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Property and Equipment | 12 Months Ended
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Dec. 31, 2020
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, 2020 and 2019 are as follows:
|  | Cable and wire facilities |  |  | Central equipment |  |  | Network facilities |  |  | Buildings |  |  | Vehicles, furniture and other network equipment |  |  | Information origination and termination equipment |  |  | Land improvements |  |  | IT systems and platforms |  |  | Security platforms |  |  | Property under construction |  |  | Total |
|  | (in million pesos) |
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 |
Year ended December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net book value at beginning of the year |  |  | 47,471 |  |  |  | 15,967 |  |  |  | 70,338 |  |  |  | 5,989 |  |  |  | 6,699 |  |  |  | 5,071 |  |  |  | 4,306 |  |  |  | — |  |  |  | — |  |  |  | 40,123 |  |  |  | 195,964 |
Effect of adoption of IFRS 16 |  |  | — |  |  |  | — |  |  |  | (244 | ) |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (245 | )
Net book value at the beginning of the year (as restated) |  |  | 47,471 |  |  |  | 15,967 |  |  |  | 70,094 |  |  |  | 5,988 |  |  |  | 6,699 |  |  |  | 5,071 |  |  |  | 4,306 |  |  |  | — |  |  |  | — |  |  |  | 40,123 |  |  |  | 195,719 |
Additions (Note 4) |  |  | 1,448 |  |  |  | 856 |  |  |  | 557 |  |  |  | 176 |  |  |  | 3,804 |  |  |  | 2,987 |  |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | 63,040 |  |  |  | 72,871 |
Disposals/Retirements |  |  | (24 | ) |  |  | — |  |  |  | (99 | ) |  |  | (3 | ) |  |  | (109 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (77 | ) |  |  | (312 | )
Reclassifications |  |  | (11,066 | ) |  |  | (20,057 | ) |  |  | 24,693 |  |  |  | (5 | ) |  |  | (2,161 | ) |  |  | 1,227 |  |  |  | — |  |  |  | 6,529 |  |  |  | 16 |  |  |  | (30 | ) |  |  | (854 | )
Transfers and others |  |  | 10,374 |  |  |  | 7,720 |  |  |  | 32,290 |  |  |  | 541 |  |  |  | 1,247 |  |  |  | 4,696 |  |  |  | 21 |  |  |  | — |  |  |  | — |  |  |  | (56,889 | ) |  |  | — |
Translation differences charged directly to cumulative translation adjustments |  |  | (1 | ) |  |  | (1 | ) |  |  | — |  |  |  | (4 | ) |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4 | )
Adjustments |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (20 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (20 | )
Depreciation of revaluation increment on investment properties transferred to property and equipment charged to other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3 | )
Depreciation and amortization |  |  | (8,084 | ) |  |  | (3,857 | ) |  |  | (17,025 | ) |  |  | (1,102 | ) |  |  | (3,410 | ) |  |  | (1,782 | ) |  |  | (3 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (35,263 | )
Net book value at end of the year |  |  | 40,118 |  |  |  | 628 |  |  |  | 110,510 |  |  |  | 5,568 |  |  |  | 6,072 |  |  |  | 12,199 |  |  |  | 4,327 |  |  |  | 6,529 |  |  |  | 16 |  |  |  | 46,167 |  |  |  | 232,134 |
As at December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  |  | 201,652 |  |  |  | 2,800 |  |  |  | 321,798 |  |  |  | 28,128 |  |  |  | 29,241 |  |  |  | 30,906 |  |  |  | 4,597 |  |  |  | 50,654 |  |  |  | 17 |  |  |  | 46,167 |  |  |  | 715,960 |
Accumulated depreciation, impairment and amortization |  |  | (161,534 | ) |  |  | (2,172 | ) |  |  | (211,288 | ) |  |  | (22,560 | ) |  |  | (23,169 | ) |  |  | (18,707 | ) |  |  | (270 | ) |  |  | (44,125 | ) |  |  | (1 | ) |  |  | — |  |  |  | (483,826 | )
Net book value |  |  | 40,118 |  |  |  | 628 |  |  |  | 110,510 |  |  |  | 5,568 |  |  |  | 6,072 |  |  |  | 12,199 |  |  |  | 4,327 |  |  |  | 6,529 |  |  |  | 16 |  |  |  | 46,167 |  |  |  | 232,134 |
Year Ended December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net book value at beginning of the year |  |  | 40,118 |  |  |  | 628 |  |  |  | 110,510 |  |  |  | 5,568 |  |  |  | 6,072 |  |  |  | 12,199 |  |  |  | 4,327 |  |  |  | 6,529 |  |  |  | 16 |  |  |  | 46,167 |  |  |  | 232,134 |
Additions (Note 4) |  |  | 915 |  |  |  | 155 |  |  |  | 2,124 |  |  |  | 238 |  |  |  | 1,548 |  |  |  | 2,771 |  |  |  | 102 |  |  |  | 991 |  |  |  | — |  |  |  | 63,060 |  |  |  | 71,904 |
Disposals/Retirements |  |  | (12 | ) |  |  | — |  |  |  | (114 | ) |  |  | (212 | ) |  |  | (59 | ) |  |  | — |  |  |  | (265 | ) |  |  | (1 | ) |  |  | — |  |  |  | (16 | ) |  |  | (679 | )
Reclassifications |  |  | 6,116 |  |  |  | (707 | ) |  |  | (31,539 | ) |  |  | (263 | ) |  |  | 4,030 |  |  |  | 10,979 |  |  |  | (70 | ) |  |  | (5,893 | ) |  |  | 24 |  |  |  | 17,312 |  |  |  | (11 | )
Transfers and others |  |  | 21,066 |  |  |  | — |  |  |  | 42,477 |  |  |  | 897 |  |  |  | (455 | ) |  |  | 5,614 |  |  |  | 11 |  |  |  | 6,576 |  |  |  | 76 |  |  |  | (76,262 | ) |  |  | — |
Translation differences charged directly to cumulative translation adjustments |  |  | — |  |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | (3 | )
Adjustments |  |  | 9 |  |  |  | 871 |  |  |  | (700 | ) |  |  | 28 |  |  |  | 125 |  |  |  | 1 |  |  |  | 53 |  |  |  | (122 | ) |  |  | — |  |  |  | (201 | ) |  |  | 64 |
Depreciation of revaluation increment on investment properties transferred to property and equipment charged to other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1 | )
Depreciation and amortization (Note 3) |  |  | (9,922 | ) |  |  | (398 | ) |  |  | (11,154 | ) |  |  | (1,282 | ) |  |  | (4,664 | ) |  |  | (14,224 | ) |  |  | (10 | ) |  |  | (862 | ) |  |  | (24 | ) |  |  | — |  |  |  | (42,540 | )
Net book value at end of the year |  |  | 58,290 |  |  |  | 549 |  |  |  | 111,603 |  |  |  | 4,973 |  |  |  | 6,596 |  |  |  | 17,340 |  |  |  | 4,148 |  |  |  | 7,217 |  |  |  | 92 |  |  |  | 50,060 |  |  |  | 260,868 |
As at December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  |  | 205,338 |  |  |  | 3,134 |  |  |  | 298,169 |  |  |  | 23,647 |  |  |  | 41,856 |  |  |  | 46,885 |  |  |  | 4,427 |  |  |  | 23,868 |  |  |  | 104 |  |  |  | 50,060 |  |  |  | 697,488 |
Accumulated depreciation, impairment and amortization |  |  | (147,048 | ) |  |  | (2,585 | ) |  |  | (186,566 | ) |  |  | (18,674 | ) |  |  | (35,260 | ) |  |  | (29,545 | ) |  |  | (279 | ) |  |  | (16,651 | ) |  |  | (12 | ) |  |  | — |  |  |  | (436,620 | )
Net book value |  |  | 58,290 |  |  |  | 549 |  |  |  | 111,603 |  |  |  | 4,973 |  |  |  | 6,596 |  |  |  | 17,340 |  |  |  | 4,148 |  |  |  | 7,217 |  |  |  | 92 |  |  |  | 50,060 |  |  |  | 260,868 |
Interest capitalized to property and equipment that qualified as borrowing costs amounted to Php1,597 million, Php1,455 million and Php1,524 million for the years ended December 31, 2020, 2019 and 2018, respectively. See Note 5 – Income and Expenses – Financing Costs – Net. The average interest capitalization rate used was approximately 4% for the year ended December 31, 2020 and 5% for each of the years ended December 31, 2020, 2019 and 2018, respectively. Our net foreign exchange differences, which qualified as borrowing costs, amounted to nil for the years ended December 31, 2020 and 2019, and Php411 million for the year ended December 31, 2018. The cost of fully depreciated property and equipment that are still being used in the Group’s operations amounted to Php73,995 million and Php149,119 million as at December 31, 2020 and 2019, respectively. As at December 31, 2020 and 2019, the estimated useful lives of our property and equipment are as follows:
Cable and wire facilities |  | 5 – 15 years
Central equipment |  | 3 – 15 years
Network facilities |  | 3 – 15 years
Buildings |  | 25 – 50 years
Vehicles, furniture and other network equipment |  | 3 – 15 years
Information origination and termination equipment |  | 3 – 15 years
Land improvements |  | 10 years
IT systems and platforms |  | 3 – 5 years
Security platforms |  | 3 – 5 years
Leasehold improvements |  | 3 – 10 years or the term of the lease, whichever is shorter
Impairment of Certain Wireless Network Equipment and Facilities 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 and Estimating useful lives of Property and equipment. Sale and Leaseback On January 28, 2020, PLDT was authorized by the Board of Directors to negotiate and enter into a contract for the sale of Smart Towers Property. The transaction is subject to the compulsory notification process of the Philippine Competition Commission, or PCC, pursuant to Sections 12(b) and 16 of the Philippine Competition Act. After undertaking the compulsory notification process, PLDT on September 3, 2020 received the PCC Decision No. 16-M-013/2020 stating that the PCC resolves to take no further action on the transaction considering that it will not likely result in substantial lessening of competition due to the existence of sufficient competitive constraints. On October 5, 2020, PLDT signed the sale agreement with the buyer and received in full the consideration of Php5,500 million plus 12% VAT. The sale does not include the telecommunication assets owned or used by PLDT and Smart that are located in the Smart Headquarters. Smart, the current lessee of the property, continues to occupy the property pursuant to a new contract of lease with the buyer executed on October 5, 2020. The sale and leaseback resulted to a gain of Php1,451 million. The new contract of lease is for a period of five years and stipulates that the lessee has the option to pre-terminate without penalty after the second-year subject to a 12-month notice.

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