Globe allots $258M for new projects

Globe Telecom, a partnership between Ayala Corp. and Singapore Telecom, is spending $258 million for new projects this year aimed at capitalizing on the growing mobile telephone industry and expanding its network infrastructure.

The company expects mobile market penetration to increase from 13 percent last year to 18 to 20 percent this year and next year which basically means that around two of every 10 Filipinos will be owning cellular phones, Globe president Gerardo Ablaza said.

During yesterday’s investors’ briefing, Globe chief financial officer Delfin Gonzales, Jr. said that in order to finance this year’s capital expenditure, the company is looking at several possibilities, including bond flotation, equity, peso borrowing, syndicated loans, and suppliers’ credit.

In addition to the $258 million, Globe still has $350 to $400 million that will be carried over from last year for projects that have been started.

Gonzales said that they are looking at a bond flotation as one source of financing, as he cited the good performance of Philippine bonds which in January registered 400 basis points (how the price of RP bonds compare against US treasury) as against 600 three to four months back. "But we are still studying this matter very carefully," he said.

The $258 million will be used for Globe’s Phase 8B expansion program which will be implemented starting the second quarter of 2001. Around 60 percent of the capex will be used for the cellular business expansion, while another 30 percent will be for wireline transmission facilities.

Globe in 2001 registered a P4.305 billion net income last year as against P1.55 billion in 2000. Following the acquisition of Isla Communications (Islacom, Globe had to absorb the former’s 47 percent in 2000 to 53 percent in 2001.

The company’s debt-to-equity ratio also performed better at 1:07 last year as against 1:41 the previous year. In 2000, the debt level was placed at P28.2 billion as against a stockholders’ equity of P19.6 billion while in 2001, debt was at P47 billion as against an equity of P44.2 billion.

In 2001, capex reached $577 million, of which 78 percent was allocated for the wireless business.

For this year, Gonzales said that the company is faced with several challenges, including maintaining its position as the wireless company of choice; repositioning of Touch Mobile and offering it as having the lowest rate and with having a distinctive voice technology; focusing on text messaging, value-added services, and corporate data services; expanding on its network infrastructure; and capitalizing on the growing mobile industry.

He asked that Globe is also looking at the prospects of investing more on the new cellular technology known as general packet radio service (GPRS). The company last year made initial efforts to introduce this to the local market but on a limited basis because the GPRS-enabled handsets came in late last year only.

Meanwhile, Islacom chief operating officer Gil Genio said that they expect the company to break even on a cash flow or EBITDA basis by this year, hopefully, with the success of Touch Mobile. "But it will be difficult to tell at tis point when we will break even in terms of net income," he said.

Right now, Islacom has its own cellular brand – Touch Mobile – while operating a landline business. "Right now, our landline business in Visayas is an obligation imposed on us when we were given cellular and international gateway facility licenses. But we expect over the long run that revenues from the international and cellular to offset this obligation," he added.