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Property and Equipment | 12 Months Ended
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Dec. 31, 2018
Disclosure Of Property Plant And Equipment [Abstract] |
Property and Equipment |
9. | Property and Equipment
Changes in property and equipment account for the years ended December 31, 2018 and 2017 are as follows:
|  | Cable and wire facilities |  |  | Central office equipment |  |  | Cellular facilities |  |  | Buildings and improvements |  |  | Vehicles, aircraft, furniture and other network equipment |  |  | Communications satellite |  |  | Information origination and termination equipment |  |  | Land and land improvements |  |  |  |  | Property under construction |  |  | Total |
|  | (in million pesos) |
As at December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  |  | 196,652 |  |  |  | 115,461 |  |  |  | 202,581 |  |  |  | 25,914 |  |  |  | 55,973 |  |  |  | 966 |  |  |  | 14,596 |  |  |  | 3,440 |  |  |  |  |  | 50,070 |  |  |  | 665,653 |
Accumulated depreciation, impairment and amortization |  |  | (148,622 | ) |  |  | (96,793 | ) |  |  | (138,189 | ) |  |  | (16,992 | ) |  |  | (48,300 | ) |  |  | (966 | ) |  |  | (12,338 | ) |  |  | (265 | ) |  |  |  |  | — |  |  |  | (462,465 | )
Net book value |  |  | 48,030 |  |  |  | 18,668 |  |  |  | 64,392 |  |  |  | 8,922 |  |  |  | 7,673 |  |  |  | — |  |  |  | 2,258 |  |  |  | 3,175 |  |  |  |  |  | 50,070 |  |  |  | 203,188 |
Year ended December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net book value at beginning of the year |  |  | 48,030 |  |  |  | 18,668 |  |  |  | 64,392 |  |  |  | 8,922 |  |  |  | 7,673 |  |  |  | — |  |  |  | 2,258 |  |  |  | 3,175 |  |  |  |  |  | 50,070 |  |  |  | 203,188 |
Additions (Note 4) |  |  | 3,410 |  |  |  | 687 |  |  |  | 6,512 |  |  |  | 159 |  |  |  | 2,682 |  |  |  | — |  |  |  | 1,878 |  |  |  | 1 |  |  |  |  |  | 24,970 |  |  |  | 40,299 |
Disposals/Retirements |  |  | (8 | ) |  |  | — |  |  |  | (123 | ) |  |  | (38 | ) |  |  | (316 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | (134 | ) |  |  | (619 | )
Reclassifications (Note 13) |  |  | 5 |  |  |  | 3 |  |  |  | — |  |  |  | 3 |  |  |  | (7 | ) |  |  | — |  |  |  | — |  |  |  | 14 |  |  |  |  |  | (143 | ) |  |  | (125 | )
Impairment losses recognized during the year (Note 5) |  |  | — |  |  |  | — |  |  |  | (389 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | (3,524 | ) |  |  | (3,913 | )
Transfers and others |  |  | 7,612 |  |  |  | 3,945 |  |  |  | 8,031 |  |  |  | 1,285 |  |  |  | 1,959 |  |  |  | — |  |  |  | 1,343 |  |  |  | 3 |  |  |  |  |  | (24,178 | ) |  |  | — |
Translation differences charged directly to cumulative translation adjustments |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (1 | ) |  |  | (4 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | (6 | )
Depreciation of revaluation increment on investment properties transferred to property and equipment charged to other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | (2 | )
Depreciation and amortization |  |  | (11,594 | ) |  |  | (5,340 | ) |  |  | (28,242 | ) |  |  | (1,274 | ) |  |  | (4,106 | ) |  |  | — |  |  |  | (1,357 | ) |  |  | (2 | ) |  |  |  |  | — |  |  |  | (51,915 | )
Net book value at end of the year |  |  | 47,455 |  |  |  | 17,962 |  |  |  | 50,181 |  |  |  | 9,054 |  |  |  | 7,881 |  |  |  | — |  |  |  | 4,122 |  |  |  | 3,191 |  |  |  |  |  | 47,061 |  |  |  | 186,907 |
As at December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  |  | 207,220 |  |  |  | 119,642 |  |  |  | 209,504 |  |  |  | 27,076 |  |  |  | 58,964 |  |  |  | — |  |  |  | 17,595 |  |  |  | 3,458 |  |  |  |  |  | 50,585 |  |  |  | 694,044 |
Accumulated depreciation, impairment and amortization |  |  | (159,765 | ) |  |  | (101,680 | ) |  |  | (159,323 | ) |  |  | (18,022 | ) |  |  | (51,083 | ) |  |  | — |  |  |  | (13,473 | ) |  |  | (267 | ) |  |  |  |  | (3,524 | ) |  |  | (507,137 | )
Net book value |  |  | 47,455 |  |  |  | 17,962 |  |  |  | 50,181 |  |  |  | 9,054 |  |  |  | 7,881 |  |  |  | — |  |  |  | 4,122 |  |  |  | 3,191 |  |  |  |  |  | 47,061 |  |  |  | 186,907 |
Year ended December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net book value at beginning of the year |  |  | 47,455 |  |  |  | 17,962 |  |  |  | 50,181 |  |  |  | 9,054 |  |  |  | 7,881 |  |  |  | — |  |  |  | 4,122 |  |  |  | 3,191 |  |  |  |  |  | 47,061 |  |  |  | 186,907 |
Additions (Note 4) |  |  | 1,278 |  |  |  | 565 |  |  |  | 758 |  |  |  | 120 |  |  |  | 1,158 |  |  |  | — |  |  |  | 2,107 |  |  |  | — |  |  |  |  |  | 52,504 |  |  |  | 58,490 |
Disposals/Retirements |  |  | (10 | ) |  |  | (27 | ) |  |  | (60 | ) |  |  | (140 | ) |  |  | (95 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | (9 | ) |  |  | (341 | )
Reclassifications (Note 13) |  |  | 19 |  |  |  | (1 | ) |  |  | — |  |  |  | 127 |  |  |  | (23 | ) |  |  | — |  |  |  | — |  |  |  | 1,117 |  |  |  |  |  | — |  |  |  | 1,239 |
Transfers and others |  |  | 10,409 |  |  |  | 8,237 |  |  |  | 37,881 |  |  |  | 265 |  |  |  | 1,465 |  |  |  | — |  |  |  | 1,176 |  |  |  | — |  |  |  |  |  | (59,433 | ) |  |  | — |
Translation differences charged directly to cumulative translation adjustments |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 1 |  |  |  | (3 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | 1 |
Deconsolidation of a subsidiary |  |  | — |  |  |  | — |  |  |  | (65 | ) |  |  | (794 | ) |  |  | (273 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | (1,132 | )
Impairment losses recognized during the year (Note 5) |  |  | (299 | ) |  |  | (292 | ) |  |  | (858 | ) |  |  | (480 | ) |  |  | (29 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | (1,958 | )
Depreciation of revaluation increment on investment properties transferred to property and equipment charged to other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  | (2 | )
Depreciation and amortization |  |  | (11,381 | ) |  |  | (10,480 | ) |  |  | (17,499 | ) |  |  | (2,162 | ) |  |  | (3,382 | ) |  |  | — |  |  |  | (2,334 | ) |  |  | (2 | ) |  |  |  |  | — |  |  |  | (47,240 | )
Net book value at end of the year |  |  | 47,471 |  |  |  | 15,967 |  |  |  | 70,338 |  |  |  | 5,989 |  |  |  | 6,699 |  |  |  | — |  |  |  | 5,071 |  |  |  | 4,306 |  |  |  |  |  | 40,123 |  |  |  | 195,964 |
As at December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  |  | 217,773 |  |  |  | 128,321 |  |  |  | 217,164 |  |  |  | 26,546 |  |  |  | 58,711 |  |  |  | — |  |  |  | 20,823 |  |  |  | 4,576 |  |  |  |  |  | 40,123 |  |  |  | 714,037 |
Accumulated depreciation, impairment and amortization |  |  | (170,302 | ) |  |  | (112,354 | ) |  |  | (146,826 | ) |  |  | (20,557 | ) |  |  | (52,012 | ) |  |  | — |  |  |  | (15,752 | ) |  |  | (270 | ) |  |  |  |  | — |  |  |  | (518,073 | )
Net book value |  |  | 47,471 |  |  |  | 15,967 |  |  |  | 70,338 |  |  |  | 5,989 |  |  |  | 6,699 |  |  |  | — |  |  |  | 5,071 |  |  |  | 4,306 |  |  |  |  |  | 40,123 |  |  |  | 195,964 |
Interest capitalized to property and equipment that qualified as borrowing costs amounted to Php1,524 million, Php816 million and Php566 million for the years ended December 31, 2018, 2017 and 2016, respectively. See Note 5 – Income and Expenses – Financing Costs. The average interest capitalization rate used was approximately 5% each for the years ended December 31, 2018, 2017 and 2016. Our net foreign exchange differences, which qualified as borrowing costs, amounted to Php411 million, Php106 million and Php111 million for the years ended December 31, 2018, 2017 and 2016, respectively. The cost of fully depreciated property and equipment that are still being used in the Group’s operations amounted to Php171,867 million and Php196,612 million as at December 31, 2018 and 2017, respectively. As at December 31, 2018 and 2017, the estimated useful lives of our property and equipment are estimated as follows:
Cable and wire facilities |  | 10 – 15 years
Central office equipment |  | 3 – 15 years
Cellular facilities |  | 3 – 10 years
Buildings |  | 25 – 50 years
Vehicles, aircraft, furniture and other network equipment |  | 3 – 7 years
Information origination and termination equipment |  | 3 – 5 years
Leasehold improvements |  | 3 – 5 years or the term of the lease, which ever is shorter
Land improvements |  | 10 years
Impairment of Certain Wireless Network Equipment and Facilities In December 2017, Smart and DMPI recognized an impairment loss of Php3,913 million pertaining to network improvement project involving spectrum refarm and long-term evolution rollout. These assets include Radio Access Network, or RAN, equipment such as base transceiver sets, base station controllers, access radios, antennas, radio network controllers, power and related support facilities, among others, including software licenses and implementation services affecting the Quezon City and Marikina areas. In 2018, Digitel and DMPI recognized an impairment loss amounting to Php1,096 million and Php862 million, respectively, as a result of the full migration of fixed line subscribers to PLDT network for Digitel and continued network convergence strategy for DMPI. See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Impairment of non-financial assets.

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