Globe Telecom sees rebound in revenues as economy grows

MANILA, Philippines - Globe Telecom expects its revenues to rebound in 2010 mainly due to an anticipated overall growth in the economy as well as better performance from its mobile telephony business.

In 2009, consolidated service revenues went down one percent to P62.4 billion with mobile revenues, which account for around 80 percent of total service revenues, down four percent and the domestic economy reeling from the devastation wrought by calamities.

Globe president and CEO Ernest Cu also said they expect their mobile telephony business to post a revenue growth of low to mid single-digit, in line with the projected industry revenue growth and the broader economy. The gross domestic product (GDP) is forecast to grow 2.5 to five percent this year.

“We hope that the coming elections will provide an additional upside, amidst the risk of a slow recovery of the agricultural sector. But overall, the market environment this year is upbeat,” he added.

But with the mobile telephony business nearing saturation rate, given a cellular penetration rate of over 80 percent, he pointed out that the growth in the mobile sector will have to come from increased usage of existing customers, increased share of Globe of multiple SIM subscribers’ spend, and new subscriber acquisitions from the few millions that still do not have mobile SIMs.

Cu estimates that 2009 ended with an industry SIM count of 70 to 80 million, of which around 34 to 35 percent are held by multi-SIM users. With the national population at 92 million of which not all is addressable, acquiring new subscribers becomes more difficult, as those who do not own SIMs at this time either are too poor to use mobile phones or are simply beyond reach.

“Of the remaining market, we don’t even know how much revenues they will contribute,” he said.

Globe ended 2009 with a SIM base of 23.2 million, with gross additions in the fourth quarter up 30 percent compared to the third quarter and churn rates down to 6.9 percent from 7.8 percent in the third quarter.

The company’s fourth quarter mobile revenues were up quarter on quarter but were still nine percent below the same period in 2008 due to a weaker consumer economy and the impact of the typhoons that hit the country late in the third quarter to early fourth quarter.

The company likewise sees its consolidated earnings before interests, taxes, depreciation and amortization (EBITDA) margin at mid to high 50s compared with the 2009 group EBITDA margin of 58 percent of service revenues.

As for the broadband business, Cu said Globe aims to grow its broadband subscriber base to 1.3 million by the end of 2010, from 715,000 as of Dec. 31, 2009. The country’s broadband sector is expected to grow to about four to five million subscribers this year from 2.5 million as of end-2009.

He noted that their subscriber growth will largely come from fixed wireless (WiMax) and prepaid, nomadic segments.

As for Globe’s capital expenditure in 2010, Cu said they expect it to be about $500 million or in line with 2009 levels. Of the $500 million, around $170 million or 34 percent will be for the mobile business, $230 million or 46 percent for broadband, $50 million or 10 percent for fixed line data and others, and $50 million one time investment for Globe’s participation in two international cable system projects (TGN-Intra Asia cable system and SEA Japan cable system) and for its second fiber optic backbone network (FOBN2).

Globe’s top executive identified three key priorities of the company this year, including gaining a share of the wallet in mobile business, sustaining growth momentum in broadband and corporate data, and network quality as competitive differentiator.