Nomura gives Globe ‘outperform’ rating

A leading securities company gave an ‘outperform’ rating on Globe Telecom yesterday as it expressed confidence that the latter will not lose its provisional authority to operate its mobile phone business.

In a meeting with officials of the National Telecommunications Commission, Nomura Securities, Japan’s largest securities firm, learned that Globe was in no risk of losing its provisional authority (PA) to operate its mobile phone business.

"In this light, earlier threats by the regulator (NTC) to revoke Globe’s PA unless it suspended subscriber acquisitions appear politically motivated. We maintain our OUTPERFORM rating on Globe," Nomura said in its report on the Philippine telecommunications sector.

Nomura, in its report, said that it met with two deputy commissioners of the NTC, who confirmed that Globe submitted all the requirements for the renewal of its PA before its expiration date in September.

"As such, Globe can continue its mobile operations even without the immediate approval of its application by the regulator. The NTC officials clarified that unless the PA is revoked, it will be assumed that the application has been approved. They also confirmed our belief that the NTC will not revoke Globe’s license because of the public interest involved," it said.

Nomura said NTC Commissioner Joseph Santiago earlier linked the aproval of Globe’s PA to the latter’s compliance with the regulator’s request for the company to suspend subscriber acquisition until it has sufficiently built up capacity. Globe has accelerated its expansion program since it experienced capacity problems in the third quarter of last year.

In the case of rival Smart’s application to extend the length of its mobile phone license from 18 months to 25 years. Nomura said this is likely to be turned down.

"We suspect the regulator (NTC) prefers a shorter license period as a means of controlling the industry. PLDT, Smart’s parent company, is unlikely to be affected by this development and we reiterate our NEUTRAL rating," it said.

Smart has applied to extend its license from an 18-month duration to 25 years. "We think it is unlikely the regulator will approve this request. For one, it would show bias by the regulator, which has yet to act on Globe’s application to renew its PA. More importantly, the regulator deliberately awards licenses with shorter life spans to facilitate the suspension of any erring telecom company and retain a degree of leverage over the sector," it added.