PLDT Annual Report 2007 | Quarterlytics

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y e a r s

We’re changing lives.

ANNUAL REPORT 2007

C O N T E N T S

Comparative Highlights

Consolidated Financial Performance Highlights

A Message from the Chairman of the Board

A Letter from the President and CEO

We’re Changing Lives

Giving new meaning to broad-BAND

Making lives easier for Filipinos overseas

Growing a sunrise industry

Redefining rural banking

Innovating for community service

Corporate Governance: Going up a notch to a higher level of competency

The Board of Directors and Committees

4-6

7-9

10-11

12-13

14-15

16-17

18-19

20-21

22-23

24-25

26-27

Officers

29-30

31-61

65-66

68-69

70-71

2007 PLDT Group Significant Events

PLDT Group Products and Services

Financial Review

Audit Committee Report for 2007

Statement of Management’s Responsibility for Financial Statements

Independent Auditors’ Report

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

72-136

Notes to Consolidated Financial Statements

Registrars, Transfer Agents and Depositary

About the Cover
Ripples in a pond form the number
“80” to mark PLDT’s 80th Anniversary
in 2008. Just as one ripple can spread
with far-reaching effects, so PLDT
has touched the lives of generations
of Filipinos by providing vital
telecommunications services to the
country.

PLDT is the leading telecommunications service provider in
the Philippines. Through its three principal business groups—
wireless, fixed line, and information and communications
technology—PLDT offers the largest and most diversified range
of telecommunications services across the Philippines’ most
extensive fiber optic backbone and wireless, fixed line and
satellite networks.

PLDT is listed on the Philippine Stock Exchange (PSE:TEL) and
its American Depositary Shares are listed on the New York Stock
Exchange (NYSE:PHI). In 2007, PLDT had the largest market
capitalization among Philippine-listed companies.

SUBSIDIARIES
Wireless
SMART COMMUNICATIONS, INC. AND SUBSIDIARIES
PILIPINO TELEPHONE CORPORATION
SMART BROADBAND, INC.
ACeS PHILIPPINES CELLULAR SATELLITE CORPORATION
MABUHAY SATELLITE CORPORATION

Fixed Line
PLDT CLARK TELECOM, INC.
PLDT SUBIC TELECOM, INC.
PLDT GLOBAL CORPORATION AND SUBSIDIARIES
PLDT-MARATEL, INC.
BONIFACIO COMMUNICATIONS CORPORATION
SMART-NTT MULTIMEDIA, INC.

Information and Communications Technology
ePLDT, INC. AND SUBSIDIARIES
SPi TECHNOLOGIES, INC.
ePLDT VENTUS, INC.
VOCATIV SYSTEMS, INC.
PARLANCE SYSTEMS, INC.
INFOCOM TECHNOLOGIES, INC.
DIGITAL PARADISE, INC.
LEVEL UP! (PHILIPPINES), INC.

MISSION STATEMENT

PLDT will be the preferred full service provider of voice, video
and data at the most attractive levels of price, service quality,
content and coverage, thereby bringing maximum benefit to the
Company’s stakeholders.

PLDT ANNUAL REPORT 2007

COMPARATIVE HIGHLIGHTS

20031

20041

20051

20061

2007

Php100,580
10,714
1,478

Php115,457
6,269
5,671

Php121,104
3,312
8,111

Php124,976
2,967
9,361

Php135,476
2,480
8,146

112,772

127,397

132,527

137,304

146,102

23,606
14,740
4,931
15,336
4,394
1,227
16,094
31,921

21,405
12,025
5,671
15,695
5,478
2,228
11,352
20,360

30,822
14,136
6,705
13,712
5,093
2,464
6,501
14,437

31,869
18,359
6,886
10,854
5,010
3,149
5,522
13,424

28,613
20,470
7,310
7,088
5,824
5,588
4,844
13,108

Php112,249

Php94,214

Php93,870

Php 95,073

Php92,845

FINANCIAL INFORMATION (in millions, except
cash dividends per share of common stock)

Revenues

Service Revenues
Non-Service Revenues
Others

Expenses

Depreciation and Amortization
Compensation and Employee Benefits
Repairs and Maintenance
Financing Costs
Selling and Promotions
Professional and Other Contracted Services
Cost of Sales
Others

Net Income Attributable to Equity Holders of PLDT

Php1,347

Php28,221

Php34,135

Php35,138

Php36,004

Property, Plant and Equipment

Php306,862

Php324,991

Php331,537

Php347,408

Php364,972

Accumulated Depreciation, Amortization and Impairment

112,072

130,466

154,563

183,218

205,558

Net

Capital Expenditures

Php194,790

Php194,525

Php176,974

Php164,190

Php159,414

Php18,019

Php21,162

Php14,990

Php20,674

Php24,824

Short and Long-Term Debts

Php178,589

Php149,088

Php103,544

Php79,953

Php60,147

Equity Attributable to Equity Holders of PLDT

Php18,671

Php45,829

Php72,729

Php102,521

Php111,113

Cash Dividends Declared and Paid Per Share

of Common Stock

OPERATING INFORMATION

Php–

Php56.00

Php78.00

Php150.00

Number of Cellular Subscribers

12,947,197

19,208,232

20,408,621

24,175,384

30,041,030

Number of Fixed Line Subscribers

1,869,770

1,834,306

1,842,507

1,776,647

1,724,702

Number of Stockholders

Number of Employees

Wireless
Fixed Line
ICT

2,207,008

2,200,367

2,193,525

2,189,374

2,185,395

17,653

4,977
10,518
2,158

18,433

18,926

5,289
9,692
3,452

5,137
9,197
4,592

28,225

5,358
8,711
14,156

30,255

5,415
8,080
16,760

1 2003-2006 have been restated to reflect the change in revenue recognition policy for installation fees.

PLDT ANNUAL REPORT 2007

CONSOLIDATED FINANCIAL PERFORMANCE HIGHLIGHTS

Service Revenues
(in billion pesos)

Subscriber Base
(in millions)

1
1
2
1

8
2

4
4
4

9
3
7

0
5
2
1

9
5

3
1
4

8
7
7

5
5
3
1

6
9

8
9
3

1
6
8

5
5
1
1

0
2

4
5
4

1
8
6

6
0
0
1

3
1

6
5
4

7
3
5

7
1
3

7
1

0
6
2

8
1

0
0
3

2
4
2

0
1
2

8
1

2
2
2

8
1

2
9
1

4
0
2

8
4
1

9
1

9
2
1

2003

2004

2005

2006

2007

2003

2004

2005

2006

2007

WIRELESS

ICT

WIRELESS

FIXED LINE

Cash Flows from Operations
(in billion pesos)

Market Capitalization
(Year-end, in billion pesos)

Share Price
(Year-end, in pesos)

5
5
7

7
6
7

4
7
7

2
9
6

0
7
5

9
9
5

1
8
4

2
3
3

2
3
2

4
6
1

600

500

400

300

200

100

5
7
1
3

0
5
5
2

5
3
8
1

0
6
3
1

0
7
9

3,500

3,000

2,500

2,000

1,500

1,000

500

140

120

100

PLDT ANNUAL REPORT 2007

A MESSAGE FROM THE CHAIRMAN OF THE BOARD

My Fellow Shareholders,

I am pleased to report that your Company has again
delivered another set of excellent results in the year 2007 –
another historic high for PLDT. Service revenues and net
income posted steady growth whilst cash flows remained
robust, even as the substantial peso appreciation adversely
impacted a sizeable portion of our total revenues. Our
strong financial position has enabled us to invest more in
network infrastructure whilst raising dividend payments to
shareholders to an unprecedented level.

Further, we launched late last year a major reorganization
effort focused on revitalizing our fixed line business and
enabling it to develop new and sustainable revenue sources.
This is a critical prerequisite for the transformation of the
Group as we move forward from being an integrated
into a customer-focused
telecommunications Company
multimedia group delivering communications, information,
content and entertainment services to our various markets.
The year just passed thus provides a fitting backdrop for
the celebration in 2008 of PLDT’s 80th anniversary, for
which we have adopted the theme “We’re changing lives” –
representing as well our expansive long-term goal for our
Company.

Exceptional Results, Unprecedented Returns

Service revenues and EBITDA for the PLDT Group reached
Php135.5 billion and Php82.9 billion, up 8% and 4%,
respectively, from 2006. Reported net income reached Php36
billion, a 2% rise from the prior year. Core net income – which
excludes exceptional gains – rose 11% to Php35.2 billion.
The improvement in income is even more sizeable when
expressed in U.S. dollar terms. Reported net income was up
21% to US$869 million while core net income rose 32% to
US$849 million. Our cellular and ICT businesses continue to
power growth for the PLDT Group. Wireless service revenues
increased 10% to Php86.5 billion, whilst ePLDT posted a 59%
leap in revenues to Php10.1 billion.

The PLDT Group’s consolidated balance sheet strengthened
further with net debt down to US$0.9 billion as at 31st
December 2007. Net debt to EBITDA and net debt to equity
improved to 0.42 times and 0.31 times, respectively.

In line with its commitment to enhance shareholder returns
whenever possible, your Board of Directors had approved a
total dividend payment of Php184 per share out of 2007 core
net income. This represents a historic 100% dividend payout
of core earnings per share, improving upon the 85% payment
made in 2006.

Reflecting the volatility of the markets in 2007, our shares
traded in a wide band ranging from a low of Php2,250 to
a high of Php3,285. At year-end, our share price stood at
Php3,175, a 25% increase from the prior year’s closing. In
any event, with a market capitalization of Php599 billion
or US$14.4 billion, PLDT remained the country’s largest
capitalized and most valuable corporation in the stock exchange.

PLDT ANNUAL REPORT 2007

Looking ahead to 2008, the anticipated slowdown – perhaps even recession – in the United States and
the continued rise in petroleum prices are expected to lend a restrained tone to Philippine economic
growth. This has prompted us to temper our expectations and guide our core net income for next year
to a growth of five percent to Php37 billion, with service revenues improving by Php10-Php11 billion
to Php145-Php146 billion in 2008.

80 at ’08: Change and Transformation

In celebrating the 80th year of PLDT, our overriding themes are change and transformation. Indeed,
your Company has been changing the lives of Filipinos for the better since it was granted a franchise to
operate on 28th November 1928. At that time, telephone calls were possible only within Manila and a
few provinces. With the entry of PLDT, long distance calls between different parts of the country, and
thereafter between the Philippines and the world, became possible.

Today, in an increasingly globalized economy, PLDT’s contribution to national well-being has become
more imperative, and even more significant. We now provide “nationwidest” coverage with our cellular
network, operate the most extensive wired network and fiber optic backbone, and are rapidly deploying
more broadband, high-speed facilities all over the country.

But for the PLDT Group to sustain its growth, it must re-invent itself into an intensely-focused
customer-centric organization, delivering high-quality yet affordable services to the greatest number
of Filipinos. The concentration on quality and on providing the best possible customer experience will
grow in importance as PLDT provides increasingly sophisticated, high-bandwidth services.

Five Key Elements

Our process of transformation will require five key elements.

First, our growth must continue to be powered by innovation. Our ability to develop out-of-the-box
solutions that recast the rules of the game has been a key source of competitive advantage for the Group
in the past ten years. Breakthrough innovations such as Smart Load, for example, have enabled Smart to
grow the mobile phone market beyond the limits defined by conventional wisdom.

Second, we shall raise revenues by growing organically and by investing in new areas that optimize our
existing businesses. Our organic growth will be drawn from various sources. One such source would be
broadband applications on fixed (myDSL) and wireless (SmartBro) platforms. Currently, we already have
in excess of 600,000 broadband subscribers and will approach a million by end-2008. Our customer
interaction service (or the call center business) and knowledge processing solutions (otherwise known
as BPO) businesses are another major source of organic growth. The outlook for these operations
remains bright as the Philippines continues to gain favor among outsourcing clients in the United
States, Europe and elsewhere.

Another cluster of mobile services where we expect to gain traction in the coming months are international
and domestic remittance services running on the Smart Money platform. Recent developments in this
area have been the launch of the Landbank OFW Cash Card powered by the Smart Money platform and
the tie-up with the National Commercial Bank, the largest commercial bank in the Kingdom of Saudi
Arabia and the Middle East. This package of remittance services will utilize Smart Money as the fulfillment
vehicle. Our value proposition is that mobile commerce offers an exciting vista of opportunities for our
new suite of products and services. Organic growth may need to be complemented by acquisitions
in order to attain our desired rate and direction of growth. We are therefore vigilant about possible
acquisitions or investments, particularly in the knowledge processing solutions sector, remittances,
Mobile Virtual Network Operations (MVNOs) and content generation businesses – particularly in the
video space.

Third, we are building converged network infrastructures that are robust, future-proof and optimized.
Moving forward, we need to be more creative in using both wired and wireless platforms in order to
deliver cost-effective, quality solutions to the individual consumer, to the home, to Small and Medium
Enterprises (SMEs) and corporate segments. This will require considerable investment in both fixed and
mobile networks. We have thus provisioned Php25.4 billion in capital expenditures for 2008 alone.
Aside from the Next Generation Network (NGN), we are also making provisions for advanced wireless
broadband platforms such as High Speed Downlink Packet Access (HSDPA) and WiMax.

PLDT ANNUAL REPORT 2007

Fourth, we are engaging and empowering our workforce, raising their skills level and strengthening
their competence and commitment. We are actively involving managers, supervisors and rank and file
employees in redesigning business and technical processes in order to achieve higher levels of efficiencies
and effectiveness. At the same time, training programs are being held to support the deployment of new
technologies and new services.

Finally, we are systematically stepping up efforts to raise our service quality to world-class standards. This
has the intense attention and focus of both your Management and your Board. In DSL and fixed voice
services, for example, we are conducting end-to-end reviews of our technical and business processes for
provisioning, repair and restoration and customer interface. The ultimate objective is to improve very
significantly the customer experience across a wide range of services and solutions.

Pursuing Strategic Corporate Social Responsibility (CSR)

Through the PLDT-Smart Foundation (PSF), CSR programs have been recast in a manner which creates
a major impact on poverty alleviation and meshes better with our business. As a consequence, we have
focused our CSR programs in the following key areas: (1) providing broadband access and teachers
training to public schools via Smart Schools, PLDT Infoteach and the Gabay Guro, or 2G, programs; (2)
community development by way of continued support of low cost housing through Gawad Kalinga, GK,
Operation Compassion, military housing and a community-focused disaster reduction and management
program; (3) youth development efforts through projects such as the building of juvenile rehabilitation
centers that will house 100 children and train 300 more in Manila and Davao; (4) poverty alleviation
through livelihood projects and microfinance lending in cooperation with the Philippine Business for
Social Progress (PBSP), Pinoy Micro Enterprise (Pinoy ME) and the ASA Foundation; and (5) sports
development through programs in support of the Basketball Association of the Philippines (BAP)
Samahang Basketbol ng Pilipinas (SBP), the Amateur Boxing Association of the Philippines (ABAP); and
the promotion of Philippine arts and culture through projects such as Cinemabuhay which holds competitions
for short and full length films to showcase the work of talented young Filipino film students and film makers.

Aside from these core programs, the PSF helps to develop youth leaders through lectures by international
leaders through the MVP Ateneo Leadership Series. The PSF also seeks to promote independent,
privately-financed strategic research in economic policy and planning by supporting the Center for
National Policy and Strategy (CNAPS), a non-partisan, interdisciplinary think tank with concentration
on long-term economic issues.

Conclusion

It is propitious indeed that the 80th anniversary of PLDT coincides with the 10th anniversary of First
Pacific Company Limited’s investment in PLDT. It was in November 1998 that First Pacific acquired a
significant equity stake in PLDT. There have been moments when it must have seemed to those outside
of us, and perhaps even inside, that we had erred in putting our faith in the future of PLDT. But we held
fast. And over time, we have overcome serious challenges and, with the combined effort and dedication
of our Management and staff, gradually transformed PLDT into the country’s most valuable corporation.

The real key to the PLDT story has been the deep and abiding commitment by all its key stakeholders
– shareholders, Management, employees – to the vision of making PLDT the first Philippine company
of regional, and, ultimately, global stature. Tangible expressions of that commitment have been on the
one hand our passion for innovation, and on the other, the substantial resources being devoted to the
build-out of a wealth of infrastructures geared to service our markets better.

In conclusion, allow me to thank the Management and staff for delivering another year of outstanding
results, the Board of Directors for providing wise counsel, and our shareholders for their generous
support. On behalf of the Board and the over 30,000 people of the PLDT Group, I wish to assure you
that our efforts to transform your Company will eventually give birth to a new PLDT, with operating
results and governance practices at par with the world’s best, firmly committed to excellence, to our
customers, and to the welfare of our people.

MANUEL V. PANGILINAN
Chairman of the Board

PLDT ANNUAL REPORT 2007

A LETTER FROM THE PRESIDENT AND CEO

Dear Shareholders,

Our Company has completed another record year in 2007. Our
consolidated net income of Php36 billion for the year 2007
was 2% higher compared with the Php35.1 billion net income
reported in 2006. This year’s results benefited from a decline
in additional depreciation charges and higher foreign exchange
translations gains, offset by increased provision for taxes and
higher asset impairment charges. Core net income, net of these
exceptional items, rose to Php35.2 billion in 2007, 11% over the
core net income of Php31.5 billion in 2006. Consolidated service
revenues increased by 8% to Php135.5 billion, notwithstanding
the 10% appreciation of the peso which negatively impacted
38% of the PLDT Group’s revenues that are U.S. dollar-linked.
Consolidated EBITDA improved by 4% to Php82.9 billion while
EBITDA margin declined to 61%.

Core earnings attributable to each common share reached
Php184 per share, an increase of 9% compared to Php169 per
share last year. As a result of these robust earnings, the Company’s
Board of Directors declared a final dividend for 2007 of Php68
per share, fulfilling the Company’s commitment to pay out a
minimum ratio of 70% of core earnings. In addition, the Board
also approved a special dividend of Php56 per share. Added
to the previously paid interim dividend of Php60 per share in
September 2007, total dividends for the year will amount to
Php184 per share, representing a payout of 100% of 2007 core
earnings. This compares to an 85% payout ratio on 2006 core
earnings, inclusive of a special dividend as well. Total dividend
payments for 2007 increased by 50% to Php28.2 billion, from
Php18.8 billion in 2006.

Operating Highlights

Wireless: Setting the Pace
Consolidated wireless service revenues rose to Php86.5 billion for
the full year 2007, 10% higher than the Php78.4 billion realized
last year, with cellular subsidiaries, Smart Communications, Inc.
(Smart) and Pilipino Telephone Corporation (Piltel) continuing
their stellar performances. Service revenues of Php22.4 billion
in the fourth quarter of 2007 were 6% higher than the third
quarter revenues of 2007 due to the increased usage normally
associated with the holiday season and 10% higher than fourth
quarter revenues of Php20.4 billion in 2006.

Consolidated wireless EBITDA improved by 10% to Php55.3
billion in 2007 from Php50.3 billion in 2006 while EBITDA
margins remained at 64%.

The PLDT Group’s total cellular subscriber base for 2007 grew
by 5.9 million to 30 million. Smart recorded net additions of
approximately 3.2 million subscribers while Talk ‘N Text added

PLDT ANNUAL REPORT 2007

about 2.7 million subscribers to end 2007 with 20.3 million and 9.7 million subscribers, respectively.
In February 2008, the PLDT Group’s cellular subscriber base surpassed the 31 million mark as Smart
and Piltel added one million new subscribers in the first two months of the year.

In 2007, Smart continued to successfully defend its market leadership by developing innovative voice
and text packages that drive activations, boost usage and strengthen brand equity.

Smart’s continued strong subscriber growth belies the belief that the Philippines’ high penetration rate
is indicative of slowing market demand. This strong growth is manifested in our capital expenditure
levels as we expanded both capacity and coverage to accommodate our increasing subscriber base.
We are also gratified with the success of our segmented approach that allows us to offer customized
promotions to segments of our subscriber base to address their specific needs without diluting our
overall revenue base.

Smart’s wireless broadband service – branded SmartBro (Ang broadband ng bayan) – sustained its
excellent performance as its wireless broadband subscriber base grew 148% to reach 302,000 at the
end of 2007, adding approximately 180,000 new subscribers for the year. Smart now has 2,780
wireless broadband-enabled base stations providing high-speed Internet access to over 625 cities and
municipalities all over the Philippines. Wireless broadband revenues grew to about Php2.4 billion in
2007, an improvement of 190% over the Php823 million in 2006. In November 2007, SmartBro
enhanced its wireless broadband portfolio with SmartBro Plug-It, a service offering instant Internet
access through a portable wireless modem. SmartBro Plug-It provides Internet access in all areas where
there is Smart network coverage.

By optimizing our various technologies, we have made our wireless broadband service into another pillar
of strength for Smart. Our investment in this space will accelerate as we seek to solidify our leadership.

PLDT Fixed Line: Facing the Future
Fixed Line service revenues decreased 1% to Php48.6 billion in 2007 from Php49.2 billion in 2006
as improvements in data revenues, both from corporate data and residential DSL services, were offset
by the continued decline in revenues from the local exchange and international long distance (ILD)
services. Our U.S. dollar-linked revenues arising from the local exchange and ILD businesses were
adversely impacted by the 10% appreciation of the average U.S. dollar/Philippine peso exchange rate in 2007.
Fixed Line revenues would have improved 3% year-on-year if foreign exchange rates had remained stable.

Retail DSL continued to grow as broadband subscribers nearly doubled to 264,000 in 2007 from
133,000 at the end of 2006. PLDT DSL generated Php4.1 billion in revenues for 2007, up 18% from
Php3.5 billion in 2006, accounting for 54% of PLDT’s broadband and internet revenues for the year.

Fixed Line EBITDA in 2007 declined 7% to Php26.4 billion in line with the decrease in revenues and
costs associated with manpower rightsizing initiatives; EBITDA margin likewise declined to 54%.

On 4th December 2007, Piltel and PLDT executed an Asset Sale and Purchase Agreement covering the
sale and purchase of assets relating to Piltel’s fixed line or LEC business. The sale is still subject to the
fulfillment of certain closing conditions, including the procurement of the requisite regulatory approvals.

Our recent organizational changes underscore our commitment to match our financial success with
equally exceptional service, organization and culture. To this end, we have reorganized ourselves to
ensure that the Fixed Line continues to make the necessary changes in order to transform our business,
our corporate culture and our people.

ePLDT: Gearing Up for Growth
ePLDT, the Group’s information and communications technology arm, reported service revenues of
Php10.1 billion for 2007, a 59% increase from Php6.3 billion last year, driven by the continued growth
in the customer interaction service business (ePLDT Ventus) and the consolidation of SPi after its
acquisition in July 2006. Despite their significant growth, ePLDT’s revenues were likewise adversely

PLDT ANNUAL REPORT 2007

impacted by the strong appreciation of the peso since approximately 82% of its service revenues
are denominated in U.S. dollars. As a result, ePLDT’s EBITDA margin for 2007 declined to 11%
compared with 15% in 2006. ePLDT would have reported an additional 74% growth in revenues if the
peso had remained stable year-on-year. ePLDT’s revenues now account for 7% of the PLDT Group’s
consolidated revenues.

Consolidated customer interaction service revenues continued to make signifi cant gains, growing
24% to Php3.3 billion as a result of increased capacity utilization and billable hours, for new and
existing clients, and despite the appreciation of the peso. ePLDT Ventus now operates nine facilities
with combined seats of 6,400.

SPi, on the other hand, generated revenues of Php5.3 billion in 2007. In addition to the Philippines
and the U.S.A., SPi has operations in India and Vietnam. Consolidated seats totaled 4,500, of which
80% are located in the Philippines. SPi was ranked third globally among the “Leader - Emerging Asian
Markets,” sixth in “Best Performing BPO Provider” and ninth among “Top Leaders in Human Capital
Development” in the 2008 Global Outsourcing 100 Survey conducted by Global Services Magazine
and neoIT, an outsourcing advisory fi rm.

The continuing integration of SPi and ePLDT Ventus proceeds apace and has resulted in operating
effi ciencies and enhanced processes across both companies which we anticipate will contribute to
improved margins in due course. We also have high expectations for improving results from our
world-class data center, Vitro™, which recently achieved its ISO27001:2005 and ISO9001:2000
recertifi cation as well as Philippine Economic Zone Authority (PEZA) accreditation.

Financial Initiatives

The Group’s consolidated balance sheet continued to strengthen with consolidated debt balances
down to US$1.6 billion. Net debt as at 31st December 2007 stood at US$0.9 billion. Net debt to EBITDA
and net debt to equity improved to 0.42 times and 0.31 times, respectively.

Consolidated free cash fl ow remained strong at Php46.5 billion in 2007 despite the increases in
capital expenditures and working capital requirements. Consolidated capital expenditures increased to
approximately Php25 billion, or 20% higher than 2006 levels, and were primarily utilized to accelerate
the capacity and rollout of the wireless and broadband network as a result of higher than anticipated
subscriber growth. Total capital expenditures for 2007 remained below annual depreciation costs and
represented 18% of service revenues. Capital expenditures for the Group are expected to remain at
Php25 billion in 2008.

PLDT at 80 – Changing Lives

As we celebrate PLDT’s 80th year in the Philippines, we take pride in PLDT’s accomplishments and
the positive effect we have had on the lives our fellow Filipinos. We are determined to make this
milestone year even more special by delivering outstanding results and we also renew our commitment
to continue investing in our country by providing the needed infrastructure and value-driven services
that make a difference.

Our Chairman, Manuel V. Pangilinan, has said that our strategic goal should be to transform PLDT
from an integrated telco into a customer-centric, multimedia company delivering communications,
information, technology – especially mobile commerce – and entertainment. We have, over the past
several years, initiated a number of organizational changes that have propelled us to higher levels
of developmental challenges. These initiatives have produced unprecedented profi ts these past years.
Of course, our overarching goal is to make PLDT a truly world class company – in terms of profi ts,
customer orientation, and quality of service.

NAPOLEON L. NAZARENO
NAPOLEON L. NAZARENO
President and CEO
President and CEO

PLDT ANNUAL REPORT 2007

WE’RE
CHANGING
LIVES

For 80 years, PLDT has been an essential part of Filipinos’
lives. Since 1928, PLDT has faithfully served generations of

Filipinos when it pioneered in linking the country’s major islands

through a reliable “long distance” telephone system and eventually

grew to be the Philippines’ leading telecommunications provider.

Now, through its three principal business groups — wireless, fixed

line, and information and communications technology — PLDT

continues to pursue its mission to change and improve the lives of

Filipinos as it offers a wide range of telecommunications services

across the Philippines’ most extensive fiber optic backbone and

wireless, fixed line and satellite networks.

In the following pages are pictures and stories of some of the people

whose lives PLDT has touched — and eventually transformed.

And on its 80th year, PLDT looks at the future and aims to evolve

into an integrated multimedia company offering a wide range of

information, communications, entertainment and content services

— to keep changing lives.

PLDT ANNUAL REPORT 2007

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INNOVATIVE INTERNET SERVICES

CHANGING LIVES
Giving new meaning
to broad-BAND

On weekends and lazy summer afternoons, cousins Michael Lozano and Richie Griner often take out their guitars, and
spend their time jamming and playing their favorite songs.

Sometimes Michael, 16, would play a few bars of Metallica or Led Zeppelin. Other times, Ritchie, 13, would show
off a newly-learned Jimi Hendrix riff.

Typical teenagers rocking out in someone’s room or garage? Not quite! Michael and Ritchie add a high-tech
touch to their pastime. You might call it “remote jamming.”

The two kids are actually in their respective homes, a good two and half hours away from each other by car.
But distance does not matter in a broadbanded world. Using their PLDT myDSL connections, they can make
beautiful music together without missing a beat.

“When I jam with Richie or my friends, I usually go online and use my Instant Messenger’s conference
feature. If I want them to listen to a song that I like, I just lay the microphone down on the table, and
play my guitar so that they could hear it,” explained Michael.

“If he needs help on some parts, I would just plug in my webcam, aim it at my guitar and show him
how it’s done. He also does the same for me,” added Richie.

Even before the boys started practicing together online, they said they also learned how to play
the guitar on the Internet, not in a classroom—culling information from friends, practicing and
teaching themselves how to play via instructional videos online.

PLDT myDSL has indeed changed how kids hang out and learn new skills – just as it has reshaped
the lives of many other people as well. Broadband Internet is changing the way students learn,
the way companies and institutions operate and how government conducts its business.

PLDT is taking the lead in broadbanding the country. As at end-2007, the PLDT Group more
than doubled its number of broadband subscribers to 579,000. The higher-than-anticipated
subscriber growth has led PLDT to invest aggressively in beefing up its network.

Part of these investments involved the deployment of its legacy network to NGN. NGN
technologies allow subscribers to avail of value-added services such as DSL more quickly
and easily. It also allows PLDT to provide better quality of service, attractive bundled
services and higher data speeds according to customers’ needs.

This has been complemented by the further expansion of Smart’s wireless broadband
network. By end-2007, Smart had over 2,700 wireless broadband enabled base
stations, serving over 625 cities and municipalities all over the country.

At this rate, kids will be jamming with each other from one end of the country
to the other.

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SMART PINOY WORLDWIDE

CHANGING LIVES

Making lives easier
for Filipinos overseas

Eleven years ago, Eva Agoo left the Philippines to work in Hong Kong. Although a BS Education graduate, she opted to work
as a domestic helper abroad to get higher pay. At that time, Oliver, her only son, was turning three.

Now 42, Eva is still in Hong Kong. Her son is now in high school. She earns the equivalent of around Php23,000 a month
from her employer who lives in Hong Kong’s business district.

She regularly keeps in touch with her family using her Smart SIM, and sends money home via Smart Padala, Smart’s
world-first SMS-based remittance service launched in 2004.

“I send Php10,000 monthly via Smart Padala. I used to send money home by depositing funds in my older sister’s
bank account, but the cable charge was HK$25. Smart charges cheaper rates at only HK$15. I also send Oliver a
Php500 weekly allowance at HK$1 per transaction with no cable charge,” narrates Eva.

Her Php10,000 goes a long way. It supports not only her son Oliver, but also augments her older sister’s income.
It also subsidizes the expenses of her brother’s family. They all live in one house in Quezon City.

“We use the money she sends to pay for our rent, electricity, water, and groceries,” says Vicky Agoo, her older
sister, who works in a travel agency in Makati. “Getting our allowance through my Smart Money card is more
convenient. Since it is linked to my cell phone, I receive a text message every time money is credited to my
account. It’s fast. I can withdraw the money from bank ATMs. Before, I had to check my bank account to find
out if our allowance had been deposited, or Eva calls to tell us that she deposited money.”

Smart Pinoy Services

Eva is one of the thousands of Filipino migrant workers who benefit from Smart Pinoy Services, Smart’s
array of products and services for Overseas Filipinos and their families in the Philippines.

Aside from mobile remittances, Smart Pinoy Services include basic communication needs via IDD,
international text, international MMS and international video call. With Smart’s international roaming,
subscribers can use their cell phone in over 200 countries where Smart has forged partnerships with
over 400 international network partners.

Filipino seafarers also benefit from Smart Pinoy Services. Smart Link, the first and only prepaid satellite
phone service in the Philippines, is designed for use in areas beyond the reach of landlines or cellular
signals, particularly the seas of Asia-Pacific, Indian Ocean, Middle East and Africa. A partnership
with Blue Ocean Wireless now also allows seafarers to use their GSM mobile phones even while
in the middle of ocean waters. The new service, launched just last February, is currently being
piloted in 25 ships consisting of at least 20 crew members per ship.

Remittance

But it is in the area of mobile commerce and remittance that Smart Pinoy Services is proving
especially invaluable to Overseas Filipinos. One such service is the Land Bank OFW Cash
Card. Powered by Smart Money, the Land Bank OFW Cash Card enables Filipino workers
to send funds to their beneficiaries in the Philippines via SIM-based services anytime,
anywhere at the speed of a text message and affordable rates.

At the launch of the Land Bank Card in Dubai early this year, Roberto Galud who works
as a waiter in a hotel used his mobile phone to send funds to his sister, Riezielda Arban , in
the Philippines. “Ang bilis,” exclaimed Riezielda when she received a text message that
the money had been transferred to her Land Bank OFW beneficiary cash card. Using
the card, Riezielda immediately withdrew the funds from an ATM. The funds helped
pay for the medical expenses of their father, Reynaldo, a tricycle driver in Pasay City
who suffers from hypertension.

With these innovative services and programs, Smart is helping making life easier,
more convenient and more productive for Filipinos abroad and their families in the
Philippines.

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BUSINESS PROCESS OUTSOURCING

CHANGING LIVES

Growing a sunrise industry

For 52 straight weeks in 2007, Marie Dhel A. Mistiola, 24, scored a perfect 100. As a customer interaction service
agent in Ventus, the customer interaction service subsidiary of ePLDT, she follows a clearly prescribed process,
uses the appropriate language, listens attentively to callers, and addresses their concerns in a crisply professional
way – all in the course of a normal working day.

And each week, a quality assurance specialist samples her recorded calls and evaluates her performance.

A 100-percent score is a feat that only dedicated and high-performing individuals can achieve. And for that,
Marie Dhel became the most outstanding customer service representative for 2007. She surpassed the
performance of almost 600 other agents in the Ventus facility in the Bonifacio Global City, Taguig.

Marie Dhel values the recognition and the respect of her superiors and colleagues, but her motivation
comes from something closer to home. She is the family breadwinner. Because of her work at Ventus,
she is able to support her younger brothers and sister in their studies.

“When I joined Ventus, my dad had no work, and my sister and brother were already in college. My
employment at Ventus was really a big help,” said Marie Dhel, a mass communications graduate from
Pamantasan ng Lungsod ng Maynila.

Right now, her dad is working as a courier and her mom tends a small variety store. But still, their
income isn’t enough to sustain the growing needs of the family. Thanks to Marie Dhel, they can
now make ends meet and even enjoy some luxuries.

“I’m earning well so I can help my family. At the same time, I enjoy working here,”
she said.

With her friends at work and the support she gets from them, the hard work, stress and late
nights have become manageable.

After more than three years working as a customer interaction service agent at Ventus,
Marie Dhel believes there are opportunities for advancement waiting for her and others
like her. She has learned the discipline and skills needed for effective customer interface
which apply not only to customer interaction service operations but also to a wide range
of businesses.

By investing in the outsourcing business, PLDT has directly contributed to the
growth of one of the country’s leading sunrise industries. According to the trade and
industry department, revenues of the outsourcing industry rose to US$5 billion in
2007 from US$3.5 billion in 2006 while employment jumped to 320,000 from
235,000. ePLDT’s outsourcing subsdiary SPi and ePLDT Ventus together employ
about 16,000 people, which raises the Group’s total workforce to approximately
30,000.

PLDT also enables the entire outsourcing industry to grow by providing the
bulk of the high-bandwidth telecommunications facilities that companies need
to operate.

In these ways, PLDT has helped hundreds of thousands of Filipinos like
Marie Dhel find lucrative work in a fast-growing industry in which the
Philippines excels.

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NETWORK BANKING

CHANGING LIVES

Redefining rural banking

For many farmers in remote areas of the country, an ATM might as well be a robot from outer space.

One of the country’s largest rural banks is however bringing ATMs and modern banking down to earth. One Network
Bank, with help from PLDT, is introducing advanced banking technology to the countryside and turning farmers into
financially savvy entrepreneurs.

Operating exclusively in Mindanao, One Network Bank today has 70 branches and 68 ATMs in the country’s southern
region, including those operating in remote places such as Antipas, North Cotabato, and Maranding in Lala, Lanao
del Norte. It has installed wireless branches and ATMs in areas such as Makilala, North Cotabato, and Kapalong,
Davao del Norte, where having such facilities used to be unthinkable.

Bank President Alex V. Buenaventura says that in the past, deploying branches and ATMs in many remote rural
areas was simply impossible because wired networks needed to carry vital voice and data communications were
either non-existent or too costly to operate. That limitation has however been overcome by Smart’s extensive
mobile phone and wireless broadband networks.

Using wireless data technologies like GPRS and EDGE, PLDT’s Corporate Business Group has developed
services that support the use of facilities such as wireless point of sales (POS) terminals and wireless ATMs.
Such services have now made it possible for One Network Bank to go deep into the Mindanao countryside.

Buenaventura says easy access to cash via ATMs and to online real-time “deposit-and-withdraw-anywhere”
transactions from more branches in previously unreachable places has enabled One Network Bank to
support agriculture and open up exciting opportunities.

One such development that is revitalizing agriculture in Mindanao is the emergence of new crop
growers from the ranks of land lessors. About five years ago, when their 15-year lease agreements
with large banana companies expired, landowners were transformed into crop growers themselves.

These farmers entered into long-term production and marketing contracts with multinational agri-
companies that ensure that the crops have a ready market at guaranteed transparent pricing schemes.
From making only Php 8,000 to Php18,000 a year leasing their land to these big companies,
landowners now earn an average of Php15,000 per hectare a month farming the land themselves
as contract growers.

“There is something else to that. Now, these landowners employ their relatives to manage
and supply labor to the farm, thus creating employment,” said Buenaventura.

By providing a maximum of Php1.35 million per farmer to develop a maximum of three
hectares, and by deploying agri-technicians to supervise them and ensure productivity per
hectare per year of no less than 4,000 boxes of Class A Cavendish bananas, One Network
Bank is helping many small farmers profit more from their labor.

Setting itself apart from other banks, One Network Bank has adopted the slogan
“Pera ng Mindanao, Para sa Mindanao.”

“We felt it is a clear philosophy, clear marketing positioning for us to be a bank that
will commit 100 percent plough-back. Resources or deposits from the island of
Mindanao must all be invested in Mindanao,” says Buenaventura.

Enabled by PLDT’s innovative services such as Shops.Work UnPlugged (SWUP)
and SmartBro Enterprise Edition, One Network Bank is redefining rural banking
and carrying out its commitment to the people of Mindanao.

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CORPORATE SOCIAL RESPONSIBILITY

CHANGING LIVES

Innovating for community service

Basketbol ng Pilipinas run a grassroots training program for
the youth. PSF also supports track and field, the Philippine
Sports Association for the Differently Abled, Inc., and the
MVP Golf Cup.

Education. Under the PLDT Managers Club’s Gabay-Guro
(Teachers Guide) Program, 30 teachers have been trained
in English proficiency and computer literacy. Qualified
children of PLDT employees, meanwhile, are Employees’
Educational Grant scholars. Youth leaders also learn and
meet experts from the MVP Leadership Series held at the
Ateneo de Manila University.

PSF also supports the Center for National Policy and Strategy
(www.cnaps.org.ph), a non-partisan, interdisciplinary and
multi-stakeholder community of scholars and influential
practitioners dedicated to the collection, organization, and
synthesis of local and global policy ideas.

Juvenile Rehabilitation Program. PSF will construct two
juvenile rehabilitation facilities for 100 children and train
300 minors from Metro Manila and Davao. PSF aims to
help prevent children from serving prison terms in adult
jails. A fund-raising ball was organized in U.S. universities
and Ivy League schools for the rehabilitation center.

Disaster Risk Management. The program provides relief
and sustainable rehabilitation needs of communities,
particularly in the Bicol region. PSF has partnered with
Operation Compassion for a pilot housing project, a disaster
management system and a livelihood program for 218
families in Albay province.

The Arts. PSF supports the development of Philippine
cinema through Cinemabuhay. PSF has awarded two entries
Php1 million each for best film project: “Numbalikdiwa”
and “Cul de Sac.” PSF also supports Artists in Development,
a network of actors, directors, singers, media and sports
personalities. Videokultura, a mobile phone video
competition with Filipino themes, promotes creativity and
pride in Filipino culture among the youth.

PLDT and Smart: Stress on Innovation
For PLDT and Smart, the thrust is to apply innovative
approaches and to work with partners to pursue parallel
in education, entrepreneurship, community
programs
building,
emergency
disaster
communications, environment, volunteerism, and health.

preparedness

and

Education. PLDT’s Infoteach Outreach Program conducted
the 1st PLDT myDSL Broadband Quiz in 2007. Unlike
conventional quiz shows, the PLDT myDSL Broadband Quiz
was held simultaneously in Netopia branches in different
parts of the country, using the Internet cafés’ broadband
facilities, and in partnership with the Asian College of
Science and Technology.

The PLDT Group strengthened its community service
programs through the combined efforts of the PSF, PLDT
and Smart.

The PLDT-Smart Foundation
PSF focuses on six core programs: enterprise development
and microfinance, sports, education, juvenile rehabilitation,
disaster risk management, and the arts.

Enterprise Development and Microfinance. In partnership
with ASA Foundation, one of the country’s major
microfinance institutions, PSF aims to provide micro-
entrepreneurs better access to capital.

Sports. Support to the Amateur Boxing Association of the
Philippines provides boxers better training and a bigger
chance for an Olympic Gold. PSF also assists the Samahang

PLDT ANNUAL REPORT 2007

The Smart Schools Program (SSP), meanwhile, boasts of member public high schools
working with Smart in creating their own interactive websites. This sets the stage for
public high schools to become creators of online educational content.

Launched in December 2004, the SSP provides Internet access, online content and
training to 150 public high schools and 30 public elementary schools (under Smart
Schools Jr.) nationwide. Over 5,000 teachers have been trained on basic computer
use, PC troubleshooting and networking, and website creation.

On its 5th year, the Smart Wireless Engineering Education Program (SWEEP) is on its
second phase. In addition to the program’s thrust to provide laboratory facilities
and training programs on GSM technology, SWEEP Phase 2 includes training for
wireless broadband technologies.

PLDT’s Innovation Laboratory is now a venue for students and faculty to conduct
research on new communication technologies. In 2007, close to 1,000 students and
faculty from over 20 schools toured the facility.

Smart’s Adopt-a-School Read-to-be-Smart Program continues to draw support from
employee volunteers interested in reading tutorials, values formation activities
and feeding programs for public elementary schools in Metro Manila, Cebu and
Davao.

Entrepreneurship. The Smart Entrepreneurial Program provides students,
housewives and micro-entrepreneurs with additional income through free seminars
on entrepreneurship.

Community Building. After house-building, PLDT, Smart and PSF now focus on
livelihood projects for residents in adopted Gawad Kalinga (GK) villages.

Smart Amazing GK Village in General Nakar, Quezon province, for example, is
now home to skilled driftwood sculptors, active participants in the community art
circuit. The sculptors – former farmers and fishermen whose homes were destroyed
by typhoons in 2004 – have also become benefactors to the livelihood program of
the residents of the PLDT-Smart Amazing GK Village in Iloilo province. In GK
Iloilo, a group of women learned dressmaking, while men were taught carpentry.
The children had terracotta art workshops. PLDT, Smart and the PSF have adopted
seven PLDT-Smart Amazing GK Villages nationwide.

Disaster Preparedness and Emergency Communications. Smart has deployed
equipment for community-based early warning systems in Quezon and Sorsogon
provinces in partnership with the Philippine Institute of Volcanology and
Seismology.

Working with the Philippine National Red Cross and other partners, PLDT and
Smart set up Libreng Tawag or Free Call Centers in calamity areas to serve the
communication needs of survivors, rescue teams, media, government and private
agencies.

Environment. Supporting environmental conservation initiatives of the government,
employee volunteers planted over 75,000 trees nationwide in 2007.

Health. More than 3,000 residents have benefited from medical and dental missions
conducted by volunteer doctors and PLDT employees in Albay, Iloilo, Pampanga
and Isabela provinces.

All year round, the PLDT Group reaches out to the community in many different ways
to help Filipinos in need. Among these are, from top, Chairman Manuel V. Pangilinan
checks out the computer lab donated by the PLDT Group at Apalit, Pampanga, during his
birthday; treeplanting project at Liliw, Laguna, under PLDT’s Environmental Program;
PLDT Infoteach Outreach commencement exercises; Smart Schools Program’s Rainfall
Monitoring Workshop; PLDT Art Workshop for sick, indigent children and out-of-school
youth; bloodletting for Philippine Children’s Medical Center; and the 1st PLDT myDSL
Broadband Quiz under PLDT Infoteach Outreach.

PLDT ANNUAL REPORT 2007

Corporate Governance:

Going up a notch to a
higher level of competency

The corporate governance framework of the PLDT Group
involves three development phases: Compliance, Competency,
and Character/Culture. Following our corporate governance
framework of engineering, education and enforcement, our
corporate governance has climbed a notch higher from the
compliance level to the competency level. We aim to achieve
the final level – possessing a strong ethical corporate character or
culture – in succeeding years to complete the three C’s of our
corporate governance.

In 2007, as part of the embedding of corporate governance
standards in performance evaluation of our personnel, the Policy
on Employee Qualification for Incentives and Rewards was
amended to include corporate governance policy violations as a
disqualification factor.

Our corporate governance education and communication
activities in 2007 focused on results of a culture risk assessment done
from December 2006 to January 2007. To address identified risks,
various activities were conducted in 2007 aimed at strengthening
ethical decision-making skills among our officers, executives and
team leaders, as well as strengthening ethics and customer service
orientation among identified key responsible business units in the
Group. These included:

• Training sessions and workshops based on concepts and
modules developed by the Corporate Governance Office
(CGO) and facilitated by various professionals, both local and
international, known in the field of corporate governance and
ethics, namely: (1) Board Corporate Governance Session on
Corporate Governance Trends in Asia; (2) Officers Corporate
Governance Session on Ethical Leadership; (3) Executives
Workshop on Ethical Decision-Making; (4) Coffee and
Doughnut Sessions with high compliance risk business units;

• Development and operation of an e-Learning Session on
Conflict of Interest, which involved the development and
publication of a 5-minute audio-video material discussing the
Conflict of Interest Policy in simple terms and with examples.
All supervisors and rank and file employees of PLDT are
required to undergo the session, which was launched in
September 2007; and

• Development and distribution of the CG Handbook, primer,
posters, Ripples monthly e-newsletter and weekly CG news
summaries e-mail.

We have also communicated our commitment to, as well as
expectations on, good corporate governance from, our business
partners, including suppliers. Thus, to ensure that relations
between PLDT and its business partners are imbued with
PLDT’s standards on good corporate governance, PLDT has
held Supplier’s/Contractor’s Briefings and developed written CG
Guidelines for Suppliers and Contractors, to which PLDT suppliers
and contractors are expected to submit their individual written
conformity to signify their understanding and acceptance of these
standards as indispensable in doing business with PLDT.

Our communication, education, training, and embedding
activities described above, primarily seek to increase our employees’
understanding of our corporate governance policies and rules
(collectively, the Corporate Governance (CG) Rules), which have
been adopted between 2002 to 2006. Our CG Rules comply
with the requirements of the Philippine and U.S. Securities and
Exchange Commissions (SEC), New York Stock Exchange and
Hong Kong Stock Exchange Corporate Governance Rules, as may
be applicable.

From 2005 to 2007, our subsidiaries have also adopted
corporate governance rules and policies substantially similar in
substance and form to our CG Rules, as well as appointed their
respective corporate governance officers.

Our CG Rules, include, among others, our Corporate
Governance Manual, or Governance Manual, which was adopted
and approved by our board of directors in September 2002. Our
Governance Manual seeks to institutionalize the principles of good
governance that our board of directors and management believe to be
a necessary component of sound business management. It conforms

with the requirements of the Code of Corporate Governance, or
Philippine SEC Governance Code, that was promulgated by the
Philippine Securities and Exchange Commission, or Philippine
SEC, under the Philippine SEC Memorandum Circular No. 2,
Series of 2002, on April 5, 2002.

In compliance with the Philippine SEC Governance Code and
consistent with the relevant provisions of the Securities Regulation
Code and Corporation Code of the Philippines, our Governance
Manual covers the following key areas:

1. The qualifications and grounds for disqualification for

directorship;

2. The requirement that at least two or twenty percent of the
members of our board of directors, whichever is lesser, must
be independent directors and the standards/criteria for the
determination of independent directors;

3. The duties and responsibilities of our board of directors and

the individual directors;

4. Our board committees, specifically, the governance and
nomination committee, audit committee, and executive
compensation committee, the composition and the principal
duties and responsibilities of such committees;

5. The role of our chairman in ensuring compliance with the

corporate governance principles;

6. The role of our president/chief executive officer in ensuring
that our organizational and procedural controls are adequate
and effective to ensure reliability and integrity of financial
and operational information, effectiveness and efficiency of
operations, safeguarding of assets and compliance with laws,
rules, regulations and contracts;

7. The duties and responsibilities of our corporate secretary/
assistant corporate secretary in terms of the support services
that they need to provide our board in upholding sound
corporate governance;

8. The duties and responsibilities of the head of our internal
audit organization that would provide our board of directors,
management and shareholders with reasonable assurance that
our key organizational and procedural controls are appropriate,
adequate, effective and reasonably complied with;

9. The functions of our independent auditors that would
reasonably ensure an environment of sound corporate
governance as reflected in our financial records and reports;
the requirement that non-audit work of the independent
auditors should not conflict with their function as independent
auditors; the requirement to rotate, at least once every five
years, the independent auditors or the lead partner assigned
to handle the independent audit of our financial statements;

10. Our commitment to respect and promote shareholders’
rights such as voting right, pre-emptive right, inspection
right, dividend right, appraisal right, and right to receive
information about the background, business experience,
compensation and shareholdings of our directors and officers
and their transactions with us;

11. The requirement to appoint a compliance officer and the
duties and responsibilities of such compliance officer including
the establishment of an evaluation system to determine and
measure compliance with the provisions of our Governance
Manual; and

12. The penalties for violations of our Governance Manual.

Our Code of Business Conduct and Ethics, or Code of Ethics,
was adopted to strengthen the implementation of our Governance
Manual. Approved by our board on March 30, 2004 and
subsequently updated on July 11, 2006, our Code of Ethics sets
out our business principles and values, which aim to promote a
culture of good corporate governance in the Company. It provides
standards that govern and guide all business relationships of the
Company, its directors, officers and employees, especially with
respect to the following:

1. Compliance with applicable laws, rules and regulations;
2. Ethical handling of conflicts of interest, corporate opportunities

and confidential information;

3. Protection and proper use of Company assets;
4. Fair dealing with our employees, customers, service providers,

suppliers, and competitors;

5. Compliance with our reporting and disclosure obligations to

the relevant regulators and to investors;

6. Compliance with our disclosure and financial reporting

controls and procedures;

7. Assessment and management of risks involved in our business

endeavours; and

8. Adoption of international best practices of good corporate

governance in the conduct of our business.

In addition, the following policies were adopted by our
board to provide specific guidelines on the provisions of the Code

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of Ethics: (a) the Conflict of Interest Policy, which was approved
on October 24, 2005, ensures that work-related actions of PLDT
directors, officers, employees and consultants are based on sound
business principles and judgment devoid of bias or partiality;
(b) the Policy on Gifts, Entertainment and Sponsored Travel, which
was approved on 31 January 2006, provides safeguards so that the
custom of giving gifts is handled in accordance with the Company’s
principles of integrity, accountability, fairness and transparency;
(c) the Supplier/Contractor Relations Policy, which was approved
on January 31, 2006, ensures that the Company upholds the highest
professional standards in business practices and ethics in its dealings
with suppliers and contractors in the procurement of goods and
services; and (d) the Policy on Employee Disclosure on Violations
of the Corporate Governance Rules, Questionable Accounting
or Auditing Matters, and Offenses covered by the Company’s
Table of Penalties (Expanded Whistleblowing Policy), which
was approved on May 9, 2006, provides guidelines on handling
employee complaints, protects whistleblowers from retaliation and
ensures confidentiality and fairness in the handling of a disclosure
or complaint. An Expanded Whistleblowing Hotline and other
reporting facilities, such as a dedicated electronic mailbox, post
office box, and facsimile transmission have been installed and are
maintained.

Aside from the continuation and improvement of our
various programs geared towards ethical culture-building and
enabling ethical decision-making, plans are in the pipeline for a
commissioned research to come up with an Ethical Compliance
Framework for Philippine Business, with the objective of aligning
local culture with a global compliance culture, and participation in
a Companies Circle project to undertake an inventory of Philippine
SEC and PSE corporate governance regulations for the guidance of
all Philippine corporations.

On January 11 and January 14, 2008, respectively, our chief
governance officer submitted to the Philippine SEC and PSE our
annual certification confirming, among others, that:

1. Compliance with SEC Memorandum Circular No. 2 dated
April 5, 2002, as well as all relevant circulars on corporate
governance, has been monitored;

2. PLDT, its directors and officers complied with all the leading
practices and principles on good corporate governance as
embodied in our Governance Manual; and

3. PLDT did not commit any major deviation from the provisions

of the Governance Manual.

Said certification was based on the annual evaluation conducted
by our president and chief executive officer, treasurer, and chief
financial officer and chief governance officer of our Company’s
compliance with the Governance Manual. In making such evaluation,
said officers used our board-approved corporate governance self-
rating form which has been patterned after a similar form that was
issued by the Philippine SEC under SEC Memorandum Circular
No. 5, Series of 2003, dated April 3, 2003.

We have also summarized in our website the differences
between our corporate governance practices and those required of
U.S. listed companies under NYSE Section 303A.11.

To access our Code of Ethics, Governance Manual or the
differences between our corporate governance practices and those
required of U.S. listed companies under NYSE Section 303A.11,
please refer to:

http://www.pldt.com.ph/download/pldt-corpgov_manual.pdf or
http://www.pldt.com.ph/cgov/downloads/pldt-corpgov_manual.pdf
http://www.pldt.com.ph/download/pldt-code_ethics.pdf or
http://www.pldt.com.ph/cgov/downloads/Code%20of%20Ethics

(BD_APPRVD)-03.30.04.pdf

http://www.pldt.com.ph/download/pldt-disclosure.pdf or
http://www.pldt.com.ph/cgov/downloads/NYSE-PLDT_CG

DISC-07.01.pdf

The public may obtain information on our Code of Ethics,
Governance Manual and Charters of our Board Committees
through our website. We undertake to provide a copy, without
charge, to any person requesting for a copy of any, or both,
of the Code of Ethics and Governance Manual from our chief
governance officer, Atty. Ma. Lourdes C. Rausa-Chan, who can
be reached at e-mail address lrchan@pldt.com.ph or telephone
number +632-816-8556. We also maintain a website at www.
pldt.com.ph on which reports filed by us and other information
may be accessed.

PLDT Environment Program

As it strives to play a bigger role in the protection and preservation of the environment,
PLDT commits to the practice of sound corporate responsibility and strict compliance
with government regulations on pollution prevention and control, waste recycling
and segregation, proper waste disposal, health and safety, and conservation of vital
resources.

PLDT shall also adopt technologies with the least adverse impact on the environment.

This commitment is to be observed by all PLDT directors, officers, executives, employees,
consultants, suppliers, and partners. Subsidiaries and affiliates shall also be enjoined
to adopt this commitment.

Accomplishments in 2007

• Stewardship

Issued and disseminated throughout the Company the following corporate
environmental compliance guidelines, specifying policy and implementing mechanics
as approved by the Environmental Committee:

- Ordinary and Hazardous Wastes Management
- Air Pollution Sources (Motor Vehicles and Power Generating Sets)
- Ozone-depleting Substances (Halon Fire Fighting Equipment and Air-conditioning

Systems)

- Hazardous Substance (Polychlorinated Biphenyl Electrical Equipment)

• Risks Mitigation and Remediation

Exerted numerous efforts to mitigate potential environmental risks arising from the
conduct of business. These are:

- Completed final phase-out of old fire fighting equipment and building air-

conditioning systems containing Ozone-depleting Substance (ODS)

- Started the phase-out of old power transformers on major PLDT buildings to
eliminate Polychlorinated Biphenyl (PCB) from the equipments, through the
procurement of environmentally-compliant transformers and the disposal of
these old units via abroad where an approved technology for PCB destruction is
available

Initiated an Annual Environmental Performance Reporting system to provide
management with necessary information and/or updates on environmental
management activities, with the initial run covering the period April 2007 to
March 2008

- Continued scrap and wastes materials management, focused on reduce, re-use

and recycle (or sale)

- Continued energy conservation program in all Company facilities nationwide

Next Steps

With the acquisition of expertise, technologies and resources, the Company prepares to
be able to report its carbon footprints by 2008.

PLDT shall also designate Company Pollution Control Officers in the regional offices
to handle communication and coordination activities with the Department of the
Environment and Natural Resources. At present, these Officers operate only within its
National Capital Region offices.

Enterprise Risk Management

Our group-wide enterprise risk management framework has enhanced our existing risk
management approach through the Enterprise Risk Management Committee (ERMC).
Under the framework, risks are identified, measured and responded to in a manner
consistent with the best interests of the PLDT Group. The degree of response to risks
shall be based on the likelihood of occurrence and the potential financial and operational
impact as compared to the cost and potential consequences of the planned response.
Every company or unit and every officer and executive are responsible for the identification
and management of risks pertaining to their respective areas of responsibility.

The ERMC acts as the monitoring body for the individual risk management activities of the
different units within the PLDT Group. As the strategic body responsible for developing
and managing a comprehensive integrated risk management plan, the ERMC has the
responsibility of responding to externally imposed regulatory guidelines concerning risk
identification, disclosure, management, and monitoring. The ERMC is also mandated to
advise the appropriate authorities of the PLDT Group on risk concerns pertaining to any
of the companies within the PLDT Group.

During 2007, the ERMC conducted its annual internal and external risk assessment and
validation activity involving the business and support units within the PLDT Group. Major
risk concerns and appropriate mitigating measures were accordingly presented to the
Executive Committee and to PLDT’s Audit Committee, and eventually to the PLDT Board
during the annual budget presentation.

PLDT ANNUAL REPORT 2007
PLDT ANNUAL REPORT 2007

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23

The Board of Directors and Committees

Manuel V. Pangilinan

Napoleon L. Nazareno

Helen Y. Dee

Ray C. Espinosa

Tatsu Kono

Oscar S. Reyes

Albert F. Del Rosario

Pedro E. Roxas

Alfred V. Ty

BOARD OF DIRECTORS

ADVISORY BOARD/COMMITTEE

Manuel V. Pangilinan, Chairman of the Board
Napoleon L. Nazareno, President and CEO
Helen Y. Dee
Ray C. Espinosa
Tsuyoshi Kawashima1
Tatsu Kono
Rev. Fr. Bienvenido F. Nebres, S.J.*
Takashi Ooi2
Corazon S. de la Paz-Bernardo
Ma. Lourdes C. Rausa-Chan
Oscar S. Reyes*
Albert F. Del Rosario
Pedro E. Roxas*
Alfred V. Ty*

Roberto R. Romulo
Benny S. Santoso
Christopher H. Young
Ricardo R. Zarate

AUDIT COMMITTEE
Rev. Fr. Bienvenido F. Nebres, S.J., Chairman
Oscar S. Reyes, Member
Pedro E. Roxas, Member
Corazon S. de la Paz-Bernardo, Advisor
Roberto R. Romulo, Advisor
Tsuyoshi Kawashima1, Advisor
Tatsu Kono, Advisor

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PLDT ANNUAL REPORT 2007
PLDT ANNUAL REPORT 2007

Rev. Fr. Bienvenido F. Nebres, S.J.

Takashi Ooi

Corazon S. de la Paz-Bernardo

Ma. Lourdes C. Rausa-Chan

Roberto R. Romulo

Benny S. Santoso

Christopher H. Young

Ricardo R. Zarate

GOVERNANCE AND
NOMINATION COMMITTEE
Manuel V. Pangilinan, Chairman
Tatsu Kono, Member
Rev. Fr. Bienvenido F. Nebres, S.J., Member
Oscar S. Reyes, Member
Alfred V. Ty, Member
Ma. Lourdes C. Rausa-Chan3, Non-voting Member
Victorico P. Vargas, Non-voting Member

EXECUTIVE
COMPENSATION
COMMITTEE

Albert F. del Rosario, Chairman
Oscar S. Reyes, Member
Pedro E. Roxas, Member
Alfred V. Ty, Member
Tsuyoshi Kawashima1, Member
Tatsu Kono4, Member
Victorico P. Vargas, Non-voting Member

TECHNOLOGY
STRATEGY
COMMITTEE

Manuel V. Pangilinan, Chairman
Napoleon L. Nazareno, Member
Ray C. Espinosa, Member
Oscar S. Reyes, Member
Tatsu Kono, Member

1 Resigned effective at the close of business hours on November 5, 2007.
2 Replaced Mr. Tsuyoshi Kawashima effective November 6, 2007.
3 Replaced Mr. Rene G. Bañez effective March 25, 2008.
4 Replaced Mr. Tsuyoshi Kawashima effective January 29, 2008.
* Independent Director

PLDT ANNUAL REPORT 2007
PLDT ANNUAL REPORT 2007

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25

Officers

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PLDT ANNUAL REPORT 2007
PLDT ANNUAL REPORT 2007

PLDT Key Officers

Seated from left: George N. Lim,

June Cheryl A. Cabal-Furigay, Anabelle Lim-Chua

Standing from left: Alfredo S. Panlilio,

Victorico P. Vargas, Jun R. Florencio,

Christopher H. Young (Chief Financial Advisor)

Seated from left: Rene G. Bañez,

Ma. Lourdes C. Rausa-Chan

Standing from left: Ernesto R. Alberto,

Menardo G. Jimenez, Jr.,

Claro Carmelo P. Ramirez

Smart Key Officers

Seated from left: Orlando B. Vea,

Anabelle Lim-Chua, Mario G. Tamayo

Standing from left: Danilo J. Mojica, Rene G. Bañez,

Rolando G. Peña, Ramoncito S. Fernandez

Napoleon L. Nazareno
President and CEO

Cesar M. Enriquez
First Vice President

Arnel S. Crisostomo
Vice President

Florentino D. Mabasa, Jr.
First Vice President

Amihan E. Crooc
Vice President

Ramon Alger P. Obias
First Vice President

Rebecca Jeanine R. De Guzman
Vice President

Enrique S. Pascual, Jr.
Vice President

Ernesto R. Alberto
Senior Vice President

René G. Bañez
Senior Vice President

Jun R. Florencio
Senior Vice President

Menardo G. Jimenez, Jr.
Senior Vice President

Anabelle Lim-Chua
Senior Vice President

George N. Lim
Senior Vice President

Alfredo S. Panlilio
Senior Vice President

Leo I. Posadas
First Vice President

Nerissa S. Ramos
First Vice President

Raymond S. Relucio
First Vice President

Ramon B. Rivera, Jr.
First Vice President

Ricardo M. Sison
First Vice President

Mario C. Encarnacion
Vice President

Alejandro C. Fabian
Vice President

Elisa B. Gesalta
Vice President

Ma. Josefina T. Gorres
Vice President

Ma. Criselda B. Guhit
Vice President

Roberto G. Pador
Vice President

Lilibeth F. Pasa
Vice President

Jose Lauro G. Pelayo
Vice President

Gerardo C. Peña
Vice President

Ricardo C. Rodriguez
Vice President

Genaro C. Sanchez
Vice President

Ana Maria A. Sotto
Vice President

Julieta S. Tañeca
Vice President

Claro Carmelo P. Ramirez
Senior Vice President

Emiliano R. Tanchico
First Vice President

Emeraldo L. Hernandez
Vice President

Ma. Lourdes C. Rausa-Chan
Senior Vice President

Miguela F. Villanueva
First Vice President

Joseph Nelson M. Ladaban
Vice President

Jesus M. Tañedo
Vice President

Victorico P. Vargas
Senior Vice President

Alfredo B. Carrera
First Vice President

Celso T. Dimarucut
First Vice President

Jose A. Apelo
Vice President

Ma. Luz Natividad A. Lim
Vice President

Jose Antonio T. Valdez
Vice President

Marco Alejandro T. Borlongan
Vice President

Emmanuel B. Ocumen
Vice President

Melissa V. Vergel de Dios
Vice President

June Cheryl A. Cabal-Furigay
Vice President

Oliver Carlos G. Odulio
Vice President

ePLDT Key Officers
Seated from left: Helen T. Marquez,

Ray C. Espinosa, Jane C. Walker

Standing from left: George H. Tan,

Peter Maquera, Celso T. Dimarucut,

Emmanuel P. Dizon, Ian Wilson

PLDT ANNUAL REPORT 2007
PLDT ANNUAL REPORT 2007

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27

2007 PLDT GROUP
Significant Events

OPERATIONAL MILESTONES

Fixed Line

Owing to the rapid-fire development of
Northern Luzon, PLDT opened up its
newest Innolab at Clark Freeport Zone,
the third and the latest facility after the
Manila and Cebu Innolabs. PLDT-
ClarkTel Innolab showcases PLDT’s
present and future business solutions,
attesting to PLDT’s leading status as a
hotbed, a proving ground of innovative
ICT products and services.

The myDSL Quick Install Kit (QIK) was
launched. DSL applicants were able to
enjoy Internet connection in just 3 days.
By getting the QIK, applicants can take
home their myDSL and enjoy savings on
installation fee.

To jumpstart the acquisition activities
for 2007, the OFW Bulagaan promo
was launched. Targeting OFW families,
it offered post paid and prepaid landlines
at attractive installation rates to OFW
families.

To increase the utilization of the Next
Generation Network (NGN) facilities,
the NGN Super Bilis Kabit promo was
launched in February 2007.

To reach areas without physical or wired
PLDT voice facilities, PLDT Landline
Plus was soft-launched on a trial and test
basis. Through SIM-card enabled wireless
landline units, more Filipinos were able to
avail of affordable and reloadable landline
services.

Wireless

Smart set another world-first in April
2007 for successfully testing its text-
based remittance service with selected
overseas Filipino workers (OFWs) in
Bahrain. It is the first over-the-air foreign
currency remittance done using the
mobile phone.

In July 2007, Smart and Mediascape
(formerly 360media Corp.)
launched
myTV, a mobile TV platform that delivers
programming to cellular handsets that
support the Digital Video Broadcasting–
Handheld (DVB-H) standard.

Smart bought a 30% equity interest in
Blue Ocean Wireless (BOW), a Dublin-
based company focused on delivering
GSM communication capability for the
merchant marine sector, with an option
to acquire another 19% within the next
three years. BOW provides, for the first

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PLDT ANNUAL REPORT 2007
PLDT ANNUAL REPORT 2007

time, GSM connectivity for seafarers
in deep ocean water, where no other
network exists.

In November 2007, Smart subsidiary
Smart Broadband, Inc. (SBI) came out
with an innovative gadget (SmartBro
Plug-It) that will enable users to easily link
to the worldwide web anytime, anywhere.
Using a device called a USB modem that
can easily be plugged to a laptop or a
desktop computer, users will be able to
access the Internet with speeds ranging
from 384 to 768 kbps. SmartBro Plug-It
is initially available under Plan 799.

ICT

acquired

Springfield

(Springfield),

Services
SPi
the 10th
Corporation
largest medical and
revenue cycle
management provider in the healthcare
market. This strategic acquisition allows
SPi Healthcare to provide an end-to-
end solution to hospitals and physician
practices.

SPi opened a new and bigger facility in
Chennai, India, to house the operations of
its Publishing and Healthcare businesses.
As a result of SPi’s rapid growth and the
increased demand for its services, SPi sees
the opening of this purpose-built facility
as a significant step in positioning itself to
meet its customers’ ongoing needs.

formally

ePLDT
launched Unified
Contact Center Plus, a contact center
solution powered by Cosmocom’s
Contact Center On-Demand technology,
the global leader in Unified Customer
Communications. The Unified Contact
Center Plus is designed as a pure IP
contact center that unifies multimedia
and multi-channel capabilities and offers
a complete contact center suite.

iPlus, a subsidiary of ePLDT, launched a
customer interaction solution developed
for the growing SME market. Called
Call Center in a Box, iPlus’ newest
service is a premise-based, integrated
customer interaction solution that will
bring enhanced, personalized, and high-
quality customer service to the customer
interaction industry.

AWARDS AND RECOGNITION

Awards were given to PLDT Corporate
Business Group (CBG) products by
e-Services Philippines Awards during
the e-Services Philippines 7th Global
Sourcing Conference and Exhibition.
PLDT SWUP and FASTrack won the
“Most Innovative Product” award and

“Most Creative Application Service”
award, respectively.

its
In November 2007, Smart and
U.S.-based
technology partner Zad
Mobile, Inc. were given the Best Mobile
Advertising award at the 1st Asia Mobile
Innovation Awards held by the GSM
Association (GSMA) in Macau, China.
Smart and Zad Mobile were recognized
for the “1-in-5 Panalo” (1-in-5 Winner)
promo that Smart implemented for global
cola brand Pepsi.

In
its 2007 Special Issue “Global
Superstars,” Forbes, one of the world’s
leading business and finance magazines,
listed PLDT as the 1,321st biggest
company in the world. It is the only
Philippine firm in the list of 2,000
companies, with over US$9.01 billion in
total market value as of February 28, 2007.

Asset Magazine,
its Asset 2007
in
Corporate Governance Ranking, ranked
PLDT as the top Philippine firm in terms
of corporate governance.

PLDT gathered the following awards
based on country results and ranking in
FinanceAsia’s yearly poll of best-managed
companies in Asia: 1st place, “Consistent
God Dividends”; “Best CFO” – PLDT
Chief Financial Adviser Christopher
H. Young; 2nd place, “Best Investor
Relations”; 3rd place, “Philippines’s
Best-Managed Companies”; and 3rd
place, “Most Committed to Corporate
Governance”.

SGV & Co. and Ernst & Young certified
PLDT, being a listed company in the New
York Stock Exchange (NYSE), as having
complied with the stringent requirements
of Section 404 of the Sarbanes-Oxley Act
of 2002, or SOX 404.

Euromoney Magazine recognized PLDT
as the “Best Managed Company –
Philippines”, “Best Corporate Governance
– Philippines”, and “Most Convincing
and Coherent Strategy – Philippines” in
its January 2008 issue.

SPi was awarded the 4th position among
the “Top 10 Best-Performing BPO
Providers” and 5th among the “Top 10
Leaders in Human Capital Development”
by neoIT and Global Services Magazine
based on the 2007 Global Services 100
Survey conducted.

PLDT GROUP PRODUCTS AND SERVICES
PLDT GROUP PRODUCTS AND SERVICES

FIXED

Retail Products and Services

• PLDT is the most trusted

telecommunications company in
the country for 80 years with PLDT
landlines.

• Extended its coverage beyond its

traditional network with a wireless
landline service called PLDT
Landline Plus.

• Pioneered broadband technology
with myDSL, which is three times
more preferred than its nearest
competitor.

• Extended its reach to all Filipinos
with PLDT Load, Budget Card and
Touch Card.

Corporate Products and Services

• PLDT is the partner-of-choice

for Global-Class Providers doing
business in the Philippines, offering
international leased lines and
managed services.

• By leveraging on PLDT’s Domestic
Fiber Optic Network, or DFON,
world-class networking choices
are now available to Philippine
corporations.

• Deeper penetration of customer

value chains through the
introduction of innovative and
award-winning solutions.

• Enabled by the Next Generation
Network, PLDT offers pioneering
voice solutions.

PLDT ANNUAL REPORT 2007

PLDT GROUP PRODUCTS AND SERVICES

WIRELESS

• Widely-recognized service brands
that address all income segments.

• Growth in service revenues

enabled by our ability to segment
subscriber base according to
specific parameters, allowing for
tailor-made, “below the line” usage
campaigns.

• Established reputation for award-
winning, world-class innovations:
Smart Money, Smart Load, Smart
Padala.

• Value added services augmented
by relevant services: Voice Text,
Premyo sa Resibo, Special IDD rates
to select Middle East countries,
Smart Link.

• SmartBro’s wireless broadband

service enables low-cost and rapid
Internet growth.

ICT

Knowledge Processing Solutions

(otherwise known as BPO)

•

SPi and Ventus combined has made the
PLDT Group one of the leading BPO
service providers in the world.

Data Center

•

Through data center facilities that can
withstand an intensity 8 earthquake and
an emergency power back-up system
that can provide 15 days of continuous
operation, VitroTM protects clients’ vital
data.

Internet and Online Gaming

•

The PLDT Group is leading the
way in providing Internet access for
more Filipinos and supporting the
gaming industry.

PLDT ANNUAL REPORT 2007