MANILA, Philippines - Ayala-owned Globe Telecom has signed a five-year, P5-billion term loan facility with the Development Bank of the Philippines , capping its financing requirements for 2010.
Globe chief financial officer Alberto De Larrazabal said proceeds of the loan will be used to finance the company’s capital expenditures, which includes the build-up of additional mobile, wireline data, broadband and international submarine facilities to support its increasing subscriber base. He added that the loan carries a floating interest rate.
For 2010, Globe’s capital expenditure is expected to reach $500 million.
The DBP loan is the second loan facility signed by Globe this year. In the first quarter of 2010, Globe inked a P2-billion loan with Allied Bank. As of end-June 2010, Globe’s debt-to-equity ratio was at 1:01.
Total capex for the first six months of 2010 amounted to P10.8 billion, driven mainly by the continued expansion and upgrade of the company’s broadband and mobile networks. This is 16 percent below last year’s spend of P12.8 billion.
Globe earlier reported a 30 percent drop in its net income during the first half of 2010 at P5.1 billion, compared with P7.2 billion in the same period last year.
Core net income, which excludes foreign exchange and mark-to-market charges as well as non-recurring items, was also lower by 24.6 percent at P5.2 billion, as against P6.9 billion during the first six months of last year.
Globe president and CEO Ernest Cu explained that the company’s first half results are reflective of the challenges facing the industry, whereby traffic is growing, but revenues are declining with the market’s increasing preference for unlimited services.
“Competition is becoming more intense, and will likely further intensify as the market slows. We have strong brands with good value propositions, a large and loyal retail and corporate subscriber base, and an extensive and robust network. To protect our gains and grow our business, the key is to differentiate ourselves from competition by providing superior end-to-end customer service,” Cu added.
He revealed that their immediate goal is to recover revenue market share in their mobile business. “We will adapt to the changing industry dynamics, persist in our efforts, and dedicate our resources to putting our business back on the growth track,” he said.
Despite an increase in traffic and overall usage, Globe’s mobile revenues were lower with sustained price pressures resulting from intense competition and subscribers’ increasing preference for lower-yield bucket and unlimited promotions.