices;
    
    to obtain assurance from the external auditors that the audit was conducted in a
manner consistent with the requirement under applicable rules; and
    
    to resolve disagreements between management and the external auditors regarding
financial reporting.
  Governance and Nomination Committee
   1.
    
    To develop and recommend to the board for approval and oversee the
implementation of corporate governance principles and policies;2.
    
    To review and evaluate the qualifications of the persons nominated for
election as directors (including independent directors) or other positions
requiring board appointment;
  107




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##### Table of Contents



3.
    
    To identify the qualified nominees and recommend that the board select
and recommend such qualified nominees for election as directors/independent
directors at the annual meeting of shareholders; and4.
    
    To provide an assessment on our boards effectiveness in the process of
replacing or appointing new directors or members of the board committees.
 Executive Compensation Committee
   1.
    
    To provide guidance to and assist our board of directors in developing
a compensation philosophy or policy consistent with our culture, strategy and
control environment;2.
    
    To oversee the development and administration of our compensation programs; and3.
    
    To review and approve corporate goals and objectives relevant to the
compensation of our chief executive officer, evaluate the performance of our chief
executive officer in light of those goals and objectives, and set the compensation
level of our chief executive officer based on such evaluation.
 Technology Strategy Committee
   1.
    
    To review and approve our technology strategy and roadmap, and to
review and advise our board on major technology trends and strategies;2.
    
    To evaluate and advise our board on actual and proposed technology
investments and transactions;3.
    
    To review and submit to the board recommendations regarding
managements formulation and execution and overall performance in achieving
technology-related strategic goals and objectives; and4.
    
    To recommend to the board approaches to acquiring and maintaining
technology positions and maximizing our access to relevant technologies, and to
ensure optimized contribution of technology to our business strategy and growth
targets.
    108




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Directors and Officers Involvement in Certain Legal Proceedings
  1.
    
    Mr. Manuel V. Pangilinan, in his capacity as Chairman of the Board of Metro
Pacific Corporation, a stockholder of Metro Tagaytay Land Company, Inc., or MTLCI,
and four other individuals were respondents in I.S. 04-A-1057 for alleged violation
of Article 315 (1)(b), or Estafa, of the Revised Penal Code filed by Mr. Vicente A.
Tuason in behalf of Universal Leisure Club, Inc. (ULCI) and Mr. Jose L. Merin in
behalf of Universal Rightfield Property Holdings, Inc. (URPHI).In the complaint-affidavit, Messrs. Tuason and Merin alleged that, in violation of the
trust reposed by ULCI and certain contractual commitments and representations, MTLCI,
with the participation and/or conformity of the respondents, misappropriated and
converted Php139 million that ULCI entrusted for the purpose of incorporating Golf
Land Co., Inc. (GLCI), a corporation to be wholly-owned by MTLCI and to which a
property of MTLCI was to be transferred in exchange for shares in GLCI. The said
 shares were then supposed to be transferred to ULCI.Based on his counsels advice, Mr. Pangilinan cannot be held liable for violating
Article 315 (1)(b) of the Revised Penal Code because no document or other evidence has
been presented to prove that Mr. Pangilinan actually participated in the negotiation,
preparation, approval, execution and/or implementation of the agreement/contract upon
which the claims of the complainants are
purportedly based, much less that Mr. Pangilinan, with abuse of trust and confidence,
misappropriated any amounts paid by ULCI to MTLCI.On March 25, 2004, Mr. Pangilinan submitted his counter-affidavit in I.S. No.
04-A-1057, including therein counter-charges against Messrs. Tuason and Merin for
Perjury and Unjust Vexation. These counter-charges were docketed as I.S. No.
04-C-5493-94.In a Joint Resolution dated June 7, 2004, the City Prosecution Office of Makati
dismissed all charges in the Estafa case against Mr. Pangilinan as well as the
counter-charges for Perjury and Unjust Vexation against Messrs. Tuason and Merin.On November 16, 2004, MTLCI, through Mr. Pangilinan and ULCI, through Messrs. Tuason
and Merin, filed with the Philippine Department of Justice, or DOJ, their respective
Petitions for Review assailing the Resolution of the City Prosecution Office of
Makati. Thereafter, the complainants and respondents including Mr. Pangilinan filed,
with the assistance of their respective counsels, a Joint Motion to Dismiss (with
prejudice) the charges and counter-charges subject of the investigation before the
DOJ.On March 20, 2006, Mr. Pangilinan, through counsel, filed a Manifestation and Motion
reiterating the parties prayer in their Joint Motion to Dismiss that the cases be
dismissed with prejudice. On March 6, 2008, the DOJ promulgated a Resolution
dismissing the appeal by ULCI of the Resolution of the City Prosecution Office of
Makati dismissing ULCIs complaint for Estafa against Mr. Pangilinan, et al. The same
Resolution of the City Prosecution Office of Makati dismissed Mr. Pangilinans
counter-charges (perjury and unjust vexation) against Messrs. Tuason and Merin of
ULCI. Mr. Pangilinan also appealed against the said Resolution of the City
Prosecution Office of Makati before the DOJ. The DOJ has yet to rule on Mr.
Pangilinans appeal which remains pending despite the parties Joint Motion to
Dismiss.2.
    
    Mr. Napoleon L. Nazareno, in his capacity as President and Chief Executive
Officer of Smart, is a respondent in a complaint docketed as I.S. 07-3216-F filed
with the Cebu City Prosecutors Office by Integrated Distribution Network, Inc., or
IDNI, for alleged estafa and violation of R.A. 8484 or the Access Devices Regulation
Act of 1988. IDNI alleged that Smart, through its directors and officers including
Mr. Nazareno (respondent in this complaint), perpetrated fraud by blocking the SIMs
of its sub-dealers. The dispute arose from contracts executed between Smart and IDNI
on roving billboards. The parties entered into a settlement agreement allowing IDNI
to purchase electronic load from Smart within a specific period and for a specified
amount. It is Smarts position that IDNIs cause of action, if any, is purely civil
in nature.The Cebu City Prosecutors Office issued a Resolution dated November 12, 2007, finding
probable cause to indict respondents for estafa and violation of R.A. 8484 or the
Access Devices Regulation Act of 1988. On January 10, 2008, Mr. Nazareno filed a
Petition for Review before the DOJ seeking the reversal of the Resolution mentioned
above. On May 13, 2008, the DOJ issued a Resolution granting the Petition for Review.
In said Resolution, the DOJ directed the Prosecutor of Cebu City to cause the
withdrawal of the complaint for estafa and violation of the Access Devices Regulation
Act of 1988, if any has been filed in court, against Mr. Nazareno.
  109




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On July 15, 2008, the complainant filed a Motion for Reconsideration of the
aforementioned DOJ Resolution and on October 3, 2008, Mr. Nazareno together with the
other respondents filed their Opposition. The Motion for Reconsideration filed by the
complainant is pending resolution by the DOJ.3.
    
    Messrs. Napoleon L. Nazareno and Albert F. del Rosario and other directors
and officers of the former PDCP Bank and some officers of the Bangko Sentral ng
Pilipinas and Development Bank of the Philippines, are respondents in a complaint
docketed as I.S. No. 2004-631 filed by Chung Hing Wong/Unisteel/Unisco Metals, Inc.
with the DOJ, for alleged syndicated estafa, estafa through falsification of
documents, other deceits, malversation and robbery. In the complaint-affidavit, the
complainant alleged that the officers and directors of PDCP Bank deceived the
complainant to secure a loan from PDCP Bank through misrepresentation and with the
sinister purpose of taking
over the complainants corporation. As stated in their respective counter-affidavits,
the charges against the PDCP directors including Messrs. Nazareno and del Rosario are
manifestly unmeritorious. These directors have not personally met the complainants,
nor are they parties to the questioned transactions and, as such, could not have
deceived the complainants in any manner. The complaint was referred to the Office of
the Ombudsman, or OMB, by the DOJ on October 30, 2007 considering that some of the
respondents are public officers and the offenses charged were committed in the
performance of their official functions.Meanwhile, on July 23, 2008, Chung Hing Wong filed with the DOJ a Motion for
Reconsideration of a Resolution of the DOJ dated September 7, 2007 dismissing his
complaint. It appears that prior to forwarding the case records to the OMB, the DOJ
had prepared a Resolution recommending the dismissal of the complaint but did not
release the said Resolution to the parties because it wanted the OMB to conduct a
review of the DOJ Resolution in view of the fact that some of the respondents in the
case are public officers.In an Order dated July 30, 2008, the OMB confirmed that it was conducting a
review of the said DOJ Resolution for the abovestated reason and that its authority
relative to the case forwarded to it by the DOJ is limited to a review of the DOJ
Resolution and not to conduct another preliminary investigation of the case. The
review of the DOJ Resolution is still pending with the OMB.4.
    
    Mr. Albert F. del Rosario and other former directors/officers, and Ms. Ma.
Lourdes C. Rausa-Chan and other former corporate secretaries/assistant corporate
secretaries of Steniel Cavite Packaging Corporation, Metro Paper and Packaging
Products, Inc., AR Packaging Corporation and Starpack Philippines Corporation, are
respondents in a case docketed as OMB C-C-04-0363-H (CPL No. C-04-1248), in the OMB.
The complaint is for alleged: (a) violation of R.A. 3019 (otherwise known as the
Anti-Graft and Corrupt Practices Act); (b) estafa thru falsification of public
documents; (c) falsification of public documents under Article 171, in relation to
Article 172, of the Revised Penal Code (RPC); (d) infidelity in the custody of public
documents under Article 226 of the RPC; and (e) grave misconduct. It relates to
various tax credit certificates (allegedly fraudulent, with spurious and fake
supporting documents) issued to Victory Textile Mills, Inc. (allegedly, a
non-existent corporation with fictitious incorporators and directors) and transferred
to several companies including the aforesaid companies. The complaints against Mr.
del Rosario and Ms. Rausa-Chan involve the first two offenses only and in their
capacity as director and corporate secretary, respectively, of Metro Paper and
Packaging Products, Inc. In the opinion of the legal counsel of Mr. del Rosario and
Ms. Rausa-Chan, there are no legal and factual bases for their inclusion as
respondents in this complaint. Mr. del Rosario and Ms. Rausa-Chan had no
participation or involvement in the alleged anomalous acquisition and transfer of the
subject tax credit certificates. The case is still pending with the OMB.
  110




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Employees and Labor Relations
   Manggagawa ng Komunikasyon sa Pilipinas
  Gabay ng Unyon sa
Telekomunikasyon ng mga Superbisor
 
 Pension and Retirement Benefits
 Defined Benefit Plans
    111




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Defined Contribution Plan
  Note 5 
Income and Expenses Note 23 
Share-based Payments and Employee Benefits
 
 Item 7. Major Shareholders and Related Party Transactions
  Name and Address
    
    
    
    
    
    Name of Beneficial
    
    
    Number ofTitle
    
    of Record Owner and
    
    Place of
    
    
    Owner and Relationship
    
    
    Shares Held of
    
    
    Percentageof Class
    
    Relationship With Issuer
    
    Incorporation
    
    
    with Record Owner
    
    
    Record
    
    
    of ClassCommon
    
    Metro Pacific Resources, Inc.(1)
    
    Philippine
    
    Same as Record Owner
    
    
    15,745,172
    (3)
    
    
    8.40c/o Corporate Secretary
    
    Corporation18th Floor, Liberty Center,104 H. V. dela Costa St.Salcedo Village, Makati CityCommon
    
    Philippine Telecommunications
    
    Philippine
    
    Same as Record Owner
    
    
    26,034,263
    (3)
    
    
    13.89Investment Corporation(2)
    
    Corporation12th Floor Ramon Cojuangco Bldg.Makati Avenue, Makati CityCommon
    
    NTT Communications Corporation(4)
    
    Japanese
    
    See Footnote (6)
    
    
    12,633,487
    
    
    
    6.741-1-6 Uchisaiwai-cho
    
    Corporation1-Chome, Chiyoda-kuTokyo 100-8019, JapanCommon
    
    NTT DoCoMo, Inc.(5)
    
    Japanese
    
    See Footnote (6)
    
    
    18,234,821
    (6)
    
    
    9.7341st Floor, Sanno Park Tower
    
    Corporation2-11-1 Nagata-cho,
Chiyoda-ku Tokyo 100-6150, JapanCommon
    
    Social Security System(7)
    
    Philippine
    
    Same as Record Owner
    
    
    5,024,788
    
    
    
    2.68SSS Building
    
    CorporationEast Avenue, Quezon CityCommon
    
    PCD Nominee Corporation(8)
    
    Philippine
    
    See Footnote (8)
    
    
    61,542,659
    
    
    
    32.8337/F Enterprise Building, Tower I
    
    CorporationAyala Avenue cor. Paseo de RoxasMakati CityCommon
    
    J. P. Morgan Asset Holdings
    
    HongKong
    
    See Footnote (9)
    
    
    43,097,297
    
    
    
    22.99(HK) Limited(9)
    
    Corporation(various accounts)20/F Chater House8 Connaught RoadCentral, HongkongCommon
    
    Capital Research Global Investors(10)
    
    Delaware Corporation
    
    See Footnote (10)
    
    
    15,098,070
    
    
    
    8.05
  112




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(1)
    
    In addition to the 15,745,172 shares owned on record by Metro Pacific Resources, Inc., or
MPRI, MPRI beneficially owned 650,000 shares held of record by PCD Nominee Corporation, or
PCD, as of February 28, 2009. The total shareholdings of MPRI is 16,395,172 shares of PLDT
common stock representing 8.74% of the outstanding common stock of PLDT as at February 28,
2009. Based on a resolution adopted by the Board of Directors of MPRI, Mr. Manuel V.
Pangilinan has been appointed as proxy or duly authorized representative of MPRI to represent
and vote the PLDT shares of common stock of MPRI at the Annual Meeting of stockholders of
PLDT.(2)
    
    Pursuant to a resolution adopted by the Board of Directors of PTIC, the chairman of PTIC,
Mr. Manuel V. Pangilinan, has the continuing authority to represent PTIC at any and all
meetings of the stockholders of a corporation in which PTIC owns of record or beneficially any
shares of stock or other voting security, and to sign and deliver, in favor of any person he may
deem fit, a proxy or other power of attorney, with full power of delegation and substitution,
authorizing his designated proxy or attorney-in-fact to vote any and all shares of stock and
other voting securities owned of record or beneficially by PTIC at any and all meetings of the
stockholders of the corporation issuing such shares of stock or voting securities.(3)
    
    First Pacific Group beneficially owned 26.37% of the outstanding common stock of PLDT as at
February 28, 2009 by virtue of PLDT common shareholdings by intermediate holding companies,
including PTIC and MPRI.(4)
    
    Based on publicly available information, NTT Communications is a wholly-owned subsidiary of
NTT. Based on a certification signed by a duly authorized officer of NTT Communications, Mr.
Jun Sawada is authorized to execute for and on behalf of NTT Communications, endorsements,
transfers, and other matters relating to the shares of PLDT common stock held by NTT
Communications.(5)
    
    The total shareholdings of NTT DoCoMo is 26,768,074 shares of PLDT common stock, of which
18,234,821 are owned on record by NTT DoCoMo, and 8,533,253 are shares of PLDT common stock
underlying ADS representing 14.28% of the outstanding common stock of PLDT as at February 28,
2009. Based on publicly available information, NTT DoCoMo is a majority-owned and publicly
traded subsidiary of NTT. Based on a certification signed by a duly authorized officer of NTT
DoCoMo, Mr. Toshinari Kunieda or Mr. Matsuo Yamamoto, is authorized to execute for and on
behalf of NTT DoCoMo, endorsements, transfers and other matters relating to the PLDT shares of
common stock held by NTT DoCoMo.(6)
    
    NTT DoCoMo completed an acquisition of 12,633,486 shares of PLDT common stock from NTT
Communications on March 14, 2006. From March 23, 2007 to February 11, 2008, NTT DoCoMo
acquired through open market purchases a total of 14,134,588 additional shares of PLDT common
stock. The total shareholdings of NTT DoCoMo is 26,768,074 shares of PLDT common stock (of
which 18,234,821 are owned on record by NTT DoCoMo and 8,533,253 are shares of PLDT common
stock underlying ADS) representing 14.28% of the outstanding common stock of PLDT as at
February 28, 2009.In publicly available reports filed by NTT Communications and NTT DoCoMo, it is stated that
because of NTTs ownership of all the outstanding capital stock of NTT Communications and a
majority of the common stock of NTT DoCoMo, together with certain contractual arrangements
including the Cooperation Agreement dated January 31, 2006, NTT, NTT Communications and NTT
DoCoMo may be considered to constitute a group within the meaning of Section 13(d)(3) of the
U.S Securities Exchange Act of 1934, as amended. Therefore, each of them may be deemed to have
beneficial ownership of the 39,401,561 shares in aggregate held by NTT Communications and NTT
DoCoMo, representing approximately 21% of the outstanding shares of common stock of PLDT as at
February 28, 2009.(7)
    
    In addition to the 5,024,788 shares owned on record by the SSS, SSS also beneficially owned
5,906,342 shares of PLDT common stock held of record by PCD as at February 28, 2009. The
total beneficial shareholdings of SSS is 10,931,130 shares of PLDT common stock representing
5.83% of the outstanding common stock of PLDT as at February 28, 2009. Based on a resolution
adopted by the Board of Directors of the SSS Mr. Donald G. Dee, as Commissioner of the SSS,
has been authorized to represent and vote the shares of PLDT common stock of SSS in the annual
meeting of stockholders of PLDT.(8)
    
    Registered owner of shares held by participants in the Philippine Depository and Trust Co.,
or PDTC, a private company organized to implement an automated book entry system of handling
securities transactions in the Philippines. Under the PDTC procedures, when an issuer of a
PDTC-eligible issue will hold a stockholders meeting, the PDTC will execute a pro-forma proxy
in favor of its participants for the total number of shares in their respective principal
securities account as well as for the total number of shares in their client securities
account. For the shares held in the principal securities account, the participant concerned
is appointed as proxy with full voting rights and powers as registered owner of such shares.
For the shares held in the client securities account, the participant concerned is appointed
as proxy, with the obligation to constitute a sub-proxy in favor of its clients with full
voting and other rights for the number of shares beneficially owned by such clients. Based on
available information, none of the owners of the PLDT common shares registered under the name
of PCD owned more than 5% of PLDTs outstanding common stock as at February 28, 2009, except
The Hongkong and Shanghai Banking Corp. Ltd.Clients, which owned approximately 17.32% of
PLDTs outstanding common stock as at February 28, 2009. PLDT has no knowledge if any
beneficial owner of the shares under The Hongkong and Shanghai Banking Corp. Ltd.Clients
owned more than 5% of PLDTs outstanding common stock as at February 28, 2009.The PCD account also includes 650,000 shares beneficially owned by the MPRI, 5,906,342 shares
beneficially owned by the SSS and 12,461,130 shares beneficially owned by Capital Research
Global Investors or CRGI.  113




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##### Table of Contents



(9)
    
    Holds shares as nominee of JPMorgan Chase Bank, successor depositary under the Common Stock
Deposit Agreement, dated
October 14, 1994, as amended on February 10, 2003, between JPMorgan Chase Bank and the holders
of ADRs, evidencing ADSs, representing shares of common stock of PLDT (the Deposit Agreement).
Under the Deposit Agreement, if the depositary does not receive voting instructions from a
holder of ADRs, such holder will be deemed to have instructed the depositary to provide a
discretionary proxy to a person designated by PLDT for the purpose of exercising the voting
rights pertaining to the shares of common stock represented by such holder of ADRs, except that
no discretionary proxy will be given with respect to any matter as to which substantial
opposition exists or which materially and adversely affects the rights of the holders of such
ADRs.This account also includes 2,636,940 shares of PLDT common stock underlying ADSs beneficially
owned by CRGI and 8,533,253 shares of PLDT common stock underlying ADS beneficially owned by NTT
DoCoMo.(10)
    
    According to the Schedule 13G of CRGI filed with the U.S. SEC on February 17, 2009, CRGI, as
an investment adviser, beneficially owned 15,098,070 shares of PLDT common stock. In a letter
to PLDT dated March 13, 2009, CRGI confirmed that they still hold 15,098,070 shares of PLDT
common stock, which includes 2,636,940 shares of PLDT common stock underlying ADSs and
12,461,130 shares of PLDT common stock held of record by PCD.  
 Related Party Transactions
 Note 22  Related
Party Transactions
 Note 22  Related Party Transactions
  
 Item 8. Financial Information
 
 Consolidated Statements and Other Financial Information
  
 Legal Proceedings
  NTC supervision and regulation fees, or SRF
   114




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Taxation
 National Internal Revenue Taxes
  
    
    erroneously paid value-added taxes, compensating taxes, advance sales taxes and
other internal revenue taxes on PLDTs importation of various equipment, machinery, and
spare parts; and
    
    erroneously paid withholding tax on separation pay of employees who availed
themselves of the benefits under the Manpower Reduction Program.
 En Banc En Banc
  Local Business and Franchise Taxes
    115




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Note 25  Provisions and Contingencies
 Real Property Tax
  the grantee, its
successors or assignees shall be liable to pay the same taxes on their real estate, buildings and
personal property, exclusive of this franchise, as other persons or corporations which are now or
hereafter may be required by law to pay
   Note 25  Provisions and Contingencies
 
 Dividend Distribution Policy
 Note 7 
Earnings Per Common Share
 
 Item 9. The Offer and Listing
 
 Common Capital Stock and ADS
     116




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Philippine Stock
    
    
    New York StockExchange
    
    
    ExchangeHigh
    
    
    Low
    
    
    High
    
    
    Low2009First QuarterJanuary
    
    Php
    2,240.00
    
    
    Php
    2,010.00
    
    
    US$
    48.29
    
    
    US$
    42.18February
    
    
    2,305.00
    
    
    
    2,080.00
    
    
    
    49.80
    
    
    
    43.562008
    
    
    3,175.00
    
    
    
    1,810.00
    
    
    
    76.72
    
    
    
    36.05First Quarter
    
    
    3,175.00
    
    
    
    2,520.00
    
    
    
    76.72
    
    
    
    61.49Second Quarter
    
    
    2,820.00
    
    
    
    2,285.00
    
    
    
    68.96
    
    
    
    50.95Third Quarter
    
    
    2,795.00
    
    
    
    2,240.00
    
    
    
    62.97
    
    
    
    51.10September
    
    
    2,795.00
    
    
    
    2,445.00
    
    
    
    59.98
    
    
    
    51.10Fourth Quarter
    
    
    2,725.00
    
    
    
    1,810.00
    
    
    
    57.38
    
    
    
    36.05October
    
    
    2,725.00
    
    
    
    1,810.00
    
    
    
    57.38
    
    
    
    36.05November
    
    
    2,400.00
    
    
    
    1,895.00
    
    
    
    49.00
    
    
    
    38.25December
    
    
    2,395.00
    
    
    
    2,000.00
    
    
    
    50.86
    
    
    
    43.712007
    
    
    3,285.00
    
    
    
    2,250.00
    
    
    
    76.30
    
    
    
    45.25First Quarter
    
    
    2,820.00
    
    
    
    2,250.00
    
    
    
    56.62
    
    
    
    45.25Second Quarter
    
    
    2,730.00
    
    
    
    2,390.00
    
    
    
    58.88
    
    
    
    50.05Third Quarter
    
    
    2,950.00
    
    
    
    2,270.00
    
    
    
    65.16
    
    
    
    48.00Fourth Quarter
    
    
    3,285.00
    
    
    
    2,900.00
    
    
    
    76.30
    
    
    
    64.902006
    
    
    2,610.00
    
    
    
    1,675.00
    
    
    
    51.90
    
    
    
    32.152005
    
    
    1,860.00
    
    
    
    1,310.00
    
    
    
    34.35
    
    
    
    23.502004
    
    
    1,505.00
    
    
    
    810.00
    
    
    
    27.03
    
    
    
    14.38
 
 Item 10. Additional Information
 
 Articles of Incorporation and By-Laws
  Purpose of PLDT
  Directors
   117




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##### Table of Contents



Description of PLDT Capital Stock
 Authorized Capital Stock
  Common Stock
  (a)
    
    After the requirements with respect to preferential dividends on the serial
Preferred Stock shall have been met and after PLDT shall have complied with all the
requirements, if any, with respect to the setting aside of sums as purchase, retirement
or sinking funds, the holders of the Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the board of directors out of funds
legally available therefor.(b)
    
    After distribution in full of the preferential amounts to be distributed to the
holders of serial Preferred Stock in the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of PLDT, the holders of
Common Stock shall be entitled to receive all the remaining assets of PLDT of whatever
kind available for distribution to stockholders ratably in proportion to the number of
Common Stock held by them, respectively.(c)
    
    Except as may be otherwise required by law, or by the Articles of Incorporation
of PLDT, each holder of Common Stock shall have one vote in respect of each share of
such stock held by him on all matters to be voted upon by the stockholders, and the
holders of Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes. At every election of directors, a holder of
Common Stock is entitled to vote such shares of Common Stock held by him for as many
persons as there are directors to be elected, or to cumulate said shares and give one
candidate as many votes as the number of directors to be elected multiplied by the
number of his shares shall equal, or to distribute such votes on the same principle
among as many candidates as he shall think fit.
  (a)
    
    Appraisal right or the right of a dissenting stockholder to demand payment of
the fair value of his shares of stock in the following instances: (i) in case any
amendment to the articles of incorporation has the effect of changing or restricting
the rights of any stockholders or class of shares, or of authorizing preferences in any
respect superior to those of outstanding shares of any class, or of extending or
shortening the term of corporate existence; (ii) in case of sale, lease, exchange,
transfer, mortgage, pledge or other disposition of all or substantially all of the
corporate property and assets of the corporation; (iii) in case of merger or
consolidation; and (iv) in case of investment of funds of the corporation in any other
corporation or business or for any purpose other than the primary purpose for which it
was organized, except where the investment by the corporation is reasonably necessary
to accomplish its primary purpose as stated in its articles of incorporation.(b)
    
    The right to approve certain corporate acts, such as (i)
election of directors; (ii) removal of directors; (iii) extension or shortening of the corporate term; (iv) increase or decrease of
capital stock, and incurring, creating or increasing bonded indebtedness; (v) sale or
other disposition of all or substantially all of the corporate assets; (vi) investment
of corporate funds in any other corporation or business or for any purpose other than
the primary purpose for which it was organized except where the investment is reasonably
necessary to accomplish its primary purpose as stated in the corporations articles of
incorporation; (vii) declaration of stock dividend; (viii) entering into a management
contract with another corporation; (ix) plan of merger or consolidation; and (x)
voluntary dissolution of the corporation by shortening the corporate term.
  118




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##### Table of Contents



(c)
    
    The right to inspect at reasonable hours on business days the records of all
business transactions of the corporation and the minutes of any meeting; however, the
stockholders right to inspect corporate records and books is not an absolute right so
that the corporation may deny said right on the basis of impropriety of the purpose or
motive of the stockholder.(d)
    
    The right to be furnished the most recent financial statements of the
corporation, within ten (10) days from receipt by the corporation of a written request
from a stockholder. The same right exists at the annual meeting of stockholders at
which the board of directors must present to the stockholders a financial report of the
operations of the corporation for the preceding year which shall include financial
statements duly signed and certified by an independent certified public accountant.
 Restrictions on Foreign Ownership
   Meetings
     119




---



##### Table of Contents



Issues of Shares
   Transfer of Shares
   Share Certificates
  Dividends
    Preferred Stock
   120




---



##### Table of Contents



Issued and Outstanding Preferred Stock
  Series
    
    No. of SharesSeries A to HH 10% Cumulative Convertible
    
    
    405,480,512Series IV Cumulative Non-Convertible Redeemable
    
    
    36,000,000
    *Series V Cumulative Convertible Redeemable
    
    
    1,355Series VI Cumulative Convertible Redeemable
    
    
    3,891
 *
    
    Total subscribe shares is 300 million with a total subscription price of Php3 billion, out of
which amount Php360 million has been paid.
 121




---



##### Table of Contents



Change in Control
   
 Material Contracts
  
 Exchange Controls and Other Limitations Affecting Securities Holders
  Note 17  Equity Note 18  Interest-bearing Financial Liabilities
  122




---



##### Table of Contents



Taxation
     Philippine Taxation
 Taxes on Exchange of ADSs for Common Stock
  Taxation of Dividends
   123




---



##### Table of Contents



Capital Gains Tax and Stock Transaction Tax
    Documentary Stamp Taxes
   124




---



##### Table of Contents



Estate and Donors Taxes
  
    
    if the deceased at the time of death, or the donor at the time of donation, was a
citizen and resident of a foreign country which at the time of his death or donation
did not impose a transfer tax of any character in respect of intangible personal
property of citizens of the Philippines not residing in that foreign country, or
    
    if the laws of the foreign country of which the deceased or the donor was a citizen
and resident at the time of his death or donation allow a similar exemption from
transfer or death taxes of every character or description in respect of intangible
personal property owned by citizens of the Philippines not residing in that foreign
country.
  United States Federal Taxation
  Taxation of Dividends
    125




---



##### Table of Contents



Sale or Other Disposition of Equity Securities
   Passive Foreign Investment Company Rules
  
 Documents on Display
   126




---



##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures about Market Risks
  
 Liquidity Risk
    Note 24  Contractual Obligations and
Commercial Commitments
 
 Foreign Currency Exchange Risk
    127




---



##### Table of Contents



2008
    
    
    2007U.S. Dollar
    
    
    Php(1)
    
    
    U.S. Dollar
    
    
    Php(2)(in millions)Noncurrent Financial AssetDerivative financial assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    59Current Financial AssetsCash and cash equivalents
    
    
    101
    
    
    
    4,794
    
    
    
    93
    
    
    
    3,853Short-term investments
    
    
    21
    
    
    
    986
    
    
    
    56
    
    
    
    2,324Trade and other receivables
    
    
    207
    
    
    
    9,880
    
    
    
    227
    
    
    
    9,400Derivative financial assets
    
    
    1
    
    
    
    56
    
    
    
    22
    
    
    
    897Total current financial assets
    
    
    330
    
    
    
    15,716
    
    
    
    398
    
    
    
    16,474Total Financial Assets
    
    
    330
    
    
    
    15,716
    
    
    
    399
    
    
    
    16,533Noncurrent Financial LiabilitiesInterest-bearing financial liabilities  net of current portion
    
    
    925
    
    
    
    44,064
    
    
    
    1,126
    
    
    
    46,612Derivative financial liabilities
    
    
    37
    
    
    
    1,761
    
    
    
    187
    
    
    
    7,741Total noncurrent financial liabilities
    
    
    962
    
    
    
    45,825
    
    
    
    1,313
    
    
    
    54,353Current Financial LiabilitiesAccounts payable
    
    
    143
    
    
    
    6,820
    
    
    
    160
    
    
    
    6,614Accrued expenses and other current liabilities
    
    
    93
    
    
    
    4,447
    
    
    
    95
    
    
    
    3,958Derivative financial liabilities
    
    
    2
    
    
    
    87
    
    
    
    6
    
    
    
    242Current portion of interest-bearing financial liabilities
    
    
    301
    
    
    
    14,331
    
    
    
    187
    
    
    
    7,748Total current financial liabilities
    
    
    539
    
    
    
    25,685
    
    
    
    448
    
    
    
    18,562Total Financial Liabilities
    
    
    1,501
    
    
    
    71,510
    
    
    
    1,761
    
    
    
    72,915
 (1)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso was
Php47.647 to US$1.00, the peso-dollar rate as quoted through the Philippine Dealing System
as at December 31, 2008.(2)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso was
Php41.411 to US$1.00, the peso-dollar rate as quoted through the Philippine Dealing System
as at December 31, 2007.    Note 4  Segment Information
   128




---



##### Table of Contents



Interest Rate Risk
    As at December 31, 2008
 Discount/DebtIn U.S. Dollars
    
    
    
    
    
    
    Issuance
    
    
    Carrying
    
    
    Fair ValueOver 5
    
    
    
    
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1  2 years
    
    
    2  3 years
    
    
    3  5 years
    
    
    years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. Dollar
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    1,258
    
    
    
    
    
    
    
    1,258
    
    
    
    26
    
    
    
    1,258Interest rate
    
    0.10% to 4.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    2,682
    
    
    
    
    
    
    
    2,682
    
    
    
    56
    
    
    
    2,682Interest rate
    
    0.25% to 3.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    15,714
    
    
    
    
    
    
    
    15,714
    
    
    
    330
    
    
    
    15,714Interest rate
    
    0.30% to 7.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    13,806
    
    
    
    
    
    
    
    13,806
    
    
    
    290
    
    
    
    13,806Interest rate
    
    2% to 7.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    985
    
    
    
    
    
    
    
    985
    
    
    
    21
    
    
    
    985Interest rate
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    119
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119
    
    
    
    5,685
    
    
    
    
    
    
    
    5,685
    
    
    
    119
    
    
    
    5,685Interest rate
    
    
    6.69
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesPhilippine Peso
    
    
    35
    
    
    
    
    
    
    
    4
    
    
    
    9
    
    
    
    
    
    
    
    48
    
    
    
    2,291
    
    
    
    
    
    
    
    2,291
    
    
    
    48
    
    
    
    2,285Interest Rate
    
    
    6.3194
    %
    
    
    
    
    
    
    6.125
    %
    
    6.875% to 7%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    877
    
    
    
    
    
    
    
    4
    
    
    
    9
    
    
    
    
    
    
    
    890
    
    
    
    42,421
    
    
    
    
    
    
    
    42,421
    
    
    
    890
    
    
    
    42,415Liabilities:Long-term DebtFixed RateUS$ Notes
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    295
    
    
    
    568
    
    
    
    27,061
    
    
    
    368
    
    
    
    26,693
    
    
    
    559
    
    
    
    26,607Interest rate
    
    
    10.50
    %
    
    
    
    
    
    
    
    
    
    
    11.375
    %
    
    
    8.35
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$ Fixed Loans
    
    
    22
    
    
    
    50
    
    
    
    11
    
    
    
    3
    
    
    
    280
    
    
    
    366
    
    
    
    17,444
    
    
    
    4,046
    
    
    
    13,398
    
    
    
    252
    
    
    
    12,030Interest rate
    
    4.49% to 6%
    
    3.79% to 4.70%
    
    3.79% to 4.70%
    
    
    3.79
    %
    
    
    2.25
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    3
    
    
    
    1
    
    
    
    182
    
    
    
    33
    
    
    
    219
    
    
    
    10,420
    
    
    
    79
    
    
    
    10,341
    
    
    
    209
    
    
    
    9,955Interest rate
    
    
    
    
    
    6.50% to 8.4346%
    
    6.50% to 8.4346%
    
    5.625% to 8.4346%
    
    6.125% to 6.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    13
    
    
    
    215
    
    
    
    59
    
    
    
    77
    
    
    
    
    
    
    
    364
    
    
    
    17,339
    
    
    
    67
    
    
    
    17,272
    
    
    
    363
    
    
    
    17,272Interest rate
    
    US$LIBOR + 1.75% to 2.75%
    
    US$LIBOR + 0.42% to 2.50%
    
    US$LIBOR + 0.42% to 0.815%
    
    US$LIBOR + 0.42% to 0.75%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    47
    
    
    
    32
    
    
    
    40
    
    
    
    
    
    
    
    119
    
    
    
    5,670
    
    
    
    16
    
    
    
    5,654
    
    
    
    119
    
    
    
    5,653Interest rate
    
    
    
    
    
    MART1 + 0.75% to 5.70%;  PDST - F 1.0% - 1.50%
    
    MART1 + 0.75%; PDST - F 1.0% - 1.50%
    
    PDST - F 1.0% - 1.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    315
    
    
    
    103
    
    
    
    461
    
    
    
    608
    
    
    
    1,636
    
    
    
    77,934
    
    
    
    4,576
    
    
    
    73,358
    
    
    
    1,502
    
    
    
    71,517
  129




---



##### Table of Contents



As at December 31, 2007
 Discount/DebtIn U.S. Dollars
    
    
    
    
    
    
    Issuance
    
    
    Carrying
    
    
    Fair ValueOver 5
    
    
    In U.S.
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1  2 years
    
    
    2  3 years
    
    
    3  5 years
    
    
    years
    
    
    Dollar
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. dollar
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    1,249
    
    
    
    
    
    
    
    1,249
    
    
    
    30
    
    
    
    1,249Interest rate
    
    0.22% to 4.40%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    2,409
    
    
    
    
    
    
    
    2,409
    
    
    
    58
    
    
    
    2,409Interest rate
    
    0.25% to 4.25%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    10,572
    
    
    
    
    
    
    
    10,572
    
    
    
    255
    
    
    
    10,572Interest rate
    
    2% to 5.25%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    2,931
    
    
    
    
    
    
    
    2,931
    
    
    
    71
    
    
    
    2,931Interest rate
    
    1.75% to 6.05%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    2,312
    
    
    
    
    
    
    
    2,312
    
    
    
    56
    
    
    
    2,312Interest rate
    
    
    7.65
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    11,103
    
    
    
    
    
    
    
    11,103
    
    
    
    268
    
    
    
    11,103Interest rate
    
    
    6.06
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesU.S. Dollar
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    273
    
    
    
    
    
    
    
    273
    
    
    
    7
    
    
    
    283Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.875
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    1,115
    
    
    
    
    
    
    
    1,115
    
    
    
    27
    
    
    
    1,115Interest rate
    
    
    11.29
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    765
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    772
    
    
    
    31,964
    
    
    
    
    
    
    
    31,964
    
    
    
    772
    
    
    
    31,974Liabilities:Long-term DebtFixed RateUS$ Notes
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    250
    
    
    
    300
    
    
    
    686
    
    
    
    28,403
    
    
    
    387
    
    
    
    28,016
    
    
    
    770
    
    
    
    31,901Interest rate
    
    
    
    
    
    
    10.500
    %
    
    
    
    
    
    
    11.375
    %
    
    
    8.350
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$ Fixed Loans
    
    
    55
    
    
    
    46
    
    
    
    23
    
    
    
    9
    
    
    
    280
    
    
    
    413
    
    
    
    17,123
    
    
    
    4,016
    
    
    
    13,107
    
    
    
    342
    
    
    
    14,078Interest rate
    
    4.49% to 8.9%
    
    4.49% to 6.0%
    
    4.515% to 4.7%
    
    
    4.700
    %
    
    
    2.250
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    38
    
    
    
    131
    
    
    
    5,420
    
    
    
    33
    
    
    
    5,387
    
    
    
    125
    
    
    
    5,168Interest rate
    
    
    7.090
    %
    
    
    6.500
    %
    
    
    6.500
    %
    
    5.625% to 6.50%
    
    6.125% to 6.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    98
    
    
    
    92
    
    
    
    58
    
    
    
    28
    
    
    
    
    
    
    
    276
    
    
    
    11,445
    
    
    
    28
    
    
    
    11,417
    
    
    
    276
    
    
    
    11,445Interest rate
    
    0.05% to 2.75% over US$LIBOR
    
    0.05% to 2.75% over US$LIBOR
    
    0.05% to 2.5% over US$LIBOR
    
    0.75% to 0.815% over US$LIBOR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    14
    
    
    
    14
    
    
    
    13
    
    
    
    13
    
    
    
    
    
    
    
    54
    
    
    
    2,228
    
    
    
    8
    
    
    
    2,220
    
    
    
    54
    
    
    
    2,227Interest rate
    
    MART1 + 0.75% to 5.70%
    
    MART1 + 0.75% to 5.70%
    
    MART1 + 0.75% to 5.70%
    
    MART1 + 0.75%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167
    
    
    
    288
    
    
    
    94
    
    
    
    393
    
    
    
    618
    
    
    
    1,560
    
    
    
    64,619
    
    
    
    4,472
    
    
    
    60,147
    
    
    
    1,567
    
    
    
    64,819Interest rate swap
(fixed to floating)U.S. Dollar
(US$31 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.5
    
    
    
    144
    
    
    
    
    
    
    
    144
    
    
    
    3.5
    
    
    
    144Japanese Yen
(JP¥3,759 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed Rate
on US$ notional
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable Rate
on JP¥ notional
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.5
    
    
    
    144
    
    
    
    
    
    
    
    144
    
    
    
    3.5
    
    
    
    144
     130




---



##### Table of Contents



Credit Risk
     Gross Maximum Exposure(1)
    
    
    Net Maximum Exposure(2)2008
    
    
    2007
    
    
    2008
    
    
    2007(in million pesos)Loans and receivables:Advances and refundable deposits
    
    
    840
    
    
    
    734
    
    
    
    840
    
    
    
    734Cash and cash equivalents
    
    
    33,684
    
    
    
    17,447
    
    
    
    33,621
    
    
    
    17,406Short-term investments
    
    
    5,964
    
    
    
    11,366
    
    
    
    5,963
    
    
    
    11,366Investment in debt securities
    
    
    
    
    
    
    1,115
    
    
    
    
    
    
    
    1,115Foreign administrations
    
    
    5,477
    
    
    
    4,324
    
    
    
    5,477
    
    
    
    4,324Retail subscribers
    
    
    3,904
    
    
    
    3,861
    
    
    
    3,877
    
    
    
    3,861Dealers, agents and others
    
    
    2,960
    
    
    
    917
    
    
    
    2,958
    
    
    
    917Corporate subscribers
    
    
    2,865
    
    
    
    2,040
    
    
    
    2,709
    
    
    
    2,040Domestic carriers
    
    
    703
    
    
    
    1,503
    
    
    
    703
    
    
    
    1,503Held-to-maturity investments:Investment in debt securities
    
    
    2,098
    
    
    
    273
    
    
    
    2,098
    
    
    
    273Designated at fair value through profit or loss:Investment in debt securities
    
    
    193
    
    
    
    
    
    
    
    193
    
    
    
    Available-for-sale financial assets
    
    
    131
    
    
    
    143
    
    
    
    131
    
    
    
    143Held-for-trading:Short-term investments
    
    
    706
    
    
    
    2,049
    
    
    
    706
    
    
    
    2,049Foreign currency options
    
    
    38
    
    
    
    59
    
    
    
    38
    
    
    
    59Forward foreign exchange contracts
    
    
    16
    
    
    
    193
    
    
    
    16
    
    
    
    193Bifurcated embedded derivatives
    
    
    2
    
    
    
    34
    
    
    
    2
    
    
    
    34Derivatives used for hedging:Forward foreign exchange contracts
    
    
    
    
    
    
    670
    
    
    
    
    
    
    
    670Total
    
    
    59,581
    
    
    
    46,728
    
    
    
    59,332
    
    
    
    46,687
 (1)
    
    Gross financial assets before taking into account any collateral held or other
credit enhancements or offsetting arrangements.(2)
    
    Gross financial assets after taking into account any collateral held or other
credit enhancements or offsetting arrangements or deposit insurance.  Neither past duenor impaired
    
    
    Past due butTotal
    
    
    Class A(1)
    
    
    Class B(2)
    
    
    not impaired
    
    
    Impaired(in million pesos)December 31, 2008Loans and receivables:Advances and refundable deposits
    
    
    840
    
    
    
    703
    
    
    
    137
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    33,684
    
    
    
    32,979
    
    
    
    705
    
    
    
    
    
    
    
    Short-term investments
    
    
    5,964
    
    
    
    5,680
    
    
    
    284
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,188
    
    
    
    858
    
    
    
    272
    
    
    
    1,663
    
    
    
    6,395
  131




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##### Table of Contents



Neither past duenor impaired
    
    
    Past due butTotal
    
    
    Class A(1)
    
    
    Class B(2)
    
    
    not impaired
    
    
    Impaired(in million pesos)Retail subscribers
    
    
    8,993
    
    
    
    1,457
    
    
    
    550
    
    
    
    1,897
    
    
    
    5,089Foreign administrations
    
    
    5,916
    
    
    
    2,602
    
    
    
    956
    
    
    
    1,919
    
    
    
    439Dealers, agents and others
    
    
    3,271
    
    
    
    2,114
    
    
    
    444
    
    
    
    402
    
    
    
    311Domestic carriers
    
    
    877
    
    
    
    84
    
    
    
    3
    
    
    
    616
    
    
    
    174Held-to-maturity investments:Investment in debt securities
    
    
    2,098
    
    
    
    2,098
    
    
    
    
    
    
    
    
    
    
    
    Designated at fair value through profit or loss:Investment in debt securities
    
    
    193
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    131
    
    
    
    103
    
    
    
    28
    
    
    
    
    
    
    
    Held-for-trading(3):Short-term investments
    
    
    706
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency options
    
    
    38
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign currency options
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    71,917
    
    
    
    49,633
    
    
    
    3,379
    
    
    
    6,497
    
    
    
    12,408December 31, 2007Loans and receivables:Advances and refundable deposits
    
    
    734
    
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    17,447
    
    
    
    15,150
    
    
    
    2,297
    
    
    
    
    
    
    
    Short-term investments
    
    
    11,366
    
    
    
    10,637
    
    
    
    729
    
    
    
    
    
    
    
    Investment in debt securities
    
    
    1,115
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,179
    
    
    
    1,389
    
    
    
    637
    
    
    
    1,823
    
    
    
    4,330Corporate subscribers
    
    
    7,915
    
    
    
    641
    
    
    
    187
    
    
    
    1,166
    
    
    
    5,921Foreign administrations
    
    
    5,371
    
    
    
    1,828
    
    
    
    861
    
    
    
    1,635
    
    
    
    1,047Dealers, agents and others
    
    
    2,151
    
    
    
    983
    
    
    
    315
    
    
    
    196
    
    
    
    657Domestic carriers
    
    
    1,884
    
    
    
    119
    
    
    
    11
    
    
    
    1,373
    
    
    
    381Held-to-maturity investments:Investment in debt securities
    
    
    273
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    143
    
    
    
    113
    
    
    
    30
    
    
    
    
    
    
    
    Held-for-trading(3):Short-term investments
    
    
    2,049
    
    
    
    2,049
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign exchange contracts
    
    
    193
    
    
    
    190
    
    
    
    3
    
    
    
    
    
    
    
    Foreign currency options
    
    
    59
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    Derivatives used-for-hedging(3):Forward foreign exchange contracts
    
    
    670
    
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    59,583
    
    
    
    35,984
    
    
    
    5,070
    
    
    
    6,193
    
    
    
    12,336
 (1)
    
    This includes low risk and good paying customer accounts with no history of
account treatment for a defined period and no overdue accounts as at report date; and
deposits or placements to counterparties with good credit rating or bank standing financial
review;(2)
    
    This includes medium risk and average paying customer accounts with no overdue
accounts as at report date, and new customer accounts for which sufficient credit history
has not been established; and deposits or placements to counterparties not classified as
Class A; and(3)
    
    Gross receivables from counterparties, before any offsetting arrangements.  Neither past due
    
    
    Past due but not impairedTotal
    
    
    nor impaired
    
    
    1-60 days
    
    
    61-90 days
    
    
    Over 91 days
    
    
    Impaired(in million pesos)December 31, 2008Loans and receivables:Advances and refundable deposits
    
    
    840
    
    
    
    840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    33,684
    
    
    
    33,684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    5,964
    
    
    
    5,964
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,188
    
    
    
    1,130
    
    
    
    1,024
    
    
    
    313
    
    
    
    326
    
    
    
    6,395Retail subscribers
    
    
    8,993
    
    
    
    2,007
    
    
    
    1,338
    
    
    
    266
    
    
    
    293
    
    
    
    5,089Foreign administrations
    
    
    5,916
    
    
    
    3,558
    
    
    
    1,043
    
    
    
    550
    
    
    
    326
    
    
    
    439Dealers, agents and others
    
    
    3,271
    
    
    
    2,558
    
    
    
    48
    
    
    
    9
    
    
    
    345
    
    
    
    311Domestic carriers
    
    
    877
    
    
    
    87
    
    
    
    80
    
    
    
    87
    
    
    
    449
    
    
    
    174Held-to-maturity investments:Investment in debt securities
    
    
    2,098
    
    
    
    2,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Designated at fair value through profit or loss:Investment in debt securities
    
    
    193
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    131
    
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Held-for-trading:Short-term investments
    
    
    706
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign currency options
    
    
    38
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign exchange contracts
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,917
    
    
    
    53,012
    
    
    
    3,533
    
    
    
    1,225
    
    
    
    1,739
    
    
    
    12,408December 31, 2007Loans and receivables:Advances and refundable deposits
    
    
    734
    
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    17,447
    
    
    
    17,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  132




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##### Table of Contents



Neither past due
    
    
    Past due but not impairedTotal
    
    
    nor impaired
    
    
    1-60 days
    
    
    61-90 days
    
    
    Over 91 days
    
    
    Impaired(in million pesos)Short-term investments
    
    
    11,366
    
    
    
    11,366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in debt securities
    
    
    1,115
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,179
    
    
    
    2,026
    
    
    
    1,513
    
    
    
    231
    
    
    
    79
    
    
    
    4,330Corporate subscribers
    
    
    7,915
    
    
    
    828
    
    
    
    715
    
    
    
    133
    
    
    
    318
    
    
    
    5,921Foreign administrations
    
    
    5,371
    
    
    
    2,689
    
    
    
    902
    
    
    
    316
    
    
    
    417
    
    
    
    1,047Dealers, agents and others
    
    
    2,151
    
    
    
    1,298
    
    
    
    30
    
    
    
    4
    
    
    
    162
    
    
    
    657Domestic carriers
    
    
    1,884
    
    
    
    130
    
    
    
    88
    
    
    
    103
    
    
    
    1,182
    
    
    
    381Held-to-maturity investments:Investment in debt securities
    
    
    273
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    143
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Held-for-trading:Short-term investments
    
    
    2,049
    
    
    
    2,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign exchange contracts
    
    
    193
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency options
    
    
    59
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivatives used for hedging:Forward foreign exchange contracts
    
    
    670
    
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,583
    
    
    
    41,054
    
    
    
    3,248
    
    
    
    787
    
    
    
    2,158
    
    
    
    12,336
 
 Impairment Assessments
  Individually assessed allowance
  Collectively assessed allowance
   Capital Management
    133




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##### Table of Contents



Note 7  Earnings Per Common Share Note 17  Equity
   2008
    
    
    2007(in millions)Long-term debt, including current portion
    
    Php
    73,358
    
    
    Php
    60,147Notes payable
    
    
    553
    
    
    
    493Total debt
    
    
    73,911
    
    
    
    60,640Cash and cash equivalents
    
    
    (33,684
    )
    
    
    (17,447
    )Short-term investments
    
    
    (6,670
    )
    
    
    (13,415
    )Net debt
    
    
    33,557
    
    
    
    29,778Equity attributable to equity holders of PLDT under PFRS
    
    
    105,531
    
    
    
    111,113Net debt to equity ratio
    
    
    32
    %
    
    
    27
    %
 Note 24  Contractual Obligations and Commercial
Commitments
 
 Item 12. Description of Securities Other than Equity Securities
  
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 Disclosure Controls and Procedures.
  134




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##### Table of Contents



Managements Annual Report on Internal Control Over Financial Reporting.
    Changes in Internal Control Over Financial Reporting.
 
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Business Conduct and Ethics
    1.
    
    Compliance with applicable laws, rules and regulations;2.
    
    Ethical handling of conflicts of interest, corporate opportunities and
confidential information;3.
    
    Protection and proper use of our assets;4.
    
    Fair dealing with our employees, customers, service providers, suppliers and
competitors;5.
    
    Compliance with our reporting and disclosure obligations to the relevant
regulators and the investors;6.
    
    Compliance with our disclosure and financial reporting controls and procedures;
  135




---



##### Table of Contents



7.
    
    Assessment and management of risks involved in our business endeavours; and8.
    
    Adoption of international best practices of good corporate governance in the
conduct of our business.
 Corporate Governance
    1.
    
    The qualifications and grounds for disqualification for directorship;2.
    
    The requirement that at least two or 20% of the members of our board of
directors, whichever is lesser, must be independent directors and the
standards/criteria for the determination of independent directors;3.
    
    The duties and responsibilities of our board of directors and the individual
directors;4.
    
    Our board committees, specifically, the governance and nomination committee,
audit committee and executive compensation committee, the composition and the principal
duties and responsibilities of such committees;5.
    
    The role of our chairman in ensuring compliance with the corporate governance
principles;6.
    
    The role of our president/chief executive officer in ensuring that our
organizational and procedural controls are adequate and effective to ensure reliability
and integrity of financial and operational information, effectiveness and efficiency of
operations, safeguarding of assets and compliance with laws, rules, regulations and
contracts;7.
    
    The duties and responsibilities of our corporate secretary/assistant corporate
secretary in terms of the support services that they need to provide our board in
upholding sound corporate governance;8.
    
    The duties and responsibilities of the head of our internal audit organization
that would provide our board of directors, management and shareholders with reasonable
assurance that our key organizational and procedural controls are appropriate,
adequate, effective and reasonably complied with;9.
    
    The functions of our independent auditors that would reasonably ensure an
environment of sound corporate governance as reflected in our financial records and
reports; the requirement that non-audit work of the independent auditors should not
conflict with their function as independent auditors; the requirement to rotate, at
least once every five years, the independent auditors or the lead partner assigned to
handle the independent audit of our financial statements;10.
    
    Our commitment to respect and promote shareholders rights such as voting
right, pre-emptive right, inspection right, dividend right, appraisal right, and right
to receive information about the background, business experience, compensation and shareholdings of our directors and officers and
their transactions with us;11.
    
    The requirement to appoint a compliance officer and the duties and
responsibilities of such compliance officer including the establishment of an
evaluation system to determine and measure compliance with the provisions of our
Governance Manual; and12.
    
    The penalties for violations of our Governance Manual.
  136




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137




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##### Table of Contents




    
    training sessions and workshops based on concepts and modules developed by the CGO and
facilitated by various professionals, both local and international, known in the field of
corporate governance and ethics, namely: (1) Board Corporate Governance session on Current
Governance Environment in the United States and Ethics and Tone at the Top, conducted on
December 12, 2008. Facilitating the session was Ms. Suzanne Hopgood of the National
Association of Corporate Directors (NACD) of Washington DC, USA; and (2) PLDT Group
Officers Corporate Governance Enhancement Session on the CG dimensions of the current
global financial crisis, handled by Dr. Jesus P. Estanislao, Chairman of the Institute of
Corporate Directors (ICD) and the Stages of Corporate Moral Development, facilitated by Dr.
Antonette Palma-Angeles, Director of the JB Fernandez Center for Ethics of the Ateneo de
Manila University;
    
    re-development and implementation of an e-Learning Session on Conflict of Interest,
which involved the translation of the initial e-Learning module into Filipino, using simple
terms and providing examples. Roll out for all supervisors and rank-and-file employees in
other departments continued in 2008;
    
    translation of the PLDT CG Primer from English to Filipino for better appreciation and
observance of CG policies by all of our employees. The Primer has been uploaded into the
PLDT website for easy access by employees;
    
    development and launch of the PLDT music video entitled Huwag Kang Pasaway. A joint
project with the Human Resource Group, the video seeks to discourage violations of and
promote voluntary compliance with CG policies. It was launched in June 27, 2008 and has
been cascaded to all employees through their respective division heads;
    
    continuing issuance of periodic CG communication materials such as posters, Ripples
monthly e-newsletter and weekly CG news summaries e-mail.
        138




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Chief Governance Officer
   a.
    
    PLDTs Governance Manual, as adopted on September 24, 2002 and amended on
January 30, 2007, conforms with the provisions of the Manual on Corporate Governance
(Model Corporation), as prescribed by the Philippine SEC, Memorandum Circular No. 2,
Series of 2002, as well as adopted the leading practices and principles on good
corporate governance;b.
    
    PLDT has not deviated from the provisions of the Governance Manual and has
complied therewith and with certain other corporate governance standards set out in the
Sarbanes Oxley Act of 2002, Section 303A of the NYSE Listing Standards and implementing
rules issued by the U.S. SEC and NYSE.
  Board and Board Committees
   Internal Audit Organization
  1.
    
    Risks are appropriately identified and managed;2.
    
    Significant financial, 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 efficiently and adequately protected;5.
    
    Programs, plans and objectives are achieved;
  139




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##### Table of Contents



6.
    
    Quality and continuous improvement are fostered in our control process;7.
    
    Significant legislative or regulatory issues impacting us are recognized and
addressed appropriately; and8.
    
    Interaction with various governance groups occurs as needed.
  1.
    
    Provide annually an assessment on the adequacy and effectiveness of our
processes for controlling our activities and managing our risks;2.
    
    Report significant issues related to the processes of controlling our
activities, including potential improvements to those processes, and provide
information concerning such issues;3.
    
    Periodically provide information on the status and results of the annual audit
plan and the sufficiency of our internal audit organizations resources; and4.
    
    Coordinate with and provide oversight of other control and monitoring functions
(risk management, compliance, security, legal, ethics, environmental, external audit).
  Policy on Employee Disclosure on Violations of the Corporate Governance Rules, Questionable
Accounting or Auditing Matters, and Offenses Covered By PLDTs Table of Penalties
    , lrchan@pldt.com.ph www.pldt.com.ph
  140




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##### Table of Contents



Item 16C. Principal Accountant Fees and Services
  2008
    
    
    2007(in millions)Audit Fees
    
    Php
    45
    
    
    Php
    41All Other Fees
    
    
    19
    
    
    
    25Total
    
    Php
    64
    
    
    Php
    66
 Audit Fees
 All Other Fees
   
 Item 16D. Exemption from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchaser
  Total Number of SharesTotal Number of
    
    
    
    
    
    
    Purchased as Part of
    
    
    Maximum Number of SharesShares
    
    
    Average Price
    
    
    Publicly Announced
    
    
    that May Yet Be PurchasedPeriod
    
    Purchased(1)
    
    
    Paid per Share
    
    
    Plans or Programs
    
    
    Under the ProgramsMarch 17 - 19, 2008
    
    
    60,000
    
    
    
    2,635
    
    
    
    60,000
    
    
    
    1,940,000
    (2)March 24 - 27, 2008
    
    
    92,440
    
    
    
    2,708
    
    
    
    152,440
    
    
    
    1,847,560April 4, 2008
    
    
    30,000
    
    
    
    2,782
    
    
    
    182,440
    
    
    
    1,817,560April 8 - 11, 2008
    
    
    62,000
    
    
    
    2,777
    
    
    
    244,440
    
    
    
    1,755,560April 14 - 18, 2008
    
    
    101,820
    
    
    
    2,727
    
    
    
    346,260
    
    
    
    1,653,740May 9, 2008
    
    
    25,000
    
    
    
    2,588
    
    
    
    371,260
    
    
    
    1,628,740May 12 - 16, 2008
    
    
    144,810
    
    
    
    2,658
    
    
    
    516,070
    
    
    
    1,483,930May 19 - 23, 2008
    
    
    115,920
    
    
    
    2,660
    
    
    
    631,990
    
    
    
    1,368,010May 26 - 30, 2008
    
    
    83,050
    
    
    
    2,618
    
    
    
    715,040
    
    
    
    1,284,960June 2 - 6, 2008
    
    
    137,710
    
    
    
    2,556
    
    
    
    852,750
    
    
    
    1,147,250June 10 - 13, 2008
    
    
    138,280
    
    
    
    2,361
    
    
    
    991,030
    
    
    
    1,008,970June 16 - 20, 2008
    
    
    168,030
    
    
    
    2,449
    
    
    
    1,159,060
    
    
    
    840,940June 23 - 27, 2008
    
    
    182,630
    
    
    
    2,416
    
    
    
    1,341,690
    
    
    
    658,310June 30, 2008
    
    
    41,720
    
    
    
    2,394
    
    
    
    1,383,410
    
    
    
    616,590July 1 - 4, 2008
    
    
    150,440
    
    
    
    2,344
    
    
    
    1,533,850
    
    
    
    466,150July 7 - 10, 2008
    
    
    121,890
    
    
    
    2,430
    
    
    
    1,655,740
    
    
    
    344,260July 14 - 16, 2008
    
    
    83,890
    
    
    
    2,413
    
    
    
    1,739,630
    
    
    
    260,370September 15 - 16, 2008
    
    
    16,410
    
    
    
    2,571
    
    
    
    1,756,040
    
    
    
    2,243,960
    (2)September 18, 2008
    
    
    4,000
    
    
    
    2,465
    
    
    
    1,760,040
    
    
    
    2,239,960September 23, 2008
    
    
    3,100
    
    
    
    2,595
    
    
    
    1,763,140
    
    
    
    2,236,860September 30, 2008
    
    
    10,440
    
    
    
    2,646
    
    
    
    1,773,580
    
    
    
    2,226,420October 3, 2008
    
    
    20,000
    
    
    
    2,695
    
    
    
    1,793,580
    
    
    
    2,206,420October 6 - 10, 2008
    
    
    76,150
    
    
    
    2,502
    
    
    
    1,869,730
    
    
    
    2,130,270October 13 - 17, 2008
    
    
    90,160
    
    
    
    2,328
    
    
    
    1,959,890
    
    
    
    2,040,110November 7, 2008
    
    
    12,400
    
    
    
    1,983
    
    
    
    1,972,290
    
    
    
    3,027,710
    (2)Total
    
    
    1,972,290
 
 (1)
    
    Outside the share buyback program, we did not repurchase any of our shares in the year ended
December 31, 2008.(2)
    
    The Board of Directors approved the initial share buyback program of up to two million shares
of PLDTs common stock on January 29, 2008, authorized the repurchase of up to another two
million shares on August 5, 2008, and approved the repurchase of an additional one million
shares on December 9, 2008.  141




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##### Table of Contents



Item 16F. Change in Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
  
    
    Number of Independent Directors.The NYSE listing standards require a majority of the
board of directors to be independent. We have four independent directors out of 13 directors,
which exceeds the requirements under the Philippine SEC Governance Code that at least two
members or 20% of the board of directors must be independent.
 
    
    Director Independence Tests.There are differences between the director independence tests
applied in PLDTs corporate governance practice and those under the NYSE listing standards. In
some cases, the independence tests set forth in the NYSE listing standards are more stringent
than those under PLDTs corporate governance practice and vice versa.
 
    
    Examples where the NYSE listing standards impose more stringent standards than PLDTs
corporate governance practices include the auditor affiliation test. In contrast to the
NYSE listing standards, under PLDTs By-Laws and Board Committee charters, present or
previous affiliation or employment of a directors immediate family member with the
external auditors, or a directors past or present affiliation with a firm that is PLDTs
internal auditor do not preclude a determination that such director is independent.
 
    
    Examples where PLDTs corporate governance practices impose more stringent standards
than NYSE listing standards include the look back periods for the independence tests and
the material relationship with the listed company test. The look back period for each of
the past employment and the auditor affiliation tests under PLDTs corporate governance
practices is five years compared to three years under the NYSE listing standards.
Furthermore, in respect of material relationships that preclude an independence finding,
PLDTs Corporate Governance Manual provides that a director who is, or whose relative is, a
substantial shareholder of PLDT, any of its related companies or any of its substantial
shareholders cannot be considered as independent.
 
    
    Meetings of non-management directors.PLDT does not currently have regularly scheduled
sessions of the non-management directors. However, as discussed and agreed by the Governance
and Nomination Committee in its various meetings, non-management and/or independent directors
are encouraged to request the Chairman to hold such meetings of non-management directors when
there are important matters for discussion requiring such meetings.
 
    
    Nominating/Corporate Governance Committee and Compensation Committee.The NYSE listing
standards require a listed company to maintain a nominating/corporate governance committee and
a compensation committee, both composed entirely of independent directors. Our governance and
nomination committee and our executive compensation committee is each composed of five voting
members, a majority of whom are independent directors, which exceeds the requirements under
the Philippine SEC Governance Code that one of the at least three voting members of the nominating/corporate governance committee and one of
the at least three members of the compensation committee must be independent.
  142




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##### Table of Contents




    
    Audit Committee.As required by NYSE listing standards, PLDT maintains an audit committee
in full compliance with Rule 10A-3 promulgated under the U.S. Securities Exchange Act of 1934,
as amended, and Section 303A.06 of the NYSE Listed Company Manual. All of the members of
PLDTs audit committee are independent directors meeting the independence requirements of Rule
10A-3 as well as those under Section 303A.07 of the NYSE Listed Company Manual, except in
those areas where our independence tests under the Philippine SEC Governance Code differ from
those under the NYSE listing standards, as discussed above.
  
 PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  PagePHILIPPINE LONG DISTANCE TELEPHONE COMPANY AUDITED ANNUAL FINANCIAL
       STATEMENTSReport of Independent Registered Public Accounting Firm
    
    155Report of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets as at December 31, 2008 and 2007
    
    F-2Consolidated Statements of Income for the Years Ended December 31, 2008 and 2007
    
    F-4Consolidated Statements of Changes in Equity for the Years Ended December 31, 2008 and 2007
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2008 and 2007
    
    F-6Notes to Consolidated Financial Statements
    
    F-8
  143




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Item 19. Exhibits
   1
    (a).

    Articles of Incorporation (incorporated by reference to PLDTs Form 20-F as filed with the
Securities and Exchange Commission in May 2001)1
    (b).

    By-Laws (as amended on June 28, 2005) (incorporated by reference to PLDTs Form 20-F as filed
with the Securities and Exchange Commission in June 2006)2.
    

    We have not included as exhibits certain instruments with respect to our long-term debt, the
amount of debt authorized under each of which does not exceed 10% of our total assets, and we
agree to furnish a copy of any such instrument to the Securities and Exchange Commission upon
request.4.
    

    Material Contracts6.
    

    Computation of Earnings Per Share7.
    

    Calculation of Ratio of Earnings to Fixed Charges8.
    

    Subsidiaries12.1
    

    Certification of Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act12.2
    

    Certification of the Principal Financial Officer required by Rule 13a-14(a) of the Exchange Act13.1
    

    Certification of Chief Executive Officer required by Rule 13a-14(b) of the Exchange Act13.2
    

    Certification of the Principal Financial Officer required by Rule 13a-14(b) of the Exchange Act
  144




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PHILIPPINE LONG DISTANCE TELEPHONE COMPANYApril 2, 2009By:
    
    /s/ Ma. Lourdes C. Rausa-Chan

MA. LOURDES C. RAUSA-CHANSenior Vice President, Corporate Affairs andLegal Services Head and Corporate Secretary
  145




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    

    Description of Exhibit1
    (a)

    Articles of Incorporation (incorporated by reference to PLDTs Form 20-F as filed with the
Securities and Exchange Commission in May 2001)1
    (b)

    By-Laws (as amended on June 28, 2005) (incorporated by reference to PLDTs Form 20-F as filed
with the Securities and Exchange Commission in June 2006)2
    

    We have not included as exhibits certain instruments with respect to our long-term debt, the
amount of debt authorized under each of which does not exceed 10% of our total assets, and we
agree to furnish a copy of any such instrument to the Securities and Exchange Commission upon
request.4
    (a)

    Stock Purchase and Strategic Investment Agreement, dated September 28, 1999, by and among
PLDT, First Pacific Limited, Metro Pacific Corporation, Metro Pacific Asia Link Holdings,
Inc., Metro Pacific Resources, Inc. and NTT Communications Corporation (incorporated by
reference to PLDTs Form 6-K for the month of September 1999)4
    (b)

    Executive Stock Option Plan (incorporated by reference to PLDTs Form 20-F as filed with the
Securities and Exchange Commission in May 2001)4
    (c)

    Master Restructuring Agreement, dated June 21, 2000, as amended on December 12, 2000 and
December 19, 2000, between Piltel, Piltel (Cayman) Limited, PLDT, The Chase Manhattan Bank, as
escrow agent, Metropolitan Bank and Trust Company, as administrative agent and the creditors
named therein (incorporated by reference to PLDTs Form 20-F as filed with the Securities and
Exchange Commission in May 2001)4
    (d)

    The Cooperation Agreement, dated January 31, 2006, entered into by and among PLDT, First
Pacific, Metro Pacific Corporation, Metro Asia Link Holdings, Inc., Metro Pacific Resources,
Inc., Larouge B.V., Metro Pacific Assets Holdings, Inc., NTT Communications and NTT DoCoMo
(incorporated by reference to Schedule 13D/A (Amendment No.2) as filed with the United States
Securities and Exchange Commission by Nippon Telegraph and Telephone Corporation and NTT
Communications Corporation on January 31, 2006)6
    

    Computation of Earnings Per Share7
    

    Calculation of Ratio of Earnings to Fixed Charges8
    

    Subsidiaries12.1
    

    Certification of Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act12.2
    

    Certification of the Principal Financial Officer required by Rule 13a-14(a) of the Exchange Act13.1
    

    Certification of Chief Executive Officer required by Rule 13a-14(b) of the Exchange Act13.2
    

    Certification of the Principal Financial Officer required by Rule 13a-14(b) of the Exchange Act
  146




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EXHIBIT 6
 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
Computation of Earnings Per Share
For the years 2008, 2007 and 2006  Amounts in conformity with IFRS
 2008(1)
    
    

2008
    
    

2007
    
    

2006(in millions, except earnings per common share)Earnings per share for the year attributable to common equity holders of PLDTBasicNet income attributable to equity holders of PLDT
    
    US$
    720
    
    
    Php
    34,317
    
    
    Php
    39,289
    
    
    Php
    32,385Deduct: Dividends on preferred share
    
    
    (9
    )
    
    
    (455
    )
    
    
    (457
    )
    
    
    (455
    )Net income attributable to common shareholders
    
    US$
    711
    
    
    Php
    33,862
    
    
    Php
    38,832
    
    
    Php
    31,930DilutedNet income attributable to equity holders of PLDT
    
    US$
    720
    
    
    Php
    34,317
    
    
    Php
    39,289
    
    
    Php
    32,385Deduct: Dividends on preferred share
    
    
    (9
    )
    
    
    (455
    )
    
    
    (457
    )
    
    
    (455
    )Dividends on dilutive preferred stock subject to mandatory redemption
charged to interest expense for the year
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Accretion to redemption value of preferred stock
subject to mandatory conversion
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    Foreign exchange gains on preferred stock subject to mandatory conversion
    
    
    
    
    
    
    
    
    
    
    (182
    )
    
    
    Net income applicable to common shareholders
    
    US$
    711
    
    
    Php
    33,862
    
    
    Php
    38,798
    
    
    Php
    31,930BasicWeighted average number of common shares (in thousands)Outstanding common shares, beginning
    
    
    
    
    
    
    188,741
    
    
    
    188,435
    
    
    
    180,789Effect of issuance of common shares during the year
    
    
    
    
    
    
    542
    
    
    
    221
    
    
    
    3,667Effect of purchase of treasury stock during the year
    
    
    
    
    
    
    (1,120
    )
    
    
    
    
    
    
    188,163
    
    
    
    188,656
    
    
    
    184,456DilutedWeighted average number of common shares (in thousands)Outstanding common shares, beginning
    
    
    
    
    
    
    188,741
    
    
    
    188,435
    
    
    
    180,789Effect of issuance of common shares during the year
    
    
    
    
    
    
    542
    
    
    
    221
    
    
    
    3,667Average incremental number of shares under ESOP(2)
    
    
    
    
    
    
    13
    
    
    
    38
    
    
    
    98Effect of purchase of treasury stock during the year
    
    
    
    
    
    
    (1,120
    )
    
    
    
    
    
    
    Common shares equivalent of preferred shares deemed dilutive
    
    
    
    
    
    
    
    
    
    
    680
    
    
    
    188,176
    
    
    
    189,374
    
    
    
    184,554Earnings per shareBasic
    
    
    3.78
    
    
    
    179.96
    
    
    
    205.84
    
    
    
    173.10Diluted
    
    
    3.78
    
    
    
    179.95
    
    
    
    204.88
    
    
    
    173.01
 
 (3)
    
    We maintain our accounts in Philippine pesos, the functional and presentation currency under
IFRS and U.S. GAAP. For convenience, the peso financial information as at and for the year
ended December 31, 2008 has been translated into U.S. dollars at the exchange rate of
Php47.647 to US$1.00, the peso-dollar rate as quoted through the Philippine Dealing System as
at December 31, 2008.(2)
    
    The dilutive effect of the outstanding options is reflected as additional share dilution in
the computation of earnings per common share, see Note 7  Earnings per Common Share to the
accompanying audited consolidated financial statements in Item 18 for further discussion.  147




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PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
Computation of Operating Income and Earnings Per Share
For the years 2005 and 2004  Amounts in conformity with U.S. GAAP
 2005
    
    
    2004(in millions, except net operating income percommon share)1. Operating income per shareBasicOperating income
    
    Php
    48,514
    
    
    Php
    48,539Deduct: Dividends on convertible preferred shares
    
    
    1,677
    
    
    
    1,764Accretion of redemption value of preferred stock subject to mandatory conversion
    
    
    1,443
    
    
    
    1,503Operating income applicable to common shareholders
    
    Php
    45,394
    
    
    Php
    45,272DilutedOperating income
    
    Php
    48,514
    
    
    Php
    48,539Deduct: Dividends on convertible preferred shares
    
    
    70
    
    
    
    49Accretion of redemption value of preferred stock subject to mandatory conversion
    
    
    1,746
    
    
    
    Operating income applicable to common shareholders
    
    Php
    46,698
    
    
    Php
    48,490BasicWeighted average number of common shares (in thousands)Outstanding common shares, beginning
    
    
    170,214
    
    
    
    169,476Effect of issuance of common shares during the year
    
    
    1,855
    
    
    
    252172,069
    
    
    
    169,728DilutedWeighted average number of common shares (in thousands)Outstanding common shares, beginning
    
    
    170,214
    
    
    
    169,476Effect of issuance of common shares during the year
    
    
    1,855
    
    
    
    252Weighted average number of shares under ESOP during the year(1)
    
    
    94
    
    
    
    155Common shares equivalent of preferred shares deemed dilutive
    
    
    10,858
    
    
    
    22,381183,021
    
    
    
    192,264Operating income per shareBasic
    
    Php
    263.81
    
    
    Php
    266.73Diluted
    
    
    255.15
    
    
    
    252.202. Earnings per shareBasicNet income after cumulative effect of change in accounting policy
    
    Php
    40,603
    
    
    Php
    28,101Deduct: Dividends on convertible preferred shares
    
    
    1,677
    
    
    
    1,764Accretion to redemption value of preferred stock
subject to mandatory conversion
    
    
    1,443
    
    
    
    1,503Net income attributable to common shareholders
    
    Php
    37,483
    
    
    Php
    24,834DilutedNet income (loss) after cumulative effect of change in accounting policy
    
    Php
    40,603
    
    
    Php
    28,101Deduct: Dividends on convertible preferred shares
    
    
    70
    
    
    
    285Accretion to redemption value of preferred stock
subject to mandatory conversion
    
    
    1,746
    
    
    
    1,503Net income applicable to common shareholders
    
    Php
    38,787
    
    
    Php
    26,313BasicWeighted average number of common shares (in thousands)Outstanding common shares, beginning
    
    
    170,214
    
    
    
    169,476Effect of issuance of common shares during the year
    
    
    1,855
    
    
    
    252172,069
    
    
    
    169,728DilutedWeighted average number of common shares (in thousands)Outstanding common shares, beginning
    
    
    170,214
    
    
    
    169,476Effect of issuance of common shares during the year
    
    
    1,855
    
    
    
    252Average incremental number of shares under ESOP(1)
    
    
    94
    
    
    
    155Common shares equivalent of preferred shares deemed dilutive
    
    
    10,858
    
    
    
    11,213183,021
    
    
    
    181,096Earnings per share(1)Basic
    
    Php
    217.84
    
    
    Php
    146.32Diluted
    
    
    211.93
    
    
    
    145.30
 (1)
    
    The dilutive effect of the outstanding options is reflected as additional share dilution in
the computation of earnings per common share.
  148




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EXHIBIT 7
 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
Calculation of Ratio of Earnings to Fixed Charges
For the years 2008, 2007 and 2006  Amounts in conformity with IFRS
 2008(1)
    
    
    2008
    
    
    2007
    
    
    2006(in millions, except ratio of earnings to fixed charges)Earnings: Income before income taxPre-tax income from continuing operations before
adjustment for minority interest in consolidated
subsidiaries or income or loss from equity investees
subsidiaries
    
    US$
    1,134
    
    
    Php
    54,049
    
    
    Php
    58,081
    
    
    Php
    38,249Add (Deduct):Fixed Charges(see b below)
    
    
    164
    
    
    
    7,831
    
    
    
    8,051
    
    
    
    10,874Amortization of capitalized interest
    
    
    33
    
    
    
    1,543
    
    
    
    1,559
    
    
    
    1,490Capitalized interest
    
    
    (16
    )
    
    
    (778
    )
    
    
    (542
    )
    
    
    (549
    )Total Earnings(a)
    
    US$
    1,315
    
    
    Php
    62,645
    
    
    Php
    67,149
    
    
    Php
    50,064Fixed Charges(b)Interest on loans and related items
    
    US$
    107
    
    
    Php
    5,083
    
    
    Php
    5,714
    
    
    Php
    7,359Capitalized interest
    
    
    16
    
    
    
    778
    
    
    
    542
    
    
    
    549Amortization of debt issuance costs
    
    
    16
    
    
    
    751
    
    
    
    874
    
    
    
    2,214Estimated financing component of rent expense(3)
    
    
    25
    
    
    
    1,219
    
    
    
    921
    
    
    
    752Total Fixed Charges
    
    US$
    164
    
    
    Php
    7,831
    
    
    Php
    8,051
    
    
    Php
    10,874Ratio (a/b) (2)
    
    
    8.0
    
    
    
    8.0
    
    
    
    8.3
    
    
    
    4.6
 For the years 2005 through 2004  Amounts in conformity with U.S. GAAP
 2005
    
    
    2004(in millions, except ratio of earnings to fixed charges)Earnings:Pre-tax income from continuing operations before
adjustment for minority interest in consolidated
subsidiaries or income or loss from equity investees
subsidiaries
    
    Php
    45,770
    
    
    Php
    34,840Add (Deduct):Fixed Charges (see b below)
    
    
    11,273
    
    
    
    13,479Amortization of capitalized interest
    
    
    1,443
    
    
    
    1,510Capitalized interest
    
    
    (504
    )
    
    
    (595
    )Total Earnings(a)
    
    Php
    57,982
    
    
    Php
    49,234Fixed Charges(b)Interest on loans and related items
    
    Php
    9,615
    
    
    Php
    11,115Capitalized interest
    
    
    504
    
    
    
    595Amortization of debt issuance costs
    
    
    459
    
    
    
    1,049Estimated financing component of rent expense(3)
    
    
    695
    
    
    
    720Total Fixed Charges
    
    Php
    11,273
    
    
    Php
    13,479Ratio (a/b) (2)
    
    
    5.1
    
    
    
    3.7
 
 (1)
    
    We maintain our accounts in Philippine pesos, the functional and presentation currency under
IFRS and U.S. GAAP. For convenience, the peso financial information as at and for the year
ended December 31, 2008 has been translated into U.S. dollars at the exchange rate of
Php47.647 to US$1.00, the peso-dollar rate as quoted through the Philippine Dealing System as
at December 31, 2008.(2)
    
    For purposes of this ratio, Earnings consist of: (a) pre-tax income from continuing
operations before adjustment for minority interest in consolidated subsidiaries or income or
loss from equity investees, (b) fixed charges, (c) amortization of capitalized interest, (d)
distributed income of equity investees, and (e) share of pre-tax losses of equity investees
for which charges arising from guarantees are included in fixed charges; less the sum of the
following: (1) capitalized interest, (2) preference security dividend requirements of
consolidated subsidiaries, and (3) the minority interest in pre-tax income of subsidiaries
that have not incurred fixed charges.Fixed charges consist of interest expensed and capitalized interest, amortized premiums,
discounts and capitalized expenses related to indebtedness, an estimate of interest within rental
expense, and preference security dividend requirements of consolidated subsidiaries.(3)
    
    Rent expense substantially represents payments for the satellite circuits leased by PLDT.
Historically, PLDT has been using one-third of rent expense as a reasonable estimate of the
financing component of rent expense, since it is impracticable to determine the actual
financing component of rent expense.  149




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EXHIBIT 8
 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
 Percentage of OwnershipName of Subsidiary
    
    Place of Incorporation
    
    Principal Activity
    
    Direct
    
    
    IndirectWirelessSmart
    
    Philippines
    
    Cellular mobile services
    
    
    100.0
    
    
    
    Smart Broadband, Inc.
    
    Philippines
    
    Internet broadband distribution
    
    
    
    
    
    
    100.0SmartConnect Holdings Pte. Ltd.
    
    Singapore
    
    Investment company
    
    
    
    
    
    
    100.0I-Contacts Corporation
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Wolfpac Mobile, Inc.
    
    Philippines
    
    Mobile applications development and services
    
    
    
    
    
    
    100.0SmartConnect Global Pte. Ltd.
    
    Singapore
    
    International trade of satellites and GSM enabled global telecommunications
    
    
    
    
    
    
    100.0Wireless Card, Inc.
    
    Philippines
    
    Promotion of the sale and/or patronage of debit and/or charge cards
    
    
    
    
    
    
    100.0Smart Money Holdings Corporation
    
    Cayman Islands
    
    Investment Company
    
    
    
    
    
    
    100.0Smart Money, Inc.
    
    Cayman Islands
    
    Mobile commerce solutions marketing
    
    
    
    
    
    
    100.0Telecoms Solutions, Inc.
    
    Mauritius
    
    Mobile commerce platforms
    
    
    
    
    
    
    100.0Far East Capital Limited
    
    Cayman Islands
    
    Cost effective offshore financing and risk management activities for Smart
    
    
    
    
    
    
    100.0Smarthub, Incorporated
    
    Philippines
    
    Development and sale of software, maintenance and support services
    
    
    
    
    
    
    100.0PH Communications Holdings Corporation
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0Francom Holdings, Inc.
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0Connectivity Unlimited Resource Enterprise
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    100.0Airborne Access Corporation
    
    Philippines
    
    Wireless Internet services
    
    
    
    
    
    
    99.4Pilipino Telephone Corporation
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    92.53rd Brand Pte. Ltd.
    
    Singapore
    
    Solutions and systems integration services
    
    
    
    
    
    
    85.0Telesat, Inc.
    
    Philippines
    
    Satellite communications services
    
    
    100.0
    
    
    
    ACeS Philippines Cellular Satellite
Corporation
    
    Philippines
    
    Satellite information and messaging services
    
    
    88.5
    
    
    
    11.5Mabuhay Satellite Corporation
    
    Philippines
    
    Satellite communications services
    
    
    67.0
    
    
    
    Fixed LinePLDT Clark Telecom, Inc.
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT Subic Telecom, Inc.
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT Global Corporation
    
    British Virgin Islands
    
    Telecommunications services
    
    
    100.0
    
    
    
    Smart-NTT Multimedia, Inc.
    
    Philippines
    
    Data and network services
    
    
    100.0
    
    
    
    PLDT-Maratel, Inc.
    
    Philippines
    
    Telecommunications services
    
    
    97.5
    
    
    
    Bonifacio Communications Corporation
    
    Philippines
    
    Telecommunications, infrastructure and related value-added services
    
    
    75.0
    
    
    
    Information and Communications Technology, or ICTePLDT, Inc.
    
    Philippines
    
    Information and communications infrastructure for Internet-based services, e-commerce, customer interaction solutions and IT-related services
    
    
    100.0
    
    
    
    SPi Technologies, Inc. and Subsidiaries
    
    Philippines
    
    Knowledge processing solutions
    
    
    
    
    
    
    100.0ePLDT Ventus, Inc.
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Vocativ Systems, Inc.
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Parlance Systems, Inc.
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0Infocom Technologies, Inc.
    
    Philippines
    
    Internet access services
    
    
    
    
    
    
    99.6Digital Paradise Thailand
    
    Thailand
    
    Internet access services
    
    
    
    
    
    
    87.5netGames, Inc.
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    80.0Digital Paradise, Inc.
    
    Philippines
    
    Internet access services
    
    
    
    
    
    
    75.0Level Up! (Philippines), Inc.
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    60.0
  150




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##### Table of Contents



Exhibit 12.1
 CERTIFICATION
  1.
    
    I have reviewed this annual report on Form 20-F of Philippine Long Distance Telephone
Company (the Company);
 2.
    
    Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
 3.
    
    Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the Company as of, and for, the periods presented
in this report;
 4.
    
    The Companys other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Company and have:
 (a)
    
    Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the Company, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this report is being prepared;
 (b)
    
    Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
 (c)
    
    Evaluated the effectiveness of the Companys disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
 (d)
    
    Disclosed in this report any change in the Companys internal control over
financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting; and
 5.
    
    The Companys other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the Companys auditors
and the audit committee of the Companys board of directors (or persons performing the
equivalent functions):
 (a)
    
    All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the Companys ability to record, process, summarize and report financial
information; and(b)
    
    Any fraud, whether or not material, that involves management or other employees
who have a significant role in the Companys internal control over financial reporting.
  /s/  Napoleon L. NazarenoNapoleon L. NazarenoPresident and Chief Executive Officer
(Principal Executive Officer)  151




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##### Table of Contents



Exhibit 12.2
 CERTIFICATION
  1.
    
    I have reviewed this annual report on Form 20-F of Philippine Long Distance Telephone
Company (the Company);
 2.
    
    Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
 3.
    
    Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the Company as of, and for, the periods presented
in this report;
 4.
    
    The Companys other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Company and have:
 (a)
    
    Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the Company, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this report is being prepared;
 (b)
    
    Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
 (c)
    
    Evaluated the effectiveness of the Companys disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
 (d)
    
    Disclosed in this report any change in the Companys internal control over
financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting; and
 5.
    
    The Companys other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the Companys auditors
and the audit committee of the Companys board of directors (or persons performing the
equivalent functions):
 (a)
    
    All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the Companys ability to record, process, summarize and report financial
information; and
 (b)
    
    Any fraud, whether or not material, that involves management or other employees
who have a significant role in the Companys internal control over financial reporting.
  /s/  Anabelle L. ChuaAnabelle L. ChuaSenior Vice President and Treasurer
(Principal Financial Officer)  152




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##### Table of Contents



Exhibit 13.1
 CERTIFICATION
   /s/  Napoleon L. NazarenoNapoleon L. NazarenoPresident and Chief Executive Officer
(Principal Executive Officer)   153




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##### Table of Contents



Exhibit 13.2
 CERTIFICATION
   /s/  Anabelle L. ChuaAnabelle L. ChuaSenior Vice President and Treasurer
(Principal Financial Officer)   154




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     .
  
  155




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 
    
  F-1




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##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31, 2008 and 2007
(in million pesos, except par value, per share amounts and number of shares)
 2008
    
    
    2007ASSETSNoncurrent AssetsProperty, plant and equipment  net (Notes 3, 5, 8, 18 and 26)
    
    
    160,326
    
    
    
    159,414Investments in associates and joint ventures (Notes 9, 18 and 26)
    
    
    1,174
    
    
    
    1,351Available-for-sale financial assets (Note 26)
    
    
    131
    
    
    
    143Investment in debt securities (Notes 13 and 26)
    
    
    635
    
    
    
    273Investment properties (Notes 3, 10 and 26)
    
    
    617
    
    
    
    577Goodwill and intangible assets  net (Notes 3, 5, 11 and 26)
    
    
    10,450
    
    
    
    11,721Deferred income tax assets  net (Notes 3, 4, 6 and 26)
    
    
    9,605
    
    
    
    13,757Derivative financial assets (Note 26)
    
    
    
    
    
    
    59Prepayments  net of current portion (Notes 16, 22 and 26)
    
    
    2,501
    
    
    
    2,281Advances and refundable deposits  net of current portion (Note 26)
    
    
    1,086
    
    
    
    1,030Total Noncurrent Assets
    
    
    186,525
    
    
    
    190,606Current AssetsCash and cash equivalents (Notes 12 and 26)
    
    
    33,684
    
    
    
    17,447Short-term investments (Note 26)
    
    
    6,670
    
    
    
    13,415Investment in debt securities (Notes 13 and 26)
    
    
    1,656
    
    
    
    1,115Trade and other receivables  net (Notes 3, 14, 22 and 26)
    
    
    15,909
    
    
    
    12,645Inventories and supplies (Notes 3, 15 and 26)
    
    
    2,069
    
    
    
    1,167Derivative financial assets (Note 26)
    
    
    56
    
    
    
    897Current portion of prepayments (Notes 16, 22 and 26)
    
    
    4,164
    
    
    
    2,368Current portion of advances and refundable deposits (Notes 13 and 26)
    
    
    1,825
    
    
    
    498Total Current Assets
    
    
    66,033
    
    
    
    49,552TOTAL ASSETS
    
    
    252,558
    
    
    
    240,158EQUITY AND LIABILITIESEquityPreferred stock, Php10 par value, authorized  822,500,000 shares;
issued and outstanding  441,480,512 shares as at December 31, 2008
and 441,650,297 shares as at December 31, 2007 (Notes 7 and 17)
    
    
    4,415
    
    
    
    4,417Common stock, Php5 par value, authorized  234,000,000 shares;
issued  189,456,127 shares and outstanding  187,483,837 shares as at
December 31, 2008 and issued and outstanding  188,740,519 shares as at
December 31, 2007 (Notes 7 and 17)
    
    
    947
    
    
    
    943Treasury stock  1,972,290 shares as at December 31, 2008 (Notes 7, 17 and 26)
    
    
    (4,973
    )
    
    
    Stock options issued (Note 23)
    
    
    6
    
    
    
    9Equity portion of convertible preferred stock (Note 18)
    
    
    
    
    
    
    6Capital in excess of par value
    
    
    68,337
    
    
    
    67,057Retained earnings (Note 7)
    
    
    37,177
    
    
    
    39,894Cumulative translation adjustments
    
    
    (378
    )
    
    
    (1,383
    )Total Equity Attributable to Equity Holders of PLDT
    
    
    105,531
    
    
    
    110,943Minority interests
    
    
    1,438
    
    
    
    1,402TOTAL EQUITY
    
    
    106,969
    
    
    
    112,345
  F-2




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PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS ( continued )
December 31, 2008 and 2007
(in million pesos, except par value, per share amounts and number of shares)
 2008
    
    
    2007Noncurrent LiabilitiesInterest-bearing financial liabilities  net of current portion (Notes 8, 18, 24 and 26)
    
    
    58,910
    
    
    
    53,387Deferred income tax liabilities (Notes 3, 4, 6 and 26)
    
    
    1,288
    
    
    
    2,066Derivative financial liabilities (Notes 24 and 26)
    
    
    1,761
    
    
    
    7,741Pension and other employee benefits (Notes 3, 23 and 26)
    
    
    5,467
    
    
    
    4,540Customers deposits (Notes 24 and 26)
    
    
    2,251
    
    
    
    2,201Deferred credits and other noncurrent liabilities (Notes 3, 8, 11, 14, 19, 21 and 26)
    
    
    10,582
    
    
    
    9,632Total Noncurrent Liabilities
    
    
    80,259
    
    
    
    79,567Current LiabilitiesAccounts payable (Notes 20, 22, 25 and 26)
    
    
    18,268
    
    
    
    12,253Accrued expenses and other current liabilities (Notes 3, 11, 18, 19, 21, 22, 23, 24, 25 and 26)
    
    
    24,381
    
    
    
    21,929Derivative financial liabilities (Notes 24 and 26)
    
    
    87
    
    
    
    242Provisions for assessments (Notes 22, 24, 25 and 26)
    
    
    1,555
    
    
    
    1,112Current portion of interest-bearing financial liabilities (Notes 8, 18, 24 and 26)
    
    
    15,080
    
    
    
    8,764Dividends payable (Notes 7, 18, 24 and 26)
    
    
    1,379
    
    
    
    1,071Income tax payable (Notes 6 and 26)
    
    
    4,580
    
    
    
    2,875Total Current Liabilities
    
    
    65,330
    
    
    
    48,246TOTAL LIABILITIES
    
    
    145,589
    
    
    
    127,813TOTAL EQUITY AND LIABILITIES
    
    
    252,558
    
    
    
    240,158
 See accompanying Notes to Consolidated Financial Statements.
  F-3




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##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 For the Years Ended December 31, 2008, 2007 and 2006
(in million pesos, except earnings per common share amounts)
 2008
    
    
    2007
    
    
    2006REVENUESService revenues (Notes 3 and 4)
    
    
    142,873
    
    
    
    135,478
    
    
    
    124,988Non-service revenues (Notes 3, 4 and 5)
    
    
    2,964
    
    
    
    3,226
    
    
    
    2,520145,837
    
    
    
    138,704
    
    
    
    127,508EXPENSESDepreciation and amortization (Notes 3, 4 and 8)
    
    
    24,709
    
    
    
    28,613
    
    
    
    31,869Compensation and employee benefits (Notes 3, 5 and 23)
    
    
    20,709
    
    
    
    20,470
    
    
    
    18,359Repairs and maintenance (Note 22)
    
    
    8,569
    
    
    
    7,310
    
    
    
    6,886Selling and promotions
    
    
    5,695
    
    
    
    5,541
    
    
    
    4,907Cost of sales (Notes 5, 22 and 24)
    
    
    5,252
    
    
    
    5,127
    
    
    
    5,625Professional and other contracted services (Note 22)
    
    
    4,591
    
    
    
    4,719
    
    
    
    3,097Asset impairment (Notes 3, 5, 8, 9, 11, 13, 14 and 15)
    
    
    4,180
    
    
    
    1,317
    
    
    
    2,766Rent (Notes 3 and 24)
    
    
    3,656
    
    
    
    2,762
    
    
    
    2,257Taxes and licenses (Note 25)
    
    
    2,736
    
    
    
    2,319
    
    
    
    1,747Communication, training and travel
    
    
    1,993
    
    
    
    1,850
    
    
    
    1,481Insurance and security services (Note 22)
    
    
    1,196
    
    
    
    1,197
    
    
    
    1,255Provisions (Notes 3, 4, 14, 15, 22, 24 and 25)
    
    
    898
    
    
    
    666
    
    
    
    38Amortization of intangible assets (Notes 3 and 11)
    
    
    377
    
    
    
    390
    
    
    
    450Other expenses (Note 22)
    
    
    1,225
    
    
    
    1,306
    
    
    
    1,26685,786
    
    
    
    83,587
    
    
    
    82,00360,051
    
    
    
    55,117
    
    
    
    45,505OTHER INCOME (EXPENSES)Gains (losses) on derivative financial instruments  net (Note 26)
    
    
    3,115
    
    
    
    (2,849
    )
    
    
    (8,304
    )Interest income (Note 5)
    
    
    1,668
    
    
    
    1,503
    
    
    
    1,654Equity share in net losses of associates and joint ventures (Note 9
    
    
    )
    (176)
    
    
    (11
    )
    
    
    (52
    )Financing costs  net (Notes 5, 7, 8, 18 and 26)
    
    
    (6,104
    )
    
    
    (7,088
    )
    
    
    (10,854
    )Foreign exchange (losses) gains  net (Notes 8, 18 and 26)
    
    
    (6,170
    )
    
    
    7,990
    
    
    
    4,821Others (Notes 5, 8, 22 and 24)
    
    
    1,665
    
    
    
    3,419
    
    
    
    5,479(6,002
    )
    
    
    2,964
    
    
    
    (7,256
    )INCOME BEFORE INCOME TAX
    
    
    54,049
    
    
    
    58,081
    
    
    
    38,249PROVISION FOR INCOME TAX(Notes 3, 4 and 6)
    
    
    19,073
    
    
    
    18,807
    
    
    
    5,668NET INCOME FOR THE YEAR
    
    
    34,976
    
    
    
    39,274
    
    
    
    32,581ATTRIBUTABLE TO:Equity holders of PLDT (Note 7)
    
    
    34,317
    
    
    
    39,289
    
    
    
    32,385Minority interests
    
    
    659
    
    
    
    (15
    )
    
    
    19634,976
    
    
    
    39,274
    
    
    
    32,581Earnings Per Share For The Year Attributable to
Common Equity Holders of PLDT(Note 7)Basic
    
    
    179.96
    
    
    
    205.84
    
    
    
    173.10Diluted
    
    
    179.95
    
    
    
    204.88
    
    
    
    173.01
 See accompanying Notes to Consolidated Financial Statements.
  F-4




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 For the Years Ended December 31, 2008, 2007 and 2006
(in million pesos)
 TotalEquityStock
    
    
    Equity Portion
    
    
    Capital in
    
    
    
    
    
    
    Cumulative
    
    
    Attributable toPreferred
    
    
    Common
    
    
    Treasury
    
    
    Options
    
    
    of Convertible
    
    
    Excess of
    
    
    Retained
    
    
    Translation
    
    
    Equity Holders of
    
    
    Minority
    
    
    TotalStock
    
    
    Stock
    
    
    Stock
    
    
    Issued
    
    
    Preferred Stock
    
    
    Par Value
    
    
    Earnings
    
    
    Adjustments
    
    
    PLDT
    
    
    Interests
    
    
    EquityBalances at January 1, 2006
    
    
    4,433
    
    
    
    904
    
    
    
    
    
    
    
    67
    
    
    
    49
    
    
    
    53,918
    
    
    
    11,891
    
    
    
    504
    
    
    
    71,766
    
    
    
    1,162
    
    
    
    72,928Changes in equity:Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,385
    
    
    
    
    
    
    
    32,385
    
    
    
    196
    
    
    
    32,581Foreign currency translation differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (546
    )
    
    
    (546
    )
    
    
    (45
    )
    
    
    (591
    )Net gains on available-for-sale
financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    5Total expense for the year recognized
directly in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    (541
    )
    
    
    (45
    )
    
    
    (586
    )Total income and expense for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,385
    
    
    
    (541
    )
    
    
    31,844
    
    
    
    151
    
    
    
    31,995Cash dividends (Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,915
    )
    
    
    
    
    
    
    (14,915
    )
    
    
    
    
    
    
    (14,915
    )Issuance of capital stock 
net of conversion (Note 17)
    
    
    (9
    )
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    (40
    )
    
    
    12,567
    
    
    
    
    
    
    
    
    
    
    
    12,556
    
    
    
    
    
    
    
    12,556Exercised option shares (Note 23)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    62Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    227Balances at December 31, 2006
    
    
    4,424
    
    
    
    942
    
    
    
    
    
    
    
    40
    
    
    
    9
    
    
    
    66,574
    
    
    
    29,361
    
    
    
    (37
    )
    
    
    101,313
    
    
    
    1,540
    
    
    
    102,853Balances at January 1, 2007
    
    
    4,424
    
    
    
    942
    
    
    
    
    
    
    
    40
    
    
    
    9
    
    
    
    66,574
    
    
    
    29,361
    
    
    
    (37
    )
    
    
    101,313
    
    
    
    1,540
    
    
    
    102,853Changes in equity:Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,289
    
    
    
    
    
    
    
    39,289
    
    
    
    (15
    )
    
    
    39,274Deferred income tax effects on cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (256
    )
    
    
    (256
    )
    
    
    
    
    
    
    (256
    )Foreign currency translation differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,782
    )
    
    
    (1,782
    )
    
    
    (67
    )
    
    
    (1,849
    )Net gains on available-for-sale
financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    30
    
    
    
    
    
    
    
    30Net gains on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    662
    
    
    
    662
    
    
    
    
    
    
    
    662Total expense for the year recognized
directly in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,346
    )
    
    
    (1,346
    )
    
    
    (67
    )
    
    
    (1,413
    )Total income and expense for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,289
    
    
    
    (1,346
    )
    
    
    37,943
    
    
    
    (82
    )
    
    
    37,861Cash dividends (Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,756
    )
    
    
    
    
    
    
    (28,756
    )
    
    
    (12
    )
    
    
    (28,768
    )Issuance of capital stock 
net of conversion (Note 17)
    
    
    (7
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    
    
    
    
    370Exercised option shares (Note 23)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    73Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    (44
    )Balances at December 31, 2007
    
    
    4,417
    
    
    
    943
    
    
    
    
    
    
    
    9
    
    
    
    6
    
    
    
    67,057
    
    
    
    39,894
    
    
    
    (1,383
    )
    
    
    110,943
    
    
    
    1,402
    
    
    
    112,345Balances at January 1, 2008
    
    
    4,417
    
    
    
    943
    
    
    
    
    
    
    
    9
    
    
    
    6
    
    
    
    67,057
    
    
    
    39,894
    
    
    
    (1,383
    )
    
    
    110,943
    
    
    
    1,402
    
    
    
    112,345Changes in equity:Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,317
    
    
    
    
    
    
    
    34,317
    
    
    
    659
    
    
    
    34,976Deferred income tax effects on cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    251
    
    
    
    251
    
    
    
    
    
    
    
    251Foreign currency translation differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,425
    
    
    
    1,425
    
    
    
    65
    
    
    
    1,490Net losses on available-for-sale
financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Net losses on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (662
    )
    
    
    (662
    )
    
    
    
    
    
    
    (662
    )Total income for the year recognized
directly in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005
    
    
    
    1,005
    
    
    
    65
    
    
    
    1,070Total income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,317
    
    
    
    1,005
    
    
    
    35,322
    
    
    
    724
    
    
    
    36,046Cash dividends (Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,034
    )
    
    
    
    
    
    
    (37,034
    )
    
    
    (398
    )
    
    
    (37,432
    )Issuance of capital stock 
net of conversion (Note 17)
    
    
    (2
    )
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    1,270
    
    
    
    
    
    
    
    
    
    
    
    1,266
    
    
    
    
    
    
    
    1,266Exercised option shares (Note 23)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Treasury stock (Notes 7, 17 and 26)
    
    
    
    
    
    
    
    
    
    
    (4,973
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,973
    )
    
    
    (308
    )
    
    
    (5,281
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Balances at December 31, 2008
    
    
    4,415
    
    
    
    947
    
    
    
    (4,973
    )
    
    
    6
    
    
    
    
    
    
    
    68,337
    
    
    
    37,177
    
    
    
    (378
    )
    
    
    105,531
    
    
    
    1,438
    
    
    
    106,969
 See accompanying Notes to Consolidated Financial Statements.
  F-5




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##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, 2008, 2007 and 2006
(in million pesos)
 2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
    
    
    54,049
    
    
    
    58,081
    
    
    
    38,249Adjustments for:Depreciation and amortization (Notes 3, 4 and 8)
    
    
    24,709
    
    
    
    28,613
    
    
    
    31,869Foreign exchange losses (gains)  net (Notes 18 and 26)
    
    
    6,170
    
    
    
    (7,990
    )
    
    
    (4,821
    )Interest on loans and other related items  net (Note 5)
    
    
    5,083
    
    
    
    5,714
    
    
    
    7,359Asset impairment (Notes 3, 5, 14, 15 and 26)
    
    
    4,180
    
    
    
    1,317
    
    
    
    2,766Incentive plans (Notes 3, 5 and 23)
    
    
    1,281
    
    
    
    1,448
    
    
    
    3,150Accretion on financial liabilities  net (Notes 5 and 26)
    
    
    956
    
    
    
    1,161
    
    
    
    3,314Pension benefit costs (Notes 3, 5 and 23)
    
    
    725
    
    
    
    1,773
    
    
    
    1,003Amortization of intangible assets (Note 11)
    
    
    377
    
    
    
    390
    
    
    
    450Equity share in net losses of associates and joint ventures
    
    
    176
    
    
    
    11
    
    
    
    52Dividends on preferred stock subject to mandatory redemption (Note 5)
    
    
    4
    
    
    
    17
    
    
    
    130Gain on disposal of property, plant and equipment (Note 8)
    
    
    (534
    )
    
    
    (527
    )
    
    
    (158
    )Interest income (Note 5)
    
    
    (1,668
    )
    
    
    (1,503
    )
    
    
    (1,654
    )(Gains) losses on derivative financial instruments  net (Note 26)
    
    
    (3,115
    )
    
    
    2,849
    
    
    
    8,304Gain on reversal of provision for onerous contracts (Note 25)
    
    
    
    
    
    
    
    
    
    
    (3,529
    )Others
    
    
    830
    
    
    
    (1,242
    )
    
    
    (897
    )Operating income before changes in assets and liabilities
    
    
    93,223
    
    
    
    90,112
    
    
    
    85,587Decrease (increase) in:Trade and other receivables
    
    
    (3,003
    )
    
    
    (3,266
    )
    
    
    (1,187
    )Inventories and supplies
    
    
    (913
    )
    
    
    (76
    )
    
    
    343Prepayments
    
    
    (877
    )
    
    
    1,862
    
    
    
    (1,513
    )Advances and refundable deposits
    
    
    (1,338
    )
    
    
    (307
    )
    
    
    1,329Increase (decrease) in:Accounts payable
    
    
    5,244
    
    
    
    4,763
    
    
    
    (9,254
    )Accrued expenses and other current liabilities
    
    
    2,084
    
    
    
    3,558
    
    
    
    2,559Pension and other employee benefits
    
    
    (1,125
    )
    
    
    (6,649
    )
    
    
    (435
    )Customers deposits
    
    
    27
    
    
    
    12
    
    
    
    6Other noncurrent liabilities
    
    
    1
    
    
    
    (1,167
    )
    
    
    43Net cash generated from operations
    
    
    93,323
    
    
    
    88,842
    
    
    
    77,478Income taxes paid
    
    
    (15,021
    )
    
    
    (11,424
    )
    
    
    (8,267
    )Net cash provided by operating activities
    
    
    78,302
    
    
    
    77,418
    
    
    
    69,211CASH FLOWS FROM INVESTING ACTIVITIESProceeds from:Maturity of short-term investments
    
    
    28,476
    
    
    
    15,935
    
    
    
    658Redemption of investment in debt securities
    
    
    2,676
    
    
    
    
    
    
    
    Disposal of property, plant and equipment (Note 8)
    
    
    1,015
    
    
    
    953
    
    
    
    694Disposal of investment in associates
    
    
    187
    
    
    
    
    
    
    
    Disposal of investment properties
    
    
    9
    
    
    
    10
    
    
    
    72Disposal of available-for-sale financial assets
    
    
    
    
    
    
    7
    
    
    
    Collection of notes receivable
    
    
    
    
    
    
    
    
    
    
    89Payments for:Acquisition of intangibles (Note 11)
    
    
    (69
    )
    
    
    (213
    )
    
    
    Available-for-sale financial assets
    
    
    (206
    )
    
    
    
    
    
    
    Purchase of subsidiaries  net of cash acquired (Note 11)
    
    
    (375
    )
    
    
    (1,687
    )
    
    
    (10,254
    )Purchase of investments in associates
    
    
    (379
    )
    
    
    (601
    )
    
    
    (636
    )Purchase of investment in debt securities
    
    
    (3,457
    )
    
    
    (264
    )
    
    
    Interest received
    
    
    1,461
    
    
    
    1,218
    
    
    
    1,481Increase in advances and refundable deposits
    
    
    (77
    )
    
    
    (424
    )
    
    
    (1,054
    )Interest paid  capitalized to property, plant and equipment (Notes 5 and 8)
    
    
    (778
    )
    
    
    (542
    )
    
    
    (549
    )Additions to short-term investments
    
    
    (21,072
    )
    
    
    (21,429
    )
    
    
    (6,166
    )Additions to property, plant and equipment (Notes 5 and 8)
    
    
    (24,425
    )
    
    
    (24,282
    )
    
    
    (20,125
    )Net cash used in investing activities
    
    
    (17,014
    )
    
    
    (31,319
    )
    
    
    (35,790
    )
  F-6




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##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS ( continued )
For the Years Ended December 31, 2008, 2007 and 2006
(in million pesos)
 2008
    
    
    2007
    
    
    2006CASH FLOWS FROM FINANCING ACTIVITIESProceeds from availment of long-term debt (Note 18)
    
    
    17,912
    
    
    
    7,647
    
    
    
    9,724Additional capital expenditures under long-term financing
    
    
    6,614
    
    
    
    8,746
    
    
    
    9,159Proceeds from notes payable
    
    
    660
    
    
    
    502
    
    
    
    211Proceeds from issuance of capital stock
    
    
    8
    
    
    
    76
    
    
    
    66Payments of debt issuance costs
    
    
    (149
    )
    
    
    (54
    )
    
    
    (34
    )Payments of obligations under finance lease
    
    
    (474
    )
    
    
    (199
    )
    
    
    (210
    )Payments of notes payable
    
    
    (678
    )
    
    
    (193
    )
    
    
    (128
    )Settlements of derivative financial instruments
    
    
    (2,891
    )
    
    
    (2,066
    )
    
    
    (3,727
    )Interest paid  net of capitalized portion
    
    
    (5,167
    )
    
    
    (5,891
    )
    
    
    (7,528
    )Payments for redemption of shares (Notes 7, 17 and 26)
    
    
    (5,281
    )
    
    
    (15
    )
    
    
    Reduction in capital expenditures under long-term financing
    
    
    (5,519
    )
    
    
    (6,837
    )
    
    
    (9,282
    )Payments of long-term debt (Note 18)
    
    
    (13,375
    )
    
    
    (18,065
    )
    
    
    (29,238
    )Cash dividends paid
    
    
    (37,124
    )
    
    
    (28,470
    )
    
    
    (14,913
    )Net cash used in financing activities
    
    
    (45,464
    )
    
    
    (44,819
    )
    
    
    (45,900
    )EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
    
    
    413
    
    
    
    (703
    )
    
    
    (710
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    16,237
    
    
    
    577
    
    
    
    (13,189
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    17,447
    
    
    
    16,870
    
    
    
    30,059CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    
    33,684
    
    
    
    17,447
    
    
    
    16,870
 See accompanying Notes to Consolidated Financial Statements.
  F-7




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##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Corporate Information
        F-8




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##### Table of Contents



2.
    
    Summary of Significant Accounting Policies and Practices
 Basis of Preparation
   Basis of Consolidated Financial Statements Preparation
  2008
    
    
    2007Place of
    
    
    
    Percentage of OwnershipName of Subsidiary
    
    Incorporation
    
    Principal Activity
    
    Direct
    
    
    Indirect
    
    
    Direct
    
    
    IndirectWirelessSmart
    
    Philippines
    
    Cellular mobile services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    Smart Broadband, Inc., or SBI
    
    Philippines
    
    Internet broadband distribution
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0SmartConnect Holdings Pte. Ltd., or SCH
    
    Singapore
    
    Investment company
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0IContacts Corporation, or
IContacts
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Wolfpac Mobile, Inc., or Wolfpac
    
    Philippines
    
    Mobile applications development and services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0SmartConnect Global Pte. Ltd., or SGP
    
    Singapore
    
    International trade of satellites and Global System for Mobile Communication, or GSM, enabled global telecommunications
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Wireless Card, Inc., or WCI
    
    Philippines
    
    Promotion of the sale and/or patronage of debit and/or charge cards
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Smarthub, Incorporated, or SHI
    
    Philippines
    
    Development and sale of software, maintenance and support services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Smart Money Holdings Corporation
    
    Cayman Islands
    
    Investment company
    
    
    
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00Smart Money, Inc.
    
    Cayman Islands
    
    Mobile commerce solutions marketing
    
    
    
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00Telecoms Solutions, Inc.
    
    Mauritius
    
    Mobile commerce platforms
    
    
    
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00Far East Capital Limited
    
    Cayman Islands
    
    Cost effective offshore financing and risk management activities for Smart
    
    
    
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00PH Communications Holdings Corporation, or PHC
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    Francom Holdings, Inc., or FHI
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    Connectivity Unlimited Resource Enterprise, or CURE
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    Airborne Access Corporation, or Airborne Access
    
    Philippines
    
    Wireless Internet services
    
    
    
    
    
    
    99.4
    
    
    
    
    
    
    
    Pilipino Telephone Corporation, or Piltel
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    92.5
    
    
    
    
    
    
    
    92.13rd Brand Pte. Ltd., or
3rd Brand
    
    Singapore
    
    Solutions and systems integration services
    
    
    
    
    
    
    85.0
    
    
    
    
    
    
    
    85.0Telesat, Inc., or Telesat
    
    Philippines
    
    Satellite communications services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    ACeS Philippines Cellular Satellite
Corporation, or ACeS Philippines
    
    Philippines
    
    Satellite information and messaging services
    
    
    88.5
    
    
    
    11.5
    
    
    
    88.5
    
    
    
    11.5Mabuhay Satellite Corporation,
or Mabuhay Satellite
    
    Philippines
    
    Satellite communications services
    
    
    67.0
    
    
    
    
    
    
    
    67.0
    
    
    
    Fixed LinePLDT Clark Telecom, Inc.,
or ClarkTel
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    PLDT Subic Telecom, Inc.,
or SubicTel
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    PLDT Global Corporation,
or PLDT Global
    
    British Virgin Islands
    
    Telecommunications services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    SmartNTT Multimedia, Inc.,
or SNMI
    
    Philippines
    
    Data and network services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    PLDTMaratel, Inc., or Maratel
    
    Philippines
    
    Telecommunications services
    
    
    97.5
    
    
    
    
    
    
    
    97.5
    
    
    
    Bonifacio Communications Corporation, or BCC
    
    Philippines
    
    Telecommunications, infrastructure and related valueadded services
    
    
    75.0
    
    
    
    
    
    
    
    75.0
    
    
    
    Information and Communications Technology, or ICTePLDT, Inc., or ePLDT
    
    Philippines
    
    Information and communications infrastructure for Internetbased services, ecommerce, customer interaction solutions and ITrelated
services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    SPi Technologies, Inc.,
or SPi, and Subsidiaries,
or SPi Group
    
    Philippines
    
    Knowledge processing solutions
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0ePLDT Ventus, Inc., or Ventus
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Vocativ Systems, Inc.,
or Vocativ
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Parlance Systems, Inc.,
or Parlance
    
    Philippines
    
    Customer interaction solutions
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Infocom Technologies, Inc.,
or Infocom
    
    Philippines
    
    Internet access services
    
    
    
    
    
    
    99.6
    
    
    
    
    
    
    
    99.6Digital Paradise Thailand, or DigiPar Thailand
    
    Thailand
    
    Internet access services
    
    
    
    
    
    
    87.5
    
    
    
    
    
    
    
    87.5netGames, Inc., or netGames
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    80.0
    
    
    
    
    
    
    
    80.0Digital Paradise, Inc., or
Digital Paradise
    
    Philippines
    
    Internet access services
    
    
    
    
    
    
    75.0
    
    
    
    
    
    
    
    75.0Level Up! (Philippines), Inc.,
or Level Up!
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    60.0
    
    
    
    
    
    
    
    60.0Airborne Access Corporation, or Airborne Access
    
    Philippines
    
    Wireless Internet services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51.0
  F-9




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##### Table of Contents



Piltels Share Buyback Program
   F-10




---



##### Table of Contents



Acquisition of Airborne Access by SBI from ePLDT
 Note 11  Goodwill and Intangible Assets
  Acquisition of PHC, FHI and CURE
 Note 11  Goodwill and Intangible Assets
 Acquisition of Debt and Equity of Philcom Corporation, or Philcom
  Note 11  Goodwill and Intangible Assets
  Contemplated Consolidation of Cellular Business under Smart
 Talk N Text Talk N Text
  F-11




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##### Table of Contents



Statement of Compliance
   Adoption of New Standards and Interpretations
  
    
    IFRIC 11, IFRS 2, Group and Treasury Share Transactions.This standard has become
effective for annual periods beginning on or after March 1, 2007. This interpretation
addresses issues relating to whether transactions should be accounted for as
equity-settled or as cash-settled under IFRS 2and issues concerning share-based
payment arrangement involving entities within the same group.
 
    
    IFRIC 12, Service Concession Arrangements.This interpretation has become effective
for financial years beginning on or after January 1, 2008. This interpretation applies
to contractual arrangements whereby a private sector party participates in the
development, financing, operation and maintenance of infrastructure for public sector
services.
 
    
    IFRIC 14, IAS 19  The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.This interpretation has become effective for
financial years beginning on or after January 1, 2008. IFRIC 14addresses how to
assess the limit under IAS 19, Employee Benefits, on the amount of the pension scheme
surplus that can be recognized as an asset in our consolidated balance sheet, in
particular, when a minimum funding requirement exists. The specific issues addressed
by the interpretation are:
  
    
    Amendments to IAS 39, Financial Instruments: Recognition and Measurement,andIFRS
7, Financial Instruments: Disclosures: Reclassification of Financial Assets.The
amendments to IAS 39are effective from July 1, 2008. Entities are not permitted to
reclassify financial assets in accordance with the amendments before July 1, 2008. Any
reclassification of a financial asset made in periods beginning on or after November
15, 2008 will take effect only from the date the reclassification is made. The
amendments to IAS 39permit an entity to: (1) reclassify non-derivative financial
assets (other than those designated at fair value through profit or loss by the entity
upon initial recognition) out of the fair value through profit or loss category if the
financial asset is no longer held for the purpose of selling or repurchasing it in the
near term in particular circumstances; and (2) transfer from the available-for-sale
category to the loans and receivables category a financial asset that would have met
the definition of loans and receivables (if the financial asset had not been designated
as available-for-sale), if the entity has the intention and ability to hold that
financial asset for the foreseeable future.
  F-12




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##### Table of Contents



Significant Accounting Policies and Practices
 Business Combinations and Goodwill
  IAS 14, Segment
Reporting
    Investments in Associates
      F-13




---



##### Table of Contents



Investments in Joint Ventures
   Foreign Currency Transactions and Translations
    Financial Assets
 Initial recognition
     F-14




---



##### Table of Contents



Subsequent measurement
  Financial assets at fair value through profit or loss
    Loans and receivables
  Held-to-maturity investments
   F-15




---



##### Table of Contents



Available-for-sale financial assets
  Financial Liabilities
 Initial recognition
    Subsequent measurement
  Financial liabilities at fair value through profit or loss
    Loans and borrowings
   Offsetting of financial instruments
   F-16




---



##### Table of Contents



Fair value of financial instruments
  Amortized cost of financial instruments
  Day 1 profit or loss
  Impairment of Financial Assets
  Financial assets carried at amortized costs
    F-17




---



##### Table of Contents



Available-for-sale financial assets
    Derecognition of Financial Assets and Liabilities
 Financial assets
      F-18




---



##### Table of Contents



Financial liabilities
   Derivative Financial Instruments and Hedging
 Initial recognition and subsequent measurement
   Note 26  Financial Assets and Liabilities
    Fair value hedges
   F-19




---



##### Table of Contents



Cash flow hedges
    Hedges of a net investment
  Convertible Preferred Stock
 Philippine peso-denominated
     F-20




---



##### Table of Contents



Foreign currency-denominated
  Treasury Stock
  Property, Plant and Equipment
      Borrowing Costs
   Asset Retirement Obligations
   F-21




---



##### Table of Contents



Investment Properties
     Intangible Assets
       F-22




---



##### Table of Contents



Inventories and Supplies
   Research and Development Costs
   Impairment of Non-Financial Assets
 Property, plant and equipment
    Goodwill
   F-23




---



##### Table of Contents



Intangible assets
  Investments in associates
  Cash and Cash Equivalents
  Short-term Investments
  Trade and Other Receivables
     F-24




---



##### Table of Contents



Revenue Recognition
  Service Revenues
 Subscriptions
  Air time, traffic and value-added services
  Knowledge processing solutions
  Incentives
  Non-service Revenues
 Handset and equipment sales
  Interest income
   F-25




---



##### Table of Contents



Provisions
  Retirement Benefits
 Defined benefit pension plans
   Defined contribution plans
  Share-Based Payment Transactions
  Equity-settled transactions
 Note 23  Share-based
Payments and Employee Benefits
   F-26




---



##### Table of Contents



Note 7  Earnings Per Common Share
 Cash-settled transactions
  Leases
      F-27




---



##### Table of Contents



Income Taxes
 Current income tax
  Deferred income tax
        Contingencies
   F-28




---



##### Table of Contents



Events After the Balance Sheet Date
  New Accounting Standards, Interpretations, and Amendments to Existing Standards Effective
Subsequent to December 31, 2008
  Effective in 2009
 IFRS 2, Share-based Payment  Vesting Condition and Cancellations.
 Amendments to IFRS 7. IFRS 7 IFRS 7
 IFRS 7
 IFRS 8, Operating Segments. IFRS 8 IAS 14
 Amendments to IAS 1, Presentation of Financial Statements.
  F-29




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##### Table of Contents



IAS 23, Borrowing Costs.
 Amendments to IAS 27, Consolidated and Separate Financial Statements  Cost of an Investment in
a Subsidiary, Jointly Controlled Entity or Associate.
 Amendment to IAS 32, Financial Instruments: Presentation and IAS 1, Presentation of Financial
Statements  Puttable Financial Instruments and Obligations Arising on Liquidation.
 IFRIC 13, Customer Loyalty Programmes.
 IFRIC 15, Agreement for Construction of Real Estate. IAS 11 Construction Contracts
 IFRIC 16, Hedges of a Net Investment in a Foreign Operation.
 Improvements to IFRSs
   F-30




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##### Table of Contents



IFRS 5, Non-current Assets Held-for-Sale and Discontinued Operations. IFRS
5
 IAS 1, Presentation of Financial Statements.
 IAS 16 , Property, Plant and Equipment. IFRS 5 IAS 36, Impairment of Asset
 IAS 19, Employee Benefits. IAS 37, Provisions, Contingent Liabilities and Contingent Assets
 IAS 23, Borrowing Costs.
 IAS 28, Investment in Associates. IAS 39 IAS 28
 IAS 31, Interest in Joint Ventures. IAS 39 IAS 31
 IAS 36, Impairment of Assets.
 IAS 38, Intangible Assets.
 IAS 39, Financial Instruments: Recognition and Measurement. IFRS 4, Insurance Contracts
  F-31




---



##### Table of Contents



IAS 40, Investment Properties. IAS 16
 Effective in 2010
 Revised IFRS 3, Business Combinations and IAS 27, Consolidated and Separate Financial
Statements. IFRS 3 IAS 27 IFRS 3 IAS 27 IFRS 3 and IAS
27
 Amendment to IAS 39, Financial Instruments: Recognition and Measurement  Eligible Hedged Items. IAS 39
 IFRIC 17, Distributions of Non-Cash Assets to Owners.
 IFRIC 18, Transfers of Assets from Customers. IFRIC 18
  F-32




---



##### Table of Contents



3. Managements Use of Judgments, Estimates and Assumptions
  Judgments
  Determination of functional currency
   Leases
 IAS 17 Leases Note 18  Interest-bearing Financial
Liabilities, Note 24  Contractual Obligations and Commercial Commitments Note 26 -
Financial Assets and Liabilities
 Legal contingencies
 Note 25  Provisions and Contingencies.
 Estimates and Assumptions
  Estimating useful lives of property, plant and equipment
  Note 8  Property, Plant and Equipment Note 26  Financial Assets
and Liabilities
  F-33




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##### Table of Contents



Determining the fair value of investment properties
  Note 10  Investment Properties
 Goodwill and intangible assets
 Note 11  Goodwill and Intangible Assets
 Note 11  Goodwill and
Intangible Assets Note 26  Financial Assets and Liabilities
 Realizability of deferred income tax assets
  Note 4  Segment Information Note 6  Income Tax Note 26  Financial Assets and Liabilities
 Estimating allowance for doubtful accounts
   F-34




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##### Table of Contents



Note 5  Income and Expenses, Note 14  Trade and Other Receivables Note
26  Financial Assets and Liabilities
 Estimating net realizable value of inventories and supplies
  Note 5  Income and Expenses Note 15 
Inventories and Supplies
 Estimation of pension benefit costs and other retirement benefits
 Note 23  Share-based Payments and Employee Benefits
 Note 5 
Income and Expenses Note 23  Share-based Payments and Employee Benefits
 Share-based payment transactions
 Note 23  Share-based Payments and Employee Benefits Note 5  Income
and Expenses Note 23  Share-based Payments and Employee Benefits
  F-35




---



##### Table of Contents



Asset retirement obligations
 Note 8  Property, Plant and
Equipment Note 19  Deferred Credits and Other Noncurrent Liablities
 Asset impairment
   Note 4  Segment Information, Note Income and Expenses Note 11  Goodwill and Intangible Assets
 Notes 8, 9, 11, 14 15
 Revenue recognition
   F-36




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##### Table of Contents



Determination of fair values of financial assets and liabilities
 Note 26  Financial Assets and Liabilities
 Note 26  Financial Assets and Liabilities
 4. Segment Information
 Note 2  Summary of Significant Accounting Policies and Practices
  
    
    Wireless  wireless telecommunications services provided through our cellular service
providers namely, Smart, Piltel, and CURE, SBI and Airborne Access, our wireless broadband
providers, Wolfpac, our wireless content operator, and Mabuhay Satellite and ACeS
Philippines, our wireless broadband satellite and other service operators;
    
    Fixed Line  fixed line telecommunications services primarily provided through PLDT. We
also provide fixed line services through PLDTs subsidiaries ClarkTel, SubicTel, Maratel,
Piltel (on June 4, 2008, PLDT acquired the fixed line assets of Piltel), BCC and PLDT
Global, all of which account for approximately 2% of our consolidated fixed line
subscribers; and
  F-37




---



##### Table of Contents




    
    ICT  information and communications infrastructure and services for internet
applications, internet protocol-based solutions and multimedia content delivery provided by
ePLDT; customer interaction solutions (formerly referred to as call center business)
provided under the umbrella brand name ePLDT Ventus, including Ventus, Parlance and
Vocativ; knowledge processing solutions services (formerly referred to as business process
outsourcing) provided by the SPi Group; and internet access and online gaming services
provided by ePLDTs subsidiaries Infocom, Digital Paradise, netGames and Level Up!.
    Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Total(in million pesos)As at and for the year ended December 31, 2008RevenuesService revenues
    
    
    93,593
    
    
    
    49,266
    
    
    
    10,417
    
    
    
    (10,403
    )
    
    
    142,873External party
    
    
    93,106
    
    
    
    40,316
    
    
    
    9,451
    
    
    
    
    
    
    
    142,873Inter-segment transactions
    
    
    487
    
    
    
    8,950
    
    
    
    966
    
    
    
    (10,403
    )
    
    
    Non-service revenues (Note 5)
    
    
    2,259
    
    
    
    420
    
    
    
    566
    
    
    
    (281
    )
    
    
    2,964External party
    
    
    2,259
    
    
    
    420
    
    
    
    285
    
    
    
    
    
    
    
    2,964Inter-segment transactions
    
    
    
    
    
    
    
    
    
    
    281
    
    
    
    (281
    )
    
    
    Segment income
    
    
    95,852
    
    
    
    49,686
    
    
    
    10,983
    
    
    
    (10,684
    )
    
    
    145,837ResultIncome (loss) before income tax
    
    
    45,623
    
    
    
    10,780
    
    
    
    (2,285
    )
    
    
    (69
    )
    
    
    54,049Provision for (benefit from) income tax (Note 6)
    
    
    16,124
    
    
    
    3,048
    
    
    
    (99
    )
    
    
    
    
    
    
    19,073Net income for the year
    
    
    29,499
    
    
    
    7,732
    
    
    
    (2,186
    )
    
    
    (69
    )
    
    
    34,976Assets and liabilitiesSegment assets
    
    
    112,162
    
    
    
    189,377
    
    
    
    15,963
    
    
    
    (75,723
    )
    
    
    241,779Investments in associates and joint ventures (Note 9)
    
    
    531
    
    
    
    
    
    
    
    643
    
    
    
    
    
    
    
    1,174Deferred income tax assets (Note 6)
    
    
    251
    
    
    
    9,131
    
    
    
    223
    
    
    
    
    
    
    
    9,605Total assets
    
    
    112,944
    
    
    
    198,508
    
    
    
    16,829
    
    
    
    (75,723
    )
    
    
    252,558Segment liabilities
    
    
    67,656
    
    
    
    89,636
    
    
    
    4,222
    
    
    
    (17,213
    )
    
    
    144,301Deferred income tax liabilities (Note 6)
    
    
    911
    
    
    
    
    
    
    
    377
    
    
    
    
    
    
    
    1,288Total liabilities
    
    
    68,567
    
    
    
    89,636
    
    
    
    4,599
    
    
    
    (17,213
    )
    
    
    145,589Cash flowsNet cash provided by (used in):Operating activities
    
    
    42,780
    
    
    
    33,794
    
    
    
    1,752
    
    
    
    (24
    )
    
    
    78,302Investing activities
    
    
    (10,381
    )
    
    
    18,882
    
    
    
    (1,290
    )
    
    
    (24,225
    )
    
    
    (17,014
    )Financing activities
    
    
    (21,688
    )
    
    
    (47,937
    )
    
    
    (88
    )
    
    
    24,249
    
    
    
    (45,464
    )Other segment informationCapital expenditures
    
    
    16,728
    
    
    
    7,651
    
    
    
    824
    
    
    
    
    
    
    
    25,203Depreciation and amortization (Note 8)
    
    
    11,975
    
    
    
    11,901
    
    
    
    833
    
    
    
    
    
    
    
    24,709Interest on loans and other related items  net (Note 5)
    
    
    1,248
    
    
    
    3,802
    
    
    
    33
    
    
    
    
    
    
    
    5,083Provisions
    
    
    897
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    898Asset impairment (Notes 5, 8, 9, 11, 13, 14 and 15)
    
    
    1,006
    
    
    
    888
    
    
    
    2,286
    
    
    
    
    
    
    
    4,180Equity share in net losses (gains) of associates and joint ventures
(Note 9)
    
    
    119
    
    
    
    74
    
    
    
    (17
    )
    
    
    
    
    
    
    176As at and for the year ended December 31, 2007RevenuesService revenues
    
    
    86,499
    
    
    
    48,551
    
    
    
    10,055
    
    
    
    (9,627
    )
    
    
    135,478External party
    
    
    86,067
    
    
    
    39,836
    
    
    
    9,575
    
    
    
    
    
    
    
    135,478Inter-segment transactions
    
    
    432
    
    
    
    8,715
    
    
    
    480
    
    
    
    (9,627
    )
    
    
    
  F-38




---



##### Table of Contents



Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Total(in million pesos)Non-service revenues (Note 5)
    
    
    2,800
    
    
    
    281
    
    
    
    267
    
    
    
    (122
    )
    
    
    3,226External party
    
    
    2,800
    
    
    
    281
    
    
    
    145
    
    
    
    
    
    
    
    3,226Inter-segment transactions
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    (122
    )
    
    
    Segment income
    
    
    89,299
    
    
    
    48,832
    
    
    
    10,322
    
    
    
    (9,749
    )
    
    
    138,704ResultIncome (loss) before income tax
    
    
    47,346
    
    
    
    10,877
    
    
    
    (211
    )
    
    
    69
    
    
    
    58,081Provision for (benefit from) income tax (Note 6)
    
    
    15,566
    
    
    
    3,358
    
    
    
    (117
    )
    
    
    
    
    
    
    18,807Net income for the year
    
    
    31,780
    
    
    
    7,519
    
    
    
    (94
    )
    
    
    69
    
    
    
    39,274Assets and liabilitiesSegment assets
    
    
    89,984
    
    
    
    180,529
    
    
    
    17,663
    
    
    
    (63,126
    )
    
    
    225,050Investments in associates and joint ventures (Note 9)
    
    
    724
    
    
    
    
    
    
    
    627
    
    
    
    
    
    
    
    1,351Deferred income tax assets (Note 6)
    
    
    1,640
    
    
    
    12,040
    
    
    
    77
    
    
    
    
    
    
    
    13,757Total assets
    
    
    92,348
    
    
    
    192,569
    
    
    
    18,367
    
    
    
    (63,126
    )
    
    
    240,158Segment liabilities
    
    
    50,828
    
    
    
    78,323
    
    
    
    5,697
    
    
    
    (9,101
    )
    
    
    125,747Deferred income tax liabilities (Note 6)
    
    
    1,571
    
    
    
    
    
    
    
    495
    
    
    
    
    
    
    
    2,066Total liabilities
    
    
    52,399
    
    
    
    78,323
    
    
    
    6,192
    
    
    
    (9,101
    )
    
    
    127,813Cash flowsNet cash provided by (used in):Operating activities
    
    
    49,616
    
    
    
    25,274
    
    
    
    2,529
    
    
    
    (1
    )
    
    
    77,418Investing activities
    
    
    (19,915
    )
    
    
    26,092
    
    
    
    (2,687
    )
    
    
    (34,809
    )
    
    
    (31,319
    )Financing activities
    
    
    (34,635
    )
    
    
    (45,385
    )
    
    
    391
    
    
    
    34,810
    
    
    
    (44,819
    )Other segment informationCapital expenditures
    
    
    14,259
    
    
    
    9,886
    
    
    
    679
    
    
    
    
    
    
    
    24,824Depreciation and amortization (Note 8)
    
    
    12,202
    
    
    
    15,477
    
    
    
    934
    
    
    
    
    
    
    
    28,613Interest on loans and other related items  net (Note 5)
    
    
    1,393
    
    
    
    4,288
    
    
    
    33
    
    
    
    
    
    
    
    5,714Provisions
    
    
    
    
    
    
    666
    
    
    
    
    
    
    
    
    
    
    
    666Asset impairment (Notes 5, 8, 9, 11, 13, 14 and 15)
    
    
    563
    
    
    
    43
    
    
    
    711
    
    
    
    
    
    
    
    1,317Equity share in net losses of associates and joint ventures (Note 9)
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11As at and for the year ended December 31, 2006RevenuesService revenues
    
    
    78,395
    
    
    
    49,176
    
    
    
    6,337
    
    
    
    (8,920
    )
    
    
    124,988External party
    
    
    77,832
    
    
    
    41,300
    
    
    
    5,856
    
    
    
    
    
    
    
    124,988Inter-segment transactions
    
    
    563
    
    
    
    7,876
    
    
    
    481
    
    
    
    (8,920
    )
    
    
    Non-service revenues (Note 5)
    
    
    2,010
    
    
    
    79
    
    
    
    553
    
    
    
    (122
    )
    
    
    2,520External party
    
    
    2,010
    
    
    
    79
    
    
    
    431
    
    
    
    
    
    
    
    2,520Inter-segment transactions
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    (122
    )
    
    
    Segment income
    
    
    80,405
    
    
    
    49,255
    
    
    
    6,890
    
    
    
    (9,042
    )
    
    
    127,508ResultIncome (loss) before income tax
    
    
    36,471
    
    
    
    2,127
    
    
    
    (349
    )
    
    
    
    
    
    
    38,249Provision for (benefit from) income tax (Note 6)
    
    
    6,344
    
    
    
    (639
    )
    
    
    (37
    )
    
    
    
    
    
    
    5,668Net income for the year
    
    
    30,127
    
    
    
    2,766
    
    
    
    (312
    )
    
    
    
    
    
    
    32,581Assets and liabilitiesSegment assets
    
    
    86,037
    
    
    
    182,887
    
    
    
    16,795
    
    
    
    (64,989
    )
    
    
    220,730Investments in associates and joint ventures (Note 9)
    
    
    
    
    
    
    
    
    
    
    636
    
    
    
    
    
    
    
    636Deferred income tax assets (Note 6)
    
    
    5,645
    
    
    
    14,834
    
    
    
    59
    
    
    
    
    
    
    
    20,538Total assets
    
    
    91,682
    
    
    
    197,721
    
    
    
    17,490
    
    
    
    (64,989
    )
    
    
    241,904Segment liabilities
    
    
    49,751
    
    
    
    91,874
    
    
    
    3,396
    
    
    
    (6,372
    )
    
    
    138,649Deferred income tax liabilities (Note 6)
    
    
    6
    
    
    
    
    
    
    
    396
    
    
    
    
    
    
    
    402Total liabilities
    
    
    49,757
    
    
    
    91,874
    
    
    
    3,792
    
    
    
    (6,372
    )
    
    
    139,051Cash flowsNet cash provided by (used in):Operating activities
    
    
    37,285
    
    
    
    30,425
    
    
    
    1,501
    
    
    
    
    
    
    
    69,211Investing activities
    
    
    (15,855
    )
    
    
    7,051
    
    
    
    (11,708
    )
    
    
    (15,278
    )
    
    
    (35,790
    )Financing activities
    
    
    (30,438
    )
    
    
    (41,264
    )
    
    
    10,524
    
    
    
    15,278
    
    
    
    (45,900
    )
  F-39




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##### Table of Contents



Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Total(in million pesos)Other segment informationCapital expenditures
    
    
    10,490
    
    
    
    9,052
    
    
    
    1,132
    
    
    
    
    
    
    
    20,674Depreciation and amortization (Note 8)
    
    
    10,752
    
    
    
    20,406
    
    
    
    711
    
    
    
    
    
    
    
    31,869Interest on loans and other related items  net (Note 5)
    
    
    1,386
    
    
    
    5,953
    
    
    
    20
    
    
    
    
    
    
    
    7,359Provisions
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    38Asset impairment (Notes 5, 8, 9, 11, 13, 14 and 15)
    
    
    2,220
    
    
    
    54
    
    
    
    492
    
    
    
    
    
    
    
    2,766Equity share in net losses of associates and joint ventures (Note 9)
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    52
 5.
    
    Income and Expenses
 Non-service Revenues
 2008
    
    
    2007
    
    
    2006(in million pesos)Sale of computers, cellular handsets and cellular SIM-packs
    
    
    2,679
    
    
    
    3,081
    
    
    
    2,089Point-product-sales
    
    
    285
    
    
    
    145
    
    
    
    4312,964
    
    
    
    3,226
    
    
    
    2,520
 Compensation and Employee Benefits
 2008
    
    
    2007
    
    
    2006(in million pesos)Salaries and other employee benefits
    
    
    18,286
    
    
    
    16,645
    
    
    
    13,761Incentive plans (Notes 3 and 23)
    
    
    1,281
    
    
    
    1,448
    
    
    
    3,150Pension benefit costs (Notes 3 and 23)
    
    
    725
    
    
    
    1,773
    
    
    
    1,003Manpower rightsizing program, or MRP
    
    
    417
    
    
    
    604
    
    
    
    44520,709
    
    
    
    20,470
    
    
    
    18,359
   F-40




---



##### Table of Contents



Cost of Sales
 2008
    
    
    2007
    
    
    2006(in million pesos)Cost of computers, cellular handsets and cellular SIM-packs sold
    
    
    4,573
    
    
    
    4,713
    
    
    
    4,851Cost of point-product-sales
    
    
    511
    
    
    
    254
    
    
    
    575Cost of satellite air time and terminal units (Notes 22 and 24)
    
    
    168
    
    
    
    160
    
    
    
    1995,252
    
    
    
    5,127
    
    
    
    5,625
 Asset Impairment
 2008
    
    
    2007
    
    
    2006(in million pesos)Goodwill and intangible assets (Note 11)
    
    
    2,450
    
    
    
    1,244
    
    
    
    50Trade and other receivables (Notes 3 and 14)
    
    
    1,079
    
    
    
    417
    
    
    
    736Investments in associates and joint ventures (Note 9)
    
    
    282
    
    
    
    
    
    
    
    Inventories and supplies (Notes 3 and 15)
    
    
    242
    
    
    
    243
    
    
    
    211Property, plant and equipment (Note 8)
    
    
    104
    
    
    
    
    
    
    
    1,402Reversal of impairment in investment in debt
securities (Notes 9 and 13)
    
    
    
    
    
    
    (616
    )
    
    
    Notes receivable
    
    
    
    
    
    
    
    
    
    
    346Other assets
    
    
    23
    
    
    
    29
    
    
    
    214,180
    
    
    
    1,317
    
    
    
    2,766
 Interest Income
 2008
    
    
    2007
    
    
    2006(in million pesos)Interest income on other loans and receivables
    
    
    1,545
    
    
    
    1,270
    
    
    
    1,404Interest income on assets held-to-maturity (Note 13)
    
    
    65
    
    
    
    9
    
    
    
    Interest income on fair value through profit or loss (Note 13)
    
    
    58
    
    
    
    224
    
    
    
    2501,668
    
    
    
    1,503
    
    
    
    1,654
 Financing Costs  net
 2008
    
    
    2007
    
    
    2006(in million pesos)Interest on loans and other related items (Notes 18 and 26)
    
    
    5,861
    
    
    
    6,256
    
    
    
    7,908Accretion on financial liabilities  net (Notes 18 and 26)
    
    
    956
    
    
    
    1,161
    
    
    
    3,314Financing charges (Note 26)
    
    
    61
    
    
    
    196
    
    
    
    51Dividends on preferred stock subject to mandatory redemption
(Notes 7 and 18)
    
    
    4
    
    
    
    17
    
    
    
    130Capitalized interest (Note 8)
    
    
    (778
    )
    
    
    (542
    )
    
    
    (549
    )6,104
    
    
    
    7,088
    
    
    
    10,854
  Other Income
 2008
    
    
    2007
    
    
    2006(in million pesos)Gain on disposal of property, plant and equipment (Note 8)
    
    
    534
    
    
    
    527
    
    
    
    158Gain on reversal of provision for onerous contracts (Notes 22 and 24)
    
    
    
    
    
    
    
    
    
    
    3,529Miscellaneous income
    
    
    1,131
    
    
    
    2,892
    
    
    
    1,7921,665
    
    
    
    3,419
    
    
    
    5,479
  F-41




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##### Table of Contents



6.
    
    Income Tax
  2008
    
    
    2007(in million pesos)Net assets
    
    
    9,605
    
    
    
    13,757Net liabilities
    
    
    (1,288
    )
    
    
    (2,066
    )
  2008
    
    
    2007(in million pesos)Net assets:Unearned revenues
    
    
    4,389
    
    
    
    1,789Accumulated provision for doubtful accounts
    
    
    3,005
    
    
    
    3,428Unrealized foreign exchange losses
    
    
    2,088
    
    
    
    544Pension and other employee benefits
    
    
    1,147
    
    
    
    1,096Unamortized past service pension costs
    
    
    959
    
    
    
    985MCIT
    
    
    770
    
    
    
    645Derivative financial instruments
    
    
    540
    
    
    
    2,308Provisions for impaired assets
    
    
    533
    
    
    
    494Accumulated write-down of inventories to net realizable values
    
    
    270
    
    
    
    224Net operating loss carryover, or NOLCO
    
    
    22
    
    
    
    6,055Capitalized taxes and duties  net of amortization
    
    
    (306
    )
    
    
    (376
    )Capitalized foreign exchange differential
    
    
    (627
    )
    
    
    (783
    )Undepreciated capitalized interest charges
    
    
    (3,230
    )
    
    
    (3,572
    )Fixed asset impairment
    
    
    
    
    
    
    824Others
    
    
    45
    
    
    
    969,605
    
    
    
    13,757Net liabilities:Unearned revenues
    
    
    898
    
    
    
    914Pension and other employee benefits
    
    
    384
    
    
    
    217Asset retirement obligation  net of undepreciated capitalized asset
    
    
    329
    
    
    
    332Accumulated provision for doubtful accounts
    
    
    223
    
    
    
    304Provisions for impaired assets
    
    
    210
    
    
    
    348Intangible assets and fair value adjustments on assets acquired
    
    
    (616
    )
    
    
    (736
    )Undepreciated capitalized interest charges
    
    
    (679
    )
    
    
    (718
    )Unrealized foreign exchange gains
    
    
    (782
    )
    
    
    (1,613
    )Gain on debt exchange and debt restructuring transactions
    
    
    (1,197
    )
    
    
    (1,228
    )Others
    
    
    (58
    )
    
    
    114(1,288
    )
    
    
    (2,066
    )
  2008
    
    
    2007
    
    
    2006(in million pesos)Current
    
    
    16,358
    
    
    
    10,776
    
    
    
    10,035Deferred
    
    
    2,715
    
    
    
    8,031
    
    
    
    (4,367
    )19,073
    
    
    
    18,807
    
    
    
    5,668
  F-42




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006(in million pesos)Provision for income tax at the applicable statutory tax rates
    
    
    18,917
    
    
    
    20,328
    
    
    
    13,387Tax effects of:Loss (income) subject to lower tax rate
    
    
    1,408
    
    
    
    (1,752
    )
    
    
    326Non-deductible expenses
    
    
    724
    
    
    
    333
    
    
    
    751Equity share in net losses of associates and joint ventures
    
    
    62
    
    
    
    4
    
    
    
    18Net movement in unrecognized deferred income tax assets
    
    
    (576
    )
    
    
    823
    
    
    
    (5,889
    )Income subject to final tax
    
    
    (616
    )
    
    
    (509
    )
    
    
    (550
    )Income not subject to tax
    
    
    (846
    )
    
    
    (420
    )
    
    
    (2,375
    )Actual provision for corporate income tax (Note 4)
    
    
    19,073
    
    
    
    18,807
    
    
    
    5,668
         F-43




---



##### Table of Contents



F-44




---



##### Table of Contents



2008
    
    
    2007(in million pesos)NOLCO
    
    
    275
    
    
    
    5Accumulated provision for doubtful accounts
    
    
    126
    
    
    
    76Fixed asset impairment
    
    
    72
    
    
    
    10Accumulated write-down of inventories to net realizable values
    
    
    34
    
    
    
    33Unearned revenues
    
    
    18
    
    
    
    Unrealized foreign exchange losses
    
    
    17
    
    
    
    12Provisions for other assets
    
    
    2
    
    
    
    3MCIT
    
    
    1
    
    
    
    983545
    
    
    
    1,122
  Year Incurred
    
    Year Expiring
    
    
    (in million pesos)2008
    
    
    2011
    
    
    
    42007
    
    
    2010
    
    
    
    6412006
    
    
    2009
    
    
    
    126771Consolidated unrecognized deferred income tax
assets from MCIT as at December 31, 2008
    
    
    
    
    
    
    (1
    )Consolidated recognized deferred income tax asset
    
    
    
    
    
    
    770
  Year Incurred
    
    Year Expiring
    
    
    (in million pesos)2008
    
    2011
    
    
    542007
    
    
    2010
    
    
    
    931985Consolidated tax benefit from NOLCO
    
    
    
    
    
    
    297Consolidated unrecognized deferred income tax assets from NOLCO
as at December 31, 2008
    
    
    
    
    
    
    (275
    )Consolidated recognized deferred income tax asset
    
    
    
    
    
    
    22
 7.
    
    Earnings Per Common Share
  2008
    
    
    2007
    
    
    2006Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted(in million pesos)Consolidated net income attributable to equity holders
of PLDT for the year
    
    
    34,317
    
    
    
    34,317
    
    
    
    39,289
    
    
    
    39,289
    
    
    
    32,385
    
    
    
    32,385Dividends on convertible preferred shares
    
    
    (455
    )
    
    
    (455
    )
    
    
    (457
    )
    
    
    (457
    )
    
    
    (455
    )
    
    
    (455
    )Dividends on dilutive preferred stock subject to
mandatory redemption charged to interest expense for
the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    Accretion of preferred stock subject to mandatory
redemption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    Foreign exchange gains on preferred stock subject to
mandatory redemption (Notes 18 and 24)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (182
    )
    
    
    
    
    
    
    Consolidated net income attributable to common equity
holders of PLDT
    
    
    33,862
    
    
    
    33,862
    
    
    
    38,832
    
    
    
    38,798
    
    
    
    31,930
    
    
    
    31,930
  F-45




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##### Table of Contents



(in
thousands, except per share amounts)2008
    
    
    2007
    
    
    2006Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted(in million pesos)Outstanding common shares at beginning of year
    
    
    188,741
    
    
    
    188,741
    
    
    
    188,435
    
    
    
    188,435
    
    
    
    180,789
    
    
    
    180,789Effect of issuance of common shares during the year
    
    
    542
    
    
    
    542
    
    
    
    221
    
    
    
    221
    
    
    
    3,667
    
    
    
    3,667Average incremental number of shares under ESOP
during the year
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    98Effect of purchase of treasury stock during the year
    
    
    (1,120
    )
    
    
    (1,120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common shares equivalent of convertible preferred
shares deemed dilutive:Preferred Stock Series VI (Notes 18 and 24)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    680
    
    
    
    
    
    
    
    Weighted average number of common shares for the year
    
    
    188,163
    
    
    
    188,176
    
    
    
    188,656
    
    
    
    189,374
    
    
    
    184,456
    
    
    
    184,554Earnings per share for the year attributable to common
equity holders of PLDT
    
    Php
    179.96
    
    
    Php
    179.95
    
    
    Php
    205.84
    
    
    Php
    204.88
    
    
    Php
    173.10
    
    
    Php
    173.01
      Note 17  Equity Note 26  Financial Assets and
Liabilities
  F-46




---



##### Table of Contents



Dividends Declared For The Year Ended December 31, 2008
 Date
    
    
    AmountClass
    
    Approved
    
    
    Record
    
    
    Payable
    
    
    Per Share
    
    
    Total(in million pesos)Preferred Stock Subject to
Mandatory RedemptionSeries V
    
    March 4, 2008
    
    
    March 20, 2008
    
    
    April 15, 2008
    
    
    Php
    4.675
    
    
    
    **May 6, 2008
    
    
    June 4, 2008
    
    
    June 23, 2008
    
    
    0.051944 per day
    
    
    
    June 10, 2008
    
    
    June 26, 2008
    
    
    July 15, 2008
    
    
    
    4.675
    
    
    
    August 26, 2008
    
    
    September 25, 2008
    
    
    October 15, 2008
    
    
    
    4.675
    
    
    
    December 9, 2008
    
    
    December 24, 2008
    
    
    January 15, 2009
    
    
    
    4.675
    
    
    
    Series VI
    
    March 4, 2008
    
    
    March 20, 2008
    
    
    April 15, 2008
    
    
    US$
    0.09925
    
    
    
    2**May 6, 2008
    
    
    June 4, 2008
    
    
    June 23, 2008
    
    
    0.001103 per day
    
    
    
    1June 10, 2008
    
    
    June 26, 2008
    
    
    July 15, 2008
    
    
    
    0.09925
    
    
    
    August 26, 2008
    
    
    September 25, 2008
    
    
    October 15, 2008
    
    
    
    0.09925
    
    
    
    December 9, 2008
    
    
    December 24, 2008
    
    
    January 15, 2009
    
    
    
    0.09925
    
    
    
    Charged to income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310% Cumulative Convertible
Preferred StockSeries CC
    
    January 29, 2008
    
    
    February 28, 2008
    
    
    March 31, 2008
    
    
    Php
    1.00
    
    
    
    17Series DD
    
    January 29, 2008
    
    
    February 15, 2008
    
    
    February 29, 2008
    
    
    
    1.00
    
    
    
    3Series EE
    
    March 25, 2008
    
    
    April 24, 2008
    
    
    May 30, 2008
    
    
    
    1.00
    
    
    
    Series A, I, R, W, AA and BB
    
    July 8, 2008
    
    
    August 1, 2008
    
    
    August 29, 2008
    
    
    
    1.00
    
    
    
    128Series B, F, Q, V and Z
    
    August 5, 2008
    
    
    September 3, 2008
    
    
    September 30, 2008
    
    
    
    1.00
    
    
    
    90Series E, K, O and U
    
    August 26, 2008
    
    
    September 25, 2008
    
    
    October 31, 2008
    
    
    
    1.00
    
    
    
    44Series C, D, J, T and X
    
    September 30, 2008
    
    
    October 30, 2008
    
    
    November 28, 2008
    
    
    
    1.00
    
    
    
    57Series G, N, P and S
    
    November 4, 2008
    
    
    December 4, 2008
    
    
    December 29, 2008
    
    
    
    1.00
    
    
    
    26Series H, L, M and Y
    
    December 9, 2008
    
    
    January 2, 2009
    
    
    January 30, 2009
    
    
    
    1.00
    
    
    
    41406Cumulative Non-Convertible
Redeemable Preferred StockSeries IV*
    
    January 29, 2008
    
    
    February 22, 2008
    
    
    March 15, 2008
    
    
    Php
    
    
    
    
    12May 6, 2008
    
    
    May 23, 2008
    
    
    June 15, 2008
    
    
    
    
    
    
    
    12July 8, 2008
    
    
    August 7, 2008
    
    
    September 15, 2008
    
    
    
    
    
    
    
    13November 4, 2008
    
    
    November 21, 2008
    
    
    December 15, 2008
    
    
    
    
    
    
    
    1350Common StockRegular Dividend
    
    March 4, 2008
    
    
    March 19, 2008
    
    
    April 21, 2008
    
    
    Php
    68.00
    
    
    
    12,853August 5, 2008
    
    
    August 22, 2008
    
    
    September 22, 2008
    
    
    
    70.00
    
    
    
    13,140Special Dividend
    
    March 4, 2008
    
    
    March 19, 2008
    
    
    April 21, 2008
    
    
    
    56.00
    
    
    
    10,58536,578Charged to retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,034
 *
    
    Dividends are declared based on total amount paid up.**
    
    Only the holders of Series V and VI Convertible Preferred Stock whose shares were
originally issued on June 4, 2001 and mandatorily converted on June 5, 2008 shall be
entitled to this final dividend.  F-47




---



##### Table of Contents



Dividends Declared After December 31, 2008
 Date
    
    
    AmountClass
    
    Approved
    
    
    Record
    
    
    Payable
    
    
    Per Share
    
    
    Total(in million pesos)Cumulative
Non-Convertible
Redeemable Preferred
StockSeries IV*
    
    January 27, 2009
    
    
    February 20, 2009
        
    March 15, 2009
    
    
    Php
    
    
    
    
    1210% Cumulative Convertible
Preferred StockSeries CC
    
    January 27, 2009
    
    
    February 26, 2009
    
    
    March 31, 2009
    
    
    Php
    1.00
    
    
    
    17Series DD
    
    January 27, 2009
    
    
    February 13, 2009
    
    
    February 27, 2009
    
    
    
    1.00
    
    
    
    2Series EE
    
    March 31, 2009
    
    
    April 30, 2009
    
    
    May 29, 2009
    
    
    
    1.00
    
    
    
    19Common StockRegular Dividend
    
    March 3, 2009
    
    
    March 18, 2009
    
    
    April 21, 2009
    
    
    Php
    70.00
    
    
    
    13,124Special Dividend
    
    March 3, 2009
    
    
    March 18, 2009
    
    
    April 21, 2009
    
    
    
    60.00
    
    
    
    11,24924,37324,404
 *
    
    Dividends are declared based on total amount paid up. 8.
    
    Property, Plant and Equipment
  InformationVehicles,
    
    
    
    
    
    
    originationCable and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    furniture and
    
    
    
    
    
    
    and
    
    
    Land andwire
    
    
    Central office
    
    
    Cellular
    
    
    
    
    
    
    other network
    
    
    Communications
    
    
    termination
    
    
    land
    
    
    Property underfacilities
    
    
    equipment
    
    
    facilities
    
    
    Buildings
    
    
    equipment
    
    
    satellite
    
    
    equipment
    
    
    improvements
    
    
    construction
    
    
    Total(in million pesos)At December 31, 2006Cost
    
    
    112,621
    
    
    
    84,604
    
    
    
    64,423
    
    
    
    20,376
    
    
    
    31,039
    
    
    
    9,834
    
    
    
    9,140
    
    
    
    2,684
    
    
    
    12,686
    
    
    
    347,407Accumulated depreciation and
amortization
    
    
    (46,594
    )
    
    
    (58,292
    )
    
    
    (32,889
    )
    
    
    (6,235
    )
    
    
    (25,461
    )
    
    
    (7,678
    )
    
    
    (5,800
    )
    
    
    (268
    )
    
    
    
    
    
    
    (183,217
    )Net book value
    
    
    66,027
    
    
    
    26,312
    
    
    
    31,534
    
    
    
    14,141
    
    
    
    5,578
    
    
    
    2,156
    
    
    
    3,340
    
    
    
    2,416
    
    
    
    12,686
    
    
    
    164,190Year Ended December 31, 2007Net book value at beginning
of year
    
    
    66,027
    
    
    
    26,312
    
    
    
    31,534
    
    
    
    14,141
    
    
    
    5,578
    
    
    
    2,156
    
    
    
    3,340
    
    
    
    2,416
    
    
    
    12,686
    
    
    
    164,190Additions/Transfers  net
    
    
    4,769
    
    
    
    2,254
    
    
    
    3,018
    
    
    
    408
    
    
    
    1,811
    
    
    
    
    
    
    
    1,633
    
    
    
    1
    
    
    
    10,914
    
    
    
    24,808Disposals/Retirements
    
    
    (183
    )
    
    
    (55
    )
    
    
    (75
    )
    
    
    (11
    )
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (31
    )
    
    
    (441
    )Translation differences
charged directly to
cumulative translation
adjustments
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (77
    )
    
    
    (103
    )
    
    
    (495
    )
    
    
    
    
    
    
    (84
    )
    
    
    
    
    
    
    (754
    )Acquisition through business
combination
    
    
    
    
    
    
    99
    
    
    
    
    
    
    
    18
    
    
    
    146
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    (7
    )
    
    
    224Reclassifications
    
    
    894
    
    
    
    3
    
    
    
    4,923
    
    
    
    31
    
    
    
    888
    
    
    
    
    
    
    
    (1,709
    )
    
    
    
    
    
    
    (5,030
    )
    
    
    Depreciation and
amortization (Note 4)
    
    
    (8,449
    )
    
    
    (6,063
    )
    
    
    (7,530
    )
    
    
    (1,138
    )
    
    
    (3,426
    )
    
    
    (556
    )
    
    
    (1,448
    )
    
    
    (3
    )
    
    
    
    
    
    
    (28,613
    )Net book value at end of year
    
    
    63,058
    
    
    
    22,555
    
    
    
    31,870
    
    
    
    13,372
    
    
    
    4,849
    
    
    
    1,105
    
    
    
    1,784
    
    
    
    2,289
    
    
    
    18,532
    
    
    
    159,414Year Ended December 31, 2008Net book value at beginning
of year
    
    
    63,058
    
    
    
    22,555
    
    
    
    31,870
    
    
    
    13,372
    
    
    
    4,849
    
    
    
    1,105
    
    
    
    1,784
    
    
    
    2,289
    
    
    
    18,532
    
    
    
    159,414Additions/Transfers  net
    
    
    3,521
    
    
    
    2,304
    
    
    
    8,542
    
    
    
    874
    
    
    
    3,343
    
    
    
    
    
    
    
    302
    
    
    
    25
    
    
    
    6,747
    
    
    
    25,658Disposals/Retirements
    
    
    (52
    )
    
    
    (58
    )
    
    
    (108
    )
    
    
    (104
    )
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    (32
    )
    
    
    (490
    )Translation differences
charged directly to
cumulative translation
adjustments
    
    
    
    
    
    
    280
    
    
    
    
    
    
    
    (274
    )
    
    
    118
    
    
    
    338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    462Acquisition through business
combination
    
    
    22
    
    
    
    
    
    
    
    50
    
    
    
    14
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Impairment losses recognized
during the year (Note 5)
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104
    )Reclassifications
    
    
    99
    
    
    
    (273
    )
    
    
    
    
    
    
    69
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    (20
    )Depreciation and amortization
(Note 4)
    
    
    (9,048
    )
    
    
    (3,871
    )
    
    
    (7,544
    )
    
    
    (1,084
    )
    
    
    (2,201
    )
    
    
    (537
    )
    
    
    (423
    )
    
    
    (1
    )
    
    
    
    
    
    
    (24,709
    )Net book value at end of year
    
    
    57,600
    
    
    
    20,918
    
    
    
    32,810
    
    
    
    12,867
    
    
    
    6,074
    
    
    
    906
    
    
    
    1,663
    
    
    
    2,254
    
    
    
    25,234
    
    
    
    160,326At December 31, 2008Cost
    
    
    115,980
    
    
    
    83,562
    
    
    
    76,229
    
    
    
    21,040
    
    
    
    34,816
    
    
    
    9,581
    
    
    
    8,251
    
    
    
    2,527
    
    
    
    25,234
    
    
    
    377,220Accumulated depreciation and
amortization
    
    
    (58,380
    )
    
    
    (62,644
    )
    
    
    (43,419
    )
    
    
    (8,173
    )
    
    
    (28,742
    )
    
    
    (8,675
    )
    
    
    (6,588
    )
    
    
    (273
    )
    
    
    
    
    
    
    (216,894
    )Net book value
    
    
    57,600
    
    
    
    20,918
    
    
    
    32,810
    
    
    
    12,867
    
    
    
    6,074
    
    
    
    906
    
    
    
    1,663
    
    
    
    2,254
    
    
    
    25,234
    
    
    
    160,326
  F-48




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##### Table of Contents



Note 18 -
Interest-bearing Financial Liabilities
  2008
    
    
    2007
    
    
    2006(in million pesos)Interest (Note 5)
    
    
    778
    
    
    
    542
    
    
    
    549Foreign exchange losses  net
    
    
    385
    
    
    
    63
    
    
    
    521
   Buildings
    
    25 yearsCentral office equipment
    
    10  20 yearsCable and wire facilities
    
    10  15 yearsCommunications satellite
    
    15 yearsInformation origination and termination equipment
    
    3  15 yearsCellular facilities
    
    3  10 yearsLand improvements
    
    10 yearsVehicles, furniture and other network equipment
    
    3 - 5 years
   2008
    
    
    2007(in million pesos)Asset retirement obligations at beginning of year
    
    
    952
    
    
    
    831Accretion expenses
    
    
    85
    
    
    
    81Additional liability recognized during the year (Note 27)
    
    
    70
    
    
    
    48Settlement of obligations
    
    
    (7
    )
    
    
    (8
    )Asset retirement obligations at end of year (Notes 3 and 19)
    
    
    1,100
    
    
    
    952
  F-49




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##### Table of Contents



SBIs Acquisition of Cluster 3 Assets from Cruz Telephone Company, Inc., or Cruztelco
  Asset Impairment Review
 
 Wholesale Transponder Lease Agreement between Mabuhay Satellite, ProtoStar Ltd., or ProtoStar,
and ProtoStar III Ltd., or ProtoStar III
  IFRS 5
 9.
    
    Investments in Associates and Joint Ventures
  2008
    
    
    2007(in million pesos)ACeS International Limited
    
    
    1,896
    
    
    
    1,896Mabuhay Space Holdings Limited
    
    
    910
    
    
    
    791Blue Ocean Wireless
    
    
    724
    
    
    
    724Philweb Corporation
    
    
    712
    
    
    
    712BayanTrade Dotcom, Inc.
    
    
    97
    
    
    
    97ePDS, Inc.
    
    
    6
    
    
    
    6PLDT Italy S.r.l.
    
    
    1
    
    
    
    4,346
    
    
    
    4,226Less accumulated impairment losses and equity share in net losses of associates
and joint ventures
    
    
    3,172
    
    
    
    2,8751,174
    
    
    
    1,351
  F-50




---



##### Table of Contents



2008
    
    
    2007(in million pesos)Balance at beginning of year
    
    
    93
    
    
    
    82Equity share in net losses of associates and joint ventures for the year
    
    
    176
    
    
    
    11Balance at end of year
    
    
    269
    
    
    
    93
  2008
    
    
    2007(in million pesos)Balance at beginning of year
    
    
    2,782
    
    
    
    2,930Impairment for the year (Note 5)
    
    
    282
    
    
    
    Translation adjustments
    
    
    (161
    )
    
    
    (148
    )Balance at end of year
    
    
    2,903
    
    
    
    2,782
 Investments in Associates
 Investment of ACeS Philippines in ACeS International Limited, or AIL
   Note 22  Related Party Transactions Note 24  Contractual Obligations and Commercial
Commitments
 Investment of Smart in Blue Ocean Wireless, or BOW
 SmartLink
 Investment of ePLDT in Philweb Corporation, or Philweb
   F-51




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##### Table of Contents



Investment of ePLDT in BayanTrade Dotcom, Inc., or BayanTrade
  Investment of ePLDT in ePDS, Inc., or ePDS
  Summarized Financial Information of Equity Investees
  2008
    
    
    2007(in million pesos)Consolidated Balance Sheets:Noncurrent assets
    
    
    1,097
    
    
    
    948Current assets
    
    
    1,117
    
    
    
    1,084Capital deficiency
    
    
    (9,048
    )
    
    
    (8,340
    )Noncurrent liabilities
    
    
    10,482
    
    
    
    9,728Current liabilities
    
    
    780
    
    
    
    645
 2008
    
    
    2007
    
    
    2006(in million pesos)Consolidated Statements of Income:Revenues
    
    
    708
    
    
    
    863
    
    
    
    1,185Expenses
    
    
    378
    
    
    
    292
    
    
    
    405Net income (loss)
    
    
    314
    
    
    
    260
    
    
    
    (308
    )
  F-52




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##### Table of Contents



Piltels Acquisition of Shares in Manila Electric Company, or Meralco
  Investments in Joint Ventures
 Investment of Mabuhay Satellite in Mabuhay Space Holdings Limited, or MSHL
    Investment of PLDT Global in PLDT Italy S.r.l., or PLDT Italy
   F-53




---



##### Table of Contents



Summarized Financial Information of Joint Ventures
  2008
    
    
    2007(in million pesos)Consolidated Balance Sheets:Noncurrent assets
    
    
    532
    
    
    
    434Current assets
    
    
    161
    
    
    
    Capital deficiency
    
    
    (142
    )
    
    
    Noncurrent liabilities
    
    
    685
    
    
    
    434Current liabilities
    
    
    150
    
    
    
    
 2008
    
    
    2007
    
    
    2006(in million pesos)Consolidated Statements of Income:Revenues
    
    
    39
    
    
    
    
    
    
    
    Expenses
    
    
    287
    
    
    
    101
    
    
    
    113Net loss
    
    
    247
    
    
    
    101
    
    
    
    113
 10.
    
    Investment Properties
  2008
    
    
    2007(in million pesos)Balance at beginning of year
    
    
    577
    
    
    
    587Net gain from fair value adjustments
    
    
    59
    
    
    
    3Disposals
    
    
    (19
    )
    
    
    (13
    )Balance at end of year (Notes 3 and 26)
    
    
    617
    
    
    
    577
    F-54




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##### Table of Contents



11.
    
    Goodwill and Intangible Assets
  2008
    
    
    2007Intangible
    
    
    
    
    
    
    
    
    
    
    IntangibleGoodwill
    
    
    assets
    
    
    Total
    
    
    Goodwill
    
    
    assets
    
    
    Total(in million pesos)Cost:Balance at beginning of year
    
    
    10,879
    
    
    
    3,821
    
    
    
    14,700
    
    
    
    10,137
    
    
    
    3,456
    
    
    
    13,593Translation adjustments
    
    
    1,312
    
    
    
    209
    
    
    
    1,521
    
    
    
    (1,489
    )
    
    
    (242
    )
    
    
    (1,731
    )Additions during the year
    
    
    261
    
    
    
    83
    
    
    
    344
    
    
    
    2,231
    
    
    
    607
    
    
    
    2,838Reclassifications
    
    
    
    
    
    
    52
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    Adjustments during the year
    
    
    (163
    )
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    12,289
    
    
    
    4,165
    
    
    
    16,454
    
    
    
    10,879
    
    
    
    3,821
    
    
    
    14,700Accumulated amortization and impairment:Balance at beginning of year
    
    
    1,629
    
    
    
    1,350
    
    
    
    2,979
    
    
    
    438
    
    
    
    941
    
    
    
    1,379Impairment during the year (Note 5)
    
    
    2,026
    
    
    
    424
    
    
    
    2,450
    
    
    
    1,191
    
    
    
    53
    
    
    
    1,244Amortization during the year
    
    
    
    
    
    
    377
    
    
    
    377
    
    
    
    
    
    
    
    390
    
    
    
    390Translation adjustments
    
    
    144
    
    
    
    51
    
    
    
    195
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )Reclassifications
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    3,799
    
    
    
    2,205
    
    
    
    6,004
    
    
    
    1,629
    
    
    
    1,350
    
    
    
    2,979Net balance at end of year (Notes 3 and 26)
    
    
    8,490
    
    
    
    1,960
    
    
    
    10,450
    
    
    
    9,250
    
    
    
    2,471
    
    
    
    11,721
 2008 Acquisitions
 ePLDTs Acquisition of Minority Interests in Airborne Access
  Smarts Acquisition of PHC, FHI and CURE
   F-55




---



##### Table of Contents



ProvisionalPrevious
    
    
    ValueCarrying
    
    
    Recognized onValue
    
    
    Acquisition(in million pesos)Assets:Property, plant and equipment  net
    
    
    115
    
    
    
    115Investments in associates and joint ventures
    
    
    6
    
    
    
    6Provisional goodwill
    
    
    
    
    
    
    248Other noncurrent assets
    
    
    4
    
    
    
    4Cash and cash equivalents
    
    
    52
    
    
    
    52Other current assets
    
    
    78
    
    
    
    78255
    
    
    
    503Liabilities:Accounts payable
    
    
    82
    
    
    
    82Accrued expenses and other current liabilities
    
    
    1
    
    
    
    183
    
    
    
    83Net assets acquired
    
    
    172
    
    
    
    420
  2007 Acquisitions
 SPis Acquisition of Springfield Service Corporation, or Springfield
 Note 19  Deferred Credits and Other Noncurrent Liabilities Note
21  Accrued Expenses and Other Current Liabilities
  Fair Value Recognized onPrevious Carrying Value
    
    
    AcquisitionIn U.S. Dollar
    
    
    Php(1)
    
    
    In U.S. Dollar
    
    
    Php(1)(in millions)Assets:Property, plant and equipment  net
    
    
    3
    
    
    
    143
    
    
    
    3
    
    
    
    143Goodwill
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    2,139Intangible assets
    
    
    7
    
    
    
    333
    
    
    
    8
    
    
    
    380Cash and cash equivalents
    
    
    1
    
    
    
    48
    
    
    
    1
    
    
    
    48Trade and other receivables  net
    
    
    3
    
    
    
    143
    
    
    
    3
    
    
    
    14314
    
    
    
    667
    
    
    
    60
    
    
    
    2,853Liabilities:Deferred income tax liabilities
    
    
    1
    
    
    
    48
    
    
    
    4
    
    
    
    190Noncurrent liabilities
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    48Accounts payable and other current liabilities
    
    
    10
    
    
    
    475
    
    
    
    2
    
    
    
    9511
    
    
    
    523
    
    
    
    7
    
    
    
    333Net assets acquired
    
    
    3
    
    
    
    144
    
    
    
    53
    
    
    
    2,520
 (1)
    
    Converted to Philippine Peso using the exchange rate at the time of purchase of
Php47.536 to US$1.00.  F-56




---



##### Table of Contents



IAS 38
   Smarts Investment in 3rd Brand
  Smarts Supply Agreement with THISS Technologies Pte. Ltd., or THISS
  Subsequent Event Disclosure for 2009 Acquisition
 PLDTs Acquisition of Philcom Corporation, or Philcom
 Note 2  Summary of Significant
Accounting Policies and Practices
  F-57




---



##### Table of Contents



ProvisionalPrevious
    
    
    ValueCarrying
    
    
    Recognized onValue
    
    
    Acquisition(in million pesos)Assets:Property, plant and equipment  net
    
    
    636
    
    
    
    1,543Other noncurrent assets
    
    
    12
    
    
    
    12Cash and cash equivalents
    
    
    46
    
    
    
    46Trade and other receivables  net
    
    
    137
    
    
    
    137Other current assets
    
    
    25
    
    
    
    25856
    
    
    
    1,763Liabilities:Long-term debt
    
    
    340
    
    
    
    340Deferred income tax liabilities
    
    
    17
    
    
    
    Other noncurrent liabilities
    
    
    11
    
    
    
    11Accounts payable
    
    
    1,118
    
    
    
    1,118Accrued expenses and other current liabilities
    
    
    176
    
    
    
    1761,662
    
    
    
    1,645(806
    )
    
    
    118Minority interests
    
    
    43
    
    
    
    43Net assets acquired
    
    
    (849
    )
    
    
    75
  Other Intangible Assets
  2008
    
    
    2007Gross
    
    
    
    
    
    
    GrossAccumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization
    
    
    
    
    
    
    
    
    
    
    AmortizationEstimated
    
    
    Remaining
    
    
    Carrying
    
    
    and
    
    
    
    
    
    
    Carrying
    
    
    andUseful Lives
    
    
    Useful Lives
    
    
    Amount
    
    
    Impairment
    
    
    Net
    
    
    Amount
    
    
    Impairment
    
    
    Net(in million pesos)Customer list
    
    3  7 years
    
    3  4 years
    
    
    1,696
    
    
    
    794
    
    
    
    902
    
    
    
    1,486
    
    
    
    384
    
    
    
    1,102Spectrum
    
    15 years
    
    11  15 years
    
    
    1,205
    
    
    
    348
    
    
    
    857
    
    
    
    1,205
    
    
    
    268
    
    
    
    937Licenses
    
    6  18 years
    
    3  14 years
    
    
    370
    
    
    
    203
    
    
    
    167
    
    
    
    318
    
    
    
    182
    
    
    
    136Technology application
    
    4  5 years
    
    1  2 years
    
    
    894
    
    
    
    860
    
    
    
    34
    
    
    
    812
    
    
    
    516
    
    
    
    2964,165
    
    
    
    2,205
    
    
    
    1,960
    
    
    
    3,821
    
    
    
    1,350
    
    
    
    2,471
   (in million pesos)2009
    
    
    3732010
    
    
    3422011
    
    
    3312012
    
    
    8662013 and onwards
    
    
    48Balance at end of year
    
    
    1,960
  F-58




---



##### Table of Contents



Impairment Testing of Goodwill
 Goodwill from Acquisition of SBI, CURE and Airborne Access
     Goodwill from Acquisition of SPi and its Subsidiary, CyMed and Springfield
    F-59




---



##### Table of Contents



Goodwill from Acquisition of Level Up!
  Goodwill from Acquisition of Digital Paradise
  12.
    
    Cash and Cash Equivalents
  2008
    
    
    2007(in million pesos)Cash on hand and in banks (Note 26)
    
    
    4,164
    
    
    
    3,944Temporary cash investments (Note 26)
    
    
    29,520
    
    
    
    13,50333,684
    
    
    
    17,447
  13.
    
    Investment in Debt Securities
  2008
    
    
    2007(in million pesos)Government Securities
    
    
    1,656
    
    
    
    National Power Corporation, or NAPOCOR, Zero Coupon Bonds
    
    
    292
    
    
    
    273Republic of the Philippines Credit Linked Notes
    
    
    193
    
    
    
    Rizal Commercial Banking Corporation, or RCBC, Note
    
    
    150
    
    
    
    Convertible Securities
    
    
    
    
    
    
    1,1152,291
    
    
    
    1,388Less current portion of investment in debt securities
    
    
    1,656
    
    
    
    1,115Net of noncurrent portion of investment in debt securities
    
    
    635
    
    
    
    273
 Government Securities
   F-60




---



##### Table of Contents



NAPOCOR Zero Coupon Bonds
  Republic of the Philippines Credit Linked Notes
 IAS 39
 RCBC Note
  Convertible Securities
   
  F-61




---



##### Table of Contents



2007(in million pesos)Balance at beginning of year
    
    
    616Reversal of impairment provision for the year
    
    
    (616
    )Balance at end of year
    
    
    
 Option to Purchase Series C Preferred Shares of ProtoStar
 Note 24  Contractual Obligations and
Commercial Commitments
 Exchangeable Note Issued by First Philippine Utilities Corporation, or FPUC
  14.
    
    Trade and Other Receivables
  2008
    
    
    2007(in million pesos)Retail subscribers (Note 26)
    
    
    8,993
    
    
    
    8,179Corporate subscribers (Notes 22 and 26)
    
    
    9,188
    
    
    
    7,915Foreign administrations (Note 26)
    
    
    5,916
    
    
    
    5,371Domestic carriers (Note 26)
    
    
    877
    
    
    
    1,884Dealers, agents and others (Notes 13, 22 and 26)
    
    
    3,271
    
    
    
    2,15128,245
    
    
    
    25,500Less allowance for doubtful accounts
    
    
    12,336
    
    
    
    12,85515,909
    
    
    
    12,645
  F-62




---



##### Table of Contents



Dealers,Retail
    
    
    Corporate
    
    
    Foreign
    
    
    Domestic
    
    
    Agents andTotal
    
    
    Subscribers
    
    
    Subscribers
    
    
    Administrations
    
    
    Carriers
    
    
    Others(in million pesos)December 31, 2008Balance at beginning of year
    
    
    12,855
    
    
    
    4,318
    
    
    
    5,875
    
    
    
    1,047
    
    
    
    381
    
    
    
    1,234Provisions for the year
(Notes 3 and 5)
    
    
    1,079
    
    
    
    850
    
    
    
    98
    
    
    
    85
    
    
    
    26
    
    
    
    20Translation adjustments
    
    
    111
    
    
    
    44
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    24Reversals
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (13
    )
    
    
    (1
    )Write-offs
    
    
    (1,693
    )
    
    
    (189
    )
    
    
    (314
    )
    
    
    (645
    )
    
    
    (142
    )
    
    
    (403
    )Reclassifications
    
    
    
    
    
    
    66
    
    
    
    621
    
    
    
    (46
    )
    
    
    (78
    )
    
    
    (563
    )Balance at end of year
    
    
    12,336
    
    
    
    5,089
    
    
    
    6,323
    
    
    
    439
    
    
    
    174
    
    
    
    311Individual impairment
    
    
    11,636
    
    
    
    4,656
    
    
    
    6,056
    
    
    
    439
    
    
    
    174
    
    
    
    311Collective impairment
    
    
    700
    
    
    
    433
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    12,336
    
    
    
    5,089
    
    
    
    6,323
    
    
    
    439
    
    
    
    174
    
    
    
    311Gross amount of
receivables, individually
impaired, before deducting
any individually assessed
impairment allowance
    
    
    11,708
    
    
    
    4,656
    
    
    
    6,128
    
    
    
    439
    
    
    
    174
    
    
    
    311December 31, 2007Balance at beginning of year
    
    
    16,770
    
    
    
    5,847
    
    
    
    6,418
    
    
    
    2,506
    
    
    
    504
    
    
    
    1,495Provisions for the year
(Notes 3 and 5)
    
    
    417
    
    
    
    226
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    40Translation adjustments
    
    
    (91
    )
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    Reversals
    
    
    (889
    )
    
    
    (867
    )
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    (11
    )Write-offs
    
    
    (3,352
    )
    
    
    (1,968
    )
    
    
    
    
    
    
    (1,284
    )
    
    
    
    
    
    
    (100
    )Reclassifications
    
    
    
    
    
    
    1,080
    
    
    
    (592
    )
    
    
    (175
    )
    
    
    (123
    )
    
    
    (190
    )Balance at end of year
    
    
    12,855
    
    
    
    4,318
    
    
    
    5,875
    
    
    
    1,047
    
    
    
    381
    
    
    
    1,234Individual impairment
    
    
    12,115
    
    
    
    3,944
    
    
    
    5,509
    
    
    
    1,047
    
    
    
    381
    
    
    
    1,234Collective impairment
    
    
    740
    
    
    
    374
    
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    12,855
    
    
    
    4,318
    
    
    
    5,875
    
    
    
    1,047
    
    
    
    381
    
    
    
    1,234Gross amount of
receivables, individually
impaired, before deducting
any individually assessed
impairment allowance
    
    
    12,168
    
    
    
    3,951
    
    
    
    5,555
    
    
    
    1,047
    
    
    
    381
    
    
    
    1,234
   F-63




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##### Table of Contents



15.
    
    Inventories and Supplies
  2008
    
    
    2007(in million pesos)Spare parts and supplies:At net realizable value
    
    
    966
    
    
    
    502At cost
    
    
    1,933
    
    
    
    1,385Terminal and cellular phone units:At net realizable value
    
    
    936
    
    
    
    554At cost
    
    
    1,098
    
    
    
    808Others:At net realizable value
    
    
    167
    
    
    
    111At cost
    
    
    167
    
    
    
    112Total inventories at the lower of cost or net
realizable value (Note 26)
    
    
    2,069
    
    
    
    1,167
  16.
    
    Prepayments
  2008
    
    
    2007(in million pesos)Prepaid taxes (Note 6)
    
    
    6,178
    
    
    
    3,995Prepaid insurance (Note 22)
    
    
    161
    
    
    
    184Prepaid fees and licenses
    
    
    100
    
    
    
    236Prepaid rent
    
    
    31
    
    
    
    61Other prepayments
    
    
    195
    
    
    
    1736,665
    
    
    
    4,649Less current portion of prepayments
    
    
    4,164
    
    
    
    2,368Net of noncurrent portion of prepayments
    
    
    2,501
    
    
    
    2,281
  17.
    
    Equity
  Preferred StockPhp10 par value per shareTotalSeries
    
    
    
    
    
    
    Preferred
    
    
    
    
    
    
    Common StockA to HH
    
    
    IV
    
    
    Stock
    
    
    
    
    
    
    Php5 par value per shareNo. of Shares
    
    
    
    
    
    
    Amount
    
    
    No. of Shares
    
    
    Amount(in millions)Authorized
    
    
    
    
    
    
    
    
    
    
    823
    
    
    Php

    8,230
    
    
    
    234
    
    
    Php
    1,170IssuedBalance at January 1, 2006
    
    
    407
    
    
    
    36
    
    
    
    443
    
        Php

    4,433
    
    
    
    181
    
    
    Php

    904Conversion
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (11
    )
    
    
    7
    
    
    
    38Issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Balance at December 31,
2006
    
    
    406
    
    
    
    36
    
    
    
    442
    

    
    Php
    4,424
    
    

        188
    
    
    Php

    942
  F-64




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##### Table of Contents



Preferred StockPhp10 par value per shareTotalSeries
    
    
    
    
    
    
    Preferred
    
    
    
    
    
    
    Common StockA to HH
    
    
    IV
    
    
    Stock
    
    
    
    
    
    
    Php5 par value per shareNo. of Shares
    
    
    
    
    
    
    Amount
    
    
    No. of Shares
    
    
    Amount(in millions)Balance at January 1, 2007
    
    
    406
    
    
    
    36
    
    
    
    442
    
    
    Php
    4,424
    
    
    
    188
    
    
    Php
    942Conversion
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (8
    )
    
    
    
    
    
    
    1Issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Balance at December 31,
2007
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,417
    
    
    
    188
    
    
    Php
    943Balance at January 1, 2008
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,417
    
    
    
    188
    
    
    Php
    943Conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    1
    
    
    
    3Issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Balance at December 31,
2008
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,415
    
    
    
    189
    
    
    Php
    947
 Preferred Stock
        F-65




---



##### Table of Contents



Common Stock
  Note 7  Earnings Per Common Share Note
26  Financial Assets and Liabilities
 18.
    
    Interest-bearing Financial Liabilities
  2008
    
    
    2007(in million pesos)Long-term portion of interest-bearing financial liabilities  net of current
portion:Long-term debt (Notes 8, 21, 24 and 26)
    
    
    58,899
    
    
    
    53,372Obligations under finance lease (Notes 8, 21, 24 and 26)
    
    
    11
    
    
    
    1558,910
    
    
    
    53,387Current portion of interest-bearing financial liabilities:Notes payable (Notes 21, 24 and 26)
    
    
    553
    
    
    
    493Long-term debt maturing within one year (Notes 8, 21, 24 and 26)
    
    
    14,459
    
    
    
    6,775Obligations under finance lease maturing within one year (Notes 8, 24 and 26)
    
    
    59
    
    
    
    481Preferred stock subject to mandatory redemption (Notes 24 and 26)
    
    
    9
    
    
    
    1,01515,080
    
    
    
    8,764
  2008
    
    
    2007(in million pesos)Long-term debt (Note 26)
    
    
    4,576
    
    
    
    4,472Obligations under finance lease (Note 8)
    
    
    1
    
    
    
    10Preferred stock subject to mandatory redemption
    
    
    
    
    
    
    56Total unamortized debt discount at end of year
    
    
    4,577
    
    
    
    4,538
  F-66




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##### Table of Contents



2008
    
    
    2007(in million pesos)Unamortized debt discount at beginning of year
    
    
    4,538
    
    
    
    6,319Revaluations during the year
    
    
    706
    
    
    
    (678
    )Additions during the year
    
    
    154
    
    
    
    59Settlements and conversions during the year
    
    
    (15
    )
    
    
    (96
    )Accretion during the year charged to interest
expense (Note 5)
    
    
    (806
    )
    
    
    (1,066
    )Total unamortized debt discount at end of year
    
    
    4,577
    
    
    
    4,538
 Long-term Debt
  Description
    
    Interest Rates
    
    2008
    
    
    2007(in millions)U.S. Dollar Debt:Export Credit Agencies-Supported Loans:Kreditanstalt für Wiederaufbau, or KfW
    
    5.65% - 7.58% and US$ LIBOR+ 0.55% - 2.5% in 2008 and 2007
    
    US$
    74
    
    
    Php
    3,540
    
    
    US$
    130
    
    
    Php
    5,365Finnvera, Plc, or Finnvera
    
    0.05% + US$ LIBOR in 2008and 2007
    
    
    30
    
    
    
    1,420
    
    
    
    49
    
    
    
    2,048Others
    
    3.79% - 6.6% and US$ LIBOR +0.15% - 0.65% in 2008 and 6.6%and US$ LIBOR + 0.15% - 0.65%and GOVCO's cost + 0.20% in2007
    
    
    7
    
    
    
    351
    
    
    
    1
    
    
    
    47111
    
    
    
    5,311
    
    
    
    180
    
    
    
    7,460Fixed Rate Notes
    
    8.35% - 11.375% in 2008 and7.85% - 11.375% in 2007
    
    
    560
    
    
    
    26,693
    
    
    
    676
    
    
    
    28,016Term Loans:Debt Exchange Facility
    
    2.25% and US$ LIBOR + 1%in 2008 and 2007
    
    
    196
    
    
    
    9,357
    
    
    
    187
    
    
    
    7,742GSM Network Expansion Facilities
    
    4.49% - 4.70% and US$ LIBOR+ 0.42% - 0.815% in 2008 and4.49% - 4.70% and US$ LIBOR+ 0.75% - 0.815% in 2007
    
    
    183
    
    
    
    8,698
    
    
    
    194
    
    
    
    8,024Others
    
    6% - 8.9% and US$ LIBOR +0.40% - 0.50% in 2008 and 6% -10% and US$ LIBOR + 0.40% in2007
    
    
    141
    
    
    
    6,694
    
    
    
    4
    
    
    
    153Satellite Acquisition Loans
    
    US$ LIBOR + 1.75% - 2.75% in2008 and 5.66% and US$ LIBOR+ 1.75% - 2.75% in 2007
    
    
    13
    
    
    
    610
    
    
    
    28
    
    
    
    1,145US$
    1,204
    
    
    
    57,363
    
    
    US$
    1,269
    
    
    
    52,540Philippine Peso Debt:Fixed Rate Corporate Notes
    
    5.625% - 8.4346% in 2008 and5.625% - 15% in 2007
    
    
    
    
    
    
    9,921
    
    
    
    
    
    
    
    4,967Term Loans:Unsecured Term Loans
    
    6.125%, MART1 + 0.75% andPDST-F + 1% - 1.50% in 2008and 6.125% and MART1 + 0.75%in 2007
    
    
    
    
    
    
    6,070
    
    
    
    
    
    
    
    2,634Secured Term Loans
    
    7.09% and MART1 + 5.70% in2008 and 7.09%, MART1 + 5.70%and 90-day PHILBOR + 3% in2007
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    615,995
    
    
    
    
    
    
    
    7,607Total long-term debt
    
    
    
    
    
    
    
    
    73,358
    
    
    
    
    
    
    
    60,147Less portion maturing within one year (Note 26)
    
    
    
    
    
    
    
    
    14,459
    
    
    
    
    
    
    
    6,775Noncurrent portion of long-term debt (Note 26)
    
    
    
    
    
    
    
    Php
    58,899
    
    
    
    
    
    
    Php
    53,372
 Note: Amounts presented are net of unamortized debt discount and debt issuance costs.
  F-67




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##### Table of Contents



U.S. Dollar Debt
    
    
    Php Debt
    
    
    TotalYear
    
    In U.S. Dollar
    
    
    In Php
    
    
    In Php
    
    
    In Php(in millions)2009


    289
    
    

    13,768
    
    
    
    805
    
    
    
    14,5732010
    
    
    125
    
    
    
    5,971
    
    
    
    1,572
    
    
    
    7,5432011
    
    
    69
    
    
    
    3,305
    
    
    
    1,571
    
    
    
    4,8762012
    
    
    214
    
    
    
    10,183
    
    
    
    4,816
    
    
    
    14,9992013 and onwards
    
    
    601
    
    
    
    28,617
    
    
    
    7,326
    
    
    
    35,9431,298
    
    
    
    61,844
    
    
    
    16,090
    
    
    
    77,934
 U.S. Dollar Debts:
 Export Credit Agencies-Supported Loans
  Kreditanstalt für Wiederaufbau, or KfW
  
    
    US$53 million provided under various export credit agency-backed facilities, of which
US$0.6 million was in connection with our expansion and service improvement programs, and
US$52.4 million in connection with the US$149 million refinancing facility discussed below;
and
 
    
    US$21 million provided for the 15% downpayment portion and credit facilities without
guarantee/insurance cover from the export credit agencies, of which US$13 million was in
connection with the US$149 million refinancing facility discussed in the following
paragraphs.
   Finnvera, Plc, or Finnvera
    F-68




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##### Table of Contents



Exportkreditnamnden, or EKN
    Fixed Rate Notes
  Principal Amount
    
    Interest Rate
    
    
    Maturity Date
    
    
    2008
    
    
    2007(in millions)US$294,984,000
    
    
    8.350
    %
    
    March 6, 2017
    
    US$
    291
    
    
    Php13,896
    
    
    US$
    296
    
    
    Php12,273US$159,180,000
    
    
    11.375
    %
    
    May 15, 2012
    
    
    155
    
    
    
    7,380
    
    
    
    245
    
    
    
    10,136US$113,786,000
    
    
    10.500
    %
    
    April 15, 2009
    
    
    114
    
    
    
    5,417
    
    
    
    135
    
    
    
    5,607US$
    560
    
    
    Php26,693
    
    US$
    676
    
    
    Php28,016
 Consent Solicitation for the US$175 Million 10.5% Notes due 2009, or 2009 Notes, US$250 Million
11.375% Notes due 2012, or 2012 Notes, and US$300 Million 8.35% Notes due 2017, or 2017 Notes
  Term Loans
 US$283 Million Term Loan Facility, or Debt Exchange Facility
   F-69




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##### Table of Contents




    
    2007 Facility in the amount of US$0.2 million which was paid in full in December 2007;
    
    2008 Facility in the amount of US$2.9 million which was paid in full in December 2008;
and
    
    2014 Facility in the amount of US$280.1 million will be payable in full in June 2014.
   GSM Network Expansion Facilities
      F-70




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##### Table of Contents



Other Term Loans
    Satellite Acquisition Loans
   F-71




---



##### Table of Contents



Philippine Peso Debts:
 Fixed Rate Corporate Notes
 Php5,000 Million Peso Fixed Rate Corporate Notes
  Php5,000 Million Fixed Rate Corporate Notes
  Php5,000 Million Fixed Rate Corporate Notes
  Term Loans
 Php2,500 Million Term Loan Facility
   F-72




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##### Table of Contents



Php400 Million and Php20 Million Refinancing Loans
  Php2,500 Million Term Loan Facility
  Php2,400 Million Term Loan Facility
  Php3,000 Million Term Loan Facility
  Php2,000 Million Term Loan Facility
  Php2,500 Million Term Loan Facility
   F-73




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##### Table of Contents



Debt Covenants
        F-74




---



##### Table of Contents



Obligations Under Finance Lease
  Year
    
    (in million pesos)2009
    
    
    602010
    
    
    52011
    
    
    32012 and onwards
    
    
    3Total minimum finance lease payments (Note 24)
    
    
    71Less amount representing interest
    
    
    1Present value of net minimum finance lease payments (Notes 3 and 26)
    
    
    70Less obligations under finance lease maturing within one year (Notes 8 and 26)
    
    
    59Long-term portion of obligations under finance lease (Notes 8 and 26)
    
    
    11
 Municipal Telephone Projects
   Other Long-term Finance Lease Obligations
    F-75




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##### Table of Contents



Preferred Stock Subject to Mandatory Redemption
  2008
    
    
    2007Series V
    
    
    Series VI
    
    
    Total
    
    
    Series V
    
    
    Series VI
    
    
    Total(in million pesos)Balance at beginning of year
    
    
    49
    
    
    
    966
    
    
    
    1,015
    
    
    
    61
    
    
    
    1,308
    
    
    
    1,369Accretion
    
    
    3
    
    
    
    36
    
    
    
    39
    
    
    
    10
    
    
    
    131
    
    
    
    141Revaluation
    
    
    
    
    
    
    32
    
    
    
    32
    
    
    
    
    
    
    
    (182
    )
    
    
    (182
    )Conversion (Note 27)
    
    
    (50
    )
    
    
    (1,027
    )
    
    
    (1,077
    )
    
    
    (22
    )
    
    
    (291
    )
    
    
    (313
    )Balance at end of year (Notes 24 and 26)
    
    
    2
    
    
    
    7
    
    
    
    9
    
    
    
    49
    
    
    
    966
    
    
    
    1,015
   Note 2  Summary of
Significant Accounting Policies and Practices Note 26  Financial Assets and Liabilities
   F-76




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##### Table of Contents



Note 24  Contractual Obligations and Commercial Commitments
 Note 5  Income and Expenses Note 7  Earnings Per Common Share
 Notes Payable
  19.
    
    Deferred Credits and Other Noncurrent Liabilities
  2008
    
    
    2007(in million pesos)Accrual of capital expenditures under long-term financing
    
    
    8,650
    
    
    
    7,554Liabilities on asset retirement obligations (Notes 3 and 8)
    
    
    1,100
    
    
    
    952Future earn-out payments  net (Note 11)
    
    
    593
    
    
    
    782Unearned revenues (Note 21)
    
    
    190
    
    
    
    290Others
    
    
    49
    
    
    
    5410,582
    
    
    
    9,632
    F-77




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##### Table of Contents



20.
    
    Accounts Payable
  2008
    
    
    2007(in million pesos)Suppliers and contractors (Notes 24 and 26)
    
    
    14,131
    
    
    
    8,672Taxes (Notes 25 and 26)
    
    
    1,970
    
    
    
    1,648Carriers (Note 26)
    
    
    1,780
    
    
    
    1,843Related parties (Note 22)
    
    
    120
    
    
    
    29Others
    
    
    267
    
    
    
    6118,268
    
    
    
    12,253
 21.
    
    Accrued Expenses and Other Current Liabilities
  2008
    
    
    2007(in million pesos)Accrued utilities and related expenses (Note 22)
    
    
    13,504
    
    
    
    10,823Unearned revenues (Note 19)
    
    
    4,249
    
    
    
    4,024Accrued employee benefits (Note 23)
    
    
    2,928
    
    
    
    2,837Accrued taxes and related expenses (Notes 24 and 25)
    
    
    1,398
    
    
    
    977Accrued interests and other related costs (Notes 18, 22 and 26)
    
    
    1,212
    
    
    
    1,234Current portion of future earn-out payments (Note 11)
    
    
    127
    
    
    
    266Payable in installment purchase of equity investment (Note 11)
    
    
    
    
    
    
    123Others
    
    
    963
    
    
    
    1,64524,381
    
    
    
    21,929
 22.
    
    Related Party Transactions
 a.
    
    Air Time Purchase Agreement between PLDT and AIL and Related Agreements
    F-78




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##### Table of Contents



b.
    
    Transactions with Major Stockholders, Directors and Officers
  1.
    
    Cooperation Agreement with First Pacific and certain affiliates, or the FP Parties, NTT
Communications and NTT DoCoMo
  
    
    certain contractual veto rights over a number of major decisions or transactions;
and
 
    
    rights relating to the representation on the Board of Directors of PLDT and Smart,
respectively, and any committees thereof.
  
    
    Restriction on Ownership of Shares of PLDT by NTT Communications and NTT DoCoMo.
Each of NTT Communications and NTT DoCoMo has agreed not to beneficially own, directly
or indirectly, in the aggregate with their respective subsidiaries and affiliates, more
than 21% of the issued and outstanding shares of PLDTs common stock. If such event
does occur, the FP Parties, as long as they own in the aggregate not less than 21% of
the issued and outstanding shares of PLDTs common stock, have the right to terminate
their respective rights and obligations under the Cooperation Agreement, the
Shareholders Agreement and the Stock Purchase and Strategic Investment Agreement.
  F-79




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##### Table of Contents




    
    Limitation on Competition.NTT Communications, NTT DoCoMo and their respective
subsidiaries are prohibited from investing in excess of certain thresholds in
businesses competing with PLDT in respect of customers principally located in the
Philippines and from using their assets in the Philippines in such businesses.
Moreover, if PLDT, Smart or any of Smarts subsidiaries intends to enter into any
contractual arrangement relating to certain competing businesses, PLDT is required to
provide, or to use reasonable efforts to procure that Smart or any of Smarts
subsidiaries provide, NTT Communications and NTT DoCoMo with the same opportunity to
enter into such agreement with PLDT or Smart or Smarts subsidiaries, as the case may
be.
 
    
    Business Cooperation.PLDT and NTT DoCoMo agreed in principle to collaborate with
each other on the business development, roll-out and use of a W-CDMA mobile
communication network. In addition, PLDT agreed, to the extent of the power conferred
by its direct or indirect shareholding in Smart, to procure that Smart will (i) become
a member of a strategic alliance group for international roaming and corporate sales
and services and (ii) enter into a business relationship concerning preferred roaming
and inter-operator tariff discounts with NTT DoCoMo.
 
    
    Additional Rights of NTT DoCoMo.Pursuant to amendments effected by the Cooperation
Agreement to the Stock Purchase and Strategic Investment Agreement and the Shareholders
Agreement, upon NTT Communications and NTT DoCoMo and their respective subsidiaries
owning in the aggregate 20% or more of PLDTs shares of common stock and for as long as
they continue to own in the aggregate at least 17.5% of PLDTs shares of common stock
then outstanding, NTT DoCoMo has additional rights under the Stock Purchase and
Strategic Investment Agreement and Shareholders Agreement, including that:
 1.
    
    NTT DoCoMo is entitled to nominate one additional NTT DoCoMo
nominee to the Board of Directors of each PLDT and Smart;
 2.
    
    PLDT must consult NTT DoCoMo no later than 30 days prior to the
first submission to the board of PLDT or certain of its committees of any
proposal of investment in an entity that would primarily engage in a business
that would be in direct competition or substantially the same business
opportunities, customer base, products or services with business carried on by
NTT DoCoMo, or which NTT DoCoMo has announced publicly an intention to carry on;
 3.
    
    PLDT must procure that Smart does not cease to carry on its
business, dispose of all of its assets, issue common shares, merge or
consolidate, or effect winding up or liquidation without PLDT first consulting
with NTT DoCoMo no later than 30 days prior to the first submission to the board
of PLDT or Smart, or certain of its committees; and
 4.
    
    PLDT must first consult with NTT DoCoMo no later than 30 days
prior to the first submission to the board of PLDT or certain of its committees
for the approval of any transfer by any member of the PLDT Group of Smart common
capital stock to any person who is not a member of the PLDT Group.
  
    
    Change in Control.Each of NTT Communications, NTT DoCoMo and the FP Parties agreed
that to the extent permissible under applicable laws and regulations of the Philippines
and other jurisdictions, subject to certain conditions, to cast its vote as a
shareholder in support of any resolution proposed by the Board of Directors of PLDT for
the purpose of safeguarding PLDT from any Hostile Transferee. A Hostile Transferee
is defined under the Cooperation Agreement to mean any person (other than NTT
Communications, NTT DoCoMo, First Pacific or any of their respective affiliates)
determined to be so by the PLDT Board of Directors and includes, without limitation, a
person who announces an intention to acquire, seeking to acquire or acquires 30% or
more of PLDT common shares then issued and outstanding from time-to-time or having (by
itself or together with itself) acquired 30% or more of the PLDT common shares
announces an intention to acquire, seeking to acquire or acquires a further 2% of such
PLDT common shares: (a) at a price per share which is less than the fair market
  F-80




---



##### Table of Contents



bona fide
 
    
    Termination.If NTT Communications, NTT DoCoMo or their respective subsidiaries
cease to own, in the aggregate, full legal and beneficial title to at least 10% of the
 shares of PLDTs common stock then issued and outstanding, their respective rights and
obligations under the Cooperation Agreement and the Shareholders Agreement will
terminate and the Strategic Arrangements (as defined in the Stock Purchase and
Strategic Investment Agreement) will terminate. If the FP Parties and their respective
subsidiaries cease to have, directly or indirectly, effective voting power in respect
of shares of PLDTs common stock representing at least 18.5% of the shares of PLDTs
common stock then issued and outstanding, their respective rights and obligations under
the Cooperation Agreement, the Stock Purchase and Strategic Investment Agreement, and
the Shareholders Agreement will terminate.
 2.
    
    Integrated i-mode Services Package Agreement between NTT DoCoMo and Smart
  3.
    
    Advisory Services Agreement between NTT DoCoMo and PLDT
  4.
    
    Other Agreements with NTT Communications and/or its Affiliates
  
    
    Advisory Services Agreement. On March 24, 2000, PLDT entered into an agreement
with NTT Communications, as amended on March 31, 2003, March 31, 2005 and June 16,
2006, under which NTT Communications provides PLDT with technical, marketing and other
consulting services for various business areas of PLDT starting April 1, 2000;
 
    
    Arcstar Licensing Agreement and Arcstar Service Provider Agreement.On March 24,
2000, PLDT entered into an agreement with NTT Worldwide Telecommunications Corporation
under which PLDT markets manages data and other services under NTT Communications
Arcstar brand to its corporate customers in the Philippines. PLDT also entered into
a Trade Name and Trademark Agreement with NTT Communications under which PLDT has been
given the right to use the trade name Arcstar and its
related trademark, logo and symbols, solely for the purpose of PLDTs marketing,
promotional and sales activities for the Arcstar services within the Philippines; and
  F-81




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##### Table of Contents




    
    Conventional International Telecommunications Services Agreement. On March 24,
2000, PLDT entered into an agreement with NTT Communications under which PLDT and NTT
Communications agreed to cooperative arrangements for conventional international
telecommunications services to enhance their respective international businesses.
  5.
    
    Agreements between Smart and Asia Link B.V., or ALBV
  6.
    
    Agreements Relating to Insurance Companies.
  Compensation of Key Officers of the PLDT Group
  2008
    
    
    2007
    
    
    2006(in million pesos)Short-term employee benefits
    
    
    538
    
    
    
    549
    
    
    
    541Share-based payments (Note 23)
    
    
    233
    
    
    
    299
    
    
    
    978Post-employment benefits (Note 23)
    
    
    24
    
    
    
    58
    
    
    
    30Total compensation paid to key officers of the PLDT Group
    
    
    795
    
    
    
    906
    
    
    
    1,549
    F-82




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##### Table of Contents



23.
    
    Share-based Payments and Employee Benefits
 Executive Stock Option Plan, or ESOP
   2008
    
    
    2007Balance at beginning of year
    
    
    26,758
    
    
    
    119,034Exercised shares*
    
    
    (8,417
    )
    
    
    (92,276
    )Balance at end of year
    
    
    18,341
    
    
    
    26,758
 *
    
    Based on the date of payment of exercised shares.   LTIP
     F-83




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##### Table of Contents



Note 3  Managements Use of Judgments, Estimates and Assumptions, Note 5  Income and Expenses Note 24  Contractual Obligations and Commercial Commitments
 Pension
 Defined Benefit Pension Plans
   2008
    
    
    2007
    
    
    2006(in million pesos)Change in benefit obligation:Defined benefit obligation at beginning of year
    
    
    10,160
    
    
    
    13,314
    
    
    
    7,652Interest cost
    
    
    834
    
    
    
    996
    
    
    
    895Current service cost
    
    
    600
    
    
    
    777
    
    
    
    479Actuarial (gain) loss on obligation
    
    
    (101
    )
    
    
    (4,788
    )
    
    
    4,826Actual benefits paid
    
    
    (576
    )
    
    
    (566
    )
    
    
    (594
    )Curtailment
    
    
    
    
    
    
    427
    
    
    
    Liabilities of newly acquired subsidiaries
    
    
    
    
    
    
    
    
    
    
    56Defined benefit obligation at end of year
    
    
    10,917
    
    
    
    10,160
    
    
    
    13,314Change in plan assets:Fair value of plan assets at beginning of year
    
    
    8,519
    
    
    
    5,768
    
    
    
    5,154Actual contributions
    
    
    914
    
    
    
    1,515
    
    
    
    320Expected return on plan assets
    
    
    865
    
    
    
    644
    
    
    
    541Actual benefits paid
    
    
    (575
    )
    
    
    (565
    )
    
    
    (590
    )Actuarial (loss) gain on plan assets
    
    
    (2,555
    )
    
    
    1,157
    
    
    
    343Fair value of plan assets at end of year
    
    
    7,168
    
    
    
    8,519
    
    
    
    5,768Unfunded status
    
    
    3,749
    
    
    
    1,641
    
    
    
    7,546Unrecognized net actuarial (loss) gain (Note 3)
    
    
    (1,126
    )
    
    
    1,344
    
    
    
    (4,657
    )Unrealized net transition obligation
    
    
    
    
    
    
    
    
    
    
    (1
    )Accrued benefit cost at end of year (Note 3)
    
    
    2,623
    
    
    
    2,985
    
    
    
    2,888Components of net periodic benefit cost:Interest cost
    
    
    834
    
    
    
    996
    
    
    
    895Current service cost
    
    
    600
    
    
    
    777
    
    
    
    479Net actuarial (gain) loss recognized for the year
    
    
    (11
    )
    
    
    89
    
    
    
    Expected return on plan assets
    
    
    (865
    )
    
    
    (644
    )
    
    
    (541
    )Curtailment loss
    
    
    
    
    
    
    416
    
    
    
    Amortizations of unrecognized net transition obligation
    
    
    
    
    
    
    1
    
    
    
    58Net periodic benefit cost for the year
    
    
    558
    
    
    
    1,635
    
    
    
    891
   F-84




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Average remaining working years of covered employee
    
    
    20
    
    
    
    21
    
    
    
    22Expected rate of return on plan assets
    
    
    9
    %
    
    
    10
    %
    
    
    10
    %Discount rate
    
    
    11
    %
    
    
    8
    %
    
    
    8
    %Rate of increase in compensation
    
    
    10
    %
    
    
    7
    %
    
    
    9
    %
     2008
    
    
    2007
    
    
    2006Investments in equity securities
    
    
    51
    %
    
    
    60
    %
    
    
    52
    %Investments in debt and fixed income securities
    
    
    27
    %
    
    
    21
    %
    
    
    23
    %Investments in real estate
    
    
    9
    %
    
    
    8
    %
    
    
    10
    %Investments in temporary placements
    
    
    8
    %
    
    
    5
    %
    
    
    7
    %Investments in mutual funds
    
    
    5
    %
    
    
    6
    %
    
    
    8
    %100
    %
    
    
    100
    %
    
    
    100
    %
  Defined Contribution Plan
    F-85




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006Investments in debt and fixed income securities
    
    
    68
    %
    
    
    57
    %
    
    
    68
    %Investments in equity securities
    
    
    23
    %
    
    
    35
    %
    
    
    29
    %Others
    
    
    9
    %
    
    
    8
    %
    
    
    3
    %100
    %
    
    
    100
    %
    
    
    100
    %
  Pension Benefit Cost
  2008
    
    
    2007
    
    
    2006(in million pesos)Expense recognized for defined benefit plans
    
    
    558
    
    
    
    1,635
    
    
    
    891Expense recognized for defined contribution plans
    
    
    167
    
    
    
    138
    
    
    
    112Total expense recognized for pension benefit costs (Notes 3 and 5)
    
    
    725
    
    
    
    1,773
    
    
    
    1,003
 24.
    
    Contractual Obligations and Commercial Commitments
 Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 Years
    
    
    5 years(in million pesos)December 31, 2008Long-term debt(1):
    
    
    99,363
    
    
    
    7,649
    
    
    
    31,500
    
    
    
    26,744
    
    
    
    33,470Principal
    
    
    77,934
    
    
    
    7,077
    
    
    
    19,916
    
    
    
    21,978
    
    
    
    28,963Interest
    
    
    21,429
    
    
    
    572
    
    
    
    11,584
    
    
    
    4,766
    
    
    
    4,507Lease obligations:
    
    
    7,235
    
    
    
    2,727
    
    
    
    1,608
    
    
    
    1,265
    
    
    
    1,635Operating lease
    
    
    7,164
    
    
    
    2,667
    
    
    
    1,601
    
    
    
    1,261
    
    
    
    1,635Finance lease
    
    
    71
    
    
    
    60
    
    
    
    7
    
    
    
    4
    
    
    
    Unconditional purchase obligations(2)
    
    
    762
    
    
    
    24
    
    
    
    167
    
    
    
    286
    
    
    
    285Other obligations:
    
    
    51,367
    
    
    
    33,714
    
    
    
    11,630
    
    
    
    1,816
    
    
    
    4,207Mandatory conversion and purchase of shares
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    Derivative financial liabilities(3):
    
    
    6,207
    
    
    
    108
    
    
    
    2,003
    
    
    
    1,768
    
    
    
    2,328Long-term currency swaps
    
    
    6,099
    
    
    
    
    
    
    
    2,003
    
    
    
    1,768
    
    
    
    2,328Forward foreign exchange contracts
    
    
    69
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    Long-term foreign currency options
    
    
    39
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    Various trade and other obligations:
    
    
    45,151
    
    
    
    33,597
    
    
    
    9,627
    
    
    
    48
    
    
    
    1,879Suppliers and contractors
    
    
    22,781
    
    
    
    14,131
    
    
    
    8,650
    
    
    
    
    
    
    
    Utilities and related expenses
    
    
    11,376
    
    
    
    11,346
    
    
    
    27
    
    
    
    1
    
    
    
    2Employee benefits
    
    
    2,925
    
    
    
    2,925
    
    
    
    
    
    
    
    
    
    
    
    Customers deposits
    
    
    2,251
    
    
    
    
    
    
    
    327
    
    
    
    47
    
    
    
    1,877Carriers
    
    
    1,780
    
    
    
    1,780
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    1,379
    
    
    
    1,379
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    2,659
    
    
    
    2,036
    
    
    
    623
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    158,727
    
    
    
    44,114
    
    
    
    44,905
    
    
    
    30,111
    
    
    
    39,597December 31, 2007Long-term debt(1):
    
    
    86,334
    
    
    
    11,441
    
    
    
    22,662
    
    
    
    21,218
    
    
    
    31,013Principal
    
    
    64,619
    
    
    
    6,872
    
    
    
    15,883
    
    
    
    16,267
    
    
    
    25,597Interest
    
    
    21,715
    
    
    
    4,569
    
    
    
    6,779
    
    
    
    4,951
    
    
    
    5,416Lease obligations:
    
    
    6,120
    
    
    
    2,558
    
    
    
    1,515
    
    
    
    1,040
    
    
    
    1,007Operating lease
    
    
    5,614
    
    
    
    2,067
    
    
    
    1,500
    
    
    
    1,040
    
    
    
    1,007Finance lease
    
    
    506
    
    
    
    491
    
    
    
    15
    
    
    
    
    
    
    
    Unconditional purchase obligations(2)
    
    
    776
    
    
    
    113
    
    
    
    41
    
    
    
    249
    
    
    
    373
  F-86




---



##### Table of Contents



Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 Years
    
    
    5 years(in million pesos)Other obligations:
    
    
    49,488
    
    
    
    28,023
    
    
    
    10,835
    
    
    
    4,294
    
    
    
    6,336Mandatory conversion and purchase of shares
    
    
    1,070
    
    
    
    1,070
    
    
    
    
    
    
    
    
    
    
    
    Derivative financial liabilities(3):
    
    
    11,638
    
    
    
    8
    
    
    
    2,938
    
    
    
    4,240
    
    
    
    4,452Long-term currency swaps
    
    
    11,170
    
    
    
    
    
    
    
    2,527
    
    
    
    4,191
    
    
    
    4,452Long-term foreign currency options
    
    
    318
    
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    Interest rate swap
    
    
    142
    
    
    
    
    
    
    
    93
    
    
    
    49
    
    
    
    Forward foreign exchange contracts
    
    
    8
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    Various trade and other obligations:
    
    
    36,780
    
    
    
    26,945
    
    
    
    7,897
    
    
    
    54
    
    
    
    1,884Suppliers and contractors
    
    
    16,371
    
    
    
    8,816
    
    
    
    7,555
    
    
    
    
    
    
    
    Utilities and related expenses
    
    
    10,532
    
    
    
    10,453
    
    
    
    75
    
    
    
    4
    
    
    
    Employee benefits
    
    
    2,778
    
    
    
    2,778
    
    
    
    
    
    
    
    
    
    
    
    Customers deposit
    
    
    2,201
    
    
    
    
    
    
    
    267
    
    
    
    50
    
    
    
    1,884Carriers
    
    
    2,187
    
    
    
    2,187
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    1,071
    
    
    
    1,071
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    1,640
    
    
    
    1,640
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    142,718
    
    
    
    42,135
    
    
    
    35,053
    
    
    
    26,801
    
    
    
    38,729
 (1)
    
    Before deducting unamortized debt discount and debt issuance costs.(2)
    
    Based on the Amended ATPA with AIL.(3)
    
    Gross liabilities before any offsetting application. Long-term Debt
 Note 18 Interest-bearing Financial Liabilities
 Operating Lease Obligations
 Agreement for Space Segment Services with ProtoStar Note 13  Investment
in Debt Securities
 Digital Passage Service Contracts.
 License Agreement with Mobius Management Systems (Australia) Pty Ltd., or Mobius.
 Other Operating Lease Obligations
 Finance Lease Obligations
 Note 18  Interest-bearing Financial Liabilities
  F-87




---



##### Table of Contents



Unconditional Purchase Obligations
 Note 22  Related Party Transactions
  Other Obligations
 Mandatory Conversion and Purchase of Shares Note 18  Interest-bearing
Financial Liabilities
   Derivative Financial Liabilities. Note 26  Financial Assets and Liabilities
 Various Trade and Other Obligations.
 Commercial Commitments
   F-88




---



##### Table of Contents



25.
    
    Provisions and Contingencies
 NTC Supervision and Regulation Fees, or SRF
   Local Business and Franchise Tax Assessments
     F-89




---



##### Table of Contents



Smart Communications, Inc. vs. City of Makati
 Smart vs. City of
Makati
    F-90




---



##### Table of Contents



Real Property Tax
 Smart Communications, Inc. vs. Central Board of Assessment Appeals, or CBAA, Local Board of
Assessment Appeals of Surigao City, and City Assessor of Surigao City
 Arbitration with Eastern Telecommunications Philippines, Inc., or ETPI
  26.
    
    Financial Assets and Liabilities
 Note 2  Summary of Significant Accounting Policies and Practices
  Designatedat fairvalue
    
    
    
    
    
    
    Derivatives
    
    
    Available-
    
    
    Liabilities
    
    
    Total
    
    
    Non-Loans
    
    
    Held-to-
    
    
    through
    
    
    Held-
    
    
    used
    
    
    for-sale
    
    
    carried at
    
    
    financial
    
    
    financialand
    
    
    maturity
    
    
    profit or
    
    
    for-
    
    
    for
    
    
    financial
    
    
    amortized
    
    
    assets and
    
    
    assets andreceivables
    
    
    investments
    
    
    loss
    
    
    trading
    
    
    hedging
    
    
    assets
    
    
    cost
    
    
    liabilities
    
    
    liabilities
    
    
    Total(in million pesos)Assets as at December 31, 2008Noncurrent:Property, plant and equipment  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,326
    
    
    
    160,326Investments in associates and
joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,174
    
    
    
    1,174Available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    131Investment in debt securities
    
    
    
    
    
    
    442
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    635
    
    
    
    
    
    
    
    635Investment properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    617
    
    
    
    617Goodwill and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,450
    
    
    
    10,450Deferred income tax assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,605
    
    
    
    9,605Prepayments  net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501
    
    
    
    2,501Advances and refundable deposits 
net of current portion
    
    
    840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    840
    
    
    
    246
    
    
    
    1,086Current:Cash and cash equivalents
    
    
    33,684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,684
    
    
    
    
    
    
    
    33,684Short-term investments
    
    
    5,964
    
    
    
    
    
    
    
    
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,670
    
    
    
    
    
    
    
    6,670Investment in debt securities
    
    
    
    
    
    
    1,656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,656
    
    
    
    
    
    
    
    1,656Trade and other receivables
    
    
    15,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,909
    
    
    
    
    
    
    
    15,909Inventories and supplies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,069
    
    
    
    2,069Derivative financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    56Current portion of prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,164
    
    
    
    4,164Current portion of advances and
refundable deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,825
    
    
    
    1,825Total assets
    
    
    56,397
    
    
    
    2,098
    
    
    
    193
    
    
    
    762
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    59,581
    
    
    
    192,977
    
    
    
    252,558
  F-91




---



##### Table of Contents



Designatedat fairvalue
    
    
    
    
    
    
    Derivatives
    
    
    Available-
    
    
    Liabilities
    
    
    Total
    
    
    Non-Loans
    
    
    Held-to-
    
    
    through
    
    
    Held-
    
    
    used
    
    
    for-sale
    
    
    carried at
    
    
    financial
    
    
    financialand
    
    
    maturity
    
    
    profit or
    
    
    for-
    
    
    for
    
    
    financial
    
    
    amortized
    
    
    assets and
    
    
    assets andreceivables
    
    
    investments
    
    
    loss
    
    
    trading
    
    
    hedging
    
    
    assets
    
    
    cost
    
    
    liabilities
    
    
    liabilities
    
    
    Total(in million pesos)Liabilities as at December 31, 2008Noncurrent:Interest bearing financial liabilities 
net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,910
    
    
    
    58,910
    
    
    
    
    
    
    
    58,910Deferred income tax liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,288
    
    
    
    1,288Derivative financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,761
    
    
    
    
    
    
    
    1,761Pension and other employee benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,467
    
    
    
    5,467Customers deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,251
    
    
    
    2,251
    
    
    
    
    
    
    
    2,251Deferred credits and other noncurrent
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,273
    
    
    
    9,273
    
    
    
    1,309
    
    
    
    10,582Current:Accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,294
    
    
    
    16,294
    
    
    
    1,974
    
    
    
    18,268Accrued expenses and other current
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,612
    
    
    
    18,612
    
    
    
    5,769
    
    
    
    24,381Derivative financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    87Provisions for assessments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,555
    
    
    
    1,555Current portion of interest-bearing
financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,080
    
    
    
    15,080
    
    
    
    
    
    
    
    15,080Dividends payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,379
    
    
    
    1,379
    
    
    
    
    
    
    
    1,379Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,580
    
    
    
    4,580Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,848
    
    
    
    
    
    
    
    
    
    
    
    121,799
    
    
    
    123,647
    
    
    
    21,942
    
    
    
    145,589Net assets and liabilities
    
    
    56,397
    
    
    
    2,098
    
    
    
    193
    
    
    
    (1,086
    )
    
    
    
    
    
    
    131
    
    
    
    (121,799
    )
    
    
    (64,066
    )
    
    
    171,035
    
    
    
    106,969Assets as at December 31, 2007Noncurrent:Property, plant and equipment  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,414
    
    
    
    159,414Investments in associates and
joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,351
    
    
    
    1,351Available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    143Investment in debt securities
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    273Investment properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    577
    
    
    
    577Goodwill and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,721
    
    
    
    11,721Deferred income tax assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,757
    
    
    
    13,757Derivative financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59Prepayments  net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,281
    
    
    
    2,281Advances and refundable deposits 
net of current portion
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    734
    
    
    
    296
    
    
    
    1,030Current:Cash and cash equivalents
    
    
    17,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,447
    
    
    
    
    
    
    
    17,447Short-term investments
    
    
    11,366
    
    
    
    
    
    
    
    
    
    
    
    2,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,415
    
    
    
    
    
    
    
    13,415Investment in debt securities
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,115
    
    
    
    
    
    
    
    1,115Trade and other receivables
    
    
    12,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,645
    
    
    
    
    
    
    
    12,645Inventories and supplies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,167
    
    
    
    1,167Derivative financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    897
    
    
    
    
    
    
    
    897Current portion of prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,368
    
    
    
    2,368Current portion of advances and
refundable deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    498
    
    
    
    498Total assets
    
    
    43,307
    
    
    
    273
    
    
    
    
    
    
    
    2,335
    
    
    
    670
    
    
    
    143
    
    
    
    
    
    
    
    46,728
    
    
    
    193,430
    
    
    
    240,158Liabilities as at December 31, 2007Noncurrent:Interest bearing financial liabilities 
net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,387
    
    
    
    53,387
    
    
    
    
    
    
    
    53,387Deferred income tax liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,066
    
    
    
    2,066Derivative financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    530
    
    
    
    7,211
    
    
    
    
    
    
    
    
    
    
    
    7,741
    
    
    
    
    
    
    
    7,741Pension and other employee benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,540
    
    
    
    4,540Customers deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,201
    
    
    
    2,201
    
    
    
    
    
    
    
    2,201Deferred credits and other noncurrent
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,608
    
    
    
    7,608
    
    
    
    2,024
    
    
    
    9,632Current:Accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,605
    
    
    
    10,605
    
    
    
    1,648
    
    
    
    12,253Accrued expenses and other current
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,570
    
    
    
    16,570
    
    
    
    5,359
    
    
    
    21,929Derivative financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    242
    
    
    
    
    
    
    
    242Provisions for assessments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,112
    
    
    
    1,112Current portion of interest-bearing
financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,764
    
    
    
    8,764
    
    
    
    
    
    
    
    8,764Dividends payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,071
    
    
    
    1,071
    
    
    
    
    
    
    
    1,071Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,875
    
    
    
    2,875Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    767
    
    
    
    7,216
    
    
    
    
    
    
    
    100,206
    
    
    
    108,189
    
    
    
    19,624
    
    
    
    127,813Net assets and liabilities
    
    
    43,307
    
    
    
    273
    
    
    
    
    
    
    
    1,568
    
    
    
    (6,546
    )
    
    
    143
    
    
    
    (100,206
    )
    
    
    (61,461
    )
    
    
    173,806
    
    
    
    112,345
  F-92




---



##### Table of Contents



Carrying Value
    
    
    Fair Value2008
    
    
    2007
    
    
    2008
    
    
    2007(in million pesos)Noncurrent Financial AssetsAvailable-for-sale financial assets
    
    
    131
    
    
    
    143
    
    
    
    131
    
    
    
    143Investment in debt securities
    
    
    635
    
    
    
    273
    
    
    
    629
    
    
    
    283Derivative financial assets:Long-term foreign currency options
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59Advances and refundable deposits  net of current portion
    
    
    840
    
    
    
    734
    
    
    
    728
    
    
    
    657Total noncurrent financial assets
    
    
    1,606
    
    
    
    1,209
    
    
    
    1,488
    
    
    
    1,142Current Financial AssetsCash and cash equivalents:Cash on hand and in banks
    
    
    4,164
    
    
    
    3,944
    
    
    
    4,164
    
    
    
    3,944Temporary cash investments
    
    
    29,520
    
    
    
    13,503
    
    
    
    29,520
    
    
    
    13,503Short-term investments
    
    
    6,670
    
    
    
    13,415
    
    
    
    6,670
    
    
    
    13,415Investment in debt securities
    
    
    1,656
    
    
    
    1,115
    
    
    
    1,656
    
    
    
    1,115Trade and other receivables:Foreign administrations
    
    
    5,477
    
    
    
    4,324
    
    
    
    5,477
    
    
    
    4,324Retail subscribers
    
    
    3,904
    
    
    
    3,861
    
    
    
    3,904
    
    
    
    3,861Dealers, agents and others
    
    
    2,960
    
    
    
    917
    
    
    
    2,960
    
    
    
    917Corporate subscribers
    
    
    2,865
    
    
    
    2,040
    
    
    
    2,865
    
    
    
    2,040Domestic carriers
    
    
    703
    
    
    
    1,503
    
    
    
    703
    
    
    
    1,503Derivative financial assets:Foreign currency options
    
    
    38
    
    
    
    
    
    
    
    38
    
    
    
    Forward foreign exchange contracts
    
    
    16
    
    
    
    863
    
    
    
    16
    
    
    
    863Bifurcated embedded derivatives
    
    
    2
    
    
    
    34
    
    
    
    2
    
    
    
    34Total current financial assets
    
    
    57,975
    
    
    
    45,519
    
    
    
    57,975
    
    
    
    45,519Total Financial Assets
    
    
    59,581
    
    
    
    46,728
    
    
    
    59,463
    
    
    
    46,661Noncurrent Financial LiabilitiesInterest-bearing financial liabilities:Long-term debt  net of current portion
    
    
    58,899
    
    
    
    53,372
    
    
    
    57,058
    
    
    
    58,044Obligations under finance lease
    
    
    11
    
    
    
    15
    
    
    
    11
    
    
    
    15Derivative financial liabilities:Long-term currency swap
    
    
    1,761
    
    
    
    7,211
    
    
    
    1,761
    
    
    
    7,211Long-term foreign currency options
    
    
    
    
    
    
    390
    
    
    
    
    
    
    
    390Interest rate swap
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    140Customers deposits
    
    
    2,251
    
    
    
    2,201
    
    
    
    1,476
    
    
    
    1,481Deferred credits and other noncurrent liabilities
    
    
    9,273
    
    
    
    7,608
    
    
    
    7,959
    
    
    
    6,553Total noncurrent financial liabilities
    
    
    72,195
    
    
    
    70,937
    
    
    
    68,265
    
    
    
    73,834Current Financial LiabilitiesAccounts payable:Suppliers and contractors
    
    
    14,131
    
    
    
    8,493
    
    
    
    14,131
    
    
    
    8,493Carriers
    
    
    1,780
    
    
    
    1,843
    
    
    
    1,780
    
    
    
    1,843Others
    
    
    383
    
    
    
    269
    
    
    
    383
    
    
    
    269Accrued expenses and other current liabilities:Utilities and related expenses
    
    
    13,385
    
    
    
    10,780
    
    
    
    13,385
    
    
    
    10,780Employee benefits
    
    
    2,925
    
    
    
    2,795
    
    
    
    2,925
    
    
    
    2,795Interests and other related costs
    
    
    1,212
    
    
    
    1,234
    
    
    
    1,212
    
    
    
    1,234Others
    
    
    1,090
    
    
    
    1,761
    
    
    
    1,090
    
    
    
    1,761Derivative financial liabilities:Foreign currency options
    
    
    44
    
    
    
    
    
    
    
    44
    
    
    
    Forward foreign exchange contracts
    
    
    31
    
    
    
    7
    
    
    
    31
    
    
    
    7Bifurcated embedded derivatives
    
    
    11
    
    
    
    
    
    
    
    11
    
    
    
    Bifurcated equity call options
    
    
    1
    
    
    
    231
    
    
    
    1
    
    
    
    231Interest rate swap
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Interest-bearing financial liabilities:Notes payable
    
    
    553
    
    
    
    493
    
    
    
    553
    
    
    
    493Current portion of long-term debt
    
    
    14,459
    
    
    
    6,775
    
    
    
    14,459
    
    
    
    6,775Obligations under finance lease
    
    
    59
    
    
    
    481
    
    
    
    59
    
    
    
    481Preferred stock subject to mandatory redemption
    
    
    9
    
    
    
    1,015
    
    
    
    9
    
    
    
    1,015Dividends payable
    
    
    1,379
    
    
    
    1,071
    
    
    
    1,379
    
    
    
    1,071Total current financial liabilities
    
    
    51,452
    
    
    
    37,252
    
    
    
    51,452
    
    
    
    37,252Total Financial Liabilities
    
    
    123,647
    
    
    
    108,189
    
    
    
    119,717
    
    
    
    111,086
  F-93




---



##### Table of Contents



Long-term financial assets and liabilities:
 Type
    
    Fair Value AssumptionsNoncurrent portion of advances and refundable deposits
    
    Estimated fair value
is based on the
discounted values of
future cash flows
using the applicable
zero coupon rates
plus credit spread.Fixed rate loans:U.S. dollar notes/convertible debt
    
    Quoted market price.Other loans in all other currencies
    
    Estimated fair value
is based on the
discounted value of
future cash flows
using the applicable
Commercial Interest
Reference Rate and
Philippine Dealing
System Treasury
Fixing rates for
similar types of
loans.Variable rate loans
    
    The carrying value
approximates fair
value because of
recent and regular
repricing based on
market conditions.Customers deposits and deferred credits and other noncurrent liabilities
    
    Estimated fair value
is based on the
discounted values of
future cash flows
using the applicable
zero coupon rates
plus credit spread.
 Preferred stock subject to mandatory redemption:
  Foreign currency options:
 Forward foreign exchange contracts, bifurcated foreign currency forwards, foreign currency and
interest rate swaps:
 Bifurcated equity call options:
 Available-for-sale financial assets:
 Investment in debt securities:
  Derivative Financial Instruments
   F-94




---



##### Table of Contents



2008
    
    
    2007Mark-to-market Gains
    
    
    
    
    
    Mark-to-marketMaturity
    
    
    Notional
    
    
    (Losses)
    
    
    Notional
    
    
    Gains (Losses)(in millions)PLDTTransactions not designated as hedges:Currency swaps
    
    
    2017
    
    
    US$
    295
    
    
    Php
    (1,197
    )
    
    US$
    300
    
    
    Php
    (3,714
    )2012
    
    
    
    159
    
    
    
    (564
    )
    
    
    250
    
    
    
    (3,496
    )Foreign currency bought call options
    
    
    2009
    
    
    
    57
    
    
    
    (16
    )
    
    
    136
    
    
    
    (390
    )Foreign currency sold call options
    
    
    2009
    
    
    
    57
    (1)
    
    
    10
    
    
    
    136
    (1)
    
    
    58Forward foreign exchange contracts
    
    
    2009
    
    
    
    57
    
    
    
    (31
    )
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    21Interest rate swap(2)
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    (144
    )Bifurcated equity call options
    
    
    2009
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )2008
    
    
    
    
    
    
    
    
    
    1
    share
    
    
    (229
    )Cash flow hedges:Forward foreign exchange contracts
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    296(1,799
    )
    
    
    
    
    
    
    (7,600
    )SMARTTransactions not designated as hedges:Bifurcated embedded derivatives
    
    
    2009
    
    
    
    3
    
    
    
    (10
    )
    
    
    5
    
    
    
    34Forward foreign exchange contracts:On loan proceeds
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    100On gross U.S. dollar revenues
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    70Cash flow hedges:Forward foreign exchange contracts
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    171
    
    
    
    265Php
    (10
    )
    
    
    
    
    
    Php
    469ePLDTTransactions not designated as hedges:Forward foreign exchange contracts
    
    
    2009
    
    
    US$
    5
    
    
    Php
    16
    
    
    US$
    
    
    
    Php
    Bifurcated embedded derivatives
    
    
    2012
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    Cash flow hedges:Forward foreign exchange contracts
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    10417
    
    
    
    
    
    
    
    104Net liabilities
    
    
    
    
    
    
    
    
    
    Php
    (1,792
    )
    
    
    
    
    
    Php
    (7,027
    )
 (1)
    
    Foreign currency sold call options based on the same notional amount as the
foreign currency bought call options.
 (2)
    
    The original term of the interest rate swap agreement is until 2012 but it was
fully terminated in March 2008.
 2008
    
    
    2007(in million pesos)Presented as:Noncurrent assets
    
    
    
    
    
    
    59Current assets
    
    
    56
    
    
    
    897Noncurrent liabilities
    
    
    (1,761
    )
    
    
    (7,741
    )Current liabilities
    
    
    (87
    )
    
    
    (242
    )Net liabilities
    
    
    (1,792
    )
    
    
    (7,027
    )
   F-95




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006(in million pesos)Net mark-to-market losses at end of year
    
    
    (1,792
    )
    
    
    (7,027
    )
    
    
    (6,499
    )Net mark-to-market losses at beginning of year
    
    
    (7,027
    )
    
    
    (6,499
    )
    
    
    (3,284
    )Net change
    
    
    5,235
    
    
    
    (528
    )
    
    
    (3,215
    )Net losses on cash flow hedges charged to cumulative translation
adjustments
    
    
    662
    
    
    
    (570
    )
    
    
    Effective portion recognized in the profit or loss for the cash flow hedge
    
    
    286
    
    
    
    
    
    
    
    Ineffective portion recognized in the profit or loss for the cash flow
hedge
    
    
    118
    
    
    
    (4
    )
    
    
    Hedge cost
    
    
    (819
    )
    
    
    (1,125
    )
    
    
    (1,446
    )Settlements, accretion and conversion
    
    
    (2,367
    )
    
    
    (622
    )
    
    
    (3,643
    )Net gains (losses) on derivative financial instruments
    
    
    3,115
    
    
    
    (2,849
    )
    
    
    (8,304
    )
 PLDT
 Transactions Not Designated as Hedges
  Currency Swaps
       F-96




---



##### Table of Contents



Foreign Currency Options
    Forward Foreign Exchange Contracts
    Interest Rate Swap
   F-97




---



##### Table of Contents



Bifurcated Equity Call Options
 Note 18  Interest-bearing Financial Liabilities
 Cash Flow Hedges
 Forward Foreign Exchange Contracts
    Smart
 Transactions Not Designated as Hedges
     F-98




---



##### Table of Contents



Cash Flow Hedges
    
 ePLDT
 Transactions Not Designated as Hedges
 Forward Foreign Exchange Contracts
   Cash Flow Hedges
     F-99




---



##### Table of Contents



Financial Risk Management Objectives and Policies
  Liquidity Risk
    Note 24  Contractual Obligations and
Commercial Commitments
 Foreign Currency Exchange Risk
   F-100




---



##### Table of Contents



2008
    
    
    2007U.S. Dollar
    
    
    Php(1)
    
    
    U.S. Dollar
    
    
    Php(2)(in millions)Noncurrent Financial AssetDerivative financial assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    59Current Financial AssetsCash and cash equivalents
    
    
    101
    
    
    
    4,794
    
    
    
    93
    
    
    
    3,853Short-term investments
    
    
    21
    
    
    
    986
    
    
    
    56
    
    
    
    2,324Trade and other receivables
    
    
    207
    
    
    
    9,880
    
    
    
    227
    
    
    
    9,400Derivative financial assets
    
    
    1
    
    
    
    56
    
    
    
    22
    
    
    
    897Total current financial assets
    
    
    330
    
    
    
    15,716
    
    
    
    398
    
    
    
    16,474Total Financial Assets
    
    
    330
    
    
    
    15,716
    
    
    
    399
    
    
    
    16,533Noncurrent Financial LiabilitiesInterest-bearing financial liabilities  net of current portion
    
    
    925
    
    
    
    44,064
    
    
    
    1,126
    
    
    
    46,612Derivative financial liabilities
    
    
    37
    
    
    
    1,761
    
    
    
    187
    
    
    
    7,741Total noncurrent financial liabilities
    
    
    962
    
    
    
    45,825
    
    
    
    1,313
    
    
    
    54,353Current Financial LiabilitiesAccounts payable
    
    
    143
    
    
    
    6,820
    
    
    
    160
    
    
    
    6,614Accrued expenses and other current liabilities
    
    
    93
    
    
    
    4,447
    
    
    
    95
    
    
    
    3,958Derivative financial liabilities
    
    
    2
    
    
    
    87
    
    
    
    6
    
    
    
    242Current portion of interest-bearing financial liabilities
    
    
    301
    
    
    
    14,331
    
    
    
    187
    
    
    
    7,748Total current financial liabilities
    
    
    539
    
    
    
    25,685
    
    
    
    448
    
    
    
    18,562Total Financial Liabilities
    
    
    1,501
    
    
    
    71,510
    
    
    
    1,761
    
    
    
    72,915
 (1)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso was
Php47.647 to US$1.00, the peso-dollar rate as quoted through the Philippine Dealing System
as at December 31, 2008.(2)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso was
Php41.411 to US$1.00, the peso-dollar rate as quoted through the Philippine Dealing System
as at December 31, 2007.    F-101




---



##### Table of Contents



Interest Rate Risk
    As at December 31, 2008
 Discount/In U.S. Dollars
    
    
    
    
    
    
    DebtIssuance
    
    
    Carrying
    
    
    Fair ValueOver 5
    
    
    
    
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    

2-3 years
    
    

3-5 years
    
    
    years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. Dollar
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    1,258
    
    
    
    
    
    
    
    1,258
    
    
    
    26
    
    
    
    1,258Interest rate
    
    0.10% to 4.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    2,682
    
    
    
    
    
    
    
    2,682
    
    
    
    56
    
    
    
    2,682Interest rate
    
    0.25% to 3.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    15,714
    
    
    
    
    
    
    
    15,714
    
    
    
    330
    
    
    
    15,714Interest rate
    
    0.30% to 7.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    13,806
    
    
    
    
    
    
    
    13,806
    
    
    
    290
    
    
    
    13,806Interest rate
    
    2% to 7.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    985
    
    
    
    
    
    
    
    985
    
    
    
    21
    
    
    
    985Interest rate
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    119
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119
    
    
    
    5,685
    
    
    
    
    
    
    
    5,685
    
    
    
    119
    
    
    
    5,685Interest rate
    
    
    6.69
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesPhilippine Peso
    
    
    35
    
    
    
    
    
    
    
    4
    
    
    
    9
    
    
    
    
    
    
    
    48
    
    
    
    2,291
    
    
    
    
    
    
    
    2,291
    
    
    
    48
    
    
    
    2,285Interest Rate
    
    
    6.3194
    %
    
    
    
    
    
    
    6.125
    %
    
    6.875% to 7%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    877
    
    
    
    
    
    
    
    4
    
    
    
    9
    
    
    
    
    
    
    
    890
    
    
    
    42,421
    
    
    
    
    
    
    
    42,421
    
    
    
    890
    
    
    
    42,415Liabilities:Long-term DebtFixed RateUS$ Notes
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    295
    
    
    
    568
    
    
    
    27,061
    
    
    
    368
    
    
    
    26,693
    
    
    
    559
    
    
    
    26,607Interest rate
    
    
    10.50
    %
    
    
    
    
    
    
    
    
    
    
    11.375
    %
    
    
    8.35
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$ Fixed Loans
    
    
    22
    
    
    
    50
    
    
    
    11
    
    
    
    3
    
    
    
    280
    
    
    
    366
    
    
    
    17,444
    
    
    
    4,046
    
    
    
    13,398
    
    
    
    252
    
    
    
    12,030Interest rate
    
    4.49% to 6%
    
    3.79% to 4.70%
    
    3.79% to 4.70%
    
    
    3.79
    %
    
    
    2.25
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    3
    
    
    
    1
    
    
    
    182
    
    
    
    33
    
    
    
    219
    
    
    
    10,420
    
    
    
    79
    
    
    
    10,341
    
    
    
    209
    
    
    
    9,955Interest rate
    
    
    
    
    
    6.50% to 8.4346%
    
    6.50% to 8.4346%
    
    5.625% to 8.4346%
    
    6.125% to 6.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    13
    
    
    
    215
    
    
    
    59
    
    
    
    77
    
    
    
    
    
    
    
    364
    
    
    
    17,339
    
    
    
    67
    
    
    
    17,272
    
    
    
    363
    
    
    
    17,272Interest rate
    
    US$LIBOR + 1.75%
    
    US$LIBOR + 0.42%
    
    US$LIBOR + 0.42%
    
    US$LIBOR + 0.42%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    to 2.75%
    
    to 2.50%
    
    to 0.815%
    
    to 0.75%Philippine Peso
    
    
    
    
    
    
    47
    
    
    
    32
    
    
    
    40
    
    
    
    
    
    
    
    119
    
    
    
    5,670
    
    
    
    16
    
    
    
    5,654
    
    
    
    119
    
    
    
    5,653Interest rate
    
    
    
    
    
    MART1 + 0.75% to
    
    MART1 + 0.75%; PDST
    
    PDST  F 1.0% -
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.70%;
    
    
    
     F 1.0% - 1.50
    %
    
    
    1.50
    %PDST  F 1.0% -1.50
    %149
    
    
    
    315
    
    
    
    103
    
    
    
    461
    
    
    
    608
    
    
    
    1,636
    
    
    
    77,934
    
    
    
    4,576
    
    
    
    73,358
    
    
    
    1,502
    
    
    
    71,517
 F-102




---



##### Table of Contents



As at December 31, 2007
 Discount/In U.S. Dollars
    
    
    
    
    
    
    DebtIssuance
    
    
    Carrying
    
    
    Fair ValueOver 5
    
    
    In U.S.
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    

2-3 years
    
    
    3-5 years
    
    
    years
    
    
    Dollar
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. dollar
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    1,249
    
    
    
    
    
    
    
    1,249
    
    
    
    30
    
    
    
    1,249Interest rate
    
    0.22% to 4.40%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    2,409
    
    
    
    
    
    
    
    2,409
    
    
    
    58
    
    
    
    2,409Interest rate
    
    0.25% to 4.25%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    10,572
    
    
    
    
    
    
    
    10,572
    
    
    
    255
    
    
    
    10,572Interest rate
    
    2% to 5.25%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    2,931
    
    
    
    
    
    
    
    2,931
    
    
    
    71
    
    
    
    2,931Interest rate
    
    1.75% to 6.05%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    2,312
    
    
    
    
    
    
    
    2,312
    
    
    
    56
    
    
    
    2,312Interest rate
    
    
    7.65
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    11,103
    
    
    
    
    
    
    
    11,103
    
    
    
    268
    
    
    
    11,103Interest rate
    
    
    6.06
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesU.S. Dollar
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    273
    
    
    
    
    
    
    
    273
    
    
    
    7
    
    
    
    283Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.875
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    1,115
    
    
    
    
    
    
    
    1,115
    
    
    
    27
    
    
    
    1,115Interest rate
    
    
    11.29
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    765
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    772
    
    
    
    31,964
    
    
    
    
    
    
    
    31,964
    
    
    
    772
    
    
    
    31,974Liabilities:Long-term DebtFixed RateUS$ Notes
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    250
    
    
    
    300
    
    
    
    686
    
    
    
    28,403
    
    
    
    387
    
    
    
    28,016
    
    
    
    770
    
    
    
    31,901Interest rate
    
    
    
    
    
    
    10.500
    %
    
    
    
    
    
    
    11.375
    %
    
    
    8.350
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$ Fixed Loans
    
    
    55
    
    
    
    46
    
    
    
    23
    
    
    
    9
    
    
    
    280
    
    
    
    413
    
    
    
    17,123
    
    
    
    4,016
    
    
    
    13,107
    
    
    
    342
    
    
    
    14,0784.49% toInterest rate
    
    
    8.9
    %
    
    4.49% to 6.0%
    
    4.515% to 4.7%
    
    
    4.700
    %
    
    
    2.250
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    38
    
    
    
    131
    
    
    
    5,420
    
    
    
    33
    
    
    
    5,387
    
    
    
    125
    
    
    
    5,168Interest rate
    
    
    7.090
    %
    
    
    6.500
    %
    
    
    6.500
    %
    
    5.625% to 6.50%
    
    6.125% to 6.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    98
    
    
    
    92
    
    
    
    58
    
    
    
    28
    
    
    
    
    
    
    
    276
    
    
    
    11,445
    
    
    
    28
    
    
    
    11,417
    
    
    
    276
    
    
    
    11,445Interest rate
    
    0.05% to 2.75% over US$LIBOR
    
    0.05% to 2.75% over
    
    0.05% to 2.5% over
    
    0.75% to 0.815%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$LIBOR
    
    US$LIBOR
    
    over US$LIBORPhilippine Peso
    
    
    14
    
    
    
    14
    
    
    
    13
    
    
    
    13
    
    
    
    
    
    
    
    54
    
    
    
    2,228
    
    
    
    8
    
    
    
    2,220
    
    
    
    54
    
    
    
    2,227Interest rate
    
    MART1 + 0.75% to 5.70%
    
    MART1 + 0.75% to
    
    MART1 + 0.75% to
    
    MART1 + 0.75%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.70
    %
    
    
    5.70
    %167
    
    
    
    288
    
    
    
    94
    
    
    
    393
    
    
    
    618
    
    
    
    1,560
    
    
    
    64,619
    
    
    
    4,472
    
    
    
    60,147
    
    
    
    1,567
    
    
    
    64,819Interest
Rate Swap (fixed to floating)U.S. Dollar (US$31 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.5
    
    
    
    144
    
    
    
    
    
    
    
    144
    
    
    
    3.5
    
    
    
    144Japanese Yen
(JP¥3,759 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed Rate on US$ notional
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    11.375
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable
Rate on JP¥ notional
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    8.11% over LIBOR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.5
    
    
    
    144
    
    
    
    
    
    
    
    144
    
    
    
    3.5
    
    
    
    144
 F-103




---



##### Table of Contents



Credit Risk
    F-104




---



##### Table of Contents



Gross Maximum Exposure(1)
    
    
    Net Maximum Exposure(2)2008
    
    
    2007
    
    
    2008
    
    
    2007(in million pesos)Loans and receivables:Advances and refundable deposits
    
    
    840
    
    
    
    734
    
    
    
    840
    
    
    
    734Cash and cash equivalents
    
    
    33,684
    
    
    
    17,447
    
    
    
    33,621
    
    
    
    17,406Short-term investments
    
    
    5,964
    
    
    
    11,366
    
    
    
    5,963
    
    
    
    11,366Investment in debt securities
    
    
    
    
    
    
    1,115
    
    
    
    
    
    
    
    1,115Foreign administrations
    
    
    5,477
    
    
    
    4,324
    
    
    
    5,477
    
    
    
    4,324Retail subscribers
    
    
    3,904
    
    
    
    3,861
    
    
    
    3,877
    
    
    
    3,861Dealers, agents and others
    
    
    2,960
    
    
    
    917
    
    
    
    2,958
    
    
    
    917Corporate subscribers
    
    
    2,865
    
    
    
    2,040
    
    
    
    2,709
    
    
    
    2,040Domestic carriers
    
    
    703
    
    
    
    1,503
    
    
    
    703
    
    
    
    1,503Held-to-maturity investments:Investment in debt securities
    
    
    2,098
    
    
    
    273
    
    
    
    2,098
    
    
    
    273Designated at fair value through profit or loss:Investment in debt securities
    
    
    193
    
    
    
    
    
    
    
    193
    
    
    
    Available-for-sale financial assets
    
    
    131
    
    
    
    143
    
    
    
    131
    
    
    
    143Held-for-trading:Short-term investments
    
    
    706
    
    
    
    2,049
    
    
    
    706
    
    
    
    2,049Foreign currency options
    
    
    38
    
    
    
    59
    
    
    
    38
    
    
    
    59Forward foreign exchange contracts
    
    
    16
    
    
    
    193
    
    
    
    16
    
    
    
    193Bifurcated embedded derivatives
    
    
    2
    
    
    
    34
    
    
    
    2
    
    
    
    34Derivatives used for hedging:Forward foreign exchange contracts
    
    
    
    
    
    
    670
    
    
    
    
    
    
    
    670Total
    
    
    59,581
    
    
    
    46,728
    
    
    
    59,332
    
    
    
    46,687
 (1)
    
    Gross financial assets before taking into account any collateral held or other
credit enhancements or offsetting arrangements.(2)
    
    Gross financial assets after taking into account any collateral held or other
credit enhancements or offsetting arrangements or deposit insurance.  Neither past duenor impaired
    
    
    Past due butTotal
    
    
    Class A(1)
    
    
    Class B(2)
    
    
    not impaired
    
    
    Impaired(in million pesos)December 31, 2008Loans and receivables:Advances and refundable deposits
    
    
    840
    
    
    
    703
    
    
    
    137
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    33,684
    
    
    
    32,979
    
    
    
    705
    
    
    
    
    
    
    
    Short-term investments
    
    
    5,964
    
    
    
    5,680
    
    
    
    284
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,188
    
    
    
    858
    
    
    
    272
    
    
    
    1,663
    
    
    
    6,395Retail subscribers
    
    
    8,993
    
    
    
    1,457
    
    
    
    550
    
    
    
    1,897
    
    
    
    5,089Foreign administrations
    
    
    5,916
    
    
    
    2,602
    
    
    
    956
    
    
    
    1,919
    
    
    
    439Dealers, agents and others
    
    
    3,271
    
    
    
    2,114
    
    
    
    444
    
    
    
    402
    
    
    
    311Domestic carriers
    
    
    877
    
    
    
    84
    
    
    
    3
    
    
    
    616
    
    
    
    174Held-to-maturity investments:Investment in debt securities
    
    
    2,098
    
    
    
    2,098
    
    
    
    
    
    
    
    
    
    
    
    Designated at fair value through profit or loss:Investment in debt securities
    
    
    193
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    131
    
    
    
    103
    
    
    
    28
    
    
    
    
    
    
    
    Held-for-trading(3):Short-term investments
    
    
    706
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency options
    
    
    38
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign currency options
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    71,917
    
    
    
    49,633
    
    
    
    3,379
    
    
    
    6,497
    
    
    
    12,408December 31, 2007Loans and receivables:Advances and refundable deposits
    
    
    734
    
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    17,447
    
    
    
    15,150
    
    
    
    2,297
    
    
    
    
    
    
    
    Short-term investments
    
    
    11,366
    
    
    
    10,637
    
    
    
    729
    
    
    
    
    
    
    
    Investment in debt securities
    
    
    1,115
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,179
    
    
    
    1,389
    
    
    
    637
    
    
    
    1,823
    
    
    
    4,330Corporate subscribers
    
    
    7,915
    
    
    
    641
    
    
    
    187
    
    
    
    1,166
    
    
    
    5,921Foreign administrations
    
    
    5,371
    
    
    
    1,828
    
    
    
    861
    
    
    
    1,635
    
    
    
    1,047Dealers, agents and others
    
    
    2,151
    
    
    
    983
    
    
    
    315
    
    
    
    196
    
    
    
    657Domestic carriers
    
    
    1,884
    
    
    
    119
    
    
    
    11
    
    
    
    1,373
    
    
    
    381Held-to-maturity investments:Investment in debt securities
    
    
    273
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    143
    
    
    
    113
    
    
    
    30
    
    
    
    
    
    
    
    
  F-105




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##### Table of Contents



Neither past duenor impaired
    
    
    Past due butTotal
    
    
    Class A(1)
    
    
    Class B(2)
    
    
    not impaired
    
    
    Impaired(in million pesos)Held-for-trading(3):Short-term investments
    
    
    2,049
    
    
    
    2,049
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign exchange contracts
    
    
    193
    
    
    
    190
    
    
    
    3
    
    
    
    
    
    
    
    Foreign currency options
    
    
    59
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    Derivatives used-for-hedging(3):Forward foreign exchange contracts
    
    
    670
    
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    59,583
    
    
    
    35,984
    
    
    
    5,070
    
    
    
    6,193
    
    
    
    12,336
 (1)
    
    This includes low risk and good paying customer accounts with no history of
account treatment for a defined period and no overdue accounts as at report date; and
deposits or placements to counterparties with good credit rating or bank standing financial
review;(2)
    
    This includes medium risk and average paying customer accounts with no overdue
accounts as at report date, and new customer accounts for which sufficient credit history
has not been established; and deposits or placements to counterparties not classified as
Class A; and(3)
    
    Gross receivables from counterparties, before any offsetting arrangements.  Neither past due
    
    
    Past due but not impairedTotal
    
    
    nor impaired
    
    
    1-60 days
    
    
    61-90 days
    
    
    Over 91 days
    
    
    Impaired(in million pesos)DECEMBER 31, 2008Loans and receivables:Advances and refundable deposits
    
    
    840
    
    
    
    840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    33,684
    
    
    
    33,684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    5,964
    
    
    
    5,964
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,188
    
    
    
    1,130
    
    
    
    1,024
    
    
    
    313
    
    
    
    326
    
    
    
    6,395Retail subscribers
    
    
    8,993
    
    
    
    2,007
    
    
    
    1,338
    
    
    
    266
    
    
    
    293
    
    
    
    5,089Foreign administrations
    
    
    5,916
    
    
    
    3,558
    
    
    
    1,043
    
    
    
    550
    
    
    
    326
    
    
    
    439Dealers, agents and others
    
    
    3,271
    
    
    
    2,558
    
    
    
    48
    
    
    
    9
    
    
    
    345
    
    
    
    311Domestic carriers
    
    
    877
    
    
    
    87
    
    
    
    80
    
    
    
    87
    
    
    
    449
    
    
    
    174Held-to-maturity investments:Investment in debt securities
    
    
    2,098
    
    
    
    2,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Designated at fair value through profit or loss:Investment in debt securities
    
    
    193
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    131
    
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Held-for-trading:Short-term investments
    
    
    706
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign currency options
    
    
    38
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign exchange contracts
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,917
    
    
    
    53,012
    
    
    
    3,533
    
    
    
    1,225
    
    
    
    1,739
    
    
    
    12,408DECEMBER 31, 2007Loans and receivables:Advances and refundable deposits
    
    
    734
    
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    17,447
    
    
    
    17,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    11,366
    
    
    
    11,366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in debt securities
    
    
    1,115
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,179
    
    
    
    2,026
    
    
    
    1,513
    
    
    
    231
    
    
    
    79
    
    
    
    4,330Corporate subscribers
    
    
    7,915
    
    
    
    828
    
    
    
    715
    
    
    
    133
    
    
    
    318
    
    
    
    5,921Foreign administrations
    
    
    5,371
    
    
    
    2,689
    
    
    
    902
    
    
    
    316
    
    
    
    417
    
    
    
    1,047Dealers, agents and others
    
    
    2,151
    
    
    
    1,298
    
    
    
    30
    
    
    
    4
    
    
    
    162
    
    
    
    657Domestic carriers
    
    
    1,884
    
    
    
    130
    
    
    
    88
    
    
    
    103
    
    
    
    1,182
    
    
    
    381Held-to-maturity investments:Investment in debt securities
    
    
    273
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    143
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Held-for-trading:Short-term investments
    
    
    2,049
    
    
    
    2,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward foreign exchange contracts
    
    
    193
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency options
    
    
    59
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivatives used for hedging:Forward foreign exchange contracts
    
    
    670
    
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,583
    
    
    
    41,054
    
    
    
    3,248
    
    
    
    787
    
    
    
    2,158
    
    
    
    12,336
 Impairment Assessments
   F-106




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##### Table of Contents



Individually assessed allowance
  Collectively assessed allowance
   Capital Management
    Note 7  Earnings Per Common Share Note 17  Equity
   F-107




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##### Table of Contents



2008
    
    
    2007(in million pesos)Long-term debt, including current portion (Note 18)
    
    
    73,358
    
    
    
    60,147Notes payable (Note 18)
    
    
    553
    
    
    
    493Total debt
    
    
    73,911
    
    
    
    60,640Cash and cash equivalents (Note 12)
    
    
    (33,684
    )
    
    
    (17,447
    )Short-term investments
    
    
    (6,670
    )
    
    
    (13,415
    )Net debt
    
    
    33,557
    
    
    
    29,778Equity attributable to equity holders of PLDT under PFRS
    
    
    105,531
    
    
    
    111,113Net debt to equity ratio
    
    
    32
    %
    
    
    27
    %
 27.
    
    Cash Flow Information
 2008
    
    
    2007
    
    
    2006(in million pesos)Non-cash investing activity:Fair value of future earn-out payments
    
    
    137
    
    
    
    1,048
    
    
    
    Non-cash financing activities:Conversion of preferred stock subject to mandatory redemption
(Note 18)
    
    
    1,077
    
    
    
    313
    
    
    
    11,020Recognition of asset retirement obligations (Note 8)
    
    
    70
    
    
    
    48
    
    
    
    45
 28.
    
    Reclassification of Accounts
   2007
    
    
    2006As Released
    
    
    Reclass
    
    
    As Adjusted
    
    
    As Released
    
    
    Reclass
    
    
    As Adjusted(in million pesos)Revenues
    
    
    151,862
    
    
    
    (13,158
    )
    
    
    138,704
    
    
    
    139,724
    
    
    
    (12,216
    )
    
    
    127,508Expenses
    
    
    93,781
    
    
    
    (10,194
    )
    
    
    83,587
    
    
    
    101,475
    
    
    
    (19,472
    )
    
    
    82,003Other income  net
    
    
    
    
    
    
    2,964
    
    
    
    2,964
    
    
    
    
    
    
    
    (7,256
    )
    
    
    (7,256
    )
  F-108