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GLOBE TELECOM CLOSES 1ST SEMESTER WITH
CORE NET INCOME OF P5.2 BILLION:
MOBILE NET ADDITIONS HIGHER
BROADBAND SUSTAINS ROBUST REVENUE GROWTH,
DECLARES CASH DIVIDEND OF P40 PER SHARE
Globe Telecom Inc. closed the first six months of the year with net income of P5.1
billion. Core net income, which excludes foreign exchange and mark-to-market charges
as well as non-recurring items, was at P5.2 billion. This compares against last year’s net
income of P7.2 billion and core net income of P6.9 billion.
The mobile business sustained positive net additions of 732,000 in the second quarter to
close the period with 24.6 million SIMs. This is 3% higher than last quarter’s base, but
2% lower than last year when the Company deliberately churned out marginal subscribers
and recalibrated its acquisition efforts. Globe Prepaid and TM led this quarter’s growth,
contributing more than 90% of this period’s net additions.
For the broadband business, Globe added almost 90,000 subscribers this quarter to end
the period with over 930,000 subscribers, up almost three-fold from last year’s 379,000
customers. The expansion was led by Globe Broadband Tattoo, the Company’s internet-
on-the-go service, as well as Globe WiMAX for at-home internet use.
Consolidated service revenues for the first six months was at P30.7 billion, down 3%
from P31.7 billion last year, but in line with second semester 2009 performance when
mobile industry revenues started to contract. Broadband and fixed line data revenues
were up by a robust 89% and 18% respectively, offsetting some of the declines in mobile
revenues which were lower by 9%.
With lower revenues and rising operating expenses to support an expanded broadband
network and subscriber base, EBITDA for the first half of the year was 11% lower at
P17.0 billion. While mobile EBITDA margins remained rich at 65% of service revenues,
consolidated EBITDA margin was at 55% from 60% last year given the increasing
contribution of the lower-margin broadband and fixed line businesses.
Compared to the first quarter, consolidated service revenues in the second quarter rose
2% to P15.5 billion. The Company’s fixed line and broadband businesses remained the
key growth drivers while mobile revenues were steady. Net income was at P2.1 billion
from P2.9 billion in the first quarter. Meanwhile, core net income was at P2.4 billion
from P2.8 billion in the prior quarter.
“Our first half results are reflective of the challenges facing the industry – 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,” said Ernest L. Cu, President and CEO. “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,” added Mr. Cu.
Globe solidified its leadership in the postpaid segment with another breakthrough
offering MY FULLY LOADED PLAN, an all-consumable plan which allows subscribers
to mix-and-match services and freebies. Subscribers simply have to choose a monthly
consumable amount that best fits their usage, and pick the freebies available under that
plan. Consumable plans range from as low as P299 to P3,799 a month. Globe likewise
complemented the strong subscriber take-up of its MY SUPERPLAN by adding to its
already extensive line of unlimited call, text, and web browsing services. The new
offering, Super One, provides unlimited calls and texts to pre-registered and frequently
called Globe or TM numbers. A 30-day subscription costs P150 and P175 for regular
postpaid and MY SUPERPLAN subscribers, respectively.
For its prepaid brand Globe Tattoo, meanwhile, the Company introduced another first in
the market with its Ultimate Immortal Freebie offering that comes with the Globe Tattoo
SIM. With every purchase of the SIM, subscribers can avail of Globe’s non-expiry offers
such as 35 free texts to All Networks, 50 texts and 5-minute consumable calls to other
Globe and TM subscribers, and 1 hour of mobile surfing. The Globe Tattoo SIM retails
for only P40 and is available at Globe’s various distribution channels. Also, to further
stimulate usage and improve subscriber retention, Globe recently introduced SuperUnli
25, a variant of the earlier offering which provides unlimited calls and texts from a Globe
Prepaid or Globe Tattoo number to other Globe or TM subscribers. The service is good
for 1 day and only costs P25.
For TM, on the other hand, the Company further boosted its drive to gain a stronger
foothold in the mass market with the launch of ALL NET COMBO, an all-in-one promo
that provides 100 text messages and 10-minute consumable calls to all networks for only
P25 a day. Alternatively, TM subscribers can avail of ASTIGTXTALL which provides
150 text messages to all networks for only P15 for 1 day.
For the trendy and gadget fanatics, meanwhile, Globe introduced an Unlimited Data Plan
that comes with the first-ever Globe Tattoo Micro-SIM for AppleTM iPad (3G model).
Subscription to the data plan is affordable at only P999 a month and provides subscribers
unlimited connectivity to the Globe 3G network. The Globe Tattoo Micro-SIM, which
enables internet browsing, emailing, instant messaging and online chatting through
AppleTM’s iPad, is available at selected Globe Stores nationwide.
To reward its loyal subscribers, the Company sustained “My Rewards, My Globe” and
“TM Astig Rewards”, the telco industry’s first rewards program for loyal prepaid and
postpaid customers. Globe and TM subscribers earn points based on tenure, reload, and
usage profile which can be used to redeem gifts and discounts from various retail
establishments nationwide.
Globe also established the country’s first ever telco retailer loyalty program through “Ka-
Globe Retailers’ Club.” The program is the Company’s way of giving back to its loyal
small and micro business partners who have helped the Company expand and reach out to
its million of subscribers nationwide. To become a member, AMAX retailers simply
have to reach average sales of P5,000 and above for 3 months, after which they receive
their membership cards which entitle them to various benefits such as free personal
accident insurance, low medical consultation fee, and discounts from top merchants in the
country.
The Company similarly achieved a milestone in the telecommunications industry with the
opening of its flagship store in Greenbelt 4 Makati. The new store provides a one-stop
telecommunications shop that will not only serve as a venue for bill payments or line
applications but will also let customers experience what the digital lifestyle is all about.
The Globe store boasts of a shop zone, which showcases digital and interactive
merchandising and offers a wide range of live demos of the latest actual handsets that
customers can feel, touch and test. It also houses a service zone, where customers can
find immediate answers to their needs. Store specialists are also accessible to provide
instant solutions to their queries or to simply guide them as they explore the wide range
of services that the Globe Store offers.
Meanwhile, in an effort to sustain the double-digit revenue growth in the broadband
segment, Globe recently expanded its WiMax offerings by introducing a prepaid variant
in selected areas. The prepaid WiMax service is available in data-only prepaid kits that
support speeds of up to 3mbps for only P60 a day (plus a one-time modem charge). Each
prepaid kit comes preloaded with P60 in value which can be topped-up through the usual
reloading channels such as via AMAX retailers, Share-A-Load, GCash, and via ATMs.
Globe WiMax is currently available in over 365 towns and cities in nearly 60 provinces
nationwide.
“Our immediate goal is to recover revenue market share in our 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,” Mr. Cu concluded.
Finally, in line with its new dividend policy of distributing between 75% to 90% of prior
year’s net income, the Board of Directors declared the second semi-annual cash dividend
of P40 per common share, payable on September 13, 2010 to shareholders as of August
17, 2010. This brings total cash dividend payment this year to P80 per share or P10.6
billion which represents 84% of 2009 net income.
2Q 2010 FINANCIAL SUMMARY
Globe Group
Quarter on Quarter Year on Year
Results of Operations (Php Mn) 2Q 1Q QoQ 1H 1H YoY
Change Change
2010 2010 2010 2009
(%) (%)
Service Revenues …………………….. 15,500 15,231 2% 30,731 31,693 -3%
Mobile…………... ………………. 12,489 12,530 - 25,019 27,553 -9%
Fixed Line Voice…………………. 746 696 7% 1,442 1,339 8%
Fixed Line Data…………………... 866 831 4% 1,697 1,439 18%
Broadband……………………........ 1,399 1,174 19% 2,573 1,362 89%
Operating Expenses and Subsidy……. 7,174 6,580 9% 13,754 12,598 9%
EBITDA ………………………………. 8,326 8,651 -4% 16,977 19,095 -11%
EBITDA Margin……………………… 54% 57% 55% 60%
EBIT ………………………………….. 3,898 4,413 -12% 8,311 10,874 -24%
Net Income After Tax (NIAT)……….. 2,109 2,947 -28% 5,056 7,241 -30%
Core Net Income...……………………. 2,391 2,795 -14% 5,186 6,904 -25%
• Consolidated service revenues for the first half of the year was P30.7 billion, down
3% from last year’s P31.7 billion. Compared to 2H 2009 results, 1H 2010
consolidated service revenues were steady. Meanwhile, 2Q 2010 revenues of P15.5
billion were higher by 2% against last quarter’s levels.
• 1H 2010 revenues from the fixed line data and broadband businesses continued to
post double-digit growth compared to year-ago levels, offsetting some of the declines
in the mobile telephony business which saw service revenues contract by 9% from
last year. Despite an increase in traffic and over-all usage, mobile revenues were
lower with sustained price pressures resulting from intense competition and
subscribers’ increasing preference for lower-yield bucket and unlimited promotions.
The appreciation of the peso likewise weighed down the Company’s revenues, with
US dollar-linked revenues comprising 28% of consolidated revenues during the
period. On a constant-exchange basis, consolidated revenues declined by 2% against
last year.
• Total operating expenses and subsidy increased by 9% against last year from P12.6
billion to P13.8 billion on higher outsourced services, inventory and receivable-
related provisions. These were partly offset by the decline in rent resulting from the
termination of temporary cable leases following the completion of the Company’s
second fiber optic backbone network (FOBN2) last November 2009. Marketing and
subsidy likewise declined from last year due to the re-timing of some marketing
programs to later this year. As a percentage of total service revenues, however, total
marketing and subsidy for the first semester remained at par with last year’s 8%.
• With service revenues declining and operating expenses growing, consolidated
EBITDA declined by 11% year-on-year from P19.1 billion to P17.0 billion. While
mobile EBITDA margins remained at a healthy 65%, the growing contribution of the
lower-margin fixed line and broadband businesses drove down consolidated EBITDA
margin to 55% from last year’s 60%. Depreciation expense, meanwhile, rose by 5%
with the Company’s continued investments in its broadband and mobile networks.
Consequently, EBIT declined by 24% to P8.3 billion while EBIT margin dropped to
27% from last year’s 34%. .
• After-tax net income stood at P5.1 billion, 30% down from last year’s P7.2 billion.
Last year’s results included an after-tax gain of about P398 million arising from an
equipment exchange transaction with an equipment supplier. Excluding foreign
exchange and mark-to-market gains and losses, as well as non-recurring items, core
net income amounted to P5.2 billion for the first half of the year, 25% below last
year’s P6.9 billion. Meanwhile, compared to 2H 2009 core net income of P5.1
billion, 1H 2010 results were 2% higher.
• Total capital expenditures for the first six months amounted to P10.8 billion driven
mainly by the continued expansion and upgrade of the Company’s broadband and
mobile networks. This is 16% below last year’s spend of P12.8 billion. As of end-
June 2010, Globe has 11,106 base stations and 6,334 cell sites to support its 2G, 3G
and WiMAX services.
MOBILE BUSINESS
Quarter on Quarter Year on Year
2Q 1Q QoQ 1H 1H YoY
Mobile Net Service Revenues (Php Mn)
Change Change
2010 2010 2010 2009*
(%) (%)
Service
Voice……….…………………………… 6,531 6,304 4% 12,835 13,538 -5%
Data……..………………………………. 5,958 6,226 -4% 12,184 14,015 -13%
Mobile Net Service Revenues…..………... 12,489 12,530 - 25,019 27,553 -9%
*
Prior period figures have been restated for comparability.
The mobile business contributed 81% of the total service revenues for the first half of the
year compared to last year’s 87%. Mobile revenues for the first semester were lower by
9% against same period last year and 3% against 2H 2009 when industry revenues started
to contract. Intensifying competition and rising multi-SIM usage weighed down mobile
revenues. The increasing preference for unlimited and bucket promotions also drove
down yields, resulting in a decline in revenues despite the higher voice and SMS traffic.
Mobile voice revenues, which comprised 51% of total mobile service revenues in the first
semester, totaled to P12,835 million, lower by 5% against last year’s P13,538 million.
Revenues from the Company’s bulk voice and unlimited offerings as well as its roaming
services continued to increase year-on-year but were unable to fully compensate for the
decline in regular domestic and IDD voice services. Compared to last quarter, revenues
grew by 4% with higher subscriptions to bulk voice and unlimited services and an
improvement in regular voice revenues.
Mobile data revenues, which accounted for 49% of total mobile service revenues for the
first half of the year, declined by 13% from last year’s P14,015 million to close the period
at P12,184 million. Growth in mobile browsing revenues and bucket SMS subscriptions
were unable to offset the decline in revenues from regular, pay-as-you-use SMS services.
Similar trends were noted in the second quarter, resulting in a 4% contraction of mobile
data revenues.
Quarter on Quarter Year on Year
2Q 1Q QoQ 1H 1H YoY
Change Change
2010 2010 2010 2009
(%) (%)
Cumulative Subscribers (or SIMs) – Net 24,621,754 23,889,706 3% 24,621,754 25,024,228 -2%
Globe Postpaid . ………………………...……. 909,466 880,491 3% 909,466 844,152 8%
Prepaid .…………………………………… 23,712,288 23,009,215 3% 23,712,288 24,180,076 -2%
Globe Prepaid …………………………… 13,164,258 13,041,308 1% 13,164,258 13,854,893 -5%
TM ………………………………………… 10,548,030 9,967,907 6% 10,548,030 10,325,183 2%
Globe ended the period a subscriber base of 24.6 million SIMs, 2% down from last year’s
25.0 million, but up 3% quarter-on-quarter. The decline compared to year-ago levels
reflected the impact of the recalibration of acquisition drives and deliberate churn-out of
the Company’s marginal subscribers beginning second quarter of 2009. Subscriber
growth, however, has picked up starting fourth quarter of last year.
Gross acquisitions have increased beginning fourth quarter of last year, with this
quarter’s level rising to 5.4 million SIMs, up 2% from last quarter. This brought gross
additions for the first six months of the year to 10.6 million, just 1% below last year’s
mark of 10.8 million. Churn rates in the first semester declined to 6.5% against last
year’s 7.0%. Blended rates for this quarter also improved to 6.4% from 6.6% last quarter.
As a result, subscriber net additions rose to 1.4 million in the first six months of the year,
compared to about 378,000 SIMs in the same period last year. This quarter’s net
additions of about 732,000 SIMs is better than last quarter’s 645,000.
FIXED LINE AND BROADBAND BUSINESS
Quarter on Quarter Year on Year
2Q 1Q QoQ 1H 1H YoY
Net Service Revenues (Php Mn)
2010 2010 Change 2010 2009 Change
(%) (%)
Service
Fixed Line Voice…………...……………… 746 696 7% 1,442 1,339 8%
Fixed Line Data………….………………… 866 831 4% 1,697 1,439 18%
Broadband ....……………………………… 1,399 1,174 19% 2,573 1,362 89%
Fixed Line & Broadband Net Service
3,011 2,701 11% 5,712 4,140 38%
Revenues……....................................................
Total fixed line voice revenues improved by 8% to P1,442 million from P1,339 million
last year, due to the revenue gains from Globe’s DUO and SUPERDUO services,
offsetting the lower contributions received from traditional landline subscriptions.
Cumulative voice subscribers grew 23% compared to last year, driven by the higher
subscriptions to DUO and SUPERDUO as well as increased take-up of bundled voice and
broadband packages across consumer and business segments. Compared to last quarter,
cumulative voice subscribers were down 1% with fewer landline and prepaid DUO and
SUPERDUO customers, partially offset by higher subscriptions to postpaid DUO and
SUPERDUO services.
The fixed line data segment sustained its strong growth and ended the period with P1,697
million in revenues, an 18% improvement over last year’s P1,439 million following gains
across all product segments. Growth has been fueled by the Company’s expansion of its
network of high-speed data nodes, transmission links, and international bandwidth
capacity to serve the requirements of business and enterprise clients, including those in
the financial services, retail, offshoring and outsourcing industries.
Quarter on Quarter Year on Year
2Q 1Q QoQ 1H 1H YoY
2010 2010 Change 2010 2009 Change
(%) (%)
Cumulative Voice Subscribers -
Net (End of period)……….................................. 576,390 583,149 -1% 576,390 468,767 23%
Cumulative Broadband Subscribers
Wireless1……………………………………… 694,260 606,344 14% 694,260 203,532 241%
Wired…………………………………………. 235,882 234,253 1% 235,882 175,777 34%
Total (end of period) ………………………..…. 930,142 840,597 11% 930,142 379,309 145%
1
Includes fixed wireless and fully mobile broadband subscribers.
Cumulative broadband subscribers grew 145%, from about 379,000 subscribers last year
to over 930,000 this period, on the back of significant gains made by Globe Broadband
Tattoo, the Company’s nomadic broadband service, and Globe WiMAX, Globe’s fixed
wireless service for at-home use. Wireless broadband subscribers now account for 75%
of total broadband customers, up from 54% last year.
The strong subscriber pick-up across all technologies translated to revenue gains, with
service revenues growing 89% to P2,573 million from P1,362 million a year ago.
Broadband revenues now comprise over 45% of total fixed line service revenues, up from
33% a year ago. The broadband business has also doubled its contribution to Globe
Group’s consolidated service revenues to 8% in 1H 2010 from 4% in 1H 2009.
For questions, please contact:
Ditas L. Santamaria JoMari S. Fajardo
Financial Planning & Analysis Investor Relations
(632) 730-2982 (632) 730-2820
Email: alsantamaria@globetel.com.ph Email: ir@globetel.com.ph
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