##### 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, 2010
 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
  Name of each exchangeTitle of each class
    
    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, or ADSs, pursuant to the requirements of such stock
exchange.       
 þ o
 o þ
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
  o
 þ
 o
  o o
 o þ




---



##### Table of Contents



TABLE OF CONTENTS
 CERTAIN CONVENTIONS AND TERMS USED IN THIS REPORT
    
    
    3FORWARD-LOOKING STATEMENTS
    
    
    6PRESENTATION OF FINANCIAL INFORMATION
    
    
    7PART IItem 1. Identity of Directors, Senior Management and Advisors
    
    
    7Item 2. Offer Statistics and Expected Timetable
    
    
    7Item 3. Key Information
    
    
    7Performance Indicators
    
    
    7Selected Financial Data
    
    
    8Capital Stock
    
    
    10Dividends Declared
    
    
    10Dividends Paid
    
    
    11Exchange Rates
    
    
    11Capitalization and Indebtedness
    
    
    12Reasons for the Offer and Use of Proceeds
    
    
    12Risk Factors
    
    
    12Item 4. Information on the Company
    
    
    22Overview
    
    
    22Historical Background and Development
    
    
    23Recent Developments
    
    
    23Capital Expenditures and Divestitures
    
    
    24Organization
    
    
    25Development Activities (2008-2010)
    
    
    25Strengths
    
    
    29Strategy
    
    
    30Business
    
    
    31Infrastructure
    
    
    42Interconnection Agreements
    
    
    44Licenses and Regulation
    
    
    45Material Effects of Regulation on our Business
    
    
    47Competition
    
    
    49Environmental Matters
    
    
    52Intellectual Property Rights
    
    
    52Properties
    
    
    52Item 4A. Unresolved Staff Comments
    
    
    53Item 5. Operating and Financial Review and Prospects
    
    
    53Overview
    
    
    53Managements Financial Review
    
    
    54Critical Accounting Policies
    
    
    55New Accounting Standards and Interpretations to Existing Standards Effective Subsequent to
December 31, 2010
    
    
    61Results of Operations
    
    
    61Plans and Prospects
    
    
    103Liquidity and Capital Resources
    
    
    103Impact of Inflation and Changing Prices
    
    
    109Item 6. Directors, Senior Management and Employees
    
    
    110Directors, Key Officers and Advisors
    
    
    110Terms of Office
    
    
    117Family Relationships
    
    
    117Compensation of Key Management Personnel of the PLDT Group
    
    
    117Long-term Incentive Plan
    
    
    118Share Ownership
    
    
    119Board of Directors  Independent Directors
    
    
    120Audit, Governance and Nomination, Executive Compensation and Technology Strategy Committees
    
    
    120Directors and Officers Involvement in Certain Legal Proceedings
    
    
    122Employees and Labor Relations
    
    
    124Pension and Retirement Benefits
    
    
    125Item 7. Major Shareholders and Related Party Transactions
    
    
    126Related Party Transactions
    
    
    127Item 8. Financial Information
    
    
    128Consolidated Financial Statements and Other Financial Information
    
    
    128Legal Proceedings
    
    
    128Dividend Distribution Policy
    
    
    129Item 9. The Offer and Listing
    
    
    130Common Capital Stock and Amercian Depositary Shares
    
    
    130Item 10. Additional Information
    
    
    130
 i




---



##### Table of Contents



Articles of Incorporation and By-Laws
    
    
    130Material Contracts
    
    
    135Exchange Controls and Other Limitations Affecting Securities Holders
    
    
    135Taxation
    
    
    136Documents on Display
    
    
    139Item 11. Quantitative and Qualitative Disclosures About Market Risks
    
    
    139Liquidity Risk
    
    
    140Foreign Currency Exchange Risk
    
    
    140Interest Rate Risk
    
    
    142Credit Risk
    
    
    144Impairment Assessments
    
    
    147Capital Management Risk
    
    
    148Item 12. Description of Securities Other than Equity Securities
    
    
    149PART II
    
    
    150Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    150Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    150Item 15. Controls and Procedures
    
    
    150Item 16A. Audit Committee Financial Expert
    
    
    150Item 16B. Code of Business Conduct and Ethics
    
    
    151Item 16C. Principal Accountant Fees and Services
    
    
    157Item 16D. Exemption from the Listing Standards for Audit Committees
    
    
    157Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchaser
    
    
    158Item 16F. Change in Registrants Certifying Accountant
    
    
    158Item 16G. Corporate Governance
    
    
    158PART III
    
    
    159Item 17. Financial Statements
    
    
    159Item 18. Financial Statements
    
    
    160Item 19. Exhibits
    
    
    283EXHIBIT INDEX
    
    
    285CERTIFICATION
    
    
    302Ex-1.B Amended By-Laws (as amended on August 3, 2010)Ex-99.6 Computation of Earnings Per ShareEx-99.7 Calculation of Ratio of Earnings to Fixed ChargesEx-99.8 SubsidiariesEx-12.1 Section 302 Certification of the Chief Executive OfficerEx-12.2 Section 302 Certification of the Chief Financial OfficerEx-12.1 Section 906 Certification of the Chief Executive OfficerEx-12.2 Section 906 Certification of the Chief Financial Officer
  ii




---



##### Table of Contents



CERTAIN CONVENTIONS AND TERMS USED IN THIS REPORT
      
    
    3rd Brand means 3rd Brand Pte. Ltd., an 85.0%-owned subsidiary of SCH;
    
    ACeS Philippines means ACeS Philippines Cellular Satellite Corporation, a
wholly-owned subsidiary of PLDT;
    
    ADRs mean American Depositary Receipts;
    
    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 SBI;
    
    ARPU means average revenue per user;
    
    BayanTel means Bayan Telecommunication, Inc.;
    
    BayanTrade means BayanTrade, Inc. (formerly BayanTrade Dotcom, Inc.), a 93.5%-owned
subsidiary of ePLDT;
    
    BCC means Bonifacio Communications Corporation, a 75.0%-owned subsidiary of PLDT;
    
    Beacon means Beacon Electric Asset Holdings, Inc., 50.0%-owned by PCEV;
    
    BIR means Bureau of Internal Revenue;
    
    BOW means Blue Ocean Wireless, a 51.0%-owned subsidiary of SCH;
    
    BPO means business process outsourcing;
    
    BSP means Bangko Sentral ng Pilipinas;
    
    BTS means base transceiver station;
    
    CBA means collective bargaining agreement;
    
    CG Manual means PLDT Manual on Corporate Governance;
    
    CGO means Corporate Governance Office;
    
    ClarkTel means PLDT Clark Telecom, Inc., a wholly-owned subsidiary of PLDT;
    
    CMTS means cellular mobile telephone system;
 3




---



##### Table of Contents




    
    Code of Ethics means PLDTs Code of Business Conduct and Ethics;
    
    CPCN means Certificate of Public Convenience and Necessity;
    
    CSRs mean customer service representatives;
    
    CURE means Connectivity Unlimited Resource Enterprise, Inc., a wholly-owned
subsidiary of FHI;
    
    CyMed means CyMed, Inc., a wholly-owned subsidiary of SPi;
    
    DFON means domestic fiber optic network;
    
    Digital Paradise means Digital Paradise, Inc., a 75.0%-owned subsidiary of ePLDT;
    
    Digitel means Digital Telecommunications Philippines, Inc.;
    
    DSL means digital subscriber line;
    
    ECC means the Executive Compensation Committee;
    
    ePLDT means ePLDT, Inc., a wholly-owned subsidiary of PLDT;
    
    First Pacific means First Pacific Company Limited;
    
    First Pacific Group means First Pacific and its affiliates;
    
    FHI means Francom Holdings, Inc., a wholly-owned subsidiary of Smart;
    
    FPHC means First Philippine Holdings Corporation;
    
    FPUC means First Philippine Utilities Corporation;
    
    GAAP means generally accepted accounting principles;
    
    Globe means Globe Telecom, Inc.;
    
    GNC means the Governance and Nomination Committee;
    
    GSM means global system for mobile communications;
    
    HB means House Bill;
    
    I-Contacts means I-Contacts Corporation, a wholly-owned subsidiary of Smart;
    
    ICT means information and communications technology;
    
    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;
    
    Laguna Medical means Laguna Medical Systems, Inc., a wholly-owned subsidiary of SPi;
    
    LEC means local exchange carrier;
    
    Level Up! means Level Up!, Inc., a 57.5%-owned subsidiary of ePLDT;
    
    LTIP means long-term incentive plan;
    
    Mabuhay Satellite means Mabuhay Satellite Corporation, a 67.0%-owned subsidiary of
PLDT;
    
    Maratel means PLDT-Maratel, Inc., a 97.8%-owned subsidiary of PLDT;
    
    Meralco means Manila Electric Company;
 4




---



##### Table of Contents




    
    MPIC means Metro Pacific Investments Corporation, a subsidiary of First Pacific;
    
    MPRI means Metro Pacific Resources, Inc.;
    
    netGames means netGames, Inc., a 57.5%-owned subsidiary of ePLDT;
    
    NGN means Next Generation Network;
    
    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;
    
    NYSE means New York Stock Exchange;
    
    PAPTELCO means Philippine Association of Private Telephone Companies, Inc.;
    
    Parlance means Parlance Systems, Inc., merged with SPi CRM and Vocativ on April 8,
2010, wherein SPi CRM is the surviving entity;
    
    PCD means PCD Nominee Corporation;
    
    PCEV means PLDT Communications and Energy Ventures, Inc., (formerly known as
Pilipino Telephone Corporation, or Piltel), a 99.5%-owned subsidiary of Smart;
    
    PDSI means Primeworld Digital Systems, Inc., a wholly-owned subsidiary of Smart;
    
    PFRS means Philippine Financial Reporting Standards;
    
    PGCI means Philippine Global Communications, Inc.;
    
    PHC means PH Communications Holdings Corporation, a wholly-owned subsidiary of
Smart;
    
    Philcom means PLDT-Philcom, Inc., a wholly-owned subsidiary of PLDT;
    
    Philippine SEC means the Philippine Securities and Exchange Commission;
    
    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;
    
    PLP means PLDT Landline Plus;
    
    PSE means the Philippine Stock Exchange, Inc.;
    
    PTIC means Philippine Telecommunications Investment Corporation;
    
    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 SCH;
    
    SHI means Smarthub, Inc., a wholly-owned subsidiary of Smart;
    
    SIM means subscriber identification module;
    
    Smart means Smart Communications, Inc., a wholly-owned subsidiary of PLDT;
    
    SMHC means Smart Money Holdings Corporation, a wholly-owned subsidiary of Smart;
    
    SMI means Smart Money, Inc., a wholly-owned subsidiary of SMHC;
 5




---



##### Table of Contents




    
    SMS means short messaging service;
    
    SNMI means Smart-NTT Multimedia, Inc., a wholly-owned subsidiary of PLDT;
    
    SPi CRM means SPi CRM Inc., (formerly known as ePLDT Ventus, Inc., or Ventus), the
surviving entity of a merger with Vocativ and Parlance on April 8, 2010, a wholly-owned
subsidiary of ePLDT;
    
    SPi means SPi Technologies, Inc., a wholly-owned subsidiary of ePLDT;
    
    SPi Group means SPi and its subsidiaries;
    
    Springfield means Springfield Service Corporation, a wholly-owned subsidiary of SPi;
    
    SRC means the Securities Regulation Code of the Philippines;
    
    SRF means supervision and regulation fees;
    
    SubicTel means PLDT Subic Telecom, Inc., a wholly-owned subsidiary of PLDT;
    
    TSC means the Technology Strategy Committee;
    
    TSI means Telecoms Solutions, Inc., a wholly-owned subsidiary of SMHC;
    
    U.S. SEC means the United States Securities and Exchange Commission;
    
    VAS means value-added service;
    
    VAT means value-added tax;
    
    Vocativ means Vocativ Systems, Inc., merged with SPi CRM and Parlance on April 8,
2010, wherein SPi CRM became the surviving entity;
    
    VoIP means voice over internet protocol;
    
    WAP means wireless application protocol;
    
    WCI means Wireless Card, Inc., a wholly-owned subsidiary of Smart;
    
    W-CDMA means wideband-code division multiple access; and
    
    Wolfpac means Wolfpac Mobile, Inc., a wholly-owned subsidiary of Smart.
 
 FORWARD-LOOKING STATEMENTS
    6




---



##### Table of Contents



PRESENTATION OF FINANCIAL INFORMATION
 IFRS 1: First-Time Adoption of International Financial Reporting
Standards
  
 PART I
 
 Item 1. Identity of Directors, Senior Management and Advisors
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 Performance Indicators
  Adjusted EBITDA
   7




---



##### Table of Contents



Core Income
  
 Selected Financial Data
  8




---



##### Table of Contents



Amounts in conformity with IFRS:
 2010(1)
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006(in millions, except earnings per common share amounts, weighted average number of common shares, ratio of earnings tofixed charges and dividends declared per common share amounts)Statements of Operating Data:Revenues
    
    US$
    3,297
    
    
    Php
    144,459
        
    Php
    147,993
        
    Php
    145,837
        
    Php
    138,704
        
    Php
    127,508Service revenues
    
    
    3,247
    
    
    
    142,242
    
    
    
    145,567
    
    
    
    142,873
    
    
    
    135,478
    
    
    
    124,988Non-service revenues
    
    
    51
    
    
    
    2,217
    
    
    
    2,426
    
    
    
    2,964
    
    
    
    3,226
    
    
    
    2,520Expenses
    
    
    2,029
    
    
    
    88,903
    
    
    
    90,111
    
    
    
    85,786
    
    
    
    83,587
    
    
    
    82,003Net income for the year
    
    
    919
    
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976
    
    
    
    39,274
    
    
    
    32,581Earnings per common share for the year
attributable to equity holders of PLDTBasic
    
    
    4.86
    
    
    
    212.85
    
    
    
    210.38
    
    
    
    179.96
    
    
    
    205.84
    
    
    
    173.10Diluted
    
    
    4.86
    
    
    
    212.85
    
    
    
    210.36
    
    
    
    179.95
    
    
    
    204.88
    
    
    
    173.01Balance Sheets Data:Cash and cash equivalents
    
    
    837
    
    
    
    36,678
    
    
    
    38,319
    
    
    
    33,684
    
    
    
    17,447
    
    
    
    16,870Total assets
    
    
    6,341
    
    
    
    277,815
    
    
    
    280,148
    
    
    
    252,558
    
    
    
    240,158
    
    
    
    241,904Total long-term debt  net of current portion
    
    
    1,732
    
    
    
    75,879
    
    
    
    86,066
    
    
    
    58,899
    
    
    
    53,372
    
    
    
    63,769Total debt(2)
    
    
    2,046
    
    
    
    89,646
    
    
    
    98,729
    
    
    
    73,911
    
    
    
    60,640
    
    
    
    80,154Total liabilities
    
    
    4,118
    
    
    
    180,430
    
    
    
    181,023
    
    
    
    145,589
    
    
    
    127,813
    
    
    
    139,052Total equity
    
    
    2,223
    
    
    
    97,385
    
    
    
    99,125
    
    
    
    106,969
    
    
    
    112,345
    
    
    
    102,853Weighted average number of common shares
for the year (in thousands)
    
    
    
    
    
    
    186,790
    
    
    
    186,916
    
    
    
    188,163
    
    
    
    188,656
    
    
    
    184,456Other Data:Depreciation and amortization
    
    
    600
    
    
    
    26,277
    
    
    
    25,607
    
    
    
    24,709
    
    
    
    28,613
    
    
    
    31,869Ratio of earnings to fixed charges(3)
    
    
    7.4
    x
    
    
    7.4
    x
    
    
    7.7
    x
    
    
    8.0
    x
    
    
    8.3
    x
    
    
    4.6
    xNet cash provided by operating activities
    
    
    1,764
    
    
    
    77,260
    
    
    
    74,386
    
    
    
    78,302
    
    
    
    77,418
    
    
    
    69,211Net cash used in investing activities
    
    
    531
    
    
    
    23,283
    
    
    
    49,132
    
    
    
    17,014
    
    
    
    31,319
    
    
    
    35,790Net cash used in financing activities
    
    
    1,263
    
    
    
    55,322
    
    
    
    20,293
    
    
    
    45,464
    
    
    
    44,819
    
    
    
    45,900Dividends declared to common shareholders
    
    
    934
    
    
    
    40,909
    
    
    
    38,758
    
    
    
    36,578
    
    
    
    28,299
    
    
    
    14,459Dividends declared per common share
    
    
    5.00
    
    
    
    219.00
    
    
    
    207.00
    
    
    
    194.00
    
    
    
    150.00
    
    
    
    78.00
 
 (1)
    
    We maintain our accounts in Philippine pesos, the functional and presentation
currency under IFRS. For convenience, the Philippine peso financial information as at and for
the year ended December 31, 2010, has been translated into U.S. dollars at the exchange rate
of Php43.81 to US$1.00, the rate quoted through the Philippine Dealing System as at December
31, 2010. 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)
    
    Total debt represents current portion of long-term debt, long-term debt  net of
current portion and notes payable.(3)
    
    For purposes of this ratio, Earnings consist of: (a) pre-tax income from
continuing operations before adjustment for non-controlling interests 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 non-controlling interests in pre-tax income of
subsidiaries that have not incurred fixed charges.Fixed charges consist of interest expense 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. 9




---



##### Table of Contents



Capital Stock
  December 31,2010
    
    
    2009(in millions)Serial Preferred Stock10% Cumulative Convertible Preferred StockA to HH
    
    Php
    4,059
        
    Php
    4,056Cumulative Non-convertible Redeemable Preferred StockSeries IV
    
    
    360
    
    
    
    360Php
    4,419
        
    Php
    4,416Common Stock
    
    Php
    947
        
    Php
    947
 
 Dividends Declared
  Date
    
    
    
    AmountEarnings
    
    Approved
    
    Record
    
    Payable
    
    Per share

    Total Declared(in pesos)
    
    (in million pesos)2008
    
    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
    
    
    
    11,250200
    
    
    
    37,5142009
    
    August 4, 2009
    
    August 20, 2009
    
    September 22, 2009
    
    
    77
    
    
    
    14,3842009
    
    March 2, 2010
    
    March 17, 2010
    
    April 20, 2010
    
    
    76
    
    
    
    14,1972009
    
    March 2, 2010
    
    March 17, 2010
    
    April 20, 2010
    
    
    65
    
    
    
    12,142218
    
    
    
    40,7232010
    
    August 3, 2010
    
    August 19, 2010
    
    September 21, 2010
    
    
    78
    
    
    
    14,5702010
    
    March 1, 2011
    
    March 16, 2011
    
    April 19, 2011
    
    
    78
    
    
    
    14,5672010
    
    March 1, 2011
    
    March 16, 2011
    
    April 19, 2011
    
    
    66
    
    
    
    12,326222
    
    
    
    41,463
  10




---



##### Table of Contents



Dividends Paid
  In Philippine Peso
    
    In U.S. Dollars2006
    
    
    78.00
    
    
    
    1.542007
    
    
    150.00
    
    
    
    3.262008
    
    
    194.00
    
    
    
    4.47Regular Dividend  April 21, 2008
    
    
    68.00
    
    
    
    1.62Regular Dividend  September 22, 2008
    
    
    70.00
    
    
    
    1.51Special Dividend  April 21, 2008
    
    
    56.00
    
    
    
    1.342009
    
    
    207.00
    
    
    
    4.30Regular Dividend  April 21, 2009
    
    
    70.00
    
    
    
    1.45Regular Dividend  September 22, 2009
    
    
    77.00
    
    
    
    1.62Special Dividend  April 21, 2009
    
    
    60.00
    
    
    
    1.242010
    
    
    219.00
    
    
    
    4.95Regular Dividend  April 20, 2010
    
    
    76.00
    
    
    
    1.71Regular Dividend  September 21, 2010
    
    
    78.00
    
    
    
    1.78Special Dividend  April 20, 2010
    
    
    65.00
    
    
    
    1.46
  
 Exchange Rates
   Year Ended December 31,Period End
    
    Average(1)
    
    High(2)
    
    Low(3)2006
    
    Php
    49.05
        
    Php
    51.17
        
    Php
    49.05
        
    Php
    53.592007
    
    
    41.41
    
    
    
    45.88
    
    
    
    41.14
    
    
    
    49.162008
    
    
    47.65
    
    
    
    44.71
    
    
    
    40.36
    
    
    
    49.982009
    
    
    46.43
    
    
    
    47.82
    
    
    
    45.95
    
    
    
    49.062010
    
    
    43.81
    
    
    
    45.10
    
    
    
    42.52
    
    
    
    46.982011 (through March 29, 2011)
    
    
    43.53
    
    
    
    43.80
    
    
    
    43.30
    
    
    
    44.59
 
 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)2010October
    
    Php
    43.06
        
    Php
    43.40
        
    Php
    43.06
        
    Php
    43.89November
    
    
    44.15
    
    
    
    43.55
    
    
    
    42.52
    
    
    
    44.26December
    
    
    43.81
    
    
    
    43.94
    
    
    
    43.65
    
    
    
    44.382011January
    
    
    44.31
    
    
    
    44.20
    
    
    
    43.71
    
    
    
    44.59February
    
    
    43.68
    
    
    
    43.67
    
    
    
    43.36
    
    
    
    44.21March (through March 29, 2011)
    
    
    43.53
    
    
    
    43.51
    
    
    
    43.30
    
    
    
    43.95
 
 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. 11




---



##### Table of Contents



Capitalization and Indebtedness
  
 Reasons for the Offer and Use of Proceeds
  
 Risk Factors
 You should consider carefully all of the information in this annual report, including the risks and
uncertainties described below. If any of the following risks actually occurs, it could have a
material adverse effect on our business, financial condition or results of operations and the
trading price of our ADSs, could decline and you could lose all or part of your investment.
 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.
  Sun
Cellular
 Smart Buddy Talk N Text
  12




---



##### Table of Contents



The cellular telecommunications industry may not continue to grow.
  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.
    13




---



##### Table of Contents




    
    political and economic developments affecting the Philippines, including the
level of remittances from overseas Filipino workers;
    
    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;
and
    
    changes in the value of the U.S. dollar relative to the Philippine peso
resulting from either 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, among others.
 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 pressures on, our traditional
international and national long distance services.
   
    
    increases in competition from other domestic and international telecommunications
providers;
    
    advances in technology;
    
    alternative providers offering internet telephony, also known as VoIP, and broadband
capacity; and
    
    unauthorized traffic termination and bypass routings by international simple resale
operators.
   14




---



##### Table of Contents



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, as well as the ability to execute the
identified strategies in order to generate fair returns on the investment; and
    
    our ability to successfully integrate the acquired company or business with our
existing businesses.
  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.
      15




---



##### Table of Contents



Our subsidiaries could be limited in their ability to pay dividends to us due to internal cash
requirements and their creditors having superior claims over their assets and cash flows, which
could materially and adversely affect our financial condition.
    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;
 16




---



##### Table of Contents




    
    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.
   
    
    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;
 17




---



##### Table of Contents




    
    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.
  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.
  18




---



##### Table of Contents



19




---



##### Table of Contents



The NTC may implement proposed changes in existing regulations and introduce new regulations, which
may result in increased competition and/or changes in rates, each of which could have material
adverse effects on our revenues and profitability.
         (a)
    
    guidelines on the mandatory interconnection of backhaul networks to the cable
landing station, which were issued on October 7, 2008 and became effective on October
23, 2008; and(b)
    
    guidelines on the interconnection of LECs in local calling areas that eliminate
interconnection access charges between LECs within a local calling area, which were
issued on May 30, 2008 and became effective on June 17, 2008.
  20




---



##### Table of Contents



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 could have a material adverse effect on our results of operations and financial condition.
  
    
    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.
    21




---



##### 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 could materially disrupt our operations.
  
 Item 4. Information on the Company
 
 Overview
  Vitro TM
 22




---



##### Table of Contents



We operate under the jurisdiction of the NTC, which jurisdiction extends, among other
things, to approving major services that we offer and rates that we can charge.
 
 Historical Background and Development
   www.pldt.com.ph
 
 Recent Developments
 PLDTs Acquisition of Digitel
  23




---



##### Table of Contents



Sun
Cellular
      Reorganization of ePLDT
   
 Capital Expenditures and Divestitures
  24




---



##### Table of Contents



Organization
  Place of
    
    
    
    Percentage of OwnershipName of Subsidiary
    
    Incorporation
    
    Principal Business Activity
    
    Direct
    
    IndirectWirelessSmart:
    
    Philippines
    
    Cellular mobile services
    
    
    100.0
    
    
    
    Smart Broadband, Inc., or SBI, and Subsidiaries, or SBI Group
    
    Philippines
    
    Internet broadband distribution
    
    
    
    
    
    
    100.0Primeworld Digital Systems, Inc., or PDSI
    
    Philippines
    
    Internet broadband distribution services
    
    
    
    
    
    
    100.0I-Contacts Corporation, or I-Contacts
    
    Philippines
    
    Call center services
    
    
    
    
    
    
    100.0Wolfpac Mobile, Inc., or Wolfpac
    
    Philippines
    
    Mobile applications development and services
    
    
    
    
    
    
    100.0Wireless Card, Inc., or WCI
    
    Philippines
    
    Promotion of the sale and/or patronage of debit and/or charge cards
    
    
    
    
    
    
    100.0Smarthub, Inc., or SHI
    
    Philippines
    
    Software development and sale of maintenance and support services
    
    
    
    
    
    
    100.0Smart Money Holdings Corporation, or SMHC:
    
    Cayman Islands
    
    Investment company
    
    
    
    
    
    
    100.0Smart Money, Inc., or SMI
    
    Cayman Islands
    
    Mobile commerce solutions marketing
    
    
    
    
    
    
    100.0Telecoms Solutions, Inc., or TSI
    
    Mauritius
    
    Mobile commerce platforms
    
    
    
    
    
    
    100.0Far East Capital Limited and Subsidiary
    
    Cayman Islands
    
    Cost effective offshore financing and risk management activities for Smart
    
    
    
    
    
    
    100.0PH Communications Holdings Corporation, or PHC
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0Francom Holdings, Inc., or FHI:
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0Connectivity Unlimited Resource Enterprise, Inc., or CURE
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    100.0Chikka Holdings Limited, or Chikka, and Subsidiaries, or Chikka Group
    
    British Virgin Islands
    
    Mobile applications development and services; Content provider
    
    
    
    
    
    
    100.0PLDT Communications and Energy Ventures, Inc., or PCEV, (formerly known as Pilipino Telephone Corporation, or Piltel) and Subsidiaries, or PCEV Group
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    99.5SmartConnect Holdings Pte. Ltd., or SCH:
    
    Singapore
    
    Investment company
    
    
    
    
    
    
    100.0SmartConnect Global Pte. Ltd., or SGP
    
    Singapore
    
    International trade of satellites and Global System for Mobile Communication, or GSM, enabled global telecommunications
    
    
    
    
    
    
    100.03rd Brand Pte. Ltd., or 3rd Brand
    
    Singapore
    
    Solutions and systems integration services
    
    
    
    
    
    
    85.0Blue Ocean Wireless, or BOW
    
    Isle of Man
    
    Delivery of GSM communication capability for the maritime sector
    
    
    
    
    
    
    51.0Telesat, Inc., or Telesat*
    
    Philippines
    
    Satellite communications services
    
    
    100.0
    
    
    
    ACeS Philippines Cellular Satellite Corporation, or ACeS Philippines
    
    Philippines
    
    Satellite information and messaging services
    
    
    88.5
    
    
    
    11.5Mabuhay Satellite Corporation, or Mabuhay Satellite*
    
    Philippines
    
    Satellite communications services
    
    
    67.0
    
    
    
    Fixed LinePLDT Clark Telecom, Inc., or ClarkTel
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT Subic Telecom, Inc., or SubicTel
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT Global Corporation, or PLDT Global, and Subsidiaries, or PLDT Global Group
    
    British Virgin Islands
    
    Telecommunications services
    
    
    100.0
    
    
    
    Smart-NTT Multimedia, Inc., or SNMI*
    
    Philippines
    
    Data and network services
    
    
    100.0
    
    
    
    PLDT-Philcom, Inc. (formerly known as Philcom Corporation), or Philcom, and Subsidiaries, or Philcom Group
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    PLDT-Maratel, Inc., or Maratel
    
    Philippines
    
    Telecommunications services
    
    
    97.8
    
    
    
    Bonifacio Communications Corporation, or BCC
    
    Philippines
    
    Telecommunications, infrastructure and related value-added services, or VAS
    
    
    75.0
    
    
    
    Information and Communications Technology, or ICTePLDT, Inc., or ePLDT:
    
    Philippines
    
    Information and communications infrastructure for Internet-based services,
e-commerce, customer relationship
management and IT-related services
    
    
    100.0
    
    
    
    SPi Technologies, Inc., or SPi, and Subsidiaries, or SPi Group
    
    Philippines
    
    Knowledge processing solutions
    
    
    
    
    
    
    100.0SPi CRM Inc., or SPi CRM (formerly ePLDT Ventus, Inc.)**
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    100.0Parlance Systems, Inc., or Parlance**
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    Vocativ Systems, Inc., or Vocativ**
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    Infocom Technologies, Inc., or Infocom
    
    Philippines
    
    Internet services
    
    
    
    
    
    
    99.6BayanTrade, Inc. (formerly BayanTrade Dotcom, Inc.), or BayanTrade, and Subsidiaries, or BayanTrade Group
    
    Philippines
    
    Internet-based purchasing, IT consulting and professional services
    
    
    
    
    
    
    93.5Digital Paradise, Inc., or Digital Paradise
    
    Philippines
    
    Internet services
    
    
    
    
    
    
    75.0Level Up!, Inc., or Level Up!
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    57.5netGames, Inc., or netGames
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    57.5
 
 *
    
    Ceased commercial operations**
    
    On April 8, 2010, SPi CRM, Parlance and Vocativ were merged, with SPi CRM as the
surviving entity. 
 Development Activities (2008-2010)
   25




---



##### Table of Contents



26




---



##### Table of Contents



Talk N Text Talk N Text Smart Buddy
    27




---



##### Table of Contents



Wireless
  Red Mobile Red Mobile
  Red Mobiles
  28




---



##### Table of Contents



Fixed Line
    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 over 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. The Talk N Textbrand,
which is provided using Smarts network, has also gained significant recognition as a
reliable value for money brand.
    
    Leading Market Shares. With over 49 million fixed line, cellular and broadband
subscribers as at December 31, 2010, we have the leading market positions in each of
the fixed line, cellular and broadband 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 total revenues in 2010. Revenue sources of our
wireless business 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 relationship management and
internet and online gaming business, and data center and other services. Revenues from
our fixed line services, such as local exchange, national and international long
distance, have been declining over the past years due to
 29




---



##### Table of Contents



pressures on traditional fixed line voice revenues and reductions in international
interconnection rates, offset by the significant revenue contribution of our data and
other network service. Fixed line revenues represent 32% of our total revenues in 2010,
2009, and 2008. 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 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. This
includes the build out of a second network that has been designed to contain the
increase in voice traffic resulting from lower cost voice offers under our Red Mobile
brand. This network and brand strategy will allow the quality of service on our main
network serving our Buddy and Talk and Text brands to be maintained. In addition, we
continue our upgrade of our fixed line network to an all IP-based NGN, and continue to
roll out 3G and wireless broadband in order to increase broadband subscribers and
expand our data/broadband capabilities. We are also investing in the upgrade of our
wireless network to achieve, among others, greater operational and cost efficiencies.
    
    Innovative Products and Services. We have successfully introduced a number of
innovative and award-winning cellular products and services, including Smart Money,
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 Loadthat allows load transfers to other Smart Buddyand Talk N Text
subscribers.
    
    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.
 
 Strategy
  
    
    Build on our leading positions in the fixed line and wireless businesses. We plan
to build on our position as the leading fixed line and wireless service providers 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 and 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. We plan to upgrade of our
wireless network to achieve operating and cost efficiencies. 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  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 in the data
and broadband market 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.
 30




---



##### Table of Contents



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 were able to declare dividend payouts of approximately
100% in each of 2008, 2009 and 2010 of our core earnings. We expect that our free cash
flows will continue to 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 telecommunications as well as telco-related
businesses such as those in the global outsourcing and off-shoring industry.
 
 Business
 Wireless
  Cellular Service
 Overview
 Smart Money Mobile Banking
  2010
    
    2009
    
    2008Systemwide cellular subscriber base
    
    
    45,636,008
    
    
    
    41,328,641
    
    
    
    35,224,604Prepaid
    
    
    45,214,433
    
    
    
    40,893,098
    
    
    
    34,826,468Smart Buddy
    
    
    25,293,443
    
    
    
    23,762,814
    
    
    
    20,501,617Talk N Text
    
    
    18,967,381
    
    
    
    17,050,713
    
    
    
    14,308,493Red Mobile(1)
    
    
    953,609
    
    
    
    79,571
    
    
    
    16,358Postpaid
    
    
    421,575
    
    
    
    435,543
    
    
    
    398,136Growth rate of cellular subscribers
    
    
    10
    %
    
    
    17
    %
    
    
    17
    %Smart Buddy
    
    
    6
    %
    
    
    16
    %
    
    
    3
    %Talk N Text
    
    
    11
    %
    
    
    19
    %
    
    
    47
    %Red Mobile(1)
    
    
    1,098
    %
    
    
    386
    %
    
    
    100
    %Cellular revenues (in millions)
    
    Php
    86,399
        
    Php
    88,410
        
    Php
    87,518Voice
    
    
    42,250
    
    
    
    38,850
    
    
    
    37,275Data
    
    
    41,529
    
    
    
    47,072
    
    
    
    47,804Others(2)
    
    
    2,620
    
    
    
    2,488
    
    
    
    2,439Percentage of cellular revenues to total wireless service revenues
    
    
    92
    %
    
    
    92
    %
    
    
    94
    %Percentage of cellular revenues to total service revenues
    
    
    56
    %
    
    
    56
    %
    
    
    57
    %
 
 (1)
    
    The Red Mobile brand was launched in November 2008 by CURE.(2)
    
    Refers to other non-subscriber-related revenues consisting primarily of inbound
international roaming fees, share in revenues from PLDTs WeRoam and PLP services, a small
number of leased line contracts, and revenues from Chikka, Wolfpac and other Smart
subsidiaries. Service Plans Smart Buddy, Talk N Text, Smart Gold Smart Infinity, Red Mobile.
Smart Buddy, Talk N Text Red Mobile Smart Gold Smart Infinity
  31




---



##### Table of Contents



Smartalk Smart Buddy Smart Gold Smart Buddy Smart Gold
 
    
    Smartalk 100 which offers five days of unlimited calls for Php100; and
    
    Smartalk 500 which offers 30 days of unlimited calls for Php500 to any subscriber
on the Smart network.
 Smartalk Plus Smartalk Plus
 Talk N Text UnliTalk Plus 100 , Talk N Text Smart Buddy Talk N Text Smart Buddy Talk N Text Talk N Text UnliTalk 100 Talk N Text
 Red Mobile Unlimited Red-to-Red Red-to-Red
 Voice Services.
 Data Services
  32




---



##### Table of Contents




    
    Smart Money,which is a reloadable payment card powered by MasterCard, enables
subscribers to pay for their purchases by transferring money from their bank accounts
to their Smart Money cards and reload their Smart Buddy, Talk N Textand Smart Bro
accounts electronically; and
    
    Mobile Banking, launched in collaboration with various banks, allows subscribers to
execute banking transactions such as balance inquiries and transfers over their mobile
telephones.
 Smart Bro Smart Bro Smart Bro
  Rates and Discounts
  Smart Buddy Talk N Text Smart Load Smart Loads Talk N Texts Smart Load Pasa
Load
 Smart Buddy Smart Buddy Talk N
Text Talk
N Text Talk N Text Smart Buddy Red Mobile Red Mobile Smart Buddy Talk N Text
 33




---



##### Table of Contents



Smart Gold Smart Infinity
  HELLOw
 Smart Load Smart Load
  Wireless Broadband, Satellite and Other Services
 Overview
  SBI
 Smart Bro Smart Bro myDSL
 34




---



##### Table of Contents



PDSI
  Airborne Access
  Wolfpac
  Chikka
  ACeS Philippines
   Revenues
  Rates
 Smart Bro
 Smart Bro Plug-It, Smart Bro Plug-It Unli Surf200, Unli
Surf100 Unli Surf50 Smart Bro Plug-It Prepaid
 Smart Bro WiMAX WiMAX WiMAX
 35




---



##### Table of Contents



Fixed Line
   Local Exchange Service
   2010
    
    2009
    
    2008Number of local exchange line subscribers
    
    
    1,822,105
    
    
    
    1,816,541
    
    
    
    1,782,356Number of fixed line employees
    
    
    7,395
    
    
    
    7,947
    
    
    
    7,813Number of local exchange line subscribers per employee
    
    
    246
    
    
    
    229
    
    
    
    228Total local exchange service revenues (in millions)
    
    Php
    15,321
        
    Php
    15,681
        
    Php
    15,923Local exchange service revenues as a percentage of total fixed line service revenues
    
    
    31
    %
    
    
    31
    %
    
    
    32
    %Local exchange service revenues as a percentage of total service revenues
    
    
    10
    %
    
    
    10
    %
    
    
    10
    %
 PLDT Call All PLP
 Rates
  36




---



##### Table of Contents



PLP
 PLP Call All PLP
 PLP
     International Long Distance Service
   2010
    
    2009
    
    2008Total call volumes (in million minutes)
    
    
    1,714
    
    
    
    1,863
    
    
    
    2,024Inbound call volumes (in million minutes)
    
    
    1,515
    
    
    
    1,653
    
    
    
    1,786Outbound call volumes (in million minutes)
    
    
    199
    
    
    
    210
    
    
    
    238Inbound-outbound call ratio
    
    
    7.6:1
    
    
    
    7.9:1
    
    
    
    7.5:1Total international long distance service revenues (in millions)
    
    Php
    5,224
        
    Php
    6,255
        
    Php
    7,063International long distance service revenues as a percentage of total fixed line
service revenues
    
    
    11
    %
    
    
    12
    %
    
    
    14
    %International long distance service revenues as a percentage of total service revenues
    
    
    4
    %
    
    
    4
    %
    
    
    5
    %
   37




---



##### Table of Contents



Net Settlement2010
    
    
    2009
    
    
    2008(in millions)Saudi Arabia
    
    US$
    32
    
    
    US$
    33
    
    
    US$
    30United States
    
    
    31
    
    
    
    25
    
    
    
    46United Arab Emirates
    
    
    14
    
    
    
    20
    
    
    
    20Japan
    
    
    11
    
    
    
    17
    
    
    
    14Qatar
    
    
    11
    
    
    
    5
    
    
    
    4Hongkong
    
    
    10
    
    
    
    8
    
    
    
    4Taiwan
    
    
    6
    
    
    
    6
    
    
    
    6Singapore
    
    
    4
    
    
    
    5
    
    
    
    5Canada
    
    
    3
    
    
    
    9
    
    
    
    9Others
    
    
    19
    
    
    
    29
    
    
    
    36Total
    
    US$
    141
    
    
    US$
    157
    
    
    US$
    174
 Rates
   Budget Card Budget Card Middle East
Edition Budget Card Budget Card Middle East Edition
 National Long Distance Service
  38




---



##### Table of Contents



2010
    
    2009
    
    2008Total call volumes (in million minutes)
    
    
    1,290
    
    
    
    1,822
    
    
    
    1,944Total national long distance service revenues (in million pesos)
    
    
    4,690
    
    
    
    5,969
    
    
    
    6,207National long distance service revenue as a percentage of total fixed line
service revenues
    
    
    10
    %
    
    
    12
    %
    
    
    13
    %National long distance service revenue as a percentage of total service revenues
    
    
    3
    %
    
    
    4
    %
    
    
    4
    %
  Rates
     Data and Other Network Services
  39




---



##### Table of Contents



2010
    
    2009
    
    2008Subscriber base:Broadband
    
    
    665,027
    
    
    
    576,687
    
    
    
    448,826DSL
    
    
    643,048
    
    
    
    559,664
    
    
    
    432,583WeRoam
    
    
    21,979
    
    
    
    17,023
    
    
    
    16,243SWUP
    
    
    15,641
    
    
    
    12,383
    
    
    
    6,516Total data and other network service revenues (in million pesos)
    
    
    21,646
    
    
    
    21,567
    
    
    
    18,607Domestic
    
    
    15,637
    
    
    
    16,391
    
    
    
    14,155Broadband
    
    
    8,511
    
    
    
    7,232
    
    
    
    5,563DSL
    
    
    8,263
    
    
    
    7,024
    
    
    
    5,360WeRoam
    
    
    248
    
    
    
    208
    
    
    
    203Leased Lines and Others
    
    
    7,126
    
    
    
    9,159
    
    
    
    8,592InternationalLeased Lines and Others
    
    
    6,009
    
    
    
    5,176
    
    
    
    4,452Data and other network service revenues as a percentage of total fixed line service
revenues
    
    
    44
    %
    
    
    42
    %
    
    
    38
    %Data and other network service revenues as a percentage of total service revenues
    
    
    14
    %
    
    
    14
    %
    
    
    12
    %
     PLDT DSL PLDT WeRoam
 WeRoam WeRoam
 WeRoam Notebook Shop WeRoam WeRoam Notebook Shop Portable, Productive Performance
 , Shops.Work SWUP
 40




---



##### Table of Contents



Information and Communications Technology
 Vitro
 Knowledge Processing Solutions
  Customer Relationship Management
  Internet and Online Gaming
 WarpSpeed Speed Tipid Netopia.
 Data Center and Others
 Vitro
 41




---



##### Table of Contents



Infrastructure
 Wireless Network Infrastructure
 Cellular
      Wireless Broadband, Satellite and Other Services
   42




---



##### Table of Contents



Fixed Line Network Infrastructure
 Domestic
         43




---



##### Table of Contents



International
   Cable System
    
    Countries Being LinkedG-P
    
    Guam and the PhilippinesAsia-Pacific Cable Network 2
    
    Philippines, Hong Kong, Japan, Korea, Malaysia,
Singapore, China and TaiwanSEA-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 GermanyChina-U.S. Cable
    
    Japan, China, Taiwan, Korea, Guam and the U.S. MainlandFLAG Cable
    
    Japan, Korea, China, Hong Kong, Malaysia, Thailand,
India, United Arab Emirates, Saudi Arabia, Egypt,
Italy, Spain and UKSouthern Cross Cable
    
    U.S. Mainland, Hawaii, Fiji, Australia and New ZealandEAC Cable
    
    Japan, Hong Kong, Korea, Taiwan, Singapore and the
PhilippinesPC-1, Japan-U.S. Cable and TGN
    
    Japan and the U.S.Asia-America Gateway
    
    Malaysia, Singapore, Thailand, Vietnam, Brunei, Hong
Kong, Philippines, Guam, Hawaii and the U.S. Mainland
   
 Interconnection Agreements
     44




---



##### Table of Contents



Licenses and Regulations
 Licenses
   45




---



##### 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.
    46




---



##### 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 MHzSBI
    
    AMPS/CDMA(1)
    
    824-825/869-870 MHz
    
    1.0 MHz845-846.5/890-891.5 MHz
    
    1.5 MHzWireless broadband
    
    2670-2690 MHz(2)
    
    20.0 MHz2400-2483.5 MHz(2)
    
    73.0 MHz3400-3590 MHz(2)
    
    94.0MHz5470-5850 MHz(2)
    
    123.0MHzCURE
    
    3G
    
    1955-1965/2145-2155 MHz
    
    10.0 MHzPDSI
    
    BWA (WiMAX)
    
    2332.5-2362.5 MHz(3)
    
    30.0 MHz
 
 (1)
    
    On January 8, 2010, the NTC approved the transfer of PCEVs CPCN to SBI(2)
    
    SBI frequency assignments on these bands are non-contiguous and are on a per station
and location basis(3)
    
    On May 27, 2010, the NTC adjusted PDSIs frequency assignments from 2340-2370 MHz to
2332.5-2362.5 MHz, due to various technical considerations 
 Material Effects of Regulation on our Business
    47




---



##### Table of Contents




    
    On July 3, 2009, the NTC issued Memorandum Circular No. 03-07-2009, imposing an
extension of the expiration of the prepaid loads from two months to various expiration
periods ranging from three days to 120 days. Smart has been implementing the new
validity period of prepaid loads since July 19, 2009.
    
    On July 7, 2009, the NTC amended its rules on broadcast messaging in Memorandum
Circular No. 04-07-2009, which prohibits content and/or information providers from
initiating push messages. It further requires that subscribers be the party to
initiate any services with public telecommunication entities and/or content providers,
be sent a notification when they subscribe for any service and be given an option
whether to continue with the availed service.
    
    On July 23, 2009, the NTC issued Memorandum Circular No. 05-07-2009 mandating
cellular operators, including Smart, to charge calls on a maximum six-second pulse
basis instead of the previous per minute basis whether the subscriber is prepaid or
postpaid. The NTC granted Smart the provisional authority to charge new rates and
implement six second pulse scheme on December 5, 2009. Smart subsequently implemented
the six seconds per pulse directive by billing on a six second per pulse basis, if
subscribers entered additional dialing numbers as a prefix before the actual number.
The NTC opposed Smarts implementation of the six seconds per pulse directive. As of
March 31, 2010, the matter is pending before the Court of Appeals and is the subject of
a temporary restraining order preventing the NTC from implementing its six second per
pulse billing directive. In December 2009, Smart and other CMTS providers challenged
the implementation of the NTC memorandum circular before the Court of Appeals, which
issued a writ of preliminary injunction preventing the NTC from implementing its six
second per pulse billing directive.
    
    On December 28, 2010, the Court of Appeals promulgated a decision finding that
the NTC had no basis to impose the rates it fixed for the six second pulse and that the
CMTS operators have the option to file their rate applications anew. However, the
Court ruled also that under the NTC memorandum circular, the six second pulse is the
default mode and that the NTC has the power to regulate the rates of CMTS providers
under Section 17 of R. A. 7925, even in the absence of ruinous competition, monopoly,
cartel
 48




---



##### Table of Contents



or combination thereof in restraint of free competition. The NTC,
through the Office of the Solicitor
General filed a motion for reconsideration of the decision. Smart was required by the
Court of Appeals to file its comment.
   quo warranto
  (a)
    
    guidelines on the mandatory interconnection of backhaul networks to the cable
landing station, which were issued on October 7, 2008 and became effective on October
23, 2008; and(b)
    
    guidelines on the interconnection of LECs in local calling areas that eliminate
interconnection access charges between LECs within a local calling area, which were
issued on May 30, 2008 and became effective on June 17, 2008.
   
 Competition
  Cellular Service
 Sun Cellular
 49




---



##### Table of Contents



Local Exchange Service
    50




---



##### Table of Contents



PLP PLP PLP PLP
 International Long Distance Service
    National Long Distance Service
    Data and Other Network Services
  51




---



##### Table of Contents



Environmental Matters
  
 Intellectual Property Rights
  
 Properties
   
    
    69% consisted of cable, wire and cellular facilities, including our DFON, subscriber
cable facilities, inter-office trunking and toll cable facilities and cellular
facilities;
    
    15% consisted of central office equipment, including international gateway
facilities, pure national toll exchanges and combined local and toll exchanges;
    
    10% 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.
       52




---



##### Table of Contents



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 consolidated financial statements (and the related notes) as
at December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 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 consolidated financial statements, and the financial information
discussed below, have been prepared in accordance with IFRS. For convenience, certain Philippine
peso financial information in the following discussions has been translated to U.S. dollars at the
exchange rate at December 31, 2010 of Php43.81 to US$1.00, as quoted through the Philippine Dealing
System.
 
 Overview
  
    
    Wireless wireless telecommunications services provided through our cellular
service providers namely, Smart, PCEV (on August 17, 2009, Smart acquired the cellular
business of PCEV, which is formerly known as Pilipino Telephone Corporation) and CURE;
SBI, BOW, Airborne Access Corporation and PDSI, our wireless broadband service
providers; Wolfpac and Chikka Group, our wireless content operators; and ACeS
Philippines, our satellite operator;
    
    Fixed Line fixed line telecommunications services primarily provided by PLDT. We
also provide fixed line services through PLDTs subsidiaries ClarkTel, SubicTel,
Philcom and subsidiaries, Maratel, SBI, PDSI, BCC and PLDT Global, all of which
together account for approximately 4% of our consolidated fixed line subscribers; and
    
    ICT information and communications infrastructure and services for internet
applications, internet protocol-based solutions and multimedia content delivery
provided by ePLDT and BayanTrade Group; knowledge processing solutions provided by the
SPi Group; customer relationship management provided by SPi CRM, (on April 8, 2010, SPi
CRM, Parlance and Vocativ were merged wherein SPi CRM became the surviving entity);
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 10  Investments in Associates and Joint
Ventures to the accompanying consolidated financial statements in Item 18.
  53




---



##### Table of Contents



Managements Financial Review
   2010
    
    
    2009
    
    
    2008(in million pesos)Consolidated adjusted EBITDA
    
    
    83,717
    
    
    
    86,194
    
    
    
    87,996Amortization of intangible assets
    
    
    (388
    )
    
    
    (368
    )
    
    
    (377
    )Depreciation and amortization
    
    
    (26,277
    )
    
    
    (25,607
    )
    
    
    (24,709
    )Asset impairment:Investments in associates and joint ventures
    
    
    (78
    )
    
    
    
    
    
    
    (282
    )Property, plant and equipment
    
    
    (120
    )
    
    
    (634
    )
    
    
    (104
    )Goodwill and intangible assets
    
    
    (1,243
    )
    
    
    (379
    )
    
    
    (2,450
    )Prepayments and others
    
    
    (55
    )
    
    
    (1,324
    )
    
    
    (23
    )Consolidated operating profit for the year
    
    
    55,556
    
    
    
    57,882
    
    
    
    60,051Foreign exchange gains (losses)  net
    
    
    1,807
    
    
    
    909
    
    
    
    (6,170
    )Equity share in net earnings (losses) of associates and joint ventures
    
    
    1,408
    
    
    
    2
    
    
    
    (176
    )Interest income
    
    
    1,200
    
    
    
    1,539
    
    
    
    1,668Gains (losses) on derivative financial instruments  net
    
    
    (1,741
    )
    
    
    (1,006
    )
    
    
    3,115Financing costs  net
    
    
    (6,698
    )
    
    
    (6,556
    )
    
    
    (6,104
    )Other income
    
    
    2,153
    
    
    
    2,069
    
    
    
    1,665Consolidated income before income tax
    
    
    53,685
    
    
    
    54,839
    
    
    
    54,049Provision for income tax
    
    
    13,426
    
    
    
    14,744
    
    
    
    19,073Consolidated net income for the year
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976
 54




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008(in million pesos)Consolidated core income for the year
    
    
    42,028
    
    
    
    41,138
    
    
    
    38,214Foreign exchange gains (losses)  net
    
    
    1,819
    
    
    
    908
    
    
    
    (6,170
    )Core income adjustment on equity share in net earnings of associates and joint
ventures
    
    
    (699
    )
    
    
    (517
    )
    
    
    Gains (losses) on derivative financial instruments  net, excluding hedge cost
    
    
    (1,307
    )
    
    
    (407
    )
    
    
    3,934Asset impairment on noncurrent assets
    
    
    (1,492
    )
    
    
    (1,948
    )
    
    
    (2,486
    )Net tax effect of aforementioned adjustments
    
    
    (132
    )
    
    
    607
    
    
    
    825Net income for the year attributable to equity holders of PLDT
    
    
    40,217
    
    
    
    39,781
    
    
    
    34,317Net income for the year attributable to non-controlling interests
    
    
    42
    
    
    
    314
    
    
    
    659Consolidated net income for the year
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976
 
 Critical Accounting Policies
  Judgments
  Determination of functional currency
   Leases
 IAS 17, Leases,
 Significant influence in Manila Electric Company, or Meralco, on which PCEV has less than
20% ownership
 IAS 28, Investments in Associates
 55




---



##### Table of Contents



Estimates and Assumptions
  Asset impairment
     56




---



##### Table of Contents



Estimating useful lives of property, plant and equipment
   Determining the fair value of investment properties
   Goodwill and intangible assets
    57




---



##### Table of Contents



Recognition of deferred income tax assets and liabilities
   Estimating allowance for doubtful accounts
    Estimating net realizable value of inventories and supplies
   58




---



##### Table of Contents



Share-based payment transactions
  Estimation of pension benefit costs and other employee benefits
    Provision for asset retirement obligations
  59




---



##### Table of Contents



Provision for legal contingencies and tax assessments
  Revenue recognition
      Determination of fair values of financial assets and liabilities
   60




---



##### Table of Contents



New Accounting Standards and Interpretations to Existing Standards Effective Subsequent to December
31, 2010
  
 Results of Operations
  Inter-segmentWireless
    
    Fixed Line
    
    ICT
    
    Transactions
    
    Consolidated(in millions)For the year ended December 31, 2010Revenues
    
    Php
    95,187
    
    
    Php
    48,951
    
    
    Php
    11,358
    
    
    
    Php(11,037
    )
    
    Php
    144,459Expenses
    
    
    49,632
    
    
    
    38,745
    
    
    
    11,944
    
    
    
    (11,418
    )
    
    
    88,903Other income (expenses)
    
    
    1,235
    
    
    
    (2,946
    )
    
    
    221
    
    
    
    (381
    )
    
    
    (1,871
    )Income (loss) before income tax
    
    
    46,790
    
    
    
    7,260
    
    
    
    (365
    )
    
    
    
    
    
    
    53,685Provision for (benefit from) income tax
    
    
    11,414
    
    
    
    2,050
    
    
    
    (38
    )
    
    
    
    
    
    
    13,426Net income (loss) for the year/
Segment profit (loss) for the year
    
    
    35,376
    
    
    
    5,210
    
    
    
    (327
    )
    
    
    
    
    
    
    40,259Adjusted EBITDA for the year
    
    
    58,945
    
    
    
    22,668
    
    
    
    1,723
    
    
    
    381
    
    
    
    83,717Adjusted EBITDA margin for the year(1)
    
    
    63
    %
    
    
    47
    %
    
    
    16
    %
    
    
    
    
    
    
    59
    %Core income for the year
    
    
    35,418
    
    
    
    5,580
    
    
    
    1,030
    
    
    
    
    
    
    
    42,028For the year ended December 31, 2009Revenues
    
    
    97,524
    
    
    
    51,373
    
    
    
    11,549
    
    
    
    (12,453
    )
    
    
    147,993Expenses
    
    
    52,432
    
    
    
    39,081
    
    
    
    11,289
    
    
    
    (12,691
    )
    
    
    90,111Other income (expenses)
    
    
    1,149
    
    
    
    (4,170
    )
    
    
    216
    
    
    
    (238
    )
    
    
    (3,043
    )Income before income tax
    
    
    46,241
    
    
    
    8,122
    
    
    
    476
    
    
    
    
    
    
    
    54,839Provision for (benefit from) income tax
    
    
    12,514
    
    
    
    2,258
    
    
    
    (28
    )
    
    
    
    
    
    
    14,744Net income for the year/
Segment profit for the year
    
    
    33,727
    
    
    
    5,864
    
    
    
    504
    
    
    
    
    
    
    
    40,095Adjusted EBITDA for the year
    
    
    59,411
    
    
    
    25,215
    
    
    
    1,330
    
    
    
    238
    
    
    
    86,194Adjusted EBITDA margin for the year(1)
    
    
    62
    %
    
    
    49
    %
    
    
    12
    %
    
    
    
    
    
    
    59
    %Core income for the year
    
    
    33,026
    
    
    
    7,502
    
    
    
    613
    
    
    
    (3
    )
    
    
    41,138For the year ended December 31, 2008Revenues
    
    
    95,852
    
    
    
    49,686
    
    
    
    10,983
    
    
    
    (10,684
    )
    
    
    145,837Expenses
    
    
    47,589
    
    
    
    35,733
    
    
    
    13,267
    
    
    
    (10,803
    )
    
    
    85,786Other expenses
    
    
    (2,640
    )
    
    
    (3,173
    )
    
    
    (1
    )
    
    
    (188
    )
    
    
    (6,002
    )Income (loss) before income tax
    
    
    45,623
    
    
    
    10,780
    
    
    
    (2,285
    )
    
    
    (69
    )
    
    
    54,049Provision for (benefit from) income tax
    
    
    16,124
    
    
    
    3,048
    
    
    
    (99
    )
    
    
    
    
    
    
    19,073Net income for the year/
Segment profit (loss) for the year
    
    
    29,499
    
    
    
    7,732
    
    
    
    (2,186
    )
    
    
    (69
    )
    
    
    34,976Adjusted EBITDA for the year
    
    
    60,967
    
    
    
    25,854
    
    
    
    1,056
    
    
    
    119
    
    
    
    87,996Adjusted EBITDA margin for the year(1)
    
    
    65
    %
    
    
    52
    %
    
    
    10
    %
    
    
    
    
    
    
    62
    %Core income for the year
    
    
    30,250
    
    
    
    7,890
    
    
    
    138
    
    
    
    (64
    )
    
    
    38,214
 
 (1)
    
    Adjusted EBITDA margin is derived as a percentage of service revenues. 61




---



##### Table of Contents



2010 Compared to 2009
 On a Consolidated Basis
 Revenues
   Change2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    95,187
    
    
    
    66
    
    
    Php
    97,524
    
    
    
    66
    
    
    Php
    (2,337
    )
    
    
    (2
    )Fixed line
    
    
    48,951
    
    
    
    34
    
    
    
    51,373
    
    
    
    34
    
    
    
    (2,422
    )
    
    
    (5
    )Information and communications technology
    
    
    11,358
    
    
    
    8
    
    
    
    11,549
    
    
    
    8
    
    
    
    (191
    )
    
    
    (2
    )Inter-segment transactions
    
    
    (11,037
    )
    
    
    (8
    )
    
    
    (12,453
    )
    
    
    (8
    )
    
    
    1,416
    
    
    
    (11
    )Consolidated
    
    Php
    144,459
    
    
    
    100
    
    
    Php
    147,993
    
    
    
    100
    
    
    Php
    (3,534
    )
    
    
    (2
    )
 Expenses
   Change2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    49,632
    
    
    
    56
    
    
    Php
    52,432
    
    
    
    58
    
    
    Php
    (2,800
    )
    
    
    (5
    )Fixed line
    
    
    38,745
    
    
    
    44
    
    
    
    39,081
    
    
    
    43
    
    
    
    (336
    )
    
    
    (1
    )Information and communications technology
    
    
    11,944
    
    
    
    13
    
    
    
    11,289
    
    
    
    13
    
    
    
    655
    
    
    
    6Inter-segment transactions
    
    
    (11,418
    )
    
    
    (13
    )
    
    
    (12,691
    )
    
    
    (14
    )
    
    
    1,273
    
    
    
    10Consolidated
    
    Php
    88,903
    
    
    
    100
    
    
    Php
    90,111
    
    
    
    100
    
    
    Php
    (1,208
    )
    
    
    (1
    )
 Other Expenses
  62




---



##### Table of Contents



Change2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    1,235
    
    
    
    (66
    )
    
    Php
    1,149
    
    
    
    (38
    )
    
    Php
    86
    
    
    
    7Fixed line
    
    
    (2,946
    )
    
    
    158
    
    
    
    (4,170
    )
    
    
    137
    
    
    
    1,224
    
    
    
    (29
    )Information and communications technology
    
    
    221
    
    
    
    (12
    )
    
    
    216
    
    
    
    (7
    )
    
    
    5
    
    
    
    2Inter-segment transactions
    
    
    (381
    )
    
    
    20
    
    
    
    (238
    )
    
    
    8
    
    
    
    (143
    )
    
    
    60Consolidated
    
 Php
    (1,871
    )
    
    
    100
    
    
     Php
    (3,043
    )
    
    
    100
    
    
    Php
    1,172
    
    
    
    (39
    )
 Provision for Income Tax
  Net Income (Loss)
   Change2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    35,376
    
    
    
    88
    
    
    Php
    33,727
    
    
    
    84
    
    
    Php
    1,649
    
    
    
    5Fixed line
    
    
    5,210
    
    
    
    13
    
    
    
    5,864
    
    
    
    15
    
    
    
    (654
    )
    
    
    (11
    )Information and communications technology
    
    
    (327
    )
    
    
    (1
    )
    
    
    504
    
    
    
    1
    
    
    
    (831
    )
    
    
    (165
    )Consolidated
    
    Php
    40,259
    
    
    
    100
    
    
    Php
    40,095
    
    
    
    100
    
    
    Php
    164
    
    
    
    
 Adjusted EBITDA
   Change2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    58,945
    
    
    
    70
    
    
    Php
    59,411
    
    
    
    69
    
    
     Php
    (466
    )
    
    
    (1
    )Fixed line
    
    
    22,668
    
    
    
    27
    
    
    
    25,215
    
    
    
    29
    
    
    
    (2,547
    )
    
    
    (10
    )Information and communications technology
    
    
    1,723
    
    
    
    2
    
    
    
    1,330
    
    
    
    2
    
    
    
    393
    
    
    
    30Inter-segment transactions
    
    
    381
    
    
    
    1
    
    
    
    238
    
    
    
    
    
    
    
    143
    
    
    
    60Consolidated
    
    Php
    83,717
    
    
    
    100
    
    
    Php
    86,194
    
    
    
    100
    
    
     Php
    (2,477
    )
    
    
    (3
    )
 Core Income
  63




---



##### Table of Contents



Change2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    35,418
    
    
    
    84
    
    
    Php
    33,026
    
    
    
    80
    
    
    Php
    2,392
    
    
    
    7Fixed line
    
    
    5,580
    
    
    
    13
    
    
    
    7,502
    
    
    
    18
    
    
    
    (1,922
    )
    
    
    (26
    )Information and communications technology
    
    
    1,030
    
    
    
    3
    
    
    
    613
    
    
    
    2
    
    
    
    417
    
    
    
    68Inter-segment transactions
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    3
    
    
    
    100Consolidated
    
    Php
    42,028
    
    
    
    100
    
    
    Php
    41,138
    
    
    
    100
    
    
    Php
    890
    
    
    
    2
  On a Business Segment Basis
 Wireless
 Revenues
  Increase (Decrease)2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Service Revenues:Cellular
    
    Php
    86,399
    
    
    
    91
    
    
    Php
    88,410
    
    
    
    91
    
    
 Php
    (2,011
    )
    
    
    (2
    )Wireless broadband, satellite and othersWireless broadband
    
    
    6,286
    
    
    
    7
    
    
    
    5,383
    
    
    
    5
    
    
    
    903
    
    
    
    17Satellite and others
    
    
    1,145
    
    
    
    1
    
    
    
    2,036
    
    
    
    2
    
    
    
    (891
    )
    
    
    (44
    )93,830
    
    
    
    99
    
    
    
    95,829
    
    
    
    98
    
    
    
    (1,999
    )
    
    
    (2
    )Non-Service Revenues:Sale of cellular handsets, cellular
subsriber identification module, or
SIM,-packs and broadband data modems
    
    
    1,357
    
    
    
    1
    
    
    
    1,695
    
    
    
    2
    
    
    
    (338
    )
    
    
    (20
    )Total Wireless Revenues
    
    Php
    95,187
    
    
    
    100
    
    
    Php
    97,524
    
    
    
    100
    
    
    Php
    (2,337
    )
    
    
    (2
    )
 Service Revenues
  64




---



##### Table of Contents



Cellular Service
   Increase (Decrease)2010
    
    2009
    
    Amount
    %(in millions)Cellular service revenues
    
    Php
    86,399
    
    
    Php
    88,410
    
    
    Php
    (2,011
    )
    
    
    (2
    )By service type
    
    
    83,779
    
    
    
    85,922
    
    
    
    (2,143
    )
    
    
    (2
    )Prepaid
    
    
    77,231
    
    
    
    79,284
    
    
    
    (2,053
    )
    
    
    (3
    )Postpaid
    
    
    6,548
    
    
    
    6,638
    
    
    
    (90
    )
    
    
    (1
    )By component
    
    
    83,779
    
    
    
    85,922
    
    
    
    (2,143
    )
    
    
    (2
    )Voice
    
    
    42,250
    
    
    
    38,850
    
    
    
    3,400
    
    
    
    9Data
    
    
    41,529
    
    
    
    47,072
    
    
    
    (5,543
    )
    
    
    (12
    )Others(1)
    
    
    2,620
    
    
    
    2,488
    
    
    
    132
    
    
    
    5
 
 (1)
    
    Refers to other non-subscriber-related revenues consisting primarily of inbound
international roaming fees, share in revenues from PLDTs WeRoam and PLP services, a small
number of leased line contracts, and revenues from Chikka, Wolfpac and other Smart
subsidiaries. Increase (Decrease)2010
    
    2009
    
    Amount
    
    %Cellular subscriber base
    
    
    45,636,008
    
    
    
    41,328,641
    
    
    
    4,307,367
    
    
    
    10Prepaid
    
    
    45,214,433
    
    
    
    40,893,098
    
    
    
    4,321,335
    
    
    
    11Smart Buddy
    
    
    25,293,443
    
    
    
    23,762,814
    
    
    
    1,530,629
    
    
    
    6Talk N Text
    
    
    18,967,381
    
    
    
    17,050,713
    
    
    
    1,916,668
    
    
    
    11Red Mobile
    
    
    953,609
    
    
    
    79,571
    
    
    
    874,038
    
    
    
    1,098Postpaid
    
    
    421,575
    
    
    
    435,543
    
    
    
    (13,968
    )
    
    
    (3
    )Systemwide traffic volumes (in millions)Calls (in minutes)
    
    
    26,136
    
    
    
    16,305
    
    
    
    9,831
    
    
    
    60Domestic
    
    
    23,110
    
    
    
    13,371
    
    
    
    9,739
    
    
    
    73Inbound
    
    
    1,438
    
    
    
    1,495
    
    
    
    (57
    )
    
    
    (4
    )Outbound
    
    
    21,672
    
    
    
    11,876
    
    
    
    9,796
    
    
    
    82International
    
    
    3,026
    
    
    
    2,934
    
    
    
    92
    
    
    
    3Inbound
    
    
    2,817
    
    
    
    2,738
    
    
    
    79
    
    
    
    3Outbound
    
    
    209
    
    
    
    196
    
    
    
    13
    
    
    
    7SMS/Data count (in hits)
    
    
    341,113
    
    
    
    287,921
    
    
    
    53,192
    
    
    
    18Text messages
    
    
    339,530
    
    
    
    286,294
    
    
    
    53,236
    
    
    
    19Domestic
    
    
    339,011
    
    
    
    285,847
    
    
    
    53,164
    
    
    
    19Inbound
    
    
    8,058
    
    
    
    8,289
    
    
    
    (231
    )
    
    
    (3
    )Outbound
    
    
    330,953
    
    
    
    277,558
    
    
    
    53,395
    
    
    
    19Bucket-Priced
    
    
    312,634
    
    
    
    258,190
    
    
    
    54,444
    
    
    
    21Standard
    
    
    18,319
    
    
    
    19,368
    
    
    
    (1,049
    )
    
    
    (5
    )International
    
    
    519
    
    
    
    447
    
    
    
    72
    
    
    
    16Inbound
    
    
    211
    
    
    
    136
    
    
    
    75
    
    
    
    55Outbound
    
    
    308
    
    
    
    311
    
    
    
    (3
    )
    
    
    (1
    )Value-Added Services
    
    
    1,557
    
    
    
    1,608
    
    
    
    (51
    )
    
    
    (3
    )Financial Services
    
    
    26
    
    
    
    19
    
    
    
    7
    
    
    
    37
  65




---



##### Table of Contents



Voice Services
   Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    %(in millions)Voice services:DomesticInbound
    
    Php
    5,203
    
    
    Php
    5,095
    
    
    Php
    108
    
    
    
    2Outbound
    
    
    20,632
    
    
    
    16,534
    
    
    
    4,098
    
    
    
    2525,835
    
    
    
    21,629
    
    
    
    4,206
    
    
    
    19InternationalInbound
    
    
    14,698
    
    
    
    15,287
    
    
    
    (589
    )
    
    
    (4
    )Outbound
    
    
    1,717
    
    
    
    1,934
    
    
    
    (217
    )
    
    
    (11
    )16,415
    
    
    
    17,221
    
    
    
    (806
    )
    
    
    (5
    )Total
    
    Php
    42,250
    
    
    Php
    38,850
    
    
    Php
    3,400
    
    
    
    9
   Smartalk Smart Buddy Smart Gold Smart Buddy Smart Gold
 
    
    Smartalk 100 which offers five days of unlimited calls for Php100; and
    
    Smartalk 500 which offers 30 days of unlimited calls for Php500 to any subscriber
on the Smart network.
 Smartalk Plus Smartalk Plus
 66




---



##### Table of Contents



Talk N Text UnliTalk Plus 100 , Talk N Text Smart Buddy Talk N Text Smart Buddy Talk N Text Talk N Text UnliTalk 100 Talk N Text
 Red Mobile Unlimited Red-to-Red Red-to-Red
 Data Services
   Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    %(in millions)Text messagingDomestic
    
    Php
    37,478
    
    
    Php
    42,905
    
    
    Php
    (5,427
    )
    
    
    (13
    )Bucket-Priced
    
    
    23,138
    
    
    
    26,797
    
    
    
    (3,659
    )
    
    
    (14
    )Standard
    
    
    14,340
    
    
    
    16,108
    
    
    
    (1,768
    )
    
    
    (11
    )International
    
    
    1,423
    
    
    
    1,668
    
    
    
    (245
    )
    
    
    (15
    )38,901
    
    
    
    44,573
    
    
    
    (5,672
    )
    
    
    (13
    )Value-added servicesStandard(1)
    
    
    1,012
    
    
    
    1,057
    
    
    
    (45
    )
    
    
    (4
    )Rich Media(2)
    
    
    1,083
    
    
    
    998
    
    
    
    85
    
    
    
    9Pasa Load(3)
    
    
    493
    
    
    
    413
    
    
    
    80
    
    
    
    192,588
    
    
    
    2,468
    
    
    
    120
    
    
    
    5Financial servicesSmart Money
    
    
    34
    
    
    
    27
    
    
    
    7
    
    
    
    26Mobile Banking
    
    
    6
    
    
    
    4
    
    
    
    2
    
    
    
    5040
    
    
    
    31
    
    
    
    9
    
    
    
    29Total
    
    Php
    41,529
    
    
    Php
    47,072
    
    
     Php
    (5,543
    )
    
    
    (12
    )
 
 (1)
    
    Includes standard services such as info-on-demand, ringtone and logo downloads, etc.(2)
    
    Includes Multimedia Messaging System, or MMS, internet browsing, General Packet Radio Service, or GPRS, etc.(3)
    
    A service which allows prepaid and postpaid subscribers to transfer small denominations of air time credits to other prepaid subscribers.   67




---



##### Table of Contents



Pasa Load
 Subscriber Base, ARPU and Churn Rates
 Talk N Text Red Mobile
  Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    %Prepaid
    
    
    4,321,335
    
    
    
    6,066,630
    
    
    
    (1,745,295
    )
    
    
    (29
    )Smart Buddy
    
    
    1,530,629
    
    
    
    3,261,197
    
    
    
    (1,730,568
    )
    
    
    (53
    )Talk N Text
    
    
    1,916,668
    
    
    
    2,742,220
    
    
    
    (825,552
    )
    
    
    (30
    )Red Mobile
    
    
    874,038
    
    
    
    63,213
    
    
    
    810,825
    
    
    
    1,283Postpaid
    
    
    (13,968
    )
    
    
    37,407
    
    
    
    (51,375
    )
    
    
    (137
    )Total
    
    
    4,307,367
    
    
    
    6,104,037
    
    
    
    (1,796,670
    )
    
    
    (29
    )
  2010
    
    
    20091Q
    
    
    2Q
    
    
    3Q
    
    
    4Q
    
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4QPrepaid
    
    
    1,868,812
    
    
    
    2,144,244
    
    
    
    (1,212,389
    )
    
    
    1,520,668
    
    
    
    1,692,767
    
    
    
    1,575,585
    
    
    
    621,154
    
    
    
    2,177,124Smart Buddy
    
    
    1,271,132
    
    
    
    730,346
    
    
    
    (588,862
    )
    
    
    118,013
    
    
    
    419,821
    
    
    
    523,496
    
    
    
    644,932
    
    
    
    1,672,948Talk N Text
    
    
    394,984
    
    
    
    562,375
    
    
    
    128,786
    
    
    
    830,523
    
    
    
    1,256,907
    
    
    
    1,019,162
    
    
    
    (32,419
    )
    
    
    498,570Red Mobile
    
    
    202,696
    
    
    
    851,523
    
    
    
    (752,313
    )
    
    
    572,132
    
    
    
    16,039
    
    
    
    32,927
    
    
    
    8,641
    
    
    
    5,606Postpaid
    
    
    9,870
    
    
    
    (5,569
    )
    
    
    (21,266
    )
    
    
    2,997
    
    
    
    9,328
    
    
    
    17,746
    
    
    
    6,806
    
    
    
    3,527Total
    
    
    1,878,682
    
    
    
    2,138,675
    
    
    
    (1,233,655
    )
    
    
    1,523,665
    
    
    
    1,702,095
    
    
    
    1,593,331
    
    
    
    627,960
    
    
    
    2,180,651
  Smart Buddy Talk N Text Red Mobile
  68




---



##### Table of Contents



Gross(1)
    
    Decrease
    
    Net(2)
    
    Decrease2010
    
    2009
    
    Amount
    
    %
    
    2010
    
    2009
    
    Amount
    
    %PrepaidSmart Buddy
    
    Php
    220
    
    
    Php
    261
    
    
    Php
    (41
    )
    
    
    (16
    )
    
    Php
    174
    
    
    Php
    207
    
    
    Php
    (33
    )
    
    
    (16
    )Talk N Text
    
    
    139
    
    
    
    161
    
    
    
    (22
    )
    
    
    (14
    )
    
    
    115
    
    
    
    133
    
    
    
    (18
    )
    
    
    (14
    )Red Mobile
    
    
    11
    
    
    
    20
    
    
    
    (9
    )
    
    
    (45
    )
    
    
    9
    
    
    
    13
    
    
    
    (4
    )
    
    
    (31
    )Prepaid  Blended(3)
    
    
    183
    
    
    
    218
    
    
    
    (35
    )
    
    
    (16
    )
    
    
    147
    
    
    
    175
    
    
    
    (28
    )
    
    
    (16
    )Postpaid  Smart
    
    
    1,678
    
    
    
    1,817
    
    
    
    (139
    )
    
    
    (8
    )
    
    
    1,257
    
    
    
    1,313
    
    
    
    (56
    )
    
    
    (4
    )Prepaid and Postpaid Blended(4)
    
    
    198
    
    
    
    235
    
    
    
    (37
    )
    
    
    (16
    )
    
    
    158
    
    
    
    188
    
    
    
    (30
    )
    
    
    (16
    )
 
 (1)
    
    Gross monthly ARPU is calculated by dividing gross cellular service revenues for
the month, gross of discounts, allocated content-provider costs and 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, including interconnection income net of interconnection expense, but net of discounts
and content-provider costs, by the average number of subscribers in the month.(3)
    
    The average monthly ARPU of Smart Buddy, Talk N Text and Red Mobile.(4)
    
    The average monthly ARPU of all prepaid and postpaid cellular subscribers.    Prepaid
    
    PostpaidSmart Buddy
    
    Talk N Text
    
    Red Mobile
    
    SmartGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)2010First Quarter
    
    Php
    232
    
    
    Php
    184
    
    
    Php
    140
    
    
    Php
    115
    
    
    Php
    11
    
    
    Php
    8
    
    
    Php
    1,686
    
    
    Php
    1,286Second Quarter
    
    
    224
    
    
    
    179
    
    
    
    141
    
    
    
    116
    
    
    
    4
    
    
    
    3
    
    
    
    1,665
    
    
    
    1,257Third Quarter
    
    
    207
    
    
    
    163
    
    
    
    135
    
    
    
    112
    
    
    
    6
    
    
    
    5
    
    
    
    1,661
    
    
    
    1,229Fourth Quarter
    
    
    215
    
    
    
    171
    
    
    
    140
    
    
    
    116
    
    
    
    22
    
    
    
    19
    
    
    
    1,702
    
    
    
    1,2562009First Quarter
    
    
    272
    
    
    
    216
    
    
    
    176
    
    
    
    144
    
    
    
    25
    
    
    
    14
    
    
    
    1,863
    
    
    
    1,364Second Quarter
    
    
    269
    
    
    
    212
    
    
    
    168
    
    
    
    138
    
    
    
    16
    
    
    
    10
    
    
    
    1,816
    
    
    
    1,278Third Quarter
    
    
    249
    
    
    
    197
    
    
    
    148
    
    
    
    122
    
    
    
    19
    
    
    
    12
    
    
    
    1,801
    
    
    
    1,307Fourth Quarter
    
    
    252
    
    
    
    203
    
    
    
    152
    
    
    
    127
    
    
    
    18
    
    
    
    15
    
    
    
    1,791
    
    
    
    1,304
 
 (1)
    
    Gross monthly ARPU is calculated based on the average of the gross monthly ARPUs
for the quarter.(2)
    
    Net monthly ARPU is calculated based on the average of the net monthly ARPUs for the
quarter. Wireless Broadband, Satellite and Other Services
  Wireless Broadband
  69




---



##### Table of Contents



Smart Bro
 Smart Bro Plug-It, Smart Bro Plug-It Unli Surf200, Unli
Surf100 Unli Surf50 Smart Bro Plug-It Prepaid
 Smart Bro WiMAX WiMAX WiMAX
 Satellite and Other Services
  Non-Service Revenues
  Expenses
   70




---



##### Table of Contents



Increase (Decrease)2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Depreciation and amortization
    
    Php
    13,243
    
    
    
    27
    
    
    Php
    13,237
    
    
    
    25
    
    
    Php
    6
    
    
    
    Rent
    
    
    9,038
    
    
    
    18
    
    
    
    10,553
    
    
    
    20
    
    
    
    (1,515
    )
    
    
    (14
    )Compensation and employee benefits(1)
    
    
    6,385
    
    
    
    13
    
    
    
    6,059
    
    
    
    12
    
    
    
    326
    
    
    
    5Repairs and maintenance
    
    
    5,058
    
    
    
    10
    
    
    
    4,340
    
    
    
    8
    
    
    
    718
    
    
    
    17Selling and promotions
    
    
    3,809
    
    
    
    8
    
    
    
    4,051
    
    
    
    8
    
    
    
    (242
    )
    
    
    (6
    )Cost of sales
    
    
    3,587
    
    
    
    7
    
    
    
    4,363
    
    
    
    8
    
    
    
    (776
    )
    
    
    (18
    )Professional and other contracted services
    
    
    3,113
    
    
    
    6
    
    
    
    2,904
    
    
    
    6
    
    
    
    209
    
    
    
    7Taxes and licenses
    
    
    1,683
    
    
    
    3
    
    
    
    2,022
    
    
    
    4
    
    
    
    (339
    )
    
    
    (17
    )Communication, training and travel
    
    
    948
    
    
    
    2
    
    
    
    972
    
    
    
    2
    
    
    
    (24
    )
    
    
    (2
    )Insurance and security services
    
    
    831
    
    
    
    2
    
    
    
    781
    
    
    
    1
    
    
    
    50
    
    
    
    6Asset impairment
    
    
    824
    
    
    
    2
    
    
    
    2,026
    
    
    
    4
    
    
    
    (1,202
    )
    
    
    (59
    )Amortization of intangible assets
    
    
    134
    
    
    
    
    
    
    
    126
    
    
    
    
    
    
    
    8
    
    
    
    6Other expenses
    
    
    979
    
    
    
    2
    
    
    
    998
    
    
    
    2
    
    
    
    (19
    )
    
    
    (2
    )Total
    
    Php
    49,632
    
    
    
    100
    
    
    Php
    52,432
    
    
    
    100
    
    
    Php
    (2,800
    )
    
    
    (5
    )
 
 (1)
    
    Includes salaries and employee benefits, long-term incentive plan, or LTIP,
pension and manpower rightsizing program, or MRP, costs.           71




---



##### Table of Contents



Other Income
  Change2010
    
    
    2009
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses):Equity share in net earnings (losses) of associates
    
    Php
    1,222
    
    
    Php
    (68
    )
    
    Php
    1,290
    
    
    
    1,897Foreign exchange gains  net
    
    
    865
    
    
    
    387
    
    
    
    478
    
    
    
    124Interest income
    
    
    698
    
    
    
    1,139
    
    
    
    (441
    )
    
    
    (39
    )Gains on derivative financial instruments  net
    
    
    3
    
    
    
    1,166
    
    
    
    (1,163
    )
    
    
    (100
    )Financing costs  net
    
    
    (2,683
    )
    
    
    (2,619
    )
    
    
    (64
    )
    
    
    2Others
    
    
    1,130
    
    
    
    1,144
    
    
    
    (14
    )
    
    
    (1
    )Total
    
    Php
    1,235
    
    
    Php
    1,149
    
    
    Php
    86
    
    
    
    7
   Provision for Income Tax
 Talk N Text
 72




---



##### Table of Contents



Net Income
  Adjusted EBITDA
  Core Income
  Fixed Line
 Revenues
  Increase (Decrease)2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Service Revenues:Local exchange
    
    Php
    15,321
    
    
    
    31
    
    
    Php
    15,681
    
    
    
    31
    
    
    Php
    (360
    )
    
    
    (2
    )International long distance
    
    
    5,224
    
    
    
    11
    
    
    
    6,255
    
    
    
    12
    
    
    
    (1,031
    )
    
    
    (16
    )National long distance
    
    
    4,690
    
    
    
    10
    
    
    
    5,969
    
    
    
    12
    
    
    
    (1,279
    )
    
    
    (21
    )Data and other network
    
    
    21,646
    
    
    
    44
    
    
    
    21,567
    
    
    
    42
    
    
    
    79
    
    
    
    Miscellaneous
    
    
    1,728
    
    
    
    3
    
    
    
    1,668
    
    
    
    3
    
    
    
    60
    
    
    
    448,609
    
    
    
    99
    
    
    
    51,140
    
    
    
    100
    
    
    
    (2,531
    )
    
    
    (5
    )Non-Service Revenues:Sale of computers, PLPunits and SIM cards
    
    
    342
    
    
    
    1
    
    
    
    233
    
    
    
    
    
    
    
    109
    
    
    
    47Total Fixed Line Revenues
    
    Php
    48,951
    
    
    
    100
    
    
    Php
    51,373
    
    
    
    100
    
    
    Php
    (2,422
    )
    
    
    (5
    )
 Service Revenues
  73




---



##### Table of Contents



Local Exchange Service
  Increase (Decrease)2010
    
    2009
    
    Amount
    
    %Total local exchange service revenues (in millions)
    
    Php
    15,321
    
    
    Php
    15,681
    
    
    Php
    (360
    )
    
    
    (2
    )Number of fixed line subscribers
    
    
    1,822,105
    
    
    
    1,816,541
    
    
    
    5,564
    
    
    
    Postpaid
    
    
    1,703,998
    
    
    
    1,637,981
    
    
    
    66,017
    
    
    
    4Prepaid
    
    
    118,107
    
    
    
    178,560
    
    
    
    (60,453
    )
    
    
    (34
    )Number of fixed line employees
    
    
    7,395
    
    
    
    7,947
    
    
    
    (552
    )
    
    
    (7
    )Number of fixed line subscribers per employee
    
    
    246
    
    
    
    229
    
    
    
    17
    
    
    
    7
 PLDT Call All PLP
 PLP
 PLP Call All PLP Internet@Home
 PLP PLP PLP
 International Long Distance Service
  Decrease2010
    
    2009
    
    Amount
    
    %Total international long distance service revenues (in millions)
    
    Php
    5,224
    
    
    Php
    6,255
    
    
    Php
    (1,031
    )
    
    
    (16
    )Inbound
    
    
    4,499
    
    
    
    5,198
    
    
    
    (699
    )
    
    
    (13
    )Outbound
    
    
    725
    
    
    
    1,057
    
    
    
    (332
    )
    
    
    (31
    )International call volumes (in million minutes, except call ratio)
    
    
    1,714
    
    
    
    1,863
    
    
    
    (149
    )
    
    
    (8
    )Inbound
    
    
    1,515
    
    
    
    1,653
    
    
    
    (138
    )
    
    
    (8
    )Outbound
    
    
    199
    
    
    
    210
    
    
    
    (11
    )
    
    
    (5
    )Inbound-outbound call ratio
    
    
    7.6:1
    
    
    
    7.9:1
    
    
    
    
    
    
    
    
   74




---



##### Table of Contents



National Long Distance Service
  Decrease2010
    
    2009
    
    Amount
    
    %Total national long distance service revenues (in millions)
    
    Php
    4,690
    
    
    Php
    5,969
    
    
    Php
    (1,279
    )
    
    
    (21
    )National long distance call volumes (in million minutes)
    
    
    1,290
    
    
    
    1,822
    
    
    
    (532
    )
    
    
    (29
    )
  Data and Other Network Services
  Increase (Decrease)2010
    
    2009
    
    Amount
    
    %Data and other network service revenues (in millions)
    
    Php
    21,646
    
    
    Php
    21,567
    
    
    Php
    79
    
    
    
    Domestic
    
    
    15,637
    
    
    
    16,391
    
    
    
    (754
    )
    
    
    (5
    )Broadband
    
    
    8,511
    
    
    
    7,232
    
    
    
    1,279
    
    
    
    18DSL
    
    
    8,263
    
    
    
    7,024
    
    
    
    1,239
    
    
    
    18WeRoam
    
    
    248
    
    
    
    208
    
    
    
    40
    
    
    
    19Leased Lines and Others
    
    
    7,126
    
    
    
    9,159
    
    
    
    (2,033
    )
    
    
    (22
    )InternationalLeased Lines and Others
    
    
    6,009
    
    
    
    5,176
    
    
    
    833
    
    
    
    16Subscriber base:Broadband
    
    
    665,027
    
    
    
    576,687
    
    
    
    88,340
    
    
    
    15DSL
    
    
    643,048
    
    
    
    559,664
    
    
    
    83,384
    
    
    
    15WeRoam
    
    
    21,979
    
    
    
    17,023
    
    
    
    4,956
    
    
    
    29SWUP
    
    
    15,641
    
    
    
    12,383
    
    
    
    3,258
    
    
    
    26
 PLDT DSL,
  Shops.Work Unplugged SWUP
 75




---



##### Table of Contents



Broadband
 PLDT DSL PLDT WeRoam WeRoam
 Leased Lines and Others
 , Shops.Work SWUP SWUP
  Leased Lines and Others
  Miscellaneous Services
  Non-service Revenues
 PLP
 76




---



##### Table of Contents



Expenses
   Increase (Decrease)2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Depreciation and amortization
    
    Php
    12,292
    
    
    
    32
    
    
    Php
    11,619
    
    
    
    30
    
    
    Php
    673
    
    
    
    6Compensation and employee benefits(1)
    
    
    11,692
    
    
    
    30
    
    
    
    10,637
    
    
    
    27
    
    
    
    1,055
    
    
    
    10Repairs and maintenance
    
    
    4,527
    
    
    
    12
    
    
    
    4,345
    
    
    
    11
    
    
    
    182
    
    
    
    4Professional and other contracted services
    
    
    3,199
    
    
    
    8
    
    
    
    2,485
    
    
    
    6
    
    
    
    714
    
    
    
    29Rent
    
    
    2,469
    
    
    
    6
    
    
    
    2,749
    
    
    
    7
    
    
    
    (280
    )
    
    
    (10
    )Selling and promotions
    
    
    1,376
    
    
    
    3
    
    
    
    1,590
    
    
    
    4
    
    
    
    (214
    )
    
    
    (13
    )Taxes and licenses
    
    
    780
    
    
    
    2
    
    
    
    755
    
    
    
    2
    
    
    
    25
    
    
    
    3Communication, training and travel
    
    
    627
    
    
    
    2
    
    
    
    658
    
    
    
    2
    
    
    
    (31
    )
    
    
    (5
    )Insurance and security services
    
    
    434
    
    
    
    1
    
    
    
    488
    
    
    
    1
    
    
    
    (54
    )
    
    
    (11
    )Cost of sales
    
    
    433
    
    
    
    1
    
    
    
    310
    
    
    
    1
    
    
    
    123
    
    
    
    40Asset impairment
    
    
    291
    
    
    
    1
    
    
    
    2,901
    
    
    
    8
    
    
    
    (2,610
    )
    
    
    (90
    )Other expenses
    
    
    625
    
    
    
    2
    
    
    
    544
    
    
    
    1
    
    
    
    81
    
    
    
    15Total
    
    Php
    38,745
    
    
    
    100
    
    
    Php
    39,081
    
    
    
    100
    
    
    Php
    (336
    )
    
    
    (1
    )
 
 (1)
    
    Includes salaries and employee benefits, LTIP, pension and MRP costs.         77




---



##### Table of Contents



PLP PLP
   Other Expenses
  Change2010
    
    
    2009
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses):Foreign exchange gains  net
    
    Php
    1,008
    
    
    Php
    532
    
    
    Php
    476
    
    
    
    89Interest income
    
    
    484
    
    
    
    402
    
    
    
    82
    
    
    
    20Losses on derivative financial instruments  net
    
    
    (1,746
    )
    
    
    (2,180
    )
    
    
    434
    
    
    
    (20
    )Financing costs  net
    
    
    (3,856
    )
    
    
    (3,796
    )
    
    
    (60
    )
    
    
    2Equity share in net losses of joint ventures
    
    
    
    
    
    
    (98
    )
    
    
    98
    
    
    
    100Others
    
    
    1,164
    
    
    
    970
    
    
    
    194
    
    
    
    20Total
    
    (Php
    2,946
    )
    
    (Php
    4,170
    )
    
    Php
    1,224
    
    
    
    (29
    )
    Provision for Income Tax
  Net Income
  Adjusted EBITDA
  78




---



##### Table of Contents



Core Income
  Information and Communications Technology
 Revenues
    Increase (Decrease)2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Service Revenues:Knowledge processing solutions
    
    Php
    5,289
    
    
    
    47
    
    
    Php
    5,215
    
    
    
    45
    
    
    Php
    74
    
    
    
    1Customer relationship management
    
    
    2,823
    
    
    
    25
    
    
    
    3,319
    
    
    
    29
    
    
    
    (496
    )
    
    
    (15
    )Internet and online gaming
    
    
    1,059
    
    
    
    9
    
    
    
    1,113
    
    
    
    10
    
    
    
    (54
    )
    
    
    (5
    )Data center and others
    
    
    1,506
    
    
    
    13
    
    
    
    1,204
    
    
    
    10
    
    
    
    302
    
    
    
    2510,677
    
    
    
    94
    
    
    
    10,851
    
    
    
    94
    
    
    
    (174
    )
    
    
    (2
    )Non-Service Revenues:Point-product sales
    
    
    681
    
    
    
    6
    
    
    
    698
    
    
    
    6
    
    
    
    (17
    )
    
    
    (2
    )Total ICT Revenues
    
    Php
    11,358
    
    
    
    100
    
    
    Php
    11,549
    
    
    
    100
    
    
 Php
    (191
    )
    
    
    (2
    )
 Service Revenues
  Knowledge Processing Solutions
  Customer Relationship Management
  79




---



##### Table of Contents



Internet and Online Gaming
  Data Center and Others
 Vitro ä
 Non-Service Revenues
  Expenses
   Increase (Decrease)2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    Amount
    
    
    %(in millions)Compensation and employee benefits(1)
    
    Php
    6,000
    
    
    
    50
    
    
    Php
    6,418
    
    
    
    57
    
    
    Php
    (418
    )
    
    
    (7
    )Asset impairment
    
    
    1,323
    
    
    
    11
    
    
    
    134
    
    
    
    1
    
    
    
    1,189
    
    
    
    887Repairs and maintenance
    
    
    752
    
    
    
    6
    
    
    
    669
    
    
    
    6
    
    
    
    83
    
    
    
    12Cost of sales
    
    
    751
    
    
    
    6
    
    
    
    799
    
    
    
    7
    
    
    
    (48
    )
    
    
    (6
    )Depreciation and amortization
    
    
    742
    
    
    
    6
    
    
    
    751
    
    
    
    7
    
    
    
    (9
    )
    
    
    (1
    )Rent
    
    
    687
    
    
    
    6
    
    
    
    716
    
    
    
    6
    
    
    
    (29
    )
    
    
    (4
    )Professional and other contracted services
    
    
    500
    
    
    
    4
    
    
    
    592
    
    
    
    5
    
    
    
    (92
    )
    
    
    (16
    )Communication, training and travel
    
    
    461
    
    
    
    4
    
    
    
    500
    
    
    
    4
    
    
    
    (39
    )
    
    
    (8
    )Amortization of intangible assets
    
    
    254
    
    
    
    2
    
    
    
    242
    
    
    
    2
    
    
    
    12
    
    
    
    5Taxes and licenses
    
    
    108
    
    
    
    1
    
    
    
    104
    
    
    
    1
    
    
    
    4
    
    
    
    4Selling and promotions
    
    
    103
    
    
    
    1
    
    
    
    113
    
    
    
    1
    
    
    
    (10
    )
    
    
    (9
    )Insurance and security services
    
    
    79
    
    
    
    1
    
    
    
    68
    
    
    
    1
    
    
    
    11
    
    
    
    16Other expenses
    
    
    184
    
    
    
    2
    
    
    
    183
    
    
    
    2
    
    
    
    1
    
    
    
    1Total
    
    Php
    11,944
    
    
    
    100
    
    
    Php
    11,289
    
    
    
    100
    
    
    Php
    655
    
    
    
    6
 
 (1)
    
    Includes salaries and employee benefits, LTIP, pension and MRP costs.  80




---



##### Table of Contents



Other Income
  Change2010
    
    
    2009
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses):Equity share in net earnings of associates
    
    Php
    186
    
    
    Php
    168
    
    
    Php
    18
    
    
    
    11Interest income
    
    
    35
    
    
    
    28
    
    
    
    7
    
    
    
    25Gains on derivative financial instruments  net
    
    
    2
    
    
    
    8
    
    
    
    (6
    )
    
    
    (75
    )Foreign exchange losses  net
    
    
    (66
    )
    
    
    (12
    )
    
    
    (54
    )
    
    
    450Financing costs  net
    
    
    (176
    )
    
    
    (171
    )
    
    
    (5
    )
    
    
    3Others
    
    
    240
    
    
    
    195
    
    
    
    45
    
    
    
    23Total
    
    Php
    221
    
    
    Php
    216
    
    
    Php
    5
    
    
    
    2
 81




---



##### Table of Contents



Benefit from Income Tax
  Net Income (Loss)
  Adjusted EBITDA
  Core Income
  2009 Compared to 2008
 On a Consolidated Basis
 Revenues
  82




---



##### Table of Contents



Change2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    97,524
    
    
    
    66
    
    
    Php
    95,852
    
    
    
    66
    
    
    Php
    1,672
    
    
    
    2Fixed line
    
    
    51,373
    
    
    
    34
    
    
    
    49,686
    
    
    
    34
    
    
    
    1,687
    
    
    
    3Information and communications technology
    
    
    11,549
    
    
    
    8
    
    
    
    10,983
    
    
    
    7
    
    
    
    566
    
    
    
    5Inter-segment transactions
    
    
    (12,453
    )
    
    
    (8
    )
    
    
    (10,684
    )
    
    
    (7
    )
    
    
    (1,769
    )
    
    
    17Consolidated
    
    Php
    147,993
    
    
    
    100
    
    
    Php
    145,837
    
    
    
    100
    
    
    Php
    2,156
    
    
    
    1
 Expenses
   Change2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    52,432
    
    
    
    58
    
    
    Php
    47,589
    
    
    
    55
    
    
    Php
    4,843
    
    
    
    10Fixed line
    
    
    39,081
    
    
    
    43
    
    
    
    35,733
    
    
    
    42
    
    
    
    3,348
    
    
    
    9Information and communications technology
    
    
    11,289
    
    
    
    13
    
    
    
    13,267
    
    
    
    16
    
    
    
    (1,978
    )
    
    
    (15
    )Inter-segment transactions
    
    
    (12,691
    )
    
    
    (14
    )
    
    
    (10,803
    )
    
    
    (13
    )
    
    
    (1,888
    )
    
    
    17Consolidated
    
    Php
    90,111
    
    
    
    100
    
    
    Php
    85,786
    
    
    
    100
    
    
    Php
    4,325
    
    
    
    5
 Other Expenses
   Change2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    1,149
    
    
    
    (38
    )
    
    Php
    (2,640
    )
    
    
    44
    
    
    Php
    3,789
    
    
    
    144Fixed line
    
    
    (4,170
    )
    
    
    137
    
    
    
    (3,173
    )
    
    
    53
    
    
    
    (997
    )
    
    
    31Information and communications technology
    
    
    216
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    
    
    
    
    217
    
    
    
    21,700Inter-segment transactions
    
    
    (238
    )
    
    
    8
    
    
    
    (188
    )
    
    
    3
    
    
    
    (50
    )
    
    
    27Consolidated
    
    Php
    (3,043
    )
    
    
    100
    
    
    Php
    (6,002
    )
    
    
    100
    
    
    Php
    2,959
    
    
    
    (49
    )
 Provision for Income Tax
 83




---



##### Table of Contents



Net Income
   Change2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    33,727
    
    
    
    84
    
    
    Php
    29,499
    
    
    
    84
    
    
    Php
    4,228
    
    
    
    14Fixed line
    
    
    5,864
    
    
    
    15
    
    
    
    7,732
    
    
    
    22
    
    
    
    (1,868
    )
    
    
    (24
    )Information and communications technology
    
    
    504
    
    
    
    1
    
    
    
    (2,186
    )
    
    
    (6
    )
    
    
    2,690
    
    
    
    123Inter-segment transactions
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    69
    
    
    
    100Consolidated
    
    Php
    40,095
    
    
    
    100
    
    
    Php
    34,976
    
    
    
    100
    
    
    Php
    5,119
    
    
    
    15
 Adjusted EBITDA
   Change2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    59,411
    
    
    
    69
    
    
    Php
    60,967
    
    
    
    69
    
    
    Php
    (1,556
    )
    
    
    (3
    )Fixed line
    
    
    25,215
    
    
    
    29
    
    
    
    25,854
    
    
    
    30
    
    
    
    (639
    )
    
    
    (2
    )Information and communications technology
    
    
    1,330
    
    
    
    2
    
    
    
    1,056
    
    
    
    1
    
    
    
    274
    
    
    
    26Inter-segment transactions
    
    
    238
    
    
    
    
    
    
    
    119
    
    
    
    
    
    
    
    119
    
    
    
    100Consolidated
    
    Php
    86,194
    
    
    
    100
    
    
    Php
    87,996
    
    
    
    100
    
    
    Php
    (1,802
    )
    
    
    (2
    )
 Core Income
   Change2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless
    
    Php
    33,026
    
    
    
    80
    
    
    Php
    30,250
    
    
    
    79
    
    
    Php
    2,776
    
    
    
    9Fixed line
    
    
    7,502
    
    
    
    18
    
    
    
    7,890
    
    
    
    21
    
    
    
    (388
    )
    
    
    (5
    )Information and communications technology
    
    
    613
    
    
    
    2
    
    
    
    138
    
    
    
    
    
    
    
    475
    
    
    
    344Inter-segment transactions
    
    
    (3
    )
    
    
    
    
    
    
    (64
    )
    
    
    
    
    
    
    61
    
    
    
    95Consolidated
    
    Php
    41,138
    
    
    
    100
    
    
    Php
    38,214
    
    
    
    100
    
    
    Php
    2,924
    
    
    
    8
 84




---



##### Table of Contents



On a Business Segment Basis
 Wireless
 Revenues
  Increase (Decrease)2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless Services:Service Revenues:Cellular
    
    Php
    88,410
    
    
    
    91
    
    
    Php
    87,518
    
    
    
    92
    
    
    Php
    892
    
    
    
    1Wireless broadband, satellite and othersWireless broadband
    
    
    5,383
    
    
    
    5
    
    
    
    4,327
    
    
    
    4
    
    
    
    1,056
    
    
    
    24Satellite and others
    
    
    2,036
    
    
    
    2
    
    
    
    1,748
    
    
    
    2
    
    
    
    288
    
    
    
    1695,829
    
    
    
    98
    
    
    
    93,593
    
    
    
    98
    
    
    
    2,236
    
    
    
    2Non-Service Revenues:Sale of cellular handsets, cellular
SIM-packs and broadband data modems
    
    
    1,695
    
    
    
    2
    
    
    
    2,259
    
    
    
    2
    
    
    
    (564
    )
    
    
    (25
    )Total Wireless Revenues
    
    Php
    97,524
    
    
    
    100
    
    
    Php
    95,852
    
    
    
    100
    
    
    Php
    1,672
    
    
    
    2
 Service Revenues
  Cellular Service
  85




---



##### Table of Contents



Increase (Decrease)2009
    
    2008
    
    Amount
    
    %(in millions)Cellular service revenues
    
    Php
    88,410
    
    
    Php
    87,518
    
    
    Php
    892
    
    
    
    1By service type
    
    
    85,922
    
    
    
    85,079
    
    
    
    843
    
    
    
    1Prepaid
    
    
    79,284
    
    
    
    78,743
    
    
    
    541
    
    
    
    1Postpaid
    
    
    6,638
    
    
    
    6,336
    
    
    
    302
    
    
    
    5By component
    
    
    85,922
    
    
    
    85,079
    
    
    
    843
    
    
    
    1Voice
    
    
    38,850
    
    
    
    37,275
    
    
    
    1,575
    
    
    
    4Data
    
    
    47,072
    
    
    
    47,804
    
    
    
    (732
    )
    
    
    (2
    )Others(1)
    
    
    2,488
    
    
    
    2,439
    
    
    
    49
    
    
    
    2
 
 (1)
    
    Refers to other non-subscriber-related revenues consisting primarily of inbound international roaming fees, revenues from Smarts public calling offices and share in PLDTs
WeRoam and PLP services, a small number of leased line contracts, revenues from Wolfpac and other Smart subsidiaries Increase (Decrease)2009
    
    2008
    
    Amount
    
    %Cellular subscriber base
    
    
    41,328,641
    
    
    
    35,224,604
    
    
    
    6,104,037
    
    
    
    17Prepaid
    
    
    40,893,098
    
    
    
    34,826,468
    
    
    
    6,066,630
    
    
    
    17Smart Buddy
    
    
    23,762,814
    
    
    
    20,501,617
    
    
    
    3,261,197
    
    
    
    16Talk N Text(1)
    
    
    17,050,713
    
    
    
    14,308,493
    
    
    
    2,742,220
    
    
    
    19Red Mobile(2)
    
    
    79,571
    
    
    
    16,358
    
    
    
    63,213
    
    
    
    386Postpaid
    
    
    435,543
    
    
    
    398,136
    
    
    
    37,407
    
    
    
    9Systemwide traffic volumes (in millions)Calls (in minutes)
    
    
    16,305
    
    
    
    9,192
    
    
    
    7,113
    
    
    
    77Domestic
    
    
    13,371
    
    
    
    6,287
    
    
    
    7,084
    
    
    
    113Inbound
    
    
    1,495
    
    
    
    1,654
    
    
    
    (159
    )
    
    
    (10
    )Outbound
    
    
    11,876
    
    
    
    4,633
    
    
    
    7,243
    
    
    
    156International
    
    
    2,934
    
    
    
    2,905
    
    
    
    29
    
    
    
    1Inbound
    
    
    2,738
    
    
    
    2,684
    
    
    
    54
    
    
    
    2Outbound
    
    
    196
    
    
    
    221
    
    
    
    (25
    )
    
    
    (11
    )SMS/Data count (in hits)
    
    
    287,921
    
    
    
    258,246
    
    
    
    29,675
    
    
    
    11Text messages
    
    
    286,294
    
    
    
    256,606
    
    
    
    29,688
    
    
    
    12Domestic
    
    
    285,847
    
    
    
    256,181
    
    
    
    29,666
    
    
    
    12Inbound
    
    
    8,289
    
    
    
    8,430
    
    
    
    (141
    )
    
    
    (2
    )Outbound
    
    
    277,558
    
    
    
    247,751
    
    
    
    29,807
    
    
    
    12Bucket-Priced
    
    
    258,190
    
    
    
    226,937
    
    
    
    31,253
    
    
    
    14Standard
    
    
    19,368
    
    
    
    20,814
    
    
    
    (1,446
    )
    
    
    (7
    )International
    
    
    447
    
    
    
    425
    
    
    
    22
    
    
    
    5Inbound
    
    
    136
    
    
    
    125
    
    
    
    11
    
    
    
    9Outbound
    
    
    311
    
    
    
    300
    
    
    
    11
    
    
    
    4Value-Added Services
    
    
    1,608
    
    
    
    1,614
    
    
    
    (6
    )
    
    
    Financial Services
    
    
    19
    
    
    
    26
    
    
    
    (7
    )
    
    
    (27
    )
 
 (1)
    
    The transfer of PCEVs cellular business to Smart was completed on August 17, 2009(2)
    
    The Red Mobile brand was launched in November 2008 by CURE  86




---



##### Table of Contents



Voice Services
   Increase (Decrease)2009
    
    
    2008
    
    
    Amount
    
    
    %(in millions)Voice services:DomesticInbound
    
    Php
    5,095
    
    
    Php
    5,405
    
    
    (Php
    310
    )
    
    
    (6
    )Outbound
    
    
    16,534
    
    
    
    15,959
    
    
    
    575
    
    
    
    421,629
    
    
    
    21,364
    
    
    
    265
    
    
    
    1InternationalInbound
    
    
    15,287
    
    
    
    13,732
    
    
    
    1,555
    
    
    
    11Outbound
    
    
    1,934
    
    
    
    2,179
    
    
    
    (245
    )
    
    
    (11
    )17,221
    
    
    
    15,911
    
    
    
    1,310
    
    
    
    8Total
    
    Php
    38,850
    
    
    Php
    37,275
    
    
    Php
    1,575
    
    
    
    4
   Data Services
  87




---



##### Table of Contents



Increase (Decrease)2009
    
    
    2008
    
    
    Amount
    
    
    %(in millions)Text messagingDomestic
    
    Php
    42,905
    
    
    Php
    43,477
    
    
    Php
    (572
    )
    
    
    (1
    )Bucket-Priced
    
    
    26,797
    
    
    
    26,461
    
    
    
    336
    
    
    
    1Standard
    
    
    16,108
    
    
    
    17,016
    
    
    
    (908
    )
    
    
    (5
    )International
    
    
    1,668
    
    
    
    1,808
    
    
    
    (140
    )
    
    
    (8
    )44,573
    
    
    
    45,285
    
    
    
    (712
    )
    
    
    (2
    )Value-added servicesStandard(1)
    
    
    1,057
    
    
    
    1,325
    
    
    
    (268
    )
    
    
    (20
    )Rich Media(2)
    
    
    998
    
    
    
    679
    
    
    
    319
    
    
    
    47Pasa Load
    
    
    413
    
    
    
    470
    
    
    
    (57
    )
    
    
    (12
    )2,468
    
    
    
    2,474
    
    
    
    (6
    )
    
    
    Financial servicesSmart Money
    
    
    27
    
    
    
    41
    
    
    
    (14
    )
    
    
    (34
    )Mobile Banking
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    31
    
    
    
    45
    
    
    
    (14
    )
    
    
    (31
    )Total
    
    Php
    47,072
    
    
    Php
    47,804
    
    
    Php
    (732
    )
    
    
    (2
    )
 
 (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
 Talk N Text Red Mobile
 88




---



##### Table of Contents



Our net subscriber activations for the years ended December 31, 2009 and 2008 were as
follows:
 Increase (Decrease)2009
    
    
    2008
    
    
    Amount
    
    
    %Prepaid
    
    
    6,066,630
    
    
    
    5,127,318
    
    
    
    939,312
    
    
    
    18Smart Buddy
    
    
    3,261,197
    
    
    
    504,293
    
    
    
    2,756,904
    
    
    
    547Talk N Text(1)
    
    
    2,742,220
    
    
    
    4,606,667
    
    
    
    (1,864,447
    )
    
    
    (40
    )Red Mobile(2)
    
    
    63,213
    
    
    
    16,358
    
    
    
    46,855
    
    
    
    286Postpaid
    
    
    37,407
    
    
    
    56,256
    
    
    
    (18,849
    )
    
    
    (34
    )Total
    
    
    6,104,037
    
    
    
    5,183,574
    
    
    
    920,463
    
    
    
    18
 
 (1)
    
    The transfer of PCEVs cellular business to Smart was completed on August 17, 2009(2)
    
    The Red Mobile brand was launched in November 2008 by CURE  2009
    
    
    20081Q
    
    
    2Q
    
    
    3Q
    
    
    4Q
    
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4QPrepaid
    
    
    1,692,767
    
    
    
    1,575,585
    
    
    
    621,154
    
    
    
    2,177,124
    
    
    
    1,533,812
    
    
    
    1,660,040
    
    
    
    917,528
    
    
    
    1,015,938Smart Buddy
    
    
    419,821
    
    
    
    523,496
    
    
    
    644,932
    
    
    
    1,672,948
    
    
    
    282,044
    
    
    
    130,697
    
    
    
    111,487
    
    
    
    (19,935
    )Talk N Text
    
    
    1,256,907
    
    
    
    1,019,162
    
    
    
    (32,419
    )
    
    
    498,570
    
    
    
    1,251,768
    
    
    
    1,529,343
    
    
    
    806,041
    
    
    
    1,019,515Red Mobile
    
    
    16,039
    
    
    
    32,927
    
    
    
    8,641
    
    
    
    5,606
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,358Postpaid
    
    
    9,328
    
    
    
    17,746
    
    
    
    6,806
    
    
    
    3,527
    
    
    
    1,117
    
    
    
    5,027
    
    
    
    17,816
    
    
    
    32,296Total
    
    
    1,702,095
    
    
    
    1,593,331
    
    
    
    627,960
    
    
    
    2,180,651
    
    
    
    1,534,929
    
    
    
    1,665,067
    
    
    
    935,344
    
    
    
    1,048,234
 Smart Buddy Talk N Text Red Mobile
   Gross(1)
    
    Decrease
    
    Net(2)
    
    Decrease2009
    
    2008
    
    Amount
    
    %
    
    2009
    
    2008
    
    Amount
    
    %PrepaidSmart Buddy
    
    Php
    261
    
    
    Php
    290
    
    
    Php
    (29
    )
    
    
    (10
    )
    
    Php
    207
    
    
    Php
    230
    
    
    Php
    (23
    )
    
    
    (10
    )Talk N Text
    
    
    161
    
    
    
    194
    
    
    
    (33
    )
    
    
    (17
    )
    
    
    133
    
    
    
    158
    
    
    
    (25
    )
    
    
    (16
    )Red Mobile
    
    
    20
    
    
    
    48
    
    
    
    (28
    )
    
    
    (58
    )
    
    
    13
    
    
    
    39
    
    
    
    (26
    )
    
    
    (67
    )Prepaid  Blended(3)
    
    
    218
    
    
    
    254
    
    
    
    (36
    )
    
    
    (14
    )
    
    
    175
    
    
    
    203
    
    
    
    (28
    )
    
    
    (14
    )Postpaid  Smart
    
    
    1,817
    
    
    
    2,065
    
    
    
    (248
    )
    
    
    (12
    )
    
    
    1,313
    
    
    
    1,483
    
    
    
    (170
    )
    
    
    (11
    )Prepaid and Postpaid Blended(4)
    
    
    235
    
    
    
    274
    
    
    
    (39
    )
    
    
    (14
    )
    
    
    188
    
    
    
    217
    
    
    
    (29
    )
    
    
    (13
    )
 
 (1)
    
    Gross monthly ARPU is calculated by dividing gross cellular service revenues for the
month, including discounts, allocated content-provider costs and 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, including interconnection income net of interconnection expense, but net of discounts
and content-provider costs, by the average number of subscribers in the month.(3)
    
    The average monthly ARPU of Smart Buddy, Talk N Text and Red Mobile.(4)
    
    The average monthly ARPU of all prepaid and postpaid cellular subscribers.  89




---



##### Table of Contents



Prepaid
    
    PostpaidSmart Buddy
    
    TalkN Text
    
    Red Mobile
    
    SmartGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)2009First Quarter
    
    Php
    272
    
    
    Php
    216
    
    
    Php
    176
    
    
    Php
    144
    
    
    Php
    25
    
    
    Php
    14
    
    
    Php
    1,863
    
    
    Php
    1,364Second Quarter
    
    
    269
    
    
    
    212
    
    
    
    168
    
    
    
    138
    
    
    
    16
    
    
    
    10
    
    
    
    1,816
    
    
    
    1,278Third Quarter
    
    
    249
    
    
    
    197
    
    
    
    148
    
    
    
    122
    
    
    
    19
    
    
    
    12
    
    
    
    1,801
    
    
    
    1,307Fourth Quarter
    
    
    252
    
    
    
    203
    
    
    
    152
    
    
    
    127
    
    
    
    18
    
    
    
    15
    
    
    
    1,791
    
    
    
    1,3042008First Quarter
    
    
    292
    
    
    
    230
    
    
    
    207
    
    
    
    163
    
    
    
    
    
    
    
    
    
    
    
    2,013
    
    
    
    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
    
    
    
    48
    
    
    
    39
    
    
    
    2,037
    
    
    
    1,445
 
 (1)
    
    Gross quarterly ARPU is calculated based on the average of the gross monthly ARPUs
for the quarter.(2)
    
    Net quarterly ARPU is calculated based on the average of the net monthly ARPUs for
the quarter. Wireless Broadband, Satellite and Other Services
  Wireless Broadband
   Satellite and Other Services
  90




---



##### Table of Contents



Non-Service Revenues
  Expenses
    Increase (Decrease)2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Wireless Services:Depreciation and amortization
    
    Php
    13,237
    
    
    
    25
    
    
    Php
    11,975
    
    
    
    25
    
    
    Php
    1,262
    
    
    
    11Rent
    
    
    10,553
    
    
    
    20
    
    
    
    9,267
    
    
    
    20
    
    
    
    1,286
    
    
    
    14Compensation and employee benefits(1)
    
    
    6,059
    
    
    
    12
    
    
    
    5,433
    
    
    
    11
    
    
    
    626
    
    
    
    12Cost of sales
    
    
    4,363
    
    
    
    8
    
    
    
    4,236
    
    
    
    9
    
    
    
    127
    
    
    
    3Repairs and maintenance
    
    
    4,340
    
    
    
    8
    
    
    
    4,230
    
    
    
    9
    
    
    
    110
    
    
    
    3Selling and promotions
    
    
    4,051
    
    
    
    8
    
    
    
    3,781
    
    
    
    8
    
    
    
    270
    
    
    
    7Professional and other contracted services
    
    
    2,904
    
    
    
    6
    
    
    
    2,529
    
    
    
    5
    
    
    
    375
    
    
    
    15Asset impairment
    
    
    2,026
    
    
    
    4
    
    
    
    1,006
    
    
    
    2
    
    
    
    1,020
    
    
    
    101Taxes and licenses
    
    
    2,022
    
    
    
    4
    
    
    
    1,872
    
    
    
    4
    
    
    
    150
    
    
    
    8Communication, training and travel
    
    
    972
    
    
    
    2
    
    
    
    1,091
    
    
    
    2
    
    
    
    (119
    )
    
    
    (11
    )Insurance and security services
    
    
    781
    
    
    
    1
    
    
    
    722
    
    
    
    2
    
    
    
    59
    
    
    
    8Amortization of intangible assets
    
    
    126
    
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    (7
    )
    
    
    (5
    )Provisions
    
    
    
    
    
    
    
    
    
    
    897
    
    
    
    2
    
    
    
    (897
    )
    
    
    (100
    )Other expenses
    
    
    998
    
    
    
    2
    
    
    
    417
    
    
    
    1
    
    
    
    581
    
    
    
    139Total
    
    Php
    52,432
    
    
    
    100
    
    
    Php
    47,589
    
    
    
    100
    
    
    Php
    4,843
    
    
    
    10
 
 (1)
    
    Includes salaries and employee benefits, long-term incentive plan, or LTIP, pension
and MRP costs.    91




---



##### Table of Contents



Other Income (Expenses)
  Change2009
    
    
    2008
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses):Gains (losses) on derivative financial instruments  net
    
    Php
    1,166
    
    
    Php
    (241
    )
    
    Php
    1,407
    
    
    
    584Interest income
    
    
    1,139
    
    
    
    1,197
    
    
    
    (58
    )
    
    
    (5
    )Foreign exchange gains (losses)  net
    
    
    387
    
    
    
    (1,771
    )
    
    
    2,158
    
    
    
    122Equity share in net losses of associates
    
    
    (68
    )
    
    
    (119
    )
    
    
    51
    
    
    
    (43
    )Financing costs  net
    
    
    (2,619
    )
    
    
    (2,029
    )
    
    
    (590
    )
    
    
    29Others
    
    
    1,144
    
    
    
    323
    
    
    
    821
    
    
    
    254Total
    
    Php
    1,149
    
    
    Php
    (2,640
    )
    
    Php
    3,789
    
    
    
    144
  92




---



##### Table of Contents



Provision for Income Tax
  Net Income
  Adjusted EBITDA
  Core Income
  Fixed Line
 Revenues
  93




---



##### Table of Contents



Increase (Decrease)2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Service Revenues:Local exchange
    
    Php
    15,681
    
    
    
    31
    
    
    Php
    15,923
    
    
    
    32
    
    
    Php
    (242
    )
    
    
    (2
    )International long distance
    
    
    6,255
    
    
    
    12
    
    
    
    7,063
    
    
    
    14
    
    
    
    (808
    )
    
    
    (11
    )National long distance
    
    
    5,969
    
    
    
    12
    
    
    
    6,207
    
    
    
    13
    
    
    
    (238
    )
    
    
    (4
    )Data and other network
    
    
    21,567
    
    
    
    42
    
    
    
    18,607
    
    
    
    37
    
    
    
    2,960
    
    
    
    16Miscellaneous
    
    
    1,668
    
    
    
    3
    
    
    
    1,466
    
    
    
    3
    
    
    
    202
    
    
    
    1451,140
    
    
    
    100
    
    
    
    49,266
    
    
    
    99
    
    
    
    1,874
    
    
    
    4Non-Service Revenues:Sale of computers
    
    
    233
    
    
    
    
    
    
    
    420
    
    
    
    1
    
    
    
    (187
    )
    
    
    (45
    )Total Fixed Line Revenues
    
    Php
    51,373
    
    
    
    100
    
    
    Php
    49,686
    
    
    
    100
    
    
    Php
    1,687
    
    
    
    3
 Service Revenues
   Local Exchange Service
  Increase (Decrease)2009
    
    2008
    
    Amount
    
    %Total local exchange service revenues (in millions)
    
    Php
    15,681
    
    
    Php
    15,923
    
    
    Php
    (242
    )
    
    
    (2
    )Number of fixed line subscribers
    
    
    1,816,541
    
    
    
    1,782,356
    
    
    
    34,185
    
    
    
    2Postpaid
    
    
    1,637,981
    
    
    
    1,533,687
    
    
    
    104,294
    
    
    
    7Prepaid
    
    
    178,560
    
    
    
    248,669
    
    
    
    (70,109
    )
    
    
    (28
    )Number of fixed line employees(1)
    
    
    7,947
    
    
    
    7,813
    
    
    
    134
    
    
    
    2Number of fixed line subscribers per employee
    
    
    229
    
    
    
    228
    
    
    
    1
    
    
    
    
 
 (1)
    
    Increase in headcount was primarily due to the acquisition of Philcom. PLP
  94




---



##### Table of Contents



International Long Distance Service
  Decrease2009
    
    2008
    
    Amount
    
    %Total international long distance service revenues (in millions)
    
    Php
    6,255
    
    
    Php
    7,063
    
    
    Php
    (808
    )
    
    
    (11
    )Inbound
    
    
    5,198
    
    
    
    5,667
    
    
    
    (469
    )
    
    
    (8
    )Outbound
    
    
    1,057
    
    
    
    1,396
    
    
    
    (339
    )
    
    
    (24
    )International call volumes (in million minutes, except call ratio)
    
    
    1,863
    
    
    
    2,024
    
    
    
    (161
    )
    
    
    (8
    )Inbound
    
    
    1,653
    
    
    
    1,786
    
    
    
    (133
    )
    
    
    (7
    )Outbound
    
    
    210
    
    
    
    238
    
    
    
    (28
    )
    
    
    (12
    )Inbound-outbound call ratio
    
    
    7.9:1
    
    
    
    7.5:1
    
    
    
    
    
    
    
    
    National Long Distance Service
  Decrease2009
    
    2008
    
    Amount
    
    %Total national long distance service revenues (in millions)
    
    Php
    5,969
    
    
    Php
    6,207
    
    
    Php
    (238
    )
    
    
    (4
    )National long distance call volumes (in million minutes)
    
    
    1,822
    
    
    
    1,944
    
    
    
    (122
    )
    
    
    (6
    )
  95




---



##### Table of Contents



Data and Other Network Services
  Increase2009
    
    2008
    
    Amount
    
    %Data and other network service revenues (in millions)
    
    Php
    21,567
    
    
    Php
    18,607
    
    
    Php
    2,960
    
    
    
    16Domestic
    
    
    16,391
    
    
    
    14,155
    
    
    
    2,236
    
    
    
    16Broadband
    
    
    7,232
    
    
    
    5,563
    
    
    
    1,669
    
    
    
    30DSL
    
    
    7,024
    
    
    
    5,360
    
    
    
    1,664
    
    
    
    31WeRoam
    
    
    208
    
    
    
    203
    
    
    
    5
    
    
    
    2Leased Lines and Others
    
    
    9,159
    
    
    
    8,592
    
    
    
    567
    
    
    
    7InternationalLeased Lines and Others
    
    
    5,176
    
    
    
    4,452
    
    
    
    724
    
    
    
    16Subscriber base:Broadband
    
    
    576,687
    
    
    
    448,826
    
    
    
    127,861
    
    
    
    28DSL
    
    
    559,664
    
    
    
    432,583
    
    
    
    127,081
    
    
    
    29WeRoam
    
    
    17,023
    
    
    
    16,243
    
    
    
    780
    
    
    
    5SWUP
    
    
    12,383
    
    
    
    6,516
    
    
    
    5,867
    
    
    
    90
 PLDT DSL, SWUP
   Broadband
 PLDT DSL PLDT WeRoam WeRoam
 Leased Lines and Others
 , Shops.Work SWUP SWUP
 96




---



##### Table of Contents



Leased Lines and Others
  Miscellaneous
  Non-service Revenues
  Expenses
   Increase (Decrease)2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Fixed Line Services:Depreciation and amortization
    
    Php
    11,619
    
    
    
    30
    
    
    Php
    11,901
    
    
    
    33
    
    
    Php
    (282
    )
    
    
    (2
    )Compensation and employee benefits(1)
    
    
    10,637
    
    
    
    27
    
    
    
    9,093
    
    
    
    25
    
    
    
    1,544
    
    
    
    17Repairs and maintenance
    
    
    4,345
    
    
    
    11
    
    
    
    4,634
    
    
    
    13
    
    
    
    (289
    )
    
    
    (6
    )Asset impairment
    
    
    2,901
    
    
    
    8
    
    
    
    888
    
    
    
    3
    
    
    
    2,013
    
    
    
    227Rent
    
    
    2,749
    
    
    
    7
    
    
    
    2,492
    
    
    
    7
    
    
    
    257
    
    
    
    10Professional and other contracted services
    
    
    2,485
    
    
    
    6
    
    
    
    2,143
    
    
    
    6
    
    
    
    342
    
    
    
    16Selling and promotions
    
    
    1,590
    
    
    
    4
    
    
    
    1,715
    
    
    
    5
    
    
    
    (125
    )
    
    
    (7
    )Taxes and licenses
    
    
    755
    
    
    
    2
    
    
    
    769
    
    
    
    2
    
    
    
    (14
    )
    
    
    (2
    )Communication, training and travel
    
    
    658
    
    
    
    2
    
    
    
    608
    
    
    
    2
    
    
    
    50
    
    
    
    8Insurance and security services
    
    
    488
    
    
    
    1
    
    
    
    487
    
    
    
    1
    
    
    
    1
    
    
    
    Cost of sales
    
    
    310
    
    
    
    1
    
    
    
    356
    
    
    
    1
    
    
    
    (46
    )
    
    
    (13
    )Provisions
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    (100
    )Other expenses
    
    
    544
    
    
    
    1
    
    
    
    646
    
    
    
    2
    
    
    
    (102
    )
    
    
    (16
    )Total
    
    Php
    39,081
    
    
    
    100
    
    
    Php
    35,733
    
    
    
    100
    
    
    Php
    3,348
    
    
    
    9
 
 (1)
    
    Includes salaries and employee benefits, LTIP, pension and MRP costs. 97




---



##### Table of Contents



WeRoam
  Other Expenses
  Change2009
    
    
    2008
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses):Foreign exchange gains (losses)  net
    
    Php
    532
    
    
    Php
    (4,513
    )
    
    Php
    5,045
    
    
    
    112Interest income
    
    
    402
    
    
    
    448
    
    
    
    (46
    )
    
    
    (10
    )Equity share in net losses of joint ventures
    
    
    (98
    )
    
    
    (74
    )
    
    
    (24
    )
    
    
    32Gains (losses) on derivative financial instruments  net
    
    
    (2,180
    )
    
    
    3,444
    
    
    
    (5,624
    )
    
    
    (163
    )Financing costs  net
    
    
    (3,796
    )
    
    
    (3,903
    )
    
    
    107
    
    
    
    (3
    )Others
    
    
    970
    
    
    
    1,425
    
    
    
    (455
    )
    
    
    (32
    )Total
    
    Php
    (4,170
    )
    
    Php
    (3,173
    )
    
    Php
    (997
    )
    
    
    31
 98




---



##### Table of Contents



Provision for Income Tax
  Net Income
  Adjusted EBITDA
  Core Income
  Information and Communications Technology
 Revenues
    99




---



##### Table of Contents



Increase (Decrease)2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)Service Revenues:Knowledge processing solutions
    
    Php
    5,215
    
    
    
    45
    
    
    Php
    5,272
    
    
    
    48
    
    
    Php
    (57
    )
    
    
    (1
    )Customer relationship management
    
    
    3,319
    
    
    
    29
    
    
    
    3,402
    
    
    
    31
    
    
    
    (83
    )
    
    
    (2
    )Internet and online gaming
    
    
    1,113
    
    
    
    10
    
    
    
    976
    
    
    
    9
    
    
    
    137
    
    
    
    14Data center and others
    
    
    1,284
    
    
    
    11
    
    
    
    767
    
    
    
    7
    
    
    
    517
    
    
    
    6710,931
    
    
    
    95
    
    
    
    10,417
    
    
    
    95
    
    
    
    514
    
    
    
    5Non-Service Revenues:Point-product sales
    
    
    618
    
    
    
    5
    
    
    
    566
    
    
    
    5
    
    
    
    52
    
    
    
    9Total ICT Revenues
    
    Php
    11,549
    
    
    
    100
    
    
    Php
    10,983
    
    
    
    100
    
    
    Php
    566
    
    
    
    5
 Service Revenues
  Knowledge Processing Solutions
  Customer Relationship Management
  Internet and Online Gaming
  100




---



##### Table of Contents



Data Center and Others
 Vitro ä
 Non-Service Revenues
   Expenses
   Increase (Decrease)2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    Amount
    
    
    %(in millions)ICT Services:Compensation and employee benefits(1)
    
    Php
    6,418
    
    
    
    57
    
    
    Php
    6,131
    
    
    
    46
    
    
    Php
    287
    
    
    
    5Cost of sales
    
    
    799
    
    
    
    7
    
    
    
    660
    
    
    
    5
    
    
    
    139
    
    
    
    21Depreciation and amortization
    
    
    751
    
    
    
    7
    
    
    
    833
    
    
    
    6
    
    
    
    (82
    )
    
    
    (10
    )Rent
    
    
    716
    
    
    
    6
    
    
    
    665
    
    
    
    5
    
    
    
    51
    
    
    
    8Repairs and maintenance
    
    
    669
    
    
    
    6
    
    
    
    573
    
    
    
    4
    
    
    
    96
    
    
    
    17Professional and other contracted services
    
    
    592
    
    
    
    5
    
    
    
    747
    
    
    
    6
    
    
    
    (155
    )
    
    
    (21
    )Communication, training and travel
    
    
    500
    
    
    
    4
    
    
    
    573
    
    
    
    4
    
    
    
    (73
    )
    
    
    (13
    )Amortization of intangible assets
    
    
    242
    
    
    
    2
    
    
    
    244
    
    
    
    2
    
    
    
    (2
    )
    
    
    (1
    )Asset impairment
    
    
    134
    
    
    
    1
    
    
    
    2,286
    
    
    
    17
    
    
    
    (2,152
    )
    
    
    (94
    )Selling and promotions
    
    
    113
    
    
    
    1
    
    
    
    203
    
    
    
    2
    
    
    
    (90
    )
    
    
    (44
    )Taxes and licenses
    
    
    104
    
    
    
    1
    
    
    
    98
    
    
    
    1
    
    
    
    6
    
    
    
    6Insurance and security services
    
    
    68
    
    
    
    1
    
    
    
    61
    
    
    
    
    
    
    
    7
    
    
    
    11Other expenses
    
    
    183
    
    
    
    2
    
    
    
    193
    
    
    
    2
    
    
    
    (10
    )
    
    
    (5
    )Total
    
    Php
    11,289
    
    
    
    100
    
    
    Php
    13,267
    
    
    
    100
    
    
    Php
    (1,978
    )
    
    
    (15
    )
 
 (1)
    
    Includes salaries and employee benefits, LTIP, pension and MRP costs.   101




---



##### Table of Contents



Other Income (Expenses)
  Change2009
    
    
    2008
    
    
    Amount
    
    
    %(in millions)Other Income (Expenses):Equity share in net earnings of associates
    
    Php
    168
    
    
    Php
    17
    
    
    Php
    151
    
    
    
    888Interest income
    
    
    28
    
    
    
    22
    
    
    
    6
    
    
    
    27Gains (losses) on derivative financial instruments  net
    
    
    8
    
    
    
    (59
    )
    
    
    67
    
    
    
    114Foreign exchange gains (losses)  net
    
    
    (12
    )
    
    
    93
    
    
    
    (105
    )
    
    
    (113
    )Financing costs  net
    
    
    (171
    )
    
    
    (172
    )
    
    
    1
    
    
    
    (1
    )Others
    
    
    195
    
    
    
    98
    
    
    
    97
    
    
    
    99Total
    
    Php
    216
    
    
    Php
    (1
    )
    
    Php
    217
    
    
    
    21,700
  102




---



##### Table of Contents



Benefit from Income Tax
  Net Income (Loss)
  Adjusted EBITDA
  Core Income
  
 Plans and Prospects
    (1)
    
    Technical Objectives  these include the upgrade and modernization of the
wireless network in order to realize operating and cost efficiencies, provide greater
resilience and redundancy, as well as investments in additional cable systems;(2)
    
    Commercial Objectives  these include the provisioning of expanded capacity
and coverage as well as new platforms to expand service offerings; and(3)
    
    IT/Support Systems  these include the upgrade of our IT and support systems.
  
 Liquidity and Capital Resources
  103




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008(in millions)Cash FlowsNet cash provided by operating activities
    
    Php
    77,260
    
    Php
    74,386
    
    Php

    78,302Net cash used in investing activities
    
    
    23,283
    
    
    
    49,132
    
    
    
    17,014Capital expenditures
    
    
    28,766
    
    
    
    28,069
    
    
    
    25,203Net cash used in financing activities
    
    
    55,322
    
    
    
    20,293
    
    
    
    45,464Net increase (decrease) in cash and cash equivalents
    
    
    (1,641
    )
    
    
    4,635
    
    
    
    16,237
 2010
    
    
    2009(in millions)CapitalizationInterest-bearing financial liabilities:Long-term portion of financial liabilities:Long-term debt
    
    Php
    75,879
    
    
    Php
    86,066Obligations under finance lease
    
    
    9
    
    
    
    1375,888
    
    
    
    86,079Current portion of interest-bearing financial liabilities:Notes payable
    
    
    
    
    
    
    2,279Long-term debt maturing within one year
    
    
    13,767
    
    
    
    10,384Obligations under finance lease maturing within one year
    
    
    34
    
    
    
    5113,801
    
    
    
    12,714Total interest-bearing financial liabilities
    
    
    89,689
    
    
    
    98,793Total equity
    
    
    97,069
    
    
    
    98,575Php
    186,758
    
    
    Php
    197,368Other Selected Financial DataTotal assets
    
    Php
    277,815

    
    
    Php
    280,148Property, plant and equipment  net
    
    
    163,184
    
    
    
    161,256Cash and cash equivalents
    
    
    36,678
    
    
    
    38,319Short-term investments
    
    
    669
    
    
    
    3,824
   Operating Activities
   104




---



##### Table of Contents



Investing Activities
    105




---



##### Table of Contents



.
  Financing Activities
  Debt Financing
   106




---



##### Table of Contents



Debt Covenants
   Financing Requirements
   107




---



##### Table of Contents



Off-Statement of Financial Position Arrangements
  Equity Financing
   108




---



##### 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, 2010Debt(1):
    
    
    113,394
    
    
    
    6,569
    
    
    
    51,308
    
    
    
    33,978
    
    
    
    21,539Principal
    
    
    92,590
    
    
    
    6,206
    
    
    
    38,263
    
    
    
    29,335
    
    
    
    18,786Interest
    
    
    20,804
    
    
    
    363
    
    
    
    13,045
    
    
    
    4,643
    
    
    
    2,753Lease obligations:
    
    
    8,003
    
    
    
    4,383
    
    
    
    1,710
    
    
    
    948
    
    
    
    962Operating lease
    
    
    7,959
    
    
    
    4,353
    
    
    
    1,697
    
    
    
    947
    
    
    
    962Finance lease
    
    
    44
    
    
    
    30
    
    
    
    13
    
    
    
    1
    
    
    
    Unconditional purchase obligations(2)
    
    
    797
    
    
    
    271
    
    
    
    263
    
    
    
    263
    
    
    
    Other obligations:
    
    
    68,714
    
    
    
    50,247
    
    
    
    13,895
    
    
    
    683
    
    
    
    3,889Derivative financial liabilities(3):
    
    
    4,173
    
    
    
    
    
    
    
    1,667
    
    
    
    674
    
    
    
    1,832Long-term currency swaps
    
    
    4,173
    
    
    
    
    
    
    
    1,667
    
    
    
    674
    
    
    
    1,832Various trade and other obligations:
    
    
    64,541
    
    
    
    50,247
    
    
    
    12,228
    
    
    
    9
    
    
    
    2,057Suppliers and contractors
    
    
    32,997
    
    
    
    20,957
    
    
    
    12,040
    
    
    
    
    
    
    
    Utilities and related expenses
    
    
    16,477
    
    
    
    16,446
    
    
    
    10
    
    
    
    3
    
    
    
    18Employee benefits
    
    
    3,853
    
    
    
    3,853
    
    
    
    
    
    
    
    
    
    
    
    Customers deposits
    
    
    2,223
    
    
    
    
    
    
    
    178
    
    
    
    6
    
    
    
    2,039Dividends
    
    
    2,086
    
    
    
    2,086
    
    
    
    
    
    
    
    
    
    
    
    Carriers
    
    
    1,866
    
    
    
    1,866
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    5,039
    
    
    
    5,039
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    190,908
    
    
    
    61,470
    
    
    
    67,176
    
    
    
    35,872
    
    
    
    26,390
 
 (1)
    
    Consist of notes payable and long-term debt, including current portion; gross
of unamortized debt discount and debt issuance costs.(2)
    
    Based on the Amended ATPA with AIL.(3)
    
    Gross liabilities before any offsetting application.  Commercial Commitments
  
 Impact of Inflation and Changing Prices
   109




---



##### 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
    
    64
    
    November 24, 1998 to presentNapoleon L. Nazareno
    
    61
    
    November 24, 1998 to presentDonald G. Dee(1)
    
    64
    
    September 30, 2008 to December 5, 2010Helen Y. Dee
    
    66
    
    June 18, 1986 to presentRay C. Espinosa
    
    54
    
    November 24, 1998 to presentTatsu Kono
    
    58
    
    March 28, 2006 to presentRev. Fr. Bienvenido F. Nebres, S.J.(2)
    
    70
    
    November 24, 1998 to presentTakashi Ooi
    
    49
    
    November 6, 2007 to presentJuan B. Santos(3)
    
    72
    
    January 25, 2011 to presentOscar S. Reyes
    
    64
    
    April 5, 2005 to presentAlbert F. del Rosario(4)
    
    71
    
    November 24, 1998 to presentPedro E. Roxas(2)
    
    54
    
    March 1, 2001 to presentAlfred V. Ty(2)
    
    43
    
    June 13, 2006 to presentTony Tan Caktiong
    
    58
    
    July 8, 2008 to presentMa. Lourdes C. Rausa-Chan(5)
    
    57
    
    March 29, 2011 to present
 
 (1)
    
    Resigned effective December 6, 2010.(2)
    
    Independent Director.(3)
    
    Elected effective January 25, 2011.(4)
    
    Resigned effective March 25, 2011.(5)
    
    Elected effective March 29, 2011.  Name
    
    Age
    
    Position(s)
    
    Period during which individual has served as suchManuel V. Pangilinan
    
    64
    
    Chairman of the Board
    
    February 19, 2004 to presentNapoleon L. Nazareno
    
    61
    
    President and Chief Executive Officer
    
    February 19, 2004 to presentPresident and Chief Executive Officer of Smart
    
    January 2000 to presentRay C. Espinosa
    
    55
    
    Regulatory Affairs and Policies Head
    
    March 4, 2008 to presentMa. Lourdes C. Rausa-Chan
    
    57
    
    Corporate Secretary
    
    November 24, 1998 to presentSenior Vice President
    
    January 5, 1999 to presentCorporate Affairs and Legal Services HeadChief Governance Officer
    
    March 4, 2008 to presentAnabelle L. Chua
    
    50
    
    Senior Vice President
    
    February 26, 2002 to presentCorporate Finance and Treasury Head
    
    March 1, 1998 to presentTreasurer
    
    February 1, 1999 to presentChief Financial Officer of Smart
    
    December 1, 2005 to presentErnesto R. Alberto
    
    49
    
    Senior Vice President
    
    May 15, 2003 to presentCustomer Sales and Marketing Head
    
    February 1, 2008 to presentCorporate Business Head
    
    May 15, 2003 to January 31, 2008Rene G. Bañez
    
    55
    
    Senior Vice President
    
    January 25, 2005 to presentAdministration and Materials
    
    January 1, 2008 to presentManagement HeadChief Governance Officer
    
    October 5, 2004 to March 3, 2008Jun R. Florencio
    
    55
    
    Senior Vice President
    
    June 14, 2005 to presentInternal Audit and Fraud Risk
    
    February 16, 2006 to presentManagement HeadAudit and Assurance Head
    
    September 1, 2000 to February 15, 2006Menardo G. Jimenez, Jr.
    
    47
    
    Senior Vice President
    
    December 9, 2004 to presentHuman Resources Head and Business
    
    August 1, 2010 to presentTransformation Office HeadBusiness Transformation Office 
    
    January 1, 2008 to July 2010Revenue Team HeadRetail Business Head
    
    June 16, 2004 to December 31, 2007Corporate Communications and
    
    December 1, 2001 to June 15, 2004Public Affairs Head
 110




---



##### Table of Contents



Name
    
    Age
    
    Position(s)
    
    Period during which individual has served as suchGeorge N. Lim
    
    58
    
    Senior Vice President
    
    February 26, 1999 to presentNetwork Services Assurance Head
    
    October 16, 2010 to presentBusiness Transformation Office 
    
    January 1, 2008 to presentNetwork Team HeadNetwork Services Head
    
    February 1, 2003 to December 31, 2007Alfredo S. Panlilio(1)
    
    47
    
    Senior Vice President
    
    May 8, 2001 to December 15, 2010International and Carrier Business Head
    
    February 1, 2003 to June 15, 2004PLDT Global Corp. President
    
    June 16, 2004 to December 15, 2010Claro Carmelo P. Ramirez
    
    50
    
    Senior Vice President
    
    July 1, 1999 to presentOffice of the President and CEO
    
    January 1, 2008 to presentConsumer Affairs Head
    
    December 5, 2005 to December 31, 2007International and Carrier Business Head
    
    June 16, 2004 to December 4, 2005Retail Business Head
    
    February 1, 2003 to June 15, 2004Victorico P. Vargas(2)
    
    59
    
    Senior Vice President
    
    February 15, 2000 to August 1, 2010Human Resources Head
    
    February 15, 2000 to August 1, 2010International and Carrier Business Head
    
    March 1, 2007 to December 31, 2007Business Transformation Office Head
    
    January 1, 2008 to August 1, 2010June Cheryl A. Cabal
    
    37
    
    First Vice President
    
    May 6, 2008 to presentFinancial Reporting and Controllership Head
    
    November 15, 2006 to presentFinancial Reporting and Planning Head
    
    May 1, 2002 to November 15, 2006Christopher H. Young
    
    53
    
    Chief Financial Advisor
    
    November 24, 1998 to present
 
 (1)
    
    Availed of the MRP effective at the close of business hours on December 15, 2010.(2)
    
    Availed of the MRP effective at the close of business hours on August 1, 2010.   111




---



##### Table of Contents



Mr. Manuel V. Pangilinan
   Asiamoney
  Mr. Napoleon L. Nazareno
   112




---



##### Table of Contents



Asiamoney
  Ms. Helen Y. Dee
 Mr. Tatsu Kono
 Rev. Fr. Bienvenido F. Nebres, S.J.
 Mr. Takashi Ooi
 Mr. Oscar S. Reyes
  113




---



##### Table of Contents



Mr. Pedro E. Roxas
 Mr. Juan B. Santos
  Mr. Tony Tan Caktiong
 Mr. Alfred V. Ty
 Atty. Ray C. Espinosa
  Atty. Ma. Lourdes C. Rausa-Chan
 114




---



##### Table of Contents



Ms. Anabelle L. Chua
 Mr. Ernesto R. Alberto
 Mr. Rene G. Bañez
 Mr. Jun R. Florencio
 Mr. Menardo G. Jimenez, Jr.,
 Mr. George N. Lim,
 115




---



##### Table of Contents



Mr. Claro Carmelo P. Ramirez
 Ms. June Cheryl A. Cabal
 Mr. Christopher H. Young
  Mr. Rolando G. Peña
  Name of CompaniesName of Director
    
    Public
    
    PrivateHelen Y. Dee
    
    EEI Corporation
    
    AY Holdings, Inc.National Reinsurance Corporation
of the Philippines (Chairman)
    
    Great Life Financial Assurance Corporation
Great Pacific Life Assurance Corp.Petro Energy Resources Corporation
    
    Hi-Eisai Pharmaceuticals, Inc. (Chairman)Rizal Commercial Banking Corporation (Chairman)
    
    Honda Cars, KalookanSeafront Resources Corporation
    
    Honda Cars Philippines, Inc.Bankard, Inc.
    
    Isuzu Philippines, Inc.La Funeraria Paz, Inc. (Chairman)Landev Corp. (Chairman)Malayan Insurance Company (Chairman)Manila Memorial Park Cemetery, Inc. (Chairman)Mapua Information Technology Center, Inc. (Chairman)Merchants Bank (Chairman)MICO Equities, Inc.Pan Malayan ExpressPan Malayan Management and Investment
Corporation (Vice Chairman)Pan Malayan Realty Corp. (Chairman)RCBC Forex Brokers Corp.(Chairman)RCBC Savings Bank (Chairman)South Western Cement Corporation (Chairman)Xamdu Motors, Inc. (Chairman)Ray C. Espinosa
    
    Cyber Bay Corporation
    
    ABC Development Corporation
 116




---



##### Table of Contents



Name of CompaniesName of Director
    
    Public
    
    PrivateLepanto Consolidated Mining Company
(Independent Director)
    
    Beacon Electric Asset Holdings, Inc.Metro Pacific Investments Corporation
    
    Bonifacio Communications CorporationManila Electric Company
    
    ePDS, Inc.Philweb Corporation (Vice Chairman)
    
    Meralco PowerGen CorporationMetro Pacific Assets Holdings, Inc.Metro Pacific Resources, Inc.Philippine Telecommunications Investment CorporationOscar S. Reyes
    
    Alcorn Gold Resources, Inc. (Independent
Director)
    
    Mindoro Resources Ltd.Ayala Land, Inc. (Independent Drector)
    
    Petrolift, Inc. (Independent Director)Bank of the Philippine Islands
    
    Smart Communications, Inc.Basic Energy Corporation (Independent Director)
    
    Sun Life Dollar Advantage Fund, Inc. (Independent Director)Manila Water Company, Inc. (Independent
Director)
    
    Sun Life Dollar Abundance Fund, Inc. (Independent Director)Pepsi Cola Products Philippines, Inc.
(Independent Director)
    
    Sun Life Financial Plans, Inc. (Independent Director)
 
 Terms of Office
  
 Family Relationships
  
 Compensation of Key Management Personnel
  117




---



##### Table of Contents



2011
    
    2010
    
    2009Estimate
    
    Actual(in millions)President and CEO(1)and four most highly compensated key officers:Salary(2)
    
    
    Php55
    
    
    
    Php51
    
    
    
    Php47Bonus(3)
    
    
    14
    
    
    
    12
    
    
    
    10Other compensation(4)
    
    
    46
    
    
    
    225
    
    
    
    52115
    
    
    
    288
    
    
    
    109All other key officers, other officers and directors as a group
(excluding the President and CEO and four most highly compensated key
officers):Salary(2)
    
    
    227
    
    
    
    232
    
    
    
    204Bonus(3)
    
    
    62
    
    
    
    61
    
    
    
    54Other compensation(4)
    
    
    215
    
    
    
    1,087
    
    
    
    246Php504
    
    
    
    Php1,380
    
    
    
    Php504
 
 (1)
    
    The President and CEO receives compensation from Smart but not from PLDT.(2)
    
    Basic monthly salary.(3)
    
    Includes longevity pay, mid-year bonus, 13thmonth and Christmas bonus.(4)
    
    Includes variable pay and other payments. Variable pay is based on an annual
incentive system that encourages and rewards both individual and group/team performance and is
tied to the achievement of Corporate/Unit/Customer Satisfaction Objectives. It covers regular
officers and executives of PLDT and is based on a percentage of their guaranteed annual cash
compensation. The 2010 other compensation includes LTIP payments during the year.     
 Long-term Incentive Plan
  118




---



##### Table of Contents



Share Ownership
  Shares of
    
    Shares ofName of Owner
    
    Common Stock
    
    Preferred StockManuel V. Pangilinan
    
    
    227,450
    (1)
    
    
    360Napoleon L. Nazareno
    
    
    13,927
    (1)
    
    
    495Helen Y. Dee
    
    
    98
    
    
    
    180Ray C. Espinosa
    
    
    18,743
    (1)
    
    
    Takashi Ooi
    
    
    1
    
    
    
    Tatsu Kono
    
    
    100
    
    
    
    Rev. Fr. Bienvenido F. Nebres, S.J.
    
    
    2
    
    
    
    Oscar S. Reyes
    
    
    1
    
    
    
    360Albert F. del Rosario(2)
    
    
    140,005
    (3)
    
    
    2,100Pedro E. Roxas
    
    
    21
    
    
    
    540Juan B. Santos(4)
    
    
    2
    
    
    
    360Alfred V. Ty
    
    
    1
    
    
    
    Tony Tan Caktiong
    
    
    1
    
    
    
    50Ma. Lourdes C. Rausa-Chan
    
    
    699
    (1)
    
    
    350Ernesto R. Alberto
    
    
    9,000
    (1)
    
    
    Rene G. Bañez
    
    
    1
    
    
    
    540Anabelle L. Chua
    
    
    13,878
    (1)
    
    
    Jun R. Florencio
    
    
    15
    
    
    
    530Menardo G. Jimenez, Jr.
    
    
    22
    
    
    
    George N. Lim
    
    
    5,356
    (1)
    
    
    360Claro Carmelo P. Ramirez
    
    
    11,500
    
    
    
    June Cheryl A. Cabal
    
    
    
    
    
    
    Christopher H. Young
    
    
    54,313
    (1)
    
    
    
 
 (1)
    
    Includes PLDT common shares that have been lodged with the Philippine Depository
and Trust Co., or PDTC.(2)
    
    Resigned effective March 25, 2011.(3)
    
    Out of the 140,005 common shares, 140,004 common shares are under the name of Albert
F. del Rosario and/or Margaret Gretchen del Rosario.(4)
    
    Elected effective January 25, 2011. 119




---



##### Table of Contents



Board of Directors  Independent Directors
  
 Audit, Governance and Nomination, Executive Compensation and Technology Strategy Committees
  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;
 120




---



##### Table of Contents




    
    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.
  Audit Committee Report
  
    
    Each voting member of the audit committee is an independent director as determined
by the board of directors;
    
    In the performance of their oversight responsibilities, the audit committee has
reviewed and discussed our financial statements as at and for the year ended December
31, 2009 with management, which has the primary responsibility for the financial
statements, and with SGV & Co., our independent auditor, who is responsible for
expressing an opinion on the conformity of our financial statements with generally
accepted accounting principles;
    
    The audit committee has discussed with SGV & Co. the matters required to be
discussed by the Statement on Auditing Standards No. 61 (Communication with Audit
Committees) as modified or supplemented;
    
    The audit committee has received written disclosures and the letter from SGV & Co.
pursuant to Rule 3526 of the Public Company Accounting Oversight Board (Communication
with Audit Committees Concerning Independence) and has discussed with SGV & Co. its
independence from the PLDT Group and the PLDT Groups management;
    
    The audit committee likewise discussed with our internal audit group and SGV & Co.
the overall scope and plans for their respective audits. The audit committee also met
with our internal audit group and representatives of SGV & Co. to discuss the results
of their examinations, their evaluations of our internal controls and the overall
quality of our financial reporting;
    
    Based on the reviews and discussions referred to above, in reliance on management
and SGV & Co. and subject to the limitations of the audit committees role, the audit
committee recommended to our board of directors and our board has approved, the
inclusion of our financial statements as at and for the year ended December 31, 2009 in
our Annual Report to the Stockholders and to the Philippine SEC and U.S. SEC on Form
17-A; and
    
    Based on a review of SGV & Co.s performance and qualifications, including
consideration of managements recommendation, the audit committee approved the
appointment of SGV & Co. as our independent auditor.
 Governance and Nomination Committee
  121




---



##### Table of Contents



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;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.
  
 Directors and Officers Involvement in Certain Legal Proceedings
  122




---



##### Table of Contents



(b)
    
    any bankruptcy petition filed by or against any business of which a
director/independent director or officer or person nominated for election as a
director/independent director or officer was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time;(c)
    
    any conviction by final judgment in a criminal proceeding, domestic or foreign,
or any criminal proceeding, domestic or foreign, pending against any
director/independent director or officer or person nominated for election as a
director/independent director or officer, except as noted below;(d)
    
    any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, domestic or foreign, permanently or
temporarily enjoining, barring, suspending or otherwise limiting the involvement of any
director/independent director or officer or person nominated for election as a
director/independent director or officer in any type of business, securities,
commodities or banking activities; and
   1.
    
    Mr. Napoleon L. Nazareno and other directors and officers of the
former PDCP Bank and some officers of the BSP and Development Bank of the
Philippines (hereinafter the Respondents), were charged in a complaint docketed
as I.S. No. 2004-631 filed by Chung Hing Wong/Unisteel/Unisco Metals, Inc. (the
Complainants) with the Department of Justice, or DOJ, for alleged syndicated
estafa, estafa thru falsification of documents, other deceits, malversation and
robbery. In the complaint-affidavit, the Complainants alleged that the officers
and directors of PDCP Bank deceived the Complainants to secure a loan from PDCP
Bank through misrepresentation and with the sinister purpose of taking over the
Complainants corporation. As stated in Mr. Nazarenos counter-affidavit, the
charges against him are manifestly unmeritorious since he has not personally met
the Complainants, nor is he a party 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, the Complainants filed with the DOJ a Motion for
Reconsideration of a Resolution of the DOJ dated September 7, 2007 dismissing their
complaint. It appears that prior to forwarding the case records to the OMB, the DOJ
has prepared a Resolution recommending the dismissal of all the charges against the
Respondents 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 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 conducting a review of
the DOJ Resolution and not to conduct another preliminary investigation of the case.In the OMBs Review and Recommendation dated November 28, 2008, the OMB approved the
DOJ Resolution dated September 7, 2007 dismissing the complaint and referred the
case to the DOJ for appropriate action.The Complainants filed separate Motions for Reconsideration before the DOJ and OMB
on July 16, 2008 and December 1, 2009, respectively. On December 16, 2009, the DOJ
issued a Resolution
 123




---



##### Table of Contents



denying the Complainants Motion for Reconsideration for lack of merit. In
response, the Complainants filed a Petition for Review with the Secretary of Justice
on March 2, 2010. Mr. Nazareno and the other Respondents have filed their respective Comments to the
petition, which remain pending to date with the Office of the Secretary of Justice.With respect to the Complainants Motion for Reconsideration with the OMB, the
latter issued an Order dated December 4, 2009 denying the same and affirming its
Review and Recommendation of November 28, 2008. In response, the Complainants filed
a Petition for Certiorari with the Court of Appeals (CA) on July 12, 2010. In a
Resolution dated July 26, 2010, the CA dismissed the petition for lack of
jurisdiction. The Complainants filed a Motion for Reconsideration on August 17,
2010. Acting on the said motion, the CA issued a Resolution dated September 1,
2010, requiring the Respondents to file their Comment to the motion. On September
28, 2010, the Respondents through counsel filed their Opposition to the
Complainants Motion for Reconsideration. In a Resolution dated December 1, 2010,
the CA noted the respective Comments and/or Opposition filed by the Respondents and
considered the Complainants Motion for Reconsideration submitted for resolution.2.
    
    Atty. 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 complaint docketed as
OMB C-C-04-0363-H (CPL No. C-04-1248), filed with the OMB. The complaint is for
alleged: (a) violation of Republic Act No. 3019 (otherwise known as the
Anti-Graft and Corrupt Practices Act); (b) estafa through falsification of public
documents; (c) falsification of public documents under Article 171, in relation to
Article 172, of the Revised Penal Code; (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 Atty. Rausa-Chan involve the first two offenses only and in her
capacity as corporate secretary of Metro Paper and Packaging Products, Inc. In
the opinion of the legal counsel of Atty. Rausa-Chan, there are no legal and
factual bases for her inclusion as respondent in this complaint. Atty. 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.
 
 Employees and Labor Relations
   2010
    
    2009
    
    2008PLDT Group
    
    
    28,770
    
    
    
    29,035
    
    
    
    29,904Wireless
    
    
    5,165
    
    
    
    5,507
    
    
    
    5,602Fixed Line
    
    
    7,395
    
    
    
    7,947
    
    
    
    7,813ICT
    
    
    16,210
    
    
    
    15,581
    
    
    
    16,489PLDT Only
    
    
    7,008
    
    
    
    7,543
    
    
    
    7,590
   124




---



##### Table of Contents



Manggagawa ng Komunikasyon sa Pilipinas
 Gabay ng Unyon sa Telekomunikasyon ng mga
Superbisor
  
 Pension and Retirement Benefits
 Defined Benefit Pension Plans
     Defined Contribution Plan
  125




---



##### Table of Contents



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
    
    Philippine Telecommunications
    
    Philippine
    
    Same as Record Owner
    
    
    26,034,263
    (2)
    
    
    13.94Investment Corporation(1)
    
    Corporation12th Floor Ramon Cojuangco Bldg.
Makati Avenue, Makati CityCommon
    
    Metro Pacific Resources, Inc.(3)
    
    Philippine
    
    Same as Record Owner
    
    
    15,745,172
    (2)
    
    
    8.43c/o Corporate Secretary
    
    Corporation18th Floor, Liberty Center,
104 H. V. dela Costa St.
Salcedo Village, Makati CityCommon
    
    NTT Communications Corporation(4)
    
    Japanese
    
    See Footnote (5)
    
    
    12,633,487
    
    
    
    6.761-1-6 Uchisaiwai-cho
    
    Corporation1-Chome, Chiyoda-ku
Tokyo 100-8019, JapanCommon
    
    NTT DoCoMo, Inc.(6)
    
    Japanese
    
    See Footnote (5)
    
    
    18,234,821
    (7)
    
    
    9.7641st Floor, Sanno Park Tower
    
    Corporation2-11-1 Nagata-cho, Chiyoda-ku Tokyo
100-6150, JapanCommon
    
    Social Security System(8)
    
    Philippine
    
    Same as Record Owner
    
    
    5,024,789
    (9)
    
    
    2.69SSS Building
    
    CorporationEast Avenue, Quezon CityCommon
    
    PCD Nominee Corporation(10)
    
    Philippine
    
    See Footnote (10)
    
    
    53,084,846
    
    
    
    28.4237/F Enterprise Building, Tower I
    
    CorporationAyala Avenue cor. Paseo de Roxas St.
Makati CityCommon
    
    J. P. Morgan Asset Holdings
    
    HongKong
    
    See Footnote (11)
    
    
    45,102,238
    
    
    
    24.15(HK) Limited(11)
    
    Corporation(various accounts)
20/F Chater House 8 Connaught Road
Central, HongkongCommon
    
    Lazard Asset Management LLC(12)
    
    Delaware Corporation
    
    See Footnote (12)
    
    
    13,525,292
    
    
    
    7.24
 
 (1)
    
    Based on a resolution adopted by the Board of Directors of PTIC, the Chairman of
the Board 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.(2)
    
    First Pacific Group beneficially owned 26% of the outstanding common stock of PLDT
as at February 28, 2011 by virtue of PLDT common 126




---



##### Table of Contents



shareholdings by intermediate holding companies, including PTIC and MPRI.(3)
    
    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 in the Annual Meeting.(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 PLDT shares of
common stock held by NTT Communications.(5)
    
    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, 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 common stock of PLDT as at
February 28, 2011.(6)
    
    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. Mutsuo 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.(7)
    
    The total PLDT shareholdings of NTT DoCoMo is 26,768,074 shares, of which 18,234,821
are owned on record by NTT DoCoMo, and 8,533,253 are shares underlying ADSs, collectively
representing 14.33% of the outstanding common stock of PLDT as at February 28, 2011.(8)
    
    Based on a resolution adopted by the Board of Directors of the SSC, Mr. Juan B.
Santos, as Chairman of the SSC, has been authorized to sign the proxy constituting the lawful
attorney/proxy of SSS with full power to represent and vote the PLDT shares of common stock of
SSS in the Annual Meeting of PLDT.(9)
    
    The total PLDT shareholdings of SSS is 10,703,748 shares of PLDT of which 5,024,789
are owned on record by SSS and 5,678,959 shares are held on record by PCD, collectively
representing 5.73% of the outstanding common stock of PLDT as at February 28, 2011.(10)
    
    PCD is the 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, 2011, except The Hongkong and Shanghai Banking Corp. Ltd.Clients, which
owned approximately 14.92% of PLDTs outstanding common stock as of such date. 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, 2011.The PCD account also includes 5,678,959 shares of PLDT common stock beneficially owned by the
SSS.(11)
    
    JP Morgan Asset Holdings (HK) Limited 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 8,533,253 shares of PLDT common stock underlying ADS beneficially
owned by NTT DoCoMo, and 13,525,292 shares of PLDT common stock underlying ADSs beneficially
owned by Lazard Asset Management LLC, or LAMLLC.(12)
    
    According to the Schedule 13G/A of LAMLLC filed with the U.S. Securities and
Exchange Commission on February 11, 2011, LAMLLC, as an investment adviser, beneficially owned
13,525,292 shares of PLDT common stock. LAMLLC confirmed that all of the 13,525,292 shares of
PLDT common stock are underlying ADSs.  
 Related Party Transactions
   127




---



##### Table of Contents



Item 8. Financial Information
 
 Consolidated Financial Statements and Other Financial Information
  
 Legal Proceedings
  NTC SRF
   Matters Relating to a Third Party Aggregator
  128




---



##### Table of Contents



Taxation
 Local Business and Franchise Taxes
    Arbitration with Eastern Telecommunications Philippines, Inc., or ETPI
  IAS 37, Provisions, Contingent Liabilities and Contingent Assets
  
 Dividend Distribution Policy
  129




---



##### Table of Contents



Item 9. The Offer and Listing
 
 Common Capital Stock and ADSs
     Philippine Stock
    
    New York StockExchange
    
    ExchangeHigh
    
    Low
    
    High
    
    Low2011First QuarterJanuary
    
    
    2,550.00
    
    
    
    2,456.00
    
    
    
    58.80
    
    
    
    55.55February
    
    
    2,524.00
    
    
    
    2,150.00
    
    
    
    56.44
    
    
    
    49.48March (until March 29, 2011)
    
    
    2.292.00
    
    
    
    1,990.00
    
    
    
    53.50
    
    
    
    46.082010First Quarter
    
    
    2,775.00
    
    
    
    2,420.00
    
    
    
    60.65
    
    
    
    53.05Second Quarter
    
    
    2,540.00
    
    
    
    2,320.00
    
    
    
    57.49
    
    
    
    50.04Third Quarter
    
    
    2,630.00
    
    
    
    2,355.00
    
    
    
    59.92
    
    
    
    51.47September
    
    
    2,630.00
    
    
    
    2,398.00
    
    
    
    59.92
    
    
    
    54.10Fourth Quarter
    
    
    2,764.00
    
    
    
    2,360.00
    
    
    
    64.35
    
    
    
    53.61October
    
    
    2,764.00
    
    
    
    2,596.00
    
    
    
    64.35
    
    
    
    59.52November
    
    
    2,684.00
    
    
    
    2,364.00
    
    
    
    63.45
    
    
    
    53.61December
    
    
    2,558.00
    
    
    
    2,360.00
    
    
    
    58.70
    
    
    
    54.282009
    
    
    2,670.00
    
    
    
    1,830.00
    
    
    
    58.17
    
    
    
    38.43First Quarter
    
    
    2,310.00
    
    
    
    1,830.00
    
    
    
    49.80
    
    
    
    38.43Second Quarter
    
    
    2,620.00
    
    
    
    2,125.00
    
    
    
    52.16
    
    
    
    43.01Third Quarter
    
    
    2,625.00
    
    
    
    2,300.00
    
    
    
    54.50
    
    
    
    48.12Fourth Quarter
    
    
    2,670.00
    
    
    
    2,405.00
    
    
    
    58.17
    
    
    
    51.122008
    
    
    3,175.00
    
    
    
    1,810.00
    
    
    
    76.72
    
    
    
    36.052007
    
    
    3,285.00
    
    
    
    2,250.00
    
    
    
    76.30
    
    
    
    45.252006
    
    
    2,610.00
    
    
    
    1,675.00
    
    
    
    51.90
    
    
    
    32.15
 
 Item 10. Additional Information
 
 Articles of Incorporation and By-Laws
  Purpose of PLDT
  130




---



##### Table of Contents



Directors
  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 therefore.(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, each holder of
Common Stock is entitled to vote such shares of Common Stock held by him and he may
vote such number of shares 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
 131




---



##### Table of Contents



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.(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
   132




---



##### Table of Contents



Issues of Shares
   Transfer of Shares
    Share Certificates
  Dividends
   133




---



##### Table of Contents



Preferred Stock
  Issued and Outstanding Preferred Stock
  Series
    
    No. of SharesFebruary 28, 2011
    
    December 31, 2010Series A to HH 10% Cumulative Convertible
    
    
    405,912,897
    
    
    
    405,887,387Series IV Cumulative Non-convertible Redeemable
    
    
    36,000,000
    *
    
    
    36,000,000
    *
 
 *
    
    Total subscribed shares is 300 million with a total subscription price of Php3 billion, out of
which amount Php360 million has been paid.   Change in Control
  134




---



##### Table of Contents



Material Contracts
  
 Exchange Controls and Other Limitations Affecting Securities Holders
    135




---



##### Table of Contents



Taxation
     Philippine Taxation
 Taxes on Exchange of ADSs for Common Stock
  Taxation of Dividends
  136




---



##### Table of Contents



Capital Gains Tax and Stock Transaction Tax
     Documentary Stamp Taxes
  137




---



##### 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
   138




---



##### Table of Contents



Sale or Other Disposition of Equity Securities
   Passive Foreign Investment Company Rules
  
 Documents on Display
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risks
  139




---



##### Table of Contents



Liquidity Risk
    . .
 
 Foreign Currency Exchange Risk
   140




---



##### Table of Contents



2010
    
    
    2009U.S. Dollar
    
    
    Php(1)
    
    
    U.S. Dollar
    
    
    Php(2)(in millions)Noncurrent Financial AssetsNote receivable
    
    
    2
    
    
    
    84
    
    
    
    2
    
    
    
    81Derivative financial assets
    
    
    4
    
    
    
    178
    
    
    
    
    
    
    
    Advances and refundable deposits
    
    
    1
    
    
    
    38
    
    
    
    
    
    
    
    7Total noncurrent financial assets
    
    
    7
    
    
    
    300
    
    
    
    2
    
    
    
    88Current Financial AssetsCash and cash equivalents
    
    
    138
    
    
    
    6,050
    
    
    
    140
    
    
    
    6,496Short-term investments
    
    
    15
    
    
    
    652
    
    
    
    47
    
    
    
    2,164Trade and other receivables  net
    
    
    214
    
    
    
    9,361
    
    
    
    206
    
    
    
    9,573Derivative financial assets
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    6Total current financial assets
    
    
    367
    
    
    
    16,068
    
    
    
    393
    
    
    
    18,239Total Financial Assets
    
    
    374
    
    
    
    16,368
    
    
    
    395
    
    
    
    18,327Noncurrent Financial LiabilitiesInterest-bearing financial liabilities  net of current portion
    
    
    782
    
    
    
    34,244
    
    
    
    837
    
    
    
    38,871Derivative financial liabilities
    
    
    82
    
    
    
    3,604
    
    
    
    59
    
    
    
    2,751Total noncurrent financial liabilities
    
    
    864
    
    
    
    37,848
    
    
    
    896
    
    
    
    41,622Current Financial LiabilitiesAccounts payable
    
    
    169
    
    
    
    7,415
    
    
    
    155
    
    
    
    7,180Accrued expenses and other current liabilities
    
    
    143
    
    
    
    6,267
    
    
    
    95
    
    
    
    4,409Current portion of interest-bearing financial liabilities
    
    
    103
    
    
    
    4,537
    
    
    
    155
    
    
    
    7,220Total current financial liabilities
    
    
    415
    
    
    
    18,219
    
    
    
    405
    
    
    
    18,809Total Financial Liabilities
    
    
    1,279
    
    
    
    56,067
    
    
    
    1,301
    
    
    
    60,431
 
 (1)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso
was Php43.81 to US$1.00, the peso-dollar exchange rate as quoted through the Philippine
Dealing System as at December 31, 2010.(2)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso was
Php46.43 to US$1.00, the peso-dollar exchange rate as quoted through the Philippine Dealing
System as at December 31, 2009.     141




---



##### Table of Contents



Interest Rate Risk
    As at December 31, 2010
 Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. Dollar
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    474
    
    
    
    
    
    
    
    474
    
    
    
    11
    
    
    
    474Interest rate
    
    0.0025% to 0.7840%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    1,362
    
    
    
    
    
    
    
    1,362
    
    
    
    31
    
    
    
    1,362Interest rate
    
    0.0625% to 2.9000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Currencies
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    118
    
    
    
    
    
    
    
    118
    
    
    
    3
    
    
    
    118Interest rate
    
    0.0100% to 2.4000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    4,813
    
    
    
    
    
    
    
    4,813
    
    
    
    110
    
    
    
    4,813Interest rate
    
    0.1000% to 1.7000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    28,959
    
    
    
    
    
    
    
    28,959
    
    
    
    661
    
    
    
    28,959Interest rate
    
    1.0000% to 4.8100%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    652
    
    
    
    
    
    
    
    652
    
    
    
    15
    
    
    
    652Interest rate
    
    1.9000% to 10.672%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Interest rate
    
    
    3.2500%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesPhilippine Peso
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    3
    
    
    
    
    
    
    
    11
    
    
    
    484
    
    
    
    
    
    
    
    484
    
    
    
    11
    
    
    
    502Interest rate
    
    
    
    
    
    
    
    
    
    
    6.8750
    %
    
    
    7.0000
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    
    
    
    
    8
    
    
    
    3
    
    
    
    
    
    
    
    842
    
    
    
    36,879
    
    
    
    
    
    
    
    36,879
    
    
    
    842
    
    
    
    36,897Liabilities:Long-term Debt
 142




---



##### Table of Contents



Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Fixed RateU.S. Dollar Notes
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    380
    
    
    
    16,650
    
    
    
    200
    
    
    
    16,450
    
    
    
    440
    
    
    
    19,274Interest rate
    
    
    
    
    
    
    11.3750%
    
    
    
    
    
    
    
    
    
    
    
    8.3500%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Dollar Fixed Loans
    
    
    9
    
    
    
    29
    
    
    
    15
    
    
    
    295
    
    
    
    
    
    
    
    348
    
    
    
    15,264
    
    
    
    2,586
    
    
    
    12,678
    
    
    
    276
    
    
    
    12,120Interest rate
    
    
    4.7000%
    
    
    2.9900% to 3.7900%
    
    
    2.9900% to 3.7900%
    
    
    2.2500% to
2.9900%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    68
    
    
    
    146
    
    
    
    121
    
    
    
    339
    
    
    
    195
    
    
    
    869
    
    
    
    38,066
    
    
    
    74
    
    
    
    37,992
    
    
    
    961
    
    
    
    42,091Interest rate
    
    6.0323% to 8.7792%
    
    
    5.6250% to 8.4346%
    
    
    6.5000% to 8.4346%
    
    
    6.5000% to 9.1038%
    
    
    6.5000% to 9.1038%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    6
    
    
    
    148
    
    
    
    45
    
    
    
    15
    
    
    
    
    
    
    
    214
    
    
    
    9,357
    
    
    
    71
    
    
    
    9,286
    
    
    
    212
    
    
    
    9,286Interest rate
    
    US$ LIBOR + 0.8150%
    
    
    US$ Swap rate + 2.7900%;
 LIBOR + 0.4200%
to 1.8500%
    
    
    US$ Swap rate + 2.7900%;
 LIBOR + 0.4200%
to 1.8500%
    
    
    US$ Swap rate + 2.7900%;
 LIBOR + 1.3500%
to 1.8500%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    58
    
    
    
    150
    
    
    
    74
    
    
    
    20
    
    
    
    
    
    
    
    302
    
    
    
    13,253
    
    
    
    13
    
    
    
    13,240
    
    
    
    302
    
    
    
    13,240Interest rate
    
    PDST-F + 0.3000% to 1.2500%
    
    
    PDST-F + 0.3000% to
1.3750%; AUBs
prime rate
    
    
    PDST-F + 0.3000%
    
    
    PDST-F + 0.3000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    619
    
    
    
    255
    
    
    
    669
    
    
    
    429
    
    
    
    2,113
    
    
    
    92,590
    
    
    
    2,944
    
    
    
    89,646
    
    
    
    2,191
    
    
    
    96,011
 As at December 31, 2009
 Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. Dollar
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    540
    
    
    
    
    
    
    
    540
    
    
    
    11
    
    
    
    540Interest rate
    
    0.0025% to 0.88%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    1,673
    
    
    
    
    
    
    
    1,673
    
    
    
    36
    
    
    
    1,673Interest rate
    
    0.625% to 2.90%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Currencies
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    31
    
    
    
    
    
    
    
    31
    
    
    
    1
    
    
    
    31Interest rate
    
    0.0014 to 2.40%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    17,870
    
    
    
    
    
    
    
    17,870
    
    
    
    384
    
    
    
    17,870Interest rate
    
    0.50% to 1.75%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369
    
    
    
    17,149
    
    
    
    
    
    
    
    17,149
    
    
    
    369
    
    
    
    17,149Interest rate
    
    1.25% to 5.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    2,132
    
    
    
    
    
    
    
    2,132
    
    
    
    46
    
    
    
    2,132Interest rate
    
    4.25% to 7.006%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    1,692
    
    
    
    
    
    
    
    1,692
    
    
    
    36
    
    
    
    1,692Interest rate
    
    
    4.40%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesPhilippine Peso
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    462
    
    
    
    
    
    
    
    462
    
    
    
    10
    
    
    
    474Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.92%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    883
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    893
    
    
    
    41,549
    
    
    
    
    
    
    
    41,549
    
    
    
    893
    
    
    
    41,561Liabilities:Long-term DebtFixed RateU.S. Dollar Notes
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    245
    
    
    
    391
    
    
    
    18,161
    
    
    
    285
    
    
    
    17,876
    
    
    
    449
    
    
    
    20,837Interest rate
    
    
    
    
    
    
    
    
    
    
    11.375%
    
    
    
    
    
    
    
    8.350%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Dollar Fixed Loans
    
    
    14
    
    
    
    27
    
    
    
    5
    
    
    
    285
    
    
    
    
    
    
    
    331
    
    
    
    15,397
    
    
    
    3,338
    
    
    
    12,059
    
    
    
    229
    
    
    
    10,654Interest rate
    
    
    4.515%
    
    
    3.79% to 4.70%
    
    
    
    3.79%
    
    
    2.25% to
3.79%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    63
    
    
    
    126
    
    
    
    236
    
    
    
    305
    
    
    
    730
    
    
    
    33,858
    
    
    
    84
    
    
    
    33,774
    
    
    
    744
    
    
    
    34,535Interest rate
    
    
    
    
    
    6.0323% to 8.4346%
    
    
    5.625% to 8.4346%
    
    
    6.125% to 9.1038%
    
    
    6.50% to 9.1038%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    41
    
    
    
    160
    
    
    
    74
    
    
    
    60
    
    
    
    
    
    
    
    335
    
    
    
    15,543
    
    
    
    124
    
    
    
    15,419
    
    
    
    332
    
    
    
    15,419Interest rate
    
    US$ LIBOR + 0.05% to 2.5%
    
    
    US$ LIBOR + 0.42%
to 1.85%;
swap rate + 2.79%
    
    
    US$ LIBOR + 0.42%
to 1.85%;
swap rate + 2.79%
    
    
    US$ LIBOR + 0.42%
to 1.85%;
swap rate + 2.79%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    185
    
    
    
    81
    
    
    
    107
    
    
    
    
    
    
    
    373
    
    
    
    17,349
    
    
    
    27
    
    
    
    17,322
    
    
    
    373
    
    
    
    17,322
 143




---



##### Table of Contents



Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Interest rate
    
    
    
    
    
    PDST-F + 0.75% to
1.5%; AUBs prime
rate
    
    
    PDST-F + 1.0% to
1.50%; AUBs prime
rate
    
    
    PDST-F + 1.0% to
1.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term DebtNotes PayableU.S. Dollar
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    279
    
    
    
    
    
    
    
    279
    
    
    
    6
    
    
    
    279Interest rate
    
    
    3.25%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    2,000
    
    
    
    
    
    
    
    2,000
    
    
    
    43
    
    
    
    2,000Interest rate
    
    PDST-F + 1.5%; 6.0896%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    435
    
    
    
    432
    
    
    
    688
    
    
    
    550
    
    
    
    2,209
    
    
    
    102,587
    
    
    
    3,858
    
    
    
    98,729
    
    
    
    2,176
    
    
    
    101,046
    
 Credit Risk
    144




---



##### Table of Contents



Gross Maximum Exposure(1)
    
    Net Maximum Exposure(2)2010
    
    2009
    
    2010
    
    2009(in million pesos)Loans and receivables:Advances and refundable deposits
    
    
    1,000
    
    
    
    849
    
    
    
    999
    
    
    
    848Cash and cash equivalents
    
    
    36,678
    
    
    
    38,319
    
    
    
    36,458
    
    
    
    38,101Short-term investments
    
    
    152
    
    
    
    3,338
    
    
    
    152
    
    
    
    3,338Foreign administrations
    
    
    4,321
    
    
    
    4,064
    
    
    
    4,277
    
    
    
    4,011Retail subscribers
    
    
    3,872
    
    
    
    3,546
    
    
    
    3,799
    
    
    
    3,505Corporate subscribers
    
    
    2,042
    
    
    
    2,429
    
    
    
    1,918
    
    
    
    2,328Domestic carriers
    
    
    1,453
    
    
    
    1,184
    
    
    
    1,453
    
    
    
    1,184Dealers, agents and others
    
    
    4,740
    
    
    
    3,506
    
    
    
    4,740
    
    
    
    3,506Held-to-maturity investments:Investment in debt securities
    
    
    484
    
    
    
    462
    
    
    
    484
    
    
    
    462Available-for-sale financial assets
    
    
    147
    
    
    
    134
    
    
    
    147
    
    
    
    134Fair value through profit or loss:Short-term investments
    
    
    517
    
    
    
    486
    
    
    
    517
    
    
    
    486Long-term currency swap
    
    
    178
    
    
    
    
    
    
    
    178
    
    
    
    Bifurcated embedded derivatives
    
    
    5
    
    
    
    6
    
    
    
    5
    
    
    
    6Total
    
    
    55,589
    
    
    
    58,323
    
    
    
    55,127
    
    
    
    57,909
 
 (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. 145




---



##### Table of Contents



Neither past duenor impaired
    
    Past due butTotal
    
    Class A(1)
    
    Class B(2)
    
    not impaired
    
    Impaired(in million pesos)December 31, 2010Loans and receivables:Advances and refundable deposits
    
    
    1,000
    
    
    
    951
    
    
    
    49
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    36,678
    
    
    
    35,368
    
    
    
    1,310
    
    
    
    
    
    
    
    Short-term investments
    
    
    152
    
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,917
    
    
    
    946
    
    
    
    926
    
    
    
    2,000
    
    
    
    5,045Corporate subscribers
    
    
    7,998
    
    
    
    393
    
    
    
    612
    
    
    
    1,037
    
    
    
    5,956Foreign administrations
    
    
    4,479
    
    
    
    1,756
    
    
    
    699
    
    
    
    1,866
    
    
    
    158Domestic carriers
    
    
    1,591
    
    
    
    191
    
    
    
    23
    
    
    
    1,239
    
    
    
    138Dealers, agents and others
    
    
    5,273
    
    
    
    2,599
    
    
    
    2,013
    
    
    
    128
    
    
    
    533Held-to-maturity investments:Investment in debt securities
    
    
    484
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    147
    
    
    
    108
    
    
    
    39
    
    
    
    
    
    
    
    Fair value through profit or loss(3):Short-term investments
    
    
    517
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    Long-term currency swap
    
    
    178
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    67,419
    
    
    
    43,648
    
    
    
    5,671
    
    
    
    6,270
    
    
    
    11,830December 31, 2009Loans and receivables:Advances and refundable deposits
    
    
    849
    
    
    
    790
    
    
    
    59
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    38,319
    
    
    
    37,767
    
    
    
    552
    
    
    
    
    
    
    
    Short-term investments
    
    
    3,338
    
    
    
    2,971
    
    
    
    367
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,106
    
    
    
    1,078
    
    
    
    283
    
    
    
    1,068
    
    
    
    6,677Retail subscribers
    
    
    8,026
    
    
    
    1,236
    
    
    
    518
    
    
    
    1,792
    
    
    
    4,480Foreign administrations
    
    
    4,353
    
    
    
    1,261
    
    
    
    451
    
    
    
    2,352
    
    
    
    289Domestic carriers
    
    
    1,267
    
    
    
    157
    
    
    
    8
    
    
    
    1,019
    
    
    
    83Dealers, agents and others
    
    
    3,927
    
    
    
    2,068
    
    
    
    1,022
    
    
    
    416
    
    
    
    421Held-to-maturity investments:Investment in debt securities
    
    
    462
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    134
    
    
    
    103
    
    
    
    31
    
    
    
    
    
    
    
    Fair value through profit or loss(3):Short-term investments
    
    
    486
    
    
    
    486
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    70,273
    
    
    
    48,385
    
    
    
    3,291
    
    
    
    6,647
    
    
    
    11,950
 
 (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.(3)
    
    Gross receivables from counterparties, before any offsetting arrangements. 146




---



##### Table of Contents



Past due but not impairedNeither past dueTotal
    
    nor impaired
    
    1-60 days
    
    61-90 days
    
    Over 91 days
    
    Impaired(in million pesos)December 31, 2010Loans and receivables:Advances and refundable deposits
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    36,678
    
    
    
    36,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    152
    
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,917
    
    
    
    1,872
    
    
    
    1,387
    
    
    
    150
    
    
    
    463
    
    
    
    5,045Corporate subscribers
    
    
    7,998
    
    
    
    1,005
    
    
    
    642
    
    
    
    159
    
    
    
    236
    
    
    
    5,956Foreign administrations
    
    
    4,479
    
    
    
    2,455
    
    
    
    616
    
    
    
    393
    
    
    
    857
    
    
    
    158Domestic carriers
    
    
    1,591
    
    
    
    214
    
    
    
    165
    
    
    
    182
    
    
    
    892
    
    
    
    138Dealers, agents and others
    
    
    5,273
    
    
    
    4,612
    
    
    
    21
    
    
    
    20
    
    
    
    87
    
    
    
    533Held-to-maturity investments:Investment in debt securities
    
    
    484
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    147
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value through profit or loss:Short-term investments
    
    
    517
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term currency swap
    
    
    178
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    67,419
    
    
    
    49,319
    
    
    
    2,831
    
    
    
    904
    
    
    
    2,535
    
    
    
    11,830December 31, 2009Loans and receivables:Advances and refundable deposits
    
    
    849
    
    
    
    849
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    38,319
    
    
    
    38,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    3,338
    
    
    
    3,338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,106
    
    
    
    1,361
    
    
    
    433
    
    
    
    198
    
    
    
    437
    
    
    
    6,677Retail subscribers
    
    
    8,026
    
    
    
    1,754
    
    
    
    1,362
    
    
    
    184
    
    
    
    246
    
    
    
    4,480Foreign administrations
    
    
    4,353
    
    
    
    1,712
    
    
    
    1,320
    
    
    
    405
    
    
    
    627
    
    
    
    289Domestic carriers
    
    
    1,267
    
    
    
    165
    
    
    
    283
    
    
    
    293
    
    
    
    443
    
    
    
    83Dealers, agents and others
    
    
    3,927
    
    
    
    3,090
    
    
    
    332
    
    
    
    21
    
    
    
    63
    
    
    
    421Held-to-maturity investments:Investment in debt securities
    
    
    462
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    134
    
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value through profit or loss:Short-term investments
    
    
    486
    
    
    
    486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    70,273
    
    
    
    51,676
    
    
    
    3,730
    
    
    
    1,101
    
    
    
    1,816
    
    
    
    11,950
 
 Impairment Assessments
  Individually assessed allowance
  Collectively assessed allowances
  147




---



##### Table of Contents



Capital Management Risk
        2010
    
    2009(in million pesos)Long-term debt, including current portion (Note 20)
    
    
    89,646
    
    
    
    96,450Notes payable (Note 20)
    
    
    
    
    
    
    2,279Total consolidated debt
    
    
    89,646
    
    
    
    98,729Cash and cash equivalents (Note 15)
    
    
    (36,678
    )
    
    
    (38,319
    )Short-term investments
    
    
    (669
    )
    
    
    (3,824
    )Net consolidated debt
    
    
    52,299
    
    
    
    56,586Equity attributable to equity holders of PLDT
    
    
    97,069
    
    
    
    98,575Net consolidated debt to equity ratio
    
    
    54
    %
    
    
    57
    %
 148




---



##### Table of Contents



Item 12. Description of Securities Other than Equity Securities
 Item 12.D.3  Fees and Charges for Holders of American Depositary Receipts
   
    
    US$0.02 or less per ADS (or portion thereof) for any cash distribution made;
    
    US$1.50 per ADR for transfer made (to the extent such fee is not prohibited by the rules
of the primary stock exchange upon which the ADSs are listed);
    
    a fee in an amount equal to the fee for the execution and delivery of ADSs for the
distribution or sale of securities, which would have been charged as a result of the
deposit of such securities but which securities or the net proceeds from the sale thereof
are instead distributed by the depositary to the holders entitled thereto;
    
    US$0.02 per ADS (or a portion thereof) per year for the services rendered by the
depositary for administering the ADR program (which fee shall be assessed as of the record
date or dates set by the depositary not more than once each calendar year and shall be
payable at the sole discretion of the depositary by billing such holders or by deducting
such charge from one or more cash dividends or other cash distribution);
    
    such fees and expenses as are incurred by the depositary (including without limitation
expenses incurred on behalf of holders in compliance with foreign exchange control
regulations or any law or regulation relating to foreign investment) in the delivery of the
common stock or otherwise in connection with the depositarys or its custodians compliance
with applicable laws, rules or regulations;
    
    stock transfer and other taxes and governmental charges (which are payable by the holder
or person depositing the common stock), cable, telex and facsimile transmission and
delivery charges incurred at the request of the person depositing the common stock or
holder delivering the common stock, ADRs or deposited common stock (which are payable by
such person or holder), transfer or registration fees for the registration or transfer of
deposited common stock in connection with the deposit or withdrawal of the deposited common
stock (which are payable by the person depositing or withdrawing deposited common stock),
expense by the depositary in the conversion of foreign currency into U.S. dollars; and
    
    any other charge payable by the depositary or its agents in connection with its service
as depositary in implementation of the Companys ADR Program pursuant to Section 4.02,
4.03, 4.04, or 4.05 of the Deposit Agreement, as amended.
 Item 12.D.4  Fees and Other Payments Made by the Depositary to Us
  Category of Expenses
    
    Amount Reimbursed forInvestor relations and investor event fees
    
    US$
    643,783Legal and accounting fees incurred in
connection with the preparation of Form 20-F,
ongoing SEC compliance and listing requirements
    
    
    258,103Listing fees
    
    
    57,014Total
    
    US$
    958,900
  149




---



##### Table of Contents



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.
 Managements Annual Report on Internal Control Over Financial Reporting.
    Changes in Internal Control Over Financial Reporting.
 
 Item 16A. Audit Committee Financial Expert
  150




---



##### Table of Contents



Item 16B. Code of Business Conduct and Ethics
   A. Code of Ethics and Other Policies
  
    
    Compliance with applicable laws, rules and regulations;
    
    Ethical handling of conflicts of interest, corporate opportunities and confidential
information;
    
    Protection and proper use of company assets;
    
    Fair dealing with employees, customers, service providers, suppliers, and competitors;
    
    Compliance with reporting and disclosure obligations to the relevant regulators and to
investors;
    
    Compliance with disclosure and financial reporting controls and procedures;
    
    Assessment and management of risks involved in business endeavors; and
    
    Adoption of international best practices of good corporate governance in the conduct of
the Companys business.
  151




---



##### Table of Contents



Other policies
  (a)
    
    CG Manual The PLDT CG Manual was approved and adopted by the Board of Directors on
March 26, 2010 pursuant to SEC Memorandum Circular No. 6 Series of 2009 or the Revised Code
of Corporate Governance. It supersedes the CG Manual approved and adopted on September 24,
2002, as amended on March 30, 2004 and January 30, 3007. The structures and processes set
forth in the CG Manual, as well as the Articles of Incorporation and By-Laws, combined with
the Companys commitment to the principles of transparency, accountability, fairness and
integrity, form PLDTs basic framework of governance by which our Board of Directors,
officers, executives and employees strive to achieve the Companys strategic objectives,
create value for all its stakeholders, and sustain its long-term viability.
  
    
    the composition of our Board of Directors as well as the qualifications and grounds
for disqualification for directorship;
    
    the requirement that at least 20% of the membership of the Board of Directors, and
in no case less than two members, must be independent directors and the
standards/criteria for the determination of independent directors;
    
    the duties and responsibilities of our board of directors and the individual
directors;
    
    the manner of conduct of Board meetings including the requirement to have an
independent director present in every meeting to promote transparency and the need to
have an executive session for non-executive and independent directors;
    
    establishment of board committees, specifically, the audit committee, ECC and GNC
including the composition and the principal duties and responsibilities of such
committees, as well as the requirement for each board committee to have its own
charter;
    
    the role of the Chairman as the leader of the Board and as the prime mover in
ensuring compliance with, and the performance of, corporate governance policies and
practices ;
    
    the role of the President/Chief Executive Officer in ensuring that the Companys
business affairs are managed in a sound and prudent manner and that operational,
financial and internal 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;
    
    the duties and responsibilities of the Corporate Secretary/Assistant Corporate
Secretary in terms of the support services that they need to provide the Board in
upholding sound corporate governance;
    
    the duties and responsibilities of the head of internal audit organization that
would provide the Board of Directors, management and shareholders with reasonable
assurance that the Companys key organizational and procedural controls are
appropriate, adequate, effective and reasonably complied with;
    
    the functions of the independent auditors that would reasonably ensure an
environment of sound corporate governance as reflected in the Companys 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 financial statements;
    
    the requirement to appoint a Chief Governance Officer and the duties and
responsibilities of such Chief Governance Officer including the establishment of an
evaluation system to determine and measure compliance with the provisions of our CG
Manual;
 152




---



##### Table of Contents




    
    the duty of the Board of Directors to promote and uphold stockholders rights such
as the right to vote, pre-emptive right, the right to inspect corporate books and
records, right to timely receive relevant information, right to dividends, and the
appraisal right;
    
    the requirement for the Board to explore and implement steps to reduce excessive or
unnecessary costs that impede stockholders participation and to act with transparency
and fairness at the annual and special stockholders meetings;
    
    the Companys undertaking to disclose material information promptly and accurately
as well as the imposition of reasonable rules regarding the treatment and handling of
material non-public information; and
    
    the establishment of an appropriate evaluation system for purposes of monitoring and
assessing compliance with the CG Manual and other applicable laws and administrative
issuances.
 (b)
    
    Conflict of Interest Policy approved on October 24, 2005.This Policy aims to ensure
that work-related actions of our directors, officers, employees and consultants are based
on sound business principles and judgment devoid of bias or partiality. It enjoins all
employees to be aware of the possibility of such bias and partiality in dealings with
various entities or individuals in the course of or in relation to their work. The policy
likewise mandates that employees who find themselves in a possible conflict of interest
situation should promptly disclose the matter to the relevant authorities. If warranted,
the employee concerned should also obtain appropriate approvals and inhibit himself from
any action, transaction or decision involving an existing or potential conflict of
interest.(c)
    
    Policy on Gifts, Entertainment and Sponsored Travel approved on January 31, 2006.This
Policy provides safeguards so that the custom of giving gifts is handled in accordance with
the principles of integrity, accountability, fairness and transparency. It aims to prevent
the occurrence of situations or actions that could significantly affect objective,
independent or effective performance of an employees duties. Specifically, it prohibits
the solicitation of gifts, sponsored travel, and entertainment from third parties. Receipt
and acceptance of gifts voluntarily given by such third parties are handled according to
this policy as well.(d)
    
    Supplier/Contractor Relations Policy approved on January 31, 2006. This Policy seeks
to ensure that the Company upholds the highest professional standards in business practices
and ethics in its dealings with suppliers and contractors in the procurement of goods and
services. The policy also seeks to maintain PLDTs reputation for equal opportunity and
honest treatment of suppliers in all business transactions. The policy establishes clear
rules for arms length transactions and fair treatment of prospective and existing
suppliers with the objective of always obtaining the best value for the company.(e)
    
    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 (or the Expanded Whistleblowing Policy) approved on May 9, 2006.This Policy
provides guidelines on handling employee disclosure or complaints of violation of rules
pertaining to the aforestated matters, protects whistleblowers from retaliation and ensures
confidentiality and fairness in the handling of a disclosure or complaint.
   http://www.pldt.com.ph/governance/about/Documents/27623c20007849698da4df57179ec70dPLDT_Code_of_Business_Conduct
_and_Ethics.pdfhttp://www.pldt.com.ph/governance/about/Documents/22336f71c88c495793d15575c2addffcpldtcorpgov_manual.pdfhttp://www.pldt.com.ph/governance/about/Documents/f7933d17962d4b2c942e50ba4980f21bpldtdisclosure.pdf
 
 153




---



##### Table of Contents



B. Enhancements and Education
   C. Performance Evaluation
  154




---



##### Table of Contents



D. Governance Structures
 Board of Directors
   (1)
 
 (1)
    
    Mr. Reyes status as an independent director ceased as at August 3, 2010 when he
was appointed Chief Operating Officer of Meralco, an affiliate and investee company of the
PLDT Group. Chief Executive Officer
  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;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.
 
 155




---



##### Table of Contents



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).
  Chief Governance Officer
   Corporate Governance Office
  , lrchan@pldt.com.ph www.pldt.com.ph
 156




---



##### Table of Contents



Item 16C. Principal Accountant Fees and Services
  2010
    
    
    2009(in millions)Audit Fees
    
    Php39
    
    Php46All Other Fees
    
    
    15
    
    
    
    19Total
    
    Php54
    
    Php65
 Audit Fees
 All Other Fees
   
 Item 16D. Exemption from the Listing Standards for Audit Committees
  157




---



##### Table of Contents



Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchaser
  Total Number ofSharesAverage Price
    
    Purchased as Part of
    
    Maximum Number of SharesTotal Number of
    
    Paid per
    
    Publicly Announced
    
    that May Yet Be PurchasedPeriod
    
    Shares Purchased(1)
    
    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)March 17-18, 2009
    
    
    39,060
    
    
    
    1,876
    
    
    
    2,011,350
    
    
    
    2,988,650March 20, 2009
    
    
    130,000
    
    
    
    1,980
    
    
    
    2,141,350
    
    
    
    2,858,650March 23, 2009
    
    
    523,226
    
    
    
    2,020
    
    
    
    2,664,576
    
    
    
    2,335,424September 18, 2009
    
    
    13,210
    
    
    
    2,306
    
    
    
    2,677,786
    
    
    
    2,322,214September 22, 2009
    
    
    5,170
    
    
    
    2,330
    
    
    
    2,682,956
    
    
    
    2,317,044November 9, 2010
    
    
    20,000
    
    
    
    2,416
    
    
    
    2,702,956
    
    
    
    2,297,044November 10, 2010
    
    
    21,155
    
    
    
    2,421
    
    
    
    2,724,111
    
    
    
    2,275,889Total
    
    
    2,724,111
 
 (1)
    
    Outside the share buyback program, we did not repurchase any of our shares
in the year ended December 31, 2010.(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. 
 Item 16F. Change in Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
  158




---



##### Table of Contents




    
    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.
 o
    
    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.o
    
    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/independent directors.The NYSE listing standards require
regularly scheduled executive sessions consisting of non-management directors without
management present or regularly scheduled executive sessions consisting of only independent
directors. As part of the Board assessment process formally adopted by the GNC, PLDTs
independent directors and/or non-management directors hold meetings at least once a year to,
among other things, discuss and evaluate the results of the Boards annual self-assessment.
In addition, while PLDTs Corporate Governance Manual does not mandate the holding of
regularly scheduled executive sessions with non-management directors nor executive sessions
with only independent directors, PLDTs independent and/or non-management directors, through
the Audit Committee and the GNC, in either or both of which all independent directors and
most non-management directors are serving as members or advisors, are provided the opportunity
to have open discussions, whether individually or as a group, without the presence of
management/executive directors.
    
    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 GNC and our
ECC 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.
    
    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
  159




---



##### Table of Contents



Item 18. Financial Statements
  PagePHILIPPINE LONG DISTANCE TELEPHONE COMPANY ANNUAL FINANCIAL STATEMENTSAttestation Report of the Independent Registered Public Accounting Firm
    
    
    161Report of Independent Registered Public Accounting Firm
    
    
    163Consolidated Statements of Financial Position as at December 31, 2010 and 2009
    
    
    165Consolidated Income Statements for the Years Ended December 31, 2010 and 2009
    
    
    166Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2010 and 2009
    
    
    167Consolidated Statements of Changes in Equity for the Years Ended December 31, 2010 and 2009
    
    
    168Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
    
    
    169Notes to Consolidated Financial Statements
    
    
    171
 160




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
  
     161




---



##### Table of Contents



.
  
 162




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
 163




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 December 31, 2010 and 2009
 (in million pesos, except par value and number of shares)
 2010
    
    
    2009ASSETSNoncurrent AssetsProperty, plant and equipment (Notes 3, 5, 9, 13, 20 and 28)
    
    
    163,184
    
    
    
    161,256Investments in associates and joint ventures (Notes 3, 4, 5, 10, 24 and 28)
    
    
    23,203
    
    
    
    22,233Available-for-sale financial assets (Notes 6, 13 and 28)
    
    
    147
    
    
    
    134Investment in debt securities (Notes 11 and 28)
    
    
    484
    
    
    
    462Investment properties (Notes 3, 6, 9, 12 and 28)
    
    
    1,560
    
    
    
    1,210Goodwill and intangible assets (Notes 3, 4, 5, 13, 14, 21 and 28)
    
    
    11,485
    
    
    
    13,024Deferred income tax assets  net (Notes 3, 4, 7, 13 and 28)
    
    
    6,110
    
    
    
    7,721Derivative financial assets (Note 28)
    
    
    178
    
    
    
    Prepayments  net of current portion (Notes 3, 5, 13,18, 25 and 28)
    
    
    8,679
    
    
    
    8,663Advances and refundable deposits  net of current portion (Notes 13 and 28)
    
    
    1,187
    
    
    
    1,102Total Noncurrent Assets
    
    
    216,217
    
    
    
    215,805Current AssetsCash and cash equivalents (Notes 13, 15 and 28)
    
    
    36,678
    
    
    
    38,319Short-term investments (Note 28)
    
    
    669
    
    
    
    3,824Trade and other receivables (Notes 3, 5, 13, 16, 18, 24 and 28)
    
    
    16,428
    
    
    
    14,729Inventories and supplies (Notes 3, 4, 5, 13, 17 and 28)
    
    
    2,219
    
    
    
    2,165Derivative financial assets (Note 28)
    
    
    5
    
    
    
    6Current portion of prepayments (Notes 13, 18 and 28)
    
    
    5,418
    
    
    
    5,098Current portion of advances and refundable deposits (Notes 13 and 28)
    
    
    181
    
    
    
    202Total Current Assets
    
    
    61,598
    
    
    
    64,343TOTAL ASSETS
    
    
    277,815
    
    
    
    280,148EQUITY AND LIABILITIESEquityPreferred stock, Php10 par value per share, authorized - 822,500,000 shares;
issued and outstanding - 441,887,387 shares as at December 31, 2010 and
441,631,062 shares as at December 31, 2009 (Notes 8, 19 and 28)
    
    
    4,419
    
    
    
    4,416Common stock, Php5 par value per share, authorized - 234,000,000 shares;
issued - 189,480,549 shares and outstanding - 186,756,438 shares as at
December 31, 2010; and issued - 189,480,260 shares and outstanding -
186,797,304 shares as at December 31, 2009 (Notes 8, 19 and 28)
    
    
    947
    
    
    
    947Treasury stock - 2,724,111 shares as at December 31, 2010 and 2,682,956 shares
as at December 31, 2009 (Notes 8, 19 and 28)
    
    
    (6,505
    )
    
    
    (6,405
    )Capital in excess of par value (Note 13)
    
    
    62,890
    
    
    
    62,890Retained earnings (Note 19)
    
    
    36,594
    
    
    
    37,744Other comprehensive income (Note 6)
    
    
    (1,276
    )
    
    
    (1,017
    )Total Equity Attributable to Equity Holders of PLDT
    
    
    97,069
    
    
    
    98,575Non-controlling interests (Notes 6 and 13)
    
    
    316
    
    
    
    550TOTAL EQUITY
    
    
    97,385
    
    
    
    99,125
 164




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)  December 31, 2010 and 2009
(in million pesos, except par value and number of shares)
 2010
    
    
    2009Noncurrent LiabilitiesInterest-bearing financial liabilities  net of current portion
(Notes 3, 4, 5, 9, 13, 20, 23, 26 and 28)
    
    
    75,888
    
    
    
    86,079Deferred income tax liabilities  net (Notes 3, 4, 7, 13 and 28)
    
    
    1,099
    
    
    
    1,321Derivative financial liabilities (Notes 26 and 28)
    
    
    3,604
    
    
    
    2,751Pension and other employee benefits (Notes 3, 5, 13, 23, 25, 26 and 28)
    
    
    1,834
    
    
    
    374Customers deposits (Notes 26 and 28)
    
    
    2,223
    
    
    
    2,166Deferred credits and other noncurrent liabilities (Notes 3, 5, 9, 13, 14, 21, 23, 28 and 29)
    
    
    13,567
    
    
    
    14,438Total Noncurrent Liabilities
    
    
    98,215
    
    
    
    107,129Current LiabilitiesAccounts payable (Notes 13, 22, 24, 26, 27 and 28)
    
    
    25,804
    
    
    
    19,601Accrued expenses and other current liabilities
(Notes 3, 10, 13, 14, 20, 21, 23, 24, 25, 26, 27 and 28)
    
    
    35,959
    
    
    
    35,446Provision for assessments (Notes 3, 26, 27 and 28)
    
    
    1,555
    
    
    
    1,555Current portion of interest-bearing financial liabilities (Notes 3, 4, 5, 9, 13, 20, 23, 26 and 28)
    
    
    13,801
    
    
    
    12,714Dividends payable (Notes 13, 19, 26 and 28)
    
    
    2,086
    
    
    
    1,749Income tax payable (Notes 7, 13 and 28)
    
    
    3,010
    
    
    
    2,829Total Current Liabilities
    
    
    82,215
    
    
    
    73,894TOTAL LIABILITIES
    
    
    180,430
    
    
    
    181,023TOTAL EQUITY AND LIABILITIES
    
    
    277,815
    
    
    
    280,148
 See accompanying Notes to Consolidated Financial Statements.
 165




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS
 For the Years Ended December 31, 2010, 2009 and 2008
 (in million pesos, except earnings per common share amounts)
 2010
    
    2009
    
    2008REVENUESService revenues (Notes 3 and 4)
    
    
    142,242
    
    
    
    145,567
    
    
    
    142,873Non-service revenues (Notes 3, 4 and 5)
    
    
    2,217
    
    
    
    2,426
    
    
    
    2,964144,459
    
    
    
    147,993
    
    
    
    145,837EXPENSESDepreciation and amortization (Notes 3, 4 and 9)
    
    
    26,277
    
    
    
    25,607
    
    
    
    24,709Compensation and employee benefits (Notes 3, 5 and 25)
    
    
    24,070
    
    
    
    23,100
    
    
    
    20,709Repairs and maintenance (Notes 12, 17 and 24)
    
    
    9,434
    
    
    
    8,631
    
    
    
    8,569Selling and promotions (Note 8)
    
    
    5,284
    
    
    
    5,749
    
    
    
    5,695Professional and other contracted services (Note 24)
    
    
    4,853
    
    
    
    4,361
    
    
    
    4,591Cost of sales (Notes 5, 17 and 24)
    
    
    4,771
    
    
    
    5,432
    
    
    
    5,252Rent (Notes 3 and 26)
    
    
    3,970
    
    
    
    4,055
    
    
    
    3,656Taxes and licenses (Note 27)
    
    
    2,571
    
    
    
    2,881
    
    
    
    2,736Asset impairment (Notes 3, 4, 5, 9, 10, 14, 16, 17, 18 and 28)
    
    
    2,438
    
    
    
    5,061
    
    
    
    4,180Communication, training and travel
    
    
    1,832
    
    
    
    1,902
    
    
    
    1,993Insurance and security services (Note 24)
    
    
    1,252
    
    
    
    1,264
    
    
    
    1,196Amortization of intangible assets (Notes 3, 4 and 14)
    
    
    388
    
    
    
    368
    
    
    
    377Other expenses (Note 24)
    
    
    1,763
    
    
    
    1,700
    
    
    
    2,12388,903
    
    
    
    90,111
    
    
    
    85,78655,556
    
    
    
    57,882
    
    
    
    60,051OTHER INCOME (EXPENSES)Foreign exchange gains (losses)  net (Notes 4, 9 and 28)
    
    
    1,807
    
    
    
    909
    
    
    
    (6,170
    )Equity share in net earnings (losses) of associates and joint ventures
(Notes 4 and 10)
    
    
    1,408
    
    
    
    2
    
    
    
    (176
    )Interest income (Notes 4, 5, 11 and 15)
    
    
    1,200
    
    
    
    1,539
    
    
    
    1,668Gains (losses) on derivative financial instruments  net (Notes 4 and 28)
    
    
    (1,741
    )
    
    
    (1,006
    )
    
    
    3,115Financing costs  net (Notes 4, 5, 9, 20 and 28)
    
    
    (6,698
    )
    
    
    (6,556
    )
    
    
    (6,104
    )Other income (Notes 4 and 18)
    
    
    2,153
    
    
    
    2,069
    
    
    
    1,665(1,871
    )
    
    
    (3,043
    )
    
    
    (6,002
    )INCOME BEFORE INCOME TAX(Note 4)
    
    
    53,685
    
    
    
    54,839
    
    
    
    54,049PROVISION FOR INCOME TAX(Notes 3, 4 and 7)
    
    
    13,426
    
    
    
    14,744
    
    
    
    19,073NET INCOME FOR THE YEAR(Note 4)
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976ATTRIBUTABLE TO:Equity holders of PLDT (Notes 4 and 8)
    
    
    40,217
    
    
    
    39,781
    
    
    
    34,317Non-controlling interests (Note 4)
    
    
    42
    
    
    
    314
    
    
    
    65940,259
    
    
    
    40,095
    
    
    
    34,976Earnings Per Share For The Year Attributable to
Common Equity Holders of PLDT(Note 8)Basic
    
    
    212.85
    
    
    
    210.38
    
    
    
    179.96Diluted
    
    
    212.85
    
    
    
    210.36
    
    
    
    179.95
 See accompanying Notes to Consolidated Financial Statements.
 166




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 For the Years Ended December 31, 2010, 2009 and 2008
 (in million pesos)
 2010
    
    2009
    
    2008NET INCOME FOR THE YEAR(Note 4)
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976OTHER COMPREHENSIVE INCOME (LOSS)(Note 6)Revaluation increment on investment properties:
    
    
    314
    
    
    
    
    
    
    
    Revaluation increment of property, plant and equipment transferred
to investment properties during the year
    
    
    449
    
    
    
    
    
    
    
    Income tax related to revaluation increment charged directly to equity
    
    
    (135
    )
    
    
    
    
    
    
    Net gains (losses) on available-for-sale financial assets:
    
    
    22
    
    
    
    3
    
    
    
    (9
    )Gains (losses) from changes in fair value recognized during the year
    
    
    23
    
    
    
    3
    
    
    
    (9
    )Losses removed from other comprehensive income taken to income
    
    
    3
    
    
    
    
    
    
    
    Income tax related to fair value adjustments charged directly to equity
    
    
    (4
    )
    
    
    
    
    
    
    Foreign currency translation differences of subsidiaries
    
    
    (761
    )
    
    
    (657
    )
    
    
    1,490Net transactions on cash flow hedges  net of tax:
    
    
    
    
    
    
    
    
    
    
    (411
    )Net losses on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    (662
    )Income tax related to cash flow hedges:
    
    
    
    
    
    
    
    
    
    
    251Charged directly to equity
    
    
    
    
    
    
    
    
    
    
    251Total Other Comprehensive Income (Loss)
    
    
    (425
    )
    
    
    (654
    )
    
    
    1,070TOTAL COMPREHENSIVE INCOME FOR THE YEAR
    
    
    39,834
    
    
    
    39,441
    
    
    
    36,046ATTRIBUTABLE TO:Equity holders of PLDT
    
    
    39,958
    
    
    
    39,142
    
    
    
    35,322Non-controlling interests
    
    
    (124
    )
    
    
    299
    
    
    
    72439,834
    
    
    
    39,441
    
    
    
    36,046
 See accompanying Notes to Consolidated Financial Statements.
 167




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 For the Years Ended December 31, 2010, 2009 and 2008
 (in million pesos)
 EquityPortion of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total EquityStock
    
    Convertible
    
    Capital in
    
    
    
    
    
    Other
    
    Attributable to
    
    Non-Preferred
    
    Common
    
    Treasury
    
    Options
    
    Preferred
    
    Excess of
    
    Retained
    
    Comprehensive
    
    Equity Holders
    
    controlling
    
    TotalStock
    
    Stock
    
    Stock
    
    Issued
    
    Stock
    
    Par Value
    
    Earnings
    
    Income
    
    of PLDT
    
    Interests
    
    EquityBalances as at January 1, 2008
    
    
    4,417
    
    
    
    943
    
    
    
    
    
    
    
    9
    
    
    
    6
    
    
    
    67,057
    
    
    
    39,894
    
    
    
    (1,383
    )
    
    
    110,943
    
    
    
    1,402
    
    
    
    112,345Total comprehensive income for the year:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,317
    
    
    
    1,005
    
    
    
    35,322
    
    
    
    724
    
    
    
    36,046Net income for the year (Notes 4 and 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,317
    
    
    
    
    
    
    
    34,317
    
    
    
    659
    
    
    
    34,976Other comprehensive income (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005
    
    
    
    1,005
    
    
    
    65
    
    
    
    1,070Cash dividends (Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,034
    )
    
    
    
    
    
    
    (37,034
    )
    
    
    (398
    )
    
    
    (37,432
    )Issuance of capital stock  net of conversion
(Note 19)
    
    
    (2
    )
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    1,270
    
    
    
    
    
    
    
    
    
    
    
    1,266
    
    
    
    
    
    
    
    1,266Exercised option shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Acquisition of treasury stocks
(Notes 2, 8, 19 and 25)
    
    
    
    
    
    
    
    
    
    
    (4,973
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,973
    )
    
    
    (308
    )
    
    
    (5,281
    )Business combinations and others (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Balances as at December 31, 2008
    
    
    4,415
    
    
    
    947
    
    
    
    (4,973
    )
    
    
    6
    
    
    
    
    
    
    
    68,337
    
    
    
    37,177
    
    
    
    (378
    )
    
    
    105,531
    
    
    
    1,438
    
    
    
    106,969Balances as at January 1, 2009
    
    
    4,415
    
    
    
    947
    
    
    
    (4,973
    )
    
    
    6
    
    
    
    
    
    
    
    68,337
    
    
    
    37,177
    
    
    
    (378
    )
    
    
    105,531
    
    
    
    1,438
    
    
    
    106,969Total comprehensive income for the year:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,781
    
    
    
    (639
    )
    
    
    39,142
    
    
    
    299
    
    
    
    39,441Net income for the year (Notes 4 and 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,781
    
    
    
    
    
    
    
    39,781
    
    
    
    314
    
    
    
    40,095Other comprehensive income (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (639
    )
    
    
    (639
    )
    
    
    (15
    )
    
    
    (654
    )Cash dividends (Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,214
    )
    
    
    
    
    
    
    (39,214
    )
    
    
    (436
    )
    
    
    (39,650
    )Issuance of capital stock  net of conversion
(Note 19)
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Exercised option shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Acquisition of treasury stocks
(Notes 2, 8, 19 and 25)
    
    
    
    
    
    
    
    
    
    
    (1,432
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,432
    )
    
    
    (320
    )
    
    
    (1,752
    )Business combinations and others (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,479
    )
    
    
    
    
    
    
    
    
    
    
    (5,479
    )
    
    
    (431
    )
    
    
    (5,910
    )Balances as at December 31, 2009
    
    
    4,416
    
    
    
    947
    
    
    
    (6,405
    )
    
    
    
    
    
    
    
    
    
    
    62,890
    
    
    
    37,744
    
    
    
    (1,017
    )
    
    
    98,575
    
    
    
    550
    
    
    
    99,125Balances as at January 1, 2010
    
    
    4,416
    
    
    
    947
    
    
    
    (6,405
    )
    
    
    
    
    
    
    
    
    
    
    62,890
    
    
    
    37,744
    
    
    
    (1,017
    )
    
    
    98,575
    
    
    
    550
    
    
    
    99,125Total comprehensive income for the year:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,217
    
    
    
    (259
    )
    
    
    39,958
    
    
    
    (124
    )
    
    
    39,834Net income for the year (Notes 4 and 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,217
    
    
    
    
    
    
    
    40,217
    
    
    
    42
    
    
    
    40,259Other comprehensive income (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    (259
    )
    
    
    (166
    )
    
    
    (425
    )Cash dividends (Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,367
    )
    
    
    
    
    
    
    (41,367
    )
    
    
    (50
    )
    
    
    (41,417
    )Issuance of capital stock  net of conversion
(Note 19)
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Acquisition of treasury stocks
(Notes 2, 8, 19 and 25)
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    (6
    )
    
    
    (106
    )Business combinations and others (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Balances as at December 31, 2010
    
    
    4,419
    
    
    
    947
    
    
    
    (6,505
    )
    
    
    
    
    
    
    
    
    
    
    62,890
    
    
    
    36,594
    
    
    
    (1,276
    )
    
    
    97,069
    
    
    
    316
    
    
    
    97,385
 See accompanying Notes to Consolidated Financial Statements.
 168




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, 2010, 2009 and 2008
 (in million pesos)
 2010
    
    2009
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax (Note 4)
    
    
    53,685
    
    
    
    54,839
    
    
    
    54,049Adjustments for:Depreciation and amortization (Notes 3, 4 and 9)
    
    
    26,277
    
    
    
    25,607
    
    
    
    24,709Interest on loans and other related items  net (Notes 4, 5, 9, 20 and 28)
    
    
    5,471
    
    
    
    5,317
    
    
    
    5,083Asset impairment (Notes 3, 4, 5, 9, 10, 14, 16, 17 and 28)
    
    
    2,438
    
    
    
    5,061
    
    
    
    4,180Losses (gains) on derivative financial instruments  net (Notes 4 and 28)
    
    
    1,741
    
    
    
    1,006
    
    
    
    (3,115
    )Incentive plans (Notes 3, 5 and 25)
    
    
    1,392
    
    
    
    1,833
    
    
    
    1,281Accretion on financial liabilities  net (Notes 5, 20 and 28)
    
    
    1,177
    
    
    
    1,062
    
    
    
    956Amortization of intangible assets (Notes 3 and 14)
    
    
    388
    
    
    
    368
    
    
    
    377Pension benefit costs (Notes 3, 5 and 25)
    
    
    236
    
    
    
    1,306
    
    
    
    725Gains on disposal of property, plant and equipment (Note 9)
    
    
    (913
    )
    
    
    (127
    )
    
    
    (534
    )Interest income (Notes 4, 5 and 15)
    
    
    (1,200
    )
    
    
    (1,539
    )
    
    
    (1,668
    )Equity share in net losses (earnings) of associates and joint ventures (Notes 4 and 10)
    
    
    (1,408
    )
    
    
    (2
    )
    
    
    176Foreign exchange losses (gains)  net (Notes 4, 9 and 28)
    
    
    (1,807
    )
    
    
    (909
    )
    
    
    6,170Dividends on preferred stock subject to mandatory redemption (Notes 5 and 8)
    
    
    
    
    
    
    
    
    
    
    4Others
    
    
    (352
    )
    
    
    (802
    )
    
    
    830Operating income before changes in assets and liabilities
    
    
    87,125
    
    
    
    93,020
    
    
    
    93,223Decrease (increase) in:Trade and other receivables
    
    
    (3,132
    )
    
    
    (1,324
    )
    
    
    (3,003
    )Inventories and supplies
    
    
    89
    
    
    
    (305
    )
    
    
    (913
    )Prepayments
    
    
    (146
    )
    
    
    (1,333
    )
    
    
    (877
    )Advances and refundable deposits
    
    
    (15
    )
    
    
    271
    
    
    
    (1,338
    )Increase (decrease) in:Accounts payable
    
    
    6,407
    
    
    
    130
    
    
    
    5,244Accrued expenses and other current liabilities
    
    
    3,722
    
    
    
    8,227
    
    
    
    2,084Pension and other employee benefits
    
    
    (4,603
    )
    
    
    (9,071
    )
    
    
    (1,125
    )Customers deposits
    
    
    57
    
    
    
    32
    
    
    
    27Other noncurrent liabilities
    
    
    50
    
    
    
    (46
    )
    
    
    1Net cash generated from operations
    
    
    89,554
    
    
    
    89,601
    
    
    
    93,323Income taxes paid
    
    
    (12,294
    )
    
    
    (15,215
    )
    
    
    (15,021
    )Net cash provided by operating activities
    
    
    77,260
    
    
    
    74,386
    
    
    
    78,302CASH FLOWS FROM INVESTING ACTIVITIESProceeds from:Maturity of short-term investments
    
    
    6,256
    
    
    
    9,728
    
    
    
    28,476Disposal of property, plant and equipment (Note 9)
    
    
    859
    
    
    
    932
    
    
    
    1,015Redemption of investment in debt securities
    
    
    409
    
    
    
    4,005
    
    
    
    2,676Disposal of investment properties (Note 12)
    
    
    89
    
    
    
    18
    
    
    
    9Disposal of investments held-for-sale
    
    
    10
    
    
    
    
    
    
    
    Disposal of available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    174Disposal of investment in associates
    
    
    
    
    
    
    
    
    
    
    3Interest received
    
    
    1,165
    
    
    
    1,352
    
    
    
    1,461Dividends received
    
    
    534
    
    
    
    360
    
    
    
    Payments for:Available-for-sale financial assets
    
    
    (2
    )
    
    
    
    
    
    
    (206
    )Acquisition of intangibles (Notes 13 and 14)
    
    
    (13
    )
    
    
    (21
    )
    
    
    (69
    )Purchase of subsidiaries and non-controlling interests  net of cash acquired (Note
13)
    
    
    (188
    )
    
    
    (8,989
    )
    
    
    (743
    )Purchase of investment in debt securities (Note 10)
    
    
    (403
    )
    
    
    (3,572
    )
    
    
    (3,457
    )Short-term investments
    
    
    (3,114
    )
    
    
    (6,838
    )
    
    
    (21,072
    )Notes receivable
    
    
    
    
    
    
    (80
    )
    
    
    Purchase of investments in associates (Note 10)
    
    
    
    
    
    
    (18,070
    )
    
    
    Interest paid  capitalized to property, plant and equipment (Notes 4, 5, 9, 20 and 28)
    
    
    (710
    )
    
    
    (691
    )
    
    
    (778
    )Additions to property, plant and equipment (Notes 4 and 9)
    
    
    (28,056
    )
    
    
    (27,378
    )
    
    
    (24,425
    )Decrease (increase) in advances and refundable deposits
    
    
    (119
    )
    
    
    112
    
    
    
    (78
    )Net cash used in investing activities
    
    
    (23,283
    )
    
    
    (49,132
    )
    
    
    (17,014
    )
 169




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS ( continued)  For the Years Ended December 31, 2010, 2009 and 2008
(in million pesos)
 2010
    
    2009
    
    2008CASH FLOWS FROM FINANCING ACTIVITIESProceeds from availment of long-term debt (Note 20)
    
    
    7,246
    
    
    
    41,989
    
    
    
    17,912Availment of long-term financing for capital expenditures
    
    
    3,777
    
    
    
    7,993
    
    
    
    6,614Proceeds from issuance of capital stock
    
    
    3
    
    
    
    18
    
    
    
    8Payments of obligations under finance lease
    
    
    (29
    )
    
    
    (24
    )
    
    
    (474
    )Payments for acquisition of treasury shares (Notes 8, 19 and 28)
    
    
    (106
    )
    
    
    (1,752
    )
    
    
    (5,281
    )Payments of debt issuance costs (Note 20)
    
    
    (111
    )
    
    
    (173
    )
    
    
    (149
    )Settlements of derivative financial instruments (Note 28)
    
    
    (1,095
    )
    
    
    (1,913
    )
    
    
    (2,891
    )Payments of notes payable (Note 20)
    
    
    (2,274
    )
    
    
    (270
    )
    
    
    (678
    )Settlement of long-term financing for capital expenditures
    
    
    (3,702
    )
    
    
    (4,678
    )
    
    
    (5,519
    )Interest paid  net of capitalized portion (Notes 5, 20 and 28)
    
    
    (5,580
    )
    
    
    (5,239
    )
    
    
    (5,167
    )Payments of long-term debt (Note 20)
    
    
    (12,371
    )
    
    
    (18,958
    )
    
    
    (13,375
    )Cash dividends paid (Note 19)
    
    
    (41,080
    )
    
    
    (39,286
    )
    
    
    (37,124
    )Proceeds from notes payable (Note 20)
    
    
    
    
    
    
    2,000
    
    
    
    660Net cash used in financing activities
    
    
    (55,322
    )
    
    
    (20,293
    )
    
    
    (45,464
    )EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
    
    
    (296
    )
    
    
    (326
    )
    
    
    413NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (1,641
    )
    
    
    4,635
    
    
    
    16,237CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    38,319
    
    
    
    33,684
    
    
    
    17,447CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    
    36,678
    
    
    
    38,319
    
    
    
    33,684
 See accompanying Notes to Consolidated Financial Statements.
 170




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Corporate Information
       171




---



##### Table of Contents



2. Summary of Significant Accounting Policies
 Basis of Preparation
   Basis of Consolidation
  2010
    
    2009Place of
    
    
    


    Percentage of OwnershipName of Subsidiary
    
    Incorporation
    
    Principal Business Activity
    
    Direct
    
    Indirect
    
    Direct
    
    IndirectWirelessSmart:
    
    Philippines
    
    Cellular mobile services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    Smart Broadband, Inc., or SBI, and Subsidiaries, or SBI Group
    
    Philippines
    
    Internet broadband distribution
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Primeworld Digital Systems, Inc., or PDSI
    
    Philippines
    
    Internet broadband distribution services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0I-Contacts Corporation, or I-Contacts
    
    Philippines
    
    Call center services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Wolfpac Mobile, Inc., or Wolfpac
    
    Philippines
    
    Mobile applications development and services
    
    
    
    
    
    
    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, Inc., or SHI
    
    Philippines
    
    Software development and sale of maintenance and support services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Smart Money Holdings Corporation, or SMHC:
    
    Cayman Islands
    
    Investment company
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Smart Money, Inc., or SMI
    
    Cayman Islands
    
    Mobile commerce solutions marketing
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Telecoms Solutions, Inc., or TSI
    
    Mauritius
    
    Mobile commerce platforms
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Far East Capital Limited and Subsidiary
    
    Cayman Islands
    
    Cost effective offshore financing and risk management activities for Smart
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0PH Communications Holdings Corporation, or PHC
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Francom Holdings, Inc., or FHI:
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Connectivity Unlimited Resource Enterprise, Inc., or CURE
    
    Philippines
    
    Cellular mobile services
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Chikka Holdings Limited, or Chikka, and Subsidiaries, or Chikka Group
    
    British Virgin Islands
    
    Mobile applications development and services; Content provider
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0PLDT Communications and Energy Ventures, Inc., or PCEV, (formerly known as
Pilipino Telephone Corporation, or Piltel) and Subsidiaries, or PCEV Group
    
    Philippines
    
    Investment company
    
    
    
    
    
    
    99.5
    
    
    
    
    
    
    
    99.5SmartConnect Holdings Pte. Ltd., or SCH:
    
    Singapore
    
    Investment company
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    100.03rd Brand Pte. Ltd., or 3rd Brand
    
    Singapore
    
    Solutions and systems integration services
    
    
    
    
    
    
    85.0
    
    
    
    
    
    
    
    85.0Blue Ocean Wireless, or BOW
    
    Isle of Man
    
    Delivery of GSM communication capability for the maritime sector
    
    
    
    
    
    
    51.0
    
    
    
    
    
    
    
    51.0Telesat, 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, and Subsidiaries, or PLDT Global Group 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-Philcom, Inc. (formerly known as Philcom Corporation), or Philcom, and
Subsidiaries, or Philcom Group
    
    Philippines
    
    Telecommunications services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    PLDT-Maratel, Inc., or Maratel
    
    Philippines
    
    Telecommunications services
    
    
    97.8
    
    
    
    
    
    
    
    97.8
    
    
    
    Bonifacio Communications Corporation, or BCC
    
    Philippines
    
    Telecommunications, infrastructure and related value-added services, or VAS
    
    
    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 relationship management and IT-related services
    
    
    100.0
    
    
    
    
    
    
    
    100.0
    
    
    
    SPi Technologies, Inc., or SPi, and Subsidiaries, or SPi Group
    
    Philippines
    
    Knowledge processing solutions
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0
 172




---



##### Table of Contents



2010
    
    2009Place of
    
    
    


    Percentage of OwnershipName of Subsidiary
    
    Incorporation
    
    Principal Business Activity
    
    Direct
    
    Indirect
    
    Direct
    
    IndirectSPi CRM Inc., or SPi CRM (formerly ePLDT Ventus, Inc.)**
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    100.0
    
    
    
    
    
    
    
    100.0Parlance Systems, Inc., or Parlance**
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.0Vocativ Systems, Inc., or Vocativ**
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.0Infocom Technologies, Inc.,
or Infocom
    
    Philippines
    
    Internet services
    
    
    
    
    
    
    99.6
    
    
    
    
    
    
    
    99.6BayanTrade, Inc. (formerly BayanTrade Dotcom, Inc.), or BayanTrade, and
Subsidiaries, or BayanTrade Group
    
    Philippines
    
    Internet-based purchasing, IT consulting and professional services
    
    
    
    
    
    
    93.5
    
    
    
    
    
    
    
    93.5Digital Paradise, Inc., or
Digital Paradise
    
    Philippines
    
    Internet services
    
    
    
    
    
    
    75.0
    
    
    
    
    
    
    
    75.0Level Up!, Inc., or Level Up!
    
    Philippines
    
    Publisher of online games
    
    
    
    
    
    
    57.5
    
    
    
    
    
    
    
    60.0netGames, Inc., or netGames
    
    Philippines
    
    Customer relationship management
    
    
    
    
    
    
    57.5
    
    
    
    
    
    
    
    60.0
 
 *
    
    Ceased commercial operations**
    
    On April 8, 2010, SPi CRM, Parlance and Vocativ were merged, with SPi CRM as the
surviving entity. Basis of Consolidation from January 1, 2009
      Basis of Consolidation prior to January 1, 2009
   PCEVs Share Buyback Program
  173




---



##### Table of Contents



Corporate Merger of Vocativ, Parlance and SPi CRM
  Reorganization of ePLDT
 Note 4  Operating Segment Information
 Statement of Compliance
  Changes in Accounting Policies and Disclosures
  
    
    Amendment to IFRS 2, Share-based Payment  Group Cash-settled Share-based Payment
Transactions;
    
    Improvements to IFRS 5, Noncurrent Assets Held-for-Sale and Discontinued Operations;
    
    Amendment to International Accounting Standard, or IAS, 39, Financial Instruments:
Recognition and Measurement  Eligible Hedged Items;
    
    IFRIC 17, Distributions of Non-cash Assets to Owners;and
    
    Improvements to IFRSs (2009)
  Amendment to IFRS 2, Share-based Payment.
 Improvements to IFRS 5, Noncurrent Assets Held-for-Sale and Discontinued Operations. IFRS 5
 174




---



##### Table of Contents



Amendment to IAS 39, Financial Instruments: Recognition and Measurement  Eligible Hedged
Items. IAS 39
 IFRIC 17, Distributions of Non-cash Assets to Owners.
 Improvements to IFRSs
  
    
    IFRS 2, Share-based Payment.The amendment clarifies that the contribution of a
business on formation of a joint venture and combinations under common control are not
within the scope of IFRS 2, even though they are out of scope of Revised IFRS 3,
Business Combinations.
    
    IFRS 5, Noncurrent Assets Held-for-Sale and Discontinued Operations.The amendment
clarifies that the disclosures required in respect of noncurrent assets or disposal
groups classified as held-for-sale or discontinued operations are only those set out in
IFRS 5. The disclosure requirements of other IFRSs apply only if specifically required
for such noncurrent assets or discontinued operations.It also clarifies that the general requirements of IAS 1, Presentation of Financial
Statements,still apply, particularly paragraphs 15 (to achieve fair presentation) and
125 (sources of estimation and uncertainty).
    
    IFRS 8, Operating Segments.The amendment clarifies that segment assets and
liabilities need only be reported when those assets and liabilities are included in
measures that are used by the chief operating decision maker. As the chief operating
decision maker reviews segment revenues, net income (loss) for the year, assets,
liabilities, and other segment information of our reportable operating segments, we
have continued to disclose this information in Note 4  Operating Segment Information.
    
    IAS 1, Presentation of Financial Statements.The amendment terms of a liability
that could result, at anytime, in its settlement by the issuance of equity instruments
at the option of the counterparty do not affect its classification.
    
    IAS 7, Statement of Cash Flows.The amendment explicitly states that only
expenditure that results in a recognized asset can be classified as a cash flow from
investing activities. This amendment will impact, among others, the presentation in
the statement of cash flows of the contingent consideration on the business combination
completed in 2010 upon cash settlement.
    
    IAS 17, Leases.The amendment removes the specific guidance on classifying land as
lease so that only the general guidance remains.
    
    IAS 36, Impairment of Assets.The amendment clarifies that the largest unit
permitted for allocating goodwill acquired in a business combination is the operating
segment, as defined in IFRS 8, before aggregation for reporting purposes. The
amendment had no impact on us as the annual impairment test is performed before
aggregation.
 175




---



##### Table of Contents




    
    IAS 38, Intangible Assets.The amendment clarifies that if an intangible asset
acquired in a business combination is identifiable only with another intangible asset,
the acquirer may recognize the group of intangible assets as a single asset, provided
that the individual assets have similar useful lives. It also clarifies that the
valuation techniques presented for determining the fair value of intangible assets
acquired in a business combination that are not traded in active markets are only
examples and are not restrictive on the methods that can be used.
    
    IAS 39, Financial Instruments: Recognition and Measurement.The amendment clarifies
that a prepayment option is considered closely related to the host contract when the
exercise price of a prepayment option reimburses the lender up to the approximate
present value of lost interest for the remaining term of the host contract. The
amendment also clarifies that the scope exemption for contracts between an acquirer and
a vendor in a business combination to buy or sell and acquiree at a future date,
applies only to forward binding contracts, and not derivative contracts where some
actions by either party have yet to be taken. It also clarifies that gains or losses
on cash flow hedges of a forecast transaction that subsequently results in the
recognition of a financial instrument or on cash flow hedges of recognized financial
instruments should be reclassified in the year that the hedged forecast cash flows
affected profit or loss.
    
    IFRIC 9, Reassessment of Embedded Derivatives.The improvement clarifies that it
does not apply to possible reassessment, at the date of acquisition, of embedded
derivatives in contracts acquired in a combination between entities or businesses under
common control or in the formation of a joint venture.
    
    IFRIC 16, Hedges of a Net Investment in a Foreign Operation.The improvement states
that, in a hedge of a net investment in a foreign operation, qualifying hedging
instruments may be held by any entity or entities within the group, including the
foreign operation itself, as long as the designation, documentation and effectiveness
requirements of IAS 39that relate to a net investment hedge are satisfied.
 Significant Accounting Policies
 Business Combinations and Goodwill
 Business combinations from January 1, 2009
    IAS 39
   176




---



##### Table of Contents



Business combinations prior to January 1, 2009
      Investments in Associates
       177




---



##### Table of Contents



Investments in Joint Ventures
    Foreign Currency Transactions and Translations
      178




---



##### Table of Contents



Financial Assets
 Initial recognition
     Subsequent measurement
  Financial assets at fair value through profit or loss
    Loans and receivables
  179




---



##### Table of Contents



Held-to-maturity investments
  Available-for-sale financial assets
  Financial Liabilities
 Initial recognition
    Subsequent measurement
  Financial liabilities at fair value through profit or loss
  180




---



##### Table of Contents



Other financial liabilities
   Offsetting of financial instruments
  Fair value of financial instruments
  Amortized cost of financial instruments
  Day 1 difference
  Impairment of Financial Assets
  181




---



##### Table of Contents



Financial assets carried at amortized cost
    Available-for-sale financial assets
   182




---



##### Table of Contents



Derecognition of Financial Assets and Liabilities
 Financial assets
     Financial liabilities
   Derivative Financial Instruments and Hedging
 Initial recognition and subsequent measurement
   Note 28  Financial Assets and Liabilities
  183




---



##### Table of Contents



Fair value hedges
    Cash flow hedges
    Hedges of a net investment in a foreign operation
  184




---



##### Table of Contents



Current versus noncurrent classification
     Property, Plant and Equipment
    Note 9  Property, Plant and Equipment
    Borrowing Costs
  185




---



##### Table of Contents



Asset Retirement Obligations
  Investment Properties
     Intangible Assets
    186




---



##### Table of Contents



Research and Development Costs
   Inventories and Supplies
   Impairment of Non-Financial Assets
 Property, plant and equipment
   187




---



##### Table of Contents



Goodwill
   Intangible assets
  Investments in associates and joint ventures
  Investment in Debt Securities
  Cash and Cash Equivalents
  Short-term Investments
  Trade and Other Receivables
   188




---



##### Table of Contents



Revenue Recognition
  Service Revenues
 Subscriptions
  Air time, traffic and VAS
  Knowledge processing solutions and customer relationship management
  Incentives
  189




---



##### Table of Contents



Smart Money Smart Gold, Smart Buddy SmartBro Smart Money Smart Load SmartBro Smart Money Cash Load
 Non-service Revenues
 Handset and equipment sales
  Interest income
  Expenses
  Provisions
  Retirement Benefits
 Defined benefit pension plans
  190




---



##### Table of Contents



Defined contribution plans
  Other Long-term Employee Benefits
   Share-based Payment Transactions
 Cash-settled transactions
  Leases
   As a Lessor.
 191




---



##### Table of Contents



As a Lessee.
  Income Taxes
 Current income tax
  Deferred income tax
       192




---



##### Table of Contents



Contingencies
  Events After the End of the Reporting Period
  Equity
       New Accounting Standards and Interpretations to Existing Standards Effective Subsequent to
December 31, 2010
  Effective 2011
 Revised IAS 24, Related Party Disclosures.
 Amendment to IAS 32, Financial Instruments: Presentation  Classification of Rights Issues.
 193




---



##### Table of Contents



Amendment to IFRIC 14, Prepayments of a Minimum Funding Requirement.
 IFRIC 19, Extinguishing Financial Liabilities with Equity Instrument.
 Improvements to IFRSs
  
    
    IFRS 3, Business Combinations.The improvements include: (a) clarification that the
amendments to IFRS 7, Financial Instruments: Disclosures, IAS 32, Financial
Instruments: Presentation,and IAS 39, Financial Instruments: Recognition and
Measurement,that eliminate the exemption for contingent consideration, do not apply to
contingent consideration that arose from business combinations whose acquisition dates
precede the application of IFRS 3(as revised in 2008); (b) guidance that the choice of
measuring non-controlling interests at fair value or at the proportionate share of the
acquirees net assets applies only to instruments that represent present ownership
interests and entitle their holders to a proportionate share of the net assets in the
event of liquidation. All other components of non-controlling interest are measured at
fair value unless another measurement basis is required by IFRS; and
 (c)

 clarification that the application guidance in IFRS 3applies to all share-based
payment transactions that are part of a business combination, including un-replaced and
voluntarily replaced share-based payment awards. These improvements are applied
prospectively.
    
    IFRS 7, Financial Instruments.The amendment emphasizes the interaction between
quantitative and qualitative disclosures about the nature and extent of risks
associated with financial instruments. This amendment is applied retrospectively.
    
    IAS 1, Presentation of Financial Statements.The amendment clarifies that an entity
will present an analysis of other comprehensive income for each component of equity,
either in the statement of changes in equity or in the notes to the financial
statements. This amendment is applied retrospectively.
    
    IAS 27, Consolidated and Separate Financial Statements.The improvement clarifies
that the consequential amendments from IAS 27made to IAS 21, The Effect of Changes in
Foreign Exchange Rates, IAS 28, Investments in Associates,and IAS 31, Interests in
Joint Ventures,apply prospectively for annual periods beginning on or after July 1,
2009, or earlier when IAS 27is applied earlier. This improvement is applied
retrospectively.
    
    IAS 34, Interim Financial Reporting.The amendment provides guidance on how to
apply disclosure principles in IAS 34and add disclosure requirements around: (a) the
circumstances likely to affect fair
 194




---



##### Table of Contents



values of financial instruments and their classification; (b) transfers of financial
instruments between different levels of the fair value hierarchy; (c) changes in
classification of financial assets; and (d) changes in contingent liabilities and
assets. This amendment is applied retrospectively.
 
    
    IFRIC 13, Customer Loyalty Programmes.The amendment clarifies the meaning of fair
value in the context of measuring award credits under customer loyalty programmes.
 Effective 2012
 Amendments to IFRS 7, Disclosures  Transfers of Financial Assets.
 Amendment to IAS 12, Income Taxes  Deferred Income Tax: Recovery of Underlying Assets.
 Effective 2013
 IFRS 9, Financial Instruments: Classification and Measurement. IFRS IAS 39 IAS 39 IFRS 9
 3. Managements Use of Judgments, Estimates and Assumptions
  Judgments
  Determination of functional currency
   195




---



##### Table of Contents



Leases
 IAS 17
 Note 20 
Interest-bearing Financial Liabilities, Note 26  Contractual Obligations and Commercial
Commitments Note 28  Financial Assets and Liabilities
 Significant influence in Manila Electric Company, or Meralco, on which PCEV has less than
20% ownership
 IAS 28
  Note 10  Investments in Associates and Joint Ventures
 Estimates and Assumptions
  Asset impairment
  196




---



##### Table of Contents



Note 4  Operating Segment Information, Note 5  Income and
Expenses Note 10  Investments in Associates and Joint Ventures
 Notes 9, 10, 14, 16, 17 18,
 Estimating useful lives of property, plant and equipment
  Note 4  Operating Segment Information Note
9  Property, Plant and Equipment
 Determining the fair value of investment properties
  Note 12  Investment Properties
 197




---



##### Table of Contents



Goodwill and intangible assets
    Note 13  Business Combinations
and Acquisition of Non-Controlling Interests Note 14  Goodwill and Intangible Assets
 Recognition of deferred income tax assets and liabilities
  Note 4 
Operating Segment Information Note 7  Income Taxes
 Estimating allowance for doubtful accounts
  198




---



##### Table of Contents



Note 4  Operating Segment Information, Note 5  Income and
Expenses, Note 16  Trade and Other Receivables Note 28  Financial Assets and
Liabilities
 Estimating net realizable value of inventories and supplies
  Note 4  Operating Segment Information, Note 5
 Income and Expenses Note 17  Inventories and Supplies
 Share-based payment transactions
 Note 25  Share-based
Payments and Employee Benefits Note 5  Income and Expenses, Note 23  Accrued Expenses and Other
Current Liabilities Note 25  Share-based Payments and Employee Benefits
 Estimation of pension benefit costs and other employee benefits
 Note 25  Share-based Payments and
Employee Benefits
 199




---



##### Table of Contents



Note 5  Income and Expenses, Note 18 
Prepayments
 Note 25  Share-based Payments and Employee Benefits
 Note 5  Income and Expenses Note 25  Shared-based Payments and
Employee Benefits
 Provision for asset retirement obligations
 Note 21  Deferred
Credits and Other Noncurrent Liabilities
 Provision for legal contingencies and tax assessments
 Note 27  Provisions and
Contingencies
 Revenue recognition
    200




---



##### Table of Contents



Determination of fair values of financial assets and liabilities
  Note 28  Financial Assets and Liabilities
 4. Operating Segment Information
   
    
    Wireless  wireless telecommunications services provided through our cellular service
providers namely, Smart, PCEV, (on August 17, 2009, Smart acquired the cellular business of
PCEV, which is formerly known as Pilipino Telephone Corporation) and CURE; SBI, BOW,
Airborne Access Corporation and PDSI, our wireless broadband service providers; Wolfpac and
Chikka Group, our wireless content operators; and ACeS Philippines, our satellite operator;
    
    Fixed Line  fixed line telecommunications services primarily provided by PLDT. We
also provide fixed line services through PLDTs subsidiaries ClarkTel, SubicTel, Philcom,
Maratel, SBI, PDSI, BCC and PLDT Global, all of which together account for approximately 4%
of our consolidated fixed line subscribers; and
    
    ICT  information and communications infrastructure and services for internet
applications, internet protocol-based solutions and multimedia content delivery provided by
ePLDT and BayanTrade Group; knowledge processing solutions provided by the SPi Group;
customer relationship management provided by SPi CRM (on April 8, 2010, SPi CRM, Parlance
and Vocativ were merged wherein SPi CRM became the surviving entity); internet and online
gaming services provided by Infocom, Digital Paradise, netGames and Level Up!; ande-commerce, and IT-related services provided by other investees of ePLDT, as discussed in
Note 10  Investments in Associates and Joint Ventures.
  201




---



##### Table of Contents



Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Consolidated(in million pesos)As at and for the year ended December 31, 2010RevenuesExternal customer:
    
    
    94,343
    
    
    
    40,167
    
    
    
    9,949
    
    
    
    
    
    
    
    144,459Service revenues (Note 3)
    
    
    92,986
    
    
    
    39,825
    
    
    
    9,431
    
    
    
    
    
    
    
    142,242Non-service revenues (Notes 3 and 5)
    
    
    1,357
    
    
    
    342
    
    
    
    518
    
    
    
    
    
    
    
    2,217Inter-segment transactions:
    
    
    844
    
    
    
    8,784
    
    
    
    1,409
    
    
    
    (11,037
    )
    
    
    Service revenues (Note 3)
    
    
    844
    
    
    
    8,784
    
    
    
    1,246
    
    
    
    (10,874
    )
    
    
    Non-service revenues (Notes 3 and 5)
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    (163
    )
    
    
    Total revenues
    
    
    95,187
    
    
    
    48,951
    
    
    
    11,358
    
    
    
    (11,037
    )
    
    
    144,459ResultsDepreciation and amortization (Notes 3 and 9)
    
    
    13,243
    
    
    
    12,292
    
    
    
    742
    
    
    
    
    
    
    
    26,277Asset impairment (Notes 3, 5, 9, 10, 14, 16, 17, 18 and 28)
    
    
    824
    
    
    
    291
    
    
    
    1,323
    
    
    
    
    
    
    
    2,438Financing costs  net (Notes 5, 9, 20 and 28)
    
    
    2,683
    
    
    
    3,856
    
    
    
    176
    
    
    
    (17
    )
    
    
    6,698Equity share in net earnings of associates and joint ventures
(Note 10)
    
    
    1,221
    
    
    
    
    
    
    
    187
    
    
    
    
    
    
    
    1,408Interest income (Note 5)
    
    
    698
    
    
    
    484
    
    
    
    35
    
    
    
    (17
    )
    
    
    1,200Provision for (benefit from) income tax (Notes 3 and 7)
    
    
    11,414
    
    
    
    2,050
    
    
    
    (38
    )
    
    
    
    
    
    
    13,426Net income (loss) for the year / Segment profit (loss) for
the year
    
    
    35,376
    
    
    
    5,210
    
    
    
    (327
    )
    
    
    
    
    
    
    40,259Adjusted EBITDA for the year
    
    
    58,945
    
    
    
    22,668
    
    
    
    1,723
    
    
    
    381
    
    
    
    83,717Adjusted EBITDA margin for the year
    
    
    63
    %
    
    
    47
    %
    
    
    16
    %
    
    
    
    
    
    
    59
    %Core income for the year
    
    
    35,418
    
    
    
    5,580
    
    
    
    1,030
    
    
    
    
    
    
    
    42,028
 202




---



##### Table of Contents



Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Consolidated(in million pesos)Assets and liabilitiesOperating assets
    
    
    111,852
    
    
    
    197,318
    
    
    
    15,095
    
    
    
    (75,763
    )
    
    
    248,502Investments in associates and joint ventures (Notes 3, 5, 10
and 28)
    
    
    22,275
    
    
    
    
    
    
    
    928
    
    
    
    
    
    
    
    23,203Deferred income tax assets  net (Notes 3, 7 and 28)
    
    
    41
    
    
    
    5,908
    
    
    
    161
    
    
    
    
    
    
    
    6,110Consolidated total assets
    
    
    134,168
    
    
    
    203,226
    
    
    
    16,184
    
    
    
    (75,763
    )
    
    
    277,815Operating liabilities
    
    
    96,895
    
    
    
    104,944
    
    
    
    4,435
    
    
    
    (26,943
    )
    
    
    179,331Deferred income tax liabilities  net (Notes 3, 7 and 28)
    
    
    596
    
    
    
    22
    
    
    
    178
    
    
    
    303
    
    
    
    1,099Consolidated total liabilities
    
    
    97,491
    
    
    
    104,966
    
    
    
    4,613
    
    
    
    (26,640
    )
    
    
    180,430Other segment informationCapital expenditures (including capitalized interest)
    
    
    16,959
    
    
    
    11,057
    
    
    
    750
    
    
    
    
    
    
    
    28,766As at and for the year ended December 31, 2009RevenuesExternal customer:
    
    
    96,560
    
    
    
    41,318
    
    
    
    10,115
    
    
    
    
    
    
    
    147,993Service revenues (Note 3)
    
    
    94,865
    
    
    
    41,085
    
    
    
    9,617
    
    
    
    
    
    
    
    145,567Non-service revenues (Notes 3 and 5)
    
    
    1,695
    
    
    
    233
    
    
    
    498
    
    
    
    
    
    
    
    2,426Inter-segment transactions:
    
    
    964
    
    
    
    10,055
    
    
    
    1,434
    
    
    
    (12,453
    )
    
    
    Service revenues (Note 3)
    
    
    964
    
    
    
    10,055
    
    
    
    1,234
    
    
    
    (12,253
    )
    
    
    Non-service revenues (Notes 3 and 5)
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    (200
    )
    
    
    Total revenues
    
    
    97,524
    
    
    
    51,373
    
    
    
    11,549
    
    
    
    (12,453
    )
    
    
    147,993ResultsDepreciation and amortization (Notes 3 and 9)
    
    
    13,237
    
    
    
    11,619
    
    
    
    751
    
    
    
    
    
    
    
    25,607Asset impairment (Notes 3, 5, 9, 10, 14, 16, 17, 18 and 28)
    
    
    2,026
    
    
    
    2,901
    
    
    
    134
    
    
    
    
    
    
    
    5,061Financing costs  net (Notes 5, 9, 20 and 28)
    
    
    2,619
    
    
    
    3,796
    
    
    
    171
    
    
    
    (30
    )
    
    
    6,556Interest income (Note 5)
    
    
    1,139
    
    
    
    402
    
    
    
    28
    
    
    
    (30
    )
    
    
    1,539Equity share in net earnings (losses) of associates and
joint ventures (Note 10)
    
    
    (68
    )
    
    
    (98
    )
    
    
    168
    
    
    
    
    
    
    
    2Provision for (benefit from) income tax (Notes 3 and 7)
    
    
    12,514
    
    
    
    2,258
    
    
    
    (28
    )
    
    
    
    
    
    
    14,744Net income for the year / Segment profit for the year
    
    
    33,727
    
    
    
    5,864
    
    
    
    504
    
    
    
    
    
    
    
    40,095Adjusted EBITDA for the year
    
    
    59,411
    
    
    
    25,215
    
    
    
    1,330
    
    
    
    238
    
    
    
    86,194Adjusted EBITDA margin for the year
    
    
    62
    %
    
    
    49
    %
    
    
    12
    %
    
    
    
    
    
    
    59
    %Core income for the year
    
    
    33,026
    
    
    
    7,502
    
    
    
    613
    
    
    
    (3
    )
    
    
    41,138Assets and liabilitiesOperating assets
    
    
    107,880
    
    
    
    206,385
    
    
    
    16,297
    
    
    
    (80,368
    )
    
    
    250,194Investments in associates and joint ventures
(Notes 3, 5, 10 and 28)
    
    
    21,440
    
    
    
    
    
    
    
    793
    
    
    
    
    
    
    
    22,233Deferred income tax assets  net (Notes 3, 7 and 28)
    
    
    187
    
    
    
    7,346
    
    
    
    188
    
    
    
    
    
    
    
    7,721Total assets
    
    
    129,507
    
    
    
    213,731
    
    
    
    17,278
    
    
    
    (80,368
    )
    
    
    280,148Operating liabilities
    
    
    96,194
    
    
    
    111,294
    
    
    
    4,574
    
    
    
    (32,360
    )
    
    
    179,702Deferred income tax liabilities  net (Notes 3, 7 and 28)
    
    
    640
    
    
    
    21
    
    
    
    328
    
    
    
    332
    
    
    
    1,321Total liabilities
    
    
    96,834
    
    
    
    111,315
    
    
    
    4,902
    
    
    
    (32,028
    )
    
    
    181,023Other segment informationCapital expenditures (including capitalized interest)
    
    
    16,281
    
    
    
    11,059
    
    
    
    729
    
    
    
    
    
    
    
    28,069As at and for the year ended December 31, 2008RevenuesExternal customer:
    
    
    95,365
    
    
    
    40,736
    
    
    
    9,736
    
    
    
    
    
    
    
    145,837Service revenues
    
    
    93,106
    
    
    
    40,316
    
    
    
    9,451
    
    
    
    
    
    
    
    142,873Non-service revenues (Note 5)
    
    
    2,259
    
    
    
    420
    
    
    
    285
    
    
    
    
    
    
    
    2,964Inter-segment transactions:
    
    
    487
    
    
    
    8,950
    
    
    
    1,247
    
    
    
    (10,684
    )
    
    
    Service revenues
    
    
    487
    
    
    
    8,950
    
    
    
    966
    
    
    
    (10,403
    )
    
    
    Non-service revenues
    
    
    
    
    
    
    
    
    
    
    281
    
    
    
    (281
    )
    
    
    Total revenues
    
    
    95,852
    
    
    
    49,686
    
    
    
    10,983
    
    
    
    (10,684
    )
    
    
    145,837ResultsDepreciation and amortization (Notes 3 and 9)
    
    
    11,975
    
    
    
    11,901
    
    
    
    833
    
    
    
    
    
    
    
    24,709Asset impairment (Notes 3, 5, 9, 10, 14, 16, 17, 18 and 28)
    
    
    1,006
    
    
    
    888
    
    
    
    2,286
    
    
    
    
    
    
    
    4,180Provisions (Notes 3, 26 and 27)
    
    
    897
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    898Interest income (Note 5)
    
    
    1,197
    
    
    
    448
    
    
    
    22
    
    
    
    1
    
    
    
    1,668Equity share in net earnings (losses) of associates and
joint ventures (Note 10)
    
    
    (119
    )
    
    
    (74
    )
    
    
    17
    
    
    
    
    
    
    
    (176
    )Financing costs  net (Notes 5, 9, 20 and 28)
    
    
    2,029
    
    
    
    3,903
    
    
    
    172
    
    
    
    
    
    
    
    6,104
 203




---



##### Table of Contents



Inter-segmentWireless
    
    
    Fixed Line
    
    
    ICT
    
    
    Transactions
    
    
    Consolidated(in million pesos)Provision for (benefit from) income tax (Notes 3 and 7)
    
    
    16,124
    
    
    
    3,048
    
    
    
    (99
    )
    
    
    
    
    
    
    19,073Net income (loss) for the year / Segment profit (loss) for
the year
    
    
    29,499
    
    
    
    7,732
    
    
    
    (2,186
    )
    
    
    (69
    )
    
    
    34,976Adjusted EBITDA for the year
    
    
    60,967
    
    
    
    25,854
    
    
    
    1,056
    
    
    
    119
    
    
    
    87,996Adjusted EBITDA margin for the year
    
    
    65
    %
    
    
    52
    %
    
    
    10
    %
    
    
    
    
    
    
    62
    %Core income for the year
    
    
    30,250
    
    
    
    7,890
    
    
    
    138
    
    
    
    (64
    )
    
    
    38,214Assets and liabilitiesOperating assets
    
    
    112,162
    
    
    
    189,377
    
    
    
    15,963
    
    
    
    (75,723
    )
    
    
    241,779Investments in associates and joint ventures
(Notes 3, 5, 10 and 28)
    
    
    531
    
    
    
    
    
    
    
    643
    
    
    
    
    
    
    
    1,174Deferred income tax assets  net (Notes 3, 7 and 28)
    
    
    251
    
    
    
    9,131
    
    
    
    223
    
    
    
    
    
    
    
    9,605Total assets
    
    
    112,944
    
    
    
    198,508
    
    
    
    16,829
    
    
    
    (75,723
    )
    
    
    252,558Operating liabilities
    
    
    67,656
    
    
    
    89,636
    
    
    
    4,222
    
    
    
    (17,213
    )
    
    
    144,301Deferred income tax liabilities  net (Notes 3, 7 and 28)
    
    
    911
    
    
    
    
    
    
    
    377
    
    
    
    
    
    
    
    1,288Total liabilities
    
    
    68,567
    
    
    
    89,636
    
    
    
    4,599
    
    
    
    (17,213
    )
    
    
    145,589Other segment informationCapital expenditures (including capitalized interest)
    
    
    16,728
    
    
    
    7,651
    
    
    
    824
    
    
    
    
    
    
    
    25,203
  2010
    
    
    2009
    
    
    2008(in million pesos)Consolidated adjusted EBITDA
    
    
    83,717
    
    
    
    86,194
    
    
    
    87,996Amortization of intangible assets (Notes 3 and 14)
    
    
    (388
    )
    
    
    (368
    )
    
    
    (377
    )Depreciation and amortization (Notes 3 and 9)
    
    
    (26,277
    )
    
    
    (25,607
    )
    
    
    (24,709
    )Asset impairment:Investments in associates and joint ventures (Notes 3, 5 and 10)
    
    
    (78
    )
    
    
    
    
    
    
    (282
    )Property, plant and equipment (Notes 3, 5 and 9)
    
    
    (120
    )
    
    
    (634
    )
    
    
    (104
    )Goodwill and intangible assets (Notes 3, 5 and 14)
    
    
    (1,243
    )
    
    
    (379
    )
    
    
    (2,450
    )Prepayments and others (Notes 3, 5 and 18)
    
    
    (55
    )
    
    
    (1,324
    )
    
    
    (23
    )Consolidated operating profit for the year
    
    
    55,556
    
    
    
    57,882
    
    
    
    60,051Foreign exchange gains (losses)  net (Notes 9 and 28)
    
    
    1,807
    
    
    
    909
    
    
    
    (6,170
    )Equity share in net earnings (losses) of associates and joint ventures (Note 10)
    
    
    1,408
    
    
    
    2
    
    
    
    (176
    )Interest income (Note 5)
    
    
    1,200
    
    
    
    1,539
    
    
    
    1,668Gains (losses) on derivative financial instruments  net (Note 28)
    
    
    (1,741
    )
    
    
    (1,006
    )
    
    
    3,115Financing costs  net (Notes 5, 9, 20 and 28)
    
    
    (6,698
    )
    
    
    (6,556
    )
    
    
    (6,104
    )Other income
    
    
    2,153
    
    
    
    2,069
    
    
    
    1,665Consolidated income before income tax
    
    
    53,685
    
    
    
    54,839
    
    
    
    54,049Provision for income tax (Notes 3 and 7)
    
    
    13,426
    
    
    
    14,744
    
    
    
    19,073Consolidated net income for the year
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976
  2010
    
    
    2009
    
    
    2008(in million pesos)Consolidated core income for the year
    
    
    42,028
    
    
    
    41,138
    
    
    
    38,214Foreign exchange gains (losses)  net (Notes 9 and 28)
    
    
    1,819
    
    
    
    908
    
    
    
    (6,170
    )Core income adjustment on equity share in net earnings of associates
and joint ventures
    
    
    (699
    )
    
    
    (517
    )
    
    
    Gains (losses) on derivative financial instruments  net, excluding hedge cost
(Note 28)
    
    
    (1,307
    )
    
    
    (407
    )
    
    
    3,934Asset impairment on noncurrent assets (Notes 3, 5, 9, 10, 14 and 18)
    
    
    (1,492
    )
    
    
    (1,948
    )
    
    
    (2,486
    )Net tax effect of aforementioned adjustments
    
    
    (132
    )
    
    
    607
    
    
    
    825Net income for the year attributable to equity holders of PLDT (Notes 6 and 8)
    
    
    40,217
    
    
    
    39,781
    
    
    
    34,317Net income for the year attributable to non-controlling interests
    
    
    42
    
    
    
    314
    
    
    
    659Consolidated net income for the year
    
    
    40,259
    
    
    
    40,095
    
    
    
    34,976
 204




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008(in million pesos)Wireless servicesService revenues:Cellular
    
    
    85,555
    
    
    
    87,829
    
    
    
    87,410Broadband
    
    
    6,286
    
    
    
    5,383
    
    
    
    4,327Satellite and others
    
    
    1,145
    
    
    
    1,653
    
    
    
    1,36992,986
    
    
    
    94,865
    
    
    
    93,106Non-service revenues:Sale of cellular handsets, cellular subscriber identification module,
or SIM,-packs and broadband data modems
    
    
    1,357
    
    
    
    1,695
    
    
    
    2,259Total wireless revenues
    
    
    94,343
    
    
    
    96,560
    
    
    
    95,365Fixed line servicesServices revenues:Local exchange
    
    
    15,205
    
    
    
    15,530
    
    
    
    15,794International long distance
    
    
    5,217
    
    
    
    6,250
    
    
    
    7,044National long distance
    
    
    4,651
    
    
    
    6,239
    
    
    
    6,143Data and other network
    
    
    14,448
    
    
    
    12,585
    
    
    
    10,864Miscellaneous
    
    
    304
    
    
    
    481
    
    
    
    47139,825
    
    
    
    41,085
    
    
    
    40,316Non-service revenues:Sale of computers
    
    
    342
    
    
    
    233
    
    
    
    420Total fixed line revenues
    
    
    40,167
    
    
    
    41,318
    
    
    
    40,736ICT servicesService revenues:Knowledge processing solutions
    
    
    5,289
    
    
    
    5,215
    
    
    
    5,272Customer relationship management
    
    
    2,284
    
    
    
    2,676
    
    
    
    2,922Internet and online gaming
    
    
    1,027
    
    
    
    1,079
    
    
    
    945Data center and others
    
    
    831
    
    
    
    647
    
    
    
    3129,431
    
    
    
    9,617
    
    
    
    9,451Non-service revenues:Point-product-sales
    
    
    518
    
    
    
    498
    
    
    
    285Total ICT revenues
    
    
    9,949
    
    
    
    10,115
    
    
    
    9,736Total products and services from external customers
    
    
    144,459
    
    
    
    147,993
    
    
    
    145,837
   5. Income and Expenses
 Non-service Revenues
  2010
    
    
    2009
    
    
    2008(in million pesos)Sale of computers, cellular
handsets, cellular SIM-packs and
broadband data modems
    
    
    1,699
    
    
    
    1,928
    
    
    
    2,679Point-product-sales
    
    
    518
    
    
    
    498
    
    
    
    285(Note 4)
    
    
    2,217
    
    
    
    2,426
    
    
    
    2,964
 205




---



##### Table of Contents



Compensation and Employee Benefits
  2010
    
    
    2009
    
    
    2008(in million pesos)Salaries and other employee benefits
    
    
    20,259
    
    
    
    19,468
    
    
    
    18,286Manpower rightsizing program, or MRP
    
    
    2,183
    
    
    
    493
    
    
    
    417Incentive plans (Notes 3 and 25)
    
    
    1,392
    
    
    
    1,833
    
    
    
    1,281Pension benefit costs (Notes 3 and 25)
    
    
    236
    
    
    
    1,306
    
    
    
    72524,070
    
    
    
    23,100
    
    
    
    20,709
  Cost of Sales
  2010
    
    
    2009
    
    
    2008(in million pesos)Cost of computers, cellular handsets, cellular SIM-packs sold and
broadband data modems
    
    
    4,061
    
    
    
    4,690
    
    
    
    4,573Cost of point-product-sales
    
    
    588
    
    
    
    584
    
    
    
    511Cost of satellite air time and terminal units (Notes 24 and 26)
    
    
    122
    
    
    
    158
    
    
    
    1684,771
    
    
    
    5,432
    
    
    
    5,252
 Asset Impairment
  2010
    
    
    2009
    
    
    2008(in million pesos)Goodwill and intangible assets (Notes 3 and 14)
    
    
    1,243
    
    
    
    379
    
    
    
    2,450Trade and other receivables (Notes 3 and 16)
    
    
    834
    
    
    
    2,335
    
    
    
    1,079Property, plant and equipment (Notes 3 and 9)
    
    
    120
    
    
    
    634
    
    
    
    104Inventories and supplies (Notes 3 and 17)
    
    
    108
    
    
    
    389
    
    
    
    242Investments in associates and joint ventures (Notes 3 and 10)
    
    
    78
    
    
    
    
    
    
    
    282Prepayments and others (Notes 3 and 18)
    
    
    55
    
    
    
    1,324
    
    
    
    232,438
    
    
    
    5,061
    
    
    
    4,180
 Interest Income
  2010
    
    
    2009
    
    
    2008(in million pesos)Interest income on other loans and receivables
    
    
    1,134
    
    
    
    1,406
    
    
    
    1,545Interest income on fair value through profit or loss
    
    
    37
    
    
    
    86
    
    
    
    58Interest income on held-to-maturity investments
    
    
    29
    
    
    
    47
    
    
    
    65(Note 4)
    
    
    1,200
    
    
    
    1,539
    
    
    
    1,668
 206




---



##### Table of Contents



Financing Costs  net
  2010
    
    
    2009
    
    
    2008(in million pesos)Interest on loans and other related items (Notes 4, 20 and 28)
    
    
    6,181
    
    
    
    6,008
    
    
    
    5,861Accretion on financial liabilities  net (Notes 20, 21 and 28)
    
    
    1,177
    
    
    
    1,062
    
    
    
    956Financing charges
    
    
    50
    
    
    
    177
    
    
    
    61Capitalized interest (Notes 4 and 9)
    
    
    (710
    )
    
    
    (691
    )
    
    
    (778
    )Dividends on preferred stock subject to mandatory redemption (Note 8)
    
    
    
    
    
    
    
    
    
    
    4(Note 4)
    
    
    6,698
    
    
    
    6,556
    
    
    
    6,104
  6. Other Comprehensive Income
  Net gains
    
    
    
    
    
    
    
    
    
    Total otherForeign
    
    (losses) on
    
    
    
    
    
    Revaluation
    
    comprehensivecurrency
    
    available-for-
    
    Net transactions
    
    increment on
    
    income
    
    
    
    
    
    Total othertranslation
    
    sale financial
    
    on cash flow
    
    investment
    
    attributable to
    
    
    
    
    
    comprehensivedifferences of
    
    assets
    
    hedges
    
    properties
    
    equity holders
    
    Non-controlling
    
    income (loss)subsidiaries
    

 net of tax
    

 net of tax
    

 net of tax
    
    of PLDT
    
    interests
    

 net of tax(in million pesos)Balances as at January 1, 2008
    
    
    (1,827
    )
    
    
    33
    
    
    
    411
    
    
    
    
    
    
    
    (1,383
    )
    
    
    115
    
    
    
    (1,268
    )Other comprehensive income for
the year
    
    
    1,425
    
    
    
    (9
    )
    
    
    (411
    )
    
    
    
    
    
    
    1,005
    
    
    
    65
    
    
    
    1,070Balances as at December 31, 2008
    
    
    (402
    )
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    (378
    )
    
    
    180
    
    
    
    (198
    )Balances as at January 1, 2009
    
    
    (402
    )
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    (378
    )
    
    
    180
    
    
    
    (198
    )Other comprehensive income for the year
    
    
    (642
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    (639
    )
    
    
    (15
    )
    
    
    (654
    )Balances as at December 31, 2009
    
    
    (1,044
    )
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (1,017
    )
    
    
    165
    
    
    
    (852
    )Balances as at January 1, 2010
    
    
    (1,044
    )
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (1,017
    )
    
    
    165
    
    
    
    (852
    )Other comprehensive income for
the year
    
    
    (595
    )
    
    
    22
    
    
    
    
    
    
    
    314
    
    
    
    (259
    )
    
    
    (166
    )
    
    
    (425
    )Balances as at December 31, 2010
    
    
    (1,639
    )
    
    
    49
    
    
    
    
    
    
    
    314
    
    
    
    (1,276
    )
    
    
    (1
    )
    
    
    (1,277
    )
  7. Income Taxes
 Corporate Income Tax
  2010
    
    
    2009(in million pesos)Net deferred income tax assets (Notes 3 and 4)
    
    
    6,110
    
    
    
    7,721Net deferred income tax liabilities (Notes 3 and 4)
    
    
    (1,099
    )
    
    
    (1,321
    )
 207




---



##### Table of Contents



2010
    
    
    2009(in million pesos)Net deferred income tax assets:Unearned revenues
    
    
    2,586
    
    
    
    3,412Unamortized past service pension costs
    
    
    2,548
    
    
    
    2,974Accumulated provision for doubtful accounts
    
    
    2,488
    
    
    
    2,708Derivative financial instruments
    
    
    1,028
    
    
    
    825Unrealized foreign exchange losses
    
    
    924
    
    
    
    1,291MCIT
    
    
    446
    
    
    
    21Provision for impaired assets
    
    
    379
    
    
    
    767Accumulated write-down of inventories to net realizable values
    
    
    289
    
    
    
    293NOLCO
    
    
    119
    
    
    
    44Asset impairment
    
    
    27
    
    
    
    24Capitalized taxes and duties  net of amortization
    
    
    (186
    )
    
    
    (246
    )Capitalized foreign exchange differential  net of depreciation
    
    
    (363
    )
    
    
    (495
    )Pension and other employee benefits
    
    
    (1,361
    )
    
    
    (891
    )Undepreciated capitalized interest charges
    
    
    (2,685
    )
    
    
    (2,976
    )Others
    
    
    (129
    )
    
    
    (30
    )6,110
    
    
    
    7,721Net deferred income tax liabilities:Unearned revenues
    
    
    668
    
    
    
    1,047Pension and other employee benefits
    
    
    35
    
    
    
    100Fair value adjustment on fixed assets
    
    
    (303
    )
    
    
    (332
    )Undepreciated capitalized interest charges
    
    
    (304
    )
    
    
    (536
    )Intangible assets and fair value adjustments on assets acquired  net of amortization
    
    
    (423
    )
    
    
    (478
    )Unrealized foreign exchange gains
    
    
    (707
    )
    
    
    (879
    )Others
    
    
    (65
    )
    
    
    (243
    )(1,099
    )
    
    
    (1,321
    )
  2010
    
    
    2009(in million pesos)Net deferred income tax assets  balance at beginning of year (Notes 3, 4 and 28)
    
    
    7,721
    
    
    
    9,605Net deferred income tax liabilities  balance at beginning of year (Notes 3, 4 and 28)
    
    
    (1,321
    )
    
    
    (1,288
    )Net balance at beginning of year
    
    
    6,400
    
    
    
    8,317Provision for deferred income tax (Note 3)
    
    
    (1,198
    )
    
    
    (656
    )Movement charged directly to equity
    
    
    (139
    )
    
    
    Business combinations (Note 13)
    
    
    
    
    
    
    (349
    )Excess MCIT deducted against RCIT due
    
    
    
    
    
    
    (766
    )Others
    
    
    (52
    )
    
    
    (146
    )Net balance at end of year
    
    
    5,011
    
    
    
    6,400Net deferred income tax assets  balance at end of year (Notes 3, 4 and 28)
    
    
    6,110
    
    
    
    7,721Net deferred income tax liabilities  balance at end of year (Notes 3, 4 and 28)
    
    
    (1,099
    )
    
    
    (1,321
    )
  2010
    
    
    2009(in million pesos)Deferred income tax assets:Deferred income tax assets to be recovered after 12 months
    
    
    8,789
    
    
    
    9,565Deferred income tax assets to be recovered within 12 months
    
    
    2,222
    
    
    
    3,60511,011
    
    
    
    13,170Deferred income tax liabilities:Deferred income tax liabilities to be settled after 12 months
    
    
    (4,240
    )
    
    
    (4,793
    )Deferred income tax liabilities to be settled within 12 months
    
    
    (661
    )
    
    
    (656
    )(4,901
    )
    
    
    (5,449
    )Net deferred income tax assets (Notes 3, 4 and 28)
    
    
    6,110
    
    
    
    7,721
 208




---



##### Table of Contents



2010
    
    
    2009(in million pesos)Deferred income tax assets:Deferred income tax assets to be recovered after 12 months
    
    
    690
    
    
    
    1,161Deferred income tax assets to be recovered within 12 months
    
    
    72
    
    
    
    20762
    
    
    
    1,181Deferred income tax liabilities:Deferred income tax liabilities to be settled after 12 months
    
    
    (1,746
    )
    
    
    (2,289
    )Deferred income tax liabilities to be settled within 12 months
    
    
    (115
    )
    
    
    (213
    )(1,861
    )
    
    
    (2,502
    )Net deferred income tax liabilities (Notes 3, 4 and 28)
    
    
    (1,099
    )
    
    
    (1,321
    )
  2010
    
    
    2009
    
    
    2008(in million pesos)Current
    
    
    12,228
    
    
    
    14,088
    
    
    
    16,358Deferred (Note 3)
    
    
    1,198
    
    
    
    656
    
    
    
    2,71513,426
    
    
    
    14,744
    
    
    
    19,073
  2010
    
    
    2009
    
    
    2008(in million pesos)Provision for income tax at the applicable statutory tax rates
    
    
    16,105
    
    
    
    16,452
    
    
    
    18,917Tax effects of:Losses (income) subject to lower tax rate
    
    
    450
    
    
    
    (443
    )
    
    
    1,408Nondeductible expenses
    
    
    442
    
    
    
    201
    
    
    
    724Income not subject to income tax
    
    
    (324
    )
    
    
    (1,483
    )
    
    
    (846
    )Income subject to final tax
    
    
    (404
    )
    
    
    (502
    )
    
    
    (616
    )Equity share in net losses (earnings) of associates and joint ventures
    
    
    (423
    )
    
    
    (1
    )
    
    
    62Net movement in unrecognized deferred income tax assets and other
adjustments
    
    
    (661
    )
    
    
    3,830
    
    
    
    (576
    )Difference between OSD and itemized deductions
    
    
    (1,759
    )
    
    
    (3,310
    )
    
    
    Others
    
    
    
    
    
    
    
    
    
    
    Actual provision for corporate income tax
    
    
    13,426
    
    
    
    14,744
    
    
    
    19,073
     209




---



##### Table of Contents



Note
3  Managements Use of Judgments, Estimates and Assumptions
  2010
    
    
    2009(in million pesos)NOLCO
    
    
    2,292
    
    
    
    2,341Accumulated provision for doubtful accounts
    
    
    1,257
    
    
    
    894Unearned revenues
    
    
    712
    
    
    
    188Provisions for other assets
    
    
    170
    
    
    
    163Accumulated write-down of inventories to net realizable values
    
    
    155
    
    
    
    261Fixed asset impairment
    
    
    112
    
    
    
    111Pension and other employee benefits
    
    
    60
    
    
    
    44MCIT
    
    
    36
    
    
    
    19Unrealized foreign exchange losses
    
    
    29
    
    
    
    33Derivative financial instruments
    
    
    11
    
    
    
    19Operating lease and others
    
    
    6
    
    
    
    34,840
    
    
    
    4,076Unrecognized deferred income tax assets (Note 3)
    
    
    1,477
    
    
    
    1,236
   Date Incurred
    
    Expiry Date
    
    MCIT
    
    
    NOLCO(in million pesos)December 31, 2008
    
    December 31, 2011
    
    
    5
    
    
    
    622December 31, 2009
    
    December 31, 2012
    
    
    10
    
    
    
    970December 31, 2010
    
    December 31, 2013
    
    
    467
    
    
    
    1,096482
    
    
    
    2,688Consolidated tax benefits
    
    
    
    
    482
    
    
    
    806Consolidated unrecognized deferred income tax assets
    
    
    
    
    (36
    )
    
    
    (687
    )Consolidated recognized deferred income tax assets
    
    
    
    
    446
    
    
    
    119
    Registration with Subic Bay Freeport and Clark Special Economic Zone
  210




---



##### Table of Contents



Note 9 
Property, Plant and Equipment
 Registration with Philippine Economic Zone Authority, or PEZA
         Registration with BOI
  211




---



##### Table of Contents



8. Earnings Per Common Share
  2010
    
    
    2009
    
    
    2008Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted(in million pesos)Consolidated net income for the year attributable
to equity holders of PLDT (Note 4)
    
    
    40,217
    
    
    
    40,217
    
    
    
    39,781
    
    
    
    39,781
    
    
    
    34,317
    
    
    
    34,317Dividends on preferred shares (Note 19)
    
    
    (458
    )
    
    
    (458
    )
    
    
    (457
    )
    
    
    (457
    )
    
    
    (455
    )
    
    
    (455
    )Consolidated net income for the year attributable
to common equity holders of PLDT
    
    
    39,759
    
    
    
    39,759
    
    
    
    39,324
    
    
    
    39,324
    
    
    
    33,862
    
    
    
    33,862(in thousands, except per share amounts)Outstanding common shares at beginning of year
    
    
    186,797
    
    
    
    186,797
    
    
    
    187,484
    
    
    
    187,484
    
    
    
    188,741
    
    
    
    188,741Effect of issuance of common shares during the year
(Note 19)
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15
    
    
    
    542
    
    
    
    542Average incremental number of shares under executive
stock option plan, or ESOP, during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    13Effect of purchase of treasury stock during the year
(Note 19)
    
    
    (7
    )
    
    
    (7
    )
    
    
    (583
    )
    
    
    (583
    )
    
    
    (1,120
    )
    
    
    (1,120
    )Weighted average number of common shares for the year
    
    
    186,790
    
    
    
    186,790
    
    
    
    186,916
    
    
    
    186,937
    
    
    
    188,163
    
    
    
    188,176Earnings per share for the year attributable to
common equity holders of PLDT
    
    Php
    212.85
    
    
    Php
    212.85
    
    
    Php
    210.38
    
    
    Php
    210.36
    
    
    Php
    179.96
    
    
    Php
    179.95
  212




---



##### Table of Contents



Note 19  Equity Note 28  Financial Assets and Liabilities
 213




---



##### Table of Contents



9. Property, Plant and Equipment
  Vehicles,furniture and
    
    
    
    
    
    InformationCable and
    
    Central
    
    
    
    
    
    Buildings
    
    other
    
    
    
    
    
    origination and
    
    Land and
    
    Propertywire
    
    office
    
    Cellular
    
    and
    
    network
    
    Communications
    
    termination
    
    land
    
    underfacilities
    
    equipment
    
    facilities
    
    improvements
    
    equipment
    
    satellite
    
    equipment
    
    improvements
    
    construction
    
    Total(in million pesos)As at December 31, 2008Cost
    
    
    115,980
    
    
    
    83,562
    
    
    
    76,229
    
    
    
    21,040
    
    
    
    34,816
    
    
    
    9,581
    
    
    
    8,251
    
    
    
    2,527
    
    
    
    25,234
    
    
    
    377,220Accumulated depreciation,
impairment 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
    
    
    
    160,326Year Ended December 31, 2009Net book value at beginning of
year
    
    
    57,600
    
    
    
    20,918
    
    
    
    32,810
    
    
    
    12,867
    
    
    
    6,074
    
    
    
    906
    
    
    
    1,663
    
    
    
    2,254
    
    
    
    25,234
    
    
    
    160,326Additions
    
    
    1,834
    
    
    
    513
    
    
    
    4,040
    
    
    
    316
    
    
    
    1,970
    
    
    
    149
    
    
    
    225
    
    
    
    67
    
    
    
    19,091
    
    
    
    28,205Disposals/Retirements
    
    
    (530
    )
    
    
    (6
    )
    
    
    (843
    )
    
    
    (6
    )
    
    
    (107
    )
    
    
    (463
    )
    
    
    (3
    )
    
    
    (5
    )
    
    
    (1,228
    )
    
    
    (3,191
    )Translation differences charged
directly to cumulative
translation adjustments
    
    
    3
    
    
    
    (2
    )
    
    
    
    
    
    
    (10
    )
    
    
    (13
    )
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )Acquisition through business
combinations (Note 13)
    
    
    1,348
    
    
    
    194
    
    
    
    141
    
    
    
    186
    
    
    
    104
    
    
    
    
    
    
    
    420
    
    
    
    105
    
    
    
    (10
    )
    
    
    2,488Impairment losses recognized
during the year (Notes 3, 4 and 5)
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    (54
    )
    
    
    (17
    )
    
    
    
    
    
    
    (418
    )
    
    
    (49
    )
    
    
    
    
    
    
    (634
    )Reclassifications/Transfers (Note
12)
    
    
    6,949
    
    
    
    2,776
    
    
    
    8,404
    
    
    
    326
    
    
    
    386
    
    
    
    
    
    
    
    110
    
    
    
    (184
    )
    
    
    (19,029
    )
    
    
    (262
    )Depreciation and amortization
(Notes 3 and 4)
    
    
    (8,793
    )
    
    
    (3,381
    )
    
    
    (9,013
    )
    
    
    (1,151
    )
    
    
    (2,176
    )
    
    
    (545
    )
    
    
    (542
    )
    
    
    (6
    )
    
    
    
    
    
    
    (25,607
    )Net book value at end of year
(Note 3)
    
    
    58,411
    
    
    
    21,012
    
    
    
    35,443
    
    
    
    12,474
    
    
    
    6,221
    
    
    
    
    
    
    
    1,455
    
    
    
    2,182
    
    
    
    24,058
    
    
    
    161,256As at December 31, 2009Cost
    
    
    126,327
    
    
    
    87,517
    
    
    
    83,451
    
    
    
    21,693
    
    
    
    35,282
    
    
    
    966
    
    
    
    8,940
    
    
    
    2,458
    
    
    
    24,058
    
    
    
    390,692Accumulated depreciation,
impairment and amortization
    
    
    (67,916
    )
    
    
    (66,505
    )
    
    
    (48,008
    )
    
    
    (9,219
    )
    
    
    (29,061
    )
    
    
    (966
    )
    
    
    (7,485
    )
    
    
    (276
    )
    
    
    
    
    
    
    (229,436
    )Net book value (Note 3)
    
    
    58,411
    
    
    
    21,012
    
    
    
    35,443
    
    
    
    12,474
    
    
    
    6,221
    
    
    
    
    
    
    
    1,455
    
    
    
    2,182
    
    
    
    24,058
    
    
    
    161,256Year Ended December 31, 2010Net book value at beginning
of year (Note 3)
    
    
    58,411
    
    
    
    21,012
    
    
    
    35,443
    
    
    
    12,474
    
    
    
    6,221
    
    
    
    
    
    
    
    1,455
    
    
    
    2,182
    
    
    
    24,058
    
    
    
    161,256Additions
    
    
    1,494
    
    
    
    245
    
    
    
    2,336
    
    
    
    228
    
    
    
    2,045
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    22,284
    
    
    
    28,816Disposals/Retirements
    
    
    (10
    )
    
    
    (60
    )
    
    
    (59
    )
    
    
    (286
    )
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (484
    )Translation differences charged
directly to cumulative
translation adjustments
    
    
    23
    
    
    
    7
    
    
    
    
    
    
    
    (5
    )
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (38
    )Acquisition through business
combinations (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73Impairment losses recognized
during the year (Notes 3, 4 and 5)
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (13
    )
    
    
    (5
    )
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    (120
    )Reclassifications/Transfers
(Notes 12 and 13)
    
    
    4,578
    
    
    
    2,440
    
    
    
    5,653
    
    
    
    823
    
    
    
    1,740
    
    
    
    
    
    
    
    104
    
    
    
    (54
    )
    
    
    (15,326
    )
    
    
    (42
    )Depreciation and amortization
(Notes 3 and 4)
    
    
    (7,851
    )
    
    
    (3,705
    )
    
    
    (9,418
    )
    
    
    (2,004
    )
    
    
    (2,792
    )
    
    
    
    
    
    
    (506
    )
    
    
    (1
    )
    
    
    
    
    
    
    (26,277
    )Net book value at end of year
(Note 3)
    
    
    56,645
    
    
    
    19,928
    
    
    
    33,955
    
    
    
    11,217
    
    
    
    7,156
    
    
    
    
    
    
    
    1,146
    
    
    
    2,127
    
    
    
    31,010
    
    
    
    163,184As at December 31, 2010Cost
    
    
    132,356
    
    
    
    89,992
    
    
    
    90,574
    
    
    
    21,873
    
    
    
    38,078
    
    
    
    966
    
    
    
    9,136
    
    
    
    2,405
    
    
    
    31,010
    
    
    
    416,390Accumulated depreciation,
impairment and amortization
    
    
    (75,711
    )
    
    
    (70,064
    )
    
    
    (56,619
    )
    
    
    (10,656
    )
    
    
    (30,922
    )
    
    
    (966
    )
    
    
    (7,990
    )
    
    
    (278
    )
    
    
    
    
    
    
    (253,206
    )Net book value (Note 3)
    
    
    56,645
    
    
    
    19,928
    
    
    
    33,955
    
    
    
    11,217
    
    
    
    7,156
    
    
    
    
    
    
    
    1,146
    
    
    
    2,127
    
    
    
    31,010
    
    
    
    163,184
 Note 20  Interest-bearing Financial Liabilities
  2010
    
    
    2009
    
    
    2008(in million pesos)Interest (Note 5)
    
    
    710
    
    
    
    691
    
    
    
    778Foreign exchange losses (gains)  net
    
    
    
    
    
    
    (119
    )
    
    
    385
  214




---



##### Table of Contents



Cable and wire facilities
    
    10  15 yearsCentral office equipment
    
    10  20 yearsCellular facilities
    
    3  10 yearsBuildings
    
    25 yearsVehicles, furniture and other network equipment
    
    3  5 yearsInformation origination and termination equipment
    
    3  15 yearsLand and land improvements
    
    10 years
 Note 20  Interest-bearing
Financial Liabilities
 Satellite Wholesale Lease and Purchase Agreement, or SWLPA, and Operations Management Agreement,
or OMA, between Mabuhay Satellite and Asia Broadcast Satellite Holdings, Ltd.
      215




---



##### Table of Contents



Impairment of BOWs Property and Equipment
 Note 14  Goodwill and Intangible
Assets
 Impairment of Smarts Payphone Business
   10. Investments in Associates and Joint Ventures
  2010
    
    
    2009(in million pesos)Carrying Value of Investments in Associates:Meralco
    
    
    6,733
    
    
    
    21,420Philweb Corporation, or Philweb
    
    
    878
    
    
    
    750ACeS International Limited, or AIL
    
    
    
    
    
    
    7,611
    
    
    
    22,170Carrying Value of Investments in Joint Ventures:Beacon
    
    
    15,438
    
    
    
    Mobile Payment Solutions Pte. Ltd., or MPSPL
    
    
    104
    
    
    
    ePDS, Inc., or ePDS
    
    
    50
    
    
    
    43PLDT Italy S.r.l., or PLDT Italy
    
    
    
    
    
    
    2015,592
    
    
    
    63Total carrying value of investments in associates and joint ventures (Note 28)
    
    
    23,203
    
    
    
    22,233
  2010
    
    
    2009(in million pesos)Balance at beginning of year
    
    
    24,170
    
    
    
    4,346Additions during the year (including transfer of interests in Meralco to Beacon)
    
    
    15,245
    
    
    
    21,555Disposal during the year (including transfer of interests in Meralco to Beacon)
    
    
    (14,767
    )
    
    
    Business combinations (Note 13)
    
    
    
    
    
    
    (821
    )Dissolution of Mabuhay Space Holdings Limited, or MSHL
    
    
    
    
    
    
    (887
    )Translation and other adjustments
    
    
    (12
    )
    
    
    (23
    )Balance at end of year
    
    
    24,636
    
    
    
    24,170
 216




---



##### Table of Contents



2010
    
    
    2009(in million pesos)Balance at beginning of year
    
    
    1,906
    
    
    
    2,903Impairment for the year (Notes 3, 4 and 5)
    
    
    78
    
    
    
    Dissolution of MSHL
    
    
    
    
    
    
    (887
    )Translation and other adjustments
    
    
    (10
    )
    
    
    (110
    )Balance at end of year
    
    
    1,974
    
    
    
    1,906
  2010
    
    
    2009(in million pesos)Balance at beginning of year
    
    
    (31
    )
    
    
    (269
    )Equity share in net earnings (losses) of associates and joint ventures for the year (Note 4):
    
    
    1,408
    
    
    
    2Meralco
    
    
    874
    
    
    
    398Beacon
    
    
    354
    
    
    
    Philweb
    
    
    161
    
    
    
    152ePDS
    
    
    26
    
    
    
    21SHI
    
    
    (7
    )
    
    
    BayanTrade
    
    
    
    
    
    
    (5
    )PLDT Italy
    
    
    
    
    
    
    (98
    )BOW
    
    
    
    
    
    
    (466
    )Disposals
    
    
    (316
    )
    
    
    Dividends
    
    
    (530
    )
    
    
    (357
    )Translation and other adjustments
    
    
    10
    
    
    
    593Balance at end of year
    
    
    541
    
    
    
    (31
    )
 Investments in Associates
 PCEVs Acquisition of Shares in Meralco
    217




---



##### Table of Contents



Note 3  Managements Use
of Judgments, Estimates and Assumptions
  Investment of ePLDT in Philweb
      Investment of ACeS Philippines in AIL
      218




---



##### Table of Contents



Note 24  Related Party Transactions Note 26  Contractual Obligations and Commercial
Commitments
 Summarized Financial Information of Associates
  2010
    
    
    2009(in million pesos)Statements of Financial Position:Noncurrent assets
    
    
    131,812
    
    
    
    128,954Current assets
    
    
    57,058
    
    
    
    46,098Equity
    
    
    60,983
    
    
    
    52,411Noncurrent liabilities
    
    
    79,501
    
    
    
    78,949Current liabilities
    
    
    48,386
    
    
    
    43,692
 2010
    
    
    2009
    
    
    2008(in million pesos)Income Statements:Revenues
    
    
    246,807
    
    
    
    186,227
    
    
    
    572Expenses
    
    
    229,145
    
    
    
    178,018
    
    
    
    359Other expenses
    
    
    1,242
    
    
    
    1,966
    
    
    
    76Net income
    
    
    10,834
    
    
    
    6,634
    
    
    
    290
  2010
    
    
    2009(in million pesos)Statements of Financial Position:Noncurrent assets
    
    
    130,423
    
    
    
    127,444Current assets
    
    
    54,831
    
    
    
    44,685Equity
    
    
    68,339
    
    
    
    61,146Noncurrent liabilities
    
    
    72,552
    
    
    
    68,860Current liabilities
    
    
    44,363
    
    
    
    42,123Income Statements:Revenues
    
    
    245,461
    
    
    
    184,872Expenses
    
    
    228,288
    
    
    
    173,927Other expenses
    
    
    1,281
    
    
    
    1,966Net income
    
    
    10,117
    
    
    
    6,005
 Investments in Joint Ventures
 Transfer of PCEVs Equity Interest in Meralco
  219




---



##### Table of Contents



Investment in Beacon
         220




---



##### Table of Contents



Transfer of Meralco Shares to Beacon
        Call Option
  221




---



##### Table of Contents



Property Dividends
  Governance Arrangements
      222




---



##### Table of Contents



Investment of SHI in MPSPL
  Investment of ePLDT in ePDS
  Investment of PLDT Global in PLDT Italy
    Summarized Financial Information of Joint Ventures
  2010
    
    
    2009(in million pesos)Statements of Financial Position:Noncurrent assets
    
    
    73,366
    
    
    
    103Current assets
    
    
    1,807
    
    
    
    244Equity
    
    
    55,047
    
    
    
    57Noncurrent liabilities
    
    
    16,037
    
    
    
    88Current liabilities
    
    
    4,089
    
    
    
    202
 2010
    
    
    2009
    
    
    2008(in million pesos)Income Statements:Revenues
    
    
    2,884
    
    
    
    387
    
    
    
    175Expenses
    
    
    297
    
    
    
    527
    
    
    
    387Other expenses
    
    
    1,503
    
    
    
    3
    
    
    
    2Net income
    
    
    1,065
    
    
    
    154
    
    
    
    223
 223




---



##### Table of Contents



(in million pesos)Statement of Financial Position:Noncurrent assets
    
    
    73,322Current assets
    
    
    1,658Equity
    
    
    54,956Noncurrent liabilities
    
    
    16,027Current liabilities
    
    
    3,997Income Statements:Equity share in net income of Meralco
    
    
    2,655Expenses
    
    
    78Other expenses
    
    
    1,501Net income
    
    
    1,077
  11. Investment in Debt Securities
  2010
    
    
    2009(in million pesos)National Power Corporation, or NAPOCOR, Zero Coupon Bond
    
    
    334
    
    
    
    312Rizal Commercial Banking Corporation, or RCBC, Note
    
    
    150
    
    
    
    150Noncurrent portion of investment in debt securities (Note 28)
    
    
    484
    
    
    
    462
 NAPOCOR Zero Coupon Bonds
  RCBC Note
  12. Investment Properties
  2010
    
    
    2009(in million pesos)Balance at beginning of year
    
    
    1,210
    
    
    
    617Transfers from property, plant and equipment (Note 9)
    
    
    491
    
    
    
    262Net gains from fair value adjustments charged to profit or loss(1) (Note 3)
    
    
    6
    
    
    
    352Disposals
    
    
    (147
    )
    
    
    (21
    )Balance at end of year (Notes 3 and 28)
    
    
    1,560
    
    
    
    1,210
 (1)Presented as part of Other income in our consolidated income statement.
 224




---



##### Table of Contents



13. Business Combinations and Acquisition of Non-Controlling Interests
 2009 Acquisitions
 PLDTs Acquisition of Philcom
   (in million pesos)Assets:Property, plant and equipment
    
    
    1,851Available-for-sale financial assets
    
    
    5Deferred income tax assets  net
    
    
    3Cash and cash equivalents
    
    
    51Trade and other receivables
    
    
    204Inventories and supplies  net
    
    
    15Prepayments
    
    
    82,137Liabilities:Long-term debt
    
    
    340Deferred income tax liabilities  net
    
    
    381Pension and other employee benefits
    
    
    13Accounts payable
    
    
    1,206Accrued expenses and other current liabilities
    
    
    77Dividends payable
    
    
    2Income tax payable
    
    
    32,022115Non-controlling interests
    
    
    40Net assets acquired
    
    
    75
    ePLDTs Acquisition of BayanTrade
  225




---



##### Table of Contents



Fair ValuePrevious Carrying
    
    Recognized onValue
    
    Acquisition(in million pesos)Assets:Property, plant and equipment
    
    
    21
    
    
    
    21Goodwill (Note 14)
    
    
    184
    
    
    
    216Deferred income tax assets  net
    
    
    19
    
    
    
    19Advances and refundable deposits
    
    
    11
    
    
    
    7Cash and cash equivalents
    
    
    6
    
    
    
    6Trade and other receivables
    
    
    179
    
    
    
    156Prepayments and other current assets
    
    
    6
    
    
    
    426
    
    
    
    425Liabilities:Long-term debt
    
    
    150
    
    
    
    150Pension and other employee benefits
    
    
    5
    
    
    
    5Other noncurrent liabilities
    
    
    59
    
    
    
    16Accounts payable
    
    
    85
    
    
    
    121Accrued expenses and other current liabilities
    
    
    75
    
    
    
    82374
    
    
    
    37452
    
    
    
    51Non-controlling interests
    
    
    (9
    )
    
    
    (10
    )Net assets acquired
    
    
    61
    
    
    
    61
      Smarts Acquisition of Non-Controlling Interests in PCEV
  226




---



##### Table of Contents



Smarts Acquisition of Shares in BOW
   In U.S. Dollar
    
    In Php(1)(in millions)Assets:Property, plant and equipment
    
    
    12
    
    
    
    558Goodwill (Note 14)
    
    
    1
    
    
    
    45Intangible assets (Note 14)
    
    
    5
    
    
    
    221Advances and refundable deposits
    
    
    
    
    
    
    7Cash and cash equivalents
    
    
    5
    
    
    
    231Trade and other receivables
    
    
    
    
    
    
    33Prepayments
    
    
    
    
    
    
    3123
    
    
    
    1,126Liabilities:Long-term debt
    
    
    4
    
    
    
    203Accrued expenses and other current liabilities
    
    
    2
    
    
    
    1066
    
    
    
    30917
    
    
    
    817Non-controlling interests
    
    
    8
    
    
    
    378Net assets acquired
    
    
    9
    
    
    
    439
 (1)Converted to Philippine Peso using the exchange rate at the time of purchase of
Php48.07 to US$1.00.
    Smart Link
  227




---



##### Table of Contents



SPis Acquisition of Laguna Medical Systems, Inc., or Laguna Medical
 Note 21  Deferred Credits and Other Noncurrent Liabilities Note 23 
Accrued Expenses and Other Current Liabilities
  Fair Value Recognized onPrevious Carrying Value
    
    AcquisitionIn U.S. Dollar
    
    In Php(1)
    
    In U.S. Dollar
    
    In Php(1)(in millions)Assets:Property, plant and equipment
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Goodwill (Note 14)
    
    
    10
    
    
    
    494
    
    
    
    10
    
    
    
    463Intangible assets (Note 14)
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    73Deferred income tax assets  net
    
    
    1
    
    
    
    10
    
    
    
    
    
    
    
    3Cash and cash equivalents
    
    
    1
    
    
    
    26
    
    
    
    1
    
    
    
    26Trade and other receivables
    
    
    1
    
    
    
    59
    
    
    
    1
    
    
    
    53Other current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1513
    
    
    
    597
    
    
    
    14
    
    
    
    641Liabilities:Accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Accrued expenses and other current liabilities
    
    
    1
    
    
    
    27
    
    
    
    1
    
    
    
    24Deferred income tax liabilities  net
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    26Other current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    27
    
    
    
    2
    
    
    
    62Net assets acquired
    
    
    12
    
    
    
    570
    
    
    
    12
    
    
    
    579
 (1)Converted to Philippine Peso using the exchange rate at the time of purchase of Php47.42 to US$1.00.
   IAS 38
    228




---



##### Table of Contents



Smarts Acquisition of PDSI
   Fair ValuePrevious Carrying
    
    Recognized onValue
    
    Acquisition(in million pesos)Assets:Property, plant and equipment
    
    
    42
    
    
    
    115Goodwill (Note 14)
    
    
    1,597
    
    
    
    1,530Intangible assets (Note 14)
    
    
    
    
    
    
    23Prepayments
    
    
    10
    
    
    
    10Advances and refundable deposits  net of current portion
    
    
    8
    
    
    
    8Cash and cash equivalents
    
    
    12
    
    
    
    12Trade and other receivables
    
    
    42
    
    
    
    42Current portion of advances and refundable deposits
    
    
    6
    
    
    
    61,717
    
    
    
    1,746Liabilities:Deferred income tax liabilities  net
    
    
    
    
    
    
    29Accounts payable
    
    
    30
    
    
    
    30Accrued expenses and other current liabilities
    
    
    116
    
    
    
    116Income tax payable
    
    
    2
    
    
    
    2148
    
    
    
    177Net assets acquired
    
    
    1,569
    
    
    
    1,569
     Smarts Acquisition of Chikka
  229




---



##### Table of Contents



Note 23  Accrued Expenses and Other Current Liabilities
  Fair ValuePrevious Carrying
    
    Recognized onValue
    
    Acquisition(in million pesos)Assets:Property, plant and equipment
    
    
    8
    
    
    
    8Goodwill (Note 14)
    
    
    561
    
    
    
    469Intangible assets (Note 14)
    
    
    27
    
    
    
    159Advances and refundable deposits  net of current portion
    
    
    1
    
    
    
    1Cash and cash equivalents
    
    
    89
    
    
    
    89Trade and other receivables
    
    
    51
    
    
    
    51Current portion of advances and refundable deposits
    
    
    19
    
    
    
    19756
    
    
    
    796Liabilities:Deferred income tax liabilities  net
    
    
    
    
    
    
    40Accounts payable
    
    
    8
    
    
    
    8Accrued expenses and other current liabilities
    
    
    105
    
    
    
    105Accrued retirement benefits
    
    
    12
    
    
    
    12Income tax payable
    
    
    2
    
    
    
    2127
    
    
    
    167Net assets acquired
    
    
    629
    
    
    
    629
      230




---



##### Table of Contents



14. Goodwill and Intangible Assets
  TotalIntangible Assets
    
    
    
    
    
    
    
    
    
    GoodwillTotal
    
    
    
    
    
    andCustomer
    
    
    
    
    
    
    
    
    
    Technology
    
    
    
    
    
    Intangible
    
    
    
    
    
    IntangibleList
    
    Spectrum
    
    Licenses
    
    Application
    
    Trademark
    
    Assets
    
    Goodwill
    
    Assets(in million pesos)December 31, 2010Costs:Balance at beginning of year
    
    
    1,655
    
    
    
    1,205
    
    
    
    613
    
    
    
    967
    
    
    
    27
    
    
    
    4,467
    
    
    
    15,201
    
    
    
    19,668Additions
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    4
    
    
    
    1
    
    
    
    43
    
    
    
    
    
    
    
    43Translation and other adjustments (Note
13)
    
    
    (42
    )
    
    
    
    
    
    
    (78
    )
    
    
    22
    
    
    
    131
    
    
    
    33
    
    
    
    (468
    )
    
    
    (435
    )Balance at end of year
    
    
    1,632
    
    
    
    1,205
    
    
    
    554
    
    
    
    993
    
    
    
    159
    
    
    
    4,543
    
    
    
    14,733
    
    
    
    19,276Accumulated amortization and impairment:Balance at beginning of year
    
    
    995
    
    
    
    428
    
    
    
    448
    
    
    
    964
    
    
    
    
    
    
    
    2,835
    
    
    
    3,809
    
    
    
    6,644Impairment during the year (Notes 4 and
5)
    
    
    56
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    1,169
    
    
    
    1,243Amortization during the year (Note 3)
    
    
    219
    
    
    
    81
    
    
    
    36
    
    
    
    11
    
    
    
    41
    
    
    
    388
    
    
    
    
    
    
    
    388Translation and other adjustments (Note
13)
    
    
    (58
    )
    
    
    
    
    
    
    (76
    )
    
    
    2
    
    
    
    
    
    
    
    (132
    )
    
    
    (352
    )
    
    
    (484
    )Balance at end of year
    
    
    1,212
    
    
    
    509
    
    
    
    426
    
    
    
    977
    
    
    
    41
    
    
    
    3,165
    
    
    
    4,626
    
    
    
    7,791Net balance at end of year(Notes 3 and 28)
    
    
    420
    
    
    
    696
    
    
    
    128
    
    
    
    16
    
    
    
    118
    
    
    
    1,378
    
    
    
    10,107
    
    
    
    11,485Estimated useful lives (in years)
    
    
    1  8
    
    
    
    15
    
    
    
    2  18
    
    
    
    3  5
    
    
    
    1  10
    
    
    
    
    
    
    
    
    
    
    
    Remaining useful lives (in years)
    
    
    1  7
    
    
    
    9
    
    
    
    1  12
    
    
    
    2  4
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2009Costs:Balance at beginning of year
    
    
    1,696
    
    
    
    1,205
    
    
    
    370
    
    
    
    894
    
    
    
    
    
    
    
    4,165
    
    
    
    12,289
    
    
    
    16,454Business combinations (Notes 3, 13 and 21)
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    27
    
    
    
    248
    
    
    
    3,013
    
    
    
    3,261Translation and other adjustments (Note 13)
    
    
    (41
    )
    
    
    
    
    
    
    22
    
    
    
    73
    
    
    
    
    
    
    
    54
    
    
    
    (101
    )
    
    
    (47
    )Balance at end of year
    
    
    1,655
    
    
    
    1,205
    
    
    
    613
    
    
    
    967
    
    
    
    27
    
    
    
    4,467
    
    
    
    15,201
    
    
    
    19,668Accumulated amortization and impairment:Balance at beginning of year
    
    
    794
    
    
    
    348
    
    
    
    203
    
    
    
    860
    
    
    
    
    
    
    
    2,205
    
    
    
    3,799
    
    
    
    6,004Impairment during the year
    
    
    
    
    
    
    
    
    
    
    213
    
    
    
    73
    
    
    
    
    
    
    
    286
    
    
    
    93
    
    
    
    379Amortization during the year (Note 3)
    
    
    220
    
    
    
    80
    
    
    
    37
    
    
    
    31
    
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    368Translation and other adjustments
    
    
    (19
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    (83
    )
    
    
    (107
    )Balance at end of year
    
    
    995
    
    
    
    428
    
    
    
    448
    
    
    
    964
    
    
    
    
    
    
    
    2,835
    
    
    
    3,809
    
    
    
    6,644Net balance at end of year(Notes 3 and 28)
    
    
    660
    
    
    
    777
    
    
    
    165
    
    
    
    3
    
    
    
    27
    
    
    
    1,632
    
    
    
    11,392
    
    
    
    13,024Estimated useful lives (in years)
    
    
    1  7
    
    
    
    15
    
    
    
    3  18
    
    
    
    4  5
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Remaining useful lives (in years)
    
    
    1  4
    
    
    
    10
    
    
    
    2  13
    
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
 Intangible Assets
 Intangible Assets from Acquisition of SPi, Level Up! and CyMed, Inc., or CyMed
   231




---



##### Table of Contents



Intangible Assets from Acquisition of BOW
 Note 9  Property, Plant and Equipment
 Intangible Assets from Acquisition of Chikka and PDSI
  Note 13  Business Combinations and Acquisition of Non-Controlling Interests
  Year
    
    (in million pesos)2011
    
    
    2742012
    
    
    2602013
    
    
    2082014
    
    
    1232015 and onwards
    
    
    513Balance at end of year
    
    
    1,378
 Impairment Testing of Goodwill
 Goodwill from Acquisition of SBI, CURE, Airborne Access, PDSI and Chikka
    232




---



##### Table of Contents



Goodwill from Acquisition of BOW
 Note 9  Property, Plant and Equipment
 Goodwill from Acquisition of SPi and its Subsidiaries, CyMed, Springfield Service
Corporation, or Springfield, and Laguna Medical
   Goodwill from Acquisition of Level Up!
  Goodwill from Acquisition of Digital Paradise
  Goodwill from Acquisition of BayanTrade
  233




---



##### Table of Contents



15. Cash and Cash Equivalents
  2010
    
    
    2009(in million pesos)Cash on hand and in banks (Note 28)
    
    
    2,906
    
    
    
    3,300Temporary cash investments (Note 28)
    
    
    33,772
    
    
    
    35,01936,678
    
    
    
    38,319
 Note 28  Financial Assets and Liabilities
  16. Trade and Other Receivables
  2010
    
    
    2009(in million pesos)Retail subscribers (Note 28)
    
    
    8,917
    
    
    
    8,026Corporate subscribers (Notes 24 and 28)
    
    
    7,998
    
    
    
    9,106Foreign administrations (Note 28)
    
    
    4,479
    
    
    
    4,353Domestic carriers (Notes 24 and 28)
    
    
    1,591
    
    
    
    1,267Dealers, agents and others (Notes 18, 24 and 28)
    
    
    5,273
    
    
    
    3,92728,258
    
    
    
    26,679Less allowance for doubtful accounts (Notes 3, 5 and 28)
    
    
    11,830
    
    
    
    11,950(Notes 3, 5 and 28)
    
    
    16,428
    
    
    
    14,729
  Dealers,Corporate
    
    
    
    
    
    
    
    Domestic
    
    Agents andTotal
    
    Subscribers
    
    Retail Subscribers
    
    Foreign Administrations
    
    Carriers
    
    Others(in million pesos)December 31, 2010Balance at beginning of year
    
    
    11,950
    
    
    
    6,677
    
    
    
    4,480
    
    
    
    289
    
    
    
    83
    
    
    
    421Provisions for the year (Notes 3, 4 and 5)
    
    
    834
    
    
    
    152
    
    
    
    493
    
    
    
    
    
    
    
    64
    
    
    
    125Write-offs
    
    
    (932
    )
    
    
    (562
    )
    
    
    (284
    )
    
    
    (5
    )
    
    
    
    
    
    
    (81
    )Translation and other adjustments
    
    
    (22
    )
    
    
    (311
    )
    
    
    356
    
    
    
    (126
    )
    
    
    (9
    )
    
    
    68Balance at end of year
    
    
    11,830
    
    
    
    5,956
    
    
    
    5,045
    
    
    
    158
    
    
    
    138
    
    
    
    533Individual impairment
    
    
    8,861
    
    
    
    5,413
    
    
    
    2,745
    
    
    
    158
    
    
    
    138
    
    
    
    407Collective impairment
    
    
    2,969
    
    
    
    543
    
    
    
    2,300
    
    
    
    
    
    
    
    
    
    
    
    12611,830
    
    
    
    5,956
    
    
    
    5,045
    
    
    
    158
    
    
    
    138
    
    
    
    533Gross amount of receivables individually
impaired, before deducting any impairment
allowance
    
    
    8,861
    
    
    
    5,413
    
    
    
    2,745
    
    
    
    158
    
    
    
    138
    
    
    
    407December 31, 2009Balance at beginning of year
    
    
    12,336
    
    
    
    6,323
    
    
    
    5,089
    
    
    
    439
    
    
    
    174
    
    
    
    311Provisions for the year (Notes 3, 4 and 5)
    
    
    2,335
    
    
    
    670
    
    
    
    1,512
    
    
    
    18
    
    
    
    35
    
    
    
    100Business combinations (Note 13)
    
    
    513
    
    
    
    36
    
    
    
    454
    
    
    
    
    
    
    
    
    
    
    
    23Write-offs
    
    
    (22
    )
    
    
    (1,178
    )
    
    
    (1,657
    )
    
    
    (216
    )
    
    
    (157
    )
    
    
    (4
    )Translation and other adjustments
    
    
    (3,212
    )
    
    
    826
    
    
    
    (918
    )
    
    
    48
    
    
    
    31
    
    
    
    (9
    )Balance at end of year
    
    
    11,950
    
    
    
    6,677
    
    
    
    4,480
    
    
    
    289
    
    
    
    83
    
    
    
    421Individual impairment
    
    
    9,624
    
    
    
    6,256
    
    
    
    2,595
    
    
    
    289
    
    
    
    83
    
    
    
    401Collective impairment
    
    
    2,326
    
    
    
    421
    
    
    
    1,885
    
    
    
    
    
    
    
    
    
    
    
    2011,950
    
    
    
    6,677
    
    
    
    4,480
    
    
    
    289
    
    
    
    83
    
    
    
    421Gross amount of receivables individually
impaired, before deducting any impairment
allowance
    
    
    9,624
    
    
    
    6,256
    
    
    
    2,595
    
    
    
    289
    
    
    
    83
    
    
    
    401
 234




---



##### Table of Contents



17. Inventories and Supplies
  2010
    
    
    2009(in million pesos)Spare parts and supplies:At net realizable value
    
    
    1,152
    
    
    
    982At cost
    
    
    2,163
    
    
    
    1,998Terminal and cellular phone units:At net realizable value
    
    
    737
    
    
    
    652At cost
    
    
    918
    
    
    
    981Others:At net realizable value
    
    
    330
    
    
    
    531At cost
    
    
    333
    
    
    
    534Total inventories and supplies at the lower of cost or net realizable value (Notes 3, 4, 5 and 28)
    
    
    2,219
    
    
    
    2,165
  2010
    
    
    2009
    
    
    2008(in million pesos)Cost of sales
    
    
    3,517
    
    
    
    4,714
    
    
    
    4,380Repairs and maintenance
    
    
    357
    
    
    
    429
    
    
    
    549Write-down of inventories and supplies (Notes 3, 4 and 5)
    
    
    108
    
    
    
    389
    
    
    
    2423,982
    
    
    
    5,532
    
    
    
    5,171
 18. Prepayments
  2010
    
    
    2009(in million pesos)Prepaid taxes
    
    
    7,476
    
    
    
    7,768Prepaid benefit costs (Notes 3 and 25)
    
    
    5,333
    
    
    
    5,414Prepaid selling and promotions
    
    
    1,011
    
    
    
    102Prepaid insurance (Note 24)
    
    
    122
    
    
    
    109Prepaid rent  net (Notes 3 and 5)
    
    
    53
    
    
    
    208Prepaid fees and licenses
    
    
    40
    
    
    
    44Other prepayments
    
    
    62
    
    
    
    11614,097
    
    
    
    13,761Less current portion of prepayments (Note 28)
    
    
    5,418
    
    
    
    5,098Noncurrent portion of prepayments (Note 28)
    
    
    8,679
    
    
    
    8,663
  Note 25  Share-based Payments and Employee
Benefits
 Agreement between PLDT and Smart with ABC Development Corporation (TV5)
  235




---



##### Table of Contents



Option to Purchase Series C Preferred Shares of ProtoStar
   19. Equity
  Preferred Stock Php10 par value per shareTotalSeries
    
    
    
    
    
    Preferred
    
    
    
    
    
    Common Stock A to HH
    
    IV
    
    Stock
    
    
    
    
    
    Php5 par value per shareNumber of Shares
    
    
    
    
    
    Amount
    
    Number of Shares
    
    Amount(in millions)Authorized
    
    
    
    
    
    
    
    
    
    
    823
    
    
    Php
    8,230
    
    
    
    234
    
    
Php
    1,170IssuedBalances as at January 1, 2008
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,417
    
    
    
    188
    
    
    Php
    943Issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    1
    
    
    
    3Balances as at December 31, 2008
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,415
    
    
    
    189
    
    
    Php
    947Balances as at January 1, 2009
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,415
    
    
    
    189
    
    
    Php
    947Issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    Balances as at December 31, 2009
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,416
    
    
    
    189
    
    
    Php
    947Balances as at January 1, 2010
    
    
    405
    
    
    
    36
    
    
    
    441
    
    
    Php
    4,416
    
    
    
    189
    
    
    Php
    947Issuance
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    Balances as at December 31, 2010
    
    
    406
    
    
    
    36
    
    
    
    442
    
    
    Php
    4,419
    
    
    
    189
    
    
    Php
    947
 236




---



##### Table of Contents



Preferred Stock
         Common Stock
   237




---



##### Table of Contents



common stock at a weighted average price of Php2,387 per share for a total consideration of
Php6,405 million as at December 31, 2009. See Note 8  Earnings Per Common Shareand Note 28
 Financial Assets and Liabilities.Dividends Declared For The Year Ended December 31, 2010
 Date
    
    
    AmountClass
    
    Approved
    
    
    Record
    
    
    Payable
    
    
    Per Share
    
    
    Total(in million pesos)10% Cumulative Convertible
Preferred StockSeries CC
    
    January 26, 2010
    
    February 25, 2010
    
    March 31, 2010
    
    Php1.00
    
    
    
    17Series DD
    
    January 26, 2010
    
    February 11, 2010
    
    February 26, 2010
    
    
    1.00
    
    
    
    3Series EE
    
    March 26, 2010
    
    April 23, 2010
    
    May 31, 2010
    
    
    1.00
    
    
    
    Series A, I, R, W, AA and BB
    
    July 7, 2010
    
    August 5, 2010
    
    August 31, 2010
    
    
    1.00
    
    
    
    128Series B, F, Q, V and Z
    
    August 3, 2010
    
    September 2, 2010
    
    September 30, 2010
    
    
    1.00
    
    
    
    92Series E, K, O and U
    
    August 31, 2010
    
    September 30, 2010
    
    October 29, 2010
    
    
    1.00
    
    
    
    44Series C, D, J, T and X
    
    September 28, 2010
    
    October 28, 2010
    
    November 30, 2010
    
    
    1.00
    
    
    
    57Series G, N, P and S
    
    November 4, 2010
    
    December 2, 2010
    
    December 29, 2010
    
    
    1.00
    
    
    
    26Series H, L, M and Y
    
    December 7, 2010
    
    January 4, 2011
    
    January 31, 2011
    
    
    1.00
    
    
    
    42409Cumulative Non-convertible
Redeemable Preferred StockSeries IV*
    
    January 26, 2010
    
    February 19, 2010
    
    March 15, 2010
    
    Php
    
    
    
    12May 13, 2010
    
    May 27, 2010
    
    June 15, 2010
    
    
    
    
    
    
    13August 3, 2010
    
    August 18, 2010
    
    September 15, 2010
    
    
    
    
    
    
    12November 4, 2010
    
    November 19, 2010
    
    December 15, 2010
    
    
    
    
    
    
    1249Common StockRegular Dividend
    
    March 2, 2010
    
    March 17, 2010
    
    April 20, 2010
    
    Php76.00
    
    
    
    14,197August 3, 2010
    
    August 19, 2010
    
    September 21, 2010
    
    
    78.00
    
    
    
    14,570Special Dividend
    
    March 2, 2010
    
    March 17, 2010
    
    April 20, 2010
    
    
    65.00
    
    
    
    12,14240,909Charged to retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,367
 *
    
    Dividends were declared based on total amount paid up.
 Dividends Declared For The Year Ended December 31, 2009
 Date
    
    
    AmountClass
    
    Approved
    
    
    Record
    
    
    Payable
    
    
    Per Share
    
    
    Total(in million pesos)Preferred Stock Subject to Mandatory RedemptionSeries V
    
    March 3, 2009
    
    March 19, 2009
    
    April 15, 2009
    
    Php4.675
    
    
    
    June 9, 2009
    
    June 25, 2009
    
    July 15, 2009
    
    
    4.675
    
    
    
    *August 4, 2009
    
    August 22, 2009
    
    September 10, 2009
    
    0.051944 per day
    
    
    
    Series VI
    
    March 3, 2009
    
    March 19, 2009
    
    April 15, 2009
    
    
    US$0.09925
    
    
    
    June 9, 2009
    
    June 25, 2009
    
    July 15, 2009
    
    
    0.09925
    
    
    
    August 25, 2009
    
    September 24, 2009
    
    October 15, 2009
    
    
    0.09925
    
    
    
    **November 3, 2009
    
    November 8, 2009
    
    December 8, 2009
    
    Php0.001103 per day
    
    
    
    Charged to income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10%
Cumulative Convertible Preferred StockSeries CC
    
    January 27, 2009
    
    February 26, 2009
    
    March 31, 2009
    
    Php1.00
    
    
    
    17Series DD
    
    January 27, 2009
    
    February 13, 2009
    
    February 27, 2009
    
    
    1.00
    
    
    
    3Series EE
    
    March 31, 2009
    
    April 30, 3009
    
    May 29, 2009
    
    
    1.00
    
    
    
    Series A, I, R, W, AA and BB
    
    July 7, 2009
    
    August 6, 2009
    
    August 28, 2009
    
    
    1.00
    
    
    
    128Series B, F, Q, V and Z
    
    August 4, 2009
    
    September 1, 2009
    
    September 30, 2009
    
    
    1.00
    
    
    
    91Series E, K, O and U
    
    August 25, 2009
    
    September 24, 2009
    
    October 30, 2009
    
    
    1.00
    
    
    
    44Series C, D, J, T and X
    
    September 29, 2009
    
    October 29, 2009
    
    November 26, 2009
    
    
    1.00
    
    
    
    57Series G, N, P, and S
    
    November 3, 2009
    
    December 3, 2009
    
    December 29, 2009
    
    
    1.00
    
    
    
    26Series H, L, M and Y
    
    December 8, 2009
    
    January 4, 2010
    
    January 29, 2010
    
    
    1.00
    
    
    
    40406Cumulative Non-convertible
Redeemable Preferred StockSeries IV***
    
    January 27, 2009
    
    February 20, 2009
    
    March 15, 2009
    
    Php
    
    
    
    12May 5, 2009
    
    May 22, 2009
    
    June 15, 2009
    
    
    
    
    
    
    13August 4, 2009
    
    August 19, 2009
    
    September 15, 2009
    
    
    
    
    
    
    13November 3, 2009
    
    November 20, 2009
    
    December 15, 2009
    
    
    
    
    
    
    1250Common StockRegular Dividend
    
    March 3, 2009
    
    March 18, 2009
    
    April 21, 2009
    
    Php70.00
    
    
    
    13,124August 4, 2009
    
    August 20, 2009
    
    September 22, 2009
    
    
    77.00
    
    
    
    14,384Special Dividend
    
    March 3, 2009
    
    March 18, 2009
    
    April 21, 2009
    
    
    60.00
    
    
    
    11,25038,758Charged to retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,214
 *
    
    Only the holders of Series V Convertible Preferred Stock whose shares were originally
issued on August 22, 2002 and mandatorily converted on August 23, 2009 are entitled to this
final dividend.**
    
    Only the holders of Series VI Convertible Preferred Stock whose shares were originally
issued on November 8, 2002 and mandatorily converted on November 9, 2009 are entitled to
this final dividend.***
    
    Dividends are declared based on total amount paid up.
 238




---



##### 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
    
    Php4.675
    
    
    
    *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
    
    Php1.00
    
    
    
    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
    
    Php68.00
    
    
    
    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
 *
    
    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 are entitled to
these final dividends.**
    
    Dividends are declared based on total amount paid up.
 Dividends Declared After December 31, 2010
 Date
    
    
    AmountClass
    
    Approved
    
    
    Record
    
    
    Payable
    
    
    Per Share
    
    
    Total(in million pesos)Cumulative
Non-convertible
Redeemable Preferred
StockSeries IV*
    
    January 25, 2011
    
    February 18, 2011
    
    March 15, 2011
    
    Php
    
    
    
    1210% Cumulative Convertible
Preferred StockSeries CC
    
    January 25, 2011
    
    February 24, 2011
    
    March 31, 2011
    
    Php1.00
    
    
    
    17Series DD
    
    January 25, 2011
    
    February 10, 2011
    
    February 28, 2011
    
    
    1.00
    
    
    
    2Series FF
    
    January 25, 2011
    
    February 10, 2011
    
    February 28, 2011
    
    
    1.00
    
    
    
    Series GG
    
    January 25, 2011
    
    February 24, 2011
    
    March 31, 2011
    
    
    1.00
    
    
    
    Series EE
    
    March 29, 2011
    
    April 28, 2011
    
    May 31, 2011
    
    
    1.00
    
    
    
    Series HH
    
    March 29, 2011
    
    April 28, 2011
    
    May 31, 2011
    
    
    1.00
    
    
    
    19Common StockRegular Dividend
    
    March 1, 2011
    
    March 16, 2011
    
    April 19, 2011
    
    Php78.00
    
    
    
    14,567Special Dividend
    
    March 1, 2011
    
    March 16, 2011
    
    April 19, 2011
    
    
    66.00
    
    
    
    12,32626,89326,924
 *
    
    Dividends were declared based on total amount paid up.
 239




---



##### Table of Contents



20.
    
    Interest-bearing Financial Liabilities
 As at December 31, 2010 and 2009, this account consists of the following:
 2010
    
    
    2009(in million pesos)Long-term portion of interest-bearing financial liabilities:Long-term debt (Notes 4, 5, 9, 23, 26 and 28)
    
    
    75,879
    
    
    
    86,066Obligations under finance lease (Notes 3, 4, 5, 23, 26 and 28)
    
    
    9
    
    
    
    1375,888
    
    
    
    86,079Current portion of interest-bearing financial liabilities:Long-term debt maturing within one year (Notes 4, 5, 9, 23, 26 and 28)
    
    
    13,767
    
    
    
    10,384Obligations under finance lease maturing within one year (Notes 3, 4, 5, 23, 26 and 28)
    
    
    34
    
    
    
    51Notes payable (Notes 4, 5, 23, 26 and 28)
    
    
    
    
    
    
    2,27913,801
    
    
    
    12,714
 Unamortized debt discount, representing debt issuance costs and any difference between the
fair value of consideration given or received at initial recognition, included in the financial
liabilities as at December 31, 2010 and 2009 are as follows:
 2010
    
    
    2009(in million pesos)Long-term debt (Note 28)
    
    
    2,944
    
    
    
    3,858Obligation under finance lease
    
    
    1
    
    
    
    3Unamortized debt discount at end of year
    
    
    2,945
    
    
    
    3,861
 The following table describes all changes to unamortized debt discount as at December 31,
2010 and 2009.
 2010
    
    
    2009(in million pesos)Unamortized debt discount at beginning of year
    
    
    3,861
    
    
    
    4,577Additions during the year
    
    
    114
    
    
    
    182Revaluations during the year
    
    
    (16
    )
    
    
    22Accretion during the year included as part of Financing costs  net 
Accretion on financial liabilities  net (Note 5)
    
    
    (1,014
    )
    
    
    (920
    )Unamortized debt discount at end of year
    
    
    2,945
    
    
    
    3,861
 Long-term DebtAs at December 31, 2010 and 2009, long-term debt consists of:
 Description
    
    Interest Rates
    
    
    2010
    
    
    2009(in millions)U.S. Dollar Debts:Export Credit Agencies-Supported Loans:Finnvera, Plc, or Finnvera
    

2.99% and US$ LIBOR + 0.05% to 1.35% in 2010 and US$ LIBOR
+ 0.05% to 1.35% in 2009
    
    US$
    82
    
    
    Php  3,590

    
    
    US$
    58
    
    
    Php  2,681Exportkreditnamnden, or EKN
    
    3.79% in 2010 and 2009
    
    
    14
    
    
    
    613
    
    
    
    18
    
    
    
    860Kreditanstalt für Wiederaufbau, or KfW
    

US$ LIBOR + 0.65% to  2.50% in 2010 and 5.65% and US$
LIBOR + 0.65% to 2.50% in 2009
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    1,45496
    
    
    
    4,203
    
    
    
    107
    
    
    
    4,995Fixed Rate Notes
    
    8.35% to 11.375% in 2010 and 2009
    
    
    375
    
    
    
    16,450
    
    
    
    385
    
    
    
    17,876Term Loans:Debt Exchange Facility
    
    2.25% in 2010 and 2009
    
    
    223
    
    
    
    9,791
    
    
    
    209
    
    
    
    9,725GSM Network Expansion Facilities
    
    4.515% to 4.70% and US$ LIBOR + 0.42% to 1.85% in
2010 and 4.49% to 4.70% and US$ LIBOR + 0.42% to 1.85% in 2009
    
    
    97
    
    
    
    4,230
    
    
    
    157
    
    
    
    7,274Others
    
    2.79% + swap rate and US$ LIBOR + 0.42% to 0.50% in
2010 and 6%; 2.79% + swap rate and US$ LIBOR + 0.42% to 0.50% in 2009
    
    
    85
    
    
    
    3,740
    
    
    
    118
    
    
    
    5,484US$
    876
    
    
    Php  38,414
    
    
    US$
    976
    
    
    Php  45,354
 240




---



##### Table of Contents



Description
    
    Interest Rates
    
    
    2010
    
    
    2009(in millions)Philippine Peso Debts:Corporate Notes
    
    5.625% to 9.1038% and PDST-F + 1.25% in 2010 and 2009
    
    
    
    
    
    Php  29,677
    
    
    
    
    
    
    Php  24,863Term Loans:Unsecured Term Loans
    
    6.125% to 8.7792% and PDST-F + 0.30% to 1.50% in 2010
and 6.125% to 8.7792% and PDST-F + 0.75% to 1.50% in 2009
    
    
    
    
    
    
    21,439
    
    
    
    
    
    
    
    26,088Secured Term Loans
    
    PDST-F + 1.375% and AUBs prime rate in 2010 and
PDST-F + 5.70% + Banks cost of funds; PDST-F + 1.375% and AUBs prime rate in 2009
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    14551,232
    
    
    
    
    
    
    
    51,096Total long-term debt
    
    
    
    
    
    
    
    
    
    
    89,646
    
    
    
    
    
    
    
    96,450Less portion maturing within one year (Note 28)
    
    
    
    
    
    
    
    
    
    
    13,767
    
    
    
    
    
    
    
    10,384Noncurrent portion of long-term (Note 28)
    
    
    
    
    
    
    
    
    
    Php  75,879
    
    
    
    
    
    
    Php  86,066
 Note: Amounts presented are net of unamortized debt discount and debt issuance costs.The scheduled maturities of our consolidated outstanding long-term debt at nominal values
as at
December 31, 2010 are as follows:
 U.S. Dollar Debt
    
    
    Php Debt
    
    
    TotalYear
    
    In U.S. Dollar
    
    
    In Php
    
    
    In Php
    
    
    In Php(in millions)2011
    
    
    104
    
    
    
    4,535
    
    
    
    9,400
    
    
    
    13,9352012
    
    
    234
    
    
    
    10,273
    
    
    
    9,127
    
    
    
    19,4002013
    
    
    60
    
    
    
    2,606
    
    
    
    8,528
    
    
    
    11,1342014
    
    
    305
    
    
    
    13,375
    
    
    
    6,125
    
    
    
    19,5002015 and onwards
    
    
    239
    
    
    
    10,482
    
    
    
    18,139
    
    
    
    28,621942
    
    
    
    41,271
    
    
    
    51,319
    
    
    
    92,590
 U.S. Dollar Debts:Export Credit Agencies-Supported Loans
 In order to acquire imported components for our network infrastructure in connection with our
expansion and service improvement programs, we obtained loans extended and/or guaranteed by
various export credit agencies.
 Finnvera, Plc, or Finnvera
 On February 11, 2005, Smart signed a refinancing facility with Finnish Export Credit, Plc, as
Lender, and ING Bank N.V., as Arranger and Facility Agent under an export credit agency-backed
facility in connection with Smarts GSM expansion program. This facility was covered by a
guarantee from Finnvera, the Finnish Export Credit Agency, for 100% of the political and
commercial risk for the refinancing facility of GSM Phases 5A and 5B. The principal benefit of
refinancing the Phase 5 loan was the savings from a lower interest margin on the refinancing
facility. The facility was payable in equal semi-annual payments over five years startingSeptember 1, 2005. The outstanding balance amounted to US$9.98 million, or Php464 million, net
of unamortized discount, as at December 31, 2009 was paid in full on March 1, 2010.On May 14, 2009, Smart signed a US$50 million five-year term facility to finance the Phase 10
(Extension) GSM equipment and services contract with Finnish Export Credit, Plc guaranteed by
Finnvera and awarded to Calyon as the Arranger. The facility was drawn on July 15, 2009. The
loan is payable over five years in ten equal semi-annual payments. The amounts of US$39
million, or Php1,703 million, and US$48 million, or Php2,240 million, both net of unamortized
debt discount, remained outstanding as at December 31, 2010 and 2009, respectively.On October 9, 2009, Smart signed a US$50 million five-year term loan facility to finance GSM
equipment and services contracts with Finnish Export Credit, Plc guaranteed by Finnvera, the
Finnish Export Credit Agency, for 100% political and commercial risk cover. The facility was
awarded to Citicorp as the Arranger. The loan is payable over five years in ten equal
semi-annual payments. As at December 31, 2009, no amount had been drawn under the facility.
The amount of US$43 million, or Php1,887 million, net of unamortized debt discount,
 241




---



##### Table of Contents



which was drawn on April 7, 2010, remained outstanding as at December 31, 2010.
 Exportkreditnamnden, or EKN
 On November 25, 2008, Smart signed a US$22 million five-year term loan facility to finance the
supply, installation, commissioning and testing of Wireless-Code Division Multiple Access, or
W-CDMA/High Speed Packet Access project with Nordea Bank AB as Original Lender, Arranger and
Facility Agent and subsequently assigned its rights and obligations to the Swedish Export Credit
Corporation (AB Svensk Exportkredit) supported by EKN on December 10, 2008. The amounts of US$8
million, US$13 million and US$1 million were drawn on December 15, 2008, August 5, 2009 and
September 1, 2009, respectively. This facility is payable semi-annually in ten equal
installments commencing six months from December 10, 2008. The outstanding balance under the
facility amounted to US$14 million, or Php613 million, and US$18 million, or Php860 million,
both net of unamortized debt discount, as at December 31, 2010 and 2009, respectively.
 Kreditanstalt für Wiederaufbau, or KfW
 On January 25, 2002, PLDT signed two loan agreements with KfW, which provided PLDT with a US$149
million facility to refinance in part the repayment installments under its existing loans from
KfW due from January 2002 to December 2004. The facility is composed of a nine-year loan,
inclusive of a three-year disbursement period and a two-year grace period during which no
principal is payable. It partly enjoys the guarantee of HERMES, the export credit agency of the
Federal Republic of Germany. On various dates from 2002 to 2004, we had drawn a total of US$140
million under this facility. PLDT waived further disbursements under this refinancing facility
effective September 1, 2004 and the undrawn portion of US$9 million was cancelled.The outstanding balance under the facility amounted to US$31 million, or Php1,454 million, as at
December 31, 2009. Final repayment was made on October 15, 2010 and there are no outstanding
amounts remaining under the facility as at December 31, 2010.Fixed Rate NotesPLDT has the following non-amortizing fixed rate notes outstanding as at December 31, 2010 and
2009:
 Principal Amount
    
    Interest Rate
    
    
    Maturity Date
    
    

    2010
    
    

    2009(in millions)US$234,259,000
    
    
    8.350
    %
    
    March 6, 2017
    
    
    US$
    231
    
    
    Php 10,149
    
    
    US$
    242
    
    
    Php 11,256US$145,789,000
    
    
    11.375
    %
    
    May 15, 2012
    
    
    
    144
    
    
    
    6,301
    
    
    
    143
    
    
    
    6,620US$
    375
    
    
    Php 16,450
    
    
    US$
    385
    
    
    Php 17,876
 Term Loans
 US$283 Million Term Loan Facility, or Debt Exchange Facility
 On July 2, 2004, Smart acquired from PCEVs creditors approximately US$289 million, or 69.4%,
the aggregate of PCEVs outstanding restructured debt at that time, in exchange for Smart debt
and a cash payment by Smart. In particular, Smart paid an amount in cash of US$1.5 million, or
Php84 million and issued new debt ofUS$283.2 million, or Php15,854 million, at fair value of Php8,390 million, net of unamortized
debt discount amounting to Php7,464 million.The outstanding balance of the Facility amounted to US$223 million, or Php9,791 million, and
US$209 million, or Php9,725 million, both net of unamortized debt discount, as at December 31,
2010 and 2009, respectively. The Facility will be payable in full on June 30, 2014.
 GSM Network Expansion Facilities
 On August 8, 2005, Smart signed a US$30 million commercial facility with Nordic Investment Bank
to partly finance the related Phase 8 GSM equipment and services contracts. The facility is a
five-year term loan payable semi-annually in ten equal installments with final repayment on July
11, 2011. The facility was drawn on
July 11, 2006 for the full amount of US$30 million. The amounts of US$6 million, or Php263
million, and
 242




---



##### Table of Contents



US$12 million, or Php556 million, both net of unamortized debt discount, remained outstanding as
at December 31, 2010 and 2009, respectively.On August 10, 2005, Smart signed a loan facility for its GSM Phase 8 financing in the amount of
US$70 million. The facility was awarded to the Bank of Tokyo Mitsubishi Ltd., Mizuho Corporate
Bank Ltd., Standard Chartered Bank and Sumitomo Mitsui Banking Corporation as the Lead
Arrangers, with Finnish Export Credit, Plc as the Lender. Smart opted to utilize only a total
of US$67 million of which US$10 million and US$57 million were drawn on February 15, 2006 and
March 13, 2006, respectively. The undrawn balance of US$3 million was cancelled. The facility
is a five-year term loan payable in ten equal semi-annual installments. The amount of US$15
million, or Php678 million, net of unamortized discount, remained outstanding as at December 31,
2009. The facility was paid in full on September 1, 2010.On July 31, 2006, Smart signed a U.S. Dollar term loan facility for US$44.2 million to partly
finance the related Phase 9 GSM equipment and services contracts. The Lender is Finnish Export
Credit, Plc with ABN AMRO Bank N.V., Standard Chartered Bank, Sumitomo Mitsui Banking
Corporation and Mizuho Corporate Bank Ltd. as the Lead Arrangers. The facility is a five-year
term loan payable in ten equal semi-annual installments with final repayment on July 15, 2011.
The facility was drawn on November 10, 2006 for the full amount of
US$44.2 million. The amounts of US$9 million, or Php387 million, and US$18 million, or Php819
million, both net of unamortized debt discount, remained outstanding as at December 31, 2010 and
2009, respectively.On October 16, 2006, Smart signed a U.S. Dollar term loan facility with Metropolitan Bank and
Trust Company to finance the related Phase 9 GSM facility for an amount of US$50 million. The
facility is a five-year loan payable in 18 equal quarterly installments commencing on the third
quarter from initial drawdown date with final repayment on October 10, 2012. The facility was
drawn on October 10, 2007 for the full amount of US$50 million. The amounts of US$22 million,
or Php973 million, and US$33 million, or Php1,547 million, both net of unamortized debt
discount, remained outstanding as at December 31, 2010 and 2009, respectively.On October 10, 2007, Smart signed a US$50 million five-year term loan facility to finance the
related Phase 10 GSM equipment and service contracts. The facility was awarded to Norddeutsche
Landesbank Girozentrale Singapore Branch as the Original Lender with Standard Chartered Bank
(Hong Kong) Ltd. as the Facility Agent. The full amount of the facility was drawn on March 10,
2008. The loan is payable over five years in ten equal semi-annual payments with final
repayment on March 11, 2013. The amounts of US$25 million, or
Php1,091 million, and US$35 million, or Php1,616 million, both net of unamortized debt discount,
remained outstanding as at December 31, 2010 and 2009, respectively.On November 27, 2008, Smart signed a US$50 million five-year term loan facility to finance the
Phase 10 GSM equipment and service contracts with Finnish Export Credit, Plc. The facility was
awarded to ABN AMRO Bank N.V., Australia and New Zealand Banking Group Limited, Standard
Chartered Bank, Mizuho Corporate Bank Ltd. as the Lead Arrangers. The loan is payable over five
years in ten equal semi-annual installments with final repayment on January 23, 2014. The
facility was drawn on January 23, 2009 and May 5, 2009 in the amounts of US$5 million and US$45
million, respectively. The amounts of US$35 million, or Php1,516 million, and US$44 million, or
Php2,058 million, both net of unamortized debt discount, remained outstanding as at
December 31, 2010 and 2009, respectively.
 Other Term Loans
 On January 15, 2008, PLDT signed a US$100 million term loan facility agreement with Norddeutsche
Landesbank Girozentrale Singapore Branch to be used for the capital expenditure requirements of
PLDT. Two separate drawings of US$50 million each was drawn from the facility on March 27, 2008
and April 10, 2008 and is payable over five years in ten equal semi-annual installments with
final repayment on March 27, 2013. The amounts of US$50 million, or Php2,191 million, and US$70
million, or Php3,250 million, remained outstanding as at December 31, 2010 and 2009,
respectively.On July 15, 2008, PLDT signed a loan agreement amounting to US$50 million with the Bank of the
Philippine Islands to refinance its loan obligations which were utilized for service
improvements and expansion programs. The initial drawdown under this loan was made on July 21,
2008 in the amount of US$15 million and the balance of US$35 million was drawn on September 30,
2008. This loan is payable in 17 equal quarterly installments commencing on the fourth quarter
from initial drawdown date with final repayment on July 22, 2013. The amounts of US$32 million,
or Php1,417 million, and US$44 million, or Php2,048 million, remained outstanding
 243




---



##### Table of Contents



On September 24, 2008, BOW signed an Islamic finance facility agreement granted by the Bank of
London and the Middle East for a total of US$19 million, which will mature on various dates from
June 30, 2013 to September 30, 2014. The amounts of US$3 million, or Php132 million, and US$4 million, or Php186
million, remained outstanding as at December 31, 2010 and 2009, respectively.Philippine Peso Debts:Corporate Notes
 Php5,000 Million Fixed Rate Corporate Notes
 On February 15, 2007, Smart issued Php5,000 million fixed rate corporate notes, comprised of
Series A five-year notes amounting to Php3,800 million and Series B ten-year notes amounting to
Php1,200 million. Proceeds from the issuance of these notes have been used primarily for
Smarts capital expenditures for network improvement and expansion. The amounts of Php4,962
million and Php4,968 million, both net of unamortized debt discount, remained outstanding as at
December 31, 2010 and 2009, respectively.
 Php5,000 Million Fixed Rate Corporate Notes
 On December 12, 2008, Smart issued a five-year term unsecured fixed rate corporate notes
amounting to
Php5,000 million. The facility has annual amortizations equivalent to 1% of the principal
amount with the balance of 96% payable on December 13, 2013. Funds raised from the issuance of
these notes were used primarily to finance Smarts capital expenditures for network upgrade and
expansion. The amounts of Php4,867 million and Php4,907 million, both net of unamortized debt
discount, remained outstanding as at December 31, 2010 and 2009, respectively.
 Php5,000 Million Fixed Rate Corporate Notes
 On February 20, 2009, PLDT issued Php5,000 million fixed rate corporate notes under a Notes
Facility Agreement dated February 18, 2009, comprised of Series A five-year notes amounting to
Php2,390 million, Series B seven-year notes amounting to Php100 million, and Series C ten-year
notes amounting to Php2,510 million. Proceeds from the facility were used to finance capital
expenditures of PLDT. The aggregate amounts of Php4,976 million and Php5,000 million remained
outstanding as at December 31, 2010 and 2009, respectively.
 Php3,000 Million Corporate Notes
 On June 29, 2009, Smart signed a Notes Facility Agreement with BDO Private Bank, Inc. amounting
to
Php3,000 million to finance capital expenditures. The facility is comprised of Php1,000 million
Series A1 note payable in full in 1.5 years and Php1,000 million each for Series B1 and B2 notes
payable in full in two years. The aggregate amount of Php2,000 million of Series A1 and B1
notes were drawn on July 8, 2009 while the amount of Php1,000 million of Series B2 notes was
drawn on September 1, 2009. The aggregate amounts of Php2,997 million and Php2,988 million,
both net of unamortized debt discount, remained outstanding as at December 31, 2010 and 2009,
respectively. The Series A1 amounting to Php1,000 million was repaid on January 10, 2011.
 Php7,000 Million Fixed Rate Corporate Notes
 On December 10, 2009, PLDT issued Php7,000 million fixed rate corporate notes under a Notes
Facility Agreement dated December 8, 2009, comprised of Series A 5.25-year notes amounting to
Php5,050 million, Series B seven-year notes amounting to Php850 million, and Series C ten-year
notes amounting to Php1,100 million. Proceeds from the facility were used to finance capital
expenditures and/or to refinance its loan obligations which were also used to finance capital
expenditures for network expansion and improvement. The aggregate amounts of Php6,891 million
and Php7,000 million remained outstanding as at December 31, 2010 and 2009, respectively.
 244




---



##### Table of Contents



Php2,500 Million Fixed Rate Corporate Notes
 On July 13, 2010, PLDT issued Php2,500 million five-year fixed rate corporate notes under a
Notes Facility Agreement dated July 12, 2010. The notes are non-amortizing and will mature on
July 13, 2015. Proceeds from the facility were used to finance capital expenditures and/or to
refinance PLDTs loan obligations. The amount of Php2,500 million remained outstanding as at
December 31, 2010.
 Php2,500 Million Fixed Rate Corporate Notes
 On July 13, 2010, Smart issued Php2,500 million five-year fixed rate corporate notes under a
Notes Facility Agreement dated July 12, 2010. The notes are non-amortizing and will mature on
July 13, 2015. Proceeds from the facility was used primarily to finance Smarts capital
expenditures for network improvement and expansion. The amount of Php2,484 million, net of
unamortized debt discount, remained outstanding as at December 31, 2010.
 Php2,000 Million Fixed Rate Corporate Notes
 On March 9, 2011, Smart signed a Notes Facility Agreement with BDO Private Bank, Inc. amounting
to Php2,000 million to finance capital expenditures. Tranche A amounting to Php1,000 million
was issued on March 16, 2011 and Tranche B amounting to Php1,000 million to be issued in
multiple drawdowns of Php250 million each, all of which are payable in full in five years from
their respective issue dates. As at March 29, 2011, Php1,500 million has been drawn from this
facility.
 Php5,000 Million Fixed Rate Corporate Notes
 On March 24, 2011, PLDT issued Php5,000 million fixed rate corporate notes under a Notes
Facility Agreement dated March 22, 2011, comprised of Series A 5-year notes amounting to
Php3,435 million, Series B 7-year notes amounting to Php700 million and Series C ten-year rate
notes amounting to Php865 million. Proceeds from the facilities will be used to finance capital
expenditures and refinance existing debt obligations which were also used to finance service
improvements and expansion programs.
 Term Loans
 Unsecured Term LoansPhp2,500 Million Term Loan Facility
 On August 14, 2006, Smart signed a Philippine Peso term loan facility with Metropolitan Bank and
Trust Company amounting to Php2,500 million to finance the related Phase 9 GSM facility. The
facility is payable over five years in 18 equal quarterly installments commencing on the third
quarter from initial drawdown date with final repayment on December 9, 2011. The facility was
drawn on December 11, 2006. The amounts of Php555 million and Php1,109 million, both net of
unamortized debt discount, remained outstanding as at December 31, 2010 and 2009, respectively.
 Php400 Million and Php20 Million Refinancing Loans
 On May 22, 2007, PLDT signed loan agreements with The Philippine American Life and General
Insurance Company for Php400 million and The Philam Bond Fund, Inc. for Php20 million to
refinance their respective participations in the ten-year note under the Php1,270 million Fixed
Rate Corporate Notes which were repaid on June 12, 2007. Both refinancing loans will mature on
June 12, 2014. The amounts of Php400 million and
Php20 million remained outstanding as at December 31, 2009 were both prepaid in full on December
13, 2010.
 Php2,500 Million Term Loan Facility
 On October 21, 2008, Smart signed a Philippine Peso term loan facility with Metropolitan Bank
and Trust Company to finance capital expenditures for an amount of Php2,500 million, which was
drawn in full on
November 13, 2008. The facility is payable over five years in 16 equal consecutive quarterly
installments commencing on the fifth quarter from the date of the first drawdown with final
repayment on November 13, 2013. The amounts of Php1,870 million and Php2,492 million, both net
of unamortized debt discount, remained
 245




---



##### Table of Contents



outstanding as at December 31, 2010 and 2009, respectively.
 Php2,400 Million Term Loan Facility
 On November 21, 2008, PLDT signed a loan agreement with Land Bank of the Philippines amounting
to
Php2,400 million to finance capital expenditures and/or to refinance its loan obligations which
were utilized for service improvements and expansion programs. The initial drawdown under this
loan was made on
December 12, 2008 in the amount of Php500 million and the balance of Php1,900 million was
subsequently drawn on May 20, 2009 and July 31, 2009 in two equal Php500 million tranches and on
September 15, 2009 in the amount of Php900 million. The loan is payable over five years in ten
equal semi-annual installments with final repayment on December 12, 2013. The amounts of
Php1,533 million and Php2,044 million remained outstanding as at December 31, 2010 and 2009,
respectively.
 Php3,000 Million Term Loan Facility
 On November 26, 2008, PLDT signed a loan agreement with Union Bank of the Philippines amounting
to
Php3,000 million to finance capital expenditures and/or to refinance its loan obligations which
were utilized for service improvements and expansion programs. The initial drawdown under this
loan was made on
December 22, 2008 in the amount of Php500 million and the balance of Php2,500 million was
subsequently drawn on April 14, 2009. The loan is payable over five years in nine equal
semi-annual installments commencing on the second semester from initial drawdown date with final
repayment on December 23, 2013. The amounts of Php2,000 million and Php2,667 million remained
outstanding as at December 31, 2010 and 2009, respectively.
 Php2,000 Million Term Loan Facility
 On November 28, 2008, PLDT signed a loan agreement with Philippine National Bank amounting to
Php2,000 million to be used for its capital expenditure requirements in connection with PLDTs
service improvement and expansion programs. The initial drawdown under this loan was made on
December 19, 2008 in the amount of Php500 million and the balance of Php1,500 million was
subsequently drawn on January 30, 2009, February 27, 2009 and March 13, 2009 in three equal
Php500 million tranches. The loan is payable over five years in 17 equal quarterly installments
commencing on the fourth quarter from initial drawdown date with final repayment on December 19,
2013. The amounts of Php1,412 million and Php1,882 million remained outstanding as at December
31, 2010 and 2009, respectively.
 Php1,000 Million Term Loan Facility
 On February 20, 2009, Smart signed a Philippine Peso term loan facility with China Trust
(Philippines) Commercial Bank Corporation to finance capital expenditures for an amount of
Php1,000 million, which was drawn in full on April 27, 2009. The facility is a five-year term
loan payable in eight equal semi-annual installments starting on the eighteenth month from
initial drawdown date. The amount of Php996 million, net of unamortized debt discount,
remained outstanding as at December 31, 2009 was repaid on October 27, 2010.
 Php2,500 Million Term Loan Facility
 On March 6, 2009, PLDT signed a loan agreement with Banco de Oro Unibank, Inc. amounting to
Php2,500 million to finance capital expenditures and/or refinance its loan obligations which
were utilized for service improvements and expansion programs. The loan is payable in full upon
maturity on April 17, 2014. The amount of Php2,500 million was fully drawn on April 17, 2009
and remained outstanding as at December 31, 2010 and 2009.
 Php1,500 Million Term Loan Facility
 On May 12, 2009, Smart signed a Philippine Peso term loan facility with Banco de Oro Unibank,
Inc. amounting to Php1,500 million to finance capital expenditures which was fully drawn on May
20, 2009. The facility is a three-year loan payable in full upon maturity on May 20, 2012. The
amounts of Php1,494 million and Php1,491 million, both net of unamortized debt discount,
remained outstanding as at December 31, 2010 and 2009, respectively.
 246




---



##### Table of Contents



Php1,000 Million Term Loan Facility
 On May 14, 2009, Smart signed a Philippine Peso term loan facility with Asia United Bank
amounting to
Php1,000 million to finance capital expenditures, which was drawn in full on July 3, 2009. The
facility is payable over five years in eight equal semi-annual installments commencing on the
eighteenth month from initial drawdown date with final repayment on July 3, 2014. The amounts
of Php997 million and Php996 million, both net of unamortized debt discount, remained
outstanding as at December 31, 2010 and 2009, respectively. The debt was paid in full on
January 3, 2011.
 Php1,000 Million Term Loan Facility
 On May 15, 2009, Smart signed a Philippine Peso term loan facility with Philippine National Bank
amounting to Php1,000 million to finance capital expenditures, which was drawn in full on July
2, 2009. The facility is a seven-year loan, payable in full upon maturity on July 2, 2016. The
amounts of Php996 million and Php995 million, both net of unamortized debt discount, remained
outstanding as at December 31, 2010 and 2009, respectively. The debt was paid in full on
January 3, 2011.
 Php2,500 Million Term Loan Facility
 On June 8, 2009, PLDT signed a loan agreement with Rizal Commercial Banking Corporation
amounting to Php2,500 million to finance capital expenditures and/or refinance its loan
obligations which were utilized for service improvements and expansion programs. The facility
is payable over seven years with an annual amortization of 1% on the fifth and sixth year from
initial drawdown date and the balance payable upon maturity on September 28, 2016. The amount
of Php2,500 million was fully drawn on September 28, 2009 and remained outstanding as at
December 31, 2010 and 2009.
 Php1,500 Million Term Loan Facility
 On June 16, 2009, PLDT signed a loan agreement with Allied Banking Corporation amounting to
Php1,500 million to finance capital expenditures and/or refinance its loan obligations which
were utilized for service improvements and expansion programs. The facility is payable over
five years in 17 equal quarterly installments commencing on September 15, 2010 with final
repayment on September 15, 2014. The amount of Php1,500 million was fully drawn on September
15, 2009. The amounts of Php1,324 million and Php1,500 million remained outstanding as at
December 31, 2010 and 2009, respectively.
 Php500 Million Term Loan Facility
 On June 29, 2009, PLDT signed a loan agreement with Insular Life Assurance Company, Ltd.
amounting to Php500 million to finance capital expenditures and/or refinance its loan
obligations which were utilized for service improvements and expansion programs. The loan will
mature on July 1, 2016. The amount of Php500 million was fully drawn on July 1, 2009 and
remained outstanding as at December 31, 2010 and 2009.
 Php1,000 Million Term Loan Facility
 On July 16, 2009, Smart signed a Philippine Peso term loan facility with Metropolitan Bank and
Trust Company to finance capital expenditures for an amount of Php1,000 million, which was drawn
in full on August 3, 2009. The facility is payable over five years in 16 equal consecutive
quarterly installments commencing on the fifth quarter from the date of the first drawdown with
final repayment on August 1, 2014. The amounts of Php935 million and Php996 million, both net
of unamortized debt discount, remained outstanding as at December 31, 2010 and 2009,
respectively.
 Php2,000 Million Term Loan Facility
 On September 18, 2009, PLDT signed a loan agreement with Bank of the Philippine Islands
amounting to
Php2,000 million to finance capital expenditures and/or refinance its loan obligations which
were utilized for service improvements and expansion programs. The facility is payable over
five years in 17 equal quarterly installments with final repayment on October 27, 2014. The
initial drawdown under this loan was made on
October 26, 2009 in the amount of Php1,000 million and the balance of Php1,000 million was
subsequently drawn on December 4, 2009. The amounts of Php1,882 million and Php2,000 million
remained outstanding as at
 247




---



##### Table of Contents



December 31, 2010 and 2009, respectively.
 Php1,000 Million Term Loan Facility
 On November 23, 2009, PLDT signed a loan agreement with Bank of the Philippine Islands amounting
to
Php1,000 million to finance capital expenditures and/or refinance its obligations which were
utilized for service improvements and expansion programs. The facility is payable over five
years in 17 equal quarterly installments with final repayment on December 18, 2014. The amount
of Php1,000 million was fully drawn on
December 18, 2009. The amounts of Php941 million and Php1,000 million remained outstanding as
at
December 31, 2010 and 2009, respectively.
 Php1,500 Million Term Loan Facility
 On March 15, 2011, Smart signed a Philippine Peso term loan facility with Metropolitan Bank and
Trust Company to finance capital expenditures for an amount of Php1,500 million, which was drawn
in full on March 22, 2011. The facility is a five-year loan, payable in full upon maturity on
March 22, 2016.
 Php2,000 Million Term Loan Facility
 On March 24, 2011, Smart signed a Philippine Peso term loan facility with Philippine National
Bank to finance capital expenditures for an amount of Php2,000 million, which was drawn in full
on March 29, 2011. The facility is a five-year loan, payable in full upon maturity on March 29,
2016.
 Secured Term LoansPhp150 Million Term Loan Facility
 On June 7, 2007, BayanTrade obtained a medium term loan facility with Bank of the Philippine
Islands amounting to Php150 million, which was fully availed of in December 2007. Each interest
period will cover a 90-day period commencing on the initial drawdown date and the interest rate
will be determined at the first day of each interest period and payable at the end of the
interest period. The loan facility was obtained to facilitate the purchase of a subsidiary and
to support its working capital requirements. The aggregate loan amount is due as follows: (a)
20% within the third year from first drawdown date; (b) 20% within the fourth year from first
drawdown date; and (c) 60% within the fifth year from first drawdown date. BayanTrade is given
a right to repay the principal and the interest accruing thereon on each interest payment date
or interest rate setting date without any prepayment penalty. BayanTrade and the bank has
agreed to the following terms: (a) pledge of BayanTrades shares of stock of the subsidiary
purchased at a collateral loan ratio of 2:1; (b) assignment of receivables at a
collateral-to-loan of 2:1; and (c) negative pledge on other present and future assets of
BayanTrade. The outstanding principal balance of the loan was Php113 million and Php139 million
as at December 31, 2010 and 2009, respectively.
 Php8 Million Term Loan Facility
 On March 31, 2009, Level Up! secured a three-year loan facility with Asia United Bank amounting
to Php8 million maturing on March 30, 2012. Principal is payable in twelve equal successive
quarterly installments of
Php673 thousand starting June 30, 2009 and every quarter thereafter. This loan has a floating
interest rate payable every 30 days starting April 30, 2009. The loan is secured by the
equipment where the proceeds of the loan were used. The amounts of Php3 million and Php6
million remained outstanding as at December 31, 2010 and 2009, respectively.Notes PayableOn April 23, 2009, PLDT signed the notes facility agreement with BDO Private Bank, Inc.
amounting to
Php2,000 million to finance capital expenditures and/or refinance its loan obligations which
were utilized for service improvements and expansion programs. The facility is comprised of a
Php1,000 million Tranche A fixed rate note and a Php1,000 million Tranche B floating rate note,
which were fully drawn on April 28, 2009 and were fully paid on April 28, 2010.
 248




---



##### Table of Contents



SPi had an outstanding balance of short-term notes of US$6 million, or Php279 million, as at
December 31, 2009, which matured on various dates from April 26, 2010 to June 4, 2010.Debt CovenantsOur debt instruments contain restrictive covenants, including covenants that require us to
comply with specified financial ratios and other financial tests, calculated in conformity with
Philippine Financial Reporting Standards, or PFRS, at relevant measurement dates, principally at
the end of each quarterly period. We have complied with all of our maintenance financial ratios
as required under our loan covenants and other debt instruments.The principal factors that can negatively affect our ability to comply with these financial
ratios and other financial tests are depreciation of the Philippine peso relative to the U.S.
dollar, poor operating performance of PLDT and its consolidated subsidiaries, impairment or
similar charges in respect of investments or other long-lived assets that may be recognized by
PLDT and its consolidated subsidiaries, and increases in our interest expense. Interest expense
may increase as a result of various factors including issuance of new debt, the refinancing of
lower cost indebtedness by higher cost indebtedness, depreciation of the Philippine peso, the
lowering of PLDTs credit ratings or the credit ratings of the Philippines, increase in
reference interest rates, and general market conditions. Since approximately 43% of PLDTs
total consolidated debts as at December 31, 2010 were denominated in foreign currencies,
principally in U.S. dollars, many of these financial ratios and other tests are negatively
affected by any weakening of the Philippine peso.PLDTs debt instruments contain a number of other negative covenants that, subject to certain
exceptions and qualifications, restrict PLDTs ability to take certain actions without lenders
approval, including: (a) incurring additional indebtedness; (b) disposing of all or
substantially all of its assets or of assets in excess of specified thresholds of its tangible
net worth; (c) creating any lien or security interest; (d) permitting set-off against amounts
owed to PLDT; (e) merging or consolidating with any other company; (f) entering into
transactions with stockholders and affiliates; and (g) entering into sale and leaseback
transactions.Further, certain of PLDTs debt instruments contain provisions wherein PLDT may be required to
repurchase or prepay certain indebtedness in case of a change in control of PLDT.PLDTs debt instruments also contain customary and other default provisions that permit the
lender to accelerate amounts due or terminate their commitments to extend additional funds under
the debt instruments. These default provisions include: (a) cross-defaults that will be
triggered only if the principal amount of the defaulted indebtedness exceeds a threshold amount
specified in these debt instruments; (b) failure by PLDT to meet certain financial ratio
covenants referred to above; (c) the occurrence of any material adverse change in circumstances
that a lender reasonably believes materially impairs PLDTs ability to perform its obligations
under its debt instrument with the lender; (d) the revocation, termination or amendment of any
of the permits or franchises of PLDT in any manner unacceptable to the lender; (e) the
nationalization or sustained discontinuance of all or a substantial portion of PLDTs business;
and (f) other typical events of default, including the commencement of bankruptcy, insolvency,
liquidation or winding up proceedings by PLDT.Smarts debt instruments contain certain restrictive covenants that require Smart to comply with
specified financial ratios and other financial tests at semi-annual measurement dates. Smarts
loan agreements include compliance with financial tests such as consolidated debt to
consolidated equity, consolidated debt to consolidated EBITDA and debt service coverage ratios.
The agreements also contain customary and other default provisions that permit the lender to accelerate amounts due under the loans or terminate their commitments to extend additional funds
under the loans. These default provisions include: (a) cross-defaults and cross-accelerations
that permit a lender to declare a default if Smart is in default under another loan agreement.
These cross-default provisions are triggered upon a payment or other default permitting the
acceleration of Smart debt, whether or not the defaulted debt is accelerated; (b) failure by
Smart to comply with certain financial ratio covenants; and (c) the occurrence of any material
adverse change in circumstances that the lender reasonably believes materially impairs Smarts
ability to perform its obligations or impair guarantors ability to perform their obligations
under its loan agreements.As at December 31, 2010, we were in compliance with all of our debt covenants.
 249




---



##### Table of Contents



Obligations Under Finance LeaseThe consolidated future minimum payments for finance leases as at December 31, 2010 are as
follows:
 Year
    
    (in million pesos)Within one year
    
    
    35After one year but not more than five years
    
    
    9Total minimum finance lease payments (Note 26)
    
    
    44Less amount representing unamortized interest
    
    
    1Present value of net minimum finance lease payments (Notes 3 and 28)
    
    
    43Less obligations under finance lease maturing within one year (Notes 9 and 28)
    
    
    34Long-term portion of obligations under finance lease (Notes 9 and 28)
    
    
    9
 Municipal Telephone ProjectsPCEV has an existing finance lease agreement for the Palawan Telecommunications System of the
Municipal Telephone Project Office, or MTPO, with the Department of Transportation and
Communications, or DOTC. Presently, the 18 public calling office stations that were put up
pursuant to the MTPO Contract are no longer working. The last payment by PCEV to the DOTC was
in July 2000 and no payments have been made since then. PCEV made several attempts to
pre-terminate the MTPO Contract in letters to the DOTC where PCEV also manifested its
willingness to discuss mutually beneficial compromise agreements for the pre-termination.The DOTC denied PCEVs petition and reiterated a provision in the MTPO Contract that the
pre-termination will result in the imposition of sanctions in the form of liquidated damages not
exceeding Php23 million.PCEV maintains that it had pre-terminated the MTPO Contract as early as 2003, and that the issue
of PCEVs pre-termination of the MTPO Contract be referred for arbitrations in accordance with
the provisions of the MTPO Contract.On May 8, 2009, PCEV filed with the Philippine Dispute Resolution Center, Inc., or PDRCI, a
Request for Arbitration against the DOTC for the PDRCI to commence the formation of the tribunal
and such other procedures required under the PDRCI rules. In the Request for Arbitration, PCEV
prayed for the following: (1) as interim relief: ordering the DOTC to cease and desist from
enforcing collection and charging additional interests and penalties against PCEV pending the
resolution of the arbitration proceedings; and (2) as final relief: (a) ordering the suspension
of the MTPO Contract; (b) ordering the termination of the MTPO Contract as at March 20, 2003 and
holding PCEV free from any liability for non-performance of the obligations thereunder from
March 20, 2003; and (c) ordering the DOTC to pay PCEV attorneys fees and the expenses and cost
of arbitration.Last April 13, 2010, the Arbitral Tribunal issued a Final Award for the arbitration case. In
the Disposition portion of the Final Award, the Arbitral Tribunal declared valid and justified
PCEVs suspension of the MTPO contract as at March 20, 2003 on the basis of Section 9.3 (Force
Majeure) of the MTPO contract, thereby holding PCEV free from liquidated damages for
non-performance of the obligations thereunder. PCEV, however, was ordered to pay the DOTC the
unpaid annual lease rentals after September 2000 to January 14, 2003 in the amount of
Php5.2 million as well as interest and penalties of Php2 million for non-payment of such
rentals. Further, PCEV was declared as entitled to the automatic transfer of the ownership of
the facilities as provided in Section 7.8 of the MTPO contract. Accordingly, PCEV shall pay
DOTC 50% of the Net Present Value of the unpaid lease up to 30 years in the amount of Php21.3
million for the facilities.The total amount to be paid by PCEV to DOTC is Php28.5 million. As at December 31, 2010, PCEV
already advanced Php1 million to DOTC for arbitration expenses and site inspection costs. The
remaining balance of Php27.5 million will be paid in two parts: (1) Php26.1 million shall be
released directly to DOTC; and
(2) Php1.4 million shall be remitted to the Bureau of Treasury to be recorded under Fund Code
152, Special Account of the General Fund for the Office of the Solicitor General.On April 30, 2010, PCEV filed a Petition for Confirmation of the Final Award with the Regional
Trial Court, or RTC, of the City of Mandaluyong. In a Manifestation and Motion filed by the
DOTC in the same court, the DOTC joined PCEV in the latters Petition for Confirmation of the
Final Award. In a July 5, 2010 Decision, Branch 212 of the RTC of the City of Mandaluyong,
finding the Final Award to be not contrary to law, morals,
 250




---



##### Table of Contents



good customs and public policy, confirmed the Final Award. PCEV is now in the process of
discussing with DOTC the finalization of an agreement for the transfer of the facilities to PCEV
and the payment of the amounts due, as stated in the Final Award.Other Long-term Finance Lease ObligationsThe PLDT Group has various long-term lease contracts for a period of three years covering
various office equipment. In particular, PLDT, Smart and ePLDT have finance lease obligations
in the aggregate amounts of Php18 million and Php24 million as at December 31, 2010 and 2009,
respectively, in respect of office equipment. See Note 9  Property, Plant and Equipment.Under the terms of certain loan agreements and other debt instruments, PLDT may not create,
incur, assume, permit or suffer to exist any mortgage, pledge, lien or other encumbrance or
security interest over the whole or any part of its assets or revenues or suffer to exist any
obligation as lessee for the rental or hire of real or personal property in connection with any
sale and leaseback transaction.
 21.
    
    Deferred Credits and Other Noncurrent Liabilities
 As at December 31, 2010 and 2009, this account consists of:
 2010
    
    
    2009(in million pesos)Accrual of capital expenditures under long-term financing
    
    
    12,040
    
    
    
    11,966Provision for asset retirement obligations (Notes 3 and 9)
    
    
    1,344
    
    
    
    1,204Unearned revenues (Note 23)
    
    
    114
    
    
    
    66Contingent consideration for business acquisitions  net of current portion
(Notes 13, 14 and 23)
    
    
    
    
    
    
    1,193Others
    
    
    69
    
    
    
    913,567
    
    
    
    14,438
 Accrual of capital expenditures under long-term financing represent expenditures related to
the expansion and upgrade of our network facilities which are not due to be settled within one
year. Such accruals are settled through refinancing from long-term loans obtained from the
banks.The following table summarizes all changes to asset retirement obligations for the years ended
December 31, 2010 and 2009:
 2010
    
    
    2009(in million pesos)Provision for asset retirement obligations at beginning of year
    
    
    1,204
    
    
    
    1,100Accretion expenses for the year (Note 5)
    
    
    97
    
    
    
    94Additional liability recognized during the year (Note 29)
    
    
    49
    
    
    
    17Settlement of obligations
    
    
    (6
    )
    
    
    (7
    )Provision for asset retirement obligations at end of year (Note 3)
    
    
    1,344
    
    
    
    1,204
 22.
    
    Accounts Payable
 As at December 31, 2010 and 2009, this account consists of:
 2010
    
    
    2009(in million pesos)Suppliers and contractors (Notes 26 and 28)
    
    
    20,957
    
    
    
    14,975Taxes (Notes 27 and 28)
    
    
    2,114
    
    
    
    1,894Carriers (Notes 26 and 28)
    
    
    1,866
    
    
    
    1,937Related parties (Notes 24, 26 and 28)
    
    
    244
    
    
    
    233Others
    
    
    623
    
    
    
    56225,804
    
    
    
    19,601
 251




---



##### Table of Contents



23.
    
    Accrued Expenses and Other Current Liabilities
 As at December 31, 2010 and 2009, this account consists of:
 2010
    
    
    2009(in million pesos)Accrued utilities and related expenses (Notes 24, 26 and 28)
    
    
    19,941
    
    
    
    17,549Unearned revenues (Note 21)
    
    
    4,698
    
    
    
    4,588Accrued employee benefits (Notes 3, 25, 26 and 28)
    
    
    3,853
    
    
    
    8,074Accrued taxes and related expenses (Notes 26 and 27)
    
    
    2,236
    
    
    
    1,941Current portion of contingent consideration for business acquisitions (Notes 13, 14 and 21)
    
    
    1,632
    
    
    
    14Accrued interests and other related costs (Notes 20, 26 and 28)
    
    
    1,028
    
    
    
    1,167Liability arising from purchase of investment (Notes 10, 13 and 28)
    
    
    
    
    
    
    65Others
    
    
    2,571
    
    
    
    2,04835,959
    
    
    
    35,446
 Accrued utilities and related expenses pertain to cost incurred for repairs and maintenance
(mostly pertaining to electricity and water consumption), selling and promotions, professional
and other contracted services, rent, insurance and security services, and other
operational-related expenses pending receipt of billings and statement of accounts from
suppliers.Unearned revenues represent advance payments for leased lines, installation fees, monthly
service fees and unused and/or unexpired portion of prepaid loads.Contingent Consideration for Business AcquisitionsContingent consideration for business acquisitions were recognized in relation to SPis
acquisition cost of Springfield and Laguna Medical on April 12, 2007 and August 31, 2009,
respectively. See Note 13  Business Combinations and Acquisition of Non-Controlling Interests
and Note 14  Goodwill and Intangible Assets.SPi acquired 100% of Springfield plus contingent consideration with fair value at acquisition
date of
US$18 million, or Php894 million. The adjusted fair value of contingent consideration, as
revised after effecting adjustments on forecasted earn-out and accretion, amounted to US$35.3
million, or Php1,547 million, and
US$20.5 million, or Php951 million, as at December 31, 2010 and 2009, respectively.SPi acquired 80% of Laguna Medical with a mandatory Put-Call option in respect of the remaining
20% of the outstanding common stock of Laguna Medical. The estimated fair value of the
contingent consideration from the mandatory Put-Call option at the acquisition date amounted to
US$5.4 million, or Php257 million. The adjusted fair value of contingent consideration after
accretion amounted to US$1.9 million, or Php85 million, and US$5.5 million, or Php256 million,
as at December 31, 2010 and 2009, respectively.Movements in contingent consideration for business acquisitions for the years ended December 31,
2010 and 2009 are as follows:
 2010
    
    
    2009In U.S. Dollar
    
    
    In Php
    
    
    In U.S. Dollar
    
    
    In Php(in millions)Balance at beginning of year
    
    
    26
    
    
    
    1,207
    
    
    
    15
    
    
    
    720Business combinations (Note 13)
    
    
    8
    
    
    
    344
    
    
    
    8
    
    
    
    389Accretion for the year
    
    
    3
    
    
    
    163
    
    
    
    3
    
    
    
    142Payments
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (13
    )Translation
    
    
    
    
    
    
    (71
    )
    
    
    
    
    
    
    (31
    )Balance at end of year
    
    
    37
    
    
    
    1,632
    
    
    
    26
    
    
    
    1,207Less current portion of contingent consideration
for business acquisitions
    
    
    37
    
    
    
    1,632
    
    
    
    
    
    
    
    14Contingent consideration for business acquisitions
 net of current portion (Note 21)
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    1,193
 252




---



##### Table of Contents



24.
    
    Related Party Transactions
 a.
    
    Air Time Purchase Agreement between PLDT and AIL and Related AgreementsUnder the Founder NSP Air Time Purchase Agreement, or ATPA, entered into with AIL in March
1997, which was amended in December 1998 (as amended, the Original ATPA), PLDT was granted
the exclusive right to sell AIL services, through ACeS Philippines, as national service
provider, or NSP, in the Philippines. In exchange, the Original ATPA required PLDT to
purchase from AIL a minimum of US$5 million worth of air time (the Minimum Air Time
Purchase Obligation) annually over ten years commencing on January 1, 2002 (the Minimum
Purchase Period), the expected date of commercial operations of the Garuda I Satellite. In
the event that AILs aggregate billed revenue was less than US$45 million in any given year,
the Original ATPA also required PLDT to make supplemental air time purchase payments not to
exceed US$15 million per year during the Minimum Purchase Period (the Supplemental Air Time
Purchase Obligation).On February 1, 2007, the parties to the Original ATPA entered into an amendment to the
Original ATPA on substantially the terms attached to the term sheet negotiated with the
relevant banks (the Amended ATPA). Under the Amended ATPA, the Minimum Air Time Purchase
Obligation was amended and replaced in its entirety with an obligation of PLDT (the Amended
Minimum Air Time Purchase Obligation) to purchase from AIL a minimum of US$500 thousand
worth of air time annually over a period ending upon the earlier of: (i) the expiration of
the Minimum Purchase Period; and (ii) the date on which all indebtedness incurred by AIL to
finance the AIL System is repaid. Furthermore, the Amended ATPA unconditionally released
PLDT from any obligations arising out of or in connection with the Original ATPA prior to
the date of the Amended ATPA, except for obligations to pay for billable units used prior to
such date.Total fees under the Amended ATPA amounted to Php122 million, Php158 million and Php168
million for the years ended December 31, 2010, 2009 and 2008, respectively. Under the
Amended ATPA, the outstanding obligations of PLDT amounted to Php140 million and Php114
million as at December 31, 2010 and 2009, respectively. See Note 5  Income and Expenses.b.
    
    Agreements between PLDT and certain subsidiaries with MeralcoIn the ordinary course of business, Meralco provides electricity to PLDT and certain
subsidiaries offices within its franchise area. The rates charged by Meralco are the same
as those with unrelated parties. Total electricity costs amounted to Php2,438 million and
Php911 million for the year ended December 31, 2010 and for the period from July 14, 2009
(the date Meralco became an associate of PCEV) to December 31, 2009, respectively. Under
these agreements, the outstanding utilities payable amounted to Php183 million and Php188
million as at December 31, 2010 and 2009, respectively.In 2009, PLDT and Smart renewed their respective Pole Attachment Contracts with Meralco,
wherein Meralco leases its pole spaces to accommodate PLDTs and Smarts cable network
facilities. Total fees under these contracts amounted to Php199 million and Php67 million
for the year ended December 31, 2010 and for the period from July 14, 2009 to December 31,
2009, respectively. Under these agreements, the outstanding obligations of PLDT amounted to
Php111 million and Php135 million as at December 31, 2010 and 2009, respectively.See also Note 10  Investments in Associates and Joint Venturesfor additional transactions
involving Meralco.c.
    
    Transactions with Major Stockholders, Directors and OfficersMaterial transactions to which PLDT or any of its subsidiaries is a party, in which a
director, key officer or owner of more than 10% of the outstanding common stock of PLDT, or
any member of the immediate family of a director, key officer or owner of more than 10% of
the outstanding common stock of PLDT had a direct or indirect material interest, as at
December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 are as
follows:
 253




---



##### Table of Contents



1.
    
    Cooperation Agreement with First Pacific and certain affiliates, or the FP Parties,
NTT Communications and NTT DoCoMoIn connection with the transfer by NTT Communications of approximately 12.6 million
shares of PLDTs common stock to NTT DoCoMo pursuant to a Stock Sale and Purchase
Agreement dated January 31, 2006 between NTT Communications and NTT DoCoMo, the FP
Parties, NTT Communications and NTT DoCoMo entered into a Cooperation Agreement, dated
January 31, 2006. Under the Cooperation Agreement, the relevant parties extended
certain rights of NTT Communications under the Stock Purchase and Strategic Investment
Agreement dated September 28, 1999, as amended, and the Shareholders Agreement dated
March 24, 2000, to NTT DoCoMo, including:
 
    
    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.
 Moreover, key provisions of the Cooperation Agreement pertain to, among other things:
 
    
    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.
    
    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 intend 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 any of 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 wireless-code
division multiple access 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
 254




---



##### Table of Contents



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; and4.
    
    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.
 As at December 31, 2010, NTT Communications and NTT DoCoMo together beneficially
owned approximately 21% of PLDTs outstanding common stock.
    
    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 who 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 value as determined by
the Board of Directors of PLDT, as advised by a professional financial advisor; (b)
which is subject to conditions which are subjective or which could not be
reasonably satisfied; (c) without making an offer for all PLDT common shares not
held by it and/or its affiliates and/or persons who, pursuant to an agreement or
understanding (whether formal or informal), actively cooperate to obtain or
consolidate control over PLDT; (d) whose offer for the PLDT common shares is
unlikely to succeed; or (e) whose intention is otherwise not bona fide; provided
that, no person will be deemed a Hostile Transferee unless prior to making such
determination, the Board of Directors of PLDT has used reasonable efforts to
discuss with NTT Communications and NTT DoCoMo in good faith whether such person
should be considered a Hostile Transferee.
    
    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 SmartAn Integrated i-mode Services Package Agreement was entered into by Smart and NTT DoCoMo
on February 15, 2006, under which NTT DoCoMo agreed to grant Smart, on an exclusive
basis within the territory of the Philippines for a period of five years, an integrated
i-mode services package including a non-transferable license to use the licensed
materials and the i-mode brand, as well as implementation support and assistance and
post-commercial launch support from NTT DoCoMo. Pursuant to this agreement, Smart is
required to pay an initial license fee and running royalty fees based on the revenue
arising from i-mode subscription fees and data traffic. There was no royalty fees for
the years ended
 255




---



##### Table of Contents



December 31, 2010 and 2009 while total royalty fees charged to operations under this
agreement amounted to Php55 million for the year ended December 31, 2008. Smart has no
outstanding obligation under this agreement as at December 31, 2010 and 2009.3.
    
    Advisory Service Agreement between NTT DoCoMo and PLDTAn Advisory Services Agreement was entered into by NTT DoCoMo and PLDT on June 5, 2006,
in accordance with the Cooperation Agreement dated January 31, 2006. Pursuant to the
Advisory Services Agreement, NTT DoCoMo will provide the services of certain key
personnel in connection with certain aspects of the business of PLDT and Smart. Also,
this agreement governs the terms and conditions of the appointments of such key
personnel and the corresponding fees related thereto. Total fees under this agreement
amounted to Php75 million each for the years ended December 31, 2010 and 2009 and
Php76 million for the year ended December 31, 2008. Under this agreement, the
outstanding obligations of PLDT amounted to Php13 million and Php6 million as at
December 31, 2010 and 2009, respectively.4.
    
    Other Agreements with NTT Communications and/or its AffiliatesPLDT is a party to the following 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, and 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;
    
    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; and
    
    Service Agreement.On February 1, 2008, PLDT entered into an agreement
with NTT World Engineering Marine Corporation wherein the latter provides offshore
submarine cable repair and other allied services for the maintenance of PLDTs
domestic fiber optic network submerged plant.
 Total fees under these agreements amounted to Php114 million each for the years ended
December 31, 2010 and 2009 and Php99 million for the year ended December 31, 2008.
Under these agreements, the outstanding obligations of PLDT amounted to Php44 million
and Php39 million as at December 31, 2010 and 2009, respectively.5.
    
    Agreement between Smart and Asia Link B.V., or ALBVSmart has an existing Technical Assistance Agreement with ALBV, a subsidiary of the
First Pacific Group. ALBV provides technical support services and assistance in the
operations and maintenance of Smarts cellular business. The agreement, which upon its
expiration on February 23, 2008 was renewed until February 23, 2012 and is subject to
further renewal upon mutual agreement of the parties, provides for payment of technical
service fees equivalent to 1% of the consolidated net revenues of Smart. Total service
fees charged to operations under this agreement amounted to Php615 million, Php634
million and Php630 million for the years ended December 31, 2010, 2009 and 2008,
respectively. Under this agreement, the outstanding obligations of Smart amounted to
Php200 million and Php188 million as at December 31, 2010 and 2009, respectively.
 256




---



##### Table of Contents



6.
    
    Agreements Relating to Insurance CompaniesGotuaco del Rosario and Associates, or Gotuaco, acts as the broker for certain insurance
companies to cover certain insurable properties of the PLDT Group. Insurance premiums
are remitted to Gotuaco and the brokers fees are settled between Gotuaco and the
insurance companies. In addition, PLDT has an insurance policy with Malayan Insurance
Co., Inc., or Malayan, wherein premiums are directly paid to Malayan. Total insurance
expenses under these agreements amounted to Php328 million, Php404 million and Php419
million for the years ended December 31, 2010, 2009 and 2008, respectively. Two
directors of PLDT have direct/indirect interests in or serve as a director/officer of
Gotuaco and Malayan.
 d.
    
    OthersSee Note 18  Prepaymentsfor other related party transactions.
 Compensation of Key Officers of the PLDT GroupThe compensation of key officers of the PLDT Group by benefit type for the years ended December
31, 2010, 2009 and 2008 are as follows:
 2010
    
    
    2009
    
    
    2008(in million pesos)Short-term employee benefits
    
    
    664
    
    
    
    593
    
    
    
    498Share-based payments and other long-term employee benefits (Note 25)
    
    
    277
    
    
    
    418
    
    
    
    233Post-employment benefits (Note 25)
    
    
    25
    
    
    
    33
    
    
    
    24Total compensation paid to key officers of the PLDT Group
    
    
    966
    
    
    
    1,044
    
    
    
    755
 In 2008, each of the directors, including the members of the advisory board of PLDT, is
entitled to a directors fee in the amount of Php125 thousand for each board meeting attended.
Each of the members or advisors of the audit, executive compensation, governance and nomination
and technology strategy committees is entitled to a fee in the amount of Php50 thousand for each
committee meeting attended.On January 27, 2009, the Board of Directors of PLDT approved the increase in directors fee to
Php200 thousand for board meeting attendance and to Php75 thousand for Board Committee meeting
attendance. The directors fee was last adjusted in July 1998.There are no agreements between PLDT Group and any of its key management personnel providing for
benefits upon termination of employment, except for such benefits to which they may be entitled
under PLDT Groups retirement and incentive plans.
 25.
    
    Share-based Payments and Employee Benefits
 Share-based PaymentsOn August 28, 2006, the PLDTs Board of Directors approved, in principle, the broad outline of
the PLDT Groups strategic plans for 2007 to 2009 focusing on the development of new revenue
streams to drive future growth while protecting the existing core communications business. To
ensure the proper execution of the three-year plan, particularly with respect to the manpower
resources being committed to such plans, 2007 to 2009 LTIP, upon endorsement of the ECC, was
approved by the Board of Directors to cover the period from January 1, 2007 to December 31,
2009, or the 2007 to 2009 Performance Cycle. The payment under the 2007 to 2009 LTIP was
intended to be made at the end of the 2007 to 2009 Performance Cycle (without interim payments)
and contingent upon the achievement of an approved target increase in PLDTs common share price
by the end of the 2007 to 2009 Performance Cycle and a cumulative consolidated net income target
for the 2007 to 2009 Performance Cycle.
 257




---



##### Table of Contents



The value of the reward and accrued as at December 31, 2009, was computed in accordance with
the formula prescribed in 2007 to 2009 LTIP, subject to the minimum and maximum award level to
be granted, following the terms and formula as described therein. The fair value of the 2007 to
2009 LTIP were estimated using an option pricing model, which considered annual stock
volatility, risk-free interest rates, dividends yield, the remaining life of options and share
price. The cost per share of the 2007 to 2009 LTIP, which amounted to Php1,029 as at December
31, 2009, was based on the computed minimum award level. The fair value of the 2007 to 2009
LTIP recognized as expense amounted to Php1,833 million and Php1,281 million for the years ended
December 31, 2009 and 2008, respectively. The outstanding 2007 to 2009 LTIP liability of
Php4,582 million as at December 31, 2009 was paid in April 2010. See Note 3  Managements Use
of Judgments, Estimates and Assumptions,
Note 5  Income and Expenses, Note 23  Accrued Expenses and Other Current Liabilities
and
Note 26  Contractual Obligations and Commercial Commitments.PensionDefined Benefit Pension PlansWe have defined benefit pension plans, covering substantially all of our permanent and regular
employees, excluding those employees of Smart and its subsidiary, I-Contacts, which require
contributions to be made to a separate administrative fund.Our actuarial valuation is performed every year-end. Based on the latest actuarial valuation,
the actual present value of accrued (prepaid) benefit costs, net periodic benefit costs and
average assumptions used in developing the valuation as at and for the years ended December 31,
2010, 2009 and 2008 are as follows:
 2010
    
    
    2009
    
    
    2008(in million pesos)Changes in present value of defined benefit obligations:Present value of defined benefit obligations at beginning of year
    
    
    17,399
    
    
    
    10,917
    
    
    
    10,160Interest costs
    
    
    1,559
    
    
    
    1,193
    
    
    
    834Current service costs
    
    
    997
    
    
    
    643
    
    
    
    600Actuarial losses (gains) on obligations
    
    
    (2,855
    )
    
    
    4,720
    
    
    
    (101
    )Liabilities of newly acquired subsidiaries
    
    
    
    
    
    
    19
    
    
    
    Actual benefits paid/settlements
    
    
    (2,504
    )
    
    
    (93
    )
    
    
    (576
    )Curtailment
    
    
    8
    
    
    
    
    
    
    
    Present value of defined benefit obligations at end of year
    
    
    14,604
    
    
    
    17,399
    
    
    
    10,917Changes in fair value of plan assets:Fair value of plan assets at beginning of year
    
    
    19,980
    
    
    
    7,168
    
    
    
    8,519Actual contributions
    
    
    (17
    )
    
    
    8,866
    
    
    
    914Expected return on plan assets
    
    
    2,340
    
    
    
    673
    
    
    
    865Actual benefits paid/settlements
    
    
    (2,481
    )
    
    
    (93
    )
    
    
    (576
    )Actuarial gains (losses) on plan assets
    
    
    179
    
    
    
    3,366
    
    
    
    (2,554
    )Fair value of plan assets at end of year
    
    
    20,001
    
    
    
    19,980
    
    
    
    7,168Unfunded (surplus) status  net
    
    
    (5,397
    )
    
    
    (2,581
    )
    
    
    3,749Unrecognized net actuarial gains (losses) (Note 3)
    
    
    479
    
    
    
    (2,474
    )
    
    
    (1,126
    )(4,918
    )
    
    
    (5,055
    )
    
    
    2,623Accrued benefit costs (Note 3)
    
    
    415
    
    
    
    359
    
    
    
    2,623Prepaid benefit costs (Notes 3 and 18)
    
    
    5,333
    
    
    
    5,414
    
    
    
    Components of net periodic benefit costs:Interest costs
    
    
    1,559
    
    
    
    1,193
    
    
    
    834Current service costs
    
    
    997
    
    
    
    643
    
    
    
    600Net actuarial losses (gains) recognized for the year
    
    
    23
    
    
    
    (3
    )
    
    
    (11
    )Event gains  net
    
    
    (62
    )
    
    
    
    
    
    
    Expected return on plan assets
    
    
    (2,340
    )
    
    
    (673
    )
    
    
    (865
    )Net periodic benefit costs (Notes 3 and 5)
    
    
    177
    
    
    
    1,160
    
    
    
    558
 Actual return on plan assets amounted to gain of Php2,519 million and Php4,036 million for
the years ended December 31, 2010 and 2009, respectively, and loss of Php1,690 million for the
year ended December 31, 2008.
 258




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(in million pesos)Present value of defined benefit obligation
    
    
    14,604
    
    
    
    17,399
    
    
    
    10,917
    
    
    
    10,160
    
    
    
    13,314Fair value of assets
    
    
    20,001
    
    
    
    19,980
    
    
    
    7,168
    
    
    
    8,519
    
    
    
    5,768Experience adjustment arising on:Liability (gain) loss due to experience
as percentage of defined benefit
obligation
    
    
    (1.43
    %)
    
    
    5.10
    %
    
    
    (7.23
    %)
    
    
    0.05
    %
    
    
    (1.61
    %)Asset (gain) loss due to experience as
percentage of plan assets
    
    
    0.77
    %
    
    
    16.86
    %
    
    
    (35.66
    %)
    
    
    14.01
    %
    
    
    5.96
    %
  2010
    
    
    2009
    
    
    2008Average remaining working years of covered employee
    
    
    19
    
    
    
    18
    
    
    
    20Expected rate of return on plan assets
    
    
    11
    %
    
    
    12
    %
    
    
    9
    %Discount rate
    
    
    8
    %
    
    
    9
    %
    
    
    11
    %Rate of increase in compensation
    
    
    8
    %
    
    
    9
    %
    
    
    10
    %
     2010
    
    
    2009
    
    
    2008Investments in listed and unlisted equity securities
    
    
    70
    %
    
    
    78
    %
    
    
    51
    %Temporary cash investments
    
    
    24
    %
    
    
    7
    %
    
    
    8
    %Investments in real estate
    
    
    3
    %
    
    
    5
    %
    
    
    9
    %Investments in debt and fixed income securities
    
    
    2
    %
    
    
    9
    %
    
    
    27
    %Investments in mutual funds
    
    
    1
    %
    
    
    1
    %
    
    
    5
    %100
    %
    
    
    100
    %
    
    
    100
    %
  Defined Contribution Plan
  259




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008Investments in debt and fixed income securities
    
    
    58
    %
    
    
    61
    %
    
    
    68
    %Investments in listed and unlisted equity securities
    
    
    37
    %
    
    
    34
    %
    
    
    23
    %Others
    
    
    5
    %
    
    
    5
    %
    
    
    9
    %100
    %
    
    
    100
    %
    
    
    100
    %
  Pension Benefit Costs
  2010
    
    
    2009
    
    
    2008(in million pesos)Expense recognized for defined benefit plans
    
    
    177
    
    
    
    1,160
    
    
    
    558Expense recognized for defined contribution plans
    
    
    59
    
    
    
    146
    
    
    
    167Total expense recognized for consolidated pension
benefit costs
(Notes 3 and 5)
    
    
    236
    
    
    
    1,306
    
    
    
    725
 Other Long-term Employee Benefits
 Note 3 
Managements Use of Judgments, Estimates and Assumptions
 Note 5  Income and Expenses
  (in million pesos)Components of net periodic benefit costs:Current service costs
    
    
    1,327Interest costs
    
    
    28Net actuarial loss
    
    
    37Net periodic benefit costs
    
    
    1,392
 260




---



##### Table of Contents



26. 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, 2010Debt(1):
    
    
    113,394
    
    
    
    6,569
    
    
    
    51,308
    
    
    
    33,978
    
    
    
    21,539Principal
    
    
    92,590
    
    
    
    6,206
    
    
    
    38,263
    
    
    
    29,335
    
    
    
    18,786Interest
    
    
    20,804
    
    
    
    363
    
    
    
    13,045
    
    
    
    4,643
    
    
    
    2,753Lease obligations:
    
    
    8,003
    
    
    
    4,383
    
    
    
    1,710
    
    
    
    948
    
    
    
    962Operating lease
    
    
    7,959
    
    
    
    4,353
    
    
    
    1,697
    
    
    
    947
    
    
    
    962Finance lease
    
    
    44
    
    
    
    30
    
    
    
    13
    
    
    
    1
    
    
    
    Unconditional purchase obligations(2)
    
    
    797
    
    
    
    271
    
    
    
    263
    
    
    
    263
    
    
    
    Other obligations:
    
    
    68,714
    
    
    
    50,247
    
    
    
    13,895
    
    
    
    683
    
    
    
    3,889Derivative financial liabilities(3):
    
    
    4,173
    
    
    
    
    
    
    
    1,667
    
    
    
    674
    
    
    
    1,832Long-term currency swaps
    
    
    4,173
    
    
    
    
    
    
    
    1,667
    
    
    
    674
    
    
    
    1,832Various trade and other obligations:
    
    
    64,541
    
    
    
    50,247
    
    
    
    12,228
    
    
    
    9
    
    
    
    2,057Suppliers and contractors
    
    
    32,997
    
    
    
    20,957
    
    
    
    12,040
    
    
    
    
    
    
    
    Utilities and related expenses
    
    
    16,477
    
    
    
    16,446
    
    
    
    10
    
    
    
    3
    
    
    
    18Employee benefits
    
    
    3,853
    
    
    
    3,853
    
    
    
    
    
    
    
    
    
    
    
    Customers deposits
    
    
    2,223
    
    
    
    
    
    
    
    178
    
    
    
    6
    
    
    
    2,039Dividends
    
    
    2,086
    
    
    
    2,086
    
    
    
    
    
    
    
    
    
    
    
    Carriers
    
    
    1,866
    
    
    
    1,866
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    5,039
    
    
    
    5,039
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    190,908
    
    
    
    61,470
    
    
    
    67,176
    
    
    
    35,872
    
    
    
    26,390December 31, 2009Debt(1):
    
    
    130,075
    
    
    
    5,241
    
    
    
    56,398
    
    
    
    38,073
    
    
    
    30,363Principal
    
    
    102,587
    
    
    
    4,876
    
    
    
    40,226
    
    
    
    31,953
    
    
    
    25,532Interest
    
    
    27,488
    
    
    
    365
    
    
    
    16,172
    
    
    
    6,120
    
    
    
    4,831Lease obligations:
    
    
    7,564
    
    
    
    3,778
    
    
    
    1,956
    
    
    
    994
    
    
    
    836Operating lease
    
    
    7,497
    
    
    
    3,730
    
    
    
    1,940
    
    
    
    991
    
    
    
    836Finance lease
    
    
    67
    
    
    
    48
    
    
    
    16
    
    
    
    3
    
    
    
    Unconditional purchase obligations(2)
    
    
    834
    
    
    
    137
    
    
    
    279
    
    
    
    279
    
    
    
    139Other obligations:
    
    
    64,456
    
    
    
    44,322
    
    
    
    15,528
    
    
    
    826
    
    
    
    3,780Derivative financial liabilities(3):
    
    
    4,759
    
    
    
    
    
    
    
    2,153
    
    
    
    789
    
    
    
    1,817Long-term currency swaps
    
    
    4,759
    
    
    
    
    
    
    
    2,153
    
    
    
    789
    
    
    
    1,817Various trade and other obligations:
    
    
    59,697
    
    
    
    44,322
    
    
    
    13,375
    
    
    
    37
    
    
    
    1,963Suppliers and contractors
    
    
    26,941
    
    
    
    14,975
    
    
    
    11,966
    
    
    
    
    
    
    
    Utilities and related expenses
    
    
    14,737
    
    
    
    14,687
    
    
    
    18
    
    
    
    5
    
    
    
    27Employee benefits
    
    
    8,082
    
    
    
    8,082
    
    
    
    
    
    
    
    
    
    
    
    Customers deposits
    
    
    2,166
    
    
    
    
    
    
    
    198
    
    
    
    32
    
    
    
    1,936Carriers
    
    
    1,937
    
    
    
    1,937
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    1,749
    
    
    
    1,749
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    4,085
    
    
    
    2,892
    
    
    
    1,193
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    202,929
    
    
    
    53,478
    
    
    
    74,161
    
    
    
    40,172
    
    
    
    35,118
 (1)
    
    Consists of notes payable and long-term debt, including current portion; gross of
unamortized debt discount and debt issuance costs.(2)
    
    Based on the Amended ATPA with AIL. See Note 24  Related Party Transactions.(3)
    
    Gross liabilities before any offsetting application.
 Debt
 Note 20  Interest-bearing Financial Liabilities
 Operating Lease Obligations
  261




---



##### Table of Contents



(in million pesos)Within one year
    
    
    4,469After one year but not more than five years
    
    
    2,528More than five years
    
    
    9627,959
 Finance Lease Obligations
 Note 20  Interest-bearing Financial Liabilities
 Unconditional Purchase Obligations
 Note 24  Related Party Transactions
  Other Obligations
 Derivative Financial Liabilities
 Note 28  Financial Assets and Liabilities
 Various Trade and Other Obligations
 Note 22  Accounts Payable Note 23  Accrued Expenses and Other Current Liabilities
 Commercial Commitments
  Note 28  Financial Assets and Liabilities
 27. Provisions and Contingencies
 NTC Supervision and Regulation Fees, or SRF
  262




---



##### Table of Contents



PLDTs Local Business and Franchise Tax Assessments
      263




---



##### Table of Contents



Smarts Local Business and Franchise Tax Assessments
 Smart Communications, Inc. vs. City of Makati
 Smart vs. City of Makati Smart vs. City of Makati
    264




---



##### Table of Contents



in lieu of all taxes in lieu of all taxes all" all taxes in lieu of
all taxes
  265




---



##### Table of Contents



PCEVs Local Franchise Tax Assessment
 Pilipino Telephone Corporation vs. City of Makati
and Andrea Pacita S. Guinto (Piltel vs. City of Makati)
 Piltel vs. City of Makati
 Real Property Tax Assessment
 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
  Matters Relating to a Third Party Aggregator
  266




---



##### Table of Contents



IAS 37, Provisions, Contingent Liabilities and Contingent Assets,
 28. Financial Assets and Liabilities
 Note 2  Summary of Significant
Accounting Policies
  Fair value
    
    
    
    
    
    
    
    TotalLoans
    
    Held-to-
    
    through
    
    Available-for-
    
    Liabilities
    
    financial
    
    Non-financialand
    
    maturity
    
    profit or
    
    sale financial
    
    carried at
    
    assets and
    
    assets andreceivables
    
    investments
    
    loss
    
    assets
    
    amortized cost
    
    liabilities
    
    liabilities
    
    Total(in million pesos)Assets as at December 31, 2010Noncurrent:Property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,184
    
    
    
    163,184Investments in associates and joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,203
    
    
    
    23,203Available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    147Investment in debt securities
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    484Investment properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,560
    
    
    
    1,560Goodwill and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,485
    
    
    
    11,485Deferred income tax assets  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,110
    
    
    
    6,110Derivative financial assets
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178Prepayments  net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,679
    
    
    
    8,679Advances and refundable deposits  net of current portion
    
    
    984
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    984
    
    
    
    203
    
    
    
    1,187Current:Cash and cash equivalents
    
    
    36,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,678
    
    
    
    
    
    
    
    36,678Short-term investments
    
    
    152
    
    
    
    
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    669
    
    
    
    
    
    
    
    669Trade and other receivables
    
    
    16,428
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,428
    
    
    
    
    
    
    
    16,428Inventories and supplies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,219
    
    
    
    2,219Derivative financial assets
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Current portion of prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,418
    
    
    
    5,418
 267




---



##### Table of Contents



Fair value
    
    
    
    
    
    
    
    TotalLoans
    
    Held-to-
    
    through
    
    Available-for-
    
    Liabilities
    
    financial
    
    Non-financialand
    
    maturity
    
    profit or
    
    sale financial
    
    carried at
    
    assets and
    
    assets andreceivables
    
    investments
    
    loss
    
    assets
    
    amortized cost
    
    liabilities
    
    liabilities
    
    Total(in million pesos)Current portion of advances and refundable deposits
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    165
    
    
    
    181Total assets
    
    
    54,258
    
    
    
    484
    
    
    
    700
    
    
    
    147
    
    
    
    
    
    
    
    55,589
    
    
    
    222,226
    
    
    
    277,815Liabilities as at December 31, 2010Noncurrent:Interest-bearing financial liabilities  net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,888
    
    
    
    75,888
    
    
    
    
    
    
    
    75,888Deferred income tax liabilities  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,099
    
    
    
    1,099Derivative financial liabilities
    
    
    
    
    
    
    
    
    
    
    3,604
    
    
    
    
    
    
    
    
    
    
    
    3,604
    
    
    
    
    
    
    
    3,604Pension and other employee benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,834
    
    
    
    1,834Customers deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,223
    
    
    
    2,223
    
    
    
    
    
    
    
    2,223Deferred credits and other noncurrent liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,041
    
    
    
    12,041
    
    
    
    1,526
    
    
    
    13,567Current:Accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,673
    
    
    
    23,673
    
    
    
    2,131
    
    
    
    25,804Accrued expenses and other current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,822
    
    
    
    28,822
    
    
    
    7,137
    
    
    
    35,959Provision for assessments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,555
    
    
    
    1,555Current portion of interest-bearing financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,801
    
    
    
    13,801
    
    
    
    
    
    
    
    13,801Dividends payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    
    2,086
    
    
    
    
    
    
    
    2,086Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,010
    
    
    
    3,010Total liabilities
    
    
    
    
    
    
    
    
    
    
    3,604
    
    
    
    
    
    
    
    158,534
    
    
    
    162,138
    
    
    
    18,292
    
    
    
    180,430Net assets (liabilities)
    
    
    54,258
    
    
    
    484
    
    
    
    (2,904
    )
    
    
    147
    
    
    
    (158,534
    )
    
    
    (106,549
    )
    
    
    203,934
    
    
    
    97,385Assets as at December 31, 2009Noncurrent:Property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,256
    
    
    
    161,256Investments in associates and joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,233
    
    
    
    22,233Available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    
    
    
    
    134
    
    
    
    
    
    
    
    134Investment in debt securities
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    462Investment properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,210
    
    
    
    1,210Goodwill and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,024
    
    
    
    13,024Deferred income tax assets  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,721
    
    
    
    7,721Prepayments  net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,663
    
    
    
    8,663Advances and refundable deposits  net of current portion
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842
    
    
    
    260
    
    
    
    1,102Current:Cash and cash equivalents
    
    
    38,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,319
    
    
    
    
    
    
    
    38,319Short-term investments
    
    
    3,338
    
    
    
    
    
    
    
    486
    
    
    
    
    
    
    
    
    
    
    
    3,824
    
    
    
    
    
    
    
    3,824Trade and other receivables
    
    
    14,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,729
    
    
    
    
    
    
    
    14,729Inventories and supplies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,165
    
    
    
    2,165Derivative financial assets
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Current portion of prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,098
    
    
    
    5,098Current portion of advances and refundable deposits
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    195
    
    
    
    202Total assets
    
    
    57,235
    
    
    
    462
    
    
    
    492
    
    
    
    134
    
    
    
    
    
    
    
    58,323
    
    
    
    221,825
    
    
    
    280,148Liabilities as at December 31, 2009Noncurrent:Interest-bearing financial liabilities  net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,079
    
    
    
    86,079
    
    
    
    
    
    
    
    86,079Deferred income tax liabilities  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,321
    
    
    
    1,321Derivative financial liabilities
    
    
    
    
    
    
    
    
    
    
    2,751
    
    
    
    
    
    
    
    
    
    
    
    2,751
    
    
    
    
    
    
    
    2,751Pension and other employee benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    374
    
    
    
    374Customers deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,166
    
    
    
    2,166
    
    
    
    
    
    
    
    2,166Deferred credits and other noncurrent liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,159
    
    
    
    13,159
    
    
    
    1,279
    
    
    
    14,438Current:Accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,698
    
    
    
    17,698
    
    
    
    1,903
    
    
    
    19,601Accrued expenses and other current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,752
    
    
    
    28,752
    
    
    
    6,694
    
    
    
    35,446Provision for assessments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,555
    
    
    
    1,555Current portion of interest-bearing financial liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,714
    
    
    
    12,714
    
    
    
    
    
    
    
    12,714Dividends payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,749
    
    
    
    1,749
    
    
    
    
    
    
    
    1,749Income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,829
    
    
    
    2,829Total liabilities
    
    
    
    
    
    
    
    
    
    
    2,751
    
    
    
    
    
    
    
    162,317
    
    
    
    165,068
    
    
    
    15,955
    
    
    
    181,023Net assets (liabilities)
    
    
    57,235
    
    
    
    462
    
    
    
    (2,259
    )
    
    
    134
    
    
    
    (162,317
    )
    
    
    (106,745
    )
    
    
    205,870
    
    
    
    99,125
 268




---



##### Table of Contents



Carrying Value
    
    Fair Value2010
    
    
    2009
    
    
    2010
    
    
    2009(in million pesos)Noncurrent Financial AssetsAvailable-for-sale financial assets:Listed equity securities
    
    
    78
    
    
    
    68
    
    
    
    78
    
    
    
    68Unlisted equity securities
    
    
    69
    
    
    
    66
    
    
    
    69
    
    
    
    66Investment in debt securities
    
    
    484
    
    
    
    462
    
    
    
    502
    
    
    
    474Derivative financial assets:Long-term currency swap
    
    
    178
    
    
    
    
    
    
    
    178
    
    
    
    Advances and refundable deposits  net of current portion
    
    
    984
    
    
    
    842
    
    
    
    915
    
    
    
    732Total noncurrent financial assets
    
    
    1,793
    
    
    
    1,438
    
    
    
    1,742
    
    
    
    1,340Current Financial AssetsCash and cash equivalents:Cash on hand and in banks
    
    
    2,906
    
    
    
    3,300
    
    
    
    2,906
    
    
    
    3,300Temporary cash investments
    
    
    33,772
    
    
    
    35,019
    
    
    
    33,772
    
    
    
    35,019Short-term investments
    
    
    669
    
    
    
    3,824
    
    
    
    669
    
    
    
    3,824Trade and other receivables  net:Foreign administrations
    
    
    4,321
    
    
    
    4,064
    
    
    
    4,321
    
    
    
    4,064Retail subscribers
    
    
    3,872
    
    
    
    3,546
    
    
    
    3,872
    
    
    
    3,546Corporate subscribers
    
    
    2,042
    
    
    
    2,429
    
    
    
    2,042
    
    
    
    2,429Domestic carriers
    
    
    1,453
    
    
    
    1,184
    
    
    
    1,453
    
    
    
    1,184Dealers, agents and others
    
    
    4,740
    
    
    
    3,506
    
    
    
    4,740
    
    
    
    3,506Derivative financial assets:Bifurcated embedded derivatives
    
    
    5
    
    
    
    6
    
    
    
    5
    
    
    
    6Current portion of advances and refundable deposits
    
    
    16
    
    
    
    7
    
    
    
    16
    
    
    
    7Total current financial assets
    
    
    53,796
    
    
    
    56,885
    
    
    
    53,796
    
    
    
    56,885Total Financial Assets
    
    
    55,589
    
    
    
    58,323
    
    
    
    55,538
    
    
    
    58,225Noncurrent Financial LiabilitiesInterest-bearing financial liabilities:Long-term debt  net of current portion
    
    
    75,879
    
    
    
    86,066
    
    
    
    82,244
    
    
    
    88,383Obligations under finance lease
    
    
    9
    
    
    
    13
    
    
    
    8
    
    
    
    12Derivative financial liabilities:Long-term currency swap
    
    
    3,604
    
    
    
    2,751
    
    
    
    3,604
    
    
    
    2,751Customers deposits
    
    
    2,223
    
    
    
    2,166
    
    
    
    1,701
    
    
    
    1,375Deferred credits and other noncurrent liabilities
    
    
    12,041
    
    
    
    13,159
    
    
    
    11,457
    
    
    
    11,629Total noncurrent financial liabilities
    
    
    93,756
    
    
    
    104,155
    
    
    
    99,014
    
    
    
    104,150Current Financial LiabilitiesAccounts payable:Suppliers and contractors
    
    
    20,957
    
    
    
    14,975
    
    
    
    20,957
    
    
    
    14,975Carriers
    
    
    1,866
    
    
    
    1,937
    
    
    
    1,866
    
    
    
    1,937Related parties
    
    
    244
    
    
    
    233
    
    
    
    244
    
    
    
    233Others
    
    
    606
    
    
    
    553
    
    
    
    606
    
    
    
    553Accrued expenses and other current liabilities:Utilities and related expenses
    
    
    19,739
    
    
    
    17,388
    
    
    
    19,739
    
    
    
    17,388Employee benefits
    
    
    3,852
    
    
    
    8,071
    
    
    
    3,852
    
    
    
    8,071Interests and other related costs
    
    
    1,028
    
    
    
    1,167
    
    
    
    1,028
    
    
    
    1,167Liability arising from purchase of investment
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    65Others
    
    
    4,203
    
    
    
    2,061
    
    
    
    4,203
    
    
    
    2,061Interest-bearing financial liabilities:Current portion of long-term debt
    
    
    13,767
    
    
    
    10,384
    
    
    
    13,767
    
    
    
    10,384Obligations under finance lease
    
    
    34
    
    
    
    51
    
    
    
    34
    
    
    
    51Notes payable
    
    
    
    
    
    
    2,279
    
    
    
    
    
    
    
    2,279Dividends payable
    
    
    2,086
    
    
    
    1,749
    
    
    
    2,086
    
    
    
    1,749Total current financial liabilities
    
    
    68,382
    
    
    
    60,913
    
    
    
    68,382
    
    
    
    60,913Total Financial Liabilities
    
    
    162,138
    
    
    
    165,068
    
    
    
    167,396
    
    
    
    165,063
 269




---



##### Table of Contents



2010
    
    2009Level 1(1)
    
    Level 2(2)
    
    Total
    
    Level 1(1)
    
    Level 2(2)
    
    Total(in million pesos)Noncurrent Financial AssetsAvailable-for-sale financial
assets  Listed equity
securities
    
    
    78
    
    
    
    
    
    
    
    78
    
    
    
    68
    
    
    
    
    
    
    
    68Derivative financial assets
    
    
    
    
    
    
    178
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    Current Financial AssetsShort-term investments
    
    
    
    
    
    
    517
    
    
    
    517
    
    
    
    
    
    
    
    486
    
    
    
    486Derivative financial assets
    
    
    
    
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    6
    
    
    
    6Total
    
    
    78
    
    
    
    700
    
    
    
    778
    
    
    
    68
    
    
    
    492
    
    
    
    560Noncurrent Financial LiabilitiesDerivative financial liabilities
    
    
    
    
    
    
    3,604
    
    
    
    3,604
    
    
    
    
    
    
    
    2,751
    
    
    
    2,751Total
    
    
    
    
    
    
    3,604
    
    
    
    3,604
    
    
    
    
    
    
    
    2,751
    
    
    
    2,751
 (1)
    
    Fair values determined using observable market inputs that reflect quoted prices
in active markets for identical assets or liabilities.(2)
    
    Fair values determined using inputs other than quoted prices that are either
directly or indirectly observable for the assets or liabilities.
    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 
Other loans in all other currencies
    
    Quoted market price.
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.
 Derivative Financial Instruments:
 Foreign currency options:
 Forward foreign exchange contracts, bifurcated foreign currency forwards and foreign
currency swaps:
 Available-for-sale financial assets:
 Investment in debt securities:
 270




---



##### Table of Contents



Derivative Financial Instruments
   2010
    
    2009Mark-to-Mark-to-market
    
    
    
    
    
    
    market GainsMaturity
    
    
    Notional
    
    
    Gains (Losses)
    
    
    Notional
    
    
    (Losses)(in millions)PLDTCurrency swaps
    
    
    2017
    
    
    US$
    222
    
    
    Php
    (2,651
    )
    
    US$
    245
    
    
    Php
    (1,803
    )2012
    
    
    
    100
    
    
    
    (953
    )
    
    
    146
    
    
    
    (948
    )2012
    
    
    
    60
    (1)
    
    
    178
    
    
    
    
    
    
    
    (3,426
    )
    
    
    
    
    
    
    (2,751
    )ePLDTBifurcated embedded derivatives
    
    
    2012
    
    
    
    1
    
    
    
    5
    
    
    
    1
    
    
    
    4SmartBifurcated embedded derivatives
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Net liabilities
    
    
    
    
    
    
    
    
    
    Php
    (3,421
    )
    
    
    
    
    
    Php
    (2,745
    )
 (1)
    
    Overlay principal only swap agreements to effectively unwind a portion of the
outstanding long-term principal only swap agreement maturing in 2012.
 2010
    
    
    2009(in million pesos)Presented as:Noncurrent assets
    
    
    178
    
    
    
    Current assets
    
    
    5
    
    
    
    6Noncurrent liabilities
    
    
    (3,604
    )
    
    
    (2,751
    )Net liabilities
    
    
    (3,421
    )
    
    
    (2,745
    )
  2010
    
    
    2009
    
    
    2008(in million pesos)Net mark-to-market losses at end of year
    
    
    (3,421
    )
    
    
    (2,745
    )
    
    
    (1,792
    )Net mark-to-market losses at beginning of year
    
    
    (2,745
    )
    
    
    (1,792
    )
    
    
    (7,027
    )Net change
    
    
    (676
    )
    
    
    (953
    )
    
    
    5,235Hedge cost
    
    
    (434
    )
    
    
    (599
    )
    
    
    (819
    )Settlements, accretion and conversion
    
    
    (631
    )
    
    
    546
    
    
    
    (2,367
    )Net losses on cash flow hedges charged to other comprehensive income
    
    
    
    
    
    
    
    
    
    
    662Effective portion recognized in the profit or loss for the cash flow hedge
    
    
    
    
    
    
    
    
    
    
    286Ineffective portion recognized in the profit or loss for the cash flow hedge
    
    
    
    
    
    
    
    
    
    
    118Net gains (losses) on derivative financial instruments (Note 4)
    
    
    (1,741
    )
    
    
    (1,006
    )
    
    
    3,115
 271




---



##### Table of Contents



PLDT
  Currency Swaps
      ePLDT
  Smart
  Financial Risk Management Objectives and Policies
 272




---



##### Table of Contents



Liquidity Risk
    Note 15  Cash and Cash Equivalents. Note 26  Contractual Obligations
and Commercial Commitments.
 Foreign Currency Exchange Risk
   273




---



##### Table of Contents



2010
    
    2009U.S. Dollar
    
    
    Php(1)
    
    
    U.S. Dollar
    
    
    Php(2)(in millions)Noncurrent Financial AssetsNote receivable
    
    
    2
    
    
    
    84
    
    
    
    2
    
    
    
    81Derivative financial assets
    
    
    4
    
    
    
    178
    
    
    
    
    
    
    
    Advances and refundable deposits
    
    
    1
    
    
    
    38
    
    
    
    
    
    
    
    7Total noncurrent financial assets
    
    
    7
    
    
    
    300
    
    
    
    2
    
    
    
    88Current Financial AssetsCash and cash equivalents
    
    
    138
    
    
    
    6,050
    
    
    
    140
    
    
    
    6,496Short-term investments
    
    
    15
    
    
    
    652
    
    
    
    47
    
    
    
    2,164Trade and other receivables  net
    
    
    214
    
    
    
    9,361
    
    
    
    206
    
    
    
    9,573Derivative financial assets
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    6Total current financial assets
    
    
    367
    
    
    
    16,068
    
    
    
    393
    
    
    
    18,239Total Financial Assets
    
    
    374
    
    
    
    16,368
    
    
    
    395
    
    
    
    18,327Noncurrent Financial LiabilitiesInterest-bearing financial liabilities  net of current portion
    
    
    782
    
    
    
    34,244
    
    
    
    837
    
    
    
    38,871Derivative financial liabilities
    
    
    82
    
    
    
    3,604
    
    
    
    59
    
    
    
    2,751Total noncurrent financial liabilities
    
    
    864
    
    
    
    37,848
    
    
    
    896
    
    
    
    41,622Current Financial LiabilitiesAccounts payable
    
    
    169
    
    
    
    7,415
    
    
    
    155
    
    
    
    7,180Accrued expenses and other current liabilities
    
    
    143
    
    
    
    6,267
    
    
    
    95
    
    
    
    4,409Current portion of interest-bearing financial liabilities
    
    
    103
    
    
    
    4,537
    
    
    
    155
    
    
    
    7,220Total current financial liabilities
    
    
    415
    
    
    
    18,219
    
    
    
    405
    
    
    
    18,809Total Financial Liabilities
    
    
    1,279
    
    
    
    56,067
    
    
    
    1,301
    
    
    
    60,431
 (1)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso
was Php43.81 to US$1.00, the peso-dollar exchange rate as quoted through the Philippine
Dealing System as at December 31, 2010.(2)
    
    The exchange rate used to translate the U.S. dollar amounts into Philippine peso
was Php46.43 to US$1.00, the peso-dollar exchange rate as quoted through the Philippine
Dealing System as at December 31, 2009.
  Note 20  Interest-bearing Financial
Liabilities
  Note 4  Operating Segment
Information
 274




---



##### Table of Contents



Interest Rate Risk
    As at December 31, 2010
 Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. Dollar
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    474
    
    
    
    
    
    
    
    474
    
    
    
    11
    
    
    
    474Interest rate
    
    
    0.0025% to 0.7840%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    1,362
    
    
    
    
    
    
    
    1,362
    
    
    
    31
    
    
    
    1,362Interest rate
    
    
    0.0625% to 2.9000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Currencies
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    118
    
    
    
    
    
    
    
    118
    
    
    
    3
    
    
    
    118Interest rate
    
    
    0.0100% to 2.4000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    4,813
    
    
    
    
    
    
    
    4,813
    
    
    
    110
    
    
    
    4,813Interest rate
    
    
    0.1000% to 1.7000%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    28,959
    
    
    
    
    
    
    
    28,959
    
    
    
    661
    
    
    
    28,959Interest rate
    
    
    1.0000% to 4.8100%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    652
    
    
    
    
    
    
    
    652
    
    
    
    15
    
    
    
    652Interest rate
    
    
    1.9000% to 10.672%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Interest rate
    
    
    3.2500
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt
SecuritiesPhilippine Peso
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    3
    
    
    
    
    
    
    
    11
    
    
    
    484
    
    
    
    
    
    
    
    484
    
    
    
    11
    
    
    
    502Interest rate
    
    
    
    
    
    
    
    
    
    
    6.8750
    %
    
    
    7.0000
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    
    
    
    
    8
    
    
    
    3
    
    
    
    
    
    
    
    842
    
    
    
    36,879
    
    
    
    
    
    
    
    36,879
    
    
    
    842
    
    
    
    36,897
 275




---



##### Table of Contents



Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Liabilities:Long-term DebtFixed RateU.S. Dollar Notes
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    380
    
    
    
    16,650
    
    
    
    200
    
    
    
    16,450
    
    
    
    440
    
    
    
    19,274Interest rate
    
    
    
    
    
    
    11.3750
    %
    
    
    
    
    
    
    
    
    
    
    8.3500
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Dollar Fixed
Loans
    
    
    9
    
    
    
    29
    
    
    
    15
    
    
    
    295
    
    
    
    
    
    
    
    348
    
    
    
    15,264
    
    
    
    2,586
    
    
    
    12,678
    
    
    
    276
    
    
    
    12,120Interest rate
    
    
    4.7000
    %
    
    
    2.9900% to 3.7900
    %
    
    
    2.9900% to 3.7900
    %
    
    
    2.2500% to2.9900
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    68
    
    
    
    146
    
    
    
    121
    
    
    
    339
    
    
    
    195
    
    
    
    869
    
    
    
    38,066
    
    
    
    74
    
    
    
    37,992
    
    
    
    961
    
    
    
    42,091Interest rate
    
    
    6.0323% to 8.7792
    %
    
    
    5.6250% to 8.4346
    %
    
    
    6.5000% to 8.4346
    %
    
    
    6.5000% to 9.1038
    %
    
    
    6.5000% to 9.1038%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    6
    
    
    
    148
    
    
    
    45
    
    
    
    15
    
    
    
    
    
    
    
    214
    
    
    
    9,357
    
    
    
    71
    
    
    
    9,286
    
    
    
    212
    
    
    
    9,286Interest rate
    
    
    US$ LIBOR + 0.8150%
    
    
    
    Swap rate + 2.7900%;
    
    
    
    Swap rate + 2.7900%;
    
    
    
    Swap rate + 2.7900%;US$ LIBOR + 0.4200% to 1.8500%
    
    
    
    US$ LIBOR + 0.4200%
    
    
    
    US$ LIBOR + 1.3500%to 1.8500%
    
    
    
    to 1.8500%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    58
    
    
    
    150
    
    
    
    74
    
    
    
    20
    
    
    
    
    
    
    
    302
    
    
    
    13,253
    
    
    
    13
    
    
    
    13,240
    
    
    
    302
    
    
    
    13,240Interest rate
    
    
    PDST-F + 0.3000% to
    
    
    
    PDST-F + 0.3000% to 1.3750%;1.2500%
    
    
    
    AUBs prime rate
    
    
    
    PDST-F + 0.3000
    %
    
    
    PDST-F + 0.3000
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    619
    
    
    
    255
    
    
    
    669
    
    
    
    429
    
    
    
    2,113
    
    
    
    92,590
    
    
    
    2,944
    
    
    
    89,646
    
    
    
    2,191
    
    
    
    96,011
 As at December 31, 2009
 Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Assets:Cash in BankU.S. Dollar
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    540
    
    
    
    
    
    
    
    540
    
    
    
    11
    
    
    
    540Interest rate
    
    
    0.0025% to 0.88
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    1,673
    
    
    
    
    
    
    
    1,673
    
    
    
    36
    
    
    
    1,673Interest rate
    
    0.625% to 2.90%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Currencies
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    31
    
    
    
    
    
    
    
    31
    
    
    
    1
    
    
    
    31Interest rate
    
    
    0.0014 to 2.40
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Temporary Cash InvestmentsU.S. Dollar
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    17,870
    
    
    
    
    
    
    
    17,870
    
    
    
    384
    
    
    
    17,870Interest rate
    
    0.50% to 1.75%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369
    
    
    
    17,149
    
    
    
    
    
    
    
    17,149
    
    
    
    369
    
    
    
    17,149Interest rate
    
    1.25% to 5.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term InvestmentsU.S. Dollar
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    2,132
    
    
    
    
    
    
    
    2,132
    
    
    
    46
    
    
    
    2,132Interest rate
    
    4.25% to 7.006%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    1,692
    
    
    
    
    
    
    
    1,692
    
    
    
    36
    
    
    
    1,692Interest rate
    
    
    4.40
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Debt SecuritiesPhilippine Peso
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    462
    
    
    
    
    
    
    
    462
    
    
    
    10
    
    
    
    474Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.92
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    883
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    893
    
    
    
    41,549
    
    
    
    
    
    
    
    41,549
    
    
    
    893
    
    
    
    41,561Liabilities:Long-term DebtFixed RateU.S. Dollar Notes
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    245
    
    
    
    391
    
    
    
    18,161
    
    
    
    285
    
    
    
    17,876
    
    
    
    449
    
    
    
    20,837Interest rate
    
    
    
    
    
    
    
    
    
    
    11.375
    %
    
    
    
    
    
    
    8.350
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Dollar Fixed Loans
    
    
    14
    
    
    
    27
    
    
    
    5
    
    
    
    285
    
    
    
    
    
    
    
    331
    
    
    
    15,397
    
    
    
    3,338
    
    
    
    12,059
    
    
    
    229
    
    
    
    10,654Interest rate
    
    
    4.515
    %
    
    
    3.79% to 4.70
    %
    
    
    3.79
    %
    
    
    2.25% to3.79
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    63
    
    
    
    126
    
    
    
    236
    
    
    
    305
    
    
    
    730
    
    
    
    33,858
    
    
    
    84
    
    
    
    33,774
    
    
    
    744
    
    
    
    34,535Interest rate
    
    
    
    
    
    
    6.0323% to 8.4346
    %
    
    
    5.625% to 8.4346
    %
    
    
    6.125% to 9.1038
    %
    
    
    6.50% to9.1038
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable RateU.S. Dollar
    
    
    41
    
    
    
    160
    
    
    
    74
    
    
    
    60
    
    
    
    
    
    
    
    335
    
    
    
    15,543
    
    
    
    124
    
    
    
    15,419
    
    
    
    332
    
    
    
    15,419Interest rate
    
    
    US$ LIBOR + 0.05% to 2.5%
    
    
    
    US$ LIBOR + 0.42% to 1.85%;
    
    
    
    US$ LIBOR + 0.42% to 1.85%;
    
    
    
    US$ LIBOR + 0.42% to 1.85%;swap rate + 2.79%
    
    
    
    swap rate + 2.79%
    
    
    
    swap rate + 2.79%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    
    
    
    
    185
    
    
    
    81
    
    
    
    107
    
    
    
    
    
    
    
    373
    
    
    
    17,349
    
    
    
    27
    
    
    
    17,322
    
    
    
    373
    
    
    
    17,322
 276




---



##### Table of Contents



Discount/DebtIssuance
    
    
    Carrying
    
    
    Fair ValueIn U.S. Dollar
    
    
    
    
    
    
    Cost
    
    
    Value
    
    
    In U.S.Below 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    Total
    
    
    In Php
    
    
    In Php
    
    
    In Php
    
    
    Dollar
    
    
    In Php(in millions)Interest rate
    
    
    
    
    
    
    PDST-F + 0.75% to
    
    
    
    PDST-F + 1.0% to
    
    
    
    PDST-F +
    
    
    
    1.5%; AUBs prime rate
    
    
    
    1.50%; AUBs prime rate
    
    
    
    1.0% to1.50%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term DebtNotes PayableU.S. Dollar
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    279
    
    
    
    
    
    
    
    279
    
    
    
    6
    
    
    
    279Interest rate
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Philippine Peso
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    2,000
    
    
    
    
    
    
    
    2,000
    
    
    
    43
    
    
    
    2,000Interest rate
    
    PDST-F + 1.5%;6.0896%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    435
    
    
    
    432
    
    
    
    688
    
    
    
    550
    
    
    
    2,209
    
    
    
    102,587
    
    
    
    3,858
    
    
    
    98,729
    
    
    
    2,176
    
    
    
    101,046
    Credit Risk
    277




---



##### Table of Contents



Gross Maximum Exposure(1)
    
    Net Maximum Exposure(2)2010
    
    
    2009
    
    
    2010
    
    
    2009(in million pesos)Loans and receivables:Advances and refundable deposits
    
    
    1,000
    
    
    
    849
    
    
    
    999
    
    
    
    848Cash and cash equivalents
    
    
    36,678
    
    
    
    38,319
    
    
    
    36,458
    
    
    
    38,101Short-term investments
    
    
    152
    
    
    
    3,338
    
    
    
    152
    
    
    
    3,338Foreign administrations
    
    
    4,321
    
    
    
    4,064
    
    
    
    4,277
    
    
    
    4,011Retail subscribers
    
    
    3,872
    
    
    
    3,546
    
    
    
    3,799
    
    
    
    3,505Corporate subscribers
    
    
    2,042
    
    
    
    2,429
    
    
    
    1,918
    
    
    
    2,328Domestic carriers
    
    
    1,453
    
    
    
    1,184
    
    
    
    1,453
    
    
    
    1,184Dealers, agents and others
    
    
    4,740
    
    
    
    3,506
    
    
    
    4,740
    
    
    
    3,506Held-to-maturity investments:Investment in debt securities
    
    
    484
    
    
    
    462
    
    
    
    484
    
    
    
    462Available-for-sale financial assets
    
    
    147
    
    
    
    134
    
    
    
    147
    
    
    
    134Fair value through profit or loss:Short-term investments
    
    
    517
    
    
    
    486
    
    
    
    517
    
    
    
    486Long-term currency swap
    
    
    178
    
    
    
    
    
    
    
    178
    
    
    
    Bifurcated embedded derivatives
    
    
    5
    
    
    
    6
    
    
    
    5
    
    
    
    6Total
    
    
    55,589
    
    
    
    58,323
    
    
    
    55,127
    
    
    
    57,909
 (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.
 278




---



##### Table of Contents



Neither past duenor impaired
    
    Past due butTotal
    
    
    Class A(1)
    
    
    Class B(2)
    
    
    not impaired
    
    
    Impaired(in million pesos)December 31, 2010Loans and receivables:Advances and refundable deposits
    
    
    1,000
    
    
    
    951
    
    
    
    49
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    36,678
    
    
    
    35,368
    
    
    
    1,310
    
    
    
    
    
    
    
    Short-term investments
    
    
    152
    
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,917
    
    
    
    946
    
    
    
    926
    
    
    
    2,000
    
    
    
    5,045Corporate subscribers
    
    
    7,998
    
    
    
    393
    
    
    
    612
    
    
    
    1,037
    
    
    
    5,956Foreign administrations
    
    
    4,479
    
    
    
    1,756
    
    
    
    699
    
    
    
    1,866
    
    
    
    158Domestic carriers
    
    
    1,591
    
    
    
    191
    
    
    
    23
    
    
    
    1,239
    
    
    
    138Dealers, agents and others
    
    
    5,273
    
    
    
    2,599
    
    
    
    2,013
    
    
    
    128
    
    
    
    533Held-to-maturity investments:Investment in debt securities
    
    
    484
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    147
    
    
    
    108
    
    
    
    39
    
    
    
    
    
    
    
    Fair value through profit or loss(3):Short-term investments
    
    
    517
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    Long-term currency swap
    
    
    178
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    67,419
    
    
    
    43,648
    
    
    
    5,671
    
    
    
    6,270
    
    
    
    11,830December 31, 2009Loans and receivables:Advances and refundable deposits
    
    
    849
    
    
    
    790
    
    
    
    59
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    38,319
    
    
    
    37,767
    
    
    
    552
    
    
    
    
    
    
    
    Short-term investments
    
    
    3,338
    
    
    
    2,971
    
    
    
    367
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,106
    
    
    
    1,078
    
    
    
    283
    
    
    
    1,068
    
    
    
    6,677Retail subscribers
    
    
    8,026
    
    
    
    1,236
    
    
    
    518
    
    
    
    1,792
    
    
    
    4,480Foreign administrations
    
    
    4,353
    
    
    
    1,261
    
    
    
    451
    
    
    
    2,352
    
    
    
    289Domestic carriers
    
    
    1,267
    
    
    
    157
    
    
    
    8
    
    
    
    1,019
    
    
    
    83Dealers, agents and others
    
    
    3,927
    
    
    
    2,068
    
    
    
    1,022
    
    
    
    416
    
    
    
    421Held-to-maturity investments:Investment in debt securities
    
    
    462
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    134
    
    
    
    103
    
    
    
    31
    
    
    
    
    
    
    
    Fair value through profit or loss(3):Short-term investments
    
    
    486
    
    
    
    486
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    70,273
    
    
    
    48,385
    
    
    
    3,291
    
    
    
    6,647
    
    
    
    11,950
 (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.(3)
    
    Gross receivables from counterparties, before any offsetting arrangements.
 279




---



##### 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)December 31, 2010Loans and receivables:Advances and refundable deposits
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    36,678
    
    
    
    36,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    152
    
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retail subscribers
    
    
    8,917
    
    
    
    1,872
    
    
    
    1,387
    
    
    
    150
    
    
    
    463
    
    
    
    5,045Corporate subscribers
    
    
    7,998
    
    
    
    1,005
    
    
    
    642
    
    
    
    159
    
    
    
    236
    
    
    
    5,956Foreign administrations
    
    
    4,479
    
    
    
    2,455
    
    
    
    616
    
    
    
    393
    
    
    
    857
    
    
    
    158Domestic carriers
    
    
    1,591
    
    
    
    214
    
    
    
    165
    
    
    
    182
    
    
    
    892
    
    
    
    138Dealers, agents and others
    
    
    5,273
    
    
    
    4,612
    
    
    
    21
    
    
    
    20
    
    
    
    87
    
    
    
    533Held-to-maturity investments:Investment in debt securities
    
    
    484
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    147
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value through profit or loss:Short-term investments
    
    
    517
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term currency swap
    
    
    178
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    67,419
    
    
    
    49,319
    
    
    
    2,831
    
    
    
    904
    
    
    
    2,535
    
    
    
    11,830December 31, 2009Loans and receivables:Advances and refundable deposits
    
    
    849
    
    
    
    849
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    38,319
    
    
    
    38,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    3,338
    
    
    
    3,338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate subscribers
    
    
    9,106
    
    
    
    1,361
    
    
    
    433
    
    
    
    198
    
    
    
    437
    
    
    
    6,677Retail subscribers
    
    
    8,026
    
    
    
    1,754
    
    
    
    1,362
    
    
    
    184
    
    
    
    246
    
    
    
    4,480Foreign administrations
    
    
    4,353
    
    
    
    1,712
    
    
    
    1,320
    
    
    
    405
    
    
    
    627
    
    
    
    289Domestic carriers
    
    
    1,267
    
    
    
    165
    
    
    
    283
    
    
    
    293
    
    
    
    443
    
    
    
    83Dealers, agents and others
    
    
    3,927
    
    
    
    3,090
    
    
    
    332
    
    
    
    21
    
    
    
    63
    
    
    
    421Held-to-maturity investments:Investment in debt securities
    
    
    462
    
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    134
    
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value through profit or loss:Short-term investments
    
    
    486
    
    
    
    486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bifurcated embedded derivatives
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    70,273
    
    
    
    51,676
    
    
    
    3,730
    
    
    
    1,101
    
    
    
    1,816
    
    
    
    11,950
 Impairment Assessments
  Individually assessed allowance
  Collectively assessed allowances
  280




---



##### Table of Contents



Capital Management Risk
    Note 8  Earnings Per Common
Share Note 19  Equity
    2010
    
    
    2009(in million pesos)Long-term debt, including current portion (Note 20)
    
    
    89,646
    
    
    
    96,450Notes payable (Note 20)
    
    
    
    
    
    
    2,279Total consolidated debt
    
    
    89,646
    
    
    
    98,729Cash and cash equivalents (Note 15)
    
    
    (36,678
    )
    
    
    (38,319
    )Short-term investments
    
    
    (669
    )
    
    
    (3,824
    )Net consolidated debt
    
    
    52,299
    
    
    
    56,586Equity attributable to equity holders of PLDT
    
    
    97,069
    
    
    
    98,575Net consolidated debt to equity ratio
    
    
    54
    %
    
    
    57
    %
 281




---



##### Table of Contents



29. Cash Flow Information
  2010
    
    
    2009
    
    
    2008(in million pesos)Transfer of Meralco shares to Beacon (Note 10)
    
    
    15,083
    
    
    
    
    
    
    
    Recognition of asset retirement obligations (Note 21)
    
    
    49
    
    
    
    17
    
    
    
    70Conversion of preferred stock subject to mandatory redemption
    
    
    
    
    
    
    9
    
    
    
    1,077
 30. Subsequent Event
 PLDTs Acquisition of Digital Telecommunications Philippines, Inc., or Digitel
 Sun Cellular
      282




---



##### Table of Contents



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 August 3, 2010) (incorporated by reference to PLDTs Form 20-F as filed
with the Securities and Exchange Commission on March 29, 2011)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
 283




---



##### Table of Contents



PHILIPPINE LONG DISTANCE TELEPHONE COMPANYBy:

/s/ Ma. Lourdes C. Rausa-ChanMA. LOURDES C. RAUSA-CHANSenior Vice President, Corporate Affairs and Legal
Services Head and Corporate Secretary 284




---



##### 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)
    
    Amended By-Laws (as amended on August 3, 2010)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 PCEV, PCEV (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
 285