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Globe 2012 annual report
management discussion and analysis
Globe offers a full range of fixed line communications
services, wired and wireless broadband access, and endto-end
connectivity solutions customized for consumers,
SMEs (Small & Medium Enterprises), large corporations and
businesses.
Globe Telecom’s fixed line voice services include local,
national and international long distance calling services in
postpaid and prepaid packages through its Globelines brand.
Subscribers get to enjoy toll-free rates for national long
distance calls with other Globelines subscribers nationwide.
Additionally, postpaid fixed line voice consumers enjoy free
unlimited dial-up internet from their Globelines subscriptions.
Low-MSF (monthly service fee) fixed line voice services
bundled with internet plans are available nationwide and can
be customized with value-added services including multicalling,
call waiting and forwarding, special numbers and
voice mail. For corporate and enterprise customers, Globe
offers voice solutions that include regular and premium
conferencing, enhanced voice mail, IP-PBX solutions and
domestic or international toll free services.
The Company’s fixed line data services include end-toend
data solutions customized according to the needs of
businesses. Globe Telecom's product offerings include
international and domestic leased line services, wholesale
and corporate internet access, data center services and
other connectivity solutions tailored to the needs of specific
industries.
Globe offers wired, fixed wireless, and fully mobile
internet-on-the-go services across various technologies
and connectivity speeds for its residential and business
customers. Tattoo@Home consists of wired or DSL
broadband packages bundled with voice, or broadband
data-only services which are available at download speeds
ranging from 1 mbps up to 15 mbps. In selected areas
where DSL is not yet available, Globe offers Tattoo WiMAX,
a fixed wireless broadband service using its WiMAX network.
Meanwhile, for consumers who require a fully mobile,
internet-on-the-go broadband connection, Tattoo On-the-Go
allows subscribers to access the internet using LTE, HSPA+,
3G with HSDPA, EDGE, GPRS or Wi-Fi at various hotspots
nationwide using a plug-and-play USB modem. This service
is available in both postpaid and prepaid packages. In
addition, consumers in selected urban areas who require
faster connections have the option to subscribe to Tattoo
Torque broadband plans using leading edge GPON (Gigabit
Passive Optical Network) technology with speeds of up to
100 mbps.
In 2012, the Company officially launched its Long-Term
Evolution (LTE) broadband service with the Tattoo Black
Postpaid Plans. The nomadic broadband plans are equipped
with an LTE dongle and LTE superstick that deliver browsing
speeds of up to 42 Mbps and come with personalized
customer handling services such as a dedicated hotline, a
relationship manager, and many other perks.
The fixed line and broadband business registered significant
gains in 2012, with revenues rising by 9% from ₱14.2 billion
in 2011 to about ₱15.6 billion on account of increasing
demand for data and internet connectivity.
Full year broadband revenues were up 16% to ₱8.7 billion
as the year marked another milestone for the business
with the commercial launch of its broadband LTE service
that provided subscribers with alternative tools to improve
their overall internet experience. The broadband business
likewise continued to ride on the popularity of social
networking sites and benefited from declining prices of
access devices such as PCs, tablets, and laptops. Full year
2012 cumulative broadband subscribers stood at about 1.7
million, up by 18% from 1.4 million in 2011.
The fixed line data also contributed to the Company’s
overall top line growth with revenues of almost ₱4.2 billion,
10% higher than the ₱3.8 billion booked in 2011. This
was accomplished by the Company’s innovative business
solutions and products that capitalized on demand for highspeed
data nodes, transmission links, bandwidth capacity
and reliable service. Globe Business’ products include M2M
(machine-to-machine) solutions, cloud computing services,
domestic and international data services, leased lines and
managed services among other solutions for improving a
business’ productivity and IT security.
On the other hand, subscription to traditional landline service
was slightly revived through low call rate offers and together
with DUO & SUPERDUO’s continued popularity lifted
cumulative voice subscriber base 6% to 711,429 customers.
However, revenues still fell 9% to ₱2.7 million as the strategy
lowered MSF and consequently ARPU.
Financial Performance
Full year 2012 consolidated service revenues soared to a
historic-high of ₱82.7 billion, up 6% from 2011 results of
₱77.8 billion. The mobile business sustained its strong
growth momentum by delivering a 6% year-on-year increase
in revenues on account of the record gross acquisitions in
the postpaid segment, expansion in mobile browsing usage
as well as unlimited and bulk voice services. Incremental
revenues compensated for the decline in IDD revenues
which were partly weighed down by an appreciating Peso,
and also helped to counter market challenges underscored
by peaking penetration levels resulting from increasing
incidence of multi-SIM, declining yields from unlimited and
value promotions, and intensifying competition. Fixed line
and broadband revenues likewise contributed additional
revenues and registered 9% year-on-year growth with
sustained expansion in total broadband subscriber base and
steady demand for data services from the corporate sector.
Operating expenses and subsidy increased by 12% yearon-year
from ₱42.7 billion to ₱47.7 billion as 2012 was a
period of investment in terms of acquiring and retaining
subscribers as well as beefing up capacity with the network
modernization and IT transformation programs. Marketing
and subsidy costs increased substantially following the
aggressive acquisition of new postpaid subscribers who
opted to get the higher-end gadgets such as the Apple
iPhone. Marketing costs also increased to support the
various brand-building initiatives such as product and service
launches for the mobile and broadband business. As a
result, marketing and subsidy as a percentage of service
revenues rose to 13% in 2012 from 9% in 2011. Networkrelated
costs, which included lease, utilities, and repairs
and maintenance, were also higher in 2012 as a result of
the continued expansion of the 2G, 3G, and broadband
networks. Operating expenses in 2012 likewise included
charges for various outsourced and contracted services, as
well as professional fees resulting from the various projects
being undertaken by the Company, including our network
and IT modernization initiatives. Interconnect costs, on the
other hand, were down year-on-year driven by the NTCmandated
reduction in access charges implemented in late
2011.
Consolidated EBITDA of ₱35.0 billion was lower by about
₱93 million from previous year’s total of ₱35.1 billion as
the overall growth in expenses outpaced the increase in
revenues. As a result, EBITDA margin declined from 45% in
2011 to 42% in 2012.
Meanwhile, total depreciation expense grew 25% year-onyear
from ₱18.9 billion to ₱23.6 billion with the increase
attributed mainly to charges related to the network
modernization and IT transformation programs. As the
Company had disclosed in the past, the carrying value of
the old, non-useable assets will impact Globe Telecom’s
profitability through an acceleration of depreciation over
its remaining useful life and until such time when the new,
replacement assets are ready for service. Accelerated
depreciation charges increased further towards the last
quarter of the year to bring full year total to ₱5.1 billion.
Excluding this item, total depreciation expense would have
declined by 2% against previous year to about ₱18.5 billion.
Globe closed the year with core net income of about ₱10.3
billion, up 2% from ₱10.0 billion in 2011. Core net income
excludes foreign exchange and mark-to-market gains
and losses as well as non-recurring items such as the
accelerated depreciation charges related to transformation
initiatives. Reported net income after tax, on the other hand,
was down 30% year-on-year from ₱9.8 billion to ₱6.9 billion
as revenue gains were offset by the impact of accelerated
depreciation charges as well as sustained investments in
subscriber postpaid acquisitions.
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