cover sheet - PLDT.com

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SEC Registration Number 

D I G I T A L T E L E C O M M U N I C A T I O N S P H I L S . 

, I N C . A N D S U B S I D I A R I E S 

(Company‟s Full Name) 

U R C C o m P o u n d , 1 1 0 E . R o d r i g u e z , J 

r . A v e n u e , B a g u m b a y a n , Q u e z o n C i t 

y 

(Business Address: No. Street City/Town/Province) 

Jaime I. Cabangis 397-8888 

(Contact Person) (Company Telephone Number) 

1 2 3 1 1 7 - A 

Month Day (Form Type) Month Day 

(Fiscal Year) (Annual Meeting) 

Amended Articles Number/Section 

(Secondary License Type, If Applicable) 

Total Amount of Borrowings 

Total No. of Stockholders Domestic Foreign 

To be accomplished by SEC Personnel concerned 

File Number LCU 

Document ID Cashier 

S T A M P S 

COVER SHEET 

Remarks: Please use BLACK ink for scanning purposes.

TABLE OF CONTENTS 

PART I - BUSINESS AND GENERAL INFORMATION 

Page No. 

Item 1 Business 4 

Item 2 Properties 16 

Item 3 Legal Proceedings 17 

Item 4 Submission of Matters to a Vote of Security Holders 17 

PART II - OPERATIONAL AND FINANCIAL INFORMATION 

Item 5 Market for Registrant‟s Common Equity and Related 

Stockholder Matters 17 

Item 6 Management‟s Discussion and Analysis or Plan 

of Operation 18 

Item 7 Financial Statements 24 

Item 8 Changes in and Disagreements With Accountants on Accounting 

and Financial Disclosure 24 

PART III - CONTROL AND COMPENSATION INFORMATION 

Item 9 Directors and Executive Officers of the Registrant 25 

Item 10 Executive Compensation 30 

Item 11 Security Ownership of Certain Record and Beneficial Owners 

and Security Ownership Management 31 

Item 12 Certain Relationships and Related Transactions 32 

PART IV - CORPORATE GOVERNANCE 

Item 13 Corporate Governance 32 

PART V - EXHIBITS AND SCHEDULES 

Item 14 a. Exhibits 32 

b. Reports on SEC Form 17-C 32 

SIGNATURES 33 

INDEX TO FINANCIAL STATEMENTS AND 

SUPPLEMENTARY SCHEDULES 34 

INDEX TO EXHIBITS 115 

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SECURITIES AND EXCHANGE COMMISSION 

SEC FORM 17-A 

ANNUAL REPORT PURSUANT TO SECTION 17 

OF THE SECURITIES REGULATION CODE AND SECTION 141 

OF THE CORPORATION CODE OF THE PHILIPPINES 

1. For the year 2010 

2. SEC Identification Number 145111 3. BIR Tax Identification No. 000-449-918-000 

4. Exact name of registrant as specified in its charter: DIGITAL TELECOMMUNICATIONS PHILS., 

INC. 

5. Philippines 6. _________ (SEC Use Only) 

Province, Country or other jurisdiction of Industry Classification Code: 

incorporation or organization 

7. 110 E. Rodriguez Jr. Ave., Bagumbayan, Quezon City 1110 

Address of principal office Postal Code 

8. (632)397-8888 

Issuer‟s telephone number, including area code 

9. Not applicable 

Former Name, former address, and former fiscal year, if changed since last report. 

10. Securities registered pursuant to Sections 8 and 12 of the SRC or Sec. 4 and 8 of the RSA 

Number of Shares of Common Stock 

Title of Each Class Outstanding and Amount of Debt Outstanding 

Common stock, P1.00 par value 6,356,976,300 

11. Are any or all of these securities listed on the Philippine Stock Exchange. 

Yes [ X ] No [ ] 

12. Check whether the registrant: 

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 

thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of 

the Corporation Code of the Philippines during the preceding twelve (12) months (or for such 

shorter period that the registrant was required to file such reports): 

Yes [ X ] No [ ] , All securities are listed as common stock 

(b) has been subject to such filing requirements for the past 90 days. 

Yes [ X ] No [ ] 

13. Aggregate market value of the voting stock held by non-affiliates as of December 31, 2010: 

4,743,984,627 

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Item 1. Business 

General 

PART I - BUSINESS AND GENERAL INFORMATION 

Established in August 1987, Digital Telecommunications Phils., Inc. (“Digitel”) is 47.4% directly 

owned by JG Summit Holdings Inc. (“JGSHI”). Digitel has expanded its interests in wireline services in recent 

years and currently provides wireless/mobile telecommunication services, wireline telecommunications, hi-speed 

data transmission and internet services. 

Digitel‟s operations are divided into three key business segments: wireless telecommunication services, 

data transmission and internet services, and wireline telecommunication services. Digitel also provides a range of 

value-added services and products in each of its segments. As of December 31, 2010, Digitel has approximately 

14.04 million wireless subscribers (across its prepaid and postpaid options and its 2G and 3G networks) and over 

450,000 subscribers across its data and wireline segments. 

Wireless telecommunication services: In September 2001, Digitel established a wholly owned 

subsidiary, Digitel Mobile Phils., Inc. (DMPI), to provide wireless telecommunication services in the Philippines. 

DMPI is one of the Philippines‟ leading mobile telecommunications companies. DMPI has operated its wireless 

mobile services under the „Sun Cellular‟ brand since 2003. Sun Cellular uses Global Service for Mobile (GSM) 

technology to provide voice services (local, national, international calling), messaging services (short text or 

multimedia messaging), outbound and inbound international roaming, broadband wireless technology, and various 

value-added services. 

Data transmission and internet services: Digitel‟s data division, the Enterprise Business Unit, offers 

consumer and corporate customers access to high-speed data transmission and internet services through domestic 

and international leased line services, frame relay, and dedicated internet lines. Digitel provides enterprise grade 

services and solutions to some of the top enterprise customers in the Philippines, with customer relationships in 

the banking, manufacturing, logistics, utilities, trading, business process outsourcing (BPO) companies, hospitality 

and real estate sectors. 

Wireline telecommunication services: Digitel is one of the major providers of wireline communication 

systems in Luzon Island. Through over 600 regional and local exchanges, Digitel telephones are now available in 

281 towns and cities throughout Luzon. As of December 31, 2010, Digitel had a total of almost 600,000 installed 

lines and over 450,000 working lines. Digitel‟s voice products and value-added services include local call, 

national, and international toll services, payphones and prepaid phone cards. 

Digitel has recently introduced the SunTel Wireless Landline to extend its landline coverage by 

employing GSM technology using Sun Cellular‟s network to provide an alternative last mile solution to traditional 

copper cable facilities. 

Service revenues are primarily derived from service connection fees and monthly service charges and 

from charges generated by voice calls that vary based on the distance, duration and time of day of the call. Since 

the launch of the wireless service, revenues are also generated from the sale of mobile phone kits and from charges 

for SMS and other value added services aside from traditional voice services. 

Products 

Wireline Communications – Voice Services 

To capture a significant market share in the fierce telecommunications industry competition, Digitel 

offers a wide range of products and services to its customers, some of which are as follows: 

Fixed Landline 

� Digitel Choice Plans are comprehensive business and residential telephone subscription packages. 

These subscription plans provide unlimited local calls at very affordable fixed basic monthly fee. 

These Choice plans come in metered and non-metered services with national and international calls. 

All Choice plans come with Internet-ready feature. 

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� Digitel Prepaid is Digitel‟s hassle-free prepaid phone card that gives subscribers convenient access to 

phone, fax, and dial-up internet from any Digitel postpaid and prepaid landline, SunTel wireless 

landline, and Digitel payphone. 

� Digitel Prepaid IDD is another prepaid service of Digitel that allows international call either through 

Digitel‟s postpaid lines, prepaid lines or payphones. With as low as P2/minute to top international 

destinations, callers, especially families of Overseas Filipino Workers, can now make frequent voice 

calls and engage in longer talk time, breaking all affordability barriers. 

Wireless Landline 

� SunTel Wireless Landline is a wireless landline service from Digitel and Sun Cellular that offers 

unlimited local landline-to-landline calls. Consumers can choose from the following plans: SunTel 

Plan 350 with free phone, Easy SunTel 350, line only and SunTel Supplementary Line 249. This 

service is available in the National Capital Region (NCR) including Rizal and in Bulacan, Cavite, 

Bataan, Pampanga, Tarlac, Benguet/Baguio, Nueva Ecija, Pangasinan, La Union, Isabela, Albay, 

Camarines Sur, Batangas, Laguna, Quezon, and Zambales, Ilocos, Albay, Camarines Sur, Camarines 

Norte, and Catanduanes. 

� SunTel Family Plan is Digitel‟s latest offering, for only P999 monthly service fee, subscribers can 

avail of 3 SunTel wireless landlines with 3 free phones, giving them savings of worth P51 per month. 

� SunTel GO is an innovative offering which combines the SunTel wireless landline service with the 

Sun Broadband Wireless service. It provides subscribers unlimited local landline calls and unlimited 

internet usage of up to 1 Mbps. It comes in two variants, SunTel Go Plan 799 which is available in 

NCR, Rizal, Bulacan, Pampanga, Pangasinan, Tarlac, Benguet, Cavite and Laguna, and SunTel Go 

plan 999 which is available in NCR, Rizal, Bulacan, Pampanga, Pangasinan, Tarlac, Benguet, Cavite, 

Laguna, Batangas, Legazpi, Zambales and Quezon. 

Voice Programs: 

� Inbound Rewards Program is a program that entitles subscribers of SunTel Wireless Landline, 

Digitel Landline, and Digitel DSL (Internet and Landline bundled service) to earn rebates on their 

Monthly Service Fee for every incoming inter-network long distance (NDD/IDD) and mobile call they 

receive. Qualified subscribers enjoy big savings on their monthly bill by simply encouraging their 

family and friends to call them on their Digitel Landline or SunTel wireless landline. 

� One Province One Local Area is a rating policy implemented in February 2010, wherein all calls 

made from Digitel Landline and SunTel Wireless Landlines to any landline within the same province 

are treated as local calls (i.e., FREE). Previous to this policy, there were certain calls to landlines of 

other telcos within the same province that were charged as long distance based on the interconnection 

agreements with the other telcos. This policy is currently being implemented in the provinces of 

Cavite, Bataan, Tarlac, Benguet, Nueva Ecija, Pangasinan, La Union, Isabela, Quirino, Nueva 

Vizcaya, Batangas, Laguna, Quezon, Zambales, Albay, Camarines Sur, Camarines Norte, and 

Catanduanes. 

Wireline Communications – Data 

� Digitel DSL is the high-speed, but low-cost Internet and landline bundled service catering to 

residential consumers all over Luzon. It comes in several packages to suit the various speed 

requirements of every household, ranging from 512 Kbps to as fast as 4.5 Mbps. It also offers the best 

value in terms of monthly fee and call rates in the market today through Plan 888 (512 Kbps), Plan 

999 (768 Kbps), Plan 1199 (1.0 Mbps), Plan 1799 (2.0 Mbps), Plan 2299 (3.0 Mbps), Plan 2799 (4.0 

Mbps) and Plan 3199 (4.5 Mbps). 

� Triple Unlimited is a DSL, landline and SunTel wireless landline bundled service. To avail of this 

great deal, DSL subscribers only have to add P249 monthly to get a free SunTel phone and make 

unlimited voice calls, making it the lowest-priced, full-packed bundle in the market. 

� Home Wi-Fi turns your home into a hot spot so all members of the family can enjoy the convenience 

of simultaneously logging into a high-speed Internet connection. Subscribers may avail of a two-inone 

Wi-Fi modem router for only P350 per month for three months or even get it for free for an 

extended lock-in period of 24 months. 

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Wireless 

� DSL with free mobile phone and Sun SIM. To take full advantage of the convergence of Digitel 

and Sun services, new Digitel DSL subscribers can get a free mobile phone from Nokia, Samsung and 

My Phone with Sun prepaid kit. 

� 15-Day DSL Free Trial. Existing postpaid voice subscribers were given a 15-day DSL free trial to 

experience the higher quality of service with Digitel‟s new investments to upgrade both its local and 

international networks. 

Sun Cellular offers the latest in GSM technology, providing voice services (local, national, international 

calling), messaging services (short text or multimedia messaging), outbound and inbound international roaming, 

broadband wireless technology, and value-added services such as Mobile Internet, and up-to-date downloadable 

contents like ringtones, dialtunes, picture messages, and logos. 

Postpaid Service 

Sun Cellular Postpaid Plans offer customers a variety of services that respond to their communication 

needs. The services offered are: Local and International Calls and SMS, Mobile Internet and Wireless Landline 

available under Postpaid plans with varying monthly service fees. In its commitment to provide innovative 

services at affordable prices, Sun Cellular has made available the following products: 

� Regular Plans – These plans offer subscribers more value because they can enjoy Sun‟s unlimited 

calls and text services, and low call rates to other networks. Subscribers can also opt to avail of Sun‟s 

unlimited add-on plans. 

� Sun Group Plans – These plans give more value for money and designed for those who seek to build 

stronger ties with family and friends. 

� Fixed Load Plans – This is a manageable and worry-free postpaid service for individuals and 

companies who want to control their mobile telephone spending and that of their immediate circle of 

dependents. This plan has a fixed monthly service fee, but offers the flexibility and the convenience of 

using prepaid services. 

� Sun EasyLine and Sun EasyPhone Plans – A Sun Cellular service that provides subscribers one of 

the easiest ways to own a postpaid line as it requires only a valid ID. 

� Sun Elite Series – Launched on October 2009, Sun Elite Series provide customers three unlimited 

services in one SIM. Sun Elite Plans are inclusive of a free high-end phone, 24/7 local Sun-to-Sun 

Call and Text Unlimited, Unlimited Mobile Internet and Unlimited local landline calls powered by 

SunTel Wireless Landline. 

� Sun Easy Postpaid – Sun offers another way to avail and enjoy the benefits of a Regular Plan but at 

the same time want the application process to be as easy as just presenting a valid ID. 

� Sun Double Unlimited (SDU) – Launched September 2009, this is a 2-in-1 SIM service that 

combines Mobile Postpaid service with a wireless Landline service from Digitel. 

� BlackBerry and BlackBerry Service Add-On Plans – provide users with quality data services. 

Add–on Plans 700 and 999 enable subscribers to utilize the full potential of their existing BlackBerry ® 

handheld through Sun‟s BlackBerry ® Internet Service. BlackBerry ® Plan 2500 offers subscribers not 

only a free BlackBerry ® handheld but also unlimited Sun-to-Sun calls and texts, BlackBerry ® service 

and mobile Internet. 

� Sun Call & Surf – provides subscribers unlimited local Sun-to-Sun Calls & Texts plus unlimited 

Mobile Internet for only P999 with a free activated Android Handset. 

� Sun Plan 450 – is a new service targeted for customers who have a mixed mobile lifestyle of calling, 

texting, and Internet browsing, particularly in checking emails, social networking sites and the latest 

news while being on-the-go. As another option to mobile internet, subscribers can choose Sun Plan 

450 IDD where they get to call and text abroad for only P2 to key destinations. 

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Prepaid Service 

Sun Cellular‟s Prepaid Service continues to attract more and more subscribers as its products are 

specifically designed to provide subscribers with the best-value choices tailored to fit their specific needs and 

wants. 

Sun Cellular is known for its Call and Text Unlimited (CTU) products, which allow subscribers to enjoy 

24 hours of Sun-to-Sun voice calls and texts for as low as P25 per day. Meanwhile, Sun‟s Text Unlimited (TU) 

products offer unlimited Sun-to-Sun SMS with free voice calls. For as low as P10, subscribers can have unlimited 

SMS and up to 5 minutes of calls to other Sun users for one day. 

Sun Cellular‟s regular loads, on the other hand, can be used to call or text mobile users of Sun and/or 

other networks. This type of load is available in call cards with denominations of P50, P150, P300, and P500, or 

via Xpress Load from P10-P149, P150, P300, and P500. For loading a minimum of P20 regular load, the 

subscriber can immediately enjoy free texts to all networks. 

In 2010, the Prepaid Business further widened its product line to better serve subscribers. Its products 

include: 

� Sun Call and Text Unlimited Superloaded -Sun Cellular‟s flagship Prepaid product Call & Text 

Unlimited is now Superloaded with extra inclusions to give the subscriber more value for money 

along with their favorite unlimited Sun calls and unlimited Sun texts. All denominations now come 

with FREE texts to other networks and FREE minutes of Mobile Internet. 

� P10 Call and Text Combo (CTC10), P20 Call and Text Combo (CTC20) and P30 Call and Text 

Combo (CTC30) – The P10 Sun Call &Text Combo provides 40 intra-network texts, 10 minutes of 

intra-network calls, and 10 texts to other networks for as low as P10. The P20 Sun Call & Text 

Combo variant, on the other hand, offers 80 Sun-to-Sun texts, 25 minutes of Sun-to-Sun calls, and 25 

texts to other networks. Last in the lineup is the P30 Call and Text Combo which has 120 intranetwork 

texts, 40 minutes of intra-network calls, and 40 texts to other networks. 

� Sun TextALL – the ultimate text load that empowers subscribers to connect with everyone regardless 

of the network they are using was launched last July 2010. Sun TextALL provides subscribers 100 

Sun texts and 50 texts to other networks for only PhP15.00 a day. 

� Sun Unlimited Mix - the first 4-in-1 load product in the market was introduced to the mobile market 

last February 2010. Sun Unlimited Mix offers the perfect combination of calls, text and mobile 

internet for as low as P25. Sun Unlimited Mix has two variants: P25 which has unlimited Sun texts, 

20 texts to other networks, 15 minutes of Sun calls every hour and 15 minutes of mobile internet, all 

good for 1 day, and P100 which offers unlimited Sun texts, 100 texts to other networks, 15 minutes of 

Sun calls every hour and 75 minutes of mobile internet, all good for 5 days. 

� Sun Flexi Load - Comes in two variants, the Flexi Load 50 and Flexi Load 30 offers subscribers 

Special “Flexi Rates” for calls and texts both to Sun and to other networks. Using this load variant, 

intranetwork texts could be sent for as low as P0.25 while texts to other networks will cost as low as 

P0.50. Sun to Sun calls meantime are pegged at P0.50 per minute, while calls to other networks cost 

P5.50 per minute. Subscribers also have the option of converting the flexi load to other Sun Special 

Loads like the Call and Text Unlimited and Call and Text Combo, among others. The promo lasted 

until August 23, 2010. 

� Sun Magic Zone Mindanao – Sun Cellular launched Sun Magic Zone Mindanao, an exclusive 

prepaid product for Mindanaoans which offers unlimited calls and texts with the lowest, most 

affordable rate at only P10. 

Other prepaid products include: 

� WinnerTXT 10 – Launched November 2009, WinnerTXT 10 is the most affordable Sun Cellular 

prepaid load in the market to date. For only P10, Sun Prepaid subscribers get to enjoy one day of 

unlimited Sun-to-Sun texting and free five minutes of consumable Sun-to-Sun calls. This means 

Prepaid subscribers can choose if they want to make one 5-minute call, or make several short calls. 

Sun WinnerTXT 10 is also available in all Xpress Load outlets nationwide. This product is valid for 

one (1) day. 

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New Business 

� P5 Budgetxt and P20 Budgetxt – The P5 Budgetxt offers 10 texts to other networks while the P20 

Budgetxt provides 40 text messages to other networks. With Budgetxt, the cost of inter-network text 

messaging is lowered to just P0.50 per message. 

� Sun P29 Super Budget SIM - This SIM is a strong addition to the value-packed line-up of Sun 

Prepaid SIMs. Launched last February 2009, this SIM has Unlimited Sun-to-Sun texts and 10 

minutes of Sun-to-Sun calls. Being the most affordable SIM in the market to date, subscribers can 

easily enjoy the „Unlimited‟ advantage Sun has to offer. 

� Sun P49 Call and Text International SIM – Geared towards families of Overseas Filipino Workers 

(OFWs) here in the Philippines, this is the only Sun SIM which allows subscribers to send 

international texts to 20 countries for only One Peso (USA, Canada, Singapore, Hong Kong, United 

Arab Emirates, Malaysia, Macau, Japan, Qatar, Brunei, Guam, Hawaii, Oman, Cayman Islands, 

Cyprus, Turkey, Northern Marianas Islands, Jamaica, Bahamas, and Puerto Rico). Other special rates 

to enjoy using this SIM are US$0.10/min IDD call rate to 10 countries (USA, Canada, China, Hong 

Kong, Singapore, Thailand, Malaysia, Brunei, Guam, and Macau) and US$0.20/min IDD call rate to 

20 countries (Saudi Arabia, United Arab Emirates, India, Japan, Australia, South Korea, Taiwan, 

Italy, Indonesia, Hawaii, Kuwait, Bahrain, Germany, Spain, Israel, France, Greece, Jordan, Northern 

Marianas Islands, and Cyprus). When this SIM was launched last June 2008, the SIM has initial load 

inclusion of 5 minutes call to 10 countries and 5 international texts to 20 countries. Last July 2009, 

Sun Cellular added FREE load in this SIM – Unlimited Sun-to-Sun texts and 20 minutes of Sun-to- 

Sun calls, all valid for 2 days. Subscribers can now instantly get in touch with all their families and 

friends, here in the Philippines and abroad. 

� Sun Unlimited Plus Promo - Sun Prepaid subscribers get a free P25 Call & Text Unlimited (CTU25) 

that gives subscribers 24 hours of non-stop calling and texting to the Sun network valid for one day. 

Sun Prepaid subscribers just need to load P25 Call & Text Unlimited for two straight days and they 

will receive a FREE CTU25 automatically on the third day. Original promo dates were July 24 to 

September 30, 2009 but was extended until January 31, 2010. 

� Sun Prepaid SIMs Promo – This promo was launched simultaneously with the Sun Unlimited Plus 

Promo last July 2009. With the Sun Prepaid SIMs Promo, they will get more free load and enjoy the 

extended one-day validity of the initial load. 

New subscribers are treated to three days of free Unlimited Sun-to-Sun calls and texts when they buy 

Sun P59 Super Value SIM. If they choose Sun P39 Super Combo SIM, they get additional one-day 10 

minutes of Sun-to-Sun calls, 40 Sun-to-Sun texts, and 10 texts to other networks. And lastly, new 

Prepaid subscribers who will choose Sun P29 Super Budget SIM can enjoy additional one-day of 

Unlimited Sun-to-Sun texts and 10 minutes of Sun-to-Sun calls. Promo was until January 31, 2010. 

� Free International Texts in Sun Prepaid SIMs – Last October 7, 2009, the Sun P59 Super Value 

SIM, Sun P39 Super Combo SIM, and Sun P29 Super Budget SIM had additional FREE load of 5 

International texts to 20 countries. This is in addition to the current Prepaid SIM inclusions. Since the 

Sun P49 Call & Text International SIM already has free international load, now, all Sun Prepaid SIMs 

have free local and international load. This is a permanent offer. 

In 2010, Sun Cellular further strengthened its Sun Broadband Wireless (SBW) service, with more and 

more internet users clamoring for its affordable broadband wireless service at break-neck speeds. Sun Broadband 

Wireless service utilizes the most advanced 3.5G HSPA (High-Speed Packet Access) technology on an all-IP 

network. To address the various needs of the market, Sun Broadband Wireless has a wide range of plans and 

offerings to choose from: 

Sun Broadband Wireless Postpaid 

� SBW Plan 649 – the lowest unlimited broadband plan in the market with speeds of up to 2Mbps. Plan 

649 is offered exclusively for existing Sun Cellular Postpaid subscribers, thus allowing them to enjoy 

CTU 24/7 and unlimited broadband for as low as P999 per month (Postpaid Plan 350 + Plan P649). 

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� SBW Plan 799 – for those subscribers who do not have a Sun Cellular Postpaid Plan, they can avail 

of Plan 799. Under Regular Plan 799, customers get a free modem with a lock-in period of 24 months. 

And for those who do not want a lengthy lock-in period, they can avail of EasyBroadband 799 by just 

presenting a valid ID and paying upfront for the modem. 

� SBW Plan 1399 - For those who want more bandwidth, Plan 1,399 is also available, with speeds of 

up to 3Mbps. 

� 3G-ready WiFi Routers – In addition to attractive plans, Sun Broadband Wireless now has offerings 

that will allow users to share their broadband connection via a 3G-ready WiFi router. This practically 

allows subscribers to set-up their own hotspot anytime, anywhere. 

� SBW Handset Promo - With the SBW Handset Promo, SBW subscribers can get a free phone (with 

1 month subscription) when they subscribe to a Sun Broadband 649 or 749 Plan. 

� SBW Prepaid Kit P1495 – Allows greater flexibility for those on a budget. This comes with a Sun 

Broadband USB stick modem plus 125 hours of free Internet usage. With its plug and play 

convenience, subscribers can surf the world wide web in just a few minutes. 

� SBW Plan 350 Lite – It is Sun‟s most flexible mobile broadband postpaid plan as it offers 45 hours 

of internet service and allows subscribers to reload credits through SBW Prepaid load or Sun Regular 

load. 

SBW Prepaid loads 

� Regular Loads – For P10 with internet usage valid for two hours. 

� SBW 50 – It‟s the first One-Day Unlimited load to hit the market that can be used by Sun Broadband 

Prepaid Subscribers as well as Sun Regular Prepaid Subscribers. 

� SBW 100 – For P100, this prepaid internet load comes with 12 hours Internet usage valid for four (4) 

days. 

� SBW 250 –. For only P250, subscribers get to enjoy seven (7) days of unlimited Internet usage. 

This may also be used on Regular Prepaid for Mobile Internet. 

� SBW 300 – For P300, this prepaid internet load comes with 48 hours Internet usage valid for 10 days. 

� Internet 25 (i25) – For just P25, prepaid subscribers can enjoy three (3) hours Internet usage valid for 

one (1) day. By just texting i25 to 272, subscribers can convert their Regular Load to i25, giving them 

the flexibility they want. 

� Internet 50 (i50) – One-day Unlimited internet access at an affordable price of only P50. Internet 

loads are now available for all SBW prepaid and regular prepaid subscribers. 

Value-Added Services 

Sun Cellular continues to keep its subscribers up to date with the latest value-added service offerings that 

will not hurt their pockets. Value-Added Services include: 

� Facebook Zero – FB Zero is another first from Sun where subscribers get Unlimited access to their 

Facebook Accounts with zero data charges. It is a free text-only mobile version of Facebook. Standard 

browsing rates of P10 per 30 minutes will apply when viewing photos or external links. 

� Facebook Text Alerts –With Facebook Zero, Sun subscribers can now receive free Facebook Text 

Alerts on their Sun phones. They can also send status updates via text for only P 0.50. 

� Yahoo Messenger – Sun Cellular has made available Yahoo Messenger to its subscribers. Now Sun 

subscribers can stay online and continue chatting with their YM buddies via text. 

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� Sun Mobile Internet – Sun subscribers can access various internet services like email, search, chat, 

and social networking sites like Friendster, through their mobile phones. There‟s no need for a PC or a 

laptop. Sun Mobile Internet offers quality broadband speeds with its 3G/HSDPA network, at an 

affordable price of P10/30 minutes (valid for 2 hours). Recently, Sun launched new cost efficient 

rates of P50/ unlimited 1 day and P25/ 3 hours (valid for 1 day use). 

� Sun Dial Tunes – Sun Cellular‟s ring back tone service. This service allows subscribers to 

personalize their ring back tone with songs and sounds of their choice. Sun subscribers can choose 

from Sun Cellular‟s vast collection of music tracks, comic spoofs, sound effects and even celebrity 

recordings. 

� Unlitones – Launched October 2009, Sun Cellular prepaid subscribers can now enjoy unlimited 

ringtone downloads for 24 hours. Subscribers simply need to go to the nearest Sun Xpressload 

retailer and pay P5 to avail the service. They will then receive an SMS list of ringtones 

(mono/polytone) that they could download from Unlitones within 24 hours from time of purchase. 

This service is offered in all Sun Xpress load retailers nationwide. 

� Give-a-Load – With its enhanced features, subscribers can give all of the Sun load variants to other 

Sun subscribers. This means that regular load, unlimited, and combo call and text product can all be 

sent to fellow Sun subscribers. 

� Sun iMessenger – Sun Cellular‟s mobile instant messaging (IM) service allows Sun Cellular 

subscribers to chat with their IM buddies on the largest IM services. Service is available on pay-peruse 

and unlimited subscription. 

� TxtBlitz – This is an easy-to-use and cost-effective way for businesses to send messages to multiple 

recipients via a simple internet-protocol connection. 

� Zlango – Launched November 2009, Sun Cellular brings texting to a different level through fun icons 

which add new life to Sun subscribers‟ messages. 

� Gimme Load – Launched July 2009, Sun subscribers can now ask for load from their families and 

friends in the Sun network for free. Sun prepaid subscribers can request for load up to three (3) times 

per day. 

� SMS2EMAIL – Service that allows subscribers to send and receive email by just using their Sun 

phone (no internet needed). 

� Sun Alertz – A service that allows Sun subscribers to post tweets and status updates on their favorite 

social networking sites for as low as P1/txt (no internet connection needed). 

International Services 

IDD Services 

� Sun Todo IDD Tawag card - Allows Sun Cellular prepaid subscribers to call 7 destinations: U.S. 

(Main), Canada, Hong Kong, Singapore, China, Guam and Hawaii for just P2 per minute. This card 

also offers as low as P5 per minute to call other countries like Australia, Taiwan, South Korea, 

Malaysia and Macau. Sun Todo IDD Tawag card is available in P300, P100 and P50 card 

denominations via Xpress Load. 

� Sun IDD 10 - Offers an affordable IDD rate of only US $0.10 per minute for every call made to U.S. 

(main), China, Hong Kong, Canada, Singapore, Thailand, Malaysia, Brunei, Guam, and Macau. There 

are no registration, no access codes and no special card needed. Sun IDD 10 is available to all Sun 

postpaid and prepaid subscribers. 

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� Sun IDD 30 - All Sun Cellular subscribers can enjoy savings with Sun‟s Regular IDD rate of only 

US $0.30 per minute to Japan, Saudi Arabia, United Arab Emirates, Australia, United Kingdom, Italy, 

Germany, Spain and over 100 countries. 

International SMS/MMS 

� Sun International SMS (iSMS) - All Sun Cellular subscribers can send international text messages 

to over 200 countries abroad. Sun Cellular‟s regular iSMS rate is only P9 per international text. 

� iSMS Promo – Only P2 to send an international SMS to 10 countries using any Sun prepaid SIM and 

also P5 to other 40 countries. Promo is extended until April 20, 2011. 

� Sun International MMS (iMMS) - Sun subscribers can send pictures, music, videos and other 

multimedia messages to their loved ones abroad in over 200 countries. Sun IMMS rates are P5 per 

message (for content up to 100kB) and P10 per message (for content up to 300kB). 

International Roaming Services 

� Postpaid Roaming - Postpaid Sun subscribers can roam in more than 100 countries with over 300 

roaming partners worldwide. 

� Prepaid Roaming - Prepaid subscribers can roam initially in Hong Kong, China, Singapore, Malaysia 

and Macau. 

� Data Roaming – GPRS roaming is available in over 70 countries. 

� Budget Roaming Text – All Sun subscribers can send text messages to the Philippines while roaming 

abroad for only P5/message via USSD. 

Other International Services 

� Sun Annyeong Korea SIM- Subscribers can enjoy P3 per minute IDD call and P3 per international 

text to South Korea. The SIM also has free IDD calls & texts to Korea, mobile internet and local Sunto-Suncalls 

& texts. 

� Sun Call Back Service – Prepaid subscribers can send a free text message to their loved ones abroad 

in 10 countries for a call back request on their Sun number. 

Sun Business (SMEs and Corporate) 

Sun Business is Sun Cellular and Digitel‟s Corporate and Business Solutions arm, which presents itself as 

the client‟s complete telecommunications partner. It provides value-for-money wired and wireless voice, data, and 

specialized services so that clients could operate more efficiently. Other than the regular products mentioned 

above, the following are the additional products being offered: 

Pro-Efficiency Specialized Solutions 

� Track & Trace – This service allows clients to monitor the status and condition of their valuable 

assets and personnel through Global Positioning System (GPS) and GSM network 24 hours, 7 days a 

week and in real time. Clients can plan their business efficiently by using the reports that the 

application will generate for them. 

� Mobile Pay – This service provides clients a Wireless point-of-sale (POS) system for mobile selling 

of their goods. Clients get to receive debit and credit card payments without added cost of wired lines 

with a competitively priced wireless POS. The POS uses Sun‟s superior GPRS connectivity, accepts 

major credit cards, and is covered by fire insurance. Clients are also provided with on-call 

maintenance and help desk facility. 

11

� Message Cast – This is a Web-based messaging service that allows clients to send and broadcast 

SMS to one or multiple recipients across all networks. Clients can make sure that their employees and 

customers are updated of the latest events and promos. 

� MobiServe – This is a customer service support center solution that allows companies to deploy a 

help desk or hotline system for their customers over SMS. Clients get to improve their operations by 

efficiently tracking and resolving customer issues. 

� Sun Cash – This service is an easy-to-setup mobile payment gateway that offers 24/7 service 

availability with real-time payment credit. Clients can have a secure community based payment 

gateway via their Sun Mobile Phone. 

� Corporate Xpress Load – This is a hassle-free and efficient web-based application that allows clients 

to load to multiple recipients. Clients can easily manage their companies‟ communication expenses. 

This is particularly for clients with load allowance allocations for their employees and outsourced 

agents. 

Pro-Stability Premium Solutions 

Data Services 

� Domestic Leased Lines –This service delivers fast, reliable and secure dedicated point-to-point 

connection from the client‟s head office to the rest of the country, 24 hours a day, 7 days a week with 

speeds ranging from 64 Kbps up to 155 Mbps. It is an ideal tool in exchanging critical information for 

data, voice or video. 

� International Private Leased Circuit – Clients are ushered to the global business arena by providing 

them with global reach through dedicated point-to-point connections that span from the Philippines to 

United States and Asia Pacific. This is delivered through strategic partnerships with major 

international carriers. Sun Business owns a Point-of-Presence (POP) in Los Angeles, California and a 

partnership with foreign operators to offer international last mile facilities. 

Internet Services 

� Dedicated Internet Access – This service offers high-speed solutions for growing businesses that 

need high performance and full time dedicated internet access. This service offers a range of options 

to suit their access needs and support all their mission-critical communications. 

� Bandwidth On Demand (BOD) – This service allows customers to utilize bandwidth over and above 

their subscribed plan. Higher bandwidth is made available to the customer anytime its business 

requires, without the hassle of application for an upgrade of service. 

� DSL - Sun Business DSL delivers the speed the clients‟ need for performing bandwidth-intensive 

network tasks, but costs only a fraction of the price of E1 and other dedicated access services. This 

business-grade broadband connection allows businesses to realize more productivity and cost savings 

right away. 

Managed Services 

� Managed Router – This service enhances end-to-end management of the clients‟ network which 

includes installation, configuration, monitoring and management of routers. It improves network 

performance and availability by extending expert monitoring and management of the clients‟ routers. 

12

Voice Services 

� Local Service, NDD/CMTS, IDD – This service allows clients to reach their customers in any 

destination, be it local, national, mobile and international, at very competitive per minute rates. 

� Foreign Exchange Service (FEX) – This service provides similar Local Phone Service to clients. 

Their phone numbers are provisioned in another Digitel Serving Exchange which in effect, eliminates 

the national toll charges for the inbound and outbound calls. This is offered to customers with heavy 

volume of NDD calls. 

� E1R2 Service – This service provides channelized E1 networks for Voice Service terminated at the 

clients‟ Central Office or Private Branch Exchange. It provides 30 Voice Channels at 64Kbps per 

channel. This service is ideal for large businesses. 

IP-Based Services 

Competition 

� Internet Protocol Virtual Private Network (IPVPN) – This is a cost-effective, secure, reliable and 

scalable way of building a private network for companies based on MPLS or Multi-Protocol Label 

Switching Technology. IPVPN sites are fully-meshed and support any-to-any connectivity with endto-end 

quality of service (QoS). It is well-suited for converged voice, data and video applications. 

� IP Centrex – This is a voice service from Sun Business using Voice over Internet Protocol (VoIP), 

where all subscribed phones have built-in PABX functionality. Sun Business‟ Softswitch provides all 

the necessary call control and service logic functions. Sun Business IP Centrex frees the clients from 

the costs, responsibilities and headaches of PBX ownership. Clients can call all their officemates via 

shortened 4-digit numbers toll free wherever they may be. 

From among the existing telecommunications operator franchisees, Digitel considers Smart 

Communications, Inc., Globe Telecom, Inc., Philippine Long Distance Telephone Co., and Bayan 

Telecommunications, Inc. as its major competitors. The principal bases of competition in both wireline and 

wireless segment are price, coverage, quality of service support, and speed of network access and availability of 

calling features. 

Currently, Digitel dominates the Luzon wireline market in terms of the total number of towns and cities 

served and lines installed. DMPI, on the other hand, is one of the fastest growing mobile network providers in the 

country with over 14 million subscribers supported by its almost 7,000 cellsites situated in all major cities and 

municipalities nationwide. 

The prepaid business continued to expand rapidly in 2010. Subscriber base grew by 28% from last year 

as more affordable and innovative products were launched. Total top-up increased by 21% compared to 2009, 

while Xpress Load top-ups leaped by 22%. The number of transacting Xpressload retailers also registered 

significant growth of 13% from last year. 

Sun Cellular continued its aggressive campaign in the Postpaid business, with over 1 million subscribers 

comprising of 1.07 million 2G subscribers and 0.15 million 3G subscribers. 

Regulation 

Digitel requires a number of franchises and licenses from government regulators to operate in each of its 

business segments. Digitel holds three franchises as follows: 

the wireline franchise was granted in February 1994 and expires after 25 years from the date of issue; 

DMPI was issued a franchise to operate a wireless network in the Philippines in December 2002. This 

franchise expires 25 years from the date of issue; and 

Digitel Crossing was granted its franchise in November 2003 to construct, install, establish, operate and 

maintain telecommunications systems throughout the Philippines by Congress under Republic Act No. 

9235. This franchise expires 25 years from the date of issue. 

13

Each franchise is subject to amendment, termination or repeal by the Philippine Congress. Each franchise 

provides that the Company may offer particular services upon obtaining the permission from the NTC, which 

permission is granted through the issuance of Certificate of Public Convenience and Necessity (CPCNs). Upon 

receipt of an application for a CPCN, the NTC normally issues a Provisional Authority (“PA”), which can be 

renewed annually that permits operation of the service pending issuance of the CPCN. The PAs may be revoked 

by the NTC if the Company fails to comply with the conditions thereof. 

Digitel is a grantee of various authorizations from the NTC as follows: 

CPCNs to (a) install, operate, maintain and develop telecommunications facilities in Regions I to V; (b) 

install, operate and maintain telephone systems/networks/services in Quezon City, Valenzuela City and 

Malabon, Metro Manila and Tarlac; (c) install, operate and maintain an International Gateway Facility 

(IGF) in Binalonan, Pangasinan; (d) install, operate and maintain an IGF in Metro Manila; (e) operate and 

maintain a National Digital Transmission Network; (f) install, operate, and maintain a nationwide CMTS 

using GSM and/or CDMA technology; and (g) install, operate and maintain a cable landing station. 

PAs to (a) install, operate and maintain LEC services in the National Capital Region (NCR); and (b) 

install, operate and maintain LEC services in Visayas and Mindanao. 

Digitel is registered with the Board of Investments (“BOI”) and is entitled to incentives on a pioneer and 

non-pioneer status as a new operator of telecommunications systems on nationwide CMTS-GSM communication 

and as an expanding operator of public telecommunications services and international gateway facility (IGF)-2. 

On October 10, 2003, the BOI registration was transferred to DMPI, subject to certain conditions. Under the 

terms of the BOI registration, DMPI is entitled to certain incentives, including among others, an income tax 

holiday (“ITH”) for a period of six years from January 1, 2003. Subsequently, the ITH of DMPI expired on 

January 1, 2009. 

On December 28, 2005, the NTC awarded a 3G frequency assignment to DMPI after finding it legally, 

financially and technically qualified to undertake 3G services. On January 3, 2006, DMPI confirmed its choice of 

3G bandwidth with the NTC. 

On December 14, 2006, DMPI was registered with the BOI and is entitled to incentives on a pioneer 

status as a new operator of 3G infrastructure and telecommunications system. 

We believe we are in compliance with all government regulations applicable to telecommunication 

companies. 

Customers 

Digitel provides local metered service as well as domestic and international long distance services to 

individual wireline and wireless subscribers both for outbound and inbound calls. It also provides data 

communications to business subscribers and internet services to both business and residential customers. 

Digitel‟s inter-exchange and IGF facilities are likewise tapped by other telephone companies and private 

enterprises in effect becoming customers of Digitel. Digitel also provides internet and data services to companies 

in the manufacturing, trading, banking, utilities, BPOs, call centers, hospitals, hotel and real estate sectors. 

Sun Cellular, on the other hand, makes its prepaid services available through its thousands of Xpressload 

retailers, distributors, as well as The Sun Shop outlets. Postpaid services meanwhile are being provided to 

individuals, families, small and medium enterprises, and local companies. 

Suppliers 

The Company has entered into major contracts with Huawei, Ericsson and Ceragon to undertake the 

implementation of Digitel‟s mobile network expansion projects in the Philippines. The Company expects to 

expand coverage to over 8,000 cellsites by end of year 2011. 

14

Contracts for other major projects with the following suppliers are ongoing: 

1. Huawei Technologies, to carry out GSM expansion and maintenance projects to enhance network 

coverage and capacity in the National Capital Region and South Luzon; expansion of GSM CORE 

Network elements; supply of equipment and other related materials for Core Network Switching System 

Services, Intelligent Network & Value Added Services; supply of equipment and other related materials 

for National Capital Region & South Luzon Base Station System Network; 3G Network UTRAN 

Equipment and Training; supply of equipment and other related materials for the Network Switching 

System & Transmission Project. 

2. Ericsson, to handle GSM expansion project to enhance network coverage and capacity in North Luzon, 

Visayas and Mindanao areas for wider nationwide coverage; equipment and supply services for Visayas 

and Mindanao maintenance; supply of equipments & other related materials for North Luzon, Visayas 

and Mindanao BSS Network Expansion. 

3. Ceragon Network, to supply equipment and handle survey, installation, commissioning and maintenance 

of the South Luzon‟s Bicol Transmission Expansion and Redundancy Project (BTEARP), NCR 13 

Rings and Baguio projects for high frequency and high capacity wireless networking equipment that 

increase network reliability and availability in Luzon. 

Compliance with Environmental Laws 

Digitel and DMPI have not been subject to any material penalties or legal or regulatory action involving 

noncompliance with environmental regulations of the Philippines. 

Employees 

Digitel had 4,379 employees as of December 31, 2010 of which 66% were rank & file employees, 32% 

were management/supervisory staff and 2% were executives. This represents a 1.4% increase in manpower level 

compared to 4,317 in 2009. 

Revenues 

Digitel‟s service revenues are primarily derived from service connection fees and local monthly service 

charges and from charges generated by telephone calls that vary based on the distance, duration and time of day of 

the call. With the launch of Digitel‟s wireless service, revenues are also generated from sale of phone kits and 

from charges for SMS and other Value Added Services (VAS) aside from the traditional voice services. 

Service revenue by business unit is presented below (in P‟000): 

2010 

2009 2008 

Amount % Amount % Amount % 

Wireless 12,892,247 79% 10,155,394 73% 7,281,942 65% 

Wireline - Voice 2,946,127 18% 3,261,514 24% 3,630,702 32% 

Wireline - Data 475,283 3% 431,131 3% 358,124 3% 

16,313,657 100% 13,848,039 100% 11,270,768 100% 

Information as to domestic and foreign revenues and their contributions to total service revenues follow 

(in P‟000): 

2010 

2009 2008 

Amount % Amount % Amount % 

Domestic 14,047,836 86% 11,933,244 86% 9,666,693 86% 

Foreign 2,265,821 14% 1,914,795 14% 1,604,075 14% 

16,313,657 100% 13,848,039 100% 11,270,768 100% 

15

Other Matters 

On December 17, 2000, the Company entered into an agreement with East Asia Netcom Philippines, Inc. 

(a wholly owned company of Asia Netcom) and Asia Netcom Philippines, Inc. (formerly Philippine Crossing 

Land Corporation) to form a joint venture known as Digitel Crossing Inc. The Company owns 40% equity interest 

in the said venture and residual interest shared by East Asia Netcom Philippines, Inc and Asia Netcom Philippines, 

Inc. at 40% and 20%, respectively. In addition, Digitel owns indirectly 12% of the joint venture thru Asia Netcom 

Philippines, Inc. 

The Company established Digitel Capital Philippines, Ltd. (DCPL), a wholly owned subsidiary, to 

engage in any activity allowed under any law of the British Virgin Island. In November 2004, DCPL issued Zero 

Coupon Convertible Bonds due in 2014 (DCPL Bonds) with a face value of US$590.1 million and issue price of 

US$190.0 million. JG Summit Philippines, Ltd. fully subscribed to the DCPL Bonds. 

Item 2. Properties 

Digitel‟s major properties, located in its various areas of operation, consist of telecommunications 

equipment, land, buildings and improvements, vehicle and work equipment, and telecommunications projects 

under construction. 

In 2005, Digitel expanded its fiber optic backbone coverage to include strategic areas in Cavite, Rizal, 

Laguna, Batangas and Quezon provinces. The new infrastructure, made up of New Generation SDH Multiplexers, 

Core and Edge Routers (all MPLS), is envisioned to address new services such as IPVPN and IP-based mission 

critical services requiring QoS. It is also intended to support the high bandwidth requirements of IP DSLAM and 

to complement the NGN switch and Video Conference Platform in providing VoIP and video conferencing 

services. IPVPN services were introduced in 2005 with the completion of the IP-MPLS core network covering 

Binalonan, Balagtas and Galleria Corporate Center (“GCC”) in Quezon City. This is the first step on the road to 

building a convergent IP-based network supporting VOIP, broadband internet and video services. 

As of December 31, 2010, Digitel had a total of almost 600,000 lines system-wide. Its fully digital 

telecommunications facilities include a Luzon-wide “backbone” (long distance) transmission system consisting of 

radio stations and fiber optic cables and a transit exchange with interconnections with other operators in Metro 

Manila. Digitel also has an International Gateway Facility (“IGF”), made up of two IGF switches, one in 

Binalonan, Pangasinan and another in Quezon City, which provides instant connectivity to more than 200 

international destinations. With Digitel‟s participation in the National Digital Transmission Network (“NDTN”) 

undertaken by the Telecoms Infrastructure Corp. of the Philippines (“Telicphil”), the Luzon-wide “backbone” 

transmission facility now extends to the Visayas and Mindanao. In addition, the Company owns submarine cable 

capacities in the Trans-Pacific Cable-5 (TPC-5), the Asia-Pacific Cable Network (“APCN”), and the Southeast 

Asia-Middle East-Western Europe (SEA-ME-WE) cable systems. It also purchased capacities from the China- 

United States cable systems and the Guam-Philippines cable systems. 

Digitel has deployed ADSL ports via DSLAMS installed in the various telephone switch central offices 

to provide connectivity to subscribers via copper wires within a 5 kilometer radius. Parts of this deployment are 

high temperature tolerant DSLAMS installed inside remote switch cabinets to serve clients remotely situated from 

main central office exchanges. The ADSL layers also serve as the transport in providing hosted content 

applications services, such as Netmedic, NetAcademy, NetInventory and NetPayroll and others. 

Digitel‟s wireless network expansion continues to be carried out by global partners, Huawei and 

Ericsson. The principal components of Digitel‟s digital wireless network are: 

cell sites, which contain transmitters, receivers and other equipment that communicate by radio signals 

with the wireless handsets within the range of the cell site; 

digital switching centers to route the calls to the proper destinations; and 

transmission facilities to link the switching centers to the cell sites. 

The Company's properties are all in good operating condition. 

16

Item 3. Legal Proceedings 

There is no material reclassification, merger, consolidation or purchase or sale of a significant amount of 

assets not in the ordinary course of business. 

report. 

There is no proceeding that was terminated during the fourth quarter of the fiscal year covered by this 

Item 4. Submission of Matters to a Vote of Security Holders 

There were no matters submitted to a vote of security holders through the solicitation of proxies during 

the fourth quarter of 2010. 

PART II - OPERATIONAL AND FINANCIAL INFORMATION 

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters 

DIVIDENDS 

The Company historically has not paid cash dividends on the Shares. Any payment of cash dividends on 

the Shares in the future will depend upon the Company‟s earnings, cash flow, financial condition, capital 

investment requirements and other factors, including certain restrictions on dividends imposed by the terms of the 

Company‟s credit and loan agreements. 

STOCK PRICES 

The Company was officially listed in the Philippine Stock Exchange on September 1996. 

The number of shareholders of record as of December 31, 2010 was 5,726 with common shares 

outstanding of 6,356,976,300. 

Quarter end stock price ranges for 2010 and 2009 are as follows: 

Quarter-End Dates High Low Close 

December 31, 2010 1.67 1.41 1.48 

September 30, 2010 1.74 1.37 1.57 

June 30, 2010 1.78 1.28 1.50 

March 31, 2010 1.46 1.28 1.34 

December 31, 2009 1.50 1.28 1.38 

September 30, 2009 1.64 1.28 1.44 

June 30, 2009 1.46 0.99 1.34 

March 31, 2009 1.14 0.96 1.06 

17

TOP 20 STOCKHOLDERS 

Top 20 stockholders as of December 31, 2010: 

Rank Name No. of Shares % to Total 

1. JG Summit Holdings, Inc. 3,016,079,550 47.4% 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

PCD Nominee Corporation (Filipino) 1,359,803,841 21.4% 

PCD Nominee Corporation (Non-Filipino) 1,328,829,279 20.9% 

Express Holdings Inc. 135,231,332 2.1% 

Solid Finance (Holdings), Limited 110,000,000 1.7% 

Makati Supermarket Corporation 56,245,330 0.9% 

Paul Gerard B. Del Rosario 48,797,000 0.8% 

ABV Inc. 33,358,590 0.5% 

Thorton Holdings, Inc. 26,680,810 0.4% 

10. United Phils. Realty Corp. 17,566,550 0.3% 

11. Elizabeth Yu Gokongwei 15,825,000 0.2% 

12. Lucio W. Yan &/or Clara Y. Yan 15,050,000 0.2% 

13. Aurora Villanueva and/or Edwin Villanueva 13,488,550 0.2% 

14. BDO Strategic Holdings, Inc. 11,625,000 0.2% 

15. Roger C.Ang 7,100,000 0.1% 

16. Gregorio B. Trinidad and/or Cynthia M. Trinidad Del R 7,000,000 0.1% 

17. Gregorio B. Trinidad and/or Enrico M. Trinidad 7,000,000 0.1% 

Gregorio B. Trinidad and/or Monique Trinidad Toda 7,000,000 0.1% 

Gregorio B. Trinidad and/or Salome S. Adajar 7,000,000 0.1% 

Chak Ching Chan 6,362,000 0.1% 

18. Seven (7) R. Port Services, Inc. 5,000,000 0.1% 

19. Edwin Villanueva 4,887,630 0.1% 

20. Feliza and/or KT Lim Lim 4,625,580 0.1% 

Total 6,244,556,042 

Item 6. Management’s Discussion and Analysis or Plan of Operation 

Results of Operations 

2010 Compared to 2009 

Digitel‟s consolidated revenues for the year ended December 31, 2010 posted an 18.0% growth year-onyear 

at P16,543.9 million from last year‟s P14,020.0 million. 

Wireless communication services recorded a 27.1% revenue growth from P10,327.4 million in 2009 to 

P13,122.5 million in 2010 fueled by the growth in subscriber base and introduction of more affordable and 

innovative products. Subscriber base stood at 14.04 million as at December 31, 2010 higher by 29.3% from last 

year‟s 10.86 million. Postpaid subscribers account for 1.22 million comprising of 1.07 million 2G subscribers and 

0.15 million 3G subscribers, an improvement of 35.6% from 0.9 million subscribers in 2009 comprising of 0.83 

million 2G subscribers and 0.07 million 3G subscribers. On the other hand, prepaid subscribers totaled 12.82 

million as at year-end 2010 comprising of 12.71 million 2G subscribers and 0.11 million 3G subscribers up from 

last year‟s prepaid subscribers count totaling 9.96 million comprising of 9.93 million 2G subscribers and 0.03 

million 3G subscribers. 

18

Wireline voice communication service revenues however, dipped by 9.7% during the year to P2,946.1 

million from P3,261.5 million in 2009. This was mainly due to lower international and domestic tolls and local 

exchange partially offset by the growth in Suntel and ADSL products which registered a 17% increase over the 

same period last year. 

Wireline data communication service revenues amounted to P475.3 million in 2010, higher by 10.2% 

against last year‟s P431.1 million due to the increase in domestic data and Internet services through its IPVPN 

services new subscriptions. 

Consolidated costs and operating expenses increased to P15,312.5 from P12,993.3 million in 2009 due to 

higher network-related and general and administrative expenses and depreciation and amortization. 

Consolidated EBITDA (Earnings before interest, taxes and depreciation and amortization) increased 

20.7% to P5,603.4 million from P4,643.0 million in 2009. 

After considering depreciation and amortization, consolidated EBIT (Earnings before interests, foreign 

exchange gain, market valuation loss and taxes) amounted to P1,231.4 million in 2010, a 19.9% improvement 

from last year‟s P1,026.8 million. 

Digitel‟s consolidated income before income tax amounted to P1,225.2 million in 2010, 541.8% more 

than last year‟s figure of P190.9 million. 

Net income for the year 2010 significantly improved to P526.6million, from last year‟s P259.7 million. 


Digitel registered a consolidated revenues of P14,020.0 million for the year ended December 31, 2009, up 

by 23.5% or P2,668.8 million from last year‟s P11,351.2 million. The increase was largely due to the significant 

increase in the wireless segment by 40.3% from P7,362.3 million in 2008 to P10,327.4 million in 2009. 

Wireline voice communication service revenues however, dropped by 10.2% during the year to P3,261.5 

million in 2009 from P3,630.7 million in 2008. This was mainly due to lower international and domestic tolls and 

local exchange. The decline was partially offset by the growth of ADSL products which registered a 23% increase 

over the same period last year. 

Wireline data communication service revenues amounted to P431.1 million in 2009, higher by 20.4% 

against last year‟s P358.1 million brought about by the growth in domestic data and Internet services through its IP 

VPN services new subscriptions. 

Consolidated costs and operating expenses rose by P2,406.5 million or 22.7% due significantly to higher 

network-related and general and administrative expenses and depreciation and amortization. 

With the significant growth in the wireless segment, the Company realized an earnings before interests, 

foreign exchange gain, market valuation loss and taxes of P1,026.8 million in 2009, a 34.3% improvement over 

last year‟s income before interests, foreign exchange loss, market valuation loss and taxes of P764.4 million. 

After considering finance costs, foreign exchange gain, market valuation loss and other income, Digitel 

posted a consolidated income before income tax of P190.9 million in 2009, a turn around from a consolidated loss 

before income tax of P3,041.9 million in 2008. 

Net income for the year 2009 is at P259.7 million versus a net loss of P1,978.1 million in 2008. This is 

primarily due to the increase in revenue and the positive impact of foreign exchange in 2009. 

Digitel continues to project an uptrend in its results of operation moving forward as the Company 

aggressively grow its coverage and capacity in the wireless network and integrating its wireline and wireless 

services to continuously bring in new, innovative and trendsetting products. 

19

DIGITAL TELECOMMUNICATIONS PHILS., INC. AND SUBSIDIARIES 

Financial Highlights and Key Performance Indicators 

(in PhP 000s, except for exchange rates 

and earnings (loss) per common share) 

Consolidated Statements of Financial Position 

December 31, 2010 December 31, 2009 Increase (Decrease) 

(Audited) (Audited) Amount % 

Total assets 90,897,908 82,296,941 8,600,967 10 

Property and equipment - net 81,326,911 72,985,125 8,341,786 11 

Cash and cash equivalents 1,107,231 1,112,695 (5,464) (0) 

Total Equity 44,515 1,349,046 (1,304,531) (97) 

Interest-bearing financial liabilities 33,160,605 28,860,827 4,299,778 15 

Bonds Payable and long-term debt 33,160,605 28,860,827 4,299,778 15 

Debt to equity ratio 745x 21x - 

Consolidated Statements of Comprehensive Income 

744.93 

21.39 

Twelve Months Ended December 31, 

2010 2009 Amount % 

(Audited) 

Revenues 16,543,917 14,020,021 2,523,896 18 

Cost and Operating Expenses 15,312,501 12,993,261 2,319,240 18 

Income before income tax 1,225,221 190,887 1,034,334 542 

Net Income 526,632 259,716 266,916 103 

Net Income margin 3% 2% 

Earnings per common share - basic 0.08 0.04 0.04 100 

Consolidated Statements of Cashflows 

Net cash provided by operating activities 6,969,658 6,357,021 612,637 10 

Net cash used in investing activities 9,503,772 11,659,396 (2,155,624) (18) 

Capital Expenditures 7,949,368 10,104,325 (2,154,957) (21) 

Net cash provided by financing activities 2,655,282 5,467,321 (2,812,039) (51) 

Exchange Rates 

Php per US$ 

December 31, 2010 43.84 

December 31, 2009 46.20 

Financial Position 


Increase (Decrease) 

Consolidated assets totaled P90,897.9 million at the end of 2010, an increase of 10.5% from P82,296.9 

million at the end of 2009. 

Inventories increased by P47.0 million or 17.8% due mainly to higher handsets, phonekits, SIM cards and 

callcards purchased over units sold during the year. 

Derivative assets amounted to P571.7 million, an increase of P208.4 million or 57.3% due to mark-to- 

market valuation gain recognized on currency forwards derivatives. 

Property and equipment, net of accumulated depreciation, increased to P81,326.9 million as of December 

31, 2010, an increase of 11.4% from P72,985.1 million as of December 31, 2009. Additions to property and 

equipment amounted to P12,731.0 million and P11,737.5 million in 2010 and 2009, respectively, as a result of 

Digitel‟s continuing investments in telecommunications facilities, particularly in the wireless business segment. 

These investments were funded through bank financing, advances from affiliates and cash generated internally. 

Long–term debts (current and non–current) aggregating to P15,261.9 million consisted of loans from 

foreign banks as of December 31, 2010. 

- 

20

Bonds payable increased to P17,898.7 million in 2010 from P15,503.2 million in 2009 resulting from 

amortization of bond discount and additional adjustment to bring the bond carrying value to its redemption value 

as at December 31, 2010 in anticipation of the redemption of bonds in 2011. The adjustment is shown as equity 

reserve in the statement of financial position and statement of changes in equity. As at December 31, 2010, the 

Digitel bonds and DCPL bonds are convertible into 978,107,008 and 16,769,354,795 common shares, 

respectively. 

The increase in net deferred tax liabilities of P675.4 million or 24.9% arose from unrealized foreign 

exchange gain, capitalized interest, unamortized debt issuance cost and mark to market gain. 

Other noncurrent liabilities increased by P4,266.1 million or 63.8% due mainly to higher accrued network 

projects. 

Capital stock stood at P8,975.7 million as of December 31, 2010 and 2009. DIGITEL‟s deficit as of 

December 31, 2010 amounted to P7,100.1 million compared from P7,626.7 million as of December 31, 2009. 

Digitel‟s financing requirements were covered by both internally generated funds and external 

borrowings. Consolidated net cash flow provided by operating activities in 2010 amounted to P6,969.7 million as 

compared to P6,357.0 million in 2009. Net cash financing from external sources amounted to P2,655.3 million in 

2010 and P5,467.3 million in 2009. 


Consolidated assets totaled P82,296.9 million at the end of 2009, an increase of 9.4% from P75,233.8 

million at the end of 2008. 

Inventories increased by P37.7 million or 16.7% due mainly to higher handsets, phonekits and 

accessories purchased over units sold during the year and purchase of laptops for the broadband wireless service. 

Derivative assets comprise mainly of embedded derivatives in foreign currency denominated purchase 

orders and contracts significantly for network-related projects, amounted to P363.4 million as of December 31, 

2009, a decrease of P271.8 million or 42.8% from previous year‟s figure of P635.2 million. 

Prepayments and other current assets rose by P68.5 million or 25.9%. This is attributable mainly to 

higher prepaid taxes and prepaid rent brought about by the additional cellsites roll-out during the year. 

Property and equipment, net of accumulated depreciation, increased to P72,985.1 million as of December 

31, 2009, an increase of 12.5% from P64,885.5 million as of December 31, 2008. Additions to property and 

equipment amounted to P11,737.5 million and P12,528.8 million in 2009 and 2008, respectively, as a result of 

Digitel‟s continuing investments in telecommunications facilities, particularly in the wireless business segment. 

These investments were funded through bank financing, advances from affiliates and cash generated internally. 

Accounts payable and accrued expenses decreased by P1,216.8 million or 15.0% due to settlement of 

various liabilities during the year. 

Long–term debts (current and non–current) aggregating to P13,357.6 million consisted of loans from 

foreign banks as of December 31, 2009. 

Digitel obtained financing from foreign and local affiliates to fund the wireless communication services 

network. As of December 31, 2009 and 2008, outstanding balances were P33,369.3 million and P30,048.2 

million, respectively. 

Bonds payable increased by P874.7 million during the year due mainly to the amortization of bond 

discount. 

Capital stock stood at P8,975.7 million as of December 31, 2009 and 2008. Digitel‟s deficit as of 

December 31, 2009 amounted to P7,626.7 million compared to P7,886.4 million as of December 31, 2008. 

Digitel‟s financing requirements were covered by both internally generated funds and external 

borrowings. Consolidated net cash flow provided by operating activities in 2009 amounted to P6,357.0 million as 

21

compared to P2,470.8 million in 2008. Net cash financing from external sources amounted to P5,467.3 million in 

2009 and P8,989.9 million in 2008. 

Prospects for the Future 

It was another remarkable year for Digitel, defying negative growth forecasts for the industry, by posting 

positive double digit-growth in Net Service Revenues. Without doubt, a major driver for the growth is the 

company‟s wireless arm, Sun Cellular, which holds the unenviable position of being the first to achieve 

acquisition of over One (1) Million in postpaid subscriptions in the country, remaining the preferred postpaid 

brand for the third straight year, with 7 out of 10 new postpaid subscribers availing themselves of Sun Cellular 

products and services. 

In 2010, Sun Cellular remained the only mobile telecommunications provider of a truly reliable unlimited 

service for its over 14 million subscribers. As Sun Cellular continues its stronghold over the unlimited call and text 

market, it is supported by a robust network built for the provisioning of unlimited texts, calls, and mobile internet 

use. New products and services successfully launched within the year further strengthened Sun Cellular as the 

best value-for-money mobile brand in the country. 

Amidst the country‟s development plans, the telecommunications and services sectors will have much 

opportunity to contribute their share towards progress and nation-building. Adhering to the demands of domestic 

and foreign investors for accessibility to reliable infrastructure, including telecommunications services 

requirements, the initiatives of the Company have been aligned to ensure quality telecommunications services 

availability. 

Serving the publics‟ need for access to development opportunities through reliable telecommunications 

infrastructure and a portfolio of innovative products and services, the Company‟s future projects and programs are 

aligned and geared towards providing the value-for-money products, services, and solutions, necessary in uplifting 

the country‟s economic and social progress. Digitel‟s integrated wireline and wireless 2G & 3G services, valueadded 

services solutions, business solutions, broadband services solutions, phone and data transmission services 

solutions are ready, available, and accessible, to drive m-commerce through mobile micro-entrepreneurship 

solutions, mobile micro-finance solutions, to aggressively address and satisfy the increased demand for such 

reliable and secure telecommunications access services. These feature-rich solutions aim to support and enable 

the growth of small and medium enterprises. For the more established industries like the banking and financial 

services sectors, including the medical and healthcare industries, and various social services agencies, which have 

already begun to advocate the efficiency and cost effectiveness of using electronic-based solutions and Internetbased 

transaction services for customer centric personalized transactions, appreciation for advancement in 

technology, service quality, and reliability are found among Digitel‟s and Sun Cellular‟s business and corporate 

solutions. 

Partnering with world-class suppliers, Digitel continues to deliver efficient and affordable 

telecommunications services solutions nationwide. Digitel‟s innovative portfolio of buffet-priced unlimited 

products and services provides choices to all segments of the market. The Company will continue to offer 

consumers value for money in all its telecommunications services solutions, satisfying the growing demand for 

reliability and service quality. Digitel continues to invest in building its telecommunications network infrastructure 

to the design and scale of market demand and opportunities. 

Digitel‟s commitment to fulfilling customers‟ satisfaction with their choice of affordable, reliable, and 

innovative services, and catering to a growing base of customer service-centric subscribers is the driving force 

motivating everyone in the company towards better service. 

22

Key Performance Indicators 

Management assessed the Company‟s performance based on the following key performance indicators: 

2010 2009 YoY change (%) 

Revenues (P‟000) 16,543,917 14,020,021 18.00 

EBITDA margin a 

34.35% 33.53% 0.82 

EBIT margin b 

7.55% 7.41% 0.14 

Cash flow provided by operating activities (P‟000) 6,969,658 6,357,021 9.64 

Debt to equity ratio c 

745x 21x 

a 

b 

EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortization and Other 

Income/Charges. EBITDA is computed by deducting cost and expenses (excluding Depreciation and 

Amortization) from total revenues. EBITDA margin is calculated by dividing EBITDA over service 

revenues. 

EBIT is defined as Earnings Before Interest, Taxes, and Other Income/Charges. EBIT is computed by 

deducting cost and expenses from total revenues. EBIT margin is calculated by dividing EBIT over 

service revenues. 

c Debt to equity ratio is computed by dividing total debt (excluding accounts payable and accrued 

expenses, deferred tax liabilities, due to affiliates and other noncurrent liabilities) to total equity. 

Subsequent Event 

On March 29, 2011, JGSHI and certain related parties executed a sale and purchase agreement with 

Philippine Long Distance Telephone Company (PLDT) under which PLDT has agreed to purchase all the rights, 

title and interest in the assets of the Parent Company which consist of the following: 

3,277,135,882 common shares in the Parent Company, representing approximately 51.55% 

equity share in the Parent Company; 

zero coupon convertible bonds due 2013 and 2014 issued by the Parent Company and its 

subsidiary to the ultimate parent and an affiliate which are convertible into approximately 

18.6 billion shares of the Parent Company by June 30, 2011; and 

intercompany advances of P=34.1 billion made by the ultimate parent and a subsidiary to the 

Group. 

The total consideration for the assets amounted to P=69.2 billion. The transaction is intended to be 

completed by the end of June 2011. 

Other Matters 

a. Any known trends, demands, commitments, events or uncertainties that will have a material impact 

on the issuer‟s liquidity. 

- We are not aware of any known trends, demands, commitments, events or uncertainties that will 

have a material impact on the issuer‟s liquidity. 

- The Company has not defaulted in paying its currently maturing obligations. In addition, 

obligations of The Company are guaranteed up to a certain extent by The Company‟s majority 

stockholders. 

b. Any events that will trigger direct or contingent financial obligation that is material to the company, 

including any default or acceleration of an obligation. 

- We are not aware of any events that will trigger direct or contingent financial obligation that is 

material to the company, including any default or acceleration of an obligation. 

c. All material off-balance sheet transactions, arrangements, obligations (including contingent 

obligations), and other relationships of the company with unconsolidated entities or other persons 

created during the reporting period. 

23

- We are not aware of any material off-balance sheet transactions, arrangements, obligations 

(including contingent obligations), and other relationships of the company with unconsolidated 

entities or other persons created during the reporting period. 

d. Description of any material commitments for capital expenditures, general purpose of such 

commitments, expected sources of funds for such expenditures 

- DMPI has a commitment to construct, install, operate and maintain a nationwide CMTS using 

GSM technology. Accordingly, DMPI entered into a supply agreement with foreign suppliers 

including their local affiliates for the said project. 

e. Any known trends, events or uncertainties that have had or that are reasonably expected to have a 

material favorable or unfavorable impact on net sales/revenues/income from continuing operations. 

- We are not aware of any known trends, events or uncertainties that have had or that are 

reasonably expected to have a material favorable or unfavorable impact on net 

sales/revenues/income from continuing operations. 

f. Any significant elements of income or loss that arise from issuer‟s continuing operations. 

- We are not aware of any significant elements of income or loss that arises from the issuer‟s 

continuing operations. 

g. Seasonal aspects that have material effect on the FS. 

- We are not aware of any seasonal aspects that have material effect on the FS. 

Item 7. Financial Statements 

The financial statements and schedules listed in the accompanying Index to Financial Statements and 

Supplementary Schedules are filed as part of this Form 17-A. 

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

The Company has not changed its independent accountant during the two most recent calendar years and 

there was no disagreement encountered during the years under audit by the independent accountant. 

Audit and Audit-Related Fees 

The expenses incurred by the Company for SGV‟s examination and audit of financial statements 

amounted to P3.7 million for 2010 and P3.5 million for 2009. 

There was a special engagement performed by SGV & Co. in 2010 and this cost the Company P5.0 

million. 

24

PART III - CONTROL AND COMPENSATION INFORMATION 

Item 9. Directors and Executive Officers of the Registrant 

The following are the directors and executive officers of the Company as of December 31, 2010: 

Name Age Citizenship Position in the Company 

Period during which the 

person has served as such 

Ricardo J. Romulo 78 Filipino Chairman & Director August 1987 to present 

James L. Go 71 Filipino Vice Chairman, President, Chief Executive Officer 

& Director 

April 1993 to present 

John L. Gokongwei, Jr. 84 Filipino Director May 1993 to present 

Lance Y. Gokongwei 44 Filipino Director April 1993 to present 

Octavio Victor R. Espiritu* 67 Filipino Director May 2006 to present 

Antonio L. Go* 71 Filipino Director May 2006 to present 

Charles A. Lim 49 Filipino Business Unit Head-CMTS/ LEC February 1, 2002 to present 

Jaime I. Cabangis 58 Filipino Chief Financial Officer July 1, 2001 to present 

William S. Pamintuan 49 Filipino SVP-Legal Services/Group Head-HRD/ 

Corporate Secretary 

April 1, 1991 to present 

Arlene Sta. Rosa-Denzon 43 Filipino SVP-Group Risk Management June 2004 to present 

Francisco L. Araña 38 Filipino VP-Product Development-CMTS November 15, 2001 to 

Adolfo C. Areola 47 Filipino VP-Service Delivery Group-LEC June 1, 1993 to present 

Carlo Dominic B. Benesa 41 Filipino VP-Core and Data Networks -CMTS February 22, 2008 to present 

Miles Tonn C. Chua 42 Filipino VP-Network Implementation and Project 

Management - 

July 16, 2007 to present 

Carlos Miguel S. Concio 37 Filipino VP- Sales-LEC August 1, 2008 to present 

Joan Marie C. Dueñas 38 Filipino VP- Prepaid Marketing and Loyalty-CMTS December 1, 2001 to present 

Noel F. Del Mundo 54 Filipino VP-Human Resources-CMTS August 1, 2004 to present 

Ma. Liza M. Delos Reyes 51 Filipino VP-Group Treasury September 13, 1995 to 

Alberto I. Entao Jr. 46 Filipino VP Human Resources -LEC June 1, 2010 to present 

Artemio P. Ermita, Jr. 59 Filipino VP-Technical Support Group-LEC January 24, 2000 to present 

Enrique D. Feliciano 51 Filipino VP- Business Center Operations Support- LEC June 16, 1997 to present 

Faraday D. Go 35 Filipino VP-Retail Management-CMTS/LEC November 18, 2002 to 

Joycelyn R. Hilao 46 Filipino VP Corporate Sales CMTS December 1, 2010 to present 

Naser S. Huab 50 Filipino VP-Group Internal Audit June 1, 1995 to present 

Susana O. Ligeralde 51 Filipino VP-Comptrollership-CMTS/LEC April 16, 2004 to present 

Roderick U. Liwanag 35 Filipino VP-Business Development and Channels-LEC August 1, 2008 to present 

Edgardo S. Macam 47 Filipino VP-Corporate Solutions Group-LEC July 16, 2008 to present 

Carmelo C. Ocampo 53 Filipino VP-Administration, Logistics and 

Procurement-CMTS/LEC 

April 15, 2004 to present 

Luciano V. Ongkingko, Jr. 52 Filipino VP- Sales-LEC September 11, 2006 to 

Reuben S.J. Pangan 45 Filipino VP-Customer Relationship Management-CMTS/LEC January 2, 2006 to present 

Patrick Vincent G. Peña 45 Filipino VP-Postpaid Acquisition and Loyalty-CMTS August 8, 2007 to present 

Baby Jane T. Quiambao 42 Filipino VP-Information Technology-CMTS/LEC May 1, 2006 to present 

Edgardo G. Razon 46 Filipino VP-Dealer Sales-CMTS July 16, 2007 to present 

Ramon B. Rivera, Jr. 61 Filipino VP-Service Delivery Group-LEC September 1, 2008 to present 

Orlando C. Sibug 57 Filipino VP- Core Operations and Admin-CMTS October 1, 2006 to present 

Virgilio S. Trinidad 49 Filipino VP-Group Billing Division and Information 

Technology-LEC 

September 7, 1998 to present 

Filomena D. Veto 52 Filipino VP-Project Finance and Monitoring Division September 15, 2004 to 

CMTS and Carrier Services-CMTS/LEC present 

Emerlyn C. Villa 45 Filipino VP-Business Operations Support and Logistics-LEC March 1, 2006 to present 

* Independent Directors 

(a) Directors 

The directors of the Company as of December 31, 2010 including their business experiences for the last 

five years are the following: 

Ricardo J. Romulo is the Chairman of the Board of Directors of Digital Telecommunications Phils., Inc. (Digitel). 

He also serves as the Chairman of the Board of Cebu Air Inc., Federal Phoenix Assurance Company, Inc., and 

Sime Darby Pilipinas, Inc., and as Director of SM Development Corporation, JG Summit Holdings, Inc. (JGSHI), 

Philippine American Life and General Insurance Company, Honda Philippines, Inc., Planters Development Bank, 

and Zuellig Pharma Corporation. He is a Senior Partner in Romulo, Mabanta, Buenaventura, Sayoc & Delos 

Angeles Law Office. 

James L. Go is the Vice Chairman of the Board of Directors of Digitel and also holds the position of President and 

Chief Executive Officer of Digitel. He is also the Chairman and Chief Executive Officer of JG Summit Holdings, 

25

Inc. (JGSHI) and as such, heads its Executive Committee. He is currently the Chairman and Chief Executive 

Officer of Universal Robina Corporation (“URC”), Robinsons Land Corporation („RLC”), JG Summit 

Petrochemical Corporation, CFC Corporation, Robinsons, Inc., and Oriental Petroleum and Minerals Corporation 

(OPMC). He is also the President and a Trustee of Gokongwei Brothers Foundation, Inc. and a director of First 

Private Power Corporation, Bauang Private Power Corporation, OPMC, Cebu Air, Inc., Panay Electric Co., United 

Industrial Corp., Ltd., Singapore Land, Ltd., Marina Center Holdings, Inc. and JG Summit Capital Markets 

Corporation. He received his Bachelor of Science and Master of Science degrees in Chemical Engineering from 

the Massachusetts Institute of Technology, USA. 

John L. Gokongwei, Jr. is a Director of Digitel. He is the Founder of JGSHI and Chairman Emeritus thereof and 

certain of its subsidiaries since January 1, 2002. He also continues to be a member of JGSHI‟s Executive 

Committee. He is currently the Chairman of the Gokongwei Brothers Foundation, Inc., Deputy Chairman and 

Director of United Industrial Corporation, Ltd. and Singapore Land, Ltd., and a Director of JG Summit Capital 

Markets Corporation, OPMC, First Private Power Corporation and Bauang Private Power Corporation. He is also 

a non-executive Director of A. Soriano Corporation and Philex Mining Corporation. He holds a Masters Degree 

in Business Administration from De La Salle University and attended the Advanced Management Program at 

Harvard Business School, USA. 

Lance Y. Gokongwei is a Director of Digitel. He is also currently the President and Chief Operating Officer of 

JGSHI and JG Summit Petrochemical Corporation and the Vice Chairman and Deputy Chief Executive Officer of 

Robinsons Land Corporation. He also holds the position of President and Chief Executive Officer of Cebu Air, 

Inc., Chairman of Robinsons Savings Bank (RSB); Vice Chairman of JG Summit Capital Markets Corporation, 

and a director of OPMC, United Industrial Corporation, Ltd., and Singapore Land, Ltd. He is also a trustee, 

secretary and treasurer of Gokongwei Brothers Foundation, Inc. (GBFI). He received a Bachelor of Science 

degree in Economics and a Bachelor of Science degree in Applied Science from the University of Pennsylvania, 

USA. 

Mr. Octavio Victor R. Espiritu is an Independent Director of Digitel. He also sits as an Independent Director of 

the Bank of the Philippine Island, Pilipinas Savings Bank, Inc., International Container Terminal Services, Inc. 

and SM Development Corporation. He also serves as a Director of Manila Electric Company, Netvoice, Inc. and 

Pueblo de Oro Golf and Country Club. He is currently Chairman of Delphi Group, Inc., a corporate financial 

advisory firm, and is also Chairman and President of MAROV Holding Company, Inc. He was the former 

President of the Bankers Association of the Philippines (BAP) for three terms and was also the President and 

Chief Executive Officer of Far East Bank and Trust Company. He likewise was Chairman of the Board of Trustees 

of the Ateneo de Manila University for fourteen years. Mr. Espiritu received his primary, secondary and college 

education from the Ateneo de Manila University where he obtained his AB Economics degree. He also holds a 

Master‟s degree in Economics from Georgetown University in Washington DC, USA. 

Mr. Antonio L. Go is an Independent Director of Digitel. He also currently serves as an Independent Director of 

Cebu Pacific Airways, Oriental Petroleum and Minerals Corporation, and of Singapore based companies such as 

Singapore Land Limited and United Industrial Corporation. He also is a Director and President of Equitable 

Computer Services, Inc. and as a Director of ALGO Leasing and Finance, Inc., Equicom Information Technology, 

Equicom Savings Bank, Maxicare Healthcare Corporation, Medilink Network, Inc., PIN-AN Holdings Corp., 

Equicom Manila Holdings, Klara Holdings, Inc, Motan Corp, and Go Kim Pah Foundation. He is also a Trustee of 

Equitable Foundation, Inc. and a Member of the Makati Business Club, Philippine-Singapore Business Council 

and Philippine Chamber of Commerce, Inc. He graduated from Youngstown University, U.S.A. with a degree in 

BS Business Administration. He attended the International Advanced Management programme at the International 

Management Institute, Geneva, Switzerland as well as the Financial Planning/Control from the ABA National 

School of Bankard Management, Northwestern University, USA. 

(b) Executive Officers 

The other officers of the Company as of December 31, 2010 including their business experiences for the 

last five years are the following: 

Charles A. Lim is the Business Unit Head of the Company and the Cellular Mobile Telephone Services (CMTS) 

business of the Company through its wholly-owned subsidiary Digitel Mobile Phils., Inc. (DMPI). Prior to joining 

the Company, he was the Strategic Business Unit Head for Mobile Communications of Globe Telecom, Inc. He 

was also the Director for Brand Marketing-Greater China of Coca-Cola China, Limited, Hongkong and the 

Business Unit Head-Van den Bergh Foods of Unilever Philippines, Inc. 

26

Jaime I. Cabangis is the Chief Financial Officer of the Company and its wholly-owned subsidiary, DMPI. Prior 

to joining the JG Summit Group, Mr. Cabangis was the President, CEO and Board Member of Asia Amalgamated 

Holdings Corporation and its subsidiaries, and Chief Financial Officer and Board Member of Uniwide Holdings 

Corporation. He was also a partner of SGV & Co., where he worked for 21 years. Mr. Cabangis is a Certified 

Public Accountant and obtained his Masters in Business Management degree from the Asian Institute of 

Management in 1979. 

William S. Pamintuan is the Corporate Secretary of the Company and its wholly-owned subsidiary, DMPI. He is 

also the Senior Vice President for Legal Services, and the Group Head for Human Resources Division. He is also 

the Asst. Corporate Secretary of Cebu Air, Inc. He is a Partner of the Jalandoni, Cope, Reyes and Pamintuan Law 

Office, a Director of the Philippine Chamber of Telecommunication Operators, Inc. and a member of the 

Telecommunications and Broadcast Attorneys‟ Association of the Philippines. He obtained his Bachelor of Laws 

degree from the University of Philippines. 

Arlene Sta. Rosa-Denzon is presently the Senior Vice President-Group Risk Management. She joined the 

Company in June 2004. Prior to joining DMPI, she was the VP-Group Treasurer (Acting Chief Financial Officer) 

of URC International in charge of Accounting, Audit, Risk Management and Treasury. 

Francisco L. Araña, holds the position of Vice President for Product Development – CMTS Business Unit. 

Before joining DIGITEL in 2001, he was employed with Globe Telecom. 

Adolfo C. Areola is presently holding the position of Vice President of the Service Delivery Group of the LEC 

Business Unit. Prior to his present position, he was the Project Director for CDMA services, the Vice President 

and General Manager for the Central Commercial Operations and North Commercial Operations of the LEC 

Business Unit for 5 and 7 years, respectively. Prior to joining DIGITEL, he was the Assistant Regional Director of 

the Telecommunications Office (TELOF) of the Department of Transportation and Communication (DOTC) at 

Region V and also held managerial positions at the DOTC‟s Municipal Telephone Projects Office and Project 

Planning and Development Division. 

Carlo Dominic B. Benesa is currently the Vice President for Core and Data Networks -CMTS Business Unit and 

has been with Digitel since 1994. He was involved in various engineering projects from different companies 

including Piltelco, Toyota Motors Philippines and Digital Telecommunications Phils from 1992 to 2001 before his 

eventual transfer to DMPI in 2002. He later joined Nokia Philippines prior to his return to DMPI . 

Miles Tonn C. Chua is the Vice President for Network Implementation and Project Management–CMTS Business 

Unit. He worked with Globe Telecom for seven years before joining DMPI in 2007. 

Carlos Miguel S. Concio is the Vice President for Sales of the LEC Business Unit. Prior to his employment in 

DIGITEL, he was the Head of the Broadband and Content/VAS Category for PLDT and Consultant for Concio 

Architects. Mr. Concio is an AB Economics and Development Studies graduate from Ateneo de Manila 

University. 

Joan Marie C. Dueñas holds the position of Vice President for Prepaid Marketing. Before joining DIGITEL, she 

was employed with Globe Telecoms as Product Manager. 

Noel F. Del Mundo is the Vice President for Human Resources-CMTS Business Unit. Before joining DMPI, he 

was the Vice President for Human Resources of JG Summit Petrochemical Corporation for more than 8 years or 

since start-up in 1996. He also worked for The Phinma Group from 1984 to 1996 holding various HR 

Management posts, the last of which were concurrently as Assistant Vice President for Training and Organization 

Development, and Executive Director of The Phinma Training Foundation (that now manages the Phinma 

Training Center in Tagaytay). 

Ma. Liza M. Delos Reyes holds the position of Vice President for Group Treasury. Before joining Digitel, she 

was employed with Urban Bank. 

Alberto I. Entao Jr. is the Vice President for Human Resources-LEC Business Unit. Prior to joining the company, 

he was the Lead for Organization Development and Internal Communications of IBM Business Services, 

Philippines. He graduated Bachelor of Arts in Psychology minor in Economics at De La Salle University with 

Masters Degree in Education major in Guidance and Counseling. 

27

Artemio P. Ermita, Jr. is the Vice President for the Technical Support Group of the LEC Business Unit. Before 

joining DIGITEL, he served as Vice President for Telecommunications Services at PT & T. He was also Vice 

President for Network Planning/Implementation, O & M (Mobile) at Isla Communications Company, Inc. He also 

had stints at Easy Call Communications Phils., Inc., Nixdorf Computer Phils., Inc., System Resources, Inc. and at 

Smith Bell & Co., Inc. 

Enrique D. Feliciano is the Vice President for Business Center Operations Support of the LEC Business Unit. 

Prior to joining DIGITEL, he served as Sr. Manager at Isla Communication. 

Faraday D. Go is currently the Vice President for Retail Management of the CMTS Business Unit. Prior to his 

employment in DIGITEL, he worked with JG Petrochemical Corporation and APO Cement Corporation. 

Jocelyn Hilao is the Vice President for Corporate Sales for both the CMTS and LEC Business Units. Prior to 

joining the Company, she was formerly connected with Motorola Communications Philippines Inc, Alcatel 

Philippines Inc., Compaq Computer Philippines, Inc, Javlon Information System Inc. and Philippine Airlines. She 

is a graduate of Bachelor of Science in Commerce from Assumption College and took her Master in Management 

at the Asian Institute of Management. 

Naser S. Huab is the Vice President of the Group Internal Audit. Prior to joining Digitel, he was employed by 

PCI Bank as Manager of its EDP Audit Division and prior to that was a Manager in SGV & Co.‟s Computer Audit 

Group. He is a Certified Public Accountant and Certified Information Systems Auditor. 

Susana O. Ligeralde is presently the Vice President for Comptrollership-CMTS and LEC Business Units. She 

has more than 20 years of work experience in the areas of finance and comptrolling in various industries. Prior to 

joining the Company, she had worked with companies like Symmetry Philippines, Inc., Uniwide Holdings, Inc., 

Uniwide Sales Group of Companies, Asia Amalgamated Holdings Corp. and Sycip, Gorres, Velayo & Co.. She 

obtained her degree in Bachelor of Science in Commerce Major in Accounting from De La Salle University. 

Roderick U. Liwanag is the Vice President for Business Development and Channels of the LEC Business Unit. 

Prior to his employment in Digitel, he was head for various sales departments under Bayantel during his six-year 

stint with his last post as Head for Partner Solutions. Mr. Liwanag is a BS Electronics and Communications 

Engineer graduate from De La Salle University. 

Edgardo S. Macam is the Vice President for the Corporate Solutions Group of the LEC Business Unit. Mr. 

Macam was the Head of National Carrier Relations of Digitel from 1995 to 2002. He was then transferred to 

GSM Carrier Business Group then to Transmission Strategic and Planning Management Division. 

Carmelo C. Ocampo is the Vice President for Logistics, Procurement and Administration - CMTS Business Unit. 

He joined DMPI on April 15, 2004. A Fellow in Supply Management (FSM), Mr. Ocampo is also the current 

President of the Philippine Institute for Supply Management where he represents DMPI. 

Luciano V. Ongkingco, Jr is the Vice President for Sales of LEC Business Unit. He joined the Company on 

September 11, 2006. Prior to joining Digitel, he was the Vice President and the Head of the LEC Business Unit of 

PT&T. He has more than 25 years of experience in other telecommunications companies, handling various 

functions such as commercial operations, carrier relations, project management and pricing. He is a licensed 

Electrical Engineer from Pamantasan ng Lungsod ng Maynila. He also finished Bachelor of Laws from Lyceum of 

the Philippines. 

Reuben SJ Pangan is the Vice President for Customer Relationship Management (CRM) and Marketing Services- 

CMTS Business Unit. Prior to joining the Company in 2006, he was concurrently Vice President for Sales, 

Marketing and Customer Service of Airfreight 2100, Inc.(Air21) and Business Unit head for Dynamic Outsource 

Solutions Inc. (DOS-I), an outsource business company which aims to create jobs and provide contact centers and 

marketing services for the Lina Group of Companies. He was also the Director for Customer Relations of Globe 

Telecoms before his stint with the Lina Group. 

Patrick Vincent G. Peña is presently the Vice President for Postpaid Acquisition and Loyalty - CMTS Business 

Unit. He is an Industrial Engineering graduate from University of the Philippines and has been in the 

telecommunications industry for more than 10 years. 

28

Baby Jane T. Quiambao is the Vice President for Information Technology of CMTS Business Unit. She joined 

DMPI in February 2003 and came on-board with more than fifteen (15) years of work experience in the area of 

Information Technology and Telecommunications. Prior to DMPI, she worked for several reputable companies 

such as IBM Philippines, House of Sara Lee, Ayala Systems Technology Inc, and Yutivo Corporation. She 

graduated from De La Salle University with a Bachelor of Science degree in Computer Science major in Computer 

Technology. 

Edgardo G. Razon is the Vice President for Dealer Sales - CMTS Business Unit. He joined DMPI on July 16, 

2007. Prior to joining the Company, he has been the VP-Sales of Coca-Cola Bottlers Phils., Inc. 

Ramon B. Rivera, Jr. is currently the Head for the Service Delivery Group of the LEC Business Unit. Mr. Rivera 

is a former Senior Executive at PLDT Co. with 39 years of diverse telecommunication hands-on experience in the 

field of Operations, Engineering, Network Maintenance, Technical Assistance, Customer Care, Business Process 

Development, and Reengineering. Mr. Rivera also serves as Vice President of Customer Contact and Service 

Management Retail Business. 

Orlando C. Sibug is presently the Vice President for Core Operations and Administration- CMTS Business Unit. 

He joined the Company in August 2002 as Assistant Vice President for Network System Administration. Prior to 

joining the Company, he was employed by Globe Telecom as Director for Systems Operations, Lucent 

Technologies, Int‟l, Saudi Arabia as Manager of Network Integration (B-Level). He graduated in 1975 with a 

Bachelor of Science Degree Major in Electronics and Communications Engineering and Minor in Electrical 

Engineering from University of Santo Tomas. 

Virgilio S. Trinidad is presently the Vice President for Group Billing and Information Technology–LEC Business 

Unit. He is also concurrently the SAP Competence Center Head. Prior to Digitel, he had worked with companies 

like Allied Information Services of the Philippines (Alltel), Manila Midtown Hotels and Land Corporation, 

Robinson‟s Incorporated, Datatape Incorporated (California, USA), Dairy Fresh Products Co. (California, USA), 

and Teledyne Incorporated (New Jersey, USA). He earned his degree in Bachelor of Science in Business 

Administration Major in Business Information Systems from the California State University, Los Angeles, USA. 

Filomena D. Veto is presently the Vice President for Project Finance and Monitoring –CMTS Business Unit and 

Carrier Services-CMTS and LEC Business Units. She has been with the Company since 2004 and responsible for 

the contract administration for all network related projects of the Company. She also handles project financing 

negotiations for network projects. Prior to joining DMPI, she worked as a Senior Finance Executive with various 

multinational corporations including Express Telecommunications Co., Inc., The Halcrow Group Ltd., Sony 

Music Philippines, Inc., James Martin & Co., Philippines, Inc., Menzi & Co., Inc. and SGV & Co. She is a 

Certified Public Accountant and a Lawyer having earned her law degree from the University of the Philippines. 

Emerlyn C. Villa is the Vice President for the Business Operations Support and Logistics of the LEC Business 

Unit. Prior to her employment in DIGITEL, she was the Vice President for Corporate Sales and Customer Service 

of Broadband Philippines, Asst. Vice President for Product Development of Express Telecom and Director for 

Corporate Sales of Smart Telecommunications. Ms. Villa has a degree in BS Computer Engineering from Mapua 

Institute of Technology. 

Significant Employees 

The Company has no employee who is not an executive officer but is expected to make a significant 

contribution to the business. 

Family Relationships 

John Gokongwei, Jr. and James L. Go are brothers. Lance Gokongwei is the son of John Gokongwei, Jr. 

Involvement in Certain Legal Proceedings of Directors and Executive Officers 

None of the Directors or Executive Officers is involved in any material pending legal proceedings or of 

which any of their properties is the subject during the last five years and up to the date of this report. 

29

Item 10. Executive Compensation 

Information as to the aggregate compensation paid or accrued including 13 th month pay and bonuses 

during the last two fiscal years and the projected aggregate compensation to be paid for the current fiscal year to 

the Company‟s most highly compensated executive officers follows: 

a. James L. Go 

Vice-Chairman/ President/ Chief Executive Officer 

b. Charles A. Lim 

Business Unit Head-CMTS/ LEC 

c. Jaime I. Cabangis 

Chief Financial Officer 

d. Miles Tonn C. Chua 

VP-Network Planning and Development-CMTS 

e. Noel F. Del Mundo 

VP-Human Resources-CMTS 

Name and Principal Position 

Five most highly compensated executive officers 

All other directors and officers as a group unnamed 1 

1 Excludes compensation of the five most highly compensated executive officers 

Compensation of Directors 

Year 

Regular 13 th Month 

Compensation & Bonuses 

Actual 2009 47,380,796 4,161,072 

Actual 2010 53,673,875 4,607,826 

Projected 2011 57,178,133 4,861,256 

Actual 2009 110,319,451 9,489,784 

Actual 2010 116,025,400 9,780,489 

Projected 2011 121,310,837 10,280,846 

Standard Arrangements. Directors are paid a per diem of PhP5,000.00 for attendance in a Regular and 

Special Board Meetings. Board meetings are scheduled to be held every quarter of the year. A director who 

attends all regular quarterly meetings earns a total of PhP20,000.00 annually. 

Compensation of Officers 

Standard Arrangements. There are no special arrangements for officers of the registrant. Officers are 

given the same compensation package as rank-and-file employees such as monthly salary and 13th month bonus. 

Employment Contract & Termination of Employment & Change-in-Control Arrangement 

There are no special employment contracts with executive officers. Hiring of corporate officers are 

conducted based on general policies on recruitment. 

Act. 

There is no compensatory act other than the legally mandated retirement plan under the Social Security 

30

Item 11. Security Ownership of Certain Record and Beneficial Owners and Security Ownership of 

Management 

Title of 

Class 

A. Security Ownership of Certain Record and Beneficial Owners 

Owners of more than 5% of the company's securities, as of 31 December 2010, are as follows: 

Name, Address of Record O wner 

and Relationship with Issuer 

Name of Beneficial O wner 

and Relationship with 

Record O wner 

Citizenship 

No. of Shares 

Held 

Percentage of 

O wnership 

Common JG Summit Holdings, Inc. (JGSHI) JG Summit Holdings, Inc. / John 

L. Gokongwei, Jr. 

Filipino 3,016,079,550 47.4% 

Common 

Common 

43/F Robinsons Equitable Tower, 

ADB Ave., cor. Pedro Poveda Rd. 

JGSHI is the parent company of 

Digitel 

John L. Gokongwei, Jr. is the 

authorized proxy. He is the 

Founder and Chairman Emeritus 

of JGSHI. 

(See note 1) 

PCD Nominee Corporation No particular individual or 

corporate investor holds more 

than 5% of the voting securities. 

37/F Tower I, The Enterprise 

Center, 6766 Ayala Ave. cor. Paseo 

de Roxas, Makati City 

PCD has no relationship with the 

Company except as stockholder. 

(See note 2) 

PCD Nominee Corporation No particular individual or 

corporate investor holds more 

than 5% of the voting securities. 

37/F Tower I, The Enterprise 

Center, 6766 Ayala Ave. cor. Paseo 

de Roxas, Makati City 

PCD has no relationship with the 

Company except as stockholder. 

(See note 2) 

Filipino 1,359,803,841 21.4% 

Non-Filipino 1,328,829,279 20.9% 

Notes: 

1. JG Summit Holdings, Inc. (JGSHI) is controlled by the Gokongwei Family and was incorporated as the holding company for a 

group of companies with substantial business interests in branded consumer foods, agro-industrial and commodity food products, real 

property development, hotel and service apartment management, retail chain, textiles, banking, airline and others. 

2. PCD Nominee Corporation, a wholly owned subsidiary of Philippine Central Depository, Inc. (“PCD”), is the registered owner of 

the shares in the books of the Company‟s transfer agent in the Philippines. PCD is a private company organized by the major 

institutions actively participating in the Philippine capital markets to implement an automated book-entry system of handling securities 

transactions in the Philippines. PCD, other than a stockholder of Digitel, has no relationship with the Company. The beneficial 

owners of such shares are PCD participants, who hold the shares on their behalf, and their clients. From these PCD participants, “THE 

HONGKONG and SHANGHAI BANKING CORP.-Clients‟ Account” holds for various trust accounts 436,190,250 shares 

representing 6.9% of Digitel‟s outstanding capital stock as of December 31, 2010. 

31

B. Security Ownership of Management 

Title of 

Class 

As of December 31, 2010, the security ownership of Directors and Executive officers of the Company follows: 

Name of Beneficial 

Owner 

Citizenship Address on records 

Common Atty. Ricardo J. Romulo Filipino Romulo Law Office, 30th Floor 

Citibank Tower, 8741 Paseo de 

Roxas, Makati City 

Common James L. Go Filipino 29/F Galleria Corporate Center 

EDSA cor. Ortigas Ave. QC 

Common Jose Perpetuo Lotilla 1 Filipino 3/F SSHG Law Centre, 105 Paseo 

De Roxas, Makati City 1226 

Nature of 

Beneficial 

Ownership 

No. of 

shares 

held 

% of 

Ownership 

Direct 122,850 0.0019% 

Direct 30,010 0.0005% 

Direct 1,000 0.0000% 

Common John L. Gokongwei, Jr. Filipino -do- Direct 10 0.0000% 

Common Lance Y. Gokongwei Filipino -do- Direct 10 0.0000% 

Common Octavio Victor R. Espiritu Filipino 203 Dinggalan St., Ayala Alabang 

Muntinlupa City 1780 

Direct 10 0.0000% 

Common Antonio L. Go Filipino 41 Cuneta Ave., Pasay City 1300 Direct 10 0.0000% 

Common William S. Pamintuan Filipino DIGITEL, 110 E. Rodriguez Jr. 

Ave. Bagumbayan 

Direct 65,000 0.0010% 

Common All Other Executive Officers Filipino 

as a group 

-do- Direct 51,500 0.0008% 

Common Aggregate Ownership 

270,400 0.0043% 

1 

Resigned as of November 30, 2010 

Item 12. Certain Relationships and Related Transactions 

The Parent Company, in its ordinary course of business, has transactions with its subsidiaries, associates and 

affiliated companies consisting mainly of lease of telecommunications facilities and interest bearing advances at prevailing 

market rates. 

The year-end balances in respect of related parties included in the financial statements are as follows: 

2010 2009 

(In Thousand Pesos) 

Due to related parties 34,118,544 33,396,292 

Item 13. Corporate Governance 

PART IV- CORPORATE GOVERNANCE 

The level of compliance of the Company to the provisions of the Corporate Governance Manual for the period 

beginning January 1 to December 31, 2010 was reported and explained in the Corporate Governance Self-Rating Form 

submitted to the Securities and Exchange Commission (SEC) on January 28, 2011. 

Among the measures undertaken by the Company in order to fully comply with the provisions of the Corporate 

Governance Manual are periodic monitoring and evaluation of the internal control system for corporate governance. 

Deviations from these provisions were also set out in the said form submitted to the SEC. Lastly, in order to improve the 

corporate governance of the Company, the Corporate Governance Manual was amended on June 3, 2004 to include new 

provisions required by the SEC and the PSE. 

There had been no material deviation from the Company‟s Manual of Corporate Governance. 

The Company, through its Compliance Officer, continues to periodically benchmark its corporate governance with its 

peers in the industry. 

Item 14. Exhibits and Reports on SEC Form 17-C 

PART V- EXHIBITS AND SCHEDULES 

(a) Exhibits - See accompanying Index to Exhibits. 

The other exhibits, as indicated in the index to Exhibits are either not applicable to the Company or require no 

answer. 

(b) Reports on SEC Form 17-C 

There was no report filed on SEC Form 17-C during the last six months prior to December 31, 2010. 

32

Consolidated Financial Statements 


INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES 

FORM 17-A, Item 7 

Statement of Management‟s Responsibility for Financial Statements 

Report of Independent Public Accountants 

Balance Sheets as of December 31, 2010 and 2009 

Statements of Income for the years ended 

December 31, 2010, 2009 and 2008 

Statement of Changes in Stockholder‟s Equity for the years ended 

December 31, 2010, 2009 and 2008 

Statements of Cash Flows for the years ended 

December 31, 2010, 2009 and 2008 

Notes to Financial Statements 

Supplementary Schedules 

A. Report of Independent Public Accountants on Supplementary Schedules 

B. Marketable Securities (Current Marketable Equity Securities and Other Short-term Cash Investments) 

C. Amounts Receivable from Directors, Officers, Employees, and Principal Stockholders (Other than affiliates) 

D. Long-term Investments in Securities (Non-current Marketable Equity Securities, Other Long-term Investments in 

Stock, Investments in Bonds and Other Debt Securities) * 

E. Advances to Unconsolidated Subsidiaries and Affiliates 

F. Property, Plant and Equipment 

G. Accumulated Depreciation 

H. Long-term Debt 

I. Indebtedness to Affiliates (Long-term Loans from Affiliated Companies) * 

J. Guarantees of Securities of Other Issuers * 

K. Capital Stock 

* These schedules, which are required by Part IV(e) of RSA Rule 48, have been omitted because they are either not required, 

not applicable or the information required to be presented is included in the Company‟s consolidated financial statements or 

to notes to financial statements. 

34

INDEPENDENT AUDITORS’ REPORT 

The Stockholders and the Board of Directors 

Digital Telecommunications Phils., Inc. 

URC Compound, 110 E. Rodriguez, Jr. Avenue 

Bagumbayan, Quezon City 

We have audited the accompanying consolidated financial statements of Digital Telecommunications 

Phils., Inc. and its subsidiaries, which comprise the consolidated statements of financial position as at 

December 31, 2010 and 2009, and the consolidated statements of comprehensive income, statements of 

changes in equity and statements of cash flows for each of the three years in the period ended December 

31, 2010, and a summary of significant accounting policies and other explanatory information. 

Management’s Responsibility for the Consolidated Financial Statements 

Management is responsible for the preparation and fair presentation of these consolidated financial 

statements in accordance with Philippine Financial Reporting Standards, and for such internal control as 

management determines is necessary to enable the preparation of consolidated financial statements that are 

free from material misstatement, whether due to fraud or error. 

Auditors’ Responsibility 

SyCip Gorres Velayo & Co. 

6760 Ayala Avenue 

1226 Makati City 

Philippines 

Phone: (632) 891 0307 

Fax: (632) 819 0872 

www.sgv.com.ph 

BOA/PRC Reg. No. 0001 

SEC Accreditation No. 0012-FR-2 

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 

We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require 

that we comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance 

about whether the consolidated financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

consolidated financial statements. The procedures selected depend on the auditor‟s judgment, including the 

assessment of the risks of material misstatement of the consolidated financial statements, whether due to 

fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 

entity‟s preparation and fair presentation of the consolidated financial statements in order to design audit 

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on 

the effectiveness of the entity‟s internal control. An audit also includes evaluating the appropriateness of 

accounting policies used and the reasonableness of accounting estimates made by management, as well as 

evaluating the overall presentation of the consolidated financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion. 

A member firm of Ernst & Young Global Limited 

36


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 


ASSETS 

December 31 

2010 2009 

Current Assets 

Cash and cash equivalents (Notes 6, 24, 25 and 26) P=1,107,231 P=1,112,695 

Receivables (Notes 7, 24, 25 and 26) 2,133,615 2,180,486 

Inventories (Note 8) 311,342 264,372 

Derivative assets (Notes 25 and 26) 571,730 363,374 

Value-added input tax and other current assets (Note 9) 2,521,166 2,508,805 

Total Current Assets 6,645,084 6,429,732 

Noncurrent Assets 

Property and equipment (Notes 10, 14, 15 and 27) 81,326,911 72,985,125 

Value-added input tax and other noncurrent assets 

(Notes 11, 25 and 26) 2,925,913 2,882,084 

Total Noncurrent Assets 84,252,824 75,867,209 

P=90,897,908 P=82,296,941 

LIABILITIES AND EQUITY 

Current Liabilities 

Accounts payable and accrued expenses (Notes 12, 25 and 26) P=9,225,855 P=9,310,908 

Current portion of long-term debt (Notes 14, 25 and 26) 3,004,206 2,514,322 

Total Current Liabilities 12,230,061 11,825,230 

Noncurrent Liabilities 

Bonds payable (Notes 13, 16, 25 and 26) 17,898,740 15,503,188 

Long-term debt - net of current portion 

(Notes 10, 14, 25 and 26) 12,257,659 10,843,317 

Due to related parties (Notes 24, 25 and 26) 34,118,544 33,369,292 

Deferred tax liabilities - net (Note 21) 3,391,740 2,716,325 

Other noncurrent liabilities (Notes 15, 23, 25 and 26) 10,956,649 6,690,543 

Total Noncurrent Liabilities 78,623,332 69,122,665 

Total Liabilities 90,853,393 80,947,895 

Equity (Note 16) 

Paid-up capital 8,975,749 8,975,749 

Equity reserve (1,831,163) – 

Deficit (7,100,071) (7,626,703) 

Total Equity 44,515 1,349,046 

P=90,897,908 P=82,296,941 

See accompanying Notes to Consolidated Financial Statements. 

38


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(In Thousand Pesos, Except Per Share Figures) 

Years Ended December 31 

2010 2009 2008 

REVENUE 

Service revenue P=16,313,657 P=13,848,039 P=11,270,768 

Nonservice revenue 230,260 171,982 80,382 

16,543,917 14,020,021 11,351,150 

COSTS AND OPERATING EXPENSES 

Network-related and general and administrative 

expenses (Notes 17, 21, 23, 24 and 27) 8,505,971 7,421,274 6,372,265 

Depreciation and amortization (Note 10) 4,371,935 3,616,281 2,855,769 

Cost of sales (Notes 8 and 11) 2,074,711 1,656,425 1,101,731 

Impairment losses (Note 20) 359,884 299,281 257,027 

15,312,501 12,993,261 10,586,792 

EXCESS OF REVENUE OVER 

COSTS AND EXPENSES 1,231,416 1,026,760 764,358 

FINANCE COSTS (Note 18) (1,466,045) (1,531,193) (1,800,890) 

FOREIGN EXCHANGE GAINS 

(LOSSES) - Net (Note 26) 1,414,652 786,743 (2,268,447) 

MARKET VALUATION LOSSES ON 

DERIVATIVE INSTRUMENTS (Note 25) (37,038) (144,739) (550,544) 

OTHER INCOME (Note 19) 82,236 53,316 813,657 

INCOME (LOSS) BEFORE INCOME TAX 1,225,221 190,887 (3,041,866) 

PROVISION FOR (BENEFIT FROM) 

INCOME TAX (Notes 21 and 28) 698,589 (68,829) (1,063,784) 

NET INCOME (LOSS) (Note 2) 526,632 259,716 (1,978,082) 

OTHER COMPREHENSIVE INCOME – – – 

TOTAL COMPREHENSIVE INCOME (LOSS) P=526,632 P=259,716 (P=1,978,082) 

Basic/Diluted Earnings (Loss) Per Share (Note 22) P=0.08 P=0.04 (P=0.31) 


39


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 


Capital 

Stock 

For the Year Ended December 31, 2010 

Paid-up Capital 

Additional 

Paid-in 

Capital 

Total 

Paid-up 

Capital 

(Note 16) 

Equity 

Reserve 

(Note 16) 

Deficit 

(Note 16) 

Total 

Equity 

Balances as of January 1, 

2010 P=6,356,976 P=2,618,773 P=8,975,749 P=– (P=7,626,703) P=1,349,046 

Net income/Total 

comprehensive income – – – – 526,632 526,632 

Adjustment on bonds payable – – – (1,831,163) – (1,831,163) 

Balances as of December 31, 

2010 P=6,356,976 P=2,618,773 P=8,975,749 (P=1,831,163) (P=7,100,071) P=44,515 

Capital 

Stock 



Additional 

Paid-in 

Capital 

Total 

Paid-up 

Capital 

(Note 16) 

Deficit 

(Note 16) 

Total 

Equity 

Balances as of January 1, 2009 P=6,356,976 P=2,618,773 P=8,975,749 (P=7,886,419) P=1,089,330 

Net income/Total comprehensive 

income – – – 259,716 259,716 

Balances as of December 31, 2009 P=6,356,976 P=2,618,773 P=8,975,749 (P=7,626,703) P=1,349,046 

Capital 

Stock 



Additional 

Paid-in 

Capital 

Total 

Paid-up 

Capital 

(Note 16) 

Deficit 

(Note 16) 

Total 

Equity 

Balances as of January 1, 2008 P=6,356,976 P=2,618,773 P=8,975,749 (P=5,908,337) P=3,067,412 

Net loss/Total comprehensive 

income – – – (1,978,082) (1,978,082) 

Balances as of December 31, 2008 P=6,356,976 P=2,618,773 P=8,975,749 (P=7,886,419) P=1,089,330 


40


CONSOLIDATED STATEMENTS OF CASH FLOWS 


2010 

Years Ended December 31 

2009 2008 

CASH FLOWS FROM OPERATING ACTIVITIES 

Income (loss) before income tax 

Adjustments for: 

P=1,225,221 P=190,887 (P=3,041,866) 

Depreciation and amortization (Note 10) 4,371,935 3,616,281 2,855,769 

Interest expense (Notes 18 and 30) 1,423,763 1,492,844 1,764,081 

Impairment losses (Note 20) 

Amortization of deferred subscriber acquisition and 

359,884 299,281 257,027 

retention costs (Note 11) 

Market valuation losses on derivative instruments 

1,506,376 1,202,868 890,856 

(Note 25) 

Accretion of asset retirement obligation 

37,038 144,739 550,544 

(Notes 15 and 18) 42,282 38,349 36,809 

Interest income (Note 19) (32,872) (36,264) (32,738) 

Realization of unearned revenue (604,166) (457,893) (420,985) 

Unrealized foreign exchange losses (gains) - net (1,196,688) (564,589) 2,360,124 

Operating income before changes in working capital 

Decrease (increase) in: 

7,132,773 5,926,503 5,219,621 

Receivables (308,523) (412,050) (799,913) 

Inventories (34,219) (52,918) 42,501 

Value-added input tax and other current assets 

Increase (decrease) in: 

(8,160) 42,392 (942,096) 

Accounts payable and accrued expenses (Note 30) 670,478 1,423,254 26,240 

Other noncurrent liabilities (13,476) 41,917 (25,964) 

Net cash flows generated from operations 7,438,873 6,969,098 3,520,389 

Interest received 30,864 34,130 24,174 

Interest paid (476,905) (635,635) (1,055,181) 

Income tax paid (23,174) (10,572) (18,630) 

Net cash flows provided by operating activities 

CASH FLOWS FROM INVESTING ACTIVITIES 

Acquisitions of property and equipment (inclusive of 

6,969,658 6,357,021 2,470,752 

capitalized borrowing costs) (Notes 10 and 30) 

Deferral of subscriber acquisition and retention 

(7,949,368) (10,104,325) (10,177,845) 

costs (Note 11) 

Decrease (increase) in value-added input tax 

(1,451,181) (1,575,564) (1,295,259) 

and other noncurrent assets (103,223) 20,493 155,025 

Net cash flows used in investing activities 

CASH FLOWS FROM FINANCING ACTIVITIES 

(9,503,772) (11,659,396) (11,318,079) 

Increase in amounts due to related parties 219,528 3,237,493 5,321,403 

Proceeds from long-term debt 5,161,319 4,762,997 5,344,580 

Payments of long-term debt (2,725,565) (2,533,169) (1,676,071) 

Net cash flows provided by financing activities 

EFFECT OF CHANGES IN FOREIGN EXCHANGE 

2,655,282 5,467,321 8,989,912 

RATES ON CASH AND CASH EQUIVALENTS 

NET INCREASE (DECREASE) IN CASH 

(126,632) (163,980) 511,282 

AND CASH EQUIVALENTS 

CASH AND CASH EQUIVALENTS AT 

(5,464) 966 653,867 

BEGINNING OF YEAR 

CASH AND CASH EQUIVALENTS AT 

1,112,695 1,111,729 457,862 

END OF YEAR (Note 6) P=1,107,231 P=1,112,695 P=1,111,729 


41


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

1. Corporate Information 

Digital Telecommunications Phils., Inc. (the Parent Company) is incorporated in the Philippines and 

enfranchised to provide domestic and international telecommunications services nationwide. The Parent 

Company‟s registered office address is URC Compound, 110 E. Rodriguez, Jr. Avenue, Bagumbayan, 

Quezon City. 

The financial statements of the Parent Company and its wholly owned subsidiaries (the Group) are 

consolidated into JG Summit Holdings, Inc. (JGSHI or the ultimate parent), as the ultimate parent has the 

ability to govern the financial and operating policies of the Group. The ultimate parent owns 49.6% of the 

Group as of December 31, 2010. 

The Parent Company owns 100% of the following companies: 

Digitel Mobile Philippines, Inc. (DMPI), which is incorporated in the Philippines and enfranchised 

under Republic Act (RA) No. 9180 to construct, install, establish, operate and maintain wire and/or 

wireless telecommunications systems throughout the Philippines; 

Digitel Capital Philippines Ltd. (DCPL), which is incorporated in the British Virgin Islands to engage in 

any activity allowed under any law of the British Virgin Islands; and 

Digitel Information Technology Services, (DITSI) Inc., which is incorporated in the Philippines to 

provide internet access and high-speed data transmission to corporate and individual customers. DITSI, 

however, became dormant following the decision of the Board of Directors (BOD) on March 12, 2002 

to integrate its operations into the Parent Company. 

The Parent Company is a grantee of various authorizations from the National Telecommunications 

Commission (NTC) as follows: 

1. Certificates of Public Convenience and Necessity (CPCN) to: (a) install, operate, maintain and develop 

telecommunications facilities in Regions I to V; (b) install, operate and maintain telephone 

systems/networks/services in Quezon City, Valenzuela City and Malabon, Metro Manila and Tarlac; (c) 

install, operate and maintain an International Gateway Facility (IGF) in Binalonan, Pangasinan; (d) 

install, operate and maintain an IGF in Metro Manila; (e) operate and maintain a National Digital 

Transmission Network; (f) install, operate and maintain a nationwide CMTS using GSM and/or CDMA 

technology; and (g) install, operate and maintain a cable landing station. 

2. Provisional Authorities (PAs) to: (a) install, operate and maintain Local Exchange Carrier (LEC) 

services in the National Capital Region (NCR); and (b) install, operate and maintain LEC services in 

Visayas and Mindanao. 

The Parent Company is registered with the Board of Investments (BOI) and is entitled to incentives on a 

pioneer and nonpioneer status as a new operator of telecommunications systems on nationwide CMTS-GSM 

communication and as an expanding operator of public telecommunications services and IGF-2, respectively 

(Note 28). 

On December 14, 2006, DMPI was registered with the BOI and is entitled to incentives on a pioneer status 

as a new operator of 3G infrastructure and telecommunications system (Note 28). 

On December 28, 2005, the NTC awarded a 3G frequency assignment to DMPI after finding it legally, 

financially and technically qualified to undertake 3G services. On January 3, 2006, DMPI confirmed its 

choice of 3G bandwidth with the NTC. 

42

On October 10, 2003, the BOI registration was transferred to DMPI, subject to certain conditions. Under the 

terms of the BOI registration, DMPI is entitled to certain incentives, including among others, an income tax 

holiday (“ITH”) for a period of six years from January 1, 2003. Subsequently, the ITH of DMPI expired on 


2. Basis of Preparation 

The accompanying consolidated financial statements of the Group have been prepared on a historical cost 

basis, except for certain derivative financial instruments that are measured at fair value. There are no items 

representing other comprehensive income as of and for the years ended December 31, 2010 and 2009. 

The consolidated financial statements of the Group are presented in Philippine Peso (P=) and all values are 

rounded to the nearest thousands (P=000), except when otherwise indicated. The functional and presentation 

currency of the Parent Company and its subsidiaries (except DCPL) is the Philippine Peso (P=). The 

functional currency of DCPL is the US Dollar (Note 4 - Foreign Currency Transactions and Translation). 

Statement of Compliance 

The consolidated financial statements of the Group have been prepared in compliance with Philippine 

Financial Reporting Standards (PFRS). 

Basis of Consolidation 

The accompanying consolidated financial statements include the accounts of the Parent Company for each 

of the three years in the period ended December 31, 2010 and its subsidiaries as of and for the years ended 

December 31, 2010, 2009 and 2008. Details of the subsidiaries follow: 

Name of Subsidiary Country of Incorporation 

Percentage of 

Ownership 

DMPI Philippines 100% 

DCPL British Virgin Islands 100% 

DITSI Philippines 100% 

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be 

consolidated from the date on which control is transferred out of the Group. Control is the power to govern 

the financial and operating policies of an entity so as to obtain benefits from its activities. The financial 

statements of the subsidiaries are prepared for the same reporting year as the Parent Company using uniform 

accounting policies for like transactions and other events in similar circumstances. All significant 

intercompany balances and transactions, including intercompany profits and losses, are eliminated during 

consolidation in accordance with the accounting policy on consolidation. 

3. Changes in Accounting Policies and Disclosures 

The accounting policies adopted are consistent with those of the previous financial year except for the 

adoption of the following new and amended PFRS and Philippine Interpretations which became effective 

January 1, 2010. Except as otherwise indicated, the adoption of these new and amended Standards and 

Interpretations did not have a significant impact on the consolidated financial statements. 

PFRS 2, Share-based Payment (Amended): Group Cash-settled Share-based Payment Transactions 

The amendment to PFRS 2 clarified the scope and the accounting for group cash-settled share-based 

payment transactions. The Group adopted this amendment as of January 1, 2010. It did not have an 

impact on the financial position or performance of the Group. 

PFRS 3 (Revised), Business Combinations, and PAS 27 (Amended), Consolidated and Separate 

Financial Statements 

PFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring 

after becoming effective. Changes affect the valuation of non-controlling interest, the accounting for 

transaction costs, the initial recognition and subsequent measurement of a contingent consideration and 

business combinations achieved in stages. These changes will impact the amount of goodwill 

43

ecognized, the reported results in the period that an acquisition occurs and future reported results. 

PAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of 

control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such 

transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the 

amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of 

control of a subsidiary. The changes by PFRS 3 (Revised) and PAS 27 (Amended) affect acquisitions 

or loss of control of subsidiaries and transactions with non-controlling interests after January 1, 2010. 

The change in accounting policy was applied prospectively and had no material impact on earnings per 

share. 

PAS 39, Financial Instruments: Recognition and Measurement (Amendment) - Eligible Hedged Items 

The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or 

cash flow variability of a financial instrument as a hedged item. This also covers the designation of 

inflation as a hedged risk or portion in particular situations. The Group has concluded that the 

amendment will have no impact on the financial position or performance of the Group, as the Group has 

not entered into any such hedges. 

Philippine Interpretation IFRIC 17, Distributions of Non-cash Assets to Owners 

This Philippine Interpretation provides guidance on accounting for arrangements whereby an entity 

distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The 

Philippine Interpretation has no effect on either, the financial position or the performance of the Group. 

Improvements to PFRS 

Improvements to PFRS, an omnibus of amendments to standards, deal primarily with a view to removing 

inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The 

adoption of the following amendments resulted in changes to accounting policies but did not have any 

impact on the financial position or performance of the Group. 

Improvements to PFRS 2008 

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, clarifies that when a 

subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even 

when the entity remains a non-controlling interest after the sale transaction. The amendment is applied 

prospectively and has no impact on the financial position or the financial performance of the Group. 


PFRS 5, Non-current Assets Held for Sale and Discontinued Operations 

PAS 7, Statement of Cash Flows 

PAS 36, Impairment of Assets 

PFRS 2, Share-based Payment 

PAS 1, Presentation of Financial Statements 

PAS 17, Leases 

PAS 38, Intangible Assets 

PAS 39, Financial Instruments: Recognition and Measurement 

Philippine Interpretation IFRIC-9, Reassessment of Embedded Derivatives 

Philippine Interpretation IFRIC-16, Hedges of a Net Investment in a Foreign Operation 

Future Changes in Accounting Policies 

The Group will adopt the following standards, interpretations and amendments to standards enumerated 

below when these become effective. Except as otherwise indicated, the Group does not expect the adoption 

of these new and amended PFRS and Philippine Interpretations to have significant impact on the 

consolidated financial statements. 

Effective in 2011 

PAS 32, Financial Instruments: Presentation (Amended) 

The amendment to PAS 32 is effective for annual periods beginning on or after February 1, 2010 and 

44

amended the definition of a financial liability in order to classify rights issues (and certain options or 

warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of 

the same class of an entity‟s non-derivative equity instruments, or to acquire a fixed number of the entity‟s 

own equity instruments for a fixed amount in any currency. This amendment will have no impact on the 

Group after initial application. 

Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments. The 

Philippine Interpretation is effective for annual periods on or after July 1, 2010. This interpretation clarifies 

that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. 

The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, 

the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognized 

immediately in profit or loss. The adoption of this interpretation will have no effect on the financial 

statements of the Group. 

PAS 24, Related Party Disclosures (Amended) 

The amended standard is effective for annual periods beginning on or after January 1, 2011. It clarified the 

definition of a related party to simplify the identification of such relationships and to eliminate 

inconsistencies in its application. The revised standard introduces a partial exemption of disclosure 

requirements for government-related entities. Early adoption is permitted for either the partial exemption 

for government-related entities or for the entire standard. 

Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding Requirement 

The amended Philippine Interpretation is effective for annual periods beginning on or after January 1, 2011, 

with retrospective application. The amendment provides guidance on assessing the recoverable amount of a 

net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding 

requirement as an asset. The amendment is deemed to have no impact on the financial statements of the 

Group. 


Improvements to PFRS is an omnibus of amendments to PFRSs. The amendments have not been adopted as 

they become effective for annual periods on or after either July 1, 2010 or January 1, 2011. The 

amendments listed below, are considered to have a reasonable possible impact on the Group: 

PFRS 3, Business Combinations 

PFRS 7, Financial Instruments: Disclosures 

PAS 1, Presentation of Financial Statements 

PAS 27, Consolidated and Separate Financial Statements 

Philippine Interpretation IFRIC 13, Customer Loyalty Programmes 

The Group, however, expects no impact from the adoption of the amendments on its consolidated financial 

position or performance. 


PFRS 7, Financial Instruments: Disclosures (Amendments) - Disclosures - Transfers of Financial Assets 

The amendments to PFRS 7 are effective for annual periods beginning on or after July 1, 2011. The 

amendments will allow users of financial statements to improve their understanding of transfer transactions 

of financial assets (for example, securitizations), including understanding the possible effects of any risks 

that may remain with the entity that transferred the assets. The amendments also require additional 

disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting 

period. 

PAS 12, Income Taxes (Amendment) - Deferred Tax: Recovery of Underlying Assets 

The amendment to PAS 12 is effective for annual periods beginning on or after January 1, 2012. It provides 

a practical solution to the problem of assessing whether recovery of an asset will be through use or sale. It 

introduces a presumption that recovery of the carrying amount of an asset will normally be through sale. 

Philippine Interpretation IFRIC 15, Agreement for Construction of Real Estate 

This Philippine Interpretation, effective for annual periods beginning on or after January 1, 2012, covers 

45

accounting for revenue and associated expenses by entities that undertake the construction of real estate 

directly or through subcontractors. The Philippine Interpretation requires that revenue on construction of 

real estate be recognized only upon completion, except when such contract qualifies as construction contract 

to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case 

revenue is recognized based on stage of completion. Contracts involving provision of services with the 

construction materials and where the risks and reward of ownership are transferred to the buyer on a 

continuous basis will also be accounted for based on stage of completion. 


PFRS 9, Financial Instruments: Classification and Measurements 

PFRS 9 as issued reflects the first phase of the work on replacing PAS 39 and applies to classification and 

measurement of financial assets and financial liabilities as defined in PAS 39. The standard is effective for 

annual periods beginning on or after January 1, 2013. In subsequent phases, hedge accounting will be 

addressed. The completion of this project is expected in second quarter of 2011. The adoption of the first 

phase of PFRS 9 will primarily have an effect on the classification and measurement of the Group‟s 

financial assets. The Group will quantify the effect in conjunction with the other phases, when issued, to 

present a comprehensive picture. 

4. Significant Accounting Policies 

Revenue Recognition 

The Group provides wireless services and wireline voice and data communication services. Revenue is 

recognized at the time of delivery of the products or services, and the collectibility is reasonably assured. 

The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as 

principal or agent. 

Service revenue includes the value of all telecommunications services provided, net of free usage allocations 

and discounts. Revenue is recognized when earned, and are net of the share of other foreign and local 

carriers and content providers, if any, under existing correspondence and interconnection and settlement 

agreements. 

Revenue is stated at amounts billed or invoiced and accrued to subscribers or other carriers and content 

providers, taking into consideration the bill cycle cut-off (for postpaid subscribers), and charges against 

preloaded airtime value (for prepaid subscribers), switch-monitored traffic (for carriers and content 

providers) and excludes value-added tax (VAT) and overseas communication tax. Inbound traffic revenue, 

net of discounts and outbound traffic charges, are accrued based on actual volume of traffic monitored by 

the Group‟s network and in the traffic settlement system. 

Service revenue 

Subscribers 

Revenue principally consists of: (1) per minute airtime and toll fees for local, domestic and 

international long distance calls in excess of free call allocation, less bonus airtime credits, airtime on 

free Subscribers‟ Identification Module (SIM), prepaid reload discounts and interconnection fees; (2) 

revenue from value-added services (VAS) such as short messaging services (SMS) in excess of 

consumable fixed monthly service fees (for postpaid) and free SMS allocations (for prepaid), 

multimedia messaging services (MMS), content downloading and infotext services, net of amounts 

settled with carriers owning the network where the outgoing voice call or SMS terminates and payout to 

content providers; (3) inbound revenue from other carriers which terminate their calls to the Group‟s 

network less discounts; 

(4) revenue from international roaming services; (5) usage of broadband and internet services in excess 

of fixed monthly service fees; (6) fixed monthly service fees (for postpaid wireless subscribers) and 

prepaid subscription fees for discounted promotional calls and SMS. 

Postpaid service arrangements include fixed monthly charges which are recognized over the 

subscription period on a pro-rata basis. Telecommunications services provided to postpaid subscribers 

46

are billed throughout the month according to the billing cycles of subscribers. As a result of the billing 

cycle cut-off, service revenue earned but not yet billed at end of month is estimated and accrued based 

on actual usage less estimated consumable usage using historical ratio of consumable over billable 

usage. 

Proceeds from over-the-air reloading channels and sale of prepaid cards are initially recognized as 

unearned revenue included under “Accounts payable and accrued expenses” account in the consolidated 

statement of financial position. Revenue is recognized upon actual usage of the airtime value of the 

card, net of discounts on promotional calls and net of discounted promotional SMS usage and bonus 

reloads. The unused value of prepaid cards is likewise recognized as revenue upon expiration. 

Interconnection fees and charges arising from the actual usage of prepaid cards are recorded as incurred. 

Connecting carriers/Traffic 

Inbound revenue and outbound charges are based on agreed transit and termination rates with other 

foreign and local carriers and content providers. Inbound revenue represents settlements received for 

traffic originating from telecommunications providers that are sent through the Group‟s network, while 

outbound charges represent settlements to telecommunications providers for traffic originating from the 

Group‟s network and settlements to providers for contents downloaded by subscribers. Both the 

inbound revenue and outbound charges are accrued based on actual volume of traffic monitored by the 

Group from the switch. 

Adjustments are made to the accrued amount for discrepancies between the traffic volume per the 

Group‟s records and per records of other carriers. The adjustments are recognized as these are 

determined and are mutually agreed-upon by the parties. Uncollected inbound revenue are recorded as 

receivables from connecting carriers under “Receivables” account in the consolidated statement of 

financial position, while unpaid outbound charges are recorded as payables to connecting carriers under 

“Accounts payable and accrued expenses” account in the consolidated statement of financial position, 

unless a legal right to offset exists. 

Nonservice revenue 

Proceeds from sale of handsets, laptops, phonekits, wireline telephone sets, SIM packs and other phone 

accessories are recognized upon delivery of the item. The related cost or net realizable value of handsets, 

laptops, phonekits, wireline telephone sets, SIM packs and accessories sold to customers are presented as 

“Cost of sales” account in the consolidated statement of comprehensive income. 

Other revenue 

Interest is recognized as it accrues (using the effective interest rate method that is the rate that exactly 

discounts estimated future cash receipts through the expected life of the financial instrument to the net 

carrying amount of the financial asset). 

Deferred Subscriber Acquisition and Retention Costs 

Subscriber acquisition costs primarily include the cost of handset and phonekit subsidies. Retention costs 

for existing postpaid subscribers are in the form of free handsets. Subscriber acquisition and retention costs 

pertaining to postpaid subscription are deferred and amortized over the base contract period, which ranges 

from twenty-four (24) to thirty (30) months from the date in which they are incurred. Deferred subscriber 

acquisition and retention costs are shown under “Other noncurrent assets” account in the consolidated 

statement of financial position (Note 11). The related amortization of subscriber acquisition costs are 

charged against current operations. Retention costs for existing postpaid subscribers are in the form of free 

handsets. 

The Group performs an overall realizability test, in order to support the deferral of the subscriber acquisition 

costs. An overall realizability test is done by determining the minimum contractual revenue after deduction 

of direct costs associated with the service contract over the base contract period. Costs are deferred and 

amortized, if there is a nonrefundable contract or a reliable basis for estimating net cash inflows under a 

revenue-producing contract which exists to provide a basis for recovery of incremental direct costs. 

47

Financial Instruments 

Date of recognition 

Financial instruments within the scope of PAS 39 are recognized in the consolidated statement of financial 

position when the Group becomes a party to the contractual provisions of the instrument. Purchases or sales 

of financial assets that require delivery of assets within the time frame established by regulation or 

convention in the marketplace are recognized on the settlement date. 

Initial recognition of financial instruments 

Financial instruments are recognized initially at fair value. Except for financial instruments valued at fair 

value through profit or loss (FVPL), the initial measurement of financial assets includes transaction costs. 

The Group classifies its financial assets into the following categories: financial assets at FVPL, held-tomaturity 

(HTM) investments, available-for-sale (AFS) investments and loans and receivables. The Group 

classifies its financial liabilities into financial liabilities at FVPL and other financial liabilities. The 

classification depends on the purpose for which the investments were acquired and whether they are quoted 

in an active market. Management determines the classification of its investments at initial recognition and, 

where allowed and appropriate, re-evaluates such designation at every reporting date. 

The financial assets of the Group consist of financial assets at FVPL and loans and receivables. Financial 

assets at FVPL include derivative assets from bifurcated embedded derivatives. The loans and receivable 

classification includes cash and cash equivalents, trade and other receivables and refundable security 

deposits (Note 26). 

As of December 31, 2010 and 2009, the Group had no HTM and AFS financial assets. 

The financial liabilities of the Group consist of financial liabilities at FVPL and other financial liabilities. 

Financial liabilities at FVPL include derivative liabilities from interest rate swaps. The other financial 

liabilities classification include accounts payable and accrued expenses, long-term debt and bonds payable 

and due to related parties (Note 26). 

Determination of fair value 

The fair value for financial instruments traded in active markets at the reporting date is based on their quoted 

market price or dealer price quotations (bid price for long positions and ask price for short positions), 

without any deduction for transaction costs. When current bid and ask prices are not available, the price of 

the most recent transaction provides evidence of the current fair value as long as there has not been a 

significant change in economic circumstances since the time of the transaction. 

For all other financial instruments not listed in an active market, the fair value is determined by using 

appropriate valuation techniques. Valuation techniques include net present value techniques, comparison to 

similar instruments for which market observable prices exist, option pricing models and other relevant 

valuation models. 

Day 1 difference 

Where the transaction price in a non-active market is different from the fair value on other observable 

current market transactions in the same instrument or based on a valuation technique whose variables 

include only data from observable markets, the Group recognizes the difference between the transaction 

price and fair value (a Day 1 difference) in the consolidated statement of comprehensive income unless it 

qualifies for recognition as some type of asset or liability. In cases where use is made of data which is not 

observable, the difference between the transaction price and model value is only recognized in the 

consolidated statement of comprehensive income when the inputs become observable or when the 

instrument is derecognized. For each transaction, the Group determines the appropriate method of 

recognizing the Day 1 difference amount. 

Financial assets and financial liabilities at FVPL 

Financial assets and financial liabilities at FVPL include financial assets and financial liabilities held for 

trading or designated by management as at FVPL on initial recognition. Derivative instruments, except 

those covered by hedge accounting relationships, are classified under this category. 

Financial assets or financial liabilities classified in this category are designated by management on initial 

recognition when the following criteria are met: 

48

the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise 

from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or 

the assets and liabilities are part of a group of financial assets, financial liabilities or both which are 

managed and their performance are evaluated on a fair value basis, in accordance with a documented 

risk management or investment strategy; or 

the financial instrument contains an embedded derivative, unless the embedded derivative does not 

significantly modify the cash flows or it is clear, with little or no analysis, that it would not be 

separately recorded. 

Financial assets and financial liabilities at FVPL are recorded in the consolidated statement of financial 

position at fair value. Changes in fair value are recorded under “Market valuation losses on derivative 

instruments” account shown in the consolidated statement of comprehensive income. 

Interest earned or incurred is recorded in interest income or expense, respectively, while dividend income is 

recorded in other income according to the terms of the contract, or when the right of the payment has been 

established. 

As of December 31, 2010 and 2009, the Group has derivative instruments at FVPL (Notes 25 and 26). 

Derivative Financial Instruments 

Derivative instruments, including bifurcated embedded derivatives are initially recognized at fair value on 

the date that a derivative transaction is entered into or bifurcated, and are subsequently re-measured at fair 

value. Any gains or losses arising from changes in fair values of derivatives (except those accounted for as 

cash flow hedges) are taken directly to the consolidated statement of comprehensive income. Derivatives 

are carried as assets when the fair value is positive and as liabilities when the fair value is negative. 

As of December 31, 2010 and 2009, the Group has outstanding interest rate swap agreement with 

international bank to hedge its interest rate exposure on long-term debt subject to floating interest rate 

(Notes 15 and 25). 

Embedded derivatives 

Embedded derivatives are bifurcated from their host contracts, when the following conditions are met: (a) 

the entire hybrid contracts (composed of both the host contract and the embedded derivative) are not 

accounted for as financial assets at FVPL; (b) when their economic risks and characteristics are not closely 

related to those of their respective host contracts; and (c) a separate instrument with the same terms as the 

embedded derivative would meet the definition of a derivative. 

The Group assesses whether embedded derivatives are required to be separated from the host contracts when 

the Group first becomes a party to the contract. Reassessment of embedded derivatives is only done when 

there are changes in the contract that significantly modifies the contractual cash flows. 

The Group has bifurcated embedded currency forward derivatives in its purchase orders and certain network 

and service agreements and embedded call options in its foreign currency-denominated zero coupon 

convertible bonds. 

The fair value changes are reported directly to the consolidated statement of comprehensive income. 

Loans and receivables 

Loans and receivables are nonderivative financial assets with fixed or determinable payments and fixed 

maturities that are not quoted in an active market. After initial measurement, loans and receivables are 

subsequently carried at amortized cost using the effective interest rate method, less any allowance for 

impairment loss. Amortized cost is calculated by taking into account any discount or premium on the issue, 

and includes fees that are an integral part of the effective interest rate and transaction costs. Penalties, 

termination fees and surcharges on past due accounts of postpaid subscribers are recognized as revenue 

upon collection. The losses arising from impairment of trade and other receivables are recognized under the 

“Impairment losses” account in the consolidated statement of comprehensive income. The level of 

allowance for impairment losses is evaluated by management on the basis of factors that affect the 

collectibility of accounts (see accounting policy on Impairment of Financial Assets). Gains and losses are 

49

ecognized in the consolidated statement of comprehensive income, when the loans and receivables are 

derecognized or impaired, as well as through the amortization process. 

Loans and receivables are classified as current assets if maturity is within twelve (12) months from the 

reporting date. Otherwise, these are classified as noncurrent assets. 

This accounting policy applies primarily to the Group‟s trade and other receivables (Note 7), certain 

refundable security deposits (Note 11) and due from related parties (Note 24). 

Cash and cash equivalents 

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that 

are readily convertible to known amounts of cash with original maturities of 

three (3) months or less from dates of placement and that are subject to an insignificant risk of changes in 

value. 

Other financial liabilities 

Issued financial instruments or their components, which are not designated at FVPL are classified as other 

financial liabilities where the substance of the contractual arrangement results in the Group having an 

obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than 

by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity 

shares. After initial measurement, other financial liabilities are subsequently measured at amortized cost 

using the effective interest rate method. Amortized cost is calculated by taking into account any discount or 

premium on the issue and fees that are an integral part of the effective interest rate. 

This accounting policy applies primarily to the Group‟s accounts payable and accrued expenses (Note 12), 

bonds payable (Note 13), long-term debt (Note 14), due to related parties (Note 24) and other obligations 

that meet the above definition. 

Debt issuance costs 

Expenditures incurred in connection with the availments of long-term debt are deferred and amortized using 

the effective interest method over the term of the loans. The debt issuance costs are included in the 

measurement of “Long-term debt” account under the consolidated statement of financial position. 

Offsetting financial instruments 

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated 

statement of financial position if, and only if, there is a currently enforceable legal right to offset the 

recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the 

liability simultaneously. 

Classification of Financial Instruments between Debt and Equity 

A financial instrument is classified as debt if it provides for a contractual obligation to: 

deliver cash or another financial asset to another entity; or 

exchange financial assets or financial liabilities with another entity under conditions that are potentially 

unfavorable to the Group; or 

satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for 

a fixed number of own equity shares. 

If the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle 

its contractual obligation, the obligation meets the definition of a financial liability. 

The components of issued financial instruments that contain both liability and equity elements are accounted 

for separately, with the equity component being assigned the residual amount after deducting from the 

instrument as a whole the amount separately determined as the fair value of the liability component on the 

date of issue. 

Impairment of Financial Assets 

The Group assesses at each reporting date whether there is objective evidence that a financial asset or group 

of financial assets is impaired. 

50

A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective 

evidence of impairment as a result of one or more events that has occurred after the initial recognition of the 

asset (an incurred „loss event‟) and that loss event (or events) has an impact on the estimated future cash 

flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of 

impairment may include indications that the borrower or a group of borrowers is experiencing significant 

financial difficulty, default or delinquency in interest or principal payments, the probability that they will 

enter bankruptcy or other financial reorganization and where observable data indicate that there is a 

measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions 

that correlate with defaults. 

Financial assets carried at amortized cost 

If there is objective evidence that an impairment loss on financial assets carried at amortized cost (i.e. 

receivables) has been incurred, the amount of the loss is measured as the difference between the asset‟s 

carrying amount and the present value of estimated future cash flows discounted at the asset‟s original 

effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. 

The amount of the loss shall be recognized in the consolidated statement of comprehensive income. The 

asset, together with the associated allowance accounts, is written off when there is no realistic prospect of 

future recovery. 

The Group first assesses whether objective evidence of impairment exists individually for financial assets 

that are individually significant, and individually or collectively for financial assets that are not individually 

significant. If it is determined that no objective evidence of impairment exists for an individually assessed 

financial asset, whether significant or not, the asset is included in a group of financial assets with similar 

credit risk characteristics and that group of financial assets is collectively assessed for impairment. Those 

characteristics are relevant to the estimation of future cash flows for groups of such assets by being 

indicative of the debtor‟s ability to pay all amounts due according to the contractual terms of the assets 

being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is or 

continues to be recognized are not included in a collective assessment of impairment. 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related 

objectively to an event occurring after the impairment was recognized, the previously recognized 

impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the 

consolidated statement of comprehensive income to the extent that the carrying value of the asset does not 

exceed its amortized cost at the reversal date. 

With respect to receivables, the Group performs a regular review of the age and status of these accounts, 

designed to identify accounts with objective evidence of impairment and provide the appropriate allowance 

for impairment loss. The review is accomplished using a combination of specific and collective assessment 

approaches (Note 25), with the impairment losses being determined for each risk grouping identified by the 

Group. 

Subscribers 

Full allowance for impairment losses is provided for receivables from permanently disconnected wireless 

and wireline subscribers. Permanent disconnections are made after a series of collection steps following 

nonpayment by postpaid subscribers. Such permanent disconnections generally occur within a 

predetermined period from statement date. 

The allowance for impairment loss on subscriber accounts is determined based on the results of the net flow 

to write-off methodology. Net flow tables are derived from account-level monitoring of subscriber accounts 

between different age brackets, from current to one (1) day past due to one hundred twenty (120) days past 

due. The net flow to write-off methodology relies on the historical data of net flow tables to establish a 

percentage (“net flow rate”) of subscriber receivables that are current or in any state of delinquency as of 

reporting date that will eventually result in write-off. The allowance for impairment losses is then computed 

based on the outstanding balances of the receivables as of the reporting date and the net flow rates 

determined for the current and each delinquency bracket. 

Regardless of the age of the account, additional impairment losses are also made for accounts specifically 

identified to be doubtful of collection when there is information on financial incapacity after considering the 

other contractual obligations between the Group and the subscriber. 

51

Specific tests of impairment are not performed on subscriber receivables since the balances are individually 

insignificant. 

Traffic 

For traffic receivables, impairment losses are made for accounts specifically identified to be doubtful of 

collection regardless of the age of the account. For receivable balances that appear doubtful of collection, 

allowance is provided after review of the status of settlement with each carrier and roaming partner, taking 

into consideration normal payment cycles, recovery experience and credit history of the parties. 

Other receivables 

Other receivables from dealers, credit card companies and other parties are provided with allowance for 

impairment losses if specifically identified to be doubtful of collection, regardless of the age of the account. 

Derecognition of Financial Instruments 

Financial asset 

A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is 

derecognized where: 

the rights to receive cash flows from the asset have expired; 

the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay 

them in full without material delay to a third party under a “pass-through” arrangement; or 

the Group has transferred its rights to receive cash flows from the asset and either: (a) has transferred 

substantially all the risks and rewards of ownership and retained control of the asset; or (b) has neither 

transferred nor retained the risks and rewards of the asset but has transferred the control of the asset. 

Where the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough 

arrangement, and has neither transferred nor retained substantially all the risks and rewards of the 

asset nor transferred control of the asset, the asset is recognized to the extent of the Group‟s continuing 

involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred 

asset is measured at the lower of original carrying amount of the asset and the maximum amount of 

consideration that the Group could be required to repay. 

Financial liability 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has 

expired. Where an existing financial liability is replaced by another from the same lender on substantially 

different terms, or the terms of an existing liability are substantially modified, such an exchange or 

modification is treated as a derecognition of the original liability and the recognition of a new liability, and 

the difference in the respective carrying amounts is recognized in the consolidated statement of 

comprehensive income. 

Inventories 

Inventories are valued at the lower of cost and net realizable value (NRV). NRV is the estimated selling 

price in the ordinary course of business less the estimated costs necessary to make the sale. NRV for 

handsets and accessories, and wireline telephone sets is the selling price in the ordinary course of business 

less direct costs to sell, while NRV for SIM packs, call cards, spare parts and supplies consists of the related 

replacement cost. Slow-moving and nonmoving items for more than one (1) year are provided with 100% 

provision. Cost is determined using the moving average method. 

Value-added Input Tax and Other Current Assets 

Value-added input tax classified under “Value-added Input Tax and Other Current Assets” account in the 

statement of financial position pertains to value-added input tax recognized on ordinary purchases of the 

Group. Other current assets pertain to prepayments and advance payments to various expenditures related to 

business activities of the Group are measured at cost. These are amortized during the period of utilization. 

Value-added Input Tax and Other Noncurrent Assets 

Value-added input tax classified under “Value-added Input Tax and Other Noncurrent Assets” account 

pertains to value-added input tax on importations which takes one year or more to be delivered to the Group. 

Other noncurrent assets pertain to deferred subscriber acquisition costs and refundable security deposits 

related to business activities of the Group are measured at cost. These are amortized for a period of more 

52

than one year. 

Property and Equipment 

Property and equipment are carried at cost less accumulated depreciation, amortization and impairment 

losses, if any. Land is stated at cost, less any accumulated impairment losses. 

The initial cost of an item of property and equipment comprises of its purchase price and any costs 

attributable in bringing the asset to its intended location and working condition. Cost also includes: (a) 

interest and other financing charges on borrowed funds used to finance the acquisition of property and 

equipment to the extent incurred during the period of installation and construction; and (b) asset retirement 

obligations (ARO) specifically for property and equipment installed/constructed on leased properties. 

Subsequent costs are capitalized as part of “Property and equipment” account, only when it is probable that 

future economic benefits associated with the item will flow to the Group and the cost of the item can be 

measured reliably. All other repairs and maintenance are charged against current operations as incurred. 

Projects under construction are transferred to the related “Property and equipment” account when the 

construction or installation and related activities necessary to prepare the property and equipment for their 

intended use are completed, and the property and equipment are ready for commercial service. 

Prior to transfer, these facilities, when rolled out, are subjected to rigid testing for serviceability and traffic 

utilization, including its ability to inter-operate with other network elements. These projects are mostly turnkey 

and must await final acceptance and certification before they qualify as for transfers to the related 

Property and equipment accounts. When the construction or installation and related activities necessary to 

prepare the property and equipment for their intended use are completed, and property and equipment are 

ready for commercial service. 

Depreciation and amortization of property and equipment commences once the property and equipment are 

available for use and are computed using the straight-line method over the estimated useful lives (EUL) of 

the assets, regardless of utilization. 

The EUL of property and equipment of the Group follows: 

Years 

Telecommunications equipment: 

Tower 20 

Switch 10 to 20 

Outside plant facilities 10 to 20 

Distribution dropwires 5 

Cellular facilities and others 3 to 20 

Buildings and improvements 25 

Investment in cable systems 15 

Vehicle and work equipment 5 to 15 

Leasehold improvements are amortized over the shorter of their EUL or the corresponding lease terms. 

The assets‟ residual values, useful lives and methods of depreciation and amortization are reviewed and 

adjusted, if appropriate, at each financial year-end (Note 10). 

An item of property and equipment is derecognized upon disposal or when no future economic benefits are 

expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset 

(calculated as the difference between the net disposal proceeds and the carrying amount of the item) is 

included in the consolidated statement of comprehensive income, in the year the item is derecognized. 

Asset Retirement Obligation (ARO) 

Asset retirement obligation arises when the Group is required to dismantle or remove an asset at the end of 

useful life and to restore the site on which it has been located. The Group recognizes the present value of 

these obligations and capitalizes these costs as part of the balances of the related property and equipment 

accounts, which are depreciated on a straight-line basis over the EUL of the related property and equipment 

53

or the contract period, whichever is shorter. Rather than allowing an entity to build up a provision for the 

required costs over the useful life of the facility, PAS 37, Provisions, Contingent Liabilities and Contingent 

Assets, requires that the liability is recognized as soon as the obligation arises which will normally be at 

commencement of operations. Other than the unwinding discount on the provision, any change in the 

present value of the estimated expenditure is reflected as an adjustment to the provision and the 

corresponding item of property and equipment. 

The amount of ARO is accrued and such accretion is recognized as interest expense (Note 18). 

Investment in a Joint Venture (JV) 

A JV is a contractual arrangement whereby two (2) or more parties undertake an economic activity that is 

subject to joint control; and a jointly controlled entity is a joint venture that involves the establishment of a 

separate entity in which each venturer has an interest. 

The Group‟s investment in Digitel Crossing Inc. (DCI) is accounted for under the equity method. Under the 

equity method, a JV, is carried in the consolidated statement of financial position at cost plus postacquisition 

changes in the Group‟s share of net assets of the JV, less any allowance for impairment losses. 

The consolidated statement of comprehensive income reflects the Group‟s share in the results of operations 

of the JV (Note 11). 

Impairment of Nonfinancial Assets 

This accounting policy applies primarily to the Group‟s property and equipment (Note 10). 

At each reporting date, the Group assesses whether there is any indication that its nonfinancial assets may be 

impaired. When an indicator of impairment exists or when an annual impairment testing for an asset is 

required, the Group makes a formal estimate of recoverable amount. Recoverable amount is the higher of 

an asset‟s (or cash-generating unit‟s) fair value less costs to sell and its value in use and is determined for an 

individual asset, unless the asset does not generate cash inflows that are largely independent of those from 

other assets or groups of assets, in which case the recoverable amount is assessed as part of the cashgenerating 

unit to which it belongs. Where the carrying amount of an asset (or cash-generating unit) 

exceeds its recoverable amount, the asset (or cash-generating unit) is considered impaired and is written 

down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to 

their present value using a pre-tax discount rate that reflects current market assessments of the time value of 

money and the risks specific to the asset (or cash-generating unit). 

An assessment is made at each reporting date as to whether there is any indication that previously 

recognized impairment losses may no longer exist or may have decreased. If such an indication exists, the 

recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has 

been a change in the estimates used to determine the asset‟s recoverable amount since the last impairment 

loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable 

amount. That increased amount cannot exceed the carrying amount that would have been determined, net of 

depreciation and amortization, had no impairment loss been recognized for the asset in prior years. Such 

reversal is recognized in the consolidated statement of comprehensive income. After such a reversal, the 

depreciation and amortization expense is adjusted in future years to allocate the asset‟s revised carrying 

amount, less any residual value, on a systematic basis over its remaining life. 

Impairment of Investment in a JV 

The Group‟s entire carrying amount of investment in a JV is tested for impairment in accordance with PAS 

36 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to 

sell) with its carrying amount, whenever application of the requirements in PAS 39 indicates that the 

investment may be impaired. An impairment loss recognized in those circumstances is not allocated to any 

asset that forms part of the carrying amount of the investment in a JV. Accordingly, any reversal of that 

impairment loss is recognised in accordance with PAS 36 to the extent that the recoverable amount of the 

investment subsequently increases. In determining the value in use of the investment, an entity estimates: 

(a) its share of the present value of the estimated future cash flows expected to be generated by the associate, 

including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the 

investment; or (b) the present value of the estimated future cash flows expected to arise from dividends to be 

received from the investment and from its ultimate disposal. 

54

Equity 


Capital stock is measured at par value for all shares issued. When the Group issues shares in excess of par, 

the excess is recognized as additional paid-in capital (APIC). Incremental costs incurred directly 

attributable to the issuance of new shares are treated as deduction from APIC. 

Deficit represents accumulated losses of the Group. 

Equity Reserve 

Intercompany balances that are in the nature of equity are accounted for as equity transactions. Adjustments 

in the carrying value of these equity advances are recognized as Equity reserve in the consolidated statement 

of financial position and consolidated statement of changes in equity. 

Leases 

The determination of whether an arrangement is, or contains a lease, is based on the substance of the 

arrangement at inception date, and requires an assessment of whether the fulfillment of the arrangement is 

dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A 

reassessment is made after inception of the lease only if one of the following applies: 

a. there is a change in contractual terms, other than a renewal or extension of the arrangement; 

b. a renewal option is exercised or an extension granted, unless that term of the renewal or extension was 

initially included in the lease term; 

c. there is a change in the determination of whether fulfillment is dependent on a specified asset; or 

d. there is a substantial change to the asset. 

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in 

circumstances gave rise to the reassessment for any of the scenarios above, and at the date of renewal or 

extension period for the second scenario. 

Group as a lessee 

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified 

as operating leases. Operating lease payments are recognized as an expense in the consolidated statement of 

comprehensive income on a straight-line basis over the lease term. 

Borrowing Costs 

Borrowing costs are capitalized if these are directly attributable to the acquisition, construction or 

production of a qualifying asset. Capitalization of borrowing costs commences when the activities for the 

asset‟s intended use are in progress and expenditures and borrowing costs are being incurred. Borrowing 

costs are capitalized until the assets are ready for their intended use. These costs are amortized using the 

straight-line method over the EUL of the related property and equipment. If the resulting carrying amount 

of the asset exceeds its recoverable amount, an impairment loss is recognized. Borrowing costs include 

interest charges and other related financing charges incurred in connection with the borrowing of funds. 

Other borrowing costs are recognized as expense in the period in which these are incurred. 

Income Tax 

Current tax 

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be 

recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount 

are those that are enacted or enacted as of the reporting date. 

Deferred tax 

Deferred tax is provided using the liability method on all temporary differences, with certain exceptions, at 

the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial 

reporting purposes. 

Deferred tax liabilities are recognized for all taxable temporary differences, with certain exceptions. 

Deferred tax assets are recognized for all deductible temporary differences with certain exceptions, and 

55

carryforward benefits of unused tax credits from excess minimum corporate income tax (MCIT) over 

regular corporate income tax and unused net operating loss carryover (NOLCO), to the extent that it is 

probable that taxable income will be available against which the deductible temporary differences and 

carryforward benefits of unused tax credits from excess MCIT and unused NOLCO can be utilized. 

Deferred tax assets are not recognized, when it arises from the initial recognition of an asset or liability in a 

transaction that is not a business combination, and at the time of transaction, affects neither the accounting 

income nor taxable income or loss. Deferred tax liabilities are not provided on nontaxable temporary 

differences associated with investments in domestic subsidiaries and interests in joint ventures. With 

respect to investments in foreign subsidiaries, deferred tax liabilities are recognized except where the timing 

of the reversal of the temporary differences can be controlled and it is probable that the temporary difference 

will not reverse in the foreseeable future. 

The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the extent 

that it is no longer probable that sufficient taxable income will be available to allow all or part of the 

deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date, 

and are recognized to the extent that it has become probable that future taxable income will allow the 

deferred tax assets to be recognized. 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when 

the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or 

substantively enacted as of reporting date. 

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off 

current tax assets against current tax liabilities, and the deferred taxes relate to the same taxable entity and 

the same taxation authority. 

Movements in the deferred tax assets and liabilities arising from changes in tax rates are charged to or 

credited against income for the year. 

Pension Costs 

Pension cost is actuarially determined using the projected unit credit method. This method reflects services 

rendered by employees up to the date of valuation and incorporates assumptions concerning employees‟ 

projected salaries. Actuarial valuations are conducted with sufficient regularity, with option to accelerate 

when significant changes to underlying assumptions occur. Pension cost includes current service cost, 

interest cost, expected return on any plan assets, actuarial gains and losses, and the effect of any curtailment 

or settlement. 

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are 

credited to or charged against income when the net cumulative unrecognized actuarial gains and losses at the 

end of the previous period exceed 10% of the higher of the present value of the defined benefit obligation 

and the fair value of plan assets at that date. The excess actuarial gains or losses are recognized over the 

average remaining working lives of the employees participating in the plan. 

The liability recognized in the consolidated statement of financial position in respect of defined benefit 

pension plan is the present value of the defined benefit obligation as of reporting date less the fair value of 

plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. 

The value of any asset is restricted to the sum of any cumulative unrecognized net actuarial losses and any 

past service cost not yet recognized and the present value of any economic benefits available in the form of 

refunds from the plan or reductions in the future contributions to the plan. The defined benefit obligation is 

calculated annually by an independent actuary using the projected unit credit method. The present value of 

the defined benefit obligation is determined by discounting the estimated future cash inflows using risk-free 

interest rates that have terms to maturity approximating the terms of the related pension liability or applying 

a single weighted average discount rate that reflects the estimated timing and amount of benefit payments. 

A portion of actuarial gains and losses is recognized as income or expense if the cumulative unrecognized 

actuarial gains and losses at the end of the previous reporting period exceeded the greater of 10% of the 

present value of the defined benefit obligation or 10% of the fair value of plan assets. These gains and 

56

losses are recognized over the expected average remaining working lives of the employees participating in 

the plan. 

Past service costs, if any, are recognized immediately in the statement of comprehensive income, unless the 

changes to the pension plan are conditional on the employees remaining in service for a specified period of 

time (the vesting period). In this case, the past service costs are amortized on a straight-line basis over the 

vesting period. 

Share-Based Payment Transactions 

The Parent Company has a stock option plan for the granting of nontransferable options to management and 

employees of the Parent Company, whereby they are granted the option to purchase a fixed number of 

shares of stock at a stated price during a specified period. Options will be measured at fair value at grant 

date (Note 23). 

No options have been awarded. Once options are granted, these will be accounted for under PFRS 2, Sharebased 

Payment, and the related Philippine Interpretations. 

General, Selling and Administrative Expenses 

General, selling and administrative expenses, except for rent (see accounting policy on leases), are charged 

against current operations as incurred. 

Commission Expense 

The Group recognizes commission expense when services are rendered by dealers and agents. The 

commission expense is recognized upon reaching certain level of sales of prepaid cards and subscriber 

acquisitions. 

Provisions 

Provisions are recognized when: (a) the Group has a present obligation (legal or constructive) as a result of a 

past event; (b) it is probable (i.e., more likely than not) that an outflow of resources embodying economic 

benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the 

obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. 

If the effect of the time value of money is material, provisions are determined by discounting the expected 

future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, 

where appropriate, the risks specific to the liability. 

Where discounting is used, the increase in the provision due to the passage of time is recognized as an 

interest expense in the consolidated statement of comprehensive income. Where the Group expects a 

provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the 

reimbursement is virtually certain. 

Foreign Currency Transactions and Translation 

The functional and presentation currency of the Parent Company and its Philippine subsidiaries is the 

Philippine Peso. The functional currency of DCPL, a non-Philippine subsidiary, is the US Dollar. 

Each entity in the Group determines its own functional currency and items included in the financial 

statements of each entity are measured using that functional currency. Transactions in foreign currencies are 

initially recorded in the functional currency rate ruling at the date of the transaction. Monetary assets and 

liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange 

ruling at the reporting date. All differences are taken to the consolidated statement of comprehensive 

income, with the exception of differences on foreign currency borrowings that provide a hedge against a net 

investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at 

which time they are recognized in the consolidated statement of comprehensive income. Tax charges and 

credits attributable to exchange differences on those borrowings are also dealt with in equity. Nonmonetary 

items that are measured in terms of historical cost in a foreign currency are translated using the exchange 

rate as of the date of initial transaction. Nonmonetary items measured at fair value in a foreign currency are 

translated using the exchange rates at the date when the fair value was determined. 

As of the reporting date, the assets and liabilities of these subsidiaries are translated into the presentation 

currency of the Parent Company at the rate of exchange ruling at the reporting date and their statement of 

57

comprehensive income are translated at the weighted average exchange rates for the year. The exchange 

differences arising on the translation are taken directly to a separate component of equity. On disposal of a 

foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign 

operation shall be recognized in the consolidated statement of comprehensive income. 

Earnings (Loss) Per Share 

Basic earnings (loss) per share is computed by dividing net income (loss) applicable to common stock [net 

income (loss) less dividends on preferred stock, if any] by the weighted average number of common shares 

issued and outstanding during the year, adjusted for any subsequent stock dividends declared. 

Diluted earnings (loss) per share amounts are calculated by dividing the net income (loss) attributable to 

ordinary equity holders of the parent (after deducting interest on the convertible preferred shares, if any) by 

the weighted average number of ordinary shares outstanding during the year plus the weighted average 

number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary 

shares into ordinary shares. 

Operating Segments 

The Group‟s operating businesses are organized and managed separately according to the nature of the 

products and services provided, with each segment representing a strategic business unit that offers different 

products and serves different markets. The Group‟s business segments consist of: (1) wireless 

communication services; (2) wireline voice communication services; and (3) wireline data communication 

services. The Group generally accounts for intersegment revenues and expenses at agreed transfer prices. 

Financial information on business segments is presented in Note 29 to the consolidated financial statements. 

Contingencies 

Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed unless 

the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not 

recognized in the consolidated financial statements but disclosed when an inflow of economic benefits is 

probable. 

Events after the Reporting Period 

Any post-year-end event up to the date of approval of the BOD of the consolidated financial statements that 

provides additional information about the Group‟s position at the reporting date (adjusting event) is reflected 

in the consolidated financial statements. Any post-year-end event that is not an adjusting event is disclosed 

in the notes to the consolidated financial statements, when material. 

5. Significant Accounting Judgments and Estimates 

The preparation of the accompanying consolidated financial statements in compliance with PFRS requires 

the Group to make certain estimates that affect the reported amounts of assets, liabilities, income and 

expenses and disclosure of contingent assets and contingent liabilities. Future events may occur which will 

cause the assumptions used in arriving at the estimates to change. The effects of any change in estimates are 

reflected in the consolidated financial statements as they become reasonably determinable. 

Significant accounting judgments and estimates are continually evaluated and are based on historical 

experience and other factors, including expectations of future events that are believed to be reasonable under 

the circumstances. 

Judgments 

Classification of financial instruments 

On initial recognition, the financial instrument, or its components parts, are classified as either a financial 

asset, a financial liability or an equity instrument in accordance with the substance of the contractual 

arrangement and the definition of a financial asset, a financial liability or an equity instrument. The 

substance of a financial instrument, rather than its legal form, governs its classification in the consolidated 

statement of financial position. 

In addition, the Group classifies financial assets by evaluating among others, whether the asset is quoted or 

not in an active market. Included in the evaluation on whether a financial asset is quoted in an active market 

58

is the determination on whether quoted prices are readily and regularly available, and whether those prices 

represent actual and regularly occurring market transactions on an arm‟s-length basis. 

Fair values of financial instruments 

The fair values of financial instruments are determined using valuation techniques. Where valuation 

techniques are used to determine fair values, fair values are validated and periodically reviewed by qualified 

personnel independent of the area that created them. All models are reviewed before they are used, and 

models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent 

practicable, models use only observable data, however, areas such as credit risk (both own and 

counterparty), volatilities and correlations require management to make estimates. Any changes in fair 

values of these financial assets and liabilities would affect the consolidated statement of comprehensive 

income and consolidated statement of financial position (Note 26). 

Classification of leases 

Management exercises judgment in determining whether substantially all the significant risks and rewards 

of ownership of the leased assets are transferred to the Group. Lease contracts, which transfer to the Group 

substantially all the risks and rewards incidental to ownership of the leased items, are capitalized. 

Otherwise, they are considered as operating leases. 

Also, the Group has lease agreements where it has determined that the risks and rewards related to the 

leased assets are retained with the lessors. Such leases are accounted for as operating leases. The future 

minimum rentals under non-cancelable operating lease amounted to P=9,082.1 million, 

P=8,908.3 million and P=8,195.0 million as of December 31, 2010, 2009 and 2008, respectively (Note 27). 

Determination of whether the Group is acting as a principal or an agent 

The Group assesses its revenue arrangements against the following criteria to determine whether it is acting 

as a principal or an agent: 

whether the Group has primary responsibility for providing the goods or service; 

whether the Group has inventory risk; 

whether the Group has discretion in establishing prices; and 

whether the Group bears the credit risk. 

If the Group has determined that it is acting as a principal, the Group recognizes revenue on a gross basis 

with the amount remitted to the other party being accounted for as part of costs and expenses. 

If the Group has determined that it is acting as an agent, only the net amount retained is recognized as 

revenue. 

The Group assessed its revenue arrangements and concluded that it is acting as principal in some 

arrangements and as an agent in other arrangements. 

Estimates 

Revenue recognition 

The Group‟s revenue recognition policies require management to make use of estimates and assumptions 

that may affect the reported amounts of revenue and receivables. 

The Group‟s postpaid service arrangements include fixed monthly charges which are recognized over the 

subscription period on a pro-rata basis. The Group bills the postpaid subscribers throughout the month 

according to the bill cycles of subscribers. As a result of the billing cycle cut-off, service revenue earned 

but not yet billed at end of the month are estimated and accrued based on actual usage. As of December 31, 

2010 and 2009, accrued but unbilled services to subscribers amounted to P=127.9 million and P=103.9 million, 

respectively (Note 7). 

The Group‟s agreements with local and foreign carriers for inbound and outbound traffic subject to 

settlements require traffic reconciliation before actual settlement is done, which may not be the actual 

volume of traffic as measured by management. Initial recognition of revenue is based on observed traffic in 

the network, since normal historical experience adjustments are not material to the consolidated financial 

statements. The differences between the amounts initially recognized and actual settlements are taken up in 

59

the accounts upon reconciliation. However, there is no assurance that such use of estimates will not result in 

material adjustments in future periods. 

Total unsettled net inbound traffic revenue from local and foreign traffic carriers as of December 31, 2010 

and 2009 (included under “Receivables” account in the consolidated statements of financial position) 

amounted to P=514.1 million and P=582.4 million, respectively (Note 7). Total unsettled net outbound traffic 

to local and foreign carriers as of December 31, 2010 and 2009 (included under “Accounts payable and 

accrued expenses” account in the consolidated statements of financial position) amounted to P=233.2 million 

and P=340.9 million, respectively (Note 12). 

Allowance for impairment losses on trade and other receivables 

The Group maintains an allowance for impairment losses at a level considered adequate to provide for 

potential uncollectible trade and other receivables. The level of this allowance is evaluated by management 

on the basis of factors that affect the collectibility of the accounts. These factors include, but are not limited 

to, the length of the Group‟s relationship with the customer, the customer‟s payment behavior and known 

market factors. The Group performs a regular review of the age and status of receivables, and identifies 

accounts that are to be provided with allowance on a continuous basis. The review is accomplished using a 

combination of specific and collective assessment approaches, with the impairment losses being determined 

for each risk grouping identified by the Group. The Group provides full allowance on trade receivables 

from permanently disconnected subscribers. The amount and timing of recorded expenses for any period 

would differ if the Group made different judgments or utilized different estimates. An increase in the 

Group‟s allowance for impairment losses on trade and other receivables would increase the recorded 

operating expenses and decrease current assets. 

Provision for impairment losses on trade and other receivables (included under “Impairment losses” account 

in the consolidated statements of comprehensive income) amounted to P=357.4 million, P=288.7 million and P= 

229.5 million in 2010, 2009 and 2008, respectively (Note 20). Total receivables, net of allowance for 

impairment losses, amounted to P=2,133.6 million and P=2,180.5 million as of December 31, 2010 and 2009, 


Obsolescence and market decline 

The Group, in determining the NRV, considers any adjustment necessary for obsolescence which is 

generally provided 100% for nonmoving items for more than one (1) year. The Group adjusts the cost of 

inventory to the recoverable value at a level considered adequate to reflect market decline in the value of the 

recorded inventories. The Group reviews the classification of the inventories and generally provides 

adjustments for recoverable values of new, actively sold and slow-moving inventories by reference to 

prevailing values of the same inventories in the market. The amount and timing of recorded expenses for 

any period would differ if different judgments were made or different estimates were utilized. An increase 

in adjustments for inventory obsolescence and market decline would increase recorded operating expenses 

and decrease current assets. 

Impairment losses on inventory obsolescence and market decline (included under “Impairment losses” 

account in the consolidated statements of comprehensive income) amounted to P=2.5 million, P=10.6 million 

and P=27.5 million in 2010, 2009 and 2008, respectively (Note 20). Reversal of inventory obsolescence and 

market decline amounted to P=18.5 million, P=7.0 million and P=2.5 million for the years ended December 31, 

2010 , 2009 and 2008, respectively. 

The Group‟s inventories amounted to P=311.3 million and P=264.4 million as of December 31, 2010 and 2009, 


ARO 

The Group is legally required under various lease contracts to restore leased property to its original 

condition and to bear the costs of dismantling and deinstallation at the end of the contract period. These 

costs are accrued based on an in-house estimate which incorporates estimates on amounts of asset retirement 

costs, third party margins and interest rates. The Group recognizes the present value of these costs as part of 

the balance of the related “Property and Equipment” accounts, and depreciates such on a straight-line basis 

over the useful life of the related asset. The present value of dismantling costs is computed based on an 

average credit adjusted risk free rate of 6.2% to 10.1%. Assumptions used to compute ARO are reviewed 

and updated annually. 

60

The amount and timing of recorded expenses for any period would differ if different judgments were made 

or different estimates were utilized. An increase in ARO would increase recorded operating expenses and 

increase noncurrent liabilities. 

In 2010, the Group updated its assumptions on timing of settlement and estimated cash outflows arising 

from ARO on its leased premises. As a result of the changes in estimates reckoned as of January 1, 2010, 

the Group adjusted downward its ARO liability (included under “Other noncurrent liabilities” account) by 

P=14.1 million against the book value of the assets on leased premises (Note 15). 

As of December 31, 2010 and 2009, the Group‟s ARO (included under “Other noncurrent liabilities” 

account in the consolidated statements of financial position) has a carrying value of P=502.0 million and 

P=391.1 million, respectively (Note 15). The related depreciation and amortization expense for the years 

ended December 31, 2010, 2009 and 2008 amounted to P=21.8 million, P=19.3 million and P=21.9 million, 

respectively. 

Estimated useful life of property and equipment 

The Group estimated the useful lives of its property and equipment based on the period over which the 

assets are expected to be available for use. The Group reviews annually the EUL of property and equipment 

based on factors that include asset utilization, internal technical evaluation, technological changes, 

environmental and anticipated use of the assets tempered by related industry benchmark information. It is 

possible that future results of operations could be materially affected by changes in these estimates brought 

about by changes in the factors mentioned. A reduction in the EUL of property and equipment would 

increase recorded depreciation and amortization expense, and decrease noncurrent assets. 

As of December 31, 2010 and 2009, the net book values of the Group‟s property and equipment amounted 

to P=81,326.9 million and P=72,985.1 million, respectively. The depreciation and amortization expense for 

the years ended December 31, 2010, 2009 and 2008 amounted to P=4,371.9 million, P=3,616.3 million and 

P=2,855.8 million, respectively (Note 10). 

Impairment of nonfinancial assets 

The Group assesses the impairment of assets (property and equipment, investments in a joint venture) 

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be 

recoverable. The factors that the Group considers important which could trigger an impairment review 

include the following: 

significant underperformance relative to expected historical or projected future operating results; 

significant changes in the manner of use of the acquired assets or the strategy for overall business; and 

significant negative industry or economic trends. 

An impairment loss is recognized whenever the carrying amount of an asset or investment exceeds its 

recoverable amount. The recoverable amount is the higher of an asset‟s fair value less cost to sell and value 

in use. The fair value less cost to sell is the amount obtainable from the sale of an asset in an arm‟s length 

transaction while value in use is the present value of estimated future cash flows expected to arise from the 

continuing use of an asset and from its disposal at the end of its useful life. 

Recoverable amounts are estimated for individual assets or investments or, if it is not possible, for the cashgenerating 

unit to which the asset belongs. For impairment loss on specific assets or investments, the 

recoverable amount represents the net selling price. 

In determining the present value of estimated future cash flows expected to be generated from the continued 

use of the assets, the Group is required to make estimates and assumptions that can materially affect the 

consolidated financial statements. 

As of December 31, 2010 and 2009, the balances of the Group‟s nonfinancial assets, net of accumulated 

depreciation and amortization and accumulated provisions for impairment losses follow: 

61

2010 2009 

Property and equipment (Note 10) 

Cost P=119,558,632 P=106,827,651 

Accumulated depreciation and amortization 

Investment in a JV (Note 11) 

38,231,721 33,842,526 

Cost 249,455 249,455 

Provision for impairment loss 249,455 249,455 

Pension and other benefits costs 

The determination of the obligation and cost of pension and other employee benefits is dependent on the 

selection of certain assumptions used in calculating such amounts. Those assumptions include, among 

others, discount rates and salary increase rates (Note 23). Actual results that differ from the Group‟s 

assumptions are accumulated and amortized over future periods and therefore, generally affect the 

recognized expense and recorded obligation in such future periods. 

While the Group believes that the assumptions are reasonable and appropriate, significant differences 

between actual experiences and assumptions may materially affect the cost of employee benefits and related 

obligations. 

The Group‟s pension liability (included in “Other noncurrent liabilities” account in the consolidated 

statements of financial position) amounted to P=182.3 million and P=174.9 million as December 31, 2010 and 

2009, respectively (Note 23). 

The Group also estimates other employee benefits obligation and expense, including the cost of paid leaves 

based on historical leave availments of employees, subject to the Group‟s policy. These estimates may vary 

depending on the future changes in salaries and actual experiences during the year. 

As of December 31, 2010 and 2009, the accrued balance of other employee benefits (included under 

“Accounts payable and accrued expenses” account in the consolidated statements of financial position) 

amounted to P=78.9 million and P=30.0 million, respectively (Note 12). 

Contingencies 

The Group is currently involved in certain legal proceedings. The estimate of the probable costs for the 

resolution of these claims has been developed in consultation with outside counsel handling the defense in 

these matters and is based upon an analysis of potential results. The Group currently does not believe these 

proceedings will have a material adverse affect on the Group‟s financial position and results of operations. 

It is possible, however, that future results of operations could be materially affected by changes in the 

estimates or in the effectiveness of the strategies relating to these proceedings (Note 27). 

Deferred tax assets 

The Group reviews the carrying amounts of its deferred tax assets at each reporting date and reduces the 

deferred tax assets to the extent that it is no longer probable that sufficient taxable income will be available 

to allow all or part of the deferred tax assets to be utilized. However, there is no assurance that the Group 

will generate sufficient taxable income to allow all or part of its deferred tax assets to be utilized. 

As of December 31, 2010 and 2009, the Group has deferred tax assets amounting P=969.8 million and 

P=1,251.8 million, respectively (Note 21). Unrecognized deferred tax as of December 31, 2010 and 2009 

amounted to P=52.2 million and P=160.8 million, respectively. 

6. Cash and Cash Equivalents 

This account consists of: 

2010 2009 

Cash on hand and in banks P=452,191 P=504,441 

Cash equivalents 655,040 608,254 

P=1,107,231 P=1,112,695 

62

Cash in banks earns interest at the respective bank deposit rates. Cash equivalents, which represent money 

market placements made for varying periods depending on the immediate cash requirements of the Group, 

earn at an average annual interest rates of 2.2% and 3.0% in 2010 and 2009, respectively. Interest income 

earned from cash and cash equivalents amounted to P=30.6 million, P=32.9 million and P=24.7 million in 2010, 

2009 and 2008, respectively (Note 19). 

7. Receivables 


2010 2009 

Trade receivables (Notes 25 and 26): 

Subscribers P=2,929,217 P=3,036,486 

Connecting carriers - net 514,129 582,440 

Agents and others 183,912 368,689 

Other receivables (Notes 25 and 26) 176,504 155,827 

Less allowance for impairment losses: 

Trade receivables: 

3,803,762 4,143,442 

Subscribers 1,595,104 1,887,913 

Connecting carriers 60,061 60,061 

Other receivables 14,982 14,982 

1,670,147 1,962,956 

P=2,133,615 P=2,180,486 

Receivables are noninterest bearing and are generally collectible in the short-term. 

Amounts collected from wireless subscribers under prepaid arrangements are reported as unearned revenue 

under “Accounts Payable and Accrued Expenses” in the statement of financial position and recognized as 

revenue upon actual usage of airtime value or upon expiration of the prepaid credit. 

The unearned revenue from these subscribers amounted to P=689.4 million and P=604.2 million as of 

December 31, 2010 and 2009, respectively (Note 12). 

Receivables from connecting carriers are presented net of payables to the same connecting carriers based on 

a currently enforceable legal right to offset the recognized amounts, and there is an intention to settle on a 

net basis, or to realize the asset and settle the liability simultaneously. 

Receivables from connecting carriers amounting P=1,327.1 million and P=1,312.9 million as of December 31, 

2010 and 2009, respectively, are presented net of payable to connecting carriers amounting P=813.0 million 

and P=730.5 million as of December 31, 2010 and 2009, respectively. 

“Agents and others” receivable account consists mainly of receivables from credit card companies, dealers 

and distributors which have collection arrangements with the Group. 

The Group‟s “Other receivables” account includes receivables from officers and employees. 

63

Changes in allowance for impairment losses on trade and other receivables follow: 

2010 

2009 

Collective and individual Collective 

Assessment Assessment 

Connecting Other 

Carriers Receivables Subscribers Total 

Balance at beginning of year 

Provision for impairment losses 

P=60,061 P=14,982 P=1,887,913 P=1,962,956 

(Notes 20 and 25) – – 357,403 357,403 

Write-off – – (650,212) (650,212) 

Balance at end of year P=60,061 P=14,982 P=1,595,104 P=1,670,147 

Individual Assessment 

Collective 

Assessment 

Connecting Other 

Carriers Receivables Subscribers Total 

Balance at beginning of year 

Provision for impairment losses 

P=58,064 P=14,982 P=2,437,613 P=2,510,659 

(Notes 20 and 25) 1,997 – 286,658 288,655 

Write-off – – (836,358) (836,358) 

Balance at end of year P=60,061 P=14,982 P=1,887,913 P=1,962,956 

8. Inventories 


2010 2009 

At NRV: 

Handsets, laptops and phonekits P=136,873 P=99,342 

Spare parts and supplies 133,103 137,526 

At cost: 

269,976 236,868 

SIM cards and call cards 41,366 27,504 

P=311,342 P=264,372 

Cost of handsets, laptops and phonekits and spare parts and supplies as of December 31, 2010 and 2009 

amounted to P=349.8 million and P=308.6 million, respectively. 

Inventories recognized as expense during the year and included as part of “Cost of sales” account in the 

consolidated statements of comprehensive income amounted to P=1,865.2 million and 

P=1,451.6 million in 2010 and 2009, respectively. These include amortization of deferred subscriber 

acquisition and retention costs of P=1,506.4 million and P=1,202.9 million in 2010 and 2009, respectively 

(Note 11). 

Impairment losses on inventory arising from obsolescence, market decline and variances amounted to P=2.5 

million, P=10.6 million and P=27.5 million in 2010, 2009 and 2008, respectively (Note 20). 

64

9. Value-added Input Tax and Other Current Assets 


2010 2009 

Value-added input tax P=2,068,500 P=2,175,676 

Prepaid taxes 188,366 133,690 

Prepaid rent 158,113 132,072 

Advances to suppliers and contractors 39,547 37,570 

Office supplies 16,701 5,210 

Subscribers‟ installation cost 14,725 2,070 

Insurance 8,826 5,692 

Others 26,388 16,825 

P=2,521,166 P=2,508,805 

Value-added input tax is an indirect tax on the goods and services which the Group uses in its operations. 

The Group recovers its input tax by setting it against the output tax as of the reporting date. Management 

believes that the amount is fully realizable in the future. 

The prepaid taxes account consists of prepayments for Spectrum Users‟ Fee (SUF), radio station licenses 

and National Telecommunications Commission (NTC) supervision regulation fees. 

The prepaid rent account represents two (2) to three (3) months of advance rental that can be applied against 

future billings (Note 27). Prepaid rent also includes day 1 difference between the present value of the 

refundable security deposit and the undiscounted amount. 

The advances to suppliers and contractors account represents payments made for the acquisition of 

inventories (Note 8) and construction of property and equipment (Note 10) and these are applied against 

payables to suppliers and contractors where contracted obligations occur. 

10. Property and Equipment 

Movements in the Group‟s “Property and equipment” account in 2010 and 2009 follow: 

2010 

Telecom- 

munications 

Equipment Land 

Buildings and 

Improvements 

Investment 

in Cable 

Systems 

Vehicle 

and Work 

Equipment 

Projects 

Under 

Construction Total 

Cost 

At January 1, 2010 P=49,897,066 P=475,998 P=3,872,617 P=758,847 P=6,215,672 P=45,607,451 P=106,827,651 

Additions 211,653 – 110,862 – 240,463 12,168,003 12,730,981 

Transfers 26,553,259 – 59,732 31,881 435,345 (27,080,217) – 

At December 31, 2010 76,661,978 475,998 4,043,211 790,728 6,891,480 30,695,237 119,558,632 

Accumulated Depreciation 

and Amortization 

At January 1, 2010 27,382,973 – 1,702,219 192,699 4,564,635 – 33,842,526 

Depreciation and amortization 3,486,685 – 205,924 45,500 633,826 – 4,371,935 

Transfers/adjustments 17,260 – – – – – 17,260 

At December 31, 2010 30,886,918 – 1,908,143 238,199 5,198,461 – 38,231,721 

Net Book Value P=45,775,060 P=475,998 P=2,135,068 P=552,529 P=1,693,019 P=30,695,237 P=81,326,911 

2009 


munications 


Buildings and 

Improvements 

Investment 

in Cable 

Systems 

Vehicle 

and Work 

Equipment 

Projects 

Under 


Cost 

At January 1, 2009 P=43,157,960 P=475,998 P=3,825,374 P=758,847 P=5,351,200 P=41,520,810 P=95,090,189 

Additions 367,014 – 47,243 – 515,240 10,807,965 11,737,462 

Transfers/adjustments 6,372,092 – – – 349,232 (6,721,324) – 

At December 31, 2009 49,897,066 475,998 3,872,617 758,847 6,215,672 45,607,451 106,827,651 

65


munications 


Buildings and 

Improvements 

Investment 

in Cable 

Systems 

Vehicle 

and Work 

Equipment 

Projects 

Under 


Accumulated Depreciation 

and Amortization 

At January 1, 2009 24,526,392 – 1,494,623 149,767 4,033,861 – 30,204,643 

Depreciation and 

amortization 2,836,161 – 207,596 42,932 529,592 – 3,616,281 

Transfers/adjustments 20,420 – – – 1,182 – 21,602 

At December 31, 2009 27,382,973 – 1,702,219 192,699 4,564,635 – 33,842,526 

Net Book Value P=22,514,093 P=475,998 P=2,170,398 P=566,148 P=1,651,037 P=45,607,451 P=72,985,125 

Projects Under Construction 

The projects under construction amounting P=30,695.2 million and P=45,607.5 million as of December 31, 

2010 and 2009, respectively, represent the accumulated costs incurred as a result of network expansion to 

cover a wider range of key areas. These primarily consists of cellular towers where relays, routers, power 

transmission including a generator set, base station and subsystems may be found in a typical structure. 

Borrowing Costs 

The Group uses its borrowed funds to finance the acquisition, construction and installation of property and 

equipment items. Borrowing costs attributed to these are capitalized and included in the cost of property 

and equipment. Total capitalized borrowing costs amounted to P=784.2 million, P=799.4 million and 

P=1,569.6 million in 2010, 2009 and 2008, respectively, using capitalization rates of 3.0% to 11.0%. 

The undepreciated borrowing costs amounted to P=2,206.0 million and P=2,198.1 million as of December 31, 

2010 and 2009, respectively. 

Investment in Cable Systems 

Investment in cable systems represents the Group‟s indefeasible rights of use (IRU) of circuits in certain 

cable systems. 

Collaterals 

The Group has no property and equipment which were used as collaterals for loans as of December 31, 2010 

and 2009. 

ARO 

As of December 31, 2010 and 2009, the Group‟s ARO (included under “Buildings and land improvements” 

in “Property and equipment” account in the statements of financial position) amounted to P=545.5 million 

and P=911.2 million, respectively. The related depreciation and amortization expense for the years ended 

December 31, 2010, 2009 and 2008 amounted to P=21.8 million, P=19.3 million and P=21.9 million. 

11. Value-added Input Tax and Other Noncurrent Assets 


2010 2009 

Deferred subscriber acquisition and retention costs P=1,454,926 P=1,510,121 

Value-added input tax 1,089,236 1,017,944 

Refundable security deposits (Notes 25 and 26) 273,500 239,122 

Others 108,251 114,897 

P=2,925,913 P=2,882,084 

66

Deferred Subscriber Acquisition and Retention Costs 

Changes in deferred subscriber acquisition and retention costs follow: 

2010 2009 

Balance at beginning of year P=1,510,121 P=1,137,425 

Deferral of subscriber acquisition and retention costs 1,451,181 1,575,564 

Amortization (1,506,376) (1,202,868) 

Balance at end of year P=1,454,926 P=1,510,121 

Value-added input tax 

Value-added input tax is an indirect tax on the goods and services which the Group uses in its operations. 

The Group recovers its input tax by setting it against the output tax as of the reporting date. Management 

believes that the amount is fully realizable in the future. 

Refundable Security Deposits 

Refundable security deposits relate to the Group‟s leased buildings, cellsite lots and commercial spaces. 

These will be collected in full at the end of the lease terms subject to adjustments by the lessor to cover 

damages incurred on the properties. 

Changes in refundable security deposits follow: 

2010 2009 

Balance at beginning of year P=239,122 P=180,948 

Additions 28,435 52,826 

Accretions 5,943 5,348 

Balance at end of year P=273,500 P=239,122 

Others account primarily includes advances to suppliers. 

Investment in a JV 

Other noncurrent assets include the Group‟s JV investment in DCI. Under the terms of the JV agreement on 

DC, the Group shall invest a total of US$12.0 million, representing a 40% direct investment in the JV. As 

of December 31, 2010 and 2009, the Group‟s investment cost in DC amounted to P=292.9 million. The 

accumulated equity in net losses of DC amounted to 

P=43.4 million as of December 31, 2010 and 2009. The carrying value of the Group‟s investment in DC 

amounting P=249.5 million has been fully impaired as of December 31, 2010 and 2009. 

Financial information of DCI, adjusted for the percentage ownership held by the Group, follows: 

2010 2009 

Total current assets P=79,087 P=52,603 

Total noncurrent assets 163,714 203,452 

Total current liabilities 48,648 63,987 

Total noncurrent liabilities 297 805 

Gross income 46,936 46,142 

Costs and operating expenses 44,597 41,060 

12. Accounts Payable and Accrued Expenses 


2010 2009 

Accrued expenses P=4,347,136 P=3,340,767 

Trade payables 2,859,399 3,966,647 

Unearned revenue (Note 7) 689,440 604,166 

Payables to connecting carriers 233,221 340,933 

67

2010 2009 

Due to affiliates (Note 24) 365,893 372,219 

Others 730,766 686,176 

P=9,225,855 P=9,310,908 

Accrued Expenses 

The Accrued expenses account consists of accruals for: 

2010 2009 

Advertising P=1,103,185 P=874,754 

Repairs and maintenance 800,505 462,977 

Project costs (Notes 15 and 27) 816,977 820,417 

Rent 317,797 268,295 

Utilities 233,567 322,896 

Interest and other financing charges 195,468 167,258 

Others 879,637 424,170 

P=4,347,136 P=3,340,767 

Trade Payables 

Trade payables and accrued expenses are normally settled within one (1) year. 

“Trade payables” account mainly includes unpaid billings from suppliers and contractors. 

Unearned Revenue 

Unearned revenue represents the unused and unexpired airtime value of prepaid cards and over-the-air 

reload services sold. 

Payables to Connecting Carriers 

Payables to connecting carriers represent interconnection fees due to other carriers for the charges on voice 

and data transmissions which enable the Group‟s subscribers to reach subscribers of other networks. 

Payables to connecting carriers are presented net of receivables from the same carrier based on a currently 

enforceable legal right to offset the recognized amounts, and there is an intention to settle on a net basis, or 

to realize the asset and settle the liability simultaneously. 

Payables to connecting carriers amounting P=1,139.4 million and P=1,181.0 million as of December 31, 2010 

and 2009, respectively, are presented net of receivables from connecting carriers amounting P=906.2 million 

and P=840.1 million as of December 31, 2010 and 2009, respectively. 

Others 

Others account includes deferred VAT credits and taxes and licenses. 

13. Bonds Payable 


Parent Company Zero Coupon Convertible 

Bonds (DIGITEL Bonds) 

DCPL Zero Coupon Convertible 

Bonds (DCPL Bonds) (Note 16) 

2010 2009 

Principal Peso Principal Peso 

amount equivalent amount equivalent 

US$25,761 P=1,129,385 US$24,159 P=1,116,148 

382,513 16,769,355 311,408 14,387,040 

US$408,274 P=17,898,740 US$335,567 P=15,503,188 

The exchange rates used to restate the US Dollar-denominated bonds payable were P=43.84 to US$1.00 and 

P=46.20 to US$1.00 as of December 31, 2010 and 2009, respectively. 

68

DIGITEL Bonds 

On December 8, 2003, the Parent Company issued DIGITEL Bonds Due 2013 with face value of US$31.1 

million and issue price of US$10.0 million. As of December 31, 2010 and 2009, the outstanding balance of 

the DIGITEL Bonds amounted to P=1,129.4 million (US$25.8 million) and P=1,116.1 million (US$24.2 

million), respectively. 

The DIGITEL Bonds bear a yield-to-maturity of 12%. The DIGITEL Bonds are redeemable at the option of 

the Parent Company, in whole or in part, at the end of each year starting one (1) year after the issue date and 

every year thereafter. 

Alternately, the bondholders will have the right to convert the DIGITEL Bonds into common shares of the 

Parent Company at redemption date. The number of conversion shares to be received by the bondholders 

upon exercise of the conversion right is equivalent to the total redemption value which the bondholders 

would have received if the DIGITEL Bonds were redeemed multiplied by the Philippine Peso-US Dollar 

exchange rate for the relevant date divided by the P=1 par value. Unless previously converted, purchased and 

cancelled or redeemed, the DIGITEL Bonds shall be converted into the common shares of the Parent 

Company at the end of the tenth year after the issue date. 

JGSHI subscribed and paid a total of US$9,996,392 for the bonds (“JGSHI-subscribed Bonds”). On January 

3, 2006, the Parent Company entered into a Memorandum of Agreement (MOA) with JGSHI to amend the 

conversion options of JGSHI-subscribed Bonds. On the said MOA, the conversion rights provided for in the 

terms and conditions of the Bonds as contained in the Application to Purchase and in the Prospectus, JGSHI 

agreed that any conversion of its JGSHI-subscribed Bonds into Parent Company shares shall be subject to 

the consent of the Parent Company. 

The DIGITEL Bonds constitute direct, unconditional, unsubordinated and unsecured obligations of the 

Parent Company and shall at all times rank pari passu and without preference among themselves and at least 

equally with all other present and future unsubordinated, unsecured obligations of the Parent Company, 

except as may be preferred by virtue of mandatory provision of law. 

The bondholders have the option, through a resolution approved by 75% of the bondholders based on the 

face value of the DIGITEL Bonds then outstanding, to require a lien on unencumbered assets of the Parent 

Company not subject to a dispute, valued at approximately US$200.0 million, subject to the limitations, 

conditions and restrictions of a Mortgage Trust Indenture (MTI). The MTI will be administered by a 

Security Trustee appointed in accordance with the MTI. 

Proceeds from the sale of the DIGITEL Bonds were used to partially fund the purchase of equipment for 

GSM Project Phases 1 and 2 valued at approximately US$200.0 million with completion of approximately 

681 cellular sites covering key urban cities nationwide pursuant to a PA issued by the NTC. 

The carrying value of the bifurcated call options on DIGITEL bonds amounted to P=74.4 million and P=60.0 

million as of December 31, 2010 and 2009, respectively (Notes 25 and 26). 

The convertible bonds are redeemable or exchangeable at the option of the holders at par value of P=1 per 

share. Based on the redemption value as at December 31, 2010, the bonds are convertible into 978,107,008 

common shares. 

DCPL Bonds 

In November 2004, DCPL issued DCPL Bonds due 2014 with face value of US$590.1 million and issue 

price of US$190.0 million. JG Summit Philippines, Ltd., a related party, fully subscribed to the DCPL 

Bonds. As of December 31, 2010 and 2009, the outstanding balance of the DCPL Bonds amounted to P= 

16,769.4 million (US$382.5 million) and P=14,387.0 million (US$311.4 million), respectively. 

The DCPL Bonds bear a yield-to-maturity of 12%. The DCPL Bonds are exchangeable into shares of the 

Parent Company, and are redeemable at the option of DCPL, in whole or in part, starting one (1) year after 

the issue date and every year thereafter. Alternately, the bondholder will have the right to convert the DCPL 

Bonds into common shares of the Parent Company at redemption date. The number of conversion shares to 

be received by the bondholders upon exercise of the conversion right is equivalent to the total redemption 

69

value which the bondholders would have received if the DCPL Bonds were redeemed multiplied by the 

Philippine Peso-US Dollar exchange rate for the relevant date divided by the P=1 par value. 

In order to exercise the conversion or exchange, the holder must submit to DCPL, with a copy to the Parent 

Company, a duly completed and executed Exchange Notice. DCPL and the Parent Company shall 

respectively transmit in writing to the subscriber/holder their consent or objection, within three (3) days 

from their respective receipt of the Exchange Notice. 

The DCPL Bonds constitute direct, unconditional, unsubordinated and unsecured obligations of DCPL and 

shall at all times rank pari passu and without preference among themselves. 

The bondholder has the option to require a lien on certain assets of the Parent Company in which case, the 

Parent Company and bondholder shall, within a reasonable time, execute an MTI. 

The convertible bonds are redeemable or exchangeable at the option of the holders at par value of P=1 per 

share. Based on the redemption value as at December 31, 2010, the bonds are convertible into 

16,769,354,795 common shares. 

14. Long-term Debt 


Loans from foreign 

banks 

Interest Rates Maturities US Dollar 

US Dollar LIBOR 

+ 

0.30% to 2.70% 

in 2010 and 2009 

Various 

dates 

through 

2017 

2010 2009 

Philippine 

Peso 

Equivalent US Dollar 

Philippine 

Peso 

Equivalent 

US$348,126 P=15,261,865 US$289,127 P=13,357,639 

Less current portion 68,527 3,004,206 54,423 2,514,322 

US$279,599 P=12,257,659 US$234,704 P=10,843,317 

The exchange rates used to restate the US Dollar-denominated borrowings were P=43.84 to US$1.00 and P= 

46.20 to US$1.00 as of December 31, 2010 and 2009, respectively. 

As of December 31, 2010 and 2009, the Group‟s loans from foreign banks are shown net of unamortized 

debt issue costs totaling P=829.4 million (US$18.9 million) and P=821.1 million (US$17.8 million), 

respectively. The rollforward analysis of the Group‟s unamortized debt issue costs follows: 

2010 2009 


Additions 218,644 166,220 

Amortization during the year (177,136) (173,614) 

Foreign exchange gains (losses) (33,232) 34,932 


70

The repayment schedule of the foregoing long-term debt follows: 

2010 2009 

Due in: 

2010 P=– P=2,514,322 

2011 3,004,206 2,497,714 

2012 2,611,152 2,079,120 

Thereafter 9,646,507 6,266,483 

P=15,261,865 P=13,357,639 

Following is a summary of the loan balances and the significant provisions of the loan contracts with foreign 

banks: 

US Dollar 

2010 2009 

Peso 

equivalent US Dollar 

Peso 

equivalent 

DMPI: 

ING Bank N.V. US$123,838 P=5,429,044 US$147,818 P=6,829,189 

Nordea Bank and ING Bank 73,253 3,211,419 20,466 945,516 

China Citic 43,587 1,910,864 – – 

HSBC and Credit Suisse 37,815 1,657,794 27,000 1,247,401 

ING Bank N.V. Amsterdam 28,068 1,230,497 32,611 1,506,647 

Societe Generale (SG) and 

Calyon 9,831 431,006 13,016 601,329 

Nordea Bank 9,089 398,474 11,018 509,052 

SG and Calyon 6,692 293,392 8,298 383,316 

Calyon and SG 6,343 278,082 8,792 406,196 

Nordic Investment Bank 3,321 145,585 6,639 306,709 

Parent Company: 

Nordea Bank 6,289 275,708 12,528 578,809 

Bayerische HypoVereinsbank – – 941 43,475 

US$348,126 P=15,261,865 US$289,127 P=13,357,639 

Loans from Foreign Banks 

DMPI ING Bank N.V. (ING) loans 

In 2006, DMPI entered into various purchase agreements with certain suppliers and service contractors. The 

purchase agreements relate to the supply of equipment, hardware, software, and services for the Phase 5 

Mobile Messaging Core Network, the Phase 5 Core Intelligent Network Project, the Phase 6 Visayas- 

Mindanao Expansion Project, the Phase 6 National Capital Region Expansion Project and the Phase 6 South 

Luzon Change Out and Expansion Project. Pursuant to the aforementioned purchase agreements, DMPI 

entered into loan agreements with ING where the latter agreed to make available funds to finance the 

purchase agreements. 

The amounts loaned from ING shall be payable in fourteen (14) consecutive equal semi-annual installments 

(the start payment dates for which the various drawdowns of which are stipulated in the contract). The 

portion of the ING loans, which pertains to the Visayas-Mindanao Expansion Project, is guaranteed by the 

Parent Company and JGSHI. 

As of December 31, 2010 and 2009, the outstanding balance of the ING loans amounted to 

P=5,429.0 million (US$123.8 million) and P=6,829.2 million (US$147.8 million), respectively. 

US$96.6 million DMPI Nordea Bank and ING Bank Loan 

On April 28, 2009, DMPI entered in to a loan facility with Nordea and ING Bank. Under the terms of the 

loan facility, Nordea and ING shall finance up to US$71.6 million, being 85% of the Export Contract Value 

purchased from Ericsson Inc. of certain equipment and $25.0 million, being 29.6% of the Export Contract 

Value for local costs incurred to Ericsson Inc. 

71

The amounts owed will be payable in seventeen (17) consecutive equal semi-annual payments at a fixed rate 

of 3.96% per annum plus a risk premium in respect of Nordea and ING at a rate of 0.75% per annum plus 

0.2% margin per annum calculated on the loan. The loan is guaranteed by the Parent Company and JGSHI. 

As of the December 31, 2010 and 2009, the outstanding balance of the loan amounted to P=3,211.4 million 

(US$73.3 million) and P=945.5 million (US$20.5 million), respectively. 

US$49.9 million China CITIC loan 

In 2009, DMPI entered into a loan facility with China CITIC for the supply of the equipment, software, and 

related materials for the Phase 2 3G Expansion, transmission for the Phase 2 3G Expansion and Phase 8A 

NCR and South Luzon BSS Expansion Projects. The loaned amount will be paid in fourteen (14) equal 

semi-annual installments with an interest rate of 1.8% per annum plus libor. The loan is guaranteed by the 

ultimate parent. As of December 31, 2010, the outstanding balance of the loan amounted to P=1,910.9 

million (US$43.6 million). 

US$40.6 million DMPI Hongkong and Shanghai Banking Corporation Limited (HSBC) 

In 2009, DMPI entered into a loan facility wherein HSBC will finance the payments to be made by DMPI 

for the supply of equipment and services of the Phase 7 South Luzon Base Station Expansion Project with 

Huawei Technologies. 

The loaned amount will be paid in fourteen (14) equal semi-annual installments with an interest rate of 1.8% 

per annum plus LIBOR. The loan is guaranteed by JGSHI. 

As of December 31, 2010 and 2009, the outstanding balance of the loan amounted to P=1,657.8 million 

(US$37.8 million) and P=1,247.4 million (US$27.0 million), respectively. 

US$34.2 million DMPI ING Bank N.V. Amsterdam (ING) Loans 

On December 14, 2007, DMPI entered into purchase agreements with Huawei Technologies Co., Ltd. The 

purchase agreements relate to the supply of equipment, hardware, software and services for the Phase 7 

CORE Expansion, Phase 1 3G Network and Phase 7 Intelligent Network Expansion. 

Pursuant to the aforementioned purchase agreements, DMPI entered into loan agreements in 2008 with ING 

where the latter agreed to make available amounts up to US$34.2 million to finance the purchase 

agreements. 

The amounts owed from ING shall be payable in fourteen (14) consecutive equal semi-annual installments 

starting March 1, 2010. The loan is guaranteed by the ultimate parent. 

As of December 31, 2010 and 2009, the total outstanding balance of the loan amounted to P=1,230.5 million 

(US$28.1 million) and P=1,506.6 million (US$32.6 million), respectively. 

US$23.6 million DMPI Societe Generale (SG) and Calyon loan 

On April 11, 2005, DMPI entered into an equipment supply contract with Huawei Technologies Co., Ltd., 

for the supply of equipment, software and off-shore services for the GSM 1800 National Capital Region (the 

Equipment Supply Contract). Under the terms and conditions of the loan, SG and Calyon agreed to make 

available a credit of up to US$23.6 million. 

The amount shall be used to finance the Equipment Supply Contract, to the extent covered by the insurance 

of SINOSURE, a credit insurance agency. 

The aggregate amount of all disbursements under the loan shall be payable in fourteen (14) consecutive 

equal semi-annual installments, the first one of which will become due six (6) months after the starting date 

for repayment and thereafter, each of them falling due on the following interest payment date starting June 

1, 2007. 

As of December 31, 2010 and 2009, the outstanding balance of the SG and Calyon loan amounted to P=431.0 

million (US$9.8 million) and P=601.3 million (US$13.0 million), respectively. 

72

US$18.7 million DMPI Nordea loan 

On April 4, 2006, DMPI entered into a loan facility with Nordea. Under the terms of the loan facility, 

Nordea shall make available the amounts of: (i) US$17.1 million and (ii) 100% of the premium payable to 

the Swedish Export Credits Guarantee Board (EKN), the aggregate amounts not to exceed the commitment 

of US$18.7 million. The Nordea loan is guaranteed by the Parent Company and JGSHI. The loan is 

payable in eighteen (18) consecutive equal semi-annual installments, the first of which shall fall due on 

October 30, 2006, subject to EKN‟s rules and regulations. 

As of December 31, 2010 and 2009, the outstanding balance of the Nordea loan amounted to P=398.5 million 


US$12.7 million DMPI SG and Calyon loan 

On March 9, 2006, DMPI entered into a purchase agreement with Huawei Technologies Co., Ltd., for the 

supply of equipment and software for the GSM services in the National Capital Region (the Phase 6A 200 

Sites Project). Under the terms and conditions of the loan, SG and Calyon agreed to make available a credit 

of up to US$12.7 million. The amount shall be used to finance the Phase 6A 200 Sites Project, to the extent 

covered by the insurance of SINOSURE, a credit insurance agency. 

The aggregate amount of all disbursements under the SG and Calyon shall be payable in fourteen (14) 

consecutive equal semi-annual installments, the first one of which will become due six (6) months after the 

starting date for repayment and thereafter, each of them falling due on the following interest payment date 

April 4,2008.. 

As of December 31, 2010 and 2009, the outstanding balance of the SG and Calyon loan amounted to P=293.4 

million (US$6.7 million) and P=383.3 million (US$8.3 million), respectively. 

US$19.0 million DMPI Calyon and SG loan 

On May 5, 2005, DMPI entered into a supply and service contract with Alcatel CIT and Alcatel Philippines 

Inc. for the supply of various telecommunications materials, software and services for the GSM Cellular 

Mobile Short-term Core Extension Project (the Supply and Service Contract). Under the terms and 

conditions of the loan, Calyon and SG agreed to make available a credit of up to US$19.0 million. The 

amount shall be used to finance the Supply and Service Contract, to the extent covered by the insurance of 

Compagnie Francaise d‟Assurance pour le Commerce Exterieur S.A., a credit insurance agency. The said 

loan is guaranteed by the ultimate parent. 

The aggregate amount of all disbursements under the loan shall be payable in fourteen (14) consecutive 

equal semi-annual installments, the first one of which will become due six (6) months after the starting date 

for repayment and thereafter, each of them falling due on the following interest payment date starting 

August 8, 2006. 

As of December 31, 2010 and 2009, the outstanding balance of the aforementioned loan pertaining to the 

Supply and Service Contract amounted to P=278.1 million (US$6.3 million) and P=406.2 million (US$8.8 

million), respectively. 

US$20.0 million DMPI Nordic Investment Bank (Nordic) loan 

On October 12, 2004, DMPI entered into a credit term loan facility with Nordic in the amount of up to 

US$20.0 million, guaranteed by the Parent Company and JGSHI. The loan is payable in twelve (12) 

consecutive equal semi-annual installments on the payment dates starting on March 15, 2006. 

As of December 31, 2010 and 2009, the outstanding balance of the loan amounted to P=145.6 million 


US$43.5 million Parent Company Nordea Bank (Nordea) loan 

On January 12, 2004, the Parent Company entered into an export credit facility with Nordea in the aggregate 

principal amount of up to US$43.5 million. Under the export credit facility, Nordea shall make available the 

amount of the loan for the sole purpose of financing up to: (i) 85% of the off-shore contract value amounting 

US$40.6 million; and (ii) 85% of the Swedish Export Credits Guarantee Board (EKN) premium. The loan 

is payable in fourteen (14) consecutive equal semi-annual installments, the first of which shall fall due on 

March 15, 2005, subject to EKN‟s rules and regulations. 

73

As of December 31, 2010 and 2009, the outstanding balance of the loan amounted to P=275.7 million 


US$14.0 million Parent Company Bayerische HypoVereinsbank (HypoVereinsbank) loan 

In January 2001, the Parent Company and HypoVereinsbank signed a buyer‟s credit agreement to finance 

the export contract of the Parent Company with a certain foreign supplier. The loan made available in two 

(2) tranches of US$11.8 million and US$2.2 million or a total of US$14.0 million, was 85% of the export 

contract value totaling US$16.5 million. 

The loan is payable in fourteen (14) equal, consecutive, semi-annual installments starting six (6) months 

after the final acceptance of all units purchased but not later than September 28, 2003. The loan was fully 

paid in 2010. 

The Group is not in breach of any loan covenants as of December 31, 2010 and 2009. 

15. Other Noncurrent Liabilities 


2010 2009 

Accrued project costs P=9,891,431 P=5,891,910 

ARO 501,988 391,102 

Derivative liability (Note 25) 249,301 101,000 

Due to affiliate (Note 24) 131,660 131,660 

Pension liabilities (Note 23) 182,269 174,871 

P=10,956,649 P=6,690,543 

Accrued Project Costs 

Accrued project costs represent costs of unbilled materials, equipment and labor which are already eligible 

for capitalization as of December 31, 2010 and 2009. Determination of costs to be capitalized is based on 

the contract price multiplied by the percentage of shipped materials and/or delivered services. 

ARO 

The rollforward analysis of the Group‟s ARO follows: 

2010 2009 


Capitalized to property and equipment 

during the year 

68,604 – 

Accretion (Note 18) 42,282 38,349 

Balance at the end year P=501,988 P=391,102 

Derivative Liability 

Derivative liability relates to the interest rate swap agreements entered between the Group and two banks. 

In 2009, the Group entered into an interest rate swap agreement with a total notional amount of US$54.1 

million, wherein the Group will pay the counterparty floating rates it has effectively exchanged, while the 

counterparty pays the Group interest equivalent to 3.88% per annum. The interest swap has a term of eight 

(8) years. 

In 2010, the Group entered into an interest rate swap agreement with HSBC with notional amount of 

US$46.5 million wherein the Group will pay the counterparty floating rates it has effectively exchanged, 

while the counterparty pays the Group interest equivalent to 3.97% per annum. The interest swap has a term 

of eight (8) years. 

74

16. Equity 

As of December 31, 2010 and 2009, the details of the Parent Company‟s common stock follow: 

2010 2009 

Authorized shares 9,000,000,000 9,000,000,000 

Par value per share P=1.00 P=1.00 

Issued shares (Note 22) 6,356,976,300 6,356,976,300 

Capital Management 

The primary objective of the Group‟s capital management is to ensure that it maintains healthy capital ratios 

in order to support its business and maximize shareholder value. The Group manages its capital structure 

and makes adjustments to these ratios in light of changes in economic conditions and the risk characteristics 

of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of 

dividend payments to shareholders, return capital structure or issue capital securities. No changes have been 

made in the objective, policies and processes as they have been applied in previous years. 

The Group‟s ultimate parent monitors the use of capital structure using a debt-to-total capital ratio which is 

gross debt divided by total capital. The ultimate parent includes within gross debt all interest-bearing loans 

and borrowings, while capital represents total equity, less any net unrealized gains (losses) reserve. 

2010 2009 

(a) Gross debt 

Long-term debt P=15,261,865 P=13,357,639 

(b) Capital P=44,515 P=1,349,046 

(c) Debt-to-capital ratio (a/b) 342.8:1 9.9:1 

The ultimate parent‟s policy is to keep the debt to capital ratio at the 1.5:1 level. Such ratios are currently 

being managed on a group-level by the ultimate parent. 

In relation to the incentives from BOI, DMPI is required to maintain a 75:25 debt-to-equity ratio within a 

specific period as prescribed by the BOI. Likewise, the NTC also requires DMPI to maintain a 70:30 debtto-equity 

ratio (Note 28). As of December 31, 2010 and 2009, DMPI is in compliance with the required 

debt-to-equity ratios. 

The Parent Company has no existing externally imposed capital ratios. 

Dividends 

The Group historically has not paid cash dividends on the shares. Any payment of cash dividends on the 

shares in the future will depend upon the Group‟s earnings, cash flow, financial condition, capital 

investment requirements and other factors. 

Equity Reserve 

In November 2004, DCPL (issuer) issued bond (i.e. DCPL Bonds) to JGSPL (bondholder and a wholly 

owned subsidiary of JGSHI, the Group‟s ultimate parent company) due 2014 with face value of US$590.1 

million and issue price of US$190.0 million. The proceeds of the bonds were used for the Company‟s 

expansion projects. The issuance of DCPL Bonds was approved by Parent Company‟s shareholders in its 

special stockholders‟ meeting held on May 28, 2001. The subscription of DCPL Bonds was approved by 

the Ultimate Parent Company‟s BOD on December 5, 2003, which was ratified by the Ultimate Parent 

Company‟s shareholders in its meeting held on July 22, 2004. This transaction being among entities under 

common control has been agreed by the Ultimate Parent Company, DCPL and JGSPL as an equity 

transaction (Note 13). 

As discussed in Note 13, the DCPL bonds are convertible to common shares based on the redemption values 

as determined on specified dates. In anticipation of the plan or intent to convert or redeem the bonds in 

2011, the issuer and bondholder agreed to bring the bond carrying value to its redemption value as at 

December 31, 2010. The adjustment amounting P=1,831.2 million is shown as Equity reserve in the 

statement of financial position and statement of changes in equity. 

75

17. Network-related and General and Administrative Expenses 


2010 2009 2008 

Rent (Note 27) P=1,488,197 P=1,334,121 P=1,205,268 

Compensation and benefits (Note 23) 1,468,739 1,303,040 1,201,107 

Utilities 1,376,038 1,373,227 1,030,630 

Repairs and maintenance 1,193,430 799,112 744,147 

Advertising and promotion 1,076,379 982,159 900,789 

Taxes and licenses 738,439 377,183 274,944 

Outside services 560,715 581,022 385,798 

Travel and transportation 173,525 145,633 121,478 

Others 430,509 525,777 508,104 

P=8,505,971 P=7,421,274 P=6,372,265 

Others account includes representation and entertainment, professional fees and miscellaneous expenses 

(Note 21). 

18. Finance Costs 

Finance costs are incurred from the following: 

2010 2009 2008 

Bonds payable (Note 13) P=1,071,703 P=1,157,851 P=1,110,303 

Long-term debt and due to related parties 

(Notes 14 and 24) 302,840 299,924 577,563 

Accretion of ARO (Note 15) 42,282 38,349 36,809 

Bank charges and others 49,220 35,069 76,215 

P=1,466,045 P=1,531,193 P=1,800,890 

The finance costs exclude borrowing costs capitalized to qualifying assets (Note 10). 

19. Other Income 


2010 2009 2008 

Interest income (Note 24) P=32,872 P=36,264 P=32,738 

Others 49,364 17,052 780,919 

P=82,236 P=53,316 P=813,657 

Interest income is earned from the following: 

2010 2009 2008 

Cash equivalents (Note 6) P=27,994 P=29,970 P=23,144 

Cash in banks (Note 6) 2,628 2,911 1,583 

Due from related parties (Note 24) 2,250 3,383 8,011 

P=32,872 P=36,264 P=32,738 

Other income in 2008 consists principally of income arising from the reversal of accruals on the Group‟s 

lease obligations. 

76

20. Impairment Losses 


2010 2009 2008 

Impairment losses on trade and other 

receivables (Note 7) 

Inventory obsolescence and market decline 

P=357,403 P=288,655 P=229,480 

(Note 8) 2,481 10,626 27,547 

P=359,884 P=299,281 P=257,027 

21. Income Tax 

Provision for (benefit from) income tax consists of: 

2010 2009 2008 

Current P=23,174 P=9,249 P=17,226 

Deferred 675,415 (78,078) (1,081,010) 

P=698,589 (P=68,829) (P=1,063,784) 

Components of the Group‟s net deferred tax liabilities follow: 

2010 2009 

Deferred tax assets on: 

NOLCO P=406,576 P=559,987 

Allowance for impairment losses on trade and other receivables 404,641 491,916 

Unfunded pension costs 46,855 40,346 

ARO 43,782 24,576 

MCIT 29,499 26,128 

Accrued rent 

Allowance for impairment losses on inventory obsolescence and market 

18,920 14,442 

decline 14,183 14,183 

Unearned revenue 5,301 5,419 

Allowance for impairment losses on investment – 74,836 

969,757 1,251,833 

Deferred tax liabilities on: 

Foreign exchange gains - net P=1,822,206 P=1,670,089 

Capitalized interest - net 1,426,192 1,386,978 

Deferred subscriber acquisition costs 440,894 401,640 

Market valuation gains on derivative instruments 279,076 191,678 

Unamortized debt issuance costs 257,582 184,577 

Casualty loss 67,908 67,908 

Accounts receivable written off 62,834 62,266 

Accretion of refundable security deposits 4,805 3,022 

4,361,497 3,968,158 

Net deferred tax liabilities P=3,391,740 P=2,716,325 

As of December 31, 2010, the Parent Company‟s carryover NOLCO and MCIT that may be claimed as 

deduction from future taxable income or used as deductions against income tax liabilities with their expiry 

years are as follows: 

Inception Year Expiry Year NOLCO MCIT 

2010 2013 P=92,622 P=1,591 

2009 2012 357,540 1,176 

2008 2011 – 12,397 

P=450,162 P=15,164 

77

Movements in NOLCO and MCIT follow: 

NOLCO 2010 2009 2008 

Balance at beginning of year P=870,001 P=512,461 P=857,904 

Additions 92,622 357,540 – 

Applications/expirations (512,461) – (345,443) 

Balance at end of year P=450,162 P=870,001 P=512,461 

MCIT 2010 2009 2008 


Additions 1,591 1,176 12,397 

Expirations (13,731) (13,679) (10,547) 


A reconciliation of the Group‟s provision for income tax computed using the statutory income tax rate and 

effective income tax rate to the provision for income tax shown in the consolidated statements of 

comprehensive income follows: 

2010 2009 2008 

Statutory income tax P=668,431 P=57,266 (P=1,064,653) 

Adjustments from the tax effects of: 

Expiration of NOLCO 153,738 – – 

Reversal of allowance for JV 74,836 – – 

Expiration of MCIT 13,731 15,068 10,547 

Other nondeductible expenses 5,644 330,213 370,440 

Interest income subjected to final tax* (557) (3,180) (3,825) 

Changes in unrecognized deferred tax 

assets (107,262) 159,440 134,982 

Changes in deferred tax liability (109,972) (629,525) – 

Effect of change in income tax rate – – (513,671) 

Others – 1,889 2,396 

Effective income tax P=698,589 (P=68,829) (P=1,063,784) 

* Net of nondeductible interest expense. 

RA No. 9337 

Republic Act (RA) No. 9337 that was enacted into law in 2005 amended various provisions in the existing 

1997 National Internal Revenue Code. Among the reforms introduced by the said RA was the reduction of 

the income tax rate from 35% to 30% beginning January 1, 2009. It further provides that nondeductible 

interest expense shall be reduced from 42% to 33% of interest income subjected to final tax beginning 


Entertainment, Amusement and Recreation (EAR) Expenses 

Current tax regulations define expenses to be classified as EAR expenses and set a limit for the amount that 

is deductible for tax purposes. EAR expenses are limited to 0.5% of net sales for sellers of goods or 

properties or 1% of net revenue for sellers of services. For sellers of both goods or properties and services, 

an apportionment formula is used in determining the ceiling on such expenses. The Group recognized EAR 

expenses (included under “Network-related and general and administrative expenses” account in the 

consolidated statements of comprehensive income) amounting P=111.1 million, P=93.7 million and 

P=84.4 million in 2010, 2009 and 2008, respectively. 

22. Earnings (Loss) Per Share 

Basic EPS is calculated by dividing the net income (loss) for the year attributable to common shareholders 

divided by the weighted average number of common shares outstanding during the year (adjusted for any 

stock dividends). 

78

The following reflects the income (loss) and share data used in the basic/dilutive EPS computations: 

2010 2009 2008 

Net income (loss) P=526,632 P=259,716 (P=1,978,082) 

Weighted average number of common 

shares (Note 16) 6,356,976,300 6,356,976,300 6,356,976,300 

Basic/dilutive earnings (loss) per share P=0.08 P=0.04 (P=0.31) 

There are no dilutive potential common shares in 2010, 2009 and 2008. 

23. Employee Benefits 

Employee Stock Option Plan (ESOP) 

The Parent Company‟s BOD and stockholders approved on August 10, 1994 and November 7, 1994, 

respectively, an ESOP which provides opportunity for all directors, officers and managers of the Parent 

Company to purchase an ownership interest in the Parent Company‟s common stock. 

The ESOP covers the offering of 320.0 million shares out of the authorized but unissued shares, including 

issued shares reacquired by the Parent Company, to all eligible participants of the ESOP at an exercise price 

of P=1.50 per share. Under the ESOP guidelines, eligible participants will be allocated an aggregate amount 

of shares determined in accordance with their rank, seniority and performance. The option to purchase 

shares under the ESOP may be exercised after completion of at least five (5) years of continuous service to 

the Parent Company by paying the full amount in cash. 

No options have been awarded. Once options are granted, these will be accounted for under PFRS 2 and the 

related Philippine Interpretations on share based payments. On December 10, 2010, the ESOP was 

terminated. 

Pension Cost 

The Group has an unfunded, noncontributory, defined benefit retirement plan covering substantially all of its 

regular employees. The benefits are based on years of service and compensation on the last year of 

employment. 

The movements in the liability recognized in the consolidated statements of financial position follow: 

2010 2009 2008 


Total pension expense 44,018 20,557 15,408 

Benefits paid (15,907) (17,735) (2,291) 

Unrecognized actuarial gains - net (20,713) – – 


Components of pension expense (included under “Network-related and general and administrative 

expenses” account in the consolidated statements of comprehensive income) follow: 

2010 2009 2008 

Interest cost P=25,155 P=15,464 P=8,200 

Current service cost 17,657 15,821 11,108 

Amortization of actuarial loss (gain) 1,206 (4,572) (11,237) 

Past service cost – – 20,483 

Effect of curtailment – (6,156) (13,146) 

Total pension expense P=44,018 P=20,557 P=15,408 

79

Past service costs recognized in 2008 were brought about by improvements in the retirement plan of the 

Parent Company and DMPI. The effect of curtailment is due to separation of some employees in 2009 and 

2008. 

Changes in the present value of the defined benefit obligation follow: 

2010 2009 2008 2007 2006 

Balance at beginning of year P=209,077 P=111,676 P=82,069 P=224,466 P=86,328 

Past service cost – – 20,483 – – 

Current service cost 17,657 15,821 11,108 39,437 17,238 

Interest cost 25,155 15,464 8,200 17,134 9,322 

Benefits paid (15,907) (17,735) (2,291) – – 

Effect of curtailment – (8,250) (8,777) – – 

Actuarial (gain) loss 103,308 92,101 884 (198,968) 111,578 

Balance at end of year P=339,290 P=209,077 P=111,676 P=82,069 P=224,466 

The assumptions used to determine pension costs follow: 

2010 2009 2008 

Discount rates 9.28% 10.58% 13.29% 

Rate of salary increase 5.50% 7.50% 7.50% 

The Group‟s experience adjustments on plan liabilities as of December 31 follow: 

2010 2009 2008 2007 2006 

Defined benefit obligation P=339,290 P=209,077 P=111,676 P=82,069 P=224,466 

Experience adjustments on plan 

liabilities 

10,654 41,048 9,386 (63,198)) 3,112 

24. Related Party Transactions 

Transactions between related parties are based on terms similar to those offered to nonrelated parties. 

Related party transactions are made under the normal course of business. Parties are considered to be 

related if one party has the ability, directly or indirectly, to control the other party or exercise significant 

influence over the other party in making financial and operating decisions; and the party controls, is 

controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow 

subsidiaries). Related parties may be individuals or corporate entities (referred herein as affiliates). 

Affiliates are entities that are owned and controlled by JGSHI and neither a subsidiary or associate of the 

Group. These affiliates are effectively sister companies of the Group by virtue of ownership of JGSHI. 

The Group‟s transactions with related parties consist mainly of the following: 

a. The Group, in the regular conduct of its business, has transactions with its major stockholder, JGSHI 

and its affiliated companies consisting principally of lease arrangements and advances at prevailing 

market rates (both interest and non interest bearing), principally for working capital requirement, 

including construction costs. Under the policy of the Group, these transactions are made substantially 

on the same terms as with other individuals and business of comparable risks. 

Outstanding payable to JGSHI and a subsidiary of JGSHI aggregated to P=34,118.5 million and 

P=33,369.3 million as of December 31, 2010 and 2009, respectively. The total interest expense on these 

payables amounted to P=507.4 million in 2010, P=987.1 million in 2009 and P=320.9 million in 2008. 

Also, the Group has various loans contracted in 2004, 2006, 2007 and 2009 which were guaranteed by 

JGSHI (Note 14). These include: 

US$43.5 million Parent Nordea loan 

US$20.0 million DMPI Nordic loan 

80

US$36.3 million DMPI SG & Calyon loan 

US$18.2 million DMPI Calyon & SG loan 

US$18.7 million DMPI Nordea loan 

US$34.2 million DMPI ING Bank N.V. Amsterdam loans 

US$198.1 million and US$61.2 million DMPI ING Bank N.V loans 

US$96.6 million DMPI Nordea Bank and ING Bank loan 

US$40.6 million DMPI HSBC and Credit Suisse loan 

US$49.9 million DMPI China Citic loan 

b. JGSHI holds 99.80% of the DIGITEL Bonds and fully subscribed the DCPL Bonds (Note 13). 

c. The Group also maintains savings and current accounts with Robinsons Savings Bank, an affiliated 

local commercial bank, amounting P=600.1 million and P=253.7 million in 2010 and 2009, respectively. 

Interest income recognized from these cash and cash equivalents amounted to P=4.1 million, P=2.5 million 

and P=4.4 million in 2010, 2009 and 2008, respectively. 

d. Compensation of key management personnel 

The compensation of the Group‟s key management personnel (included under “General and 

administrative expenses” account in the consolidated statements of comprehensive income) by benefit 

type follows: 

2010 2009 2008 

Short-term employee benefits P=184,088 P=181,660 P=155,794 

Post-employment benefits 2,495 2,588 4,421 

P=186,583 P=184,248 P=160,215 

There are no agreements between the Group and any of its directors and key officers providing for 

benefits upon termination of employment. 

Terms and conditions of transactions with related parties 

Outstanding balances at year-end are unsecured and settlement occurs in cash. There have been no 

guarantees provided or received for any related party receivables or payables. The Group has not 

recognized any impairment losses on amounts due from related parties for the years ended December 

31, 2010 and 2009. This assessment is undertaken each financial year through a review of the financial 

position of the related party and the market in which the related party operates. 

25. Financial Risk Management Objectives and Policies 

The Group‟s principal financial instruments, other than derivatives, comprise of cash and cash equivalents, 

refundable security deposits, zero-coupon bonds payable, and interest-bearing loans and borrowings. The 

main purpose of these financial instruments is to finance the Group‟s operations and capital expenditures. 

The Group has various other financial assets and financial liabilities, such as trade and other receivables and 

trade payables which arise directly from its operations, and due to related parties. 

The Group has no independent risk management system. The BOD of the Group and the ultimate parent 

review and approve policies for managing each of these risks and they are summarized below, together with 

the related risk management structure. 

There were no changes in the risk management objectives and policies of the Group as of December 31, 

2010. 

Risk Management Structure 

The Group has its own BOD which is ultimately responsible for oversight of the risk management process, 

which involves identifying, measuring, analyzing, monitoring and controlling risks. The following boardlevel 

independent committees with explicit authority and responsibility for managing and monitoring risks 

were created. 

81

1. Audit Committee (AC) 

The AC shall assist the Group‟s BOD in its fiduciary responsibility for the overall effectiveness of risk 

management systems, and both the internal and external audit functions of the Group. Furthermore, it is 

also the AC‟s purpose to lead in the general evaluation and to provide assistance in the continuous 

improvements of risk management, control and governance processes. 

The AC also aims to ensure that: 

a. financial reports comply with established internal policies and procedures, pertinent accounting 

and audit standards, and other regulatory requirements; 

b. risks are properly identified, evaluated and managed, specifically in the areas of managing credit, 

market, liquidity, operational, legal and other risks, and crisis management; 

c. audit activities of internal and external auditors are done based on plan, and deviations are 

explained through the performance of direct interface functions with the internal and external 

auditors; and 

d. the Group‟s BOD is properly assisted in the development of policies that would enhance the risk 

management and control systems. 

2. Enterprise Risk Management Group (ERMG) 

To systematize the risk management within the Group and the other business units, the ERMG was 

created by the ultimate parent‟s BOD to be primarily responsible for the execution of the enterprise risk 

management framework. The ERMG‟s main concerns include: 

a. recommending of risk policies, strategies, principles, framework and limits; 

b. managing fundamental risk issues and monitoring of relevant risk decisions; 

c. providing support to management in implementing the risk policies and strategies; and 

d. developing a risk awareness program. 

Corporate governance 

Compliance with the principles of good corporate governance is also one of the objectives of the ultimate 

parent‟s BOD. To assist the Group and the other business units in achieving this purpose, the ultimate 

parent‟s BOD has designated a Compliance Officer who shall be responsible for monitoring the actual 

compliance with the provisions and requirements of the Corporate Governance Manual and other 

requirements on good corporate governance, identifying and monitoring control compliance risks, 

determining violations, and recommending penalties on such infringements for further review and approval 

of the ultimate parent‟s BOD, among others. 

The risk management framework encompasses environmental scanning, the identification and assessment of 

business risks, development of risk management strategies, design and implementation of risk management 

capabilities and appropriate responses, monitoring risks and risk management performance, and 

identification of areas and opportunities for improvement in the risk management process. 

Support groups have likewise been created to explicitly manage on a day-to-day basis specific types of risks 

like trade receivables, supplier management, etc. 

Enterprise-wide Risk Management Group (EWRMG) 

On the business unit level, the Group created the EWRMG. The EWRMG consists mainly of the following 

divisions: 

1. Activation and Credit Management Division, which is responsible for the evaluation, approval and 

account management of postpaid lines. 

2. Revenue and Risk Management Division, which is responsible for the prevention and detection of 

revenue fraud and leakages. 

3. Inter-carrier Settlement Division, which is responsible for the management of inter-network providers‟ 

accounts. 

82

Risk Management Policies 

The main risks arising from the use of financial instruments are market risk (foreign currency risk and 

interest rate risk), credit risk and liquidity risk. The Group‟s policies for managing the aforementioned risks 

are summarized below. 

Foreign currency risk 

Foreign currency risk arises on financial instruments that are denominated in a foreign currency other than 

the functional currency in which they are measured. 

The Group has transactional currency exposures. Such exposures arise from sales in currencies other than 

the entities‟ functional currency. In 2010, 2009 and 2008, approximately 13.7%, 13.8% and 14.2% of the 

Group‟s total sales are denominated in currencies other than the functional currency, respectively. In 

addition, 36.7% and 40.1% of debt were denominated in US Dollar as of December 31, 2010 and 2009, 

respectively. The Group‟s capital expenditures are likewise substantially denominated in US Dollar. 

The Group does not have any foreign currency hedging arrangements. 

The table below summarizes the Group‟s exposure to foreign currency risk as of December 31, 2010 and 

2009. 

US Dollar 

Philippine Peso 

Equivalent US Dollar 

Philippine Peso 

Equivalent 

Assets 

Cash and cash equivalents US$1,673 P=73,344 US$2,113 P=97,621 

Receivables 6,752 296,008 6,410 296,148 

Refundable deposits – – 735 33,940 

8,425 369,352 9,258 427,709 

Liabilities 

Accounts payable and accrued expenses 33,511 1,469,122 80,027 3,697,236 

Long-term debt (including current portion) 348,127 15,261,865 289,127 13,357,639 

Bonds payable 408,274 17,898,740 341,185 15,503,188 

789,912 34,629,727 710,339 32,558,063 

Net Foreign Currency-Denominated Liabilities (US$781,487) (P=34,260,375) (US$701,081) (P=32,130,354) 

Derivative assets US$13,041 P=571,731 US$7,866 P=363,374 

Derivative liability US$5,687 P=249,301 US$2,186 P=101,000 

The exchange rates used to restate the Group‟s US Dollar-denominated assets and liabilities are 

P=43.84 to US$1.00, P=46.20 to US$1.00 and P=47.52 to US$1.00 as of December 31, 2010, 2009 and 2008, 

respectively. 

The following table sets forth the impact on the revaluation of monetary assets and liabilities and fair value 

of derivatives of the range of reasonably possible changes in the US Dollar - Philippine Peso exchange rate 

on the Group‟s income (loss) before income tax and equity for the years ended 

December 31, 2010 and 2009. 

The Group aligns its basis of assumed change in foreign currency to its ultimate parent. 

2010 

Increase (decrease) in Peso - Dollar Exchange Rate 

Change in Income 

Before Income Tax 

P=5.00 (P=1,293,991) 

(5.00) 1,293,991 

2009 

Increase (decrease) in Peso - Dollar Exchange Rate 



P=5.00 (P=3,431,100) 

(5.00) 3,431,100 

83

The Group does not expect the impact of the volatility on other currencies to be material. There is no other 

impact on the Group‟s equity, other than those already affecting the profit and loss. 

Interest rate risk 

Interest rate risk is the risk that the fair value (price interest rate risk) or future cash flows (cash flow interest 

rate risk) of a financial instrument will fluctuate because of changes in market interest rates. The Group‟s 

exposure to price interest rate risk relates to fair value changes in its embedded currency forwards, 

embedded call option, and interest rate swaps, while its exposure to cash flow interest rate risk relates 

primarily to its long-term debt. The Group‟s policy is to manage its interest cost using a mix of fixed and 

variable rate debt. 

Cash flow interest rate risk 

The Group‟s long-term debt that is subject to interest rate risk is solely denominated in US dollar. The 

following table sets forth the impact of the range of reasonably possible changes in interest rates on the 

Group‟s income (loss) before income tax in 2010 and 2009. 

2010 

Increase (decrease) in Interest Rates 



USD 1.5% (P=8,702) 

(1.5%) 8,702 

PHP 1.5% (5,565) 

(1.5%) 5,565 

2009 




USD 1.5% (P=23,889) 

(1.5%) 23,889 

PHP 1.5% (4,337) 

(1.5%) 4,337 

84

The following tables show information about the Group‟s financial instruments that are exposed to cash flow interest rate risk and presented by maturity profile 

2010 

1-2 years >2-3 years >3-4 years >4-5 years >5 years 

Total 

(In US Dollar) 

Total 

(In Philippine 

Peso) 

Debt 

Issuance Costs 

Carrying Value 


Peso) Fair Value 

Liabilities: 

Long-term debt 

Bank loans US$$72,330 US$62,709 US$61,409 US$52,476 US$43,043 US$75,077 US$367,044 P=16,091,264 P=829,399 P=15,261,865 P=15,954,626 

Floating rate US Dollar London 

Interbank 

Offer Rate US Dollar US Dollar US Dollar US Dollar US Dollar 

LIBOR + 0.30% LIBOR + 0.30% LIBOR + 0.30% LIBOR + 0.30% LIBOR + 0.30% LIBOR + 0.30% 

US Dollar US Dollar US Dollar US Dollar US Dollar US Dollar 







LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

US$367,044 P=16,091,264 P=829,399 P=15,261,865 P=15,954,626 

85

2009 

1-2 years >2-3 years >3-4 years >4-5 years >5 years 

Total 

(In US Dollar) 

Total 


Peso) 

Debt 

Issuance Costs 

Carrying Value 


Peso) Fair Value 

Liabilities: 


Bank loans US$57,852 US$56,908 US$47,286 US$45,987 US$37,053 US$61,814 US$306,900 P=14,178,762 P=821,123 P=13,357,639 P=12,223,143 

Floating rate US Dollar London 

Interbank 

Offering Rate US Dollar US Dollar US Dollar US Dollar US Dollar 









LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

LIBOR + 0.75% 

US Dollar 

LIBOR + 2.70% 

US$306,900 P=14,178,762 P=821,123 P=13,357,639 P=12,223,143 

86

- 

Price interest rate risk 

With regard to the Group‟s derivative transactions, the following table sets forth the impact of the range of 

reasonably possible changes inUSD interest rates on the Group‟s income (loss) before income tax in 2010 

and 2009. No sensitivity possible changes were made in PHP interest rates because of the immateriality of 

the impact on the fair value of derivatives. 

2010 

Change in 

Income Before 



1.5% P=154,454 

(1.5%) (153,550) 

2009 

Change in 

Income Before 



1.5% P=84,474 

(1.5%) (134,170) 

There is no impact on the Group‟s equity, other than those already affecting the profit and loss. 

Credit risk 

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause 

the other party to incur a financial loss. 

The Group trades only with recognized, creditworthy third parties. It is the Group‟s policy that all 

customers who wish to trade on credit terms are subject to credit verification procedures. In addition, 

receivable balances are monitored on an ongoing basis with the result that the Group‟s exposure to bad debts 

is not significant. 

With respect to credit risk arising from the other financial assets of the Group, which comprise cash and 

cash equivalents, due to related parties, refundable security deposits and certain derivative investments, the 

Group‟s exposure to credit risk arises from default of the counterparty with a maximum exposure equal to 

the carrying amount of these instruments. 

a. Credit risk exposure 

The table below shows the gross maximum exposure to credit risk (including derivatives) of the Group 

as of December 31, 2010 and 2009, without considering the effects of collateral and other credit risk 

mitigation techniques. 

2010 2009 

Cash and cash equivalents (excluding cash on hand 

amounting P=39.1 million and P=35.7 million as 

of December 31, 2010 and 2009, respectively) 

Receivables 

Trade receivables 

P=1,068,129 P=1,076,946 

Subscribers 1,334,113 1,148,573 

Connecting carriers 454,068 522,379 

Agents and others 183,912 368,689 

Other receivables 

Refundable security deposits (included under 

“Value-added input tax and other noncurrent 

assets” account in the consolidated statements 

161,522 140,845 

of financial position) 273,500 239,122 

87

2010 2009 

Derivative assets: 

Embedded currency forwards 480,504 303,345 

Embedded call options 91,226 60,029 

P=4,046,974 P=3,859,928 

b. Risk concentrations of the maximum exposure to credit risk 

Concentrations arise when a number of counterparties are engaged in similar business activities or 

activities in the same geographic region or have similar economic features that would cause their ability 

to meet contractual obligations to be similarly affected by changes in economic, political or other 

conditions. Concentrations indicate the relative sensitivity of the Group‟s performance to developments 

affecting a particular industry or geographical location. Such credit risk concentrations, if not properly 

managed, may cause significant losses that could threaten the Group‟s financial strength and undermine 

public confidence. 

The Group‟s policies and procedures include specific guidelines to focus on maintaining a diversified 

portfolio. In order to avoid excessive concentrations of risk, identified concentrations of credit risks are 

controlled and managed accordingly. 

i. Concentration by geographical location 

The Group‟s credit risk exposures as of December 31, before taking into account any collateral 

held or other credit enhancements are categorized by geographic location as follows: 

2010 

Philippines 

Asia 

(excluding 

Philippines) 

United 

States Europe Total 

Loans and receivables: 


(excluding cash on hand 

amounting P=39.1 million as of 

December 31, 2010) P=1,067,782 P=– P=– P=347 P=1,068,129 

Receivables 

Trade Receivables: 

Subscribers 1,334,113 – – – 1,334,113 

Connecting carriers 109,838 120,535 192,447 31,248 454,068 

Agents and others 183,912 – – – 183,912 

Other receivables 155,483 6,039 – – 161,522 

Refundable security deposits 

(included under “Value-added 

input tax and other noncurrent 

assets” account in the 

consolidated statements of 

financial position) 273,500 – – – 273,500 

Financial assets at FVPL 


Embedded currency forwards 426,220 54,284 – – 480,504 

Embedded call options 91,226 – – – 91,226 

P=3,642,074 P=180,858 P=192,447 P=31,595 P=4,046,974 

88

2009 

Philippines 

Asia 

(excluding 

Philippines) 

United 

States Europe Total 



(excluding cash on hand 

amounting P=35.7 million as of 

December 31, 2009) P=1,076,946 P=– P=– P=– P=1,076,946 

Receivables 


Subscribers 1,148,573 – – – 1,148,573 

Connecting carriers 127,822 167,136 195,796 31,625 522,379 

Agents and others 368,689 – – – 368,689 

Other receivables 120,871 19,974 – – 140,845 




assets” account in the 





Embedded currency forwards 221,106 76,476 53 5,710 303,345 


P=3,363,158 P=263,586 P=195,849 P=37,335 P=3,859,928 

i. Concentration by industry 

The table below shows the industry sector analysis of the Group‟s financial assets as of December 

31, before taking into account any collateral held or other credit enhancements. 

89

2010 

Real Estate 

Construction 

and Related 

Businesses 

Financial 

Intermediaries 

Transport, 

Storage and 

Communications 

Wholesale 

and Retail 

Private 

Households Manufacturing 

Electricity, 

Gas and 

Water Others* Total 

Cash and cash equivalents (excluding 

cash on hand amounting 

P=39.1 million) P=– P=1,068,129 P=– P=– P=– P=– P=– P=– P=1,068,129 

Receivables 


Subscribers 91,473 8,523 73,379 260,203 529,640 34,204 9,582 327,109 1,334,113 

Connecting carriers – – 454,068 – – – – – 454,068 

Agents and others – 7,405 9,347 131,392 – 1,864 9 33,895 183,912 

Other receivables 3,708 – 3,253 3,613 – – – 150,948 161,522 




assets” account in the consolidated 

statements of financial position) 273,500 – – – – – – – 273,500 


Embedded currency forwards – – – 407,360 – – – 73,144 480,504 

Embedded call options – – – – – – – 91,226 91,226 

P=368,681 P=1,084,057 P=540,047 P=802,568 P=529,640 P=36,068 P=9,591 P=676,322 P=4,046,974 

*Others include other community, social and personal services, education, mining and quarrying, public administration and defense and health and social work sectors. 

90

2009 

Real Estate 

Construction 

and Related 

Businesses 

Financial 

Intermediaries 

Transport, 

Storage and 

Communications 

Wholesale 

and Retail 

Private 

Households Manufacturing 

Electricity, 

Gas and 

Water Others* Total 

Cash and cash equivalents (excluding 

cash on hand amounting 

P=35.7 million as of December 31, 

2009) P=– P=1,076,946 P=– P=– P=– P=– P=– P=– P=1,076,946 

Receivables 


Subscribers 80,607 6,289 47,011 123,169 390,818 22,610 4,112 473,957 1,148,573 

Connecting carriers – – 522,379 – – – – – 522,379 

Agents and others – 32,519 – 216,677 – – – 119,493 368,689 

Other receivables 12,263 – 20,105 12,640 – 1,864 9 93,964 140,845 

Refundable security deposits (included 

under “Value-added input tax and 

other noncurrent assets” account in the 

consolidated statements of financial 

position) 239,122 – – – – – – – 239,122 


Embedded currency forwards – – – 280,412 – 9,710 – 13,223 303,345 

Embedded call options – – – – – – – 60,029 60,029 

P=331,992 P=1,115,754 P=602,206 P=632,898 P=390,818 P=34,184 P=4,121 P=747,955 P=3,859,928 

*Others include other community, social and personal services, education, mining and quarrying, public administration and defense and health and social work sectors. 

91

. Credit quality per class of financial assets 

The table below shows the credit quality by class of financial assets as of December 31, 2010 

and 2009. 

2010 

Neither Past Due Nor Specifically Impaired Past Due or 

High 

Grade 

Standard 

Grade 

Substandard 

Grade 

Individually 

Impaired Total 


Cash and cash equivalents P=1,068,129 P=– P=– P=– P=1,068,129 


Subscribers 363,993 140,922 113,784 2,310,518 2,929,217 

Connecting carriers 275,690 – – 238,439 514,129 

Agents and others 34,286 11,381 7,998 130,247 183,912 

Others 7,376 2,448 1,721 164,959 176,504 




Assets” account in the 



Financial assets at FVPL: 


Embedded currency forwards 480,504 – – – 480,504 


P=2,594,704 P=154,751 P=123,503 P=2,844,163 P=5,717,121 

2009 

Neither Past Due Nor Specifically Impaired Past Due or 

High 

Grade 

Standard 

Grade 

Substandard 

Grade 

Individually 

Impaired Total 


Cash and cash equivalents P=1,076,946 P=– P=– P=– P=1,076,946 


Subscribers 260,328 141,427 114,642 2,520,089 3,036,486 

Connecting carriers 391,319 – – 191,121 582,440 

Agents and others 56,283 8,128 5,476 298,802 368,689 

Others 14,758 5,047 3,400 132,622 155,827 




Assets” account in the 





Embedded currency forwards 303,345 – – – 303,345 


P=2,402,130 P=154,602 P=123,518 P=3,142,634 P=5,822,884 

High grade cash and cash equivalents are short-term placements and working cash fund placed, 

invested, or deposited in foreign and local banks belonging to the top ten (10) banks in the Philippines 

in terms of resources and profitability. 

High grade receivables from subscribers, agents and others are accounts considered to be of high value 

and have consistently exhibited good paying habits. Standard grade receivables from subscribers, 

agents and others are active accounts with propensity of deteriorating to 

mid-range age buckets. These accounts do not flow through to permanent disconnection status as they 

generally respond to credit actions and update their payments accordingly. 

92

Substandard grade receivables from subscribers, agents and others are accounts which have probability 

of impairment based on historical trend. These accounts show propensity to default in payment despite 

regular follow-up actions and extended payment terms. 

Receivables from connecting carriers which are neither past due nor impaired are considered to be of 

high quality given the reciprocal nature of the Group‟s interconnection and roaming partner agreements 

with the carriers and the Group‟s historical collection experience. 

The tables below show the analyses of age of receivables as of December 31: 

2010 

Total 

Neither Past Past Due But Not Impaired Past 

Due Nor 

Impaired < 30 Days 

30 to 60 

Days 

Over 60 

Days 

Due and 

Impaired 


Subscribers P=2,929,217 P=618,699 P=299,001 P=91,098 P=325,315 P=1,595,104 

Connecting carriers 514,129 275,690 38,652 43,897 95,829 60,061 

Agents and others 183,912 53,665 41,765 11,260 77,222 – 

Other receivables 176,504 11,545 7,332 5,589 137,056 14,982 

P=3,803,762 P=959,599 P=386,750 P=151,844 P=635,422 P=1,670,147 

2009 

Total 

Neither Past Past Due But Not Impaired Past 

Due Nor 

Impaired < 30 Days 

30 to 60 

Days 

Over 60 

Days 

Due and 

Impaired 


Subscribers P=3,036,486 P=516,397 P=276,103 P=109,846 P=246,227 P=1,887,913 

Connecting carriers 582,440 391,319 10,766 5,493 114,801 60,061 

Agents and others 368,689 69,887 128,209 28,825 141,768 – 

Other receivables 155,827 23,205 49,247 3,238 65,155 14,982 

P=4,143,442 P=1,000,808 P=464,325 P=147,402 P=567,951 P=1,962,956 

c. Impairment assessment 

The Group recognizes impairment losses based on the results of the specific/individual and collective 

assessment of its credit exposures. Impairment has taken place when there is a presence of known 

difficulties in the servicing of cash flows by counterparties, infringement of the original terms of the 

contract has happened, or when there is an inability to pay principal or interest overdue beyond a certain 

threshold. These and the other factors, either singly or in tandem with other factors, constitute 

observable events and/or data that meet the definition of an objective evidence of impairment. 

The two methodologies applied by the Group in assessing and measuring impairment include: 

(1) specific/individual assessment and (2) collective assessment. 

Under specific/individual assessment, the Group assesses each individually significant credit exposure 

for any objective evidence of impairment, and where such evidence exists, accordingly calculates the 

required impairment. Among the items and factors considered by the Group when assessing and 

measuring specific impairment allowances are: (a) the timing of the expected cash flows; (b) the 

projected receipts or expected cash flows; (c) the going concern of the counterparty‟s business; (d) the 

ability of the counterparty to repay its obligations during financial crises; (e) the availability of other 

sources of financial support; and (f) the existing realizable value of collateral. The impairment 

allowances, if any, are evaluated as the need arises, in view of favorable or unfavorable developments. 

With regard to the collective assessment of impairment, allowances are assessed collectively for losses 

on receivables that are not individually significant and for individually significant receivables when 

there is no apparent evidence or not yet objective of individual impairment. A particular portfolio is 

reviewed on a periodic basis in order to determine its corresponding appropriate allowances. The 

collective assessment evaluates and estimates the impairment of the portfolio in its entirety even though 

there is no objective evidence of impairment on an individual assessment. Impairment losses are 

93

estimated by taking into consideration the following deterministic information: (a) historical 

losses/write offs; (b) losses which are likely to occur but has not yet occurred; and (c) the expected 

receipts and recoveries once impaired. 

Specific policies regarding the Group‟s impairment assessment on receivables from subscribers and 

connecting carriers/traffic follow: 

i. Subscribers 

Full allowance is provided for trade receivables from permanently disconnected wireless and 

wireline subscribers. Permanent disconnections are made after a series of collection steps 

following nonpayment by postpaid subscribers. Such permanent disconnections generally occur 

within a predetermined period from statement date. 

The allowance for impairment losses on subscriber accounts is determined based on the results of 

the net flow to write off methodology. Net flow tables are derived from account-level monitoring 

of subscriber accounts between different age brackets, from current to one (1) day past due to one 

hundred twenty (120) days past due. The net flow to write off methodology relies on the historical 

data of net flow tables to establish a percentage (net flow rate) of subscriber receivables that are 

current or in any state of delinquency as of reporting date that will eventually result in write off. 

The allowance for impairment losses is then computed based on the outstanding balances of the 

receivables as of reporting date and the net flow rates determined for the current and each 

delinquency bracket. 

Regardless of the age of the account, additional impairment losses are also made for accounts 

specifically identified to be doubtful of collection when there is information on financial incapacity 

after considering the other contractual obligations between the Group and the subscriber. 

Specific tests of impairment are not performed on subscriber receivables, since the balances are 

individually insignificant. 

ii. Connecting carriers/traffic 

Provisions for impairment losses are made for accounts specifically identified to be doubtful of 

collection, regardless of the age of the account. Full allowance is generally provided after review 

of the status of settlement with the carriers for net receivables not settled within industry-observed 

settlement periods. 

iii. Other receivables 

Other receivables from dealers and credit card companies are provided with allowance for 

impairment loss if specifically identified to be doubtful of collection, regardless of the age of the 

account. 

Specific tests of impairment are performed on the Group‟s other financial assets such as cash and cash 

equivalents, amounts due from related parties and refundable security deposits. 

Liquidity risk 

The major liquidity risk confronting the Group is the daily calls on its available cash resources in respect of 

obligations arising from trade payables and long-term debt. 

The Group seeks to manage its liquidity profile to be able to service its maturing debts and to finance capital 

requirements. The Group maintains a level of cash and cash equivalents deemed sufficient to finance 

operations. As part of its liquidity risk management, the Group regularly evaluates its projected and actual 

cash flows. It also continuously assesses conditions in the financial markets for opportunities to pursue 

fund-raising activities. Fund-raising activities may include bank loans and capital market issues (i.e. bond 

offerings) both onshore and offshore. 

94

The table below summarizes the maturity profile of the Group‟s financial assets and liabilities as of 

December 31, 2010 and 2009, based on undiscounted contractual payments. 

2010 

1 to 3 3 to 12 1 to 5 More Than 

On Demand Months Months Years 5 Years Total 

Cash and cash equivalents P=1,107,231 P=– P=– P=– P=– P=1,107,231 

Receivables 

Refundable security 

deposits (included 

under “Value-added 

input tax and other 

noncurrent assets” 

account in the 

statements of financial 

1,501,685 540,671 48,115 28,059 1,685,233 3,803,763 

position) – – – 298,377 – 298,377 

Financial assets P=2,608,916 P=540,671 P=48,115 P=326,436 P=1,685,233 P=5,209,371 

Bonds payable 


(including current 

P=– P=– P=– P=27,233,890 P=– P=27,233,890 

portion) 

– 790,217 2,519,060 11,565,844 1,539,115 16,414,236 

Due to related parties 

Accounts payable and 

– – – 34,118,544 – 34,118,544 

accrued expenses 

20,840 5,154,145 692,535 1,121,152 

– 6,988,672 

Financial liabilities P=20,840 P=5,944,362 P=3,211,595 P=147,231,560 P=1,539,115 P=168,358,313 

2009 

1 to 3 3 to 12 1 to 5 More Than 

On Demand Months Months Years 5 Years Total 

Cash and cash equivalents P=1,112,695 P=– P=– P=– P=– P=1,112,695 

Receivables 

Refundable security 

deposits (included 

under “Value-added 

input tax and other 

noncurrent assets” 

account in the 

statements of financial 

974,831 782,212 106,466 131,556 2,148,377 4,143,442 

position) 

33,940 

107 3,392 31,412 170,272 239,123 

Financial assets P=2,121,466 P=782,319 P=109,858 P=162,968 P=2,318,649 P=5,495,260 

Bonds payable 


(including current 

P=– P=506,115 P=1,520,131 P=15,750,334 P=– P=17,776,580 

portion) 

– 796,194 2,017,064 10,132,419 1,562,787 14,508,464 

Due to related parties 

Accounts payable and 

– – – 33,369,292 – 33,369,292 

accrued expenses 

246,318 4,848,131 1,033,855 1,071,845 

– 7,200,149 

Financial liabilities P=246,318 P=6,150,440 P=4,571,050 P=60,323,890 P=1,562,787 P=72,854,485 

2010 

2011 2012 2013 2014 2015 and 

beyond 

Total 

Receive P=23,900 P=27,321 P=48,140 P=56,124 P=83,338 P=238,823 

Pay 137,010 115,414 93,158 71,231 82,226 499,039 

2009 

2010 2011 2012 2013 2014 and 

beyond 

Total 

Receive P=7,447 P=10,491 P=35,390 P=49,649 P=158,004 P=260,981 

Pay 45,954 43,126 76,792 64,689 138,249 368,810 

Derivative Financial Instruments 

The Group‟s derivatives include interest rate swaps, foreign currency forwards embedded in nonfinancial 

contracts, and options embedded in its foreign currency-denominated zero coupon convertible bonds. These 

derivatives are accounted for at FVPL. 

95

Embedded currency forwards 

The Group has derivatives embedded in some of its contracts. Such derivatives pertain to embedded 

currency forwards noted in purchase, sales and service contracts, denominated in a currency which is neither 

the functional currency of any substantial party to the contract nor the routine currency of the transaction for 

such contracts. As of December 31, 2010, 2009 and 2008, the total outstanding notional amount of 

embedded currency forwards embedded in nonfinancial contracts amounted to US$261.2million, US$318.1 

million and US$318.1 million respectively. The positive fair values amounted to P=571.3 million and P=363.4 

million as of December 31, 2010 and 2009, respectively. The nonfinancial contracts consist mainly of 

foreign currency-denominated purchase orders with various expected delivery dates ranging from twelve 

(12) to forty (40) months. 

Embedded call options 

As of December 31, 2005, the Parent Company‟s zero coupon convertible bonds contain conversion options 

which entitle the holders to exchange the bonds into shares of the Parent Company (Note 13). 

As of December 31, 2005, the outstanding notional amounts of the conversion option embedded in the 

Parent Company‟s foreign currency-denominated zero coupon convertible bonds amounted to 

639.7 million shares. The fair valuation of these options resulted in the recognition of a derivative liability 

of P=15.8 million as of December 31, 2005. 

The Parent Company may redeem the bonds at specified prices on various redemption dates up to December 

2013 (Note 13). As of December 31, 2010, 2009 and 2008, the outstanding notional amount of the 

embedded call options is US$31.1 million. As of December 31, 2010, 2009 and 2008, the positive fair value 

of these options amounted to P=91.2 million, P=60.0 million and 

P=72.1 million, respectively. 

Interest rate swaps 

On October 6, 2008, the Group entered in an interest rate swap agreement with a bank, with a total notional 

amount of US$54.1 million to hedge its interest rate exposures on the long-term USD floating rate liability 

(Note 15). The interest rate swap has a term of eight (8) years and interest exchange is every 29th day of 

March and 28th day of September. 

In 2010, the Group entered in an interest rate swap agreement with a bank, with a total notional amount of 

US$46.5 million to hedge its interest rate exposures on the long-term USD floating rate liability (Note 15). 

The interest rate swap has a term of eight (8) years and interest exchange is every 28th day of June and 29th 

day of December. 

As of December 31, 2010 and 2009, the fair value of this interest rate swap amounted to P=249.3 million and 

P=101.0 million, respectively. 

The net movements in fair value changes of derivative financial instruments follow: 

2010 2009 



Changes in fair value of derivatives 250,422 11,983 

Fair value of settled instruments (42,066) (283,807) 


2010 2009 

Derivative liability: 

Balance at beginning of year (P=101,000) P=– 

Changes in fair value of derivatives (287,460) (156,722) 

Fair value of settled instruments 139,159 55,722 

Balance at end of year (P=249,301) (P=101,000) 

96

The “Market valuation losses on derivative instruments” account in the consolidated statements of 

comprehensive income consists of the following: 

2010 2009 2008 

Changes in fair values of 

Derivative assets P=250,422 P=11,983 (P=550,544) 

Derivative liability (287,460) (156,722) – 

Balance at end of year (P=37,038) (P=144,739) (P=550,544) 

26. Fair Value Measurement 

The following methods and assumptions were used to estimate the fair value of each class of financial 

instrument for which it is practicable to estimate such value: 

Cash and cash equivalents, receivables and accounts payable and accrued expenses 

The fair values of cash and cash equivalents, trade receivables, other receivables, certain receivable and 

payable to affiliated companies and accounts payable and accrued expenses are approximately equal to their 

carrying amounts due to the short-term nature of the transaction. 

Refundable security deposits (included under “Other Noncurrent Assets” account in the consolidated 

statement of financial position) 

The fair value of noninterest-bearing refundable deposits is determined as the present value of estimated 

future cash flows using prevailing market rates in the range of 4.3% to 8.7%, 4.1% to 8.7% and 3.2% to 

6.7% as of 2010, 2009 and 2008, respectively. 


The fair value of floating rate loans is determined by discounting the future cash flows (interest and 

principal) using prevailing market rates. The frequency of repricing per year affects the fair value. In 

general, a loan that is repriced every three (3) months will have a carrying value closer to the fair value than 

a six (6)-month repriceable loan with similar maturity and interest basis. For loans repricing every six (6) 

months (in US Dollar), the discount curve was in the range of 1.0% to 4.6%, 0.4% to 2.7% and 1.4% to 

3.7% as of 2010, 2009 and 2008, respectively. 

Bonds payable 

The fair values of the zero coupon bonds are determined by discounting the future cash flows at the maturity 

dates using prevailing risk-free rates in the range of 8.3% with 7.3% spread, 9.49% with 7.3% spread and 

8.8% with 7.3% spread in 2010, 2009 and 2008, respectively. 

Derivative financial instruments 

The fair values of embedded currency forwards were calculated by reference to forward exchange market 

rates, and calculating forward exchange rates using the interest rate parity relationship. The fair values of the 

embedded prepayment option were estimated based on prices derived using binomial interest rate tree 

pricing. The fair values of interest rate swaps were computed using implied forward exchange rates and net 

present value concepts. 

The table below presents a comparison by category of the carrying amounts and estimated fair values of all 

the Group‟s financial assets and financial liabilities as of December 31: 

97

2010 2009 

Carrying 

Value Fair Value Carrying Value Fair Value 

Financial Assets 




P=1,107,231 P=1,107,231 P=1,112,695 P=1,112,695 

Subscribers 1,334,113 1,334,113 1,148,573 1,148,573 

Connecting carriers 454,068 454,068 535,090 535,090 

Agents and others 183,912 183,912 303,844 303,844 

Others 

Refundable security deposits (included under 

“Other noncurrent assets” account in the 

consolidated statements of financial 

161,522 161,522 192,979 192,979 

position) 273,500 273,500 239,122 155,564 

Total loans and receivables 



3,514,346 3,514,346 3,532,303 3,448,745 

Currency forwards 480,504 480,504 303,345 303,345 

Call options 91,226 91,226 60,029 60,029 

Financial Liabilities 

Financial liabilities carried at amortized cost: 

P=4,086,076 P=4,086,076 P=3,895,677a P=3,812,119 

Long-term debt (including current portion) P=15,261,865 P=15,954,626 P=13,357,639 P=12,223,143 

Bonds payable 

Other financial liabilities: 

17,878,440 17,878,440 15,503,188 8,290,135 

Due to related parties 34,118,544 34,118,544 33,369,292 33,369,292 

Accounts payable and accrued expenses 

Financial liabilities at FVPL 

6,988,672 6,988,672 7,200,149 7,200,149 

Derivative liability 249,301 249,301 101,000 101,000 

P=74,496,822 P=75,189,583 P=69,531,268 P=61,183,719 

The detailed schedule of income (expense), gains (losses) recognized from financial instruments in 2010 and 

2009 follows: 

2010 

Foreign 

exchange 

gain (loss) 

Interest 

income 

(Note 19) 

Interest 

expense 

Market 

valuation 

losses 

(Note 25) 

Other 

Income Total 



Cash and cash equivalents (P=126,630) P=30,622 (P=49,220) P=– P=– (P=145,228) 


Connecting carriers – – – – – – 

Refundable security deposits – – – – 5,943 5,943 

(126,630) 30,622 (49,220)) – 5,943 (139,285) 


Derivative assets – – – 250,422 – 250,422 

(126,630) 30,622 (49,220) 250,422 5,943 111,137 



Long-term debt 841,137 – (280,435) – – 560,702 

Bonds payable 58,914 – (1,071,703) – – (1,012,789) 

Accounts payable and accrued 

expenses 88,676 – – – – 88,676 

988,727 – (1,352,138) – – (363,411) 


Derivative liability – – – (287,460) – (287,460) 

988,727 – (1,352,138) (287,460) – (650,871) 

P=862,097 P=30,622 (P=1,401,358) (P=37,038) P=5,943 (P=539,734) 

98

2009 

Foreign 

exchange 

gain (loss) 

Interest 

income 

(Note 19) 

Interest 

expense 

Market 

valuation 

losses 

(Note 25) 

Other 

Income Total 



Cash and cash equivalents P=4,425 P=32,881 (P=35,069) P=– P=– P=2,237 


Connecting carriers (1,602) – – – – (1,602) 

Refundable security deposits – – – – 5,348 5,348 

2,823 32,881 (35,069) – 5,348 5,983 


Derivative assets – – – (99,461) – (99,461) 

2,823 32,881 (35,069) (99,461) 5,348 (93,478) 



Long-term debt 376,357 – (274,310) – – 102,047 

Bonds payable 32,310 – (1,157,851) – – (1,125,541) 

Accounts payable and accrued 

expenses 139,650 – – – – 139,650 

548,317 – (1,432,161) – – (883,844) 


Derivative liability – – – (45,278) – (45,278) 

548,317 – (1,432,161) (45,278) – (929,122) 

P=551,140 P=32,881 (P=1,467,230) (P=144,739) P=5,348 (P=1,022,600) 

Fair Value Hierarchy 

The Group uses the following hierarchy for determining and disclosing the fair value of financial 

instruments by valuation technique: 

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. 

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value 

are observable, either directly or indirectly. 

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are 

not based on observable market data. 

As of December 31, 2010 and 2009, the Group has derivative assets and derivative liability valued under 

level 2 amounting P=571.7 million and P=249.3 million and P=363.4 million and 

P=101.0 million, respectively. The Group used discounted cash flows techniques using implied forward rates 

for interest rate swaps and embedded currency forwards. For embedded call options, the Group used the 

binomial interest rate tree model. 

During the reporting period ended December 31, 2010 and 2009, there were no transfers between level 1 

and level 2 fair value movements, and no financial instruments are measured under level 3. 

27. Commitments and Contingencies 

Lease Commitments 

Operating Lease Commitments - Group as a Lessee 

The Group leases certain premises for some of its telecommunications facilities and equipment and for most 

of its business centers and cell sites. The operating lease agreements are for periods ranging from one (1) to 

thirty (30) years from the date of the contracts and are renewable under certain terms and conditions. 

The agreements generally require certain amounts of deposit and advance rentals, which are shown as part 

of “Value-added input tax and other current assets” and “Value-added input tax and other noncurrent assets” 

accounts in the consolidated statement of financial position (Notes 9 and 11). The Group‟s rentals incurred 

on these leases, included under “Network-related and general and administrative expenses” account in the 

consolidated statements of comprehensive income amounted to P=1,488.2 million, P=1,334.1 million and 

P=1,205.3 million in 2010, 2009 and 2008, respectively (Note 17). 

99

Future minimum lease payments under these operating leases follow: 

2010 2009 2008 

Not later than one (1) year P=1,043,756 P=893,270 P=707,477 

After one year (1) but not more than 

five (5) years 5,464,040 4,857,427 3,942,457 

After five (5) years 2,574,333 3,157,625 3,545,096 

P=9,082,129 P=8,908,322 P=8,195,030 

Agreements and Commitments with Suppliers and Carriers 

The Group has entered into agreements with various suppliers for the development or construction, delivery 

and installation of property and equipment. Under the terms of these agreements, advance payments are 

made to suppliers and delivery, installation, development or construction commences only when purchase 

orders are served. While the development or construction is in progress, project costs are accrued based on 

the billings received. 

Billings are based on the progress of the development or construction and advance payments are being 

applied proportionately to the milestone billings. When development or construction and installation are 

completed and the property and equipment is ready for service, the balance of the value of the related 

purchase orders is accrued. 

The Group has existing agreements with various telecommunications carriers and operators, local exchange 

carriers, international exchange carriers, CMTS operators, paging and trunk radio operators, provincial 

operators and with the Philippine Government to cover the following services: 

a. International telecommunications operation services between servicing points in another country where 

the other party is domiciled and the Group‟s terminals servicing points in the Philippines. 

b. National and international private leased circuit services on a reciprocal basis between the other party 

and the Group in the timely support of services to their respective customers. 

c. Internet transport and access services and other telecommunications services that may be introduced 

from time to time. 

d. Interconnection of the Group‟s CMTS network with the CMTS, local exchange, inter-exchange and 

international gateway facilities with the telecommunications network of other domestic 

telecommunications carriers. 

The Group has a commitment to construct, install, operate and maintain a nationwide CMTS using GSM 

technology. 

The consolidated accrued project costs as of December 31, 2010 and 2009 included in the “Accounts 

Payable and Accrued Expenses” and “Other Noncurrent Liabilities” accounts amounted to P=817.0 million 

and P=820.4 million (Note 12) and P=9,891.4 million and P=5,891.9 million (Note 15), respectively. 

Contingencies 

On July 23, 2009, the NTC issued NTC Memorandum Circular (MC) No. 05-07-2009 (Guidelines on Unit 

of Billing of Mobile Voice Service). The MC provides that all cellular mobile voice service shall be billed 

on a six (6) seconds per pulse scheme. 

DMPI, Globe Telecom and Smart Communications Inc. all filed petitions before the Court of Appeals 

seeking the nullification of Orders of the NTC, which sought to implement MC. DMPI maintains that the 

Orders of the NTC are void as being without basis in fact and law and in violation of DMPI‟s rights to due 

process. On February 19, 2010, the Court of Appeals (CA) issued an order restraining the NTC from 

implementing the per-pulse billing scheme. 

DMPI believes that its legal position is strong. If, however, a final judgment is made against DMPI, DMPI 

may be contingently liable to refund to any complaining subscriber any excess charges. Refund, if any, 

would however only apply to those charged on a per minute basis and not to almost all of its subscribers 

who have been availing of its unlimited voice services. 

100

As of March 29, 2011, the management believes that it will not impact the contingency on services provided 

which comprise substantially of unlimited connection. 

The Group has various contingent liabilities arising in the ordinary conduct of business which are either 

pending decision by the courts, under arbitration or being contested, the outcome of which are not presently 

determinable. In the opinion of management and its legal counsel, the eventual liability under these lawsuits 

or claims, if any, will not have a material or adverse effect on the Group‟s financial position and results of 

operations. The information normally required by PAS 37, Provisions, Contingent Liabilities and 

Contingent Assets, is not disclosed in accordance with the provisions of this standard, on the grounds that it 

may prejudice the outcome of these lawsuits, claims, arbitration and assessments. 

28. Registration with the BOI 

The Parent Company is registered with the BOI as an expanding operator of public telecommunications 

services and IGF-2 on a nonpioneer status with a registered capacity of 786,000 lines covering the areas of 

Regions I to V and the Cordillera Autonomous Region. Under the terms of its registration, the Parent 

Company is entitled to ITH for three (3) to six (6) years on income derived from certain areas, additional 

deduction of labor expenses for five (5) years but not simultaneous with the ITH, employment of foreign 

nationals for five (5) years and unrestricted use of consigned equipment. However, the Parent Company is 

subject to certain requirements such as: (a) maintaining a base equity of at least 25%; (b) filing of 

specialized financial reports with the BOI; and (c) the need for prior approval for the: (i) issuance of stock 

convertible into voting stock, (ii) repurchase of its own stock, (iii) investment in, extension of loans or 

purchase of bonds in substantial amount from any enterprise other than those bonds issued by the Philippine 

Government, (iv) expansion of its capacity, with or without incentives, and (v) transfer of ownership or 

control of the Parent Company. 

The Parent Company is registered with the BOI as a new operator of telecommunications systems on 

nationwide CMTS-GSM communication network on a pioneer status with a registered capacity of 553,451 

lines. Consequently, the Parent Company became entitled to the following incentives: 

a. ITH for six (6) years which is reckoned from January 2003 or from the actual start of commercial 

operations, whichever comes first, but in no case earlier than the date of registration; provided however, 

that the Parent Company has complied with the infusion of the minimum investment cost of P=1,000 

million not later than four (4) years from the date of its registration. In case of failure to comply with 

the said investment requirement, BOI shall be constrained to automatically amend the project‟s status of 

the registration from a pioneer status [entitled to six (6) years ITH] to a nonpioneer status [entitled to 

four (4) years ITH]. Prior to availment of ITH incentive, the Parent Company shall submit proof of 

compliance with the Tree Planting Program of BOI; 

b. Allowable additional deduction from taxable income of fifty (50) percent of the wages for the first five 

(5) years from the date of registration, corresponding to the increment in the number of direct labor for 

skilled and unskilled workers in the year of availment as against the previous year if the project meets 

the prescribed ratio of capital equipment to number of workers set by BOI of not more than US$10,000 

to one (1) worker, and provided that this incentive shall not be availed of simultaneously with the ITH; 

c. Unrestricted use of consigned equipment; and 

d. Employment of foreign nationals in technical, supervisory or advisory positions for five (5) years from 

the date of registration. 

On October 10, 2003, the BOI registration was transferred to DMPI subject to the following conditions: (1) 

submission of a resolution duly approved by the BOD accepting all the terms and conditions imposed by the 

BOI on the registration; (2) start of the period of availment of incentives of DMPI from the date of the 

registration; and (3) compliance with other requirements/conditions as may be imposed by the BOI. In 

relation to the incentives from BOI, DMPI is required to maintain a 75:25 debt-to-equity ratio within a 

specific period as prescribed by the BOI. 

101

On December 14, 2006, the Parent Company and DMPI was registered with the BOI as a new operator of 

infrastructure and telecommunications facilities (i.e., 3G telecommunications system) on a pioneer status 

with a registered capacity of 950 base transceiver stations (BTS) and 378 BTS for DMPI and the Parent 

Company, respectively. The acceptance of the terms and conditions of the approval of registration states 

that the Parent Company and DMPI reserves the right through due process, to appeal entitlement to ITH 

after the issuance of the Certificate of Registration. 

Under the terms of the registration, the Parent Company and DMPI are entitled to the following fiscal and 

non-fiscal incentives: 

a. For the first five (5) years from the date of registration, the Parent Company and DMPI shall be allowed 

an additional deduction from taxable income of 50% of the wages corresponding to the increment in the 

number of direct labor for skilled and unskilled workers in the year of availment as against the previous 

year, if the project meets the prescribed ratio of capital equipment to the number of workers set by BOI 

of US$10,000 to one (1) worker. 

b. The Parent Company and DMPI shall be allowed the employment of foreign nationals in supervisory, 

technical or advisory positions for a period of five (5) years from date of registration. The president, 

general manager and treasurer of foreign-owned registered firms or their equivalent shall not be subject 

to the limitations set in the registration. 

c. The Parent Company and DMPI shall be given tax credits equivalent to the national internal revenue 

taxes and duties paid on raw materials and supplies and semi-manufactured products used in producing 

its export product and forming part thereof for ten (10) years from start of commercial operations. The 

request for amendment of the date of start of commercial operations for purposes of determining the 

reckoning date of the ten (10)-year period shall be filed within one (1) year from date of committed start 

of commercial operations. 

d. The Parent Company and DMPI shall be entitled to simplification of Bureau of Customs‟ (Customs) 

procedures for the importation of equipment, spare parts, raw materials and supplies. 

e. The Parent Company and DMPI shall be entitled access to Customs Bonded Manufacturing Warehouse 

(CBMW), subject to Customs‟ rules and regulations and provided that the Parent Company and DMPI 

exports at least 70% of the production output. 

f. The Parent Company and DMPI shall be exempted from wharfage dues, any export tax, duty, imposts 

and fees for a ten (10) year period from date of registration. 

g. The Parent Company and DMPI shall be allowed importation of consigned equipment for a period of 

ten (10) years from date of registration, subject to the posting of re-export bond. 

h. The Parent Company and DMPI shall be exempted from taxes and duties on imported spare parts and 

consumable supplies for export producers with CBMW exporting at least 70% of production. 

i. The Parent Company and DMPI may also qualify to import capital equipment, spare parts and 

accessories with exemption on the related duties from date of registration up to June 16, 2011, pursuant 

to Executive Order No. 528 and its implementing rules and regulations. 

Under the specific terms and conditions of the BOI registration as a new operator of infrastructure and 

telecommunications facilities, the Parent Company and DMPI must increase its subscribed and paid-up 

capital stock by at least P=1,576.6 million and must submit proof of compliance prior to availment of 

incentives. 

The Parent Company and DMPI must submit to the BOI a quarterly report on actual investments, 

employment and sales pertaining to the project. Said report will be due within fifteen (15) days from end of 

each quarter, starting on the date of registration. The Parent Company and DMPI must also submit to the 

BOI an annual report of its actual investments, taxes paid and employment within one (1) month following 

the end of each fiscal year. Furthermore, the Parent Company and DMPI must submit a proof of compliance 

with the Tree Planting Program of the BOI. 

102

DMPI‟s ITH entitlement expired on January 1, 2009. Accordingly, DMPI is subjected to regular 30% 

corporate income tax and 2% MCIT for the years ended December 31, 2010 and 2009. 

As of December 31, 2010 and 2009, the Parent Company and DMPI have not filed an appeal for ITH 

entitlement under the new registration. 

29. Operating Segment Information 

In 2009, the Group adopted PFRS 8, Operating Segment, which replaces PAS 14, Segment Reporting, which 

adopted a management approach to segment reporting. Under this approach, the information reported would 

be that which management uses internally for evaluating the performance of operating segments and 

allocating resources to those segments. 

Management monitors the operating results of its operating segments separately for the purpose of making 

decision about resource allocation and performance assessment. Group financing (including interest income 

and interest expense) and income taxes are managed on a group basis and are not allocated to operating 

segments. The Group evaluates performance based on income before interest, taxes, depreciation and 

amortization (EBITDA). 

Transfer prices between operating segments are on an arm‟s length basis in a manner similar to transactions 

with third parties. 

The amount of segment assets and liabilities are based on the measurement principles that are similar with 

those used in measuring the assets and liabilities in the statement of financial condition which is in 

accordance with PFRS. 

The Group‟s operating businesses are organized and managed separately according to the nature of the 

services provided, with each segment representing a strategic business unit that serves different markets. 

The Group derives its revenue from the following reportable services: 

Wireless communication services - represents cellular telecommunications services that allow 

subscribers to make and receive domestic long distance and international long distance calls to and from 

any place within the coverage area. Revenue principally consists of one-time registration fees, fixed 

monthly service fees, revenue from value-added services such as text messaging, proceeds from sale of 

phonekits, SIM cards and other phone accessories, and per minute airtime and toll fees for basic 

services which vary based primarily on the monthly volume of calls, the network at which the call 

terminates and the time at which the call is placed. 

Wireline voice communication services - represents fixed line telecommunications services, which offer 

subscribers local, domestic long distance and international long distance services, in addition to a 

number of value-added services in various service areas covered by the PA granted by the NTC (Note 

1). Revenue principally consists of fixed monthly basic fees for service and equipment, one-time fixed 

line service connection fees, value-added service charges and toll fees for domestic and international 

long distance calls. 

Wireline data communication services - represents a variety of telecommunications services tailored to 

meet the specific needs of corporate communications. These include leased lines and internet services. 

The Group defined its EBITDA as earnings before interest, taxes and depreciation and amortization where 

earnings represents excess of revenue over costs and expenses as shown in the interim consolidated 

statements of comprehensive income. The EBITDA for the years ended December 31, 2010 and 2009 

amounted to P=5,603.4 million and P=4,643.0 million, respectively. 

103

The financial information about the operating of these business segments is summarized as follows: 

2010 

Wireless 

Communication 

Service 

Wireline Voice 

Communication 

Service 

Wireline Data 

Communication 

Service 

Adjustments and 

Eliminations 

Revenue 

Inter-segment sales P=– P=– P=– P=– P=– 

Third party 13,122,507 2,946,127 475,283 – 16,543,917 

P=13,122,507 P=2,946,127 P=475,283 P=– P=16,543,917 

Result 

Segment result P=1,298,400 P=134,661 P=158,239 P=– P=1,591,300 

Finance costs (Note 18) (1,466,045) 

Foreign exchange gain 1,414,652 

Impairment losses (Note 20) (359,884) 

Market valuation losses on derivative instruments (37,038) 

Other income (Note 19) 82,236 

Income before income tax 1,225,221 

Provision for income tax (Note 21) 698,589 

Net income P=526,632 

EBITDA P=4,359,124 P=948,708 P=295,519 P=– P=5,603,351 

Depreciation and amortization (3,221,725) (1,000,454) (149,756) – (4,371,935) 

Finance costs and others 811,006 (817,739) 538 – (6,195) 

Income (loss) before income tax P=1,948,405 (P=869,485) P=146,301 P=– P=1,225,221 

Other Information 

Segment assets P=71,766,650 P=59,289,443 P=– (P=40,158,185) P=90,897,908 

Segment liabilities P=50,119,316 P=47,417,791 P=71,001 (P=6,754,715) P=90,853,393 

Capital expenditures (Note 10) P=12,543,726 P=149,292 P=37,963 P=– P=12,730,981 

Non-cash expenses other than depreciation and amortization: 

Impairment losses on trade and other receivables (Note 20) 

Inventory obsolescence and market decline (Note 20) 

P=158,520 

P=198,883 

P=– 

P=– 

Total 

P=357,403 

2,481 

– 

– 

– 

2,481 

P=161,000 P=198,883 P=– P=– P=359,884 

104

2009 

Wireless 

Communication 

Service 


Communication 

Service 

Wireline Data 

Communication 

Service 


Eliminations Total 

Revenue 

Inter-segment sales P=– P=– P=– P=– P=– 

Third party 10,327,376 3,261,514 431,131 – 14,020,021 

P=10,327,376 P=3,261,514 P=431,131 P=– P=14,020,021 

Result 

Segment result P=1,640,208 (P=438,458) P=124,291 P=– P=1,326,041 


Foreign exchange loss 786,743 




Income before income tax 190,887 

Provision for income tax (Note 21) 68,829 

Net loss P=259,716 

EBITDA P=3,106,566 P=1,277,653 P=258,822 P=– P=4,643,041 

Depreciation and amortization (1,595,632) (1,880,441) (140,208) – (3,616,281) 

Finance costs and others 265,810 (1,092,033) (9,650) – (835,873) 

Income (loss) before income tax P=1,776,744 (1,694,821) P=108,964 P=– P=190,887 


Segment assets P=60,429,114 P=65,852,622 P=1,788,182 (P=45,772,977) P=82,296,941 

Segment liabilities P=42,145,720 P=60,696,586 P=844,590 (P=22,739,001) P=80,947,895 


Non-cash expenses other than depreciation and 

amortization: 

Impairment losses on trade and other receivables 

(Note 20) P=118,649 P=164,330 P=5,676 P=– P=288,655 

Inventory obsolescence and market decline (Note 20) 10,626 – – – 10,626 

P=129,275 P=164,330 P=5,676 P=– P=299,281 

105

2008 

Wireless 

Communication 

Service 


Communication 

Service 

Wireline Data 

Communication 

Service 


Eliminations Total 

Revenue 

Inter-segment sales P=– P=55,084 P=77,814 (P=132,898) P=– 

Third party 7,362,324 3,630,702 358,124 – 11,351,150 

P=7,362,324 P=3,685,786 P=435,938 (P=132,898) P=11,351,150 

Result 

Segment result P=1,264,759 (P=382,100) P=138,726 P=– P=1,021,385 


Foreign exchange loss (2,268,447) 




Income before income tax (3,041,866) 

Provision for income tax (Note 21) (1,063,784) 

Net loss (P=1,978,082) 

EBITDA P=1,821,821 P=1,526,356 P=271,950 – P=3,620,127 

Depreciation and amortization (668,112) (2,052,622) (135,035) – (2,855,769) 

Finance costs and others (2,643,111) (1,148,623) (14,490) – (3,806,224) 

Income (loss) before income tax (P=1,489,402) (P=1,674,889) P=122,425 P=– (P=3,041,866) 


Segment assets P=49,616,426 P=65,715,645 P=2,260,356 (P=42,358,647) P=75,233,780 

Segment liabilities P=33,575,271 P=59,390,397 P=1,574,455 (P=20,395,673) P=74,144,450 


Depreciation and amortization (Note 10) P=668,112 P=2,052,622 P=135,035 P=– P=2,855,769 

Non-cash expenses other than depreciation and 

amortization: 

Impairment losses on trade and other receivables 

(Note 20) P=107,036 P=120,633 P=1,811 P=– P=229,480 

Impairment losses on inventory obsolescence and 

market decline (Note 20) 4,013 23,534 – – 27,547 

P=111,049 P=144,167 P=1,811 P=– P=257,027 

106

The revenue of the Group consists mainly of sales to external customers. 

No operating segments have been aggregated to form the above reportable segments. 

Capital expenditures consist of additions to property and equipment. 

The Group does not report its results based on geographical segments because most of the Group‟s revenue 

are derived from operations within the Philippines. There are no transactions with a single customer that 

accounts to 10% or more of the Group‟s revenue. 

30. Note to Statements of Cash Flows 

The Group‟s significant non-cash investing activities pertain to additions to accrued project cost of P=4,003.0 

million, P=9.8 million and P=1,561.5 million for the years ended December 31, 2010, 2009 and 2008, 

respectively (Note 15), and capitalized borrowing costs of P=784.2 million, 

P=799.4 million and P=1,080.5 million (Note 10) for the years ended December 31, 2010, 2009 and 2008, 

respectively. 

31. Subsequent Event 

On March 29, 2011, ultimate parent and certain related parties executed a sale and purchase agreement with 

Philippine Long Distance Telephone Company (PLDT) under which PLDT has agreed to purchase all the 

rights, title and interest in the assets of the Parent Company which consist of the following: 

(i) 3,277,135,882 common shares in the Parent Company, representing approximately 51.55% controlling 

equity share in the Parent Company; 

(ii) zero coupon convertible bonds due 2013 and 2014 issued by Parent Company and subsidiary to the 

ultimate parent and certain related party which are convertible into approximately 18.6 billion shares of 

the Parent Company; and 

(iii) intercompany advances of P=34.1 billion made by the ultimate parent and a subsidiary to the Group. 

The total consideration for the assets amounted to P=69.2 billion. The transaction is intended to be completed 

by the end of June 2011. 

32. Approval of the Consolidated Financial Statements 

On March 29, 2011, the Group‟s BOD approved and authorized the release of the accompanying 

consolidated financial statements of Digital Telecommunications Phils., Inc. and Subsidiaries. 

107

A member firm of Ernst & Young Global Limited 

108

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC. AND SUBSIDIARIES 

Schedule B. Marketable Securities - ( Current Marketable Equity Securities and Other Short - Term Investments) 

December 31, 2010 

(Amounts in thousands) 

Name of Issuing Entity and 

Description of Each Issue 

Number of Shares or 

Principal Amount of 

Bonds and Notes 

Robinson's Savings Bank P 444,000 

Union Bank of the Phils. 100,040 

Security Bank 111,000 

P 655,040 

Amount Shown in 

the Balance Sheet 

P 444,000 

100,040 

111,000 

P 655,040 

Value based on Market 

Quotations at Balance 

Sheet Date 

Income 

Received and 

Accrued 

P 2,920 

14 

18 

P 2,953 

109


Schedule C. Accounts Receivable from Directors, Officers, Employees 

Principal Stockholders (Other than Affiliates) 



Employee Name Additions Current Ending Balance 

MILES TONN CHUA 7,020 7,020 7,020 

WILLIAM S. PAMINTUAN 1,157 1,157 1,157 

AGATON R. CIJAS 886 886 886 

DULCE P. WARD 884 884 884 

MAY DAMASCO 769 769 769 

RUDI WALTER MICHAEL FREY 728 728 728 

RAMIL M. AMUL 558 558 558 

JOEL C. VILLANUEVA 511 511 511 

OLIVER RAMOS 453 453 453 

CHERRYL V. VILLANUEVA 429 429 429 

RICARDO C. SILVA 414 414 414 

Marvin Benedict S. Zara 364 364 364 

ALLAN J. HADUCA 347 347 347 

RANDY S. YAMBAO 346 346 346 

GENEVIEVE MARIE G. BACAY 342 342 342 

MELBA G. HORTAL 342 342 342 

ARVIN G. BUAN 341 341 341 

NIÑO REY M. SOCO 320 320 320 

RICHARD ZAWILA 305 305 305 

SILVER I. DELA CRUZ 297 297 297 

BERNABE G. RANGCAPAN 293 293 293 

EDGARDO S. MACAM 291 291 291 

HERROX DE VERA 282 282 282 

DEXTER PANILAG 278 278 278 

JONATHAN L. SAYAPAL 275 275 275 

KRISTINE C. CHAN 270 270 270 

NORANAR S. SELORIO 267 267 267 

CLARENCE ANN R. SERTEZA 264 264 264 

JENNY M. MUYRONG 235 235 235 

JOEMAR B. PAGADOR 223 223 223 

ADOLFO C. AREOLA 220 220 220 

ROWENA A. ABANES 216 216 216 

TIAN JEN TOO 209 209 209 

GARY J. SUGUITAN 205 205 205 

JOSE MARI E. FRANCE 201 201 201 

GRACE E. MALANI 200 200 200 

HERSHERIEL C. PILONGO 200 200 200 

DANILO S. ACANTILADO 192 192 192 

RECHELLE M. ILOCARIO 188 188 188 

MANUEL B. RABANES 187 187 187 

ERIC DAVID C. DELA CRUZ 183 183 183 

ANNA MARIA T. FAUSTINO 180 180 180 

DARREL JOY A. BAJARO 179 179 179 

NARCISO D. FAUSTINO JR. 174 174 174 

PAUL B. BUADA 172 172 172 

GRACE O. SABATER 172 172 172 

VLADIMIR CALZADO 167 167 167 

ROBERTO E. REYES 163 163 163 

JOSE M. NORIEGA JR. 160 160 160 

IMEE B. VALERA 158 158 158 

ROLLY P. GANDEZA 158 158 158 

AINIE E. JARDIN 155 155 155 

MYLENE A. DUERME 154 154 154 

KRISTOFFER JOHN SALVADOR 153 153 153 

AMIE P. DORADO 150 150 150 

CONCEPCION B. LEE 150 150 150 

JOSEPH RAYMUND L. TANTAM 149 149 149 

CHRISTOPHER R. OMEGA 146 146 146 

RICHARD S. MANGANDI 144 144 144 

DARWIN NOEL M. MATARO 144 144 144 

MARTIN MANESE 143 143 143 

RODERICK D. CRUZ 142 142 142 

DANE L. BAGANGAN 138 138 138 

ILDEFONSO A. JUAN JR. 135 135 135 

MAUREEN B. CASTILLO 134 134 134 

CHERYL MAXINE V. PARANGAN 133 133 133 

RANDY V. REYES 131 131 131 

MYRA M. SANTIAGO 130 130 130 

MARY ANN R. LOPEZ 130 130 130 

JOSEPH DARIO S. ABALOS 129 129 129 

CESAR M. CASCON 128 128 128 

ROBERT MARTIN HULAR 126 126 126 

CARLOS MIGUEL S. CONCIO 126 126 126 

VIRGINIA E. BARROGA 125 125 125 

NENANETTE G. GUEVARRA 125 125 125 

EDMUND S. PEDRO 124 124 124 

CLARE MARI M. DELA PEÑA 117 117 117 

MARIS HERRERA 113 113 113 

MERBEN L. DIZON 109 109 109 

THOMAS BERGSTROM 109 109 109 

EUDEGARIO M. ABEGONIA 108 108 108 

HENRY RHOEL R. AGUDA 107 107 107 

ERLANDO S. SANTOS 107 107 107 

MA ROSANNA NIMFA DALIPE 106 106 106 

DINO ABENES 105 105 105 

CARISSA C. TIRADOS 105 105 105 

MA. TERESA S. RAZAL 104 104 104 

CHRISTIAN P. SIA 104 104 104 

PACIFICO JR. G. LEOQUINCO 104 104 104 

DAVID PHILIP L. AGUILAR 103 103 103 

JEFFREY B. JACINTO 103 103 103 

ADAM LOWELL V. LEE 102 102 102 

CLEOFE E. MANALO 102 102 102 

JOY V. MITRA 101 101 101 

ARIES JUSTICE D. CAPATI 100 100 100 

KENNETH V. DAVID 100 100 100 

PRYNCESS HYACINTH PERNIA 100 100 100 

ELMER L. SIENA 100 100 100 

SAHARA JEAN P. GARNICA 100 100 100 

NERISSA O. PASCUAL 100 100 100 

DOROTHY JOY G. MIRANDA 100 100 100 

JOSE NOEL III V. TADIWAN 100 100 100 

ABE R. ABARQUEZ 100 100 100 

OTHERS 29,574 29,574 29,574 

T O T A L 59,206 59,206 59,206 

110


Schedule F. Property and Equipment 


( Amounts in thousands ) 

Classification 

Beginning 

Balance 

Telecommunications Equipment P 49,897,066 

Land 475,998 

Buildings and Improvements 3,872,617 

Investment in Cable Systems 758,847 

Vehicle and Work Equipment 6,215,672 

Projects Under Construction 45,607,451 

TOTAL P 106,827,651 

Additions 

Other Changes 

- Additions 

(Deductions) Retirements (Deductions) 

P 211,653 

110,862 

240,463 

12,168,003 

P 12,730,981 

P P 26,553,259 P 76,661,978 

475,998 

59,732 4,043,211 

31,881 

790,728 

435,345 6,891,480 

(27,080,217) 30,695,237 

P - 

P - 

Ending 

Balance 

P 119,558,632 

111


Schedule G. Accumulated Depreciation 


( Amounts in thousands ) 

Classification 

Beginning 

Balance 

Telecommunications Equipment P 27,382,973 

Land - 

Buildings and Improvements 1,702,219 

Investment in Cable Systems 192,699 

Vehicle and Work Equipment 4,564,635 

Projects Under Construction - 

TOTAL P 33,842,526 

Additions 

(Deductions) Retirements 

P 3,486,685 

- 

205,924 

45,500 

633,826 

- 

P 4,371,935 

P P 17,260 

P - 

Other Changes 

- Additions 

(Deductions) 

P 17,260 

Ending 

Balance 

P 30,886,918 

- 

1,908,143 

238,199 

5,198,461 

- 

P 38,231,721 

112


Schedule H. Long-term Debt 



Bank loans: 

Name of Issuer and 

Type of Obligation 

ING Bank N.V. P 7,118,434 

Nordea 3,954,124 

China Citic Bank 2,079,548 

HSBC & Credit Suisse 1,759,981 

SG and Calyon 748,146 

Calyon and SG 284,898 

Nordic 146,133 

16,091,264 

Debt Issuance Cost (829,399) 

T O T A L P 15,261,865 

Amount Amount Amount 

Authorized by Shown as Shown as 

Indenture Current Long-term 

P 1,347,776 

790,699 

297,078 

251,426 

223,927 

113,959 

146,133 

3,170,998 

(166,792) 

P 3,004,206 

P 5,770,658 

3,163,424 

1,782,470 

1,508,555 

524,220 

170,939 

- 

12,920,266 

(662,607) 

P 12,257,659 

113


Schedule K. Capital Stock 



Title of Issue 

Common shares 9,000,000 

Number of Shares Held By 

Number of 

Number of 

Shares Issued Directors, 

Shares and Officers and 

Authorized Outstanding Affiliates Employees Others 

6,356,976 

3,151,311 

270 

3,205,395 

114

Book No.______ 

Series of 2011 

DIGITAL TELECOMMUNICATIONS PHILS., INC. 

INDEX TO EXHIBITS 

Form 17-A 

No. Page No. 

(3) Plan of Acquisition, Reorganization, Arrangement, 

Liquidation, or Succession * 

(4) Instruments Defining the Rights of Security Holders, 

Including Indentures * 

(8) Voting Trust Agreement * 

(9) Materials Contracts * 

(10) Annual Report to Security Holders, Form 11-Q or 

Quarterly Report to Security Holders * 

(13) Letter re Change in Certifying Accountant * 

(16) Report Furnished to Security Holders * 

(18) Report Furnished to Security Holders * 

(19) Published Report Regarding Matters Submitted to 

Vote of Security Holders * 

(20) Consent of Experts and Independent Counsel * 

(21) Power of Attorney * 

(22) Additional Exhibit 

Exemption from the Disclosure Rules on Executive Compensation 121 

________ 

* These Exhibits are either not applicable to the Company or require no answer. 

115

116

cover sheet - PLDT.com

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