(November 8th, 2012) Globe Telecom, Inc. closed the nine-month period with consolidated service revenues of P61.3 billion, up 6% from last year’s P57.7 billion. Sustained topline growth was underpinned by strong performances of the mobile, broadband, and fixed line data businesses which grew 6%, 14%, and 9% over last year’s results, respectively.
Mobile revenues outperformed previous year’s levels to end the nine months of the year with P49.9 billion. Growth was largely driven by the success of the Company’s revolutionizing customizable postpaid plans, supported by rising demand for mobile browsing and voice services that continued to thrive with the prevalence of unlimited and value promotions. To date, Globe has a total of 32.1 million mobile subscribers, up by 10% from 29.1 million in the same period last year.
Increasing demand for internet connectivity, fueled in part by the popularity of social networking sites, coupled with technological advancements that bring about improved internet connection speeds continue to drive growth in the Company’s broadband business. Globe has officially launched its LTE broadband service this period to further trigger sales and enhance its line-up of Tattoo Broadband products. As of end-September, Globe has total broadband subscribers of over 1.6 million, up by 20% against 1.4 million in the same period in 2011.
Against the second quarter, Globe extended its gains to once again deliver a record-breaking performance despite a traditionally lean period. Consolidated service revenues improved by about P36 million from the second period to settle at P20.6 billion in the third quarter. While mobile business fundamentals remained intact, unrelenting pressures from competition coupled with capacity constraints on the existing network held off mobile revenues at P16.6 billion, slightly lower by 1% from the second quarter peak of P16.7 billion. Fixed line data and broadband revenues, on the other hand, increased by 4% and 7% to close the third quarter with about P1.1 billion and P2.2 billion, respectively, and countered the decline in mobile and traditional fixed line voice revenues.
Consolidated EBITDA for the nine-month period improved from last year’s level by about P129 million to P27.2 billion with revenue gains from both the mobile and fixed line and broadband segments outpacing the overall rise in expenses. Operating expenses and subsidy increased by 11% year-on-year from P30.6 billion to about P34.2 billion mainly due to sustained investments in subsidy and marketing to acquire and re-contract new and existing postpaid subscribers as well as to support the various product and service launches. Network-related costs were also up year-on-year to support an expanded mobile and broadband network. This year’s operating costs likewise included additional charges related to the network modernization and IT transformation program. As a result, consolidated EBITDA margin as of September stood at 44% compared to 47% in the same period in 2011. Coupled with the increase in depreciation charges arising from ongoing efforts to upgrade the networks, net income after tax declined by 15% from about P8.0 billion a year ago to P6.8 billion this period. Excluding foreign exchange and mark-to-market gains and losses, as well as non-recurring items such as the accelerated depreciation charges, however, core net income was up by 7% year-on-year from P8.2 billion to about P8.8 billion.
On sequential basis, consolidated EBITDA was up 5% from P9.0 billion in the second quarter to P9.5 billion following a 4% decline in operating expenses. Third quarter operating expenses and subsidy were down by about P400 million from last quarter to P11.1 billion primarily due to lower marketing and subsidy costs. Congestion and capacity constraints on the existing network triggered by the surge in voice and data traffic prevented the Company to push services that partly resulted to a slowdown in subscriber acquisitions in the third quarter. As a result, consolidated EBITDA margin in the third quarter improved to 46% from 44% in the second period. However, with higher depreciation charges stemming from the larger scale network modernization initiatives, net income after tax declined by 19% from P2.3 billion to P1.8 billion in the third quarter. Excluding foreign exchange and mark-to-market gains and losses as well as non-recurring items, however, core net income in the third quarter increased by 6% to P3.1 billion from P2.9 billion last quarter.
“Despite the very challenging competitive environment, our business remains fundamentally strong. We were able to build on our earlier triumphs with customer focus being our key differentiator,” Ernest L. Cu, President and CEO of Globe Telecom, Inc. said. “Going against a traditionally lean season, we sustained our growth momentum once again in the third quarter. We still managed to post another record quarter considering that we had to confront capacity constraints on our existing network due to the spike in voice and data traffic, which only reinforced our drive to modernize our entire network and IT infrastructure. We expect competition to escalate especially after the gains that we have realized, but we are prepared for the challenge and will be in a much better position to deliver overall enhanced value to our stakeholders upon completion of our network upgrade and with the new capacities coming onstream,” added Mr. Cu. In the third quarter, Globe stepped up its efforts in delivering value to its loyal subscriber base through the various innovative service offerings across the domestic and international fronts of the mobile business, supported by the launch of its latest broadband service utilizing the LTE technology as well as exploring new channels for its mobile commerce business, GCash.
Amid an intensely competitive environment, Globe remained focus and committed to its thrust of providing the best service offerings anchored on differentiating customer service. In the third quarter, the Company announced its initial and exclusive line-up of smartphones that will run on the mobile LTE network in the fourth quarter. The LTE-powered smartphone devices consisting of the Samsung Galaxy S III LTE, HTC One XL, ZTE T81, and Huawei Ascend P1 LTE, which provide subscribers with faster mobile browsing speeds as well as better quality SMS and voice experience, will be available starting at Plan 999 and will come with bundled services such as unlimited surfing, consumable amount for calls and texts and other freebies.
The Company also started offering the revolutionary Nano-SIM in its Globe Stores in anticipation of the high demand from subscribers especially when the latest generation of smartphones that run with Nano-SIMs is launched in the market. Globe is offering the NanoSIM to both Globe Postpaid and Globe Prepaid subscribers.
To counter competition and respond to subscriber preference, Globe Prepaid introduced its strongest unlimited promo to date, GoUnli30, which provides unlimited all-network SMS, unlimited on-net calls, and unlimited Facebook browsing for an affordable rate of only P30 for one day. On the other hand, to address the growing demand for mobile internet usage, Globe Prepaid and TM boosted their mobile browsing offerings with the launch of 3 data packages that cost only P20 per subscription: Social20 for 1 day unlimited access to Facebook, Twitter, and Multiply, Fun20 for 1 day unlimited access to Facebook and YouTube, and Mail20 for 1 day unlimited access to Facebook, Yahoo Mail and Gmail.
Meanwhile, for the mass market brand, TM, the Company boosted its value offerings with Combo 10 which gives subscribers unlimited text and 10-minute bucket voice services within the TM and Globe networks as well as 50 all-network SMS for as low as P10 for one day subscription.
On the international front, Globe enhanced its services to now include an unlimited data roaming plan, Bridge Data Roam Unlimited and Bridge Data Roam Unlimited Plus, whenever Globe Postpaid subscribers are logged on to Bridge Alliance operators’ networks in the Asia Pacific Region as well as in partners’ networks in USA, China, and Europe. For Globe Postpaid roamers in Thailand, on the other hand, the Company launched a special all-unlimited roaming service which is available in three denominations: US$10 for 1 day of unlimited mobile internet browsing, US$30 for 1 day of unlimited mobile internet browsing and voice service, and US$40 for 1 day of unlimited mobile internet browsing, voice and text services.
Alternatively, to get 7 days of bucket international call and text services, Globe Postpaid subscribers may subscribe to the Bridge Voice SMS Roam service while traveling across Bridge Alliance operators’ and partners’ networks. Bridge Voice SMS Roam is available in three variants: US$18 for 15 call minutes and 15 SMS, US$32 for 30 call minutes and 30 SMS, and US$60 for 60 call minutes and 60 SMS.
To beef up its international services, Globe Prepaid likewise launched discounted IDD rates with its Go TipIDD offering which comes in three denominations: Go TipIDD30 for discounted per minute IDD calls worth P30 valid for 3 days, Go TipIDD50 for discounted per minute IDD calls worth P50 valid for 7 days, and Go TipIDD100 for discounted per minute IDD calls worth P100 valid for 15 days.
In the third period, Globe has also officially launched its LTE broadband service with Tattoo Black Postpaid Plans that comes in 2 packages that offer unique and personalized services. Tattoo Black 1799 comes with a free LTE USB dongle and provides unlimited browsing at speeds of up to 28 Mbps with perks such as priority handling in stores, a dedicated customer service hotline, and discounts at partner establishments. Tattoo Black Elite 2499, on the other hand, comes with an LTE Superstick that delivers even faster speeds at 42 Mbps and provides additional features such as a personal relationship manager and priority reservation for future Globe handsets and tablet devices as well as complimentary tickets to Tattoo events.
To make its mobile commerce business more accessible to a wider subscriber base, Globe recently launched a mobile application of its GCash mobile wallet which may be downloaded for free from the App Store, Google Play or BlackBerry App World. The smartphone application makes it more convenient and enjoyable for users to do GCash transactions such as settling postpaid accounts, paying utility bills and credit cards, and topping up E-Pass and Easy Trip.
Meanwhile, to further complement its mobile wallet functions, Globe has also recently partnered with American Express to launch the GCash American Express Virtual Card, a prepaid virtual card linked to a subscriber’s GCash mobile wallet which allows users to shop conveniently online from both local and international sites. Further, it gives the user a personalized US Address to allow delivery of purchases from international online sites which may not be directly shipping goods to the Philippines.
In other developments, the Company announced last November 5, 2012 that it has obtained the approval by its Board of Directors to commence offers to purchase (the “Debt Offers”) up to 100% of the financial obligations of Bayan Telecommunications, Inc. (“BTI”) and subsidiary Radio Communications of the Philippines, Inc. (“RCPI”) to their respective financial creditors.
The Debt Offers are conditioned on, among other things, acceptance by at least 70% of the holders of the unsecured financial indebtedness of BTI under the USD 13.5% bonds originally due in 2006; 70% of the outstanding other financial indebtedness owed by BTI; and 70% of the outstanding financial indebtedness owed by RCPI, based on outstanding aggregate principal amount under the terms of the rehabilitation plan of BTI and RCPI. BTI has been subject to court-supervised rehabilitation proceedings since 2003. The current rehabilitation plan anticipates that BTI and RCPI will remain in rehabilitation until 2023. In the event that the Debt Offers are completed, Globe intends to apply with the rehabilitation court to amend the terms of the rehabilitation plan in the interest of assuring BTI’s long-term sustainability.
Meanwhile, Globe has commenced separate discussions with the controlling shareholders of BTI regarding a wide range of commercial arrangements including a potential acquisition by Globe of an equity interest in BTI. The approval of the National Telecommunications Commission is required to complete the acquisition. The parties remain in discussions on the terms of the commercial arrangements including the price and other conditions under which the acquisition may be effected. No definitive arrangement has been executed at this time.
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