We have various financial assets such as trade and non-trade receivables, cash and short-term deposits. Our principal financial liabilities, other than derivatives, comprise of bank loans, lease liabilities, trade and non-trade payables. The main purpose of these financial liabilities is to finance our operations. We also enter into derivative transactions, primarily principal only-currency swap agreements, interest rate swaps and forward foreign exchange contracts and options to manage the currency and interest rate risks arising from our operations and sources of financing. Our accounting policies in relation to derivatives are set out in Note 2 – Summary of Material Accounting Policies – Financial Instruments.

The following table sets forth our consolidated financial assets and financial liabilities as at December 31, 2023 and 2022:


	Financial instruments at amortized cost				Financial instruments at FVPL				Total financial instruments
	(in million pesos)
Assets as at December 31, 2023
Noncurrent:
Financial assets at fair value through profit or loss		—				578				578
Debt instruments at amortized cost – net of current portion		395				—				395
Derivative financial assets – net of current portion		—				96				96
Other financial assets – net of current portion		3,481		(1)		—				3,481
Current:
Cash and cash equivalents		16,177				—				16,177
Short-term investments		122				269		(2)		391
Trade and other receivables		26,086				—				26,086
Current portion of debt instruments at amortized cost		200				—				200
Current portion of other financial assets		320		(1)		—		(3)		320
Total assets		46,781				943				47,724

Liabilities as at December 31, 2023
Noncurrent:
Interest-bearing financial liabilities – net of current portion		243,152				—				243,152
Lease liabilities – net of current portion		41,625				—				41,625
Derivative financial liabilities – net of current portion		—				12				12
Customers' deposits		2,238				—				2,238
Deferred credits and other noncurrent liabilities		229				—				229
Current:
Accounts payable		77,050				—				77,050
Accrued expenses and other current liabilities		71,756				—				71,756
Current portion of interest-bearing financial liabilities		11,646				—				11,646
Current portion of lease liabilities		5,921				—				5,921
Dividends payable		1,912				—				1,912
Current portion of derivative financial liabilities		—				1,021				1,021
Liabilities associated with assets classified as held-for-sale		1,779				—				1,779
Total liabilities		457,308				1,033				458,341
Net liabilities		(410,527	)			(90	)			(410,617	)

(1)

Includes refundable deposits and notes receivables.

(2)

Includes investments in the funds of Credit Suisse and Julius Baer. In 2021, PLDT withdrew US$6.6 million from the Supply Chain Finance fund of Credit Suisse and impaired the remaining fund value of US$3.4 million. In November 2021, Smart invested US$5.0 million in the Focus Fixed Income Asia Defensive fund of Julius Baer. As at December 31, 2023, the fund’s value amounted to US$4.85 million.

(3)

Includes RCBC Redemption Trust Account. See Note 19 – Equity – Redemption of Preferred Stock.


	Financial instruments at amortized cost				Financial instruments at FVPL				Total financial instruments
	(in million pesos)
Assets as at December 31, 2022
Noncurrent:
Financial assets at fair value through profit or loss		—				432				432
Debt instruments at amortized cost – net of current portion		596				—				596
Derivative financial assets – net of current portion		—				81				81
Other financial assets – net of current portion		3,489		(1)		—				3,489
Current:
Cash and cash equivalents		25,211				—				25,211
Short-term investments		129				254		(2)		383
Trade and other receivables		26,255				—				26,255
Current portion of other financial assets		206		(1)		—		(3)		206
Total assets		55,886				767				56,653

Liabilities as at December 31, 2022
Noncurrent:
Interest-bearing financial liabilities – net of current portion		217,288				—				217,288
Lease liabilities – net of current portion		31,958				—				31,958
Derivative financial liabilities – net of current portion		—				190				190
Customers' deposits		2,313				—				2,313
Deferred credits and other noncurrent liabilities		363				—				363
Current:
Accounts payable		101,135				—				101,135
Accrued expenses and other current liabilities		74,227				—				74,227
Current portion of interest-bearing financial liabilities		32,292				—				32,292
Current portion of lease liabilities		10,477				—				10,477
Dividends payable		1,821				—				1,821
Current portion of derivative financial liabilities		—				960				960
Liabilities associated with assets classified as held-for-sale		1,738				—				1,738
Total liabilities		473,612				1,150				474,762
Net liabilities		(417,726	)			(383	)			(418,109	)

(1)

Includes refundable deposits and notes receivables.

(2)

Includes investments in the funds of Credit Suisse and Julius Baer. PLDT withdrew US$6.6 million from the Supply Chain Finance fund of Credit Suisse in 2021. As at December 31, 2021, the fund’s value is US$3.4 million which was fully impaired as at year-end. In November 2021, Smart invested US$5.0 million in the Focus Fixed Income Asia Defensive fund of Julius Baer. As at December 31, 2022, the fund’s value is US$4.5 million.

(3)

Includes RCBC Redemption Trust Account. See Note 19 – Equity – Redemption of Preferred Stock.

The following table sets forth our consolidated offsetting of financial assets and liabilities recognized as at
December 31, 2023 and 2022:


	Gross amounts of recognized financial assets and liabilities		Gross amounts of recognized financial assets and liabilities set-off in the consolidated statements of financial position		Net amount presented in the consolidated statements of financial position
	(in million pesos)
December 31, 2023
Current Financial Assets
Trade and other receivables
Foreign administrations		4,606		3,480		1,126
Domestic carriers		332		145		187
Total		4,938		3,625		1,313
Current Financial Liabilities
Accounts payable
Suppliers and contractors		74,542		24		74,518
Carriers and others		4,713		2,351		2,362
Total		79,255		2,375		76,880

December 31, 2022
Current Financial Assets
Trade and other receivables
Foreign administrations		5,160		4,236		924
Domestic carriers		492		197		295
Total		5,652		4,433		1,219
Current Financial Liabilities
Accounts payable
Suppliers and contractors		98,700		44		98,656
Carriers and others		4,757		2,548		2,209
Total		103,457		2,592		100,865

There are no financial instruments subject to an enforceable master netting arrangement as at December 31, 2023 and 2022.

Below is the list of our consolidated financial assets and liabilities carried at fair value that are classified using a fair value hierarchy as required for our complete sets of consolidated financial statements as at December 31, 2023 and 2022. This classification provides a reasonable basis to illustrate the nature and extent of risks associated with those financial statements.


	2023								2022
	Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)		Total
	(in million pesos)
Noncurrent Financial Assets
Financial assets at FVPL		—		575		3		578		—		407		25		432
Derivative financial assets – net of current portion		—		96		—		96		—		81		—		81
Current Financial Assets
Short-term investments		—		269		—		269		—		254		—		254
Current portion of derivative financial assets		—		—		—		—		—		—		—		-
Current portion of other financial assets		—		—		—		—		—		—		—		—
Total		—		940		3		943		—		742		25		767

Noncurrent Financial Liabilities
Derivative financial liabilities – net of current portion		—		12		—		12		—		190		—		190
Current Financial Liabilities
Current portion of derivative financial liabilities		—		1,021		—		1,021		—		960		—		960
Total		—		1,033		—		1,033		—		1,150		—		1,150

(1)

Fair values determined using observable market inputs that reflect quoted prices in active markets for identical assets or liabilities.

(2)

Fair values determined using inputs other than quoted market prices that are either directly or indirectly observable for the assets or liabilities.

(3)

Fair values determined using discounted values of future cash flows for the assets or liabilities.

As at December 31, 2023 and 2022, there were no transfers into and out of Level 3 fair value measurements.

As at December 31, 2023 and 2022, there were no transfers between Level 1 and Level 2 fair value measurements.

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:

Forward foreign exchange contracts, foreign currency swaps, foreign currency options and interest rate swaps: The fair values were computed as the present value of estimated future cash flows using market U.S. Dollar and Philippine Peso interest rates as at valuation date.

The valuation techniques considered various inputs including the credit quality of counterparties.

Due to the short-term nature of the transactions, the fair value of cash and cash equivalents, short-term investments, trade and other receivables, accounts payable, accrued expenses and other current liabilities and dividends payable approximate their carrying values as at the end of the reporting period.

Our derivative financial instruments are accounted for as either cash flow hedges or transactions not designated as hedges. Cash flow hedges refer to those transactions that hedge our exposure to variability in cash flows attributable to a particular risk associated with a recognized financial asset or liability and exposures arising from forecast transactions. Changes in the fair value of these instruments representing effective hedges are recognized directly in other comprehensive income until the hedged item is recognized in our consolidated income statements. For transactions that are not designated as hedges, any gains or losses arising from the changes in fair value are recognized directly to income for the period.

As at December 31, 2023 and 2022, we have taken into account the counterparties’ credit risks (for derivative assets) and our own non-performance risk (for derivative liabilities) and have included a credit or debit valuation adjustment, as appropriate, by assessing the maximum credit exposure and taking into account market-based inputs which considers the risk of default occurring and corresponding losses once the default event occurs. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

The table below sets out the information about our consolidated derivative financial instruments as at December 31, 2023 and 2022:


									2023					2022
	Original Notional Amount	Trade Date	Underlying Transaction in U.S. Dollar	Termination Date	Weighted Average Hedge Cost		Weighted Average Foreign Exchange Rate		Notional Amount		Net Mark-to- market Gains (Losses) in Php			Notional Amount		Net Mark-to- market Gains (Losses) in Php
	(in millions)		(in millions)						(in millions)
Transactions not designated as hedges:
PLDT
Forward foreign exchange contracts	US$396	Various dates in October to December 2023	U.S. Dollar Liabilities	Various dates in January to June 2024		—	Php56.557		US$396			(448	)	US$257			(353	)
	US$206	Various dates in October to December 2023	U.S. Dollar Liabilities	Various dates in January to June 2024		—	Php56.432			—		—			—		—
Forward exchange options capped forward	US$6	Various dates in October 2021	U.S. Dollar Liabilities	Various dates in April and May 2022		—	Php50.08			—		—			—		—
Foreign exchange options seagull(a)	US$7	June 10, 2022	U.S. Dollar Liabilities	January 9, 2023		—	Php52.64			—		—			7		(7	)
						—	Php52.96			—		—			—		—
						—	Php54.00			—		—			—		—
												(448	)				(360	)
Smart
Forward foreign exchange contracts	US$449	Various dates in June 2023 to December 2023	U.S. Dollar Liabilities	Various dates in January to October 2024		—	Php56.549		US$449			(493	)		—		—
	US$94	Various dates in June 2023 to December 2023	U.S. Dollar Liabilities	Various dates in October 2023 to February 2024		—	Php56.838			—		—			—		—
	US$369	Various dates in July to December 2022	U.S. Dollar Liabilities	Various dates in January to June 2023		—	Php57.08			—		—		US$369			(481	)
	US$157	Various dates in January and February 2023	U.S. Dollar Liabilities	Various dates in February to July 2023		—	Php54.93			—		—			—		—
Subsidized forwards(b)	US$52	Various dates in November 2021	U.S. Dollar Liabilities	Various dates in April and May 2022		—	Php50.38 Php51.65			—		—			—		—
Foreign exchange options seagull(c)	US$15	Various dates in June 2023	U.S. Dollar Liabilities	Various dates in February 2024		—	Php55.94		US$15			(1	)		—		—
	US$71	Various dates in June 2022	U.S. Dollar Liabilities	Various dates in October 2022 to February 2023		—	Php52.82 Php53.37 Php54.46			—		—		US$37			(40	)
												(494	)				(521	)
												(942	)				(881	)
Transactions designated as hedges:
PLDT
Interest rate swaps(d)	US$150	April and June 2015	200 Term Loan	February 25, 2022	2.70%			—		—		—			—		—
Long-term currency swaps(e)	US$27	November 2018 to August 2020	200 MUFG Bank, Ltd.	February 25, 2022	2.15%			—		—		—			—		—
Long-term foreign currency options(f)	US$290	Various dates in July 2020 and February to March 2021	300M Notes 2031	January 23, 2031	1.20%		Php49.61 Php55.28		US$290			(87	)	US$290			(265	)
												(87	)				(265	)
Smart
Long-term currency swaps(g)	US$6	August 2020	100 Mizuho	December 7, 2022	1.99%			—		—		—			—		—
Long-term foreign currency options(h)	US$109	February to April 2021	140 PNB	December 13, 2030	1.63%		Php48.00 Php53.34		US$77			92		US$88			77
												92					77
												5					(188	)
												(937	)				(1,069	)

The main risks arising from our financial instruments are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk. The importance of managing those risks has significantly increased in light of the considerable change and volatility in both the Philippine and international financial markets. Our Board of Directors reviews and approves policies for managing each of these risks, which are summarized below. We also monitor the market price risk arising from all financial instruments.

Our exposure to liquidity risk refers to the risk that our financial requirements, working capital requirements and planned capital expenditures will not be met.

We manage our liquidity profile to be able to finance our operations and capital expenditures, service our maturing debts and meet our other financial obligations. To cover our financing requirements, we use internally generated funds and proceeds from debt and equity issues and sales of certain assets.

As part of our liquidity risk management program, we regularly evaluate our projected and actual cash flows, including our loan maturity profiles, and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, export credit agency-guaranteed facilities, debt capital and equity market issues.

Any excess funds are primarily invested in short-term and principal-protected bank products that provide flexibility of withdrawing the funds anytime. We also allocate a portion of our cash in longer tenor investments such as fixed income securities issued or guaranteed by the Republic of the Philippines, and Philippine banks and corporates and managed funds. We regularly evaluate available financial products and monitor market conditions for opportunities to enhance yields at acceptable risk levels. Our investments are also subject to certain restrictions contained in our debt covenants. Our funding arrangements are designed to keep an appropriate balance between equity and debt and to provide financing flexibility while enhancing our businesses.

Our cash position remains sufficient to support our planned capital expenditure requirements and service our debt and financing obligations; however, we may be required to finance a portion of our future capital expenditures from external financing sources. We have cash and cash equivalents, and short-term investments amounting to Php16,177 million and Php391 million, respectively, as at December 31, 2023, which we can use to meet our short-term liquidity needs.
See Note 15 – Cash and Cash Equivalents.

The following table summarizes the maturity profile of our financial assets based on our consolidated undiscounted claims outstanding as at December 31, 2023 and 2022:


	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in million pesos)
December 31, 2023
Financial instruments at amortized cost:		54,271		50,127		3,530		412		202
Debt instruments at amortized cost		595		200		45		340		10
Other financial assets		4,069		320		3,485		72		192
Temporary cash investments		6,184		6,184		—		—		—
Short-term investments		122		122		—		—		—
Retail subscribers		19,894		19,894		—		—		—
Corporate subscribers		15,934		15,934		—		—		—
Foreign administrations		1,250		1,250		—		—		—
Domestic carriers		188		188		—		—		—
Dealers, agents and others		6,035		6,035		—		—		—
Financial instruments at FVPL:		1,021		443		—		—		578
Financial assets at fair value through profit or loss		578		—		—		—		578
Short-term investments		443		443		—		—		—
Total		55,292		50,570		3,530		412		780

December 31, 2022
Financial instruments at amortized cost:		53,604		48,929		3,740		852		83
Debt instruments at amortized cost		596		—		225		361		10
Other financial assets		4,285		206		3,515		491		73
Temporary cash investments		8,678		8,678		—		—		—
Short-term investments		129		129		—		—		—
Retail subscribers		17,216		17,216		—		—		—
Corporate subscribers		15,151		15,151		—		—		—
Foreign administrations		1,058		1,058		—		—		—
Domestic carriers		296		296		—		—		—
Dealers, agents and others		6,195		6,195		—		—		—
Financial instruments at FVPL:		860		428		—		—		432
Financial assets at fair value through profit or loss		432		—		—		—		432
Short-term investments		428		428		—		—		—
Total		54,464		49,357		3,740		852		515

The following table summarizes the maturity profile of our financial liabilities based on our consolidated contractual undiscounted obligations outstanding as at December 31, 2023 and 2022:


	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in million pesos)
December 31, 2023
Debt(1):		341,848		7,430		77,131		65,342		191,945
Principal		256,927		7,250		43,292		47,648		158,737
Interest		84,921		180		33,839		17,694		33,208
Lease obligations		151,905		36,287		49,856		36,924		28,838
Various trade and other obligations:		151,062		148,560		427		28		2,047
Suppliers and contractors		74,716		74,518		194		4		—
Utilities and related expenses		61,079		61,044		35		—		—
Carriers and others		2,362		2,362		—		—		—
Employee benefits		5,510		5,510		—		—		—
Customer deposits		2,238		—		167		24		2,047
Dividends		1,912		1,912		—		—		—
Others		3,245		3,214		31		—		—
Total contractual obligations		644,815		192,277		127,414		102,294		222,830

December 31, 2022
Debt(1):		320,907		30,001		65,159		55,632		170,115
Principal		251,859		29,203		37,885		41,593		143,178
Interest		69,048		798		27,274		14,039		26,937
Lease obligations		62,216		14,658		13,504		10,591		23,463
Various trade and other obligations:		178,246		175,566		610		38		2,032
Suppliers and contractors		98,972		98,656		307		9		—
Utilities and related expenses		63,613		63,609		4		—		—
Carriers and others		2,209		2,209		—		—		—
Customers’ deposits		2,313		—		252		29		2,032
Employee benefits		6,615		6,615		—		—		—
Dividends		1,821		1,821		—		—		—
Others		2,703		2,656		47		—		—
Total contractual obligations		561,369		220,225		79,273		66,261		195,610

(1)

Consists of long-term and short-term debts, including current portion, gross of unamortized debt discount/premium and debt issuance costs.

See Note 20 – Interest-bearing Financial Liabilities – Long-term Debt for a detailed discussion of our debt.

PLDT Group has various obligations to suppliers for the acquisition of network equipment, contractors for services rendered on various projects, foreign administrations and domestic carriers for the access charges, shareholders for unpaid dividends distributions, employees for benefits and other related obligations, and various business and operational related agreements. Total obligations under these various agreements amounted to approximately Php151,062 million and Php178,246 million as at December 31, 2023 and 2022, respectively. See Note 22 – Accounts Payable and Note 23 – Accrued Expenses and Other Current Liabilities.

Since the last quarter of 2022, we have engaged in discussions with the major network vendors regarding the status of the PLDT Group's capital expenditure commitments and related outstanding balances. These discussions resulted in a number of Settlement and Mutual Release Agreements, or SMRAs, signed between us and the vendors, taking into consideration our program priorities and current business requirements. The significant commitment in respect of major network vendors amounted to about Php33,000 million, net of advances, as a result of the signing of the SMRAs in March 2023. As at December 31, 2023, such commitment was reduced to Php13,700 million, net of advances and deliveries.

Moreover, new purchase orders issued in 2023 to the same major network vendors amounted to Php13,600 million, net of advances and deliveries.

Commitments related to non-major capital expenditure vendors amounted to Php29,500 million, of which Php16,000 million represent the commitments for 2022 and prior years, net of advances and deliveries as of December 31, 2023.

We have no outstanding commercial commitments, in the form of letters of credit, as at December 31, 2023 and 2022.

There are no pledges as collaterals with respect to our financial liabilities as at December 31, 2023 and 2022.

Foreign currency exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The revaluation of our foreign currency-denominated financial assets and liabilities as a result of the appreciation or depreciation of the Philippine Peso is recognized as foreign exchange gains or losses as at the end of the reporting period. The extent of foreign exchange gains or losses is largely dependent on the amount of foreign currency denominated financial assets and liabilities. While a certain percentage of our revenues are either linked to or denominated in U.S. Dollars, a substantial portion of our capital expenditures, a portion of our indebtedness and related interest expense and a portion of our operating expenses are denominated in foreign currencies, mostly in U.S. Dollars. As such, a strengthening or weakening of the Philippine Peso against the U.S. Dollar will decrease or increase in Philippine Peso terms both the principal amount of our foreign currency-denominated debts and the related interest expense, our foreign currency-denominated capital expenditures and operating expenses as well as our U.S. Dollar-linked and U.S. Dollar-denominated revenues. In addition, many of our financial ratios and other financial tests are affected by the movements in the Philippine Peso to U.S. Dollar exchange rate.

To manage our foreign exchange risks and to stabilize our cash flows in order to improve investment and cash flow planning, we enter into forward foreign exchange contracts, currency swap contracts, currency option contracts and other hedging products aimed at reducing and/or managing the adverse impact of changes in foreign exchange rates on our operating results and cash flows. Further details of the risk management strategy are recognized in our hedge designation documentation. We use forward foreign exchange purchase contracts, currency swap contracts and currency option contracts to manage the foreign currency risks associated with our foreign currency-denominated financial liabilities. We accounted for these instruments as either cash flow hedges, wherein changes in the fair value are recognized in our consolidated other comprehensive income until the hedged transaction affects our consolidated income statements or transactions not designated as hedges, wherein changes in the fair value are recognized directly as income or expense for the year.

The following table shows our consolidated foreign currency-denominated monetary financial assets and liabilities and their Philippine Peso equivalents as at December 31, 2023 and 2022:


	2023				2022
	U.S. Dollar		Php(1)		U.S. Dollar		Php(2)
	(in millions)
Noncurrent Financial Assets
Derivative financial assets – net of current portion		2		96		1		81
Other financial assets – net of current portion		—		—		—		1
Total noncurrent financial assets		2		96		1		82
Current Financial Assets
Cash and cash equivalents		76		4,232		287		16,002
Short-term investments		5		269		5		254
Trade and other receivables – net		115		6,411		132		7,385
Current portion of other financial assets		—		12		—		12
Total current financial assets		196		10,924		424		23,653
Total Financial Assets		198		11,020		425		23,735
Noncurrent Financial Liabilities
Interest-bearing financial liabilities – net of current portion		681		37,719		719		40,153
Derivative financial liabilities – net of current portion		—		12		3		190
Other noncurrent liabilities		—		27		—		27
Total noncurrent financial liabilities		681		37,758		722		40,370
Current Financial Liabilities
Accounts payable		1,314		72,797		1,339		74,720
Accrued expenses and other current liabilities		207		11,481		218		12,184
Current portion of interest-bearing financial liabilities		39		2,149		39		2,165
Current portion of derivative financial liabilities		18		1,021		17		960
Total current financial liabilities		1,578		87,448		1,613		90,029
Total Financial Liabilities		2,259		125,206		2,335		130,399

(1)

The exchange rate used to convert the U.S. Dollar amounts into Philippine Peso was Php55.42 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the Bankers Association of the Philippines, or BAP, as at December 31, 2023.

(2)

The exchange rate used to convert the U.S. Dollar amounts into Philippine Peso was Php55.82 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the BAP as at December 31, 2022.

As at March 21, 2024, the Philippine Peso-U.S. Dollar exchange rate was Php56.03 to US$1.00. Using this exchange rate, our consolidated net foreign currency-denominated financial liabilities would have increased in Philippine Peso terms by
Php1,247 million as at December 31, 2023.

Approximately 15% and 17% of our total consolidated debts (net of consolidated debt discount) was denominated in U.S. Dollars as at December 31, 2023 and 2022, respectively. Our consolidated foreign currency-denominated debt decreased to Php39,479 million as at December 31, 2023 from Php41,894 million as at December 31, 2022. See Note 20 – Interest-bearing Financial Liabilities. The aggregate notional amount of our consolidated outstanding long-term principal only-currency swap contracts, long-term foreign currency options and short-term forwards allocated for debt were US$485 million and US$441 million as at December 31, 2023 and 2022, respectively. Consequently, the unhedged portion of our consolidated debt amounts were approximately 5% (or 5%, net of consolidated U.S. Dollar cash balances allocated for debt) as at December 31, 2023 and 7% (or 5%, net of consolidated U.S. Dollar cash balances allocated for debt) as at
December 31, 2022.

Approximately 8%, 10% and 9% of our consolidated revenues were denominated in U.S. Dollars and/or were linked to U.S. Dollars for the years ended December 31, 2023, 2022 and 2021, respectively. Approximately 6%, 5% and 7% of our consolidated expenses were denominated in U.S. Dollars and/or linked to the U.S. Dollar for the years ended
December 31, 2023, 2022 and 2021, respectively. In this respect, the higher weighted average exchange rate of the Philippine Peso against the U.S. Dollar increased our revenues and expenses, and consequently, affects our cash flow from operations in Philippine Peso terms. In view of the anticipated continued decline in dollar-denominated/dollar-linked revenues, which provide a natural hedge against our foreign currency exposure, we are progressively refinancing our dollar-denominated debts in Philippine Pesos.

The Philippine Peso depreciated by 0.72% against the U.S. Dollar to Php55.42 to US$1.00 as at December 31, 2023 from Php55.82 to US$1.00 as at December 31, 2022. As a result of our consolidated foreign exchange movements, as well as the amount of our consolidated outstanding net foreign currency financial assets and liabilities, we recognized net consolidated foreign exchange gains of Php1,153 million for the year ended December 31, 2023 and net foreign exchange losses of Php4,685 million Php3,890 million for the years ended December 31, 2022 and 2021, respectively.

Management conducted a survey among our banks to determine the outlook of the Philippine Peso-U.S. Dollar exchange rate until March 31, 2024. Our outlook is that the Philippine Peso-U.S. Dollar exchange rate may weaken/strengthen by 1.95% as compared to the exchange rate of Php55.42 to US$1.00 as at December 31, 2023. If the Philippine Peso-U.S. Dollar exchange rate had weakened/strengthened by 1.95% as at December 31, 2023, with all other variables held constant, consolidated profit after tax for the year ended December 31, 2023 and stockholders’ equity as at December 31, 2023 would

have been approximately Php2,341 million and Php27 million, respectively, lower/higher, mainly as a result of consolidated foreign exchange gains and losses on conversion of U.S. Dollar-denominated net assets/liabilities and mark-to-market valuation of derivative financial instruments.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Our exposure to the risk of changes in market interest rates relates primarily to our long-term debt obligations with floating interest rates.

Our policy is to manage interest cost through a mix of fixed and variable rate debts. We evaluate the fixed to floating ratio of our loans in line with movements of relevant interest rates in the financial markets. Based on our assessment, new financing will be priced either on a fixed or floating rate basis. We enter into interest rate swap agreements in order to manage our exposure to interest rate fluctuations. Further details of the risk management strategy are recognized in our hedge designation documentation. We make use of hedging instruments and structures solely for reducing or managing financial risk associated with our debt obligations and not for trading purposes.

The hedging instruments have no impact on our consolidated statements of financial position as at December 31, 2023 and 2022.

The hedged items on our consolidated statements of financial position has no impact as at December 31, 2023 and 2022.

The cash flow hedge on our consolidated statements of financial position has no impact as at December 31, 2023 and 2022.

The following tables set out the carrying amounts, by maturity, of our financial instruments that are expected to have exposure on interest rate risk as at December 31, 2023 and 2022. Financial instruments that are not subject to interest rate risk were not included in the table.

As at December 31, 2023


	In U.S. Dollars																			Fair Value
	Below 1 year		1-2 years		2-3 years		3-5 years		Over 5 years			Total		In Php		Discount/ Debt Issuance Cost In Php		Carrying Value In Php		In U.S. Dollar		In Php
																(in millions)
Assets:
Debt Instruments at Amortized Cost
Philippine Peso		4		—		—		6		—			10		595		—		595		10		587
Interest rate	2.3750% to 2.9000%		4.2500% to 4.2500%		6.2500% to 6.2500%		4.6250% to 4.8750%			6.5000	%		—		—		—		—		—		—
Cash in Bank
U.S. Dollar		15		—		—		—		—			15		850		—		850		15		850
Interest rate	0.0500% to 0.5000%			—		—		—		—			—		—		—		—		—		—
Philippine Peso		128		—		—		—		—			128		7,082		—		7,082		128		7,082
Interest rate	0.0500% to 1.5000%			—		—		—		—			—		—		—		—		—		—
Temporary Cash Investments
U.S. Dollar		35		—		—		—		—			35		1,933		—		1,933		35		1,933
Interest rate	4.9000% to 5.1250%			—		—		—		—			—		—		—		—		—		—
Philippine Peso		77		—		—		—		—			77		4,251		—		4,251		77		4,251
Interest rate	0.2500% to 6.2500%			—		—		—		—			—		—		—		—		—		—
Short-term Investments
Philippine Peso		2		—		—		—		—			2		122		—		122		2		122
Interest rate	0.5000% to 6.1000%			—		—		—		—			—		—		—		—		—		—
		261		—		—		6		—			267		14,833		—		14,833		267		14,825

Liabilities:
Long-term Debt
Fixed Rate
U.S. Dollar Notes		—		—		—		—		600			600		33,251		560		32,691		466		25,845
Interest rate		—		—		—		—	2.5000% to 3.4500%				—		—		—		—		—		—
Philippine Peso		72		377		227		564		334			1,574		87,225		748		86,477		1,471		81,545
Interest rate	5.1021% to 5.2813%		4.0000% to 5.3500%		4.0000% to 5.3500%		4.0000% to 5.2000%		4.0000% to 5.1560%				—		—		—		—		—		—
Variable Rate
U.S. Dollar Loans		25		28		14		42		14			123		6,816		28		6,788		123		6,816
Interest rate	SOFR + 1.47826%		SOFR + 1.31161%		SOFR + 1.31161%		SOFR + 1.31161%		SOFR + 1.31161%				—		—		—		—		—		—
Philippine Peso		33		99		36		254		1,916			2,338		129,635		793		128,842		2,339		129,635
Interest rate	0.5000% over PHP BVAL		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 0.9000% over PHP BVAL (floor rate 4.5000% to 4.6250%)				—		—		—		—		—		—
Short-term Debt
Notes Payable
		130		504		277		860		2,864			4,635		256,927		2,129		254,798		4,399		243,841

As at December 31, 2022


	In U.S. Dollars																				Fair Value
	Below 1 year		1-2 years		2-3 years			3-5 years		Over 5 years			Total		In Php		Discount/ Debt Issuance Cost In Php		Carrying Value In Php		In U.S. Dollar		In Php
																	(in millions)
Assets:
Debt Instruments at Amortized Cost
Philippine Peso		—		4		1			6		—			11		596		—		596		10		573
Interest rate		—	2.3750% to 2.9000%			4.2500	%	4.6250% to 6.2500%			6.5000	%		—		—		—		—		—		—
Cash in Bank
U.S. Dollar		23		—		—			—		—			23		1,264		—		1,264		23		1,264
Interest rate	0.0500% to 1.0000%			—		—			—		—			—		—
Philippine Peso		123		—		—			—		—			123		6,863		—		6,863		123		6,863
Interest rate	0.0500% to 1.5000%			—		—			—		—			—		—		—		—		—		—
Temporary Cash Investments
U.S. Dollar		127		—		—			—		—			127		7,092		—		7,092		127		7,092
Interest rate	3.5000% to 4.7500%			—		—			—		—			—		—
Philippine Peso		28		—		—			—		—			28		1,586		—		1,586		28		1,586
Interest rate	2.8000% to 5.0000%			—		—			—		—			—		—		—		—		—		—
Short-term Investments
Philippine Peso		2		—		—			—		—			2		129		—		129		2		129
Interest rate	0.5000% to 2.0000%			—		—			—		—			—		—
		303		4		1			6		—			314		17,530		—		17,530		313		17,507

Liabilities:
Long-term Debt
Fixed Rate
U.S. Dollar Notes		—		—		—			—		600			600		33,489		597		32,892		435		24,316
Interest rate		—		—		—			—	2.5000% to 3.4500%				—		—		—		—		—		—
Philippine Peso		319		124		340			576		540			1,899		106,018		919		105,099		1,744		97,327
Interest rate	3.9500% to 4.0000%		3.9500% to 5.1560%		4.0000% to 5.3500%			4.0000% to 5.3500%		4.0000% to 5.2000%				—		—		—		—		—		—
Variable Rate
U.S. Dollar Loans		25		53		14			28		42			162		9,042		40		9,002		162		9,042
Interest rate	LIBOR + 1.0500%		LIBOR + 1.0500%		LIBOR + 1.0500%			LIBOR + 1.0500%		LIBOR + 1.0500%				—		—		—		—		—		—
Philippine Peso		34		93		55			141		1,383			1,706		93,310		723		92,587		1,672		93,310
Interest rate		—	0.5000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)			0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)		0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%)				—		—		—		—		—		—
Short-term Debt
Notes Payable
Philippine Peso		179		—		—			—		—			179		10,000		—		10,000		179		10,000
Interest rate	2.6000 to 5.1600%			—		—			—		—			—		—		—		—		—		—
		557		270		409			745		2,565			4,546		251,859		2,279		249,580		4,192		233,995

Fixed rate financial instruments are subject to fair value interest rate risk while floating rate financial instruments are subject to cash flow interest rate risk.

Repricing of floating rate financial instruments is mostly done on intervals of three months or up to five years. Interest on fixed rate financial instruments is fixed until maturity of the particular instrument.

Approximately 53% and 41% of our consolidated debts (net of consolidated debt discount) were variable rate debts as at December 31, 2023 and 2022, respectively. Our consolidated variable rate debt increased to Php135,631 million as at December 31, 2023 from Php101,590 million as at December 31, 2022. Considering the aggregate notional amount of our consolidated outstanding long-term interest rate swap contracts of nil as at December 31, 2023 and 2022, approximately 47% and 59% of our consolidated debts were fixed as at December 31, 2023 and 2022, respectively.

Management conducted a survey among our banks to determine the outlook of the U.S. Dollar and Philippine Peso interest rates until March 31, 2024. Our outlook is that the U.S. Dollar and Philippine Peso interest rates may move 5 basis points, or bps, and 25 bps higher/lower, respectively, as compared to levels as at December 31, 2023. If the U.S. Dollar interest rates had been 5 bps higher/lower as compared to market levels as at December 31, 2023, with all other variables held constant, consolidated profit after tax for the year ended December 31, 2023 and stockholders’ equity as at December 31, 2023 would have been approximately Php4 million and Php4 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions. If the Philippine Peso interest rates had been 25 bps higher/lower as compared to market levels as at December 31, 2023, with all other variables held constant, consolidated profit after tax for the year December 31, 2023 and stockholders’ equity as at December 31, 2023 would have been approximately Php25 million and Php14 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions.

Credit risk is the risk that we will incur a loss arising from our customers, clients or counterparties that fail to discharge their contracted obligations. We manage and control credit risk by setting limits on the amount of risk we are willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

We trade only with recognized and creditworthy third parties. It is our 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 on-going basis to reduce our exposure to bad debts.

We established a credit quality review process to provide regular identification of changes in the creditworthiness of counterparties. Our credit quality review process allows us to assess the potential loss as a result of the risks to which we are exposed and allow us to take corrective actions.

The table below shows the maximum exposure to credit risk for the components of our consolidated statements of financial position, including derivative financial instruments as at December 31, 2023 and 2022. The maximum exposure is shown gross before both the effect of mitigation through use of master netting and collateral arrangements. The extent to which collateral and other credit enhancements mitigate the maximum exposure to credit risk is described in the footnotes to the table.

For financial assets recognized on our consolidated statements of financial position as at December 31, 2023 and 2022, the gross exposure to credit risk equal their carrying amount.

For financial guarantees granted, the maximum exposure to credit risk is the maximum amount that we would have to pay if the guarantees are called upon. For loan commitments and other credit related commitments that are irrevocable over the life of the respective facilities, the maximum exposure to credit risk is the full amount of the committed facilities.


	December 31, 2023
	Stage 1 12-Month ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
	(in million pesos)
High grade		20,424		11,070		—		31,494
Standard grade		271		3,683		—		3,954
Substandard grade		—		11,333		—		11,333
Default		442		4,190		13,025		17,657
Gross carrying amount		21,137		30,276		13,025		64,438
Less allowance		442		4,190		13,025		17,657
Carrying amount		20,695		26,086		—		46,781

	December 31, 2022
	Stage 1 12-Month ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
	(in million pesos)
High grade		29,328		12,380		—		41,708
Standard grade		303		4,445		—		4,748
Substandard grade		—		9,430		—		9,430
Default		764		4,236		9,425		14,425
Gross carrying amount		30,395		30,491		9,425		70,311
Less allowance		764		4,236		9,425		14,425
Carrying amount		29,631		26,255		—		55,886

Maximum exposure to credit risk after collateral held or other credit enhancements

Collateral held as security for financial assets depends on the nature of the instrument. Debt investment securities are generally unsecured. Estimates of fair value are based on the value of collateral assessed at the time of borrowing and are regularly updated according to internal lending policies and regulatory guidelines. Generally, collateral is not held over loans and advances to us except for reverse repurchase agreements. Collateral usually is not held against investment securities, and no such collateral was held as at December 31, 2023 and 2022.

Our policies regarding obtaining collateral have not significantly changed during the reporting period and there has been no significant change in the overall quality of the collateral held by us during the year.

We have not identified significant risk concentrations arising from the nature, type or location of collateral and other credit enhancements held against our credit exposures.

An analysis of the maximum exposure to credit risk for the components of our consolidated statements of financial position, including derivative financial instruments as at December 31, 2023 and 2022:


	2023
	Gross Maximum Exposure		Collateral and Other Credit Enhancements*		Net Maximum Exposure
	(in million pesos)
Financial instruments at amortized cost:		46,781		521		46,260
Debt instruments at amortized cost		595		—		595
Other financial assets		3,801		—		3,801
Cash and cash equivalents		16,177		146		16,031
Short-term investments		122		—		122
Corporate subscribers		9,988		338		9,650
Retail subscribers		10,196		37		10,159
Foreign administrations		1,126		—		1,126
Domestic carriers		187		—		187
Dealers, agents and others		4,589		—		4,589
Financial instruments at FVPL:		943		—		943
Financial assets at FVPL		578		—		578
Long-term foreign currency options		96		—		96
Short-term investments		269		—		269
Total		47,724		521		47,203

* Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31, 2023.


	2022
	Gross Maximum Exposure		Collateral and Other Credit Enhancements*		Net Maximum Exposure
	(in million pesos)
Financial instruments at amortized cost:		55,886		505		55,381
Debt instruments at amortized cost		596		—		596
Other financial assets		3,695		—		3,695
Cash and cash equivalents		25,211		105		25,106
Short-term investments		129		—		129
Retail subscribers		10,327		46		10,281
Corporate subscribers		10,052		354		9,698
Foreign administrations		924		—		924
Domestic carriers		295		—		295
Dealers, agents and others		4,657		—		4,657
Financial instruments at FVPL:		767		—		767
Financial assets at FVPL		432		—		432
Long-term foreign currency options		81		—		81
Short-term investments		254		—		254
Total		56,653		505		56,148

* Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31, 2022.

The table below provides information regarding the credit quality by class of our financial assets according to our credit ratings of counterparties as at December 31, 2023 and 2022:


			Neither past due nor credit impaired				Past due but not
	Total		Class A(1)		Class B(2)		credit impaired		Impaired
	(in million pesos)
December 31, 2023
Financial instruments at amortized cost:		64,264		31,494		3,954		11,333		17,483
Debt instruments at amortized cost		595		595		—		—		—
Other financial assets		4,069		3,800		1		—		268
Cash and cash equivalents		16,177		15,907		270		—		—
Short-term investments		122		122		—		—		—
Retail subscribers		19,894		8,083		266		1,847		9,698
Corporate subscribers		15,934		2,341		1,390		6,257		5,946
Foreign administrations		1,250		90		529		507		124
Domestic carriers		188		1		92		94		1
Dealers, agents and others		6,035		555		1,406		2,628		1,446
Financial instruments at FVPL:		1,117		701		242		—		174
Financial assets at FVPL		578		336		242		—		—
Long-term foreign currency options		96		96		—		—		—
Short-term investments		443		269		—		—		174
Total		65,381		32,195		4,196		11,333		17,657

December 31, 2022
Financial instruments at amortized cost:		70,137		41,708		4,748		9,430		14,251
Debt instruments at amortized cost		596		596		—		—		—
Other financial assets		4,285		3,694		1		—		590
Cash and cash equivalents		25,211		24,909		302		—		—
Short-term investments		129		129		—		—		—
Retail subscribers		17,216		7,782		458		2,087		6,889
Corporate subscribers		15,151		3,959		1,543		4,550		5,099
Foreign administrations		1,058		289		210		425		134
Domestic carriers		296		111		30		154		1
Dealers, agents and others		6,195		239		2,204		2,214		1,538
Financial instruments at FVPL:		941		604		163		—		174
Financial assets at FVPL		432		269		163		—		—
Long-term foreign currency options		81		81		—		—		—
Short-term investments		428		254		—		—		174
Total		71,078		42,312		4,911		9,430		14,425

(1)

This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts as at report date; and deposits or placements to counterparties with good credit rating or bank standing financial review.

(2)

This includes medium risk and average paying customer accounts with no overdue accounts as at report date, and new customer accounts for which sufficient credit history has not been established; and deposits or placements to counterparties not classified as Class A.

The aging analysis of past due but not impaired class of financial assets as at December 31, 2023 and 2022 are as follows:


					Past due but not credit impaired
	Total		Neither past due nor credit impaired		1-60 days		61-90 days		Over 91 days		Impaired
	(in million pesos)
December 31, 2023
Financial instruments at amortized cost:		64,264		35,448		3,505		618		7,210		17,483
Debt instruments at amortized cost		595		595		—		—		—		—
Other financial assets		4,069		3,801		—		—		—		268
Cash and cash equivalents		16,177		16,177		—		—		—		—
Short-term investments		122		122		—		—		—		—
Retail subscribers		19,894		8,349		1,603		223		21		9,698
Corporate subscribers		15,934		3,731		1,500		248		4,509		5,946
Foreign administrations		1,250		619		164		87		256		124
Domestic carriers		188		93		39		20		35		1
Dealers, agents and others		6,035		1,961		199		40		2,389		1,446
Financial instruments at FVPL:		1,117		943		—		—		—		174
Financial assets at FVPL		578		578		—		—		—		—
Long-term foreign currency options		96		96		—		—		—		—
Short-term investments		443		269		—		—		—		174
Total		65,381		36,391		3,505		618		7,210		17,657

December 31, 2022
Financial instruments at amortized cost:		70,137		46,456		3,289		1,709		4,432		14,251
Debt instruments at amortized cost		596		596		—		—		—		—
Other financial assets		4,285		3,695		—		—		—		590
Cash and cash equivalents		25,211		25,211		—		—		—		—
Short-term investments		129		129		—		—		—		—
Retail subscribers		17,216		8,240		1,439		372		276		6,889
Corporate subscribers		15,151		5,502		1,615		1,214		1,721		5,099
Foreign administrations		1,058		499		37		14		374		134
Domestic carriers		296		141		72		26		56		1
Dealers, agents and others		6,195		2,443		126		83		2,005		1,538
Financial instruments at FVPL:		941		767		—		—		—		174
Financial assets at FVPL		432		432		—		—		—		—
Long-term foreign currency options		81		81		—		—		—		—
Short-term investments		428		254		—		—		—		174
Total		71,078		47,223		3,289		1,709		4,432		14,425

We aim to achieve an optimal capital structure in pursuit of our business objectives which include maintaining healthy capital ratios and strong credit ratings and maximizing shareholder value.

Our approach to capital management focuses on balancing the allocation of cash and the incurrence of debt as we seek new investment opportunities for new businesses and growth areas. On August 5, 2014, the PLDT Board of Directors approved an amendment to our dividend policy, increasing the dividend payout rate to 75% from 70% of our core EPS as regular dividends. However, in view of our elevated capital expenditures to build-out a robust, superior network to support the continued growth of data traffic, plans to invest in new adjacent businesses that will complement the current business and provide future sources of profits and dividends, and management of our cash and gearing levels, the PLDT Board of Directors approved on August 2, 2016, the amendment of our dividend policy, reducing the regular dividend payout to 60% of core EPS. Starting 2019, we based our dividend payout on telco core income. In declaring dividends, we take into consideration the interest of our shareholders, as well as our working capital, capital expenditures and debt servicing requirements. The retention of earnings may be necessary to meet the funding requirements of our business expansion and development programs.

As part of the dividend policy, in the event no investment opportunities arise, we may consider the option of returning additional cash to our shareholders in the form of special dividends or share buybacks. Philippine corporate regulations prescribe, however, that we can only pay out dividends or make capital distribution up to the amount of our unrestricted retained earnings.

Some of our debt instruments contain covenants that impose maximum leverage ratios. In addition, our credit ratings from the international credit ratings agencies are based on our ability to remain within certain leverage ratios.

No changes were made in our objectives, policies or processes for managing capital during the years ended
December 31, 2023, 2022 and 2021.