Globe core profit up 6% in 2016

GLOBE TELECOM, Inc. saw its core net income rise by an annual 6%, driven by the “solid growth” in its data-related products and continued uptick in both its mobile and broadband subscribers.

Globe President and Chief Executive Officer Ernest L. Cu on Wednesday said that the company’s core net income, which excludes foreign exchange, mark-to-market gains and losses, and non-recurring items, rose to P16.014 billion for 2016, from P15.126 billion in the previous year.

“Notwithstanding the heightened market competition in 2016, we ended the year on a high note, marked by all- time high quarterly and full-year revenues, and record-level EBITDA,” Mr. Cu said in a briefing.

“Full-year consolidated service revenues, once again, reached a new record high of close to P120 billion from P113.7 billion last year due to the continuous surge in data consumption across all business segments,” he added.

However, the Ayala-led telco firm’s reported net income dipped 4% to P15.88 billion in 2016 from the P16.484 billion recorded in 2015, amid a general slowdown in traditional legacy business and non- operating charges related to its acquisition of San Miguel Corp.’s telecommunications assets.

“Despite the strong growth in EBITDA (earnings before interest, tax, depreciation and amortization), the increase in non-operating expenses as well as higher depreciation expenses recognized during the year... note that this year’s non- operating expenses included P1.1 billion of costs related to the acquisition of Vega Telecom, Inc. ( VTI), including Globe’s share in net losses of joint venture, spectrum amortization and interest expenses related to the additional debt incurred from VTI transaction,” Globe said in a separate statement.

In 2015, Globe recorded onetime gains from the sale of a 51% equity stake in Fondu, Inc. and the acquisition of a 98.6% stake in Bayan Telecommunications, Inc.

The telco giant said its “normalized income” for 2016, excluding the impact of the strategic transactions mentioned, would have been 12% higher year on year to P16.9 billion, from P15 billion.

Full-year revenues rose 6% to P119.990 billion. The bulk came from mobile revenues, which inched up to P91.877 billion from P91.243 billion in 2015, as subscribers continued to shift to data from voice and SMS. Mobile data now makes up 38% of total mobile revenues, while voice contributed 37%.

Globe’s mobile subscriber base reached 62.8 million last year, up 12% from 56.2 million reported in the same comparable period, driven by the record-level prepaid gross acquisitions during the year.

Its home broadband business saw a 28% rise in revenues to P14.460 billion in 2016 from P11.320 billion, as its subscriber base reached 1.13 million.

On the other hand, Globe’s corporate data business reported 28% higher revenues to P9.873 billion, while its traditional fixed line voice revenues increased by 11% to P3.78 billion.

For the October to December period, Globe said its core net income grew by 43% to P4.264 billion from P2.418 billion in 2015’s comparable period. Its net income for the period reached P4.172 billion.

Fourth quarter revenues went up 2% to P30.9 billion. A 0.4% drop in mobile revenues to P23.61 billion during the threemonth period as offset by 10% jump in fixed line and broadband revenues to P7.28 billion. “Globe’s record fourth quarter consolidated services revenues was 2% higher than the results posted in the same quarter of 2015. This quarter’s record performance was underpinned by the strong data- driven growth across all segments,” Globe said.

Moving forward to this year, Mr. Cu said despite a “rerated downward” outlook for the telcommunications industry due to a pricing war, Globe expects to “maintain its growth trajectory” as it continues to expand its network. This year, Globe pegged its capital expenditures (capex) at $750 million, lower than last year’s $1 billion. The bulk of the capex will be spent on data-related expenses, including deployment of LTE mobile, LTE @Home, increased network capacities and coverage, and modernization of fixed line data infrastructure for corporates and transmission facilities.

Globe said it will deploy around 1,800 LTE 700 sites and 1,000 LTE 2600 sites this year. It will also add 1,800 LTE 1800 sites “in order to boost LTE capacity and coverage.”

“As we move forward in 2017, we are optimistic that we will maintain our growth trajectory as we continue to strengthen our leadership in the digital space, through the use of innovation and partnerships with global content providers. Our aggressive investments in our network are designed to meet the country’s future digital demands,” Mr. Cu said.

“There’s no change in the way we do things, we’ll just keep pushing our [strategy]... Complacency is the worst enemy a leader can have,” he added.

Mr. Cu noted that the level of competition is expected to “remain high” as users shift to digital from traditional voice and SMS.

Globe Chief Finance Officer Rizza Maniego- Eala said separately that the company will need to tap other sources to fund its capex.

“We will need funding for that... we will continue to tap the banks for bilateral loans and we also have gotten approval from the board to file for a shelf registration to file for Philippine retail bonds,” Ms. Eala said.

Also on Wednesday, Globe disclosed that its board approved to increase the amount of the shelf registration by P20 billion, bringing the total amount for filing to up to P40 billion.

“We have not filed but we are in the process of checking with SEC ( Securities and Exchange Commission) if we can file for registration without an immediate issuance... We will access maybe second half or towards the latter part of the year... Our plan really is to maximize the bank debt, so depending again on rates or whatever the rate is towards the second half of the year then we want to be prepared,” she added.

Shares in Globe Telecom closed P50 or 2.94% higher at P1,750 apiece on Wednesday.