Globe Telecom allots P13B for capex this yr

Globe Telecom is alloting P13 billion this year for capital expenditures, a large part of which will be used to roll out the company’s 3G (third generation mobile communications technology) network.

To finance its network expansion, the country’s second largest mobile operator is raising $100 to $150 million in new loans this year. "We will first try to source pesos at reasonable prices. If not, then we will go outside for any shortfall," Globe chief finance officer Delfin Gonzalez Jr. said.

The P13-billion capex for 2006 includes a portion of the $100 million allocated by the company for 3G for a couple of years. "Depending on the take-up, we may accelerate or delay the spending of the $100 million," Gonzales said.

The 2006 capex as a ratio of revenue has dramatically dropped from 27 percent last year to only 20 percent this year. This, Gonzalez said, is due to the fact that Globe has come close to completing its 2G (second generation technology otherwise known as GSM or the global system for mobile communications) with around 93 percent of all municipalities and 97 percent of the population already covered as of end-2005. Capex for last year stood at P14.8 billion.

Gonzalez also noted that the improved traffic being experienced is still within capacity. "During our two-year expansion, we have seen the number of cellsites doubling from 2,500 to 5,159 as of end-2005. There is still capacity to be used and there is no need for incremental capex," he explained.

Also yesterday, Globe president and chief executive officer Gerardo Ablaza said the company faces a number of challenges this year, including those affecting the macro-environment, continued price and margin pressures, the deregulation of VoIP or voice over Internet protocol and the impending launch of 3G.

"The advent of VoIP and 3G will bring with it new entrants which may change the subscriber behavior and market landscape. However, we intend to manage our costs better, work towards superior network quality and coverage, sustain our price competitiveness, and build on the third and fourth quarter 2005 growth momentum," he explained.

Globe’s net income for 2005 declined by nine percent year-on-year. Key driving forces were soft revenues in the first half of last year offset by stronger performance in the latter half of the year, increased operating and network-related expenses, as well as higher consolidated income tax rate of 27 percent for 2005 compared to 10 percent for 2004. The latter was due to adjustments in landline subsidiary Innove Communications’ deferred tax assets and after its shift into a taxable income position subject to regular corporate tax rates in 2005. The tax holiday granted to Globe ended last March 2005.

Free cash flow remained strong at P19.4 billion by end-2005 from P12.1 billion in 2004 due to lower capital investments during the year.

Meanwhile, for the fourth quarter of 2005, Globe noted a strong top line performance with eight percent quarter-on-quarter growth in consolidated service revenues to P14.6 billion. Normalized revenue growth from the previous quarter was four percent.

Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) margins for the October-December 2005 period remained at the third quarter level of 60 percent while quarterly net income, including foreign exchange gains, improved quarter-on-quarter by 74 percent to P3.9 billion.

For the full year 2005, consolidated net operating revenues improved six percent to P58.7 billion from P55.6 billion in 2004 while total net service revenues went up four percent to P54.89 billion. Wireless service revenues, which accounted for 88 percent of net service revenues, grew by three percent year-on-year to P48.5 billion while wireline service revenues increased 13 percent year-on-year to P6.4 billion.

Globe’s wireless subscriber base was at 12.4 million at year-end 2005, the same level as the third quarter-end and slightly lower than the previous year’s 12.5 million. Consolidated prepaid subscribers (which account for 95 percent of total subscriber base) declined by one percent to 11.8 million in 2005 from 11.9 million in 2004 as Globe culled out the non-revenue generating subscribers related to its SIM-swap program.

Postpaid subscribers which account for five percent of total reached 594,142 in 2005 or six percent lower than the previous year due to increased incidence of Globe-initiated credit-related terminations.

Meanwhile, the wireline business recorded a double-digit growth of 14 percent in net operating revenues. The voice segment grew by 11 percent year-on-year to register P4.4 billion in net service revenues in 2005 while the data segment posted a 16-percent year-on-year growth in net service revenues to reach P2 billion at the end of 2005.