Globe allots $650M for capex

MANILA, Philippines - Ayala-controlled Globe Telecom Inc. is spending about $650 million for its capital expenditures this year despite booking a sharp drop in net income last year as part of its ambitious network modernization and transformation program.

Globe chief financial officer Alberto de Larrazabal said in an interview with reporters that the company’s budget for capital expenditures this year is higher than last year’s $600 million.

De Larrazabal said the company’s budget for capital expenditures would start to normalize after spending $700 million for its network modernization and transformation project and another $90 million for its information technology (IT) upgrade.

To fund this year’s capital expenditures, he pointed out that the company is looking at several fund raising activities to raise between $320 million and $350 million of the total amount.

These include the issuance of detailed peso bonds, bilateral peso loans, among others as several institutions has approached the company to act as book runners for the said fund raising activities.

According to him, Globe is looking at raising $200 million within the first quarter of the year to fund its expansion program.

In a separate presentation, Globe has earmarked between $450 million and $500 million consisting of $160 million to $200 million for transformation initiatives and $290 million for investments in fixed lines, international cable facilities, and IT infrastructure.

For his part, Globe president and chief executive officer Ernest L. Cu said the company is on track to completing the first phase of its $700-million network modernization and transformation project within the first quarter of the year.

The project which is about 88 percent complete would soon begin in the cities and municipalities south of Metro Manila including Taguig, Pasig, Muntinlupa, Parañaque, Pasay and Las Piñas with the completion of Makati last December.

The company reported a 30-percent drop in net income to P6.857 billion last year from P9.832 billion in 2011 as earnings plunged 97 percent to P49 million in the fourth quarter from about P1.8 billion in the same period last year.  The decline in net income was traced to higher expenses brought about by the 54 percent rise in capital expenditures as well as 86 percent jump in subsidies allowing subscribers to acquire new phones such as the iPhone5 at a lower cost.

Cu said the company’s revenues went up by six percent to an all-time high P82.742 billion last year from a year-ago level of P77.76 billion. Mobile revenues rose six percent to P67.19 billion followed by broadband that grew 16 percent to P8.721 billion and fixed line data that increased 10 percent to P4.167 billion. Its fixed line voice service fell nine percent to P2.665 billion.

“We are pleased with our performance and satisfied with the record achievements we had in 2012.  We are also encouraged by the continued growth and resilience of our mobile and broadband businesses that allowed us to reach record peaks in revenues quarter after quarter despite intense competition and the ongoing network and IT modernization,” Cu stressed.

He pointed out that Globe anticipates a more challenging year given the increasingly competitive environment.

In all, the company operating expenses and subsidy jumped 12 percent to P47.73 billion last year from P42.661 billion in 2011. Operating expenses rose eight percent to P43.75 billion from P40.52 billion while subsidy surged 86 percent to P3.97 billion from P2.13 billion.

Consolidated EBITDA of P35.0 billion was lower by about P93 million from previous year’s total of P35.1 billion as the overall growth in expenses outpaced the increase in revenues.  As a result, EBITDA margin declined to 42 percent last year from 45 percent in 2011.