050807: Globe allots P17B for 2007 capex

By Mary Ann ll. Reyes
The Philippine Star 05/08/2007

Globe Telecom is spending at least P17.1 billion ($350 million) this year and another P21.5 billion ($440 million) next year as the company focuses on new areas of growth, particularly broadband and 3G or the third-generation mobile communications technology.

Total capital expenditures for the first quarter of 2007 amounted to P3.1 billion or 34 percent higher than last year’s P2.3 billion as Globe deepened its geographic coverage to 95.2 percent and increased its population reach to 98.5 percent. The number of cell sites reached 5,963 as of end-March 2007.

Company officials expect spending for the second quarter of 2007 to be higher than the P3.1 billion during the January to March 2007 period, ramping up until the end of the year.

Of the $350 million that will be spent this year, around $190 million will be for broadband rollout encompassing both wireless and wireline network.

Globe is planning to expand the number of 3G cellsites to 1,500 within the year from 1,000 as of end-2006. Globe has around 500,000 3G phones in its network of which around 100,000 are actively using 3G.

Officials disclosed that they do not expect capex spending to increase next year, but an additional $90 million will be spent for Globe’s participation in a new cable project spearheaded by VSNL International, a member of the Tata Group of India, which will set up a trans-Asian submarine cable system that will link the Philippines to Hong Kong, with connectivity via the TGN Pacific network to Japan, Guam and the US.

Globe president and chief executive officer Gerardo Ablaza said that the increased spending in cable investment might be offset by a decreased spending in 2G. "We do not expect any big increases in capex levels next year," he pointed out.

Ablaza noted that mobile business has reached its maturity stage but there is still a lot of room for growth.

With cellular penetration rate expected to reach 60 percent by 2010 compared with 49 percent as of end-2006, Ablaza said there are still 15 million SIMs that that can be sold.

"There will still be growth in wireless but no longer the exponential growths that we’ve experience in the past. If we want more robust growths, it will have to come from new sources of revenues such as broadband," he added.

Globe posted core net earnings (net income before bond redemption costs and foreign exchange gains or losses) of P3.7 billion for the first quarter of 2007, a 12 percent improvement over the P3.3 billion registered for the same period in 2006 and 80 percent higher that the fourth quarter 2006 figures.

Ablaza said it is too early to tell if there will be a significant lift in earnings due to the May elections.

"We are quite pleased that the first quarter has shown a 12 percent growth year-on-year. The revenue growth for the wireless business is important to us. This is the first double digit growth that we’ve had in the last 18 to 24 months. OFW remittances helped on the consumption side but it is not clear whether the incoming elections have played a role. But we hope that the elections will bring about positive results for our business," he explained.

Reported net income was at P2.6 billion, 25 percent lower than the P3.45 billion in the first quarter of 2006, but six percent more than the P2.4 billion registered in the last quarter of 2006. The reduction was largely due to the P1.2 billion after tax impact of its bond redemption.

Earnings before interests, taxes, depreciation and amortization (EBITDA) during the January to March 2007 period grew seven percent to P10.4 billion compared to the same period last year while service revenues during the three-month period went up 10 percent to P15.6 billion from P14.2 billion last year, allowing Globe to post new record levels for both service revenues and EBITDA.

As for the EBITDA margin outlook, Ablaza said the company might not be able to continue with 67 percent over the next three quarter of the year due to expected increased marketing spending for the rest of the year. "We expect an early 60s in the next few quarters," he said.

Wireless service revenues expanded by 11 percent year-on-year driven by improvements in both data and voice revenues. Company officials said the sustained popularity of unlimited SMS and bucket voice offers, together with improved top-up values with the introduction of lower AMAX denominations, have been key drivers of wireless revenue growth.

Wireless data performed strongly during the quarter, registering 22 percent year-on-year growth to close at P6.45 billion from P5.2 billion in 2006.

The company’s wireless subscriber base posted significant gains during the first quarter of 2007 as it recorded a 28 percent year-on-year growth to 16.9 million subscribers. The prepaid segment composed of Globe Prepaid and TM brands made up 96 percent of total subscriber base.

Total gross subscriber additions for the period reached 3.3 million but because of lower quarter-on-quarter churn rates, the company ended with strong net additions of 1.3 million for the first quarter.

Meanwhile, wireline service revenues grew by three percent, reporting revenues of P1.64 billion for the period ending March 2007 compared to P1.58 billion in 2006, propelled by higher broadband and corporate data revenues. Improved broadband revenues came from an expanded subscriber base which grew by 167 percent to 69,170 as of end-March while a higher circuit base boosted lease revenues for the data business.

Globe’s consolidated debt is expected to fall to P34 billion by April this year.

 

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