Globe to raise add’l $120M for capex

MANILA, Philippines - Publicly-listed Globe Telecom Inc., a joint venture between conglomerate Ayala Corp. and Singapore Telecom International Pte Ltd, is raising an additional $120 million to finance the company’s capital expenditures this year.

Globe chief financial officer Alberto de Larrazabal said in an interview with reporters after the company’s annual stockholders’ meeting at the Fairmont Hotel in Makati City that the last tranche of this year’s financing program would be completed before the end of the first half of the year.

The company has so far raised $195 million early this year from two loan facilities obtained from foreign and domestic banks.

“We have raised about $200 million so far and we need about $120 million equivalent more to go. We are currently in discussions with financial institutions as the financial markets continue to offer many different alternative and very attractive opportunities for financing,” De Larrazabal stressed.

He pointed out that the company has yet to decide whether to tap the foreign or domestic debt market for the fund raising activity scheduled before June this year.

“From a time and perspective, this is something that we will more likely close towards the end of the first half of the year. As to whether we will be raising dollar financing or peso financing is still a bit early,” he added.

Globe tapped Metropolitan Bank and Trust Co. (Metrobank) of taipan George SK Ty for a $120 million loan facility and The Bank of Tokyo – Mitsubishi UFJ last month to fund the company’s capital expenditures amounting to $450 million to $500 million this year.

Proceeds of the loan would be used to finance the company’s capital expenditures including the ongoing network modernization and transformation program as well as investments in fixed line, international cable facilities, and information technology infrastructure.

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.

Globe chief financial officer Alberto de Larrazabal earlier told reporters that this year’s capital expenditures would be funded through a combination of internally generated funds and debt.

De Larrazabal said Globe is looking at several fund raising activities including the issuance of detailed peso bonds, bilateral peso loans, among others to raise between $320 million and $350 million of the total amount.

Globe is practically down with the first phase of its $700 million network modernization and transformation program with the complete change-out of equipment and has started its $90 million IT upgrade.

Globe president and chief executive officer Ernest Cu said in a press conference that the company is practically done with the first phase of its $700 million network modernization and transformation program.

Cu pointed out that Globe is just completing the transformation of 100 more cell sites to complete the first phase of its two-year network modernization and transformation program.

“From this point on, 2013 is the year when our transformation will start to bear fruit,” he stressed.

Larrazabal believes that the company’s net profit would continue to decline this year due to higher accelerated depreciation arising from Globe’s network modernization and transformation progam.

He pointed out that the costs of fully depreciated property and equipment that are still being used in the network would continue to increase from P87.16 billion last year, P70.23 billion in 2011, and P52.47 billion in 2010 resulting to lower earnings.

“Profit will continue to drop this year but core income will be a different issue this year,” de Larrazabal said.

The company’s net income dropped 30 percent 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 quarter last year.