JAZA bullish on Globe growth prospects

MANILA, Philippines - Globe Telecom chairman Jaime Augusto Zobel de Ayala has expressed confidence the Ayala Group’s telecommunications subsidiary is well-positioned to weather the current downturn and improve its market position.

In his message to be delivered today at the company’s annual shareholders’ meeting, Zobel pointed out that Globe has a leading market position, with almost 25 million cellular, 423,000 wireline voice and 234,000 broadband subscribers.

He also emphasized that the company has a solid financial position, with its wireless EBITDA (earnings before interests, taxes, depreciation and amortization) margins among the highest in the region, its prudent balance sheet management, and its ability to generate high dividend yields.

Zobel likewise stressed that Globe has solid support from its strategic shareholders, particularly Singapore Telecom and Ayala Corp.

Meanwhile, Zobel, who also chairs Ayala Corp., announced that outgoing Globe president Gerardo Ablaza will move back to the parent company to help oversee the group’s business interests in telecommunications, banking and other allied fields. Ablaza will remain in the Globe board and will be the incoming chairman of the executive committee.

Zobel also pointed out to the shareholders that the weak economy created a highly challenging operating environment in 2008, as rising food and fuel prices drove inflation to a peak of 12.4 percent in August (the highest level in 16 years) and the stock index down 48 percent at end-2008. The inflation rate was at 9.3 percent at the close of the year compared with 2.8 percent in 2007 while GDP growth was lower at 4.6 percent last year as against 7.3 percent in 2007.

In spite of this, he noted that Globe posted a net income of P11.3 billion last year, 15 percent lower than 2007 but still among the highest in Globe’s history. Last year was also the third consecutive year of returns in equity in excess of 20 percent, he said.

He likewise stressed that Globe continued to provide attractive returns to its shareholders, with a 55-percent compounded annual growth rate on dividends from 2003 to 2008.

Zobel said the company is investing for the future, with continued investments in its existing cellular, broadband, and wireline voice and data business, as well as in new businesses as a source of future growth.

Globe has entered the business of content creation and distribution with its acquisition of Entertainment Gateway Group, one of the leading content providers in the country. He noted that EG is a promising platform for value-added services in other Asia-Pacific markets, particularly those with sizeable overseas Filipino communities.

It has also entered into a microfinance bank joint venture with sister firm Bank of the Philippine Islands and Ayala Corp.

He pointed out that Globe’s capital expenditure of P20 billion in 2008 was one of the highest over the past five years. The capex includes costs related to TGN- Intra Asia Cable System, a second landing station in North Luzon, and related backhaul facilities. The TGN-IA system links the Philippines to Hong Kong, Singapore and Japan, with Globe as the exclusive landing partners in the country.

Meanwhile, Globe incoming president and CEO Ernest Cu said the company is capitalizing on opportunities presented by the financial crisis to create more shareholder value. “Our fundamentals are healthy and we are improving productivity, while serving our customers better. Our core business remains strong and subscribers can rely on our brand promise of quality, affordability, and integrity,” he said.

He also stressed that broadband will be a key avenue for growth while Wi-Max is a strong step forward ahead of competition. “We will enhance Globe’s nimbleness and flexibility for us to win in the marketplace.”