Globe to borrow P5 billion for capital expenditure

MANILA, Philippines - Globe Telecom is planning to raise about P5 billion through new loans this year to finance its capital expenditure.

The Ayala-controlled company recently signed a P1-billion term loan facility with Land Bank of the Philippines as lender. The proceeds of the facility will be used to finance the capex this year estimated at between $350 to $400 million.

Globe chief finance officer Delfin Gonzalez Jr. said another $50 million is being negotiated with the Export Development Corp. of Canada which may be signed in May.

Gonzalez added that they plan to draw down on the P5-billion loan until next year.

Of the capital expenditure budget this year, around $150 million will be spent for consumer broadband including the third generation of mobile communications technology (3G), $130 million for core cellular 2G (second generation mobile technology), $25 million for corporate data, $20 million for support capex, and $25 million as carry-over spend for international cable facilities and other non-recurring capex.

The 2009 capex budget of around P16.5 billion is 23 percent of 2008 revenues. In 2008, capex was at P19.9 billion for a capex-to-revenue ratio of 30 percent. Gonzalez earlier explained that this year’s capex is lower because the 2008 numbers included non-recurring capex for Globe’s participation in the international cable project, landing station and backhaul.

Globe was recently authorized to offer up to P10 billion in retail bonds to finance both capex and maturing debts this year of around $250 million, of which P5 billion has already been raised. Gonzalez said they are not yet sure whether they would avail of the remainder.

Meanwhile, during yesterday’s Globe annual stockholder’s meeting, company chairman Jaime Augusto Zobel de Ayala said he expects the broadband business to sustain its momentum this year. “Our objective for 2009 is to step up growth initiatives across all our businesses,” he pointed out.

For his part, newly appointed Globe president Ernest Cu expressed confidence that despite the much tougher market, Globe will be able to meet its goals. “The crisis presents a wealth of opportunities,” he said.

He also noted that broadband represents the next explosion in the local telecommunications arena. “We will be the first to implement Wi-Max as a wireless broadband solution,” Cu added.

With Cu tasked to take Globe to the next level, the company’s new president pointed out that Globe already has a strong strategy and that his focus is more on the execution skills which he believes he can enhance.

He likewise noted that while Globe already has a strong strategy, it sometimes tend to be slow in terms of execution. “The word is to be entrepreneurial. We have to take managed risks and be quick in terms of decision making,” he said.

Cu also emphasized that with the market already reaching maturity given an industry SIM base of 70 million and a population of 90 million about 20 percent of which is not addressable, as well as higher incidence of double SIMs, the company has to create new revenue streams.

When asked whether Globe now intends to venture into other businesses, Cu stressed that Globe should stay true to its core assets, which are its subscriber base and its ability to deliver load electronically (Autoload Max).

However, he emphasized that this does not mean that Globe is not on the look out for new business opportunities. Cu revealed that one possible new business for Globe is in the field of entertainment. “But we will not adopt an acquisition-type of strategy for growth although it will be part of the arsenal,” he said.

“Globe will become a rational player. We will not overpay for any asset,” he added.