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Globe 2012 annual reportmessageFor 2012, Globe Telecom sustainedits growth momentum over the pasttwo years, and recorded another alltimehigh in service revenues, as itmade notable gains along key revenueand market share metrics. This wasachieved despite the intense competitiveenvironment that has adverselyimpacted yields as the market continuedto shift towards flat-rate, value offersfor traditional mobile voice and dataservices. The development of alternativeoptions such as social networking, emailand instant messaging, driven by therising proliferation of smartphones, hasalso added pressure to the competitiveenvironment.Modest Mobile Telephony SectorGrowth amidst Intense IndustryCompetitionWithin this industry framework, the mobile telephonysector as a whole made modest revenue gains of 3% from2011. Peaking mobile penetration rates, and the continuedpreference for value-driven offers, pushed the estimatedmobile penetration rate in SIM terms beyond 100% by theend of the year. The continued prevalence of multi-SIMusage has driven Globe and its competitors to compete for agreater share of the subscribers’ wallet through more valuebased,flat-rate and unlimited value offers. This resultedin the further erosion of per unit prices and margins fortraditional voice and SMS services.In the broadband sector, industry subscribers grew by 14%,from an estimated 4.5 million in 2011, to just under 5.2 millionby the end of the year. Internet coverage has become moreextensive with the increasing affordability of access devicessuch as laptops, PCs and tablets.Laying out an additional12,000kilometersof fiber optic cablesnationwideRecord Operating Results despite theIncumbent’s Advantages in ScaleDespite the competitive industry dynamics, Globe Telecomachieved its highest level of service revenue at ₱82.7billion, 6% above the previous year’s level of ₱77.8 billion.Revenue growth was supported by the expansion of ourmobile and broadband subscriber base as well as byimprovements across all key product segments. Mobilerevenues, which also reached a record high of ₱67.2 billionand comprised 81% of total service revenues, were 6%higher than the previous year. This was attributed to thesuccess of the Company’s customizable and innovativeservice offerings for both domestic and internationalmarkets, value for money propositions, handset and gadgetlaunches, and increased demand for mobile browsingservices.Broadband revenues also reached a record high of₱8.7 billion, 16% higher versus the past year. The yearmarked another milestone for the business with thecommercial launch of its broadband LTE (Long TermEvolution) service. This provided subscribers withalternative tools to improve their overall internet experience.Wireline data services also grew by 10% year-on-year to₱4.2 billion as demand for data and connectivity solutionsacross business sectors continued to rise.Despite the increases in postpaid mobile subsidy andtransformation-related expenses, Globe’s core netincome improved by 2% year-on-year to ₱10.3 billion.Core net income excluded the effects of accelerateddepreciation, foreign exchange, mark-to-market chargesand non-recurring items. We view the increased level ofcosts as investments in both our subscribers and networkwhich are important to sustaining the growth momentummoving forward and seeding future growth.Reported net income of ₱6.9 billion declined by 30% from2011, as a result of the accelerated non-cash depreciationcharges from the decommissioning of assets related to thenetwork and IT modernization.Globe remains committed to sustaining itscompetitiveness not only in today’s market but also in themarket we envision in the future. As such, we will continueto invest in our subscribers, our network, our IT systemsand the broader community in which we operate.4 5


Globe 2012 annual reportmessageAttractive Dividend Yield forShareholdersGlobe Telecom’s sustained revenue momentum andimproved market position were reflected in the financialvaluation metrics. The company’s market capitalizationremained relatively steady at ₱144.6 billion by the end of2012. Globe likewise maintained an attractive dividendyield of 5.8%. Globe paid dividends totaling ₱8.6 billion in2012, representing a pay-out rate of 86% of 2011 core netincome. This is consistent with its recently updated dividendpay-out policy of distributing 75% to 90% of prior year’score net income.Network Modernization and ITTransformation Program UpdatesTo ensure our long-term competitiveness, in a marketenvisioned to be largely built on data traffic, Globeannounced a massive US$790 million networkmodernization and IT transformation program in November2011. This is Globe Telecom’s largest infrastructurecommitment to date. The network modernization isdesigned to significantly improve network quality, anticipatethe surge in voice and data traffic, decrease total costof ownership, and make the network robust enough forfuture needs. This will entail replacing outdated networkequipment with cutting-edge and state-of-the-art radios, aswell as increasing our fiber optic footprint to handle voiceand data traffic. In step with the network modernization,the IT transformation is envisioned to re-engineer GlobeTelecom’s IT systems over the next two years to enhanceits ability to roll-out products to the market faster andallow it to more quickly respond to customer needs andpreferences.Our network modernization and IT transformation programremains on schedule. We have completed the change-outof close to 90% of various cell sites all over the country,which is the first phase of this two-year program. Moreover,we are laying out an additional 12,000 kilometers of fiberoptic cables nationwide to boost current capacity. Sincethe deployment of our network modernization program,we have seen significant quality improvements across allupgraded regions, putting us on track to deliver our promiseof superior customer experience.Under our corporatesocial responsibilityarm, Globe BridgingCommunities (GlobeBridgeCom), we embarkon programs gearedtowards good governance,social entrepreneurship,environment conservation,education andvolunteerism.Continued Commitment to CreatingShared Value for all StakeholdersIn addition to our commitment to ensure the sustainability ofour core business, we continue to develop opportunities inadjacent spaces.In the area of mobile banking and microfinance, underBPI Globe BanKO Inc. (BanKO), (our mobile microfinancejoint venture with Ayala Corporation and the Bank of thePhilippine Islands) Globe’s mobile money platform andBPI’s banking infrastructure combined to deliver affordablemicrofinance services to the unbanked segments of thepopulation. Through 2012, BanKO has continued toexpand its network of partner outlets, which today number2,000. Its wholesale loan portfolio has grown to morethan ₱2.4 billion, spread across microfinance institutions,including non-government organizations, rural banks,cooperatives and financing companies. Within two yearsof operations, BanKO has gained over 261,000 retailcustomers and increased its retail loan portfolio nine-fold.Another pioneering initiative by Globe is the launch of itsbusiness incubator program through Kickstart Ventures,Inc. (Kickstart). Designed to support and developthe Philippines’ dynamic and growing technopreneurcommunity, Kickstart is envisioned to provide aspiringtechnopreneurs with needed funds, facilities, infrastructure,mentorship and market access to build new businesses.By providing the tools needed to build and test ideas, byproviding seed funding, and by providing training andmentorship as well as connecting technopreneurs withpartner companies within the Globe, Singtel, and Ayalanetworks in the Philippines and abroad, Kickstart providesselected startups increased chances to succeed and scalefaster. Since its launch last April 2012, Kickstart alreadyhas 10 companies in its portfolio covering the digital mediaand technology, and web/mobile platform space.All these initiatives are part of our commitment to createexceptional value to our customers, shareholders andemployees. It also fulfills our sustainability and corporateresponsibility objectives, which are embedded in variousareas of our organization and the different facets of ouroperations.In closing, let me reiterate that Globe remains committedto sustaining its competitiveness not only in today’s marketbut also in the market we envision in the future. As such,we will continue to invest in our subscribers, our network,our IT systems and the broader community in which weoperate. We recognize that our growth as a corporation willalways be linked to the growth of the larger community -- beit through the capital investments we make, the jobs andlivelihood we create directly or indirectly or the taxes andfees we pay to the government.Let me end by extending our appreciation to the Boardof Directors, the management team and each of the5,872 employees of Globe for their dedication, hard workand perseverance. We thank our shareholders, our over810,000 business partners and over 35 million subscribersfor their continued confidence and support. We remainexcited with the growth prospects of your Company andlook forward to bigger things from Globe in the succeedingyears.Jaime Augusto Zobel de AyalachairmanThe first phase of the migration of our IT transformationprogram into the new business support systems (BSS),which covers postpaid mobile subscribers, is scheduled forthe first quarter of 2013. Migration of prepaid and fixed linesubscribers are planned across varying stages throughoutthe balance of the year. Notwithstanding the efforts andfocus on the network modernization, in the latter half of2012 Globe launched its LTE broadband service in the keycentral business districts and cities, providing subscriberswith faster speeds and better overall internet experience.Under our corporate social responsibility arm, GlobeBridging Communities (Globe BridgeCom), we embarkon programs geared towards good governance, socialentrepreneurship, environment conservation, educationand volunteerism. This was most evident in our swiftrelief efforts and network restoration in the Visayas andMindanao as Typhoon Sendong ravaged Dumaguete,Cagayan de Oro and Iligan last year.6 7


Globe 2012 annual reportmessageYour Company concluded 2012 with recordbreakingperformance. Consolidated servicerevenues were at an all-time high of ₱82.7B– a strong 6% above last year’s, reflectingtremendous growth despite a very challengingcompetitive environment. Core net incomesustained healthy growth of 2% to ₱10.3B,revealing highly positive business momentumwhen isolated from one-time, nonrecurringexpenses. Against a compelling backdropof outstanding business outcomes, we alsoincreased our dividend payout by 3% andremained true to our policy of distributing 75%to 90% of the previous year’s core net income.These results reflect your Company in fightingform as a true market challenger wrestlingcompetition, winning over consumer preference,and championing integrity in business practice.We have been driving a total transformation for the past3 years, all throughout anchoring every move on strongcustomer-focus and an enriched experience. Followingthrough on our commitment, we are transforming holisticallyto serve customers better.We set out to build a brand new network that would greatlyimprove the quality of mobile experience in the Philippines.At this point, I am proud to announce that close to 90%of cell sites nationwide have already been replaced withstate-of-the-art equipment that will bring pervasive 3Gsignal. Progressively in metro cities, we are rolling out4G/LTE performance and services with close to 800 sitesstrong before 2014. Capacity boosting for all our facilitiesis simultaneously underway as we are laying out anadditional 12,000 kilometers of fiber-optic cable across thecountry. This entire undertaking importantly greens ouroperations with dramatically lower power consumption anda much smaller carbon footprint as we forge on with ourforward-looking thrust towards environmental care and thesustainability of our operations. We have adopted and willcontinue to employ eco-friendly solutions such as the moreprevalent use of solar-power and deep cycle batteries, aswell as the shift to outdoor facility models that cancel theneed for air-conditioning.We also endeavored to integrate 200-plus antiquated ITsystems to raise the bar of how we deal with customers.Our IT transformation is well underway to enable theseamless stitch between service subscriptions andreal-time billing, all the way through to comprehensiveafter-sales service. We have just freshly launched a newbusiness support system to this end that dramaticallychanges the workflow for our front-liners, and the overallexperience for our customers in corollary improvement.Soon a new business intelligence platform shall come online as well to know customers more intimately, and in sodoing, we shall be able to develop spot-on services forthem with more relevance and urgency.₱82.7billionConsolidated ServiceRevenues₱10.3billionCore Net Income₱67.2billionMobile RevenuesIn 2012, Globe set new records, moved closerto superior customer experience, and marchedsteadfastly towards long-term competitiveness.8 9


We have adopted and will continue to employ eco-friendlysolutions such as the more prevalent use of solar-powerand deep-cycle batteries, as well as the shift to outdoorfacility models that cancel the need for air-conditioning.Now then, I’d like to surface a few of our most noteworthycommercial initiatives of 2012. These served well to yieldhappy customers and boost our business results pastprevious records set. Our superior customer experienceproposition is clearly resonating among our 35.5 millionsubscribers of the present.MySuperPlan from Globe Postpaid led the charge,endearing close to 600,000 new acquisitions, an alltimehigh in gross subscriber additions for the segment.Personalization of the postpaid plan continued to bearunprecedented appeal to discerning customers who wantonly the best on their terms. Value-for-money combos andthe latest gadgets, including the Apple iPhone 5 whichcommanded our most successful Apple product launchyet, led to unprecedented growth in our postpaid business.Globe Postpaid contributed a hefty ₱22.8B in mobilerevenues in 2012, significantly accounting for 34% of theyear’s total mobile revenues.Globe Prepaid and TM both beat their quarterly records interms of gross acquisitions as the prepaid market eagerlysnapped up our brands’ most bang-for-buck offers. Amongothers, the borderless GoUnli across all networks and thefar-reaching GoTipidIDD strewn around the world wonover a quarterly high 3.1M Globe Prepaid gross additionsin the last period of the year. The TM Combo and perfectlymarket-matched mobile browsing offers like Social20,Mail20, and Fun20 widened our prepaid customer base themost by pulling in 3.4M TM SIMs in the fourth quarter.GCASH broke new ground in the mobile commerce spherewith the introduction of the GCASH American ExpressVirtual Pay product. Online shopping has never been asaccessible to Filipinos with the international credit facilityand free US shipping address the service provides. Whiletake-up is still in its early stages, we can expect strongadoption in the near future.Moreover, your Company gained substantial revenuelift from Globe Business. Capturing a huge chunk of thefixed line data business, they added ₱4.2B to our top line,notably demonstrating double-digit growth of 10% in thecompetitive space.Finally, our Broadband business continued to soar withoutlimits with Globe Tattoo clearly cementing its status asthe most preferred broadband service in the country.Testament to the accolade conferred by Frost & Sullivanas back-to-back Broadband Service Provider of the Yearfor 2011 and 2012, the brand amassed a loyal following ofclose to 1.7M subscribers in 2012, rapidly growing by 18%since 2011. Fast Tattoo On-The-Go products coupled withdependable Tattoo DSL lifted Globe Broadband revenuesto ₱8.7B, an impressive 16% increase over previous year’sperformance, and significantly scaled up to contribute 11%of total revenues.33.1millionup10%Mobile Subscriber base₱8.7billionBroadband Revenues1.7 millionup18%BroadbandSubscriber baseAll said, your Company’s products and services pushedinnovative edge and synced up relevantly to consumerlives. And while the numbers speak volumes, theconsumer has the loudest voice – in a survey conductedby CNET Asia, one of the region’s front-running onlinecontent networks, Globe emerged as the Top Telco in thePhilippines among all its readers. Frost & Sullivan similarlynamed your Company the Philippine Telecom ServiceProvider of the Year.These are laudable achievements driven by a passionateworkforce. We stand united before our customers andshareholders, proud of what we’ve accomplished.Employee engagement at Globe is at an all-time high,statistically rated even ‘stronger’ by worldwide employerstandards, as our Employee Satisfaction Index continued torise from 72.8% in 2011 to 75.3% in 2012.Such engagement levels profess the kind of customerfocus,self-giving culture vibrantly alive in your Companytoday. Globe employees never clock out when publicservice is due. Globe volunteerism thrives in trying times.A most recent example, when Typhoon Pablo ravagedMindanao in November, your Company’s employees bravedthe worst conditions the south had ever seen, to swiftlyrestore communications, and to mobilize relief operationsfor the affected communities we serve. The Department ofSocial Welfare and Development (DSWD) and no less thanPresident Benigno Aquino III himself have lauded Globevolunteers for their vigorous participation in the repackingand distribution of relief goods. Notwithstanding, this isnothing short of Globe malasakit given back to the societythat sustains us. Likewise, this clearly demonstrates ourcommitment of corporate social responsibility to the verycommunities and stakeholders that we serve.Globe Bridging Communities (BridgeCom) is the corporatesocial responsibility (CSR) arm of Globe Telecom. GlobeBridgeCom now works in strategic geographical focusareas — Batangas, Benguet, Bicol, Bohol, and Lanao —which have been chosen based on their ranking in relationto poverty incidence, vulnerability to climate change,existence of local BridgeCom partnerships, and growthpotential for our own business’ sales and marketing efforts.Globe BridgeCom takes the Communities of Practice(CoP) approach in all focus areas. Your Company’skey advocacies — good governance, environmentalconservation, entrepreneurship, access to social protectionservices, and volunteerism — are all practiced andsynergized among locals and partners to perpetuate lastingand farther-reaching change.As a concluding note to safeguard sustainability, yourCompany looked far ahead from 2012 in terms ofinfrastructure and spectrum resources. From a strategicperspective, we acknowledge the scarcity of radiofrequencies and the substantial cost of augmenting ourtransmission backbone for more capacity as patent risksGlobe 2012 annual reportmessageto fulfilling our mission to transform the lives of people,business, and communities through innovative solutions.In this vein, last December, we successfully concluded thetender offer for the debt of Bayan Telecommunications, Inc.(Bayan), gathering tenders for over 96.5% of all existing debtof bayan and its subsidiary RCPI. This marked a milestone inmoving forward to up scale and harness business synergiesthat can serve as competitive advantage for the future.In 2012, Globe set new records, moved closer to superiorcustomer experience, and marched steadfastly towards longtermcompetitiveness. From this point on, 2013 is the yearwhen our transformation will start to bear fruit. Now imaginewhat that will be like. I assure you, the best of your Companyis yet to come.ernest l. cuPresident and ceo10 11


Globe 2012 annual reportour commitmentsOur CommitmentsEnvironmentWorkplaceCommunityMarketplaceOur CommitmentsPromote efficient and effective environmental protectioninitiatives.Approach• Initiate measures to reduce energy consumption acrossthe organization.• Manage carbon footprint through its operations.• Implement waste management programs (solid wastes,hazardous wastes and electronic wastes).Our Commitments• Continuously enable our people through technology,systems and processes to make the difference in the livesof the customers we serve.• Build a Customer-centric High Performing Organizationcomposed of the happiest employees that are able todelight our customers.Approach• Improve employee engagement through The Globe Waystarting with leaders as champions.• Strengthen the recognition and rewards system that isanchored on performance.Our CommitmentsInitiate and support programs that promote social andeconomic well-being in communities by providing accessto mobile and web technologies that can enable, empowerand enrich their lives.Approach• Synergize corporate social responsibility initiatives todemonstrate model Communities of Practice (CoP) in 5target provinces – Benguet, Batangas, Bicol, Bohol andLanao.• Develop and nurture partnerships with local andinternational development organizations with specificbenefits to at least 10,000 families or more in targetprovinces.Our CommitmentsTo expand network coverage and infrastructure to provideaccess to as many people as possible.Approach• Develop diverse set of products and services to meet theever-changing needs of subscribers.• Develop effective risk management strategies.• Strive to ensure minimal operational cost but maintainhigh business efficiency.• Focus on customer loyalty programs and provide betteroffers for our customers.• Develop and groom strong leaders and high performingtalents by investing in and enabling employees' growthand career development.• Create a fun work environment promoting family, personalinterests, and total wellness.• Foster a culture of innovation.• Attain OHSAS certification for all its corporate offices inthe near future.• Leverage various modalities of employee volunteers forcommunity development.o 1,000 volunteerso 10,000 volunteer hours• Lead a value-chain analysis study, collaborating withSafety, Health and Environment (SHE) and LogisticsAdministrative Services (LAS), to assess GHG reductionopportunities and increased Recyclability.• Lead in the development of nurseries (seedlings) in20 public schools northern part of the Philippines forreforestation projects.• Continue support to the Taal Volcano ProtectedLandscape area to improve water quality in Lake Taalwhich will benefit 13 municipalities and 3 cities in thevicinity of the lake.• Continue support for the Forest Corridor program of thePhilippine Eagle Foundation in Arakan, North Cotabato.Updates in 2012Updates in 2012Updates in 2012Updates in 2012• Continue to regularly implement, monitor, and evaluateenergy efficient initiatives.• Continue to manage and monitor carbon footprint andwaste management practices.• Introduced Happy sa Globe magazine for all the Globeemployees.• Globe Longevity Award launched in 2012 to appreciateand recognize long-term Globe employees.• Initiated Fun Life at Globe for the employees.• Skill Volunteer-Matching program.• Aligned the BridgeCom programs into 5 pillars.• More focused approach in CSR.• Introduced new programs such as the My Fair Shareprogram.• Strengthened partnerships with technology-basedinnovations for financial inclusion, transparency,governance accountability, citizen participation, andcapacity-building for duty-bearers. Initiated value chainanalysis study to assess GHG reduction and wastemanagement techniques in the operations.• Introduced new Mobile Data Services Applications forcustomers.• Introduced LTE enabled services to the subscribers.12 13


Globe 2012 annual reportStakeholder ManagementGlobe Telecom communicates with its eight major stakeholder groups using diverse channels. While theCompany understands the priorities and expectations of its stakeholders, it also believes in the method ofregular communication to its stakeholders.14 15


Stakeholder Engagement MethodologyGlobe 2012 annual reportstakeholder management | materiality analysisStakeholdersMode of EngagementStakeholder ConcernsResponsivenessMateriality AnalysisShareholders/Investors/ManagementBoardEmployeesAnnual Stockholders Meeting (ASM)Extraordinary General Meetings(EGM)These meetings result in quarterlyreports submission and annualreview and address of individual andinstitutional investor’s expectations.Employee Satisfaction Survey (ESAT)Internal Customer Satisfaction Survey(ICSAT)Allowed open communicationand feedback and provided equalopportunities to share their thoughts,views and opinions between theCompany and its employees.• Higher Financial Return• Career Development Programs• Safe Work Environment• Open Communication• Regular Trainings / LearningManagement• Employee Benefits• Employee Relationship• Higher Dividends• Financial Performance• ROI• Meetings / Kapihan Sessions• Ka-Globe Jam• Townhalls• Trainings• Various Committee Formation• Globe Employees Portal (ICON)• Happy sa Globe (Employeehandout)For the 2012 Annual and Sustainability Report, Globe Telecom focused on the issues that are most material to its business andstakeholders. We identified the relevant areas of stakeholder engagement in the Stakeholder Management Table and provide themethods, means and results of each engagement. The materiality matrix is used to map material issues based on the followingcriteria:High: Issues that are most relevant to our business and have high current/potential impact on our business and stakeholders.Medium: Issues reported but not necessarily with quantitative indicators. Some issues have only partial impacts on our business andstakeholders.Low: These issues are of low materiality with minimum impact on our business and are not reported in detail.CustomersCustomer Satisfaction Survey (CSAT)Customer Feedback ManagementCustomer engagements includeconstant monitoring, researchand study on the affordabilityand accessibility of products andservices, strive to minimize customercomplaints and increase customersatisfaction.• Better network quality• Uninterrupted services• Customized Plans• Faster resolution of complaints• Loyalty / Rewards Program• Easy access to support• Transformation Plan• Mobile Data Services• 360 Degree Quality Feedbackprogram• TALK2GLOBE your way 24/7• Customer LoyaltyLocalCommunitiesCommunity Engagement throughsocial activitiesGlobe Telecom shows that it caresand supports local communities byexecuting life-improving programsand social activities.• Care and support for community• Life-improving programs• Support for good governancethrough ICT• Globe Labs• My Fair Share Program• Globe Cordillera Challenge• GBC Sim Card• i-rEcover, i-rEcycle ProgramServiceProviders/SuppliersPartnersLocalGovernmentAuthoritiesNonGovernmentalOrganizationsProcurement ManagementApply ethical supplier managementsystem to all service providers toensure that relationships adhere toprescribed policy and guidelines.Conferences and Industry WorkshopsGlobe Telecom is a member oftelecommunications industry specificassociations and has remained tobe a respected member of the localbusiness community.Compliance to Government legislativeframeworkCommunicate commercial, policy,regulatory and other relevant mattersto government authorities andregulators and continue complianceto all government requirements asprescribed by law.Partnership for communitydevelopment projectsGlobe Telecom supportsdevelopmental causes and maintainspartnerships with various NGOs,local and international, for variouscommunity development projects.• Transparency• Long-term partnership• Ethical behavior• Clear procurement policies• Continuing support and long termmembership• Regulatory disclosures• Transparency• Accountability• Building partnership• Policy alignment with areas ofnational interest i.e greeninitiative, biodiversity protection• Building Partnership• Community Development• Governance• Environment protection andpreservation• Transformation Plan• Sourcing Green Equipment• Transformation Plan• BPI Globe BanKO• Annual Financial Report• Quarterly Report• Annual and Sustainability Report• Public Disclosures• CSR Projects and Programs• Metro Weather Project• TaoPo• Global Filipino TeachersLevel ofconcern forstakeholdersCurrent potential impact on companyThe concerns and issues identified during stakeholder engagement were discussed, prioritized based on the materiality matrix andformed the basis for key considerations and reporting in 2012 performance report.Globe Telecom, in its endeavor, will continue stakeholders’ engagements to better understand their concerns and material issues,and address them using only the most favorable approach beneficial to all parties concerned.Based on the stakeholder engagement process and identified stakeholder concerns, Globe has further categorized stakeholderconcerns into high, medium, low as the level of significance depending on impact on overall business scenario. Globe hasprovided required resources and taken actions to address the stakeholder concerns. Majority of the stakeholder concerns havebeen addressed by the management and the related performance and status were disclosed in this report.16 17


Globe 2012 annual reportour businessOur BusinessSubsidiaries and Joint VenturesOrganizational ProfileGlobe Telecom, Inc.provides mobile telecommunications servicesGlobe Telecom is a results-driven organization and works hard on putting forth relevant products and services fastto the consuming market. The products and services enhance everyday communications and continuously fulfillthe company’s mission to transform the lives of millions of Filipinos. Globe is committed to enrich lives by providinginnovative solutions for a better and faster mobile and data experience and bring its customers, employees andshareholders closer to fulfill the things that are most important to them.The company’s vision of having the happiest customers and employees is best represented by its corporatetransformation philosophy called the Circle of Happiness. The philosophy links the relationship among the company’sengaged employees, delighted customers and the satisfied shareholders. Employee satisfaction leads to workdedication and results in happy customers when they experience excellent customer service in purchasing theproducts and services of Globe. This further increases profitability making the shareholders more contented andconfident with the company’s performance. Good financial performance in turn provides more opportunities to theemployees and increased employee satisfaction, adding to exceptional customer service delivery. Constantly followingGlobe Telecom’s philosophy in making great things happen, it becomes a win-win situation for all.SubsidiariesInnove Communications, Inc.provides wireless and wireline voice anddata communication services, as well asdomestic and international long distancecommunication services or carrier services.(100 % ownership)Joint VenturesBridgeMobileprovides international roaming plan for itspostpaid customers.MissionTransform the lives of people,businesses and communitiesthrough innovative solutions.VisionHappiest customersand employees.G-Xchange, Inc. (GXI)provides software application and systemdevelopment, design, administration,management and operation for bill paymentand money remittance.(100% ownership)BPI Globe BanKO, Inc.provides mobile based banking servicesin Philippines.Our ValuesEntertainment Gateway Group(EGG)provides mobile content and applicationdevelopment services(100% ownership)We put our customers first.Our people make the difference.We act with integrity.We care like an owner.We keep things simple.To us, it’s be fast or be last.I love Globe. Together, we make great things possible.GTI Business Holdings, Inc. (GTI)provides wireless and data communicationservices(100% ownership)Kickstart Ventures, Inc. (Kickstart)provides investment, research, technologydevelopment and commercializing for businessventures(100% ownership)20 21


With growth running in full throttle and transformationtaking place, it is undeniable that Globe has changedthe face of the telecommunications industry in thePhilippines.In the year 2012, Globe was recognized locally andinternationally not just for delivering outstandingproducts and services but also for drivingenvironmental initiatives and social empowerment.Growing AchievementsGlobe 2012 annual report2012 Key Highlights and RecognitionsJanuaryour business2011 Yahoo! Net Index:Most popular service provider for mobile internet servicesFebruarymarchjuneBSI Group:BS 25999 Business Continuity certification47th Annual Anvil Awards of the Public Relations Society of thePhilippines:Award for Excellence - 2010 Annual ReportAward for Merit - Globe Cordillera ChallengeFinance Asia:One of the Philippines’ best managed companies for ninestraight yearsAlpha Southeast Asia:Best Senior Management IR Support and Most ConsistentDividend Policy2012 Global Telecoms Business (GTB) Innovation Award:Mobile Content and Services Innovation together with FlashNetworks2012 Reader’s Digest Asia’s Trusted Brand Survey:Gold Award – Phone Service (fixed line or mobile) ProviderGold Award – Internet Service ProviderFrost & Sullivan:CEO of the Year Service Provider – Ernest L. Cu,Globe President and CEOjuly2012 Asia Responsible Entrepreneurship Awards:Social Empowerment Category for “Sagot Ka ni Kap” ProgramseptemberInternational Organization for Standardization (ISO)ISO 20000-1:2011 Certification for Professional ServicesDepartmentoctoberFrost & Sullivan:Philippines’ Telecom Service Provider of the YearPhilippines’ Broadband Service Provider of the Year2012 International Business Awards:Bronze Stevie Award – Communications or PR Campaign ofthe Year: Issue Management Category for its entry on GlobeAdvocacy Campaign against anti-consumer implications ofPLDT-Digitel mergernovember2012 IABC Philippine Quill Awards:Award for Excellence – Globe 2011 Annual Sustainability ReportAward for Merit – Globe Gets Me CampaignABS-CBN Foundation Bantay Kalikasan:Green Lead AwarddecemberPSE Bell Awards:1st PSE Bell Award for Corporate Governance2012 8th Indonesia Sustainability Reporting Awards (ISRA):Philippines’ Best in Sustainability Reporting2012/2013 CNET Asia Reader’s Choice Awards:Best Telco in the Philippines22 23


Globe 2012 annual reportour businessFaster and Better NetworkThe company’s strength is its dynamism and boldness to change for its customers, employees andshareholders. In order to fully become a catalyst of change, Globe understands its need to be relentless in thequest for excellence and continuously transforming the company from within. In 2012, Globe continued withthe transformation programs under the 5-pillar transformation plan which was started in 2011.BusinessIn 2011, in line with the vision of a differentiated customerexperience, Globe shifted beyond the regular CustomerSatisfaction mindset and created the total customerexperience, which would allow the company to engage notonly its customers but also the employees and shareholderswho are at the forefront of Globe Telecom’s priorities. Fastercustomer service feedback was put in place truly making thecustomers satisfied with the improved modifications.The company’s commercial transformation in the year2012 focused on changing the very foundations of its backoffice systems, including the corporate support and internalprocesses. By allowing changes to ripple out from within, thecustomers and stakeholders could see past the change inthe façade and overall ambiance of its stores. The customerscan actually experience the difference with each transactionand interaction in every Globe Store.NetworkAs an innovator in the telecommunications industry, aconstant part of Globe Telecom’s transformation includes thecontinuous development of the network. Globe has investeda total of $700M for its network modernization program.This project is envisioned to deliver faster and unparalleledcustomer experience in the country while positioning itself asthe leader and one of the best telecommunications providersin Asia.People have started to rely more and more on socialnetworking to stay connected. Also, with the growing numberof smartphone users, Globe saw the need to future-proof thenetwork to accommodate the constant increase in networktraffic especially on data.Phase 1 of the Network Transformation is the upgrading ofthe network system's access portion. The company replacedthe old hardware and technology in its cellular sites, powersources, base stations and switches allowing the accessportion to become more powerful and energy-efficient.President Aquino witnesses Ceremonial Power On of Globe $700M network modernization program. The event was led by Globe ChairmanJaime Augusto Zobel de Ayala (2nd from right) and Globe President and CEO Ernest L. Cu (left). Secretary Mar Roxas II (right) also graced thespecial occasion. The network modernization program, touted as the most significant investment of Globe in the last two decades, includes anall-IP infrastructure, pervasive 3G coverage, doubling fiber optics capacity, 4G and LTE readiness, and overall network quality and resiliency.Huawei is tapped as lead partner and end-to-end network solutions provider while French innovator Alcatel-Lucent is assigned as projectmanager.At the end of 2012, Globe was able to modernize more than80% of its cellular sites and upgrade its network systemnationwide. Starting within the National Capital Region(NCR), Makati City, being the country’s premier businessarea, significantly benefitted from the network transformation.The network development coverage includes key locationsof the city and are now enjoying stronger Globe signal.Aside from Makati, other areas such as Caloocan, Malabon,Navotas, Valenzuela (CAMANAVA), Marikina, Manila, SanJuan and Mandaluyong were completed in the last quarterof 2012. Taguig, Pasig, Paranaque, Pasay, Las Piñas andPateros followed after.In the Visayas region, Cebu took the lead in equipmentmodernization. Other Visayan key provinces lined-up for thetransformation are Leyte, Samar, Bohol, Iloilo and Roxas,consecutively. Meanwhile in the Mindanao region, the majormodernization took place in Davao as well as in Zamboangaand Misamis Oriental. Improved mobile connectivity wasachieved through the modernized facilities. Improvementsfor the province of Sulu, cities of Surigao and Butuan werecarried out during the last quarter of 2012 and in Agusan delSur by early 2013.In addition to the upgrades, Globe installed more resilientfiber optic cables in more areas to serve more customersand greatly improve voice and text messaging quality aswell as provide faster internet services. An installation of asubmarine cable in Boracay was also completed and thesame facility is being worked on in Palawan, which is duefor completion during the first quarter of 2013.All in all, thenationwide improvements allowed clearer voice call quality,easier connection, on-time delivery of text messages andfaster mobile surfing and downloading.Globe has successfully upgraded 4,000 cell sites to4G – LTE, HSPA+ and WIMAX providing better networkexperience to 91% of its customers.As the transformation program continues to take place in theyear 2013, Globe would be able to provide greater networkavailability, impressive quality on voice calls, instantaneousdelivery of SMS, improved call set-up rates and fasterbrowsing with minimal buffering of multimedia content toevery Filipino mobile user.IT SystemsFor 84 years, Globe has succeeded in constantly reinventingitself to keep pace with the ever-changing customerdemands. Network modernization and the improvement of itsIT infrastructure have always been a crucial element in takingthe lead amidst relentless market challenges.In 2012, the IT Transformation program was initiated and itwas spearheaded with Amdocs, a top software and servicesprovider, as technology partner. The IT Transformationprogram constitutes an overhaul of 90% of the company’sbusiness support systems (BSS) to improve customerexperience, strengthen its product design and developmentcapabilities, and reduce cost. The new standards-basedIT architecture will help provide faster response time tocustomer queries and service requests at the Globe storesand call centers, quicker time to market for new products,and timely customer loyalty offers.In 2013, the BSS Transformation will be implemented usinga phased approach to ensure sustained quality of servicewhile delivering enhanced customer experience. ThisStrengthening signals—with fiber: Globe Chief Technical AdviserRobert Tan (in white polo) leads the network team, includingproject managers from Huawei, in the landing and laying out ofthe network’s fiber optic cable facilities in Boracay. Globe Telecomsuccessfully interconnected Boracay through fiber optics, effectivelyboosting the connections and strengthening the network coverage ofthe internationally-renowned island.transformation approach should result in a better 5-year TotalCost of Ownership (TCO), as compared to incrementallyupgrading the existing platforms, as well as revenue upliftfrom the improved capabilities.Beginning with mobile postpaid, Globe will simultaneouslywork on the subsequent phases of these improvementsto cover mobile prepaid and wireline as well. Thesedevelopments are expected to be completed by the 4thquarter of 2013.Globe is also set to replace legacy systems with anew Enterprise Data Warehouse using top-tier datawarehouse components to deliver superior data processingperformance, comprehensive intelligence and an enhancedinformation value chain.Talent and CultureThe greatest asset Globe has is its people. The company’soutstanding performance can be credited to the hardworking,committed and pool of talented people aligned with thecompany’s values and culture. Globe Telecom’s people isthe glue that brings everything together which is why it iscrucial to ensure that the company is able to acquire theright people and enhance their exceptional abilities further.Hiring the best people guarantees that Globe will be able todeliver and achieve its goals and continue to provide fast andexcellent service within the telecommunications arena. Thecompany enhanced its learning programs as aligned withGlobe Telecom’s values and culture to nurture the abilities ofits existing and future employees.The New Globe HeadquartersAs part of the never-ending transformation, Globe hasalready started the construction of its green headquarters inBonifacio Global City, Taguig. The headquarters, which willbe named as Globe Tower, is expected to be completed bythird quarter of 2013 and shall be the future home of Globeemployees. More details on this big move can be found inGreening the Globe Section under Green Headquarters.24 25


Globe 2012 annual reportempowering you, your wayEmpowering You, Your WayThe Globe Way is to make great things possible the customer’s way. The subscribers of Globe Telecom are empoweredto choose and customize their mobile and internet needs by offering the most diverse and flexible products and services.Customization was pioneered by Globe in 2010 and has ever since changed the face of the telecommunications scene.My Super Plan has proven to be the most flexible and customizable postpaid plan in the market until today. My Super Plan letsthe subscribers choose and design their own postpaid plan depending on their needs, preferred freebies and services and ofcourse, the best devices to enjoy. In addition, Globe allows an exclusive perk of a 7-day phone warranty should a customeravail a plan but is not satisfied with the handset of his choice. This privilege can be availed by the customer immediately with noquestions asked.Product and ServicesPostpaidGlobe Telecom sustained its undisputed leadership inthe postpaid segment in 2012, proactively riding on theincreasing popularity of smartphones among Filipinosand offering these mobile devices under its suite of fullycustomizablepostpaid plans.Aside from the revolutionary and game-changing MySuper Plan that changed the landscape of postpaid, Globeexpanded its roster of postpaid plans to a more targetedset of subscribers. Unli Surf Combo plans catered to userswith heavy mobile browsing needs, Family Combo plansare perfect for families or groups of individuals that letthem enjoy 3 postpaid lines, 3 phones, and 3 unlimitedservices under one bill, Load Tipid Combo plan that allowssubscribers to set their monthly plan limit, choose their owngadget, and use their monthly consumable to avail of prepaidpromos, and Platinum plans that give customers unparalleledservice bundled with the most exclusive privileges.Keeping its partnerships stronger with the world’s leadingdevice manufacturers, Globe launched the Nokia Lumia800, Blackberry® Curve 9220. Blackberry® Curve 9320,Samsung Galaxy SIII, Samsung Galaxy Note 2, and thehighly-anticipated Apple iPhone 5 bundled with itsinnovative postpaid plans with the best offers, freebies, anddeals.Globe was also first to unveil the country’s initial range ofLTE smartphones such as the Huawei Ascend P1 LTE andthe ZTE T81 powered by its now-growing LTE networkacross the country.prepaidGlobe Prepaid has transformed the mobile network scenarioand established its position as the youth-friendly call, textand mobile internet provider. With majority of the mobilephone users come from the youth, the network is aiming tofully cater the young generation.To complement the launch of the user-friendly mobile selfservicemenu, *143#, Globe Prepaid unveiled its ChooseYour Promo offerings which introduced four new servicesfrom Globe Prepaid – the Unli All Trio, All Net 25, Unli Tingiand the sought-after comeback of the Immortal offers –Immortal Trio and Immortal Txt.Through *143#, Globe Prepaid subscribers can enjoy the latestprepaid offers bundled with text, call and mobile browsing servicesavailable in different prices and validity periods.Unli All Trio is the ultimate service that provides unlimited onnetcalls and texts and unlimited mobile browsing for as lowas ₱60 a day while All Net 25 provides unlimited all-networkSMS and 10 minutes of all-network calls, 50 minutes ofon-net calls and additional 5MB of consumable facebookbrowsing for ₱25 a day. Meanwhile, Immortal Trio provides50 on-net SMS plus 5 all-network texts and 5 minutes ofon-net calls for only ₱25, while Immortal Txt provides 25on-net SMS and 5 all-network SMS for only ₱15. Completingthe Choose Your Promo suite is Unli Tingi, offering unlimitedall-network texts, unlimited on-net calls and unlimited mobilebrowsing valid for 1 hour for only ₱5.To keep up with the social networking phenomenon in thePhilippines, Globe launched promos that give subscribersfree access to their favorite sites. Globe Prepaid launchedSuperFB10 for all-day unlimited access to Facebook for anaffordable subscription fee of ₱10, while Globe Prepaid andTM gave its subscribers free Twitter access for one month.Globe Prepaid also expanded its Blackberry® servicesto include Blackberry® Chat, which provided subscriberswith unlimited BlackBerry® Messenger and free 100 SMSto Globe and TM subscribers for ₱15 a day. On the otherhand, Globe Prepaid and TM boosted their mobile browsingofferings with the launch of three data packages that costonly ₱20 per subscription: Social20 for 1 day unlimitedaccess to Facebook, Twitter, and Multiply, Fun20 for 1 dayunlimited access to Facebook and YouTube, and Mail20 for 1day unlimited access to Facebook, Yahoo! Mail and Gmail.To cap it off, Globe Prepaid transformed its promo portfoliowith the introduction of GoAllNet and GoUnli. GoAllNet offersunlimited SMS to all networks with 60 minutes calling, ofwhich 10 minutes is for all networks and free Facebook foras low as ₱25 for a day.GoUnli, on the other hand, provides unlimited calling toGlobe/TM, unlimited texts to all networks, plus unlimitedFacebook for as low as ₱30 per day.With these new offers, Globe Prepaid has completed itsportfolio in providing subscribers promo choices that all comewith unlimited texts to all networks and mobile data services,as well as availability in various denominations that will fit aday’s, week’s or even month’s need for calling, texting andsurfing.Globe also recognized the need to provide affordable,convenient, and innovative international offers to keepFilipino families here and abroad well-connected. It launchedthree international offers in 2012—ITXTALL30, GoIDD, andGoTipIDD. ITXTALL30 is Globe Telecom’s internationalSMS offer that allows subscribers to send up to 100 textmessages to all local and international networks in 54destinations worldwide. It costs only ₱30, and is valid for1 day. GoIDD is Globe Prepaid’s bulk IDD offer that allowssubscribers to enjoy IDD rates for as low as ₱1.50/minute toU.S. (Main), Canada, China, Hawaii, Hong Kong, Singapore,and Thailand. It costs only ₱200 per registration, and is validfor 30 days. Lastly, Globe GoTipIDD provides the lowestper-minute rates to over 250 destinations worldwide, and isavailable in denominations of 30, 50, and 100 pesos.With all its pioneering offers and services, Globe Prepaid ispoised to sustain momentum as it brings personalization andcustomization to its subscribers in 2013.32 33


Globe 2012 annual reportempowering you, your wayTMTM, the company’s mass market brand, has strengthened itsposition in the market with its customized offers and promosespecially in the regions, where it has steadily attracted astrong base of consumers who look for value-for-moneycall, text and mobile internet services. It boosted its valueofferings with Combo 10 which gives subscribers unlimitedtext and 10-minute bucket voice services within the TM andGlobe networks as well as 50 all-network SMS for as low as₱10 for one day subscription.To further drive usage among its subscribers and providevalue-for-money services in 2012, the company improvedits AstigTxt10 offering with TM Extend. For an additional₱5.00 fee, TM subscribers registered to the promo gets anextra day of unlimited texts within the TM or Globe networks.It also improved its mobile browsing offers which includedSuperSurf, as well as promo bundles Social20, Mail20 andFun 20. Finally, TM responded to the growing demand forFacebook access with its TM Astig Facebook offer, givingusers unlimited access to the social networking site for only₱15 valid for 2 days. With TM Astig FB, subscribers canbrowse through their Facebook accounts to post status andcomments, add friends, upload and tag photos, and editprivacy settings while on the go.TattooTattoo, hailed as the best broadband provider in thePhilippines, continues to sustain its double-digit growthin both service revenues and subscriber base in 2012.Broadband revenues grew 16% to ₱8.7 billion from ₱7.5billion in the same period last year. The significant growthof Tattoo has significantly contributed to the total all-timehigh revenue of Globe of ₱82.7 billion, up by 6% from ₱77.8billion in 2011. Subscriber base for Tattoo broadband grew18% higher with 1.7 million subscribers by end year. Ofthis, 77% are new subscribers of Tattoo On-the-Go; whileTattoo@Home posted significant increase of 15% year-onyearin subscriber base.Tattoo was launched in 2009 as a nomadic broadbandservice with bold and edgy imagery and value-for-moneyprepaid offers. In January 2011, Tattoo evolved into anaspirational brand for the youth still retaining its core valuefor-moneyconsumer proposition but this time leveling up thecustomer experience with customizable plans and serviceswith the brand promise of “living without limits.”Tattoo also launched its home broadband service portfoliounder the Tattoo@Home brand catering to the householdand family’s varied needs with customizable homebroadband plans.Tattoo gained global recognition as Broadband ServiceProvider of the Year by Research firm Frost & Sullivan,two years in a row. It pioneered on a series of innovativeproducts and services in 2012 that led to its sustaineddouble-digit growth. Tattoo launched its first LTE broadbandservice in Tattoo Black that offers the fastest speed andcomes with premium service and exclusive privileges. At thesame time, it was the first broadband to offer its own tabletwith the Tattoo MediaPad providing an affordable yet highlyfunctional device because of its office-on-the-go feature.Tattoo also introduced LiveTattoo.ph, the first online lifestyleportal featuring the latest offers, downloads and subscriptionsfrom a host of partner establishments. Coupled with thelaunch of the website was the debut of Tattoo PrepaidLifestyle Sticks.It also launched the Tattoo U-stick, carrying the logos ofspecific universities, allowing students a creative venue toexpress their academic pride. Tattoo also launched TattooTorque, the fastest broadband with a maximum speed of 100Mbps, bundled with a free landline service and WiFi routerwith different service fees to choose from. At the end theyear, Tattoo-enabled tablet devices were launched such asthe Apple iPad 3 and Apple iPad Mini.For the second straight year, Tattoo Broadband honored thebest social media players and advocates through theT@tt Awards which the brand also pioneered. This first-everaward-giving platform for cyberspace influencers validatedTattoo’s dominance in the social media sphere.Moreover, the breakthrough mobile and landline service,Globe DUO, has expanded coverage to 49 key areas in thecountry and targeted more areas at the end of 2012. GlobeDUO allows subscribers to make unlimited calls to landlineand other DUO users using only one phone, one SIM andone billing. Additional Tattoo landline improvements includedthe launch of Globe Super Homephone, a wireless landlinewhich features unlimited local calls, unlimited calls to GlobeLandline and DUO and unlimited calls to mobile numbers inthe same network.The network’s broadband business continued to deliver itsvalue proposition by combining its services with Postpaid.Launched in the second quarter of 2012, My Ultimate SuperPlan is a bundled offer that provides subscribers calls, texts,mobile browsing, and broadband surfing under one plan foras low as ₱999 a month.For 2013, Tattoo will evolve further as a socially-relevantbrand empowering subscribers to use their social mediapresence in making a difference in the lives of other peopleand moving their world.34 35


Globe 2012 annual reportempowering you, your wayInternational servicesGlobe continued to strengthen its foothold in key Filipinocommunities overseas such as Singapore, Hong Kong,Taiwan, and Saudi Arabia through its partnership withSingtel, CSL, Taiwan Mobile, and Mobily, respectively,offering affordable and quality calling services to itssubscribers in the Philippines.In the US, Globe further advanced the efforts around buildingstronger retail presence through its affiliate, GTI Telecom,increasing customer engagement in the California and NewYork-New Jersey area after only one full year of operation.New services were offered such as the launch of clean callcards which assure consumers of their call minutes to thePhilippines. GTI also re-launched Duo International to offera virtual US landline number to Globe subscribers in thePhilippines allowing anyone from the US to contact themat domestic US rates. The company also entered into apartnership with Vonage, a U.S.-based broadband, voiceover IP (VoIP) & international long distance service provider,to offer unlimited calling for Vonage subscribers to any Globenumber in the Philippines.2012 also saw the setup of another affiliate in Hong Kong,Globe Telecom HK Limited, with the main purpose ofstreamlining delivery and distribution of Globe Telecom’svarious domestic products abroad.In the international roaming front, Globe expanded itspopular service, PowerRoam, which gives consumers asmuch as 90% savings on voice, text message, and dataroaming charges. In addition, the company aggressivelygrew its unlimited data offering for roamers by increasingavailability to 19 countries, namely China, Vietnam, CzechRepublic, Germany, Ireland, Spain, UK, USA, SaudiArabia, Hong Kong, Australia, Taiwan, Macau, Singapore,Indonesia, India, Malaysia, South Korea, and Thailand.Globe also successfully launched an offering that gaveconsumers flexible roaming packages regardless of operatorin Thailand and is expected to roll this out in other countries.Furthermore, the company is the first operator in the countryto launch LTE data roaming, allowing high-speed dataaccess to its subscribers when roaming in Hong Kong inpartnership with China Mobile Hong Kong Company Limited.Globe is working to launch the same LTE data roamingservice with more operators worldwide. Finally, Globe alsojoined forces with the Department of Tourism (DOT) tohelp boost the country’s “It’s More Fun in the Philippines”campaign. For these tourists, the company continues toprovide affordable roaming services in its mobile network andalso provides special traveller SIMs for those who choose topurchase local services.With respect to facilities, Globe continued the long-termexpansion of its international network capacities byfocusing on ensuring that the construction of the SJCcable is completed within its target in 2013. This ushersin the use of 40G waves on the company’s internationalnetwork. The company also continued with its incrementalexpansion on older networks like the East Asia Crossing(EAC cable), which, coupled with existing investments inTGN-IA, C2C and APCN2, and SEA-ME-W3 provides a richdiversity of routes within the region. Investments outsidethe region include China-US and FLAG. Total investmentsin international cables (including the International Backhaulconnectivities) have reached more than US$ 200M.To cap a good year, the International Business Groupdecided to build on its successful “Buo ang Pasko”Christmas campaign launched in 2011 which garnered aGuinness record and Anvil award for the company. 2011’sexecution focused on the Christmas tradition of gift-givingand togetherness by having the biggest simultaneous giftexchange or Secret Santa in 4 countries. For 2012, thecampaign was digital-centered and focused on the messageof giving back to Filipinos abroad by surprising them withgifts from their family in the Philippines. The three successfulviral efforts reached nearly 200,000 views and garneredmore than 90% positive comments from the public.Globe BusinessBusinesses are always looking for new ways to sustain orfurther improve their ecosystem. Gone are the days wherea small, medium, or large enterprise remains moribund. Tobe progressive, they should be watchful of the changesthat surround them, and even take it a step further by beingprepared for the future and being part of it. Globe Businessunderstands this need. Its mission is to enrich lives byproviding relevant ICT Solutions with unparalleled serviceand ultimately, to make your business better.Globe Business delivers a full suite of products and servicesto meet demands for mobility, voice, collaboration, machineto-machine,IT-enabling and hosting services, and reliableconnectivity. Innovation is what sets it apart and is also itsfoundation to constantly deliver better services and providesuperior customer experience. Globe Business understandsand focuses on the business ecosystem of the customer,allowing us to identify company pain points, and in turnpin down the best solutions to address them. Globe alsobelieves in providing consistency in meeting customer needs,constantly finding fresh revenue streams beyond basic fixedand mobile telephony services as the market progressivelymatures. Furthermore, it maintains good relationships withcustomers and partners. All of these factors ensure GlobeBusiness’ financial viability.One of the solutions that the company has recentlyintroduced to the market is the Globe Business PayrollCloud,a first of its kind in the country. It processes payroll andother Human Resources transactions, making them simpler,efficient, accessible and convenient with minimal cost.Above all, Globe Business PayrollCloud is highly advancedand reliable as it is backed up by Globe Telecom’s carriergradedata center, new network and best of class supportstructure, making sure it is always available and convenientfor everyone to use.Globe Business is also committed to expanding anddelivering solutions that highly support a greenerIT ecosystem. This can be seen in the company’scomprehensive selection of Machine-to-Machine solutions,which give customers the ability to monitor and managevarious fleet and fixed asset resources. Machine-to-Machineallows companies to get real-time valuable information thatshows real-time data of how resources are used, maintained,and how much energy they consume. Companies are alsoalerted when problems occur or are about to occur. Thisenables them to drive different efficiency programs that resultin less power and fuel consumption, decreased wastage, andpreventive loss or damage of resources. Using much lessresources is better for the environment.Cloud Solutions is another innovation by Globe Business.It promotes process automation and shared resourceswhich result in less paper, lower power consumption,reduced resources for maintenance and management of ITinfrastructures, and decreased IT hardware deploymentsand space requirements. Cloud Solutions also lessen theneed for people to travel to and from different locations sincetraditional transactions and operational activities can nowbe done on the cloud. This helps minimize carbon footprint,again promoting for a greener IT ecosystem.Globe Business also believes in contributing innovationsthat leave a positive impact in society. It is looking intonon-traditional opportunities in other industries whereinthe company can help innovate. Healthcare, for instance,is a primary need of society. Globe Business aims todeliver a better overall healthcare experience by increasingoperational efficiency and improving quality of patientcare. Subsequently, it is also exploring ways to increaseproductivity of farmers. Globe Business hopes to makean impact in the Philippine agriculture landscape, allowingfor more opportunities for farmers and increased supply ofproduce in an attempt to alleviate poverty in the Philippines.Business made better – the Globe Business mantra. AllICT solutions companies can create systems, improveefficiencies and automate processes, but Globe Businessunderstands its customers through providing superiorcustomer service and delivering targeted, customizedend-to-end solutions that the competition only hopes toachieve. Globe Business is geared towards ensuringfinancial viability, committing to a greener environment, andcontributing to social responsibility, going beyond expectedservice requirements and making an impact socially,environmentally, and nationally. This is the Globe Businessexperience – we make your business better, and more.36 37


Globe 2012 annual reportempowering you, your wayMobile Data ServicesSmartphone use in the Philippines is on a steady riseespecially with the availability of affordably-priced devices,giving subscribers full access to internet surfing on theirmobile phones anytime, anywhere.Keeping up with this growing demand, more mobile internetservices were offered by Globe, led by SuperFB for Globesubscribers and AstigFB for the TM subscribers. Subscribersare now able to enjoy unlimited mobile Facebook accessfor as low ₱10 for one day or up to 30 days for ₱199. Forsubscribers who want to do more than just Facebook, SurfBundles were made available so they can enjoy 1-dayunlimited access to Facebook and other favorite social sitessuch as Twitter, Multiply, Yahoo! Mail, GMail, or YouTube.For subscribers who want to explore the internet and itswonders with an affordable, worry-free mobile browsingexperience, Globe PowerSurf empowers them to do just that.Globe Postpaid subscribers can choose from ₱99 for 50MBsurfing or get up to 1GB surfing for 30 days for ₱499. AllPostpaid subscribers registered to PowerSurf are given a nobill shock guarantee. As long as they stay subscribed to theservice, they will not be charged higher than ₱999 for mobilebrowsing even if they exceed their megabyte (MB) allocation.Prepaid subscribers, on the other hand, can surf for as lowas ₱15 for one day with 20MB surfing or get up to 1GB for 30days for just ₱499.Aside from innovative mobile data offers, subscribers arealso provided with excellent service delivery and customerexperience. They can easily access all offers by registeringthrough text or dialing *143# from their mobile phones forfree.In October 2012, Globe and Google also introduced thepioneering Google Freezone. A first in the world, GoogleFreezone gives Globe Prepaid and TM subscribers access toGMail, Google Search and Google+ for free via libre.ph. Tostart using Google Freezone, subscribers can simply registerby texting LIBRE to 8888 or visit http://libre.ph through theirmobile phones.Ending the year with another innovation, Globe Telecomunveiled its own roster of Globe Mobile Applications –GMESSAGE, GMOVIES, GSERVICES and GCCASH,designed to give subscribers with unique, relevant, anddelightful mobile content that will add value to today’s fastpacedlifestyle.GMESSAGE, the first in Asia, is a mobile messagingapplication that enables users to send and receive free andunlimited messages, share photos, videos and audio files withother GMESSAGE users anywhere in the world. The app alsoallows users to send messages to other mobile subscribersfor only ₱0.15 per message. GMOVIES is a one-stop mobileapplication for all movie needs such as checking movieschedules and reviews, booking and reserving seats, andbuying movie tickets from the mobile phone. GSERVICES isan account management app that allows subscribers to checktheir prepaid load or outstanding postpaid balance, register topromos, check rewards points, redeem rewards and requestfor bill reprints. GCASH empowers subscribers to buy prepaidload anytime and anywhere with a 10% rebate, pay bills,send money to family and friends via their mobile or throughFacebook, and send donations without having to memorizekeywords or access numbers.Globe LabsTo further sustain the growing mobile application industry andstrengthen its confidence in the talent of every Filipino, Globebrought to life Globe Labs. Globe Labs is a fast-growingdeveloper community striving towards creating revolutionarymobile innovations. Through this group, aspiring andexperienced developers will have the opportunity andmeans to further develop their ideas and talents on mobileapplications and be able to promote these inventions on agreater scale.With Globe Labs, knowledge and skills enhancementare provided through regular trainings to introduce newtechnologies and platforms to help developers keep theircompetitive edge. Other support mechanisms such as tools,resources, facilities and enablers which pave the way forapplication development are included once registration iscompleted by every member. This pool of developers isassisted by Globe Labs in commercializing and monetizingtheir developed applications.Everyone interested can join Globe Labs even without anybackground on information technology (IT) or computersoftware. The key is every individual’s passion on buildingand innovating applications for tech-savvy mobile users.Globe Labs also has an existing partnership with theUniversity of San Jose – Recoletos (USJR) in CebuCity for idea exchange and integration to the curriculumthrough capacity building, research, and mobile applicationdevelopment. As a result, Globe Labs provides annualtraining and technical support for graduating students andfaculty members of USJR and has commissioned Orange &Bronze Software Labs, to design a mobile app developmentcourse for the school.A similar activity co-presented by Google DevelopersGroup – Philippines (GDG-PH) was held in Cebu andBacolod to bring the latest technologies through the firstGDG DevFest in the Visayas region. In the said event,tech enthusiasts were able to learn more about Googletechnologies and products and at the same time interactwith local product developers. HTML5, Android development& Google developer tools, Google Apps, Maps & locationbasedservices were also tackled. For the business mindedpeople, the focus was on Google AdSense and Social MediaMarketing.Another partnership with GDG and World Bank was enteredby Globe Labs for the staging of the Sanitation Hackathonin December. The SanHack targeted developers who couldcreate apps to address the global problem of providing cleantoilets and drinking water.Other initiatives supported by Globe Labs includePinoyBBDev and 2nd PinoyBBDev Hackathon in Augustand Blackberry® Jam Manila in October. Also, Globe Labstogether with Microsoft Philippines and Nokia Philippines,organized the first ever Windows Phone 8 Developer Day inNovember.Globe Labs will continue to organize events that supportlocal tech enthusiasts to further foster innovation andidea generation that will help boost the country’s mobiletechnology scene. So far, Globe Labs community has over4,000 members composed of IT professionals, programmers,designers, analysts and system integrators and also studentsand business managers.In 2012, various events were organized by Globe Labsto fully help its community understand and produce morerelevant ideas and innovations. For instance, GlobeLabs Developers Day focused on the theme – “AppsDevelopments using Facebook APIs”. The sessions gave anoverview and walkthrough of Facebook’s mobile platform,Open Graph API, App and Games Development andthe Facebook App Center. Facebook Head of DeveloperAdvocacy, Mr. James Pearce was present to grace the eventwhich was held in Makati City.38 39


Globe 2012 annual reportempowering you, your wayGCASHG-Xchange, Inc. (GXI) is a pillar in m-commerce and afully-owned subsidiary of Globe Telecom. GXI pioneeredthe mobile commerce service called GCASH which waslaunched in the Philippines in October 2004. GCASH isan internationally-acclaimed mobile commerce service ofG-Xchange, Inc. which allows Globe and TM subscribers tosend and receive cash conveniently anytime and anywhere.It delivers over one single platform the three major cashtransactions made by consumers today: purchase andpayments, person-to-person or P2P transactions, anddomestic and international remittances.In 2012, GCASH launched the GCASH PowerPay+, a salarydisbursement service that enables employees to receivetheir salaries through their mobile phones and withdraw theircash from any of the 13,000 ATMs all over the country usingthe PowerPay+ ATM card. Their money can also be cashedout through more than 7,000 GCASH outlets nationwide.This pioneering product also provides insurance coverage asan added benefit on top of all existing GCASH services.GCASH also launched its very own mobile application withthe GCASH Mobile App which can be downloaded for freefrom the App Store, Google Play or Blackberry® App World.This smartphone application makes it more convenientand enjoyable for users to do GCASH transactions suchas buying airtime load with 10% rebate, sending money toothers via mobile phone, Facebook and email and evenpaying utility bills.GCASH has also partnered with American Express to launchthe GCASH American Express Virtual Pay, a prepaid virtualcard linked to a subscriber’s GCASH mobile wallet whichallows users to shop conveniently online from both localand international sites. It gives each user a personalized USAddress to allow delivery of purchases right at their doorstepfrom international online sites which do not normally shipgoods to the Philippines.GCASH American Express Virtual Pay is fast becomingpopular in buying digital goods as users don’t need to havea credit card to purchase apps, music, or videos for theirsmartphones or gadgets from Apple iTunes US andPhilippines Store, Google Play, Windows Marketplace andBlackBerry® App World.GXI is registered with the Bangko Sentral ng Pilipinas (BSP)as a duly licensed Remittance Agent and Electronic MoneyIssuer. As a BSP-supervised entity, GXI is required tocomply with the implementing rules and regulations of thePhilippine Anti-Money Laundering Law (R.A. 9160/9194) aswell as the rules on E-Money (BSP Circular 649). To mitigatethe risk of fraud, GXI employs system and operational controlmeasures like the use of two-factor authentication whichrequires subscribers to use their GCASH-registered SIMstogether with their four-digit Mobile Personal IdentificationNumbers (MPIN) before a transaction is processed.GXI also has a system that diligently captures customers’personal data that are electronically recorded and digitized ina central database.Similar to banks, GXI is capable of monitoring and reportingGCASH transactions that are considered suspicious throughthe use of a robust TelCo-grade fraud monitoring system.The system captures both GCASH and TelCo data of aregistered GCASH subscriber. It uses software which canautomatically do trend analysis and linking of transactionsvia configurable parameters which helps analysts in thedetection of transactions with unusual patterns. It also hasa daily and monthly transaction limit inherently set in thesystem which prevents users in abusing the system.With all these, GCASH continues to lead the mobile financialservices industry by continuously providing products andservices to address customer needs. With both Globe andGCASH’s drive for a customer first and innovation mindset ,both new and existing customers will continue to benefit fromthese value-added services.BPI Globe BanKO – banking for theunbanked FilipinoBPI Globe BanKO, the country’s first mobile-based,microfinance-focused bank and Globe Telecom’s jointventure with BPI and Ayala Corporation, continued to makeheadway in 2012, growing to almost 300,000 depositors justone year after it launched its community banking services.The bank offers affordable financial products to serve awider market through its 2,000-strong network of partneroutlets including pawnshops, grocery stores, pharmacies,and other retail establishments. This pioneering “partneroutlet” concept of banking allows BanKO accountholders totransact at accredited establishments within their community,with expanded coverage that now includes Visayas andMindanao.BanKO conducts acquisition and financial literacy caravansat the grassroots level, giving the opportunity for residentsof marginalized communities and organizations to openbank accounts. Through its full-year TV segment “BossingSavings” in Eat Bulaga in 2012, BanKO became a householdname among the DE segment.BanKO continues to provide wholesale loans to microfinanceinstitutions (MFIs) such as rural banks, cooperatives, nongovernmentorganizations and people’s organizations, whoin turn provide credit access to micro-entrepreneurs. Itswholesale loan portfolio increased to ₱2.5B, 16% higher thanprevious year.It also partnered with various government agencies andnon-government organizations (NGOs) to provide accessto savings, insurance and loans. Recipients of the DSWD’sPantawid Pamilyang Pilipino program that provides cashgrants to qualified beneficiaries were given financial literacytraining and encouraged to open BanKO accounts. BanKOpartnered with the International Finance Corporation (IFC)to give microfinance services to communities for cleanenergy and energy-saving projects, giving access to cheaperand environmentally-friendly sources of power for smallbusinesses. It also partnered with Alay Sa Kaunlaran Inc.(ASKI) and the International Rice Research Institute (IRRI)to extend microloans to farmer-members of ASKI who arealso BanKO accountholders, giving them access to credit formaterials to grow their yield and improve their productivity.With its wide array of affordable financial services andaccessible touchpoints, BanKO is leading the way inpromoting financial inclusion by giving every Filipino theopportunity to have access to banking services.40 41


Globe 2012 annual reportempowering you, your wayKickstart VenturesThe first quarter of 2012 marked another milestone for Globewith the launch of Kickstart Ventures, Inc., an incubatorinvestmentfirm that aims to help startups launch theirown businesses. Kickstart, a wholly-owned subsidiary ofGlobe, offered the perfect enabling partner for like-mindedindividuals and organizations by providing the necessaryfunding, mentorship and education, resources, and marketaccess for technopreneurs in the country. With Kickstart,Globe stimulates innovation in digital technology businessesat the grassroots level by developing and nurturing thePhilippine startup ecosystem, providing a launchpad for thecountry’s promising talents.Kickstart Ventures, Inc. is the Philippine national sponsor ofStartup Weekend (a global startup platform headquarteredin the United States). Through this sponsorship, Globesupported startup community events in Manila, Cebu andDavao. Kickstart also enjoyed partnerships with AmazonWeb Services, ZenDesk, and the Embassy of the UnitedStates, underlining the initiative to drive inclusive growth viaentrepreneurship.The main activity of Kickstart Ventures, Inc. is investing. Bythe end of 2012, Kickstart had made ten (10) investments inearly-stage startups operating in the Philippines -- making itthe most active incubator in the country, and gaining positiveattention overseas. Globe has dramatized the critical valueof large corporations in the innovation ecosystem: supportingthe startups that Kickstart invested in, and demonstratingconcrete commitment to innovation in action.Focus on Customer ServiceIn 2012, Globe unveiled its comprehensive customer-centricprogram, Globe Guarantee, which elevated the level of aftersalesservices offered to its subscribers. For Globe Postpaid,service guarantees included the No Bill Shock policy with theimplementation of the ₱999 data bill cap. In addition, Globeimplemented a phone replacement policy, wherein postpaidsubscribers could get an automatic replacement of anyGlobe-issued handset that manifests factory defects within7 days from date of purchase. Meanwhile, Globe Prepaidintroduced the Globe Prepaid Load Watch, a free andautomatic load notification service triggered by specific loadusage scenarios and other related transactions that allowprepaid subscribers to get free and automatic real-time loadusage updates. As for Tattoo@Home, service guaranteesincluded the personalized broadband plans to fit subscribers’internet needs with speed boosters giving additional 1Mbpsat different times of day or night. Tattoo@Home subscribersalso have the Surf Safe package, which gives them totalonline protection when they browse internet sites at home foras low as ₱199 monthly. Finally, all Globe Postpaid, GlobePrepaid, and Tattoo subscribers have 24/7 exclusive accessto Talk2Globe customer service channels for all their Globeconcerns.In the last quarter of 2012, in partnership with leading globalinsurance provider Ace Insurance, Globe unveiled GlobeGadget Care, the first-of-its-kind complete mobile protectionprogram exclusive to Globe postpaid subscribers. On topof mobile protection coverage, Globe Gadget Care alsoguarantees hassle-free handset replacement, easy claimsprocessing, and worldwide protection coverage.Incubator-investment firm Kickstart Ventures, Inc., has initially chosen ten startups in the country to receive funding, training, mentoring, andbusiness network access to help accelerate the startups' respective growth plans.42 43


Globe 2012 annual reportempowering you, your waySeamless, Personalized, and Humanized– Our New Brand of Service for a NewBreed of CustomersGone are the days when one size fits all. In today’s market,consumers value customization and the ability to tailorservices to meet their individual preference and needs.Hyper-personalized products have become the trend andbusinesses need to keep up by giving customers the powerof choice over how they want to use and consume everyfacet of their services.At Globe, “Customer Experience” continues to be at thecore of everything we do. As always, it defines our brandof service, how we differentiate ourselves from competitionand how we continuously innovate to delight our subscribers.We believe in providing standardized, specialized andpersonalized services. Ultimately, this means delightingcustomers with the power of choice – a choice over how theychoose to customize their plan and today a choice over theirchannel for customer service.2012 marked a year focused on strengthening relationshipswith our subscribers through personalization of our customerservice channels and empowering customers with theability to self-serve. Once again, Globe redefines its brandof service and stands out from the competitive landscapeby giving customers the ultimate power of choice overwhich channel they wish to get service as well as ability todo relevant self-service through various web and mobilechannels.Talk2Globe your wayGlobe continues to empower customers with the ability totransact the way they want through multiple self-servicechannels made available 24/7. The re-launched Talk2GlobeHotline now provides subscribers the option to talk toGlobe in their language of choice. In an effort to drivepersonalization for the Visayan segment, Globe launchedthe first trilingual customer service—English, Taglish, andVisayan language options to delight its Visayan customerbase. In partnership with Aegis People Support andTech Mahindra, Globe established an exclusive Visayaninteractive voice response (IVR) system with self-servicefeatures, as well as dedicated Visayan speaking agentsbased in Cebu. Subscribers from Visayas and Mindanao cannow enjoy the convenience of inquiring about their balances,promos and keywords, report a payment, and many otherself-service or agent-assisted transactions in their vernacular.Aside from self-service on the hotline, Globe also furtherdeveloped its quick-access self-service menu givingcustomers the ability to do more self-service transaction onthe go, by simply dialing *143#, free of charge on any Globemobile phone. With its updated features, you can now:• Access billing or load details (Prepaid) / Balance andunbilled running charges (Postpaid)• Register to call, text, data and roaming promos• Perform GCASH transactionsGlobe also capitalized on new trends in social media andtook customer service beyond the hotline. Nowadays,customers turn to social media like Twitter to air theirconcerns. This is why Globe wants to be where thecustomers are, responding fast to any cry for help even ifthey don’t go directly to Globe. Our customers on Twitterand Facebook now experience this convenience sincewe’ve stepped-up the level of our online customer servicechannels.In its constant pursue to innovate and drive convenience,Globe has launched and refreshed all the following selfservicechannels in 2012:• MyAccount (http://account.globe.com.ph) - WithMyAccount subscribers can view, pay their bills, report apayment and request for reconnection, change their billingaddress, update account details and other requests.• globe.com.ph/help - Get access to support informationabout Globe products and services updated daily atwww.globe.com.ph/help• Twitter (@Talk2GLOBE) - Online specialists are available24/7 (official account names are listed athttp://www.globe.com.ph/contactus)• Facebook Fan Page – Check out the latest from Globe atwww.facebook.com/GlobePH• Online Chat Service – Real-time live agent chat isaccessible via the Globe website atwww.globe.com.ph/talk2Globe• SMS – You can text HELP to 1234 for free to get live agentassistance through text.• Download media such as ringtones, etc.• Share prepaid load to Globe and TM customers• Check the prepaid balance of your relatives abroadAs part of its commitment to deliver superior customer experience to complement its modernized network, Globe Telecom beefs up its onlinecustomer support with the launch of 18 new online specialists who will engage customers via Twitter @Talk2GLOBE, operating 24/7.44 45


Globe 2012 annual reportempowering you, your way360 Degree Quality Feedback ProgramsWith the introduction of these new channels, Globe hasmarked significant improvement in customer satisfaction andissue resolution resulting in a decrease in repeat calls fromcustomers and about 20% improvement in contact rate.We also continue to listen to the changing needs of ourvarying customers. We did not only launch programs toimprove our customer experience systems and processesbut we also refreshed the Philippine’s most comprehensivebest-in class customer feedback program. Today, thiscomprehensive Customer Loyalty Index (CLI) provides thebusiness with more surveys a month as basis for serviceimprovements and development for future products andservices.To complement the CLI, we wanted to ensure customersatisfaction and immediate issue resolution. In July 2012,we started measuring the First Contact Resolution (FCR)where we monitor and track customers who continue tocontact us within 7 days from the time they first raisedtheir concern. This measure reflects the agent’s efficiencyin handling customers’ issues and helps drive resolution.These initiatives have also translated into a reduction in callvolume because it eliminates the repeat calls and ultimatelydrive higher levels of customer satisfaction. Today, the FirstContact Resolution results improved 6 to 7 points in just sixmonths i.e. care postpaid increased from 79% to 85%.This is only the beginning of showing our commitment tocontinuously improve the way we serve through humanizingthe experience of consumers and build relationships thatmatter. Our focus in the near term is to step-up our onlinepresence to allow for a unique social and collaborativecustomer servicing as well as measure customers’preference as we move forward.Customer Loyalty: A more rewardingexperience with GlobeFor the past three years, Globe Telecom’s rewardsprograms, MyRewards MyGlobe and TM Astig Rewards,successfully engaged subscribers as evidenced by acontinuously growing and expanding base of redeemers.The programs have bannered innovative features that allowsubscribers to enjoy the points they earn not only throughrewards redemption from a wide array of call and textservices, handsets, gift certificates, and gadgets, but alsothrough other schemes beneficial to them.One is through gifting where subscribers can easily redeemrelevant rewards for their family and friends via text. Telcoservices can be redeemed for a friend who has run out ofload, while big ticket items can be gifted to loved ones as apleasant surprise. Some subscribers have also opted to poolpoints with their friends to redeem higher-value rewards.This is possible though the points sharing functionality of therewards program.As more redeemers enjoy their rewards for staying loyal toGlobe, MyRewards MyGlobe continued to offer more as itpartners with the biggest and most widely-used consumerbrands in the market to allow subscribers to use rewardspoints as a form of payment for daily purchases – just likecash. This paved the way for Globe to make rewards pointsmore versatile because it is now accepted as cash in partnerstores and establishments. Subscribers can easily redeemrewards anytime and have more options on what rewardsthey can avail.To date, more than 20 million subscribers have used theirpoints, and ₱4 billion worth of items have been redeemed.Testimonies have been expressed by satisfied subscribers,and social networking sites are abuzz with posts aboutdelightful redemption experiences. MyRewards MyGlobeand TM Astig Rewards have been described as a “Blessingfrom God” as subscribers got their daily purchases as aform of reward. “I was to buy food for my family members,”stated a grateful subscriber. The positive impact the rewardsprograms have impressed on subscribers was translatedto the brands’ churn rates sustained at low levels. Thesubscribers’ continued use of Globe services was alsoreinforced as a result of giving subscribers the type ofrewards no other mobile network can offer.As Globe continues to be aggressive with its acquisitionefforts, its rewards programs will play an equally-significantrole in growing the business by keeping the subscriberbase and providing them with relevant, life-enriching, andworld-class rewards. MyRewards MyGlobe and TM AstigRewards truly exemplify the company’s strong commitmentto customer delight.Retail Channel ExpansionThe company’s Customer First Policy does not only apply toits customers in mass markets, but also to its partners whocare for their business. Partnerships were once again forgedwith various Philippine universities as Globe becomes partof their celebration in major academic events. The AdamsonUniversity during its 80th foundation year launched its ownuniversity SIM, the AdU SIM, as well as the Tattoo U-Stick.The De La Salle University Dasmariñas and Don BoscoSchool also unveiled their Jubilee SIM and Globe-poweredSIM, respectively.Tattoo joined forces with JobStreet, releasing a limited editionTattoo-JobStreet prepaid kit that allows job hunters accessto their website even with zero (0) prepaid balance. Figaropartnered with Tattoo as well, to enable their customers tosurf for free while enjoying a cup of coffee in their stores.Globe has also partnered with Generika Drugstore, one ofthe fast-growing drugstore chains selling quality affordablegeneric medicines in the country, to enable customerswho are buying medicines to also reload their Globe or TMprepaid phones via point-of-sale (POS) technology at anyGenerika check-out counters nationwide.Globe Telecom eyes the expansion of its reload sales partners, in its drive to give more alternatives for Globe Prepaid and TM subscribers totop-up their mobile numbers. The Generika Drugstore chain became the latest prepaid reload partner of Globe in 2012, with all of its POS orcashier terminals equipped to sell airtime load for Globe Prepaid and TM.46 47


Globe 2012 annual reportempowering you, your wayThe Globe StoreBy end year of 2012, the company has 168 Globe storesall over the country where customers can inquire andsubscribe to wireless, broadband and fixed line services,reload prepaid credits, make GCASH transaction purchasehandsets and accessories, request for handset repairs, tryout communications devices, and pay bills. The Globe storesare also registered with the Bangko Sentral ng Pilipinas(BSP) as remittance outlets.Continuing Globe Telecom’s commitment to deliver superiorcustomer experience across the country, Globe introducednew store formats in response to the need for more customerservice channels to accommodate more subscribers availingof Globe postpaid, prepaid and internet services.The new store formats—the premium dealership store,pop-up store, microstore, kiosk, and store-on-the-go—eachprovides a different retail mix to our subscribers. The newstores were carefully designed based on demographics,lifestyle and shopping behaviors of its customers.Each store provides a unique experience for customers.A Globe Premium Dealer Store is a full-service Globeconcept store owned and operated by a third-party investor.Meanwhile, the Globe Kiosk in is a permanent fixture but itsunique design and on-the-go products coupled with selfservemachines like bills payment machine and interactivescreen for after-sales service provide a different experiencefor customers. The Globe Microstore is an in-line store thathas a more relaxing atmosphere. The retail specialist sitsbeside the customer to interact. The store’s furniture wasspecifically designed to support this type of interaction.Globe also launched its Pop-Up Store, a deployable pop-upversion of the Globe Store that can be caravanned anywherenationwide allowing more areas to experience the productsand services of Globe. Its functionality is similar to a Globeconcept store which carries the signature retail conceptdesign similar to the concept store which Globe pioneered.In addition, the Globe Store-On-The-Go is a fully-functioningmobile Globe Store that is deployed in far-flung areas wherecustomers need the services of the store.To date, Globe has converted around 80% of its total storechannel nationwide to full-service concept stores and is setto complete the conversion in 2013.Reliable Marketing and AdvertisingCorporate advertising must be fair, truthful and accurate.It should not contain any exaggerations or sweepinggeneralizations that may mislead the public regardingthe advertiser or the attributes of its products or services.Where the advertisements contain specific claims regardingthe company or its product or services, such claims mustbe verifiable and subject to substantiation in the samemanner as regular product or service advertisements. Allour products and services seek approval from NationalTelecommunications Commission (NTC) and Departmentof Trade & Industry (DTI), before being launched into themarket. All the advertisements for our products and servicesfulfill the requirements of the Ad Standards Council (ASC).Being a service provider – we ensure that consumer healthand safety are properly addressed during the marketing andcommunication stage of the product.PROCUREMENT MANAGEMENTThe Procurement team maximizes value, minimizes riskand provides the right total cost/value and innovation to thebusiness through commodity management, selection ofbest-in-class suppliers and pursuit of process excellence inprocurement and supply chain management. Globe valuesits relationship with suppliers as manifested in our shiftfrom transactional orientation to a more relational, strategicpartnership. This includes regarding our major suppliers asour business partners.In 2012, the Procurement team held the 9th BusinessPartner Awards where Globe recognizes the best performingvendors in the previous year. Also in 2012, the GlobeVendor Council program was launched, which aims tofoster stronger business relationships between Globe andits business partners and to leverage on each other’s bestpractices and capabilities in quality, customer service andcost management.Local and Foreign Suppliers of Globe:LocalAccredited Vendors90%Products and Services secured in 2012 48%Vendors Used83%Foreign10%52%17%48 49


Globe 2012 annual reportcorporate governanceCorporate GovernanceBoard of DirectorsGovernance MechanismKey RolesThe Board of Directors establishes the vision, mission and strategic direction of the Company, hence, is the supreme authorityin matters of governance. They monitor the overall corporate performance and protect the long-term interests of the variousstakeholders ensuring transparency, accountability and fairness. Ensuring the adequacy of internal control mechanisms,reliability of financial reporting and compliance with applicable laws and regulations are also integrated as part of overseeingthe responsibility for risk management. Furthermore, certain matters including the approval of corporate operating and capitalbudgets, major acquisitions and disposals of assets, major investments and changes in authority and approval limits arereserved specifically for the Board’s disposition.Board CompositionThe Board composed of eleven (11) members is elected during the Annual Stockholders Meeting (ASM). They hold office forthe ensuing year until the next ASM. Only the President and CEO is appointed as executive director while the other membersremain non-executive directors. The non-executives are not involved in the day-to-day management of the business.Globe Telecom receives the 1st Philippine Stock Exchange (PSE) Bell Award for Corporate Governance. The award was conferred by PSEto honor the five best Philippine listed firms that were able to comply with PSE's corporate governance guidelines and other related rules andregulations. The ceremony was graced by President Benigno S. Aquino III and Vice President Jejomar Binay.Globe Telecom ethos believes that integrity, accountability and transparency in all aspects of the business are crucialingredients to the Company’s success. These are the principles that make up the Company’s foundation to achieving itsmission, vision and goals. With the continuous tests brought by global and national state of affairs, these values help theCompany endure these challenges.The Company’s Articles of Incorporation and By-Laws maintain the basic structure of corporate governance while theManual for Corporate Governance acts as its supplement. These legal documents are the core of the Company’s operationalframework to its smallest detail including the principal duties of the members of the Board with emphasis on the compositionand balance of the Board, for a diverse pool of skills and background which ensures that duties and responsibilities areperformed in a proper manner despite an increasingly competitive environment.Globe Telecom established their Manual of Corporate Governance that is in line and compliant to the regulationsimplemented by the Securities and Exchange Commission (SEC). This manual was last updated in 2010 to conform withSEC Memorandum Circular No. 6, Series of 2009 (Revised Code of Corporate Governance) and will be reviewed regularly topreserve its compliance to government regulations.In addition, Globe Telecom has implemented a Code of Conduct, Conflict of Interests and Whistleblower Policy. Formalpolicies on Unethical, Corrupt and Other Prohibited Practices were put in effect to guard against unbecoming activities andserve as a guide to work performance, dealings with employees, customers and suppliers, and managing assets, records andinformation including the proper reporting, handling of complaints and fraudulent reports and whistleblowers. These policiescover employees, management and members of the Board. These documents are the key to the balance of control andgovernance at Globe Telecom.In compliance with the Revised Code of Corporate Governance, the Board appoints three highly qualified independentdirectors for effective weigh in on Board discussion and decisions. An independent director as defined by Globe is a personindependent from management and major/substantial shareholders and free from any business or other relationship whichcould materially interfere with his exercise of independent judgment in carrying out responsibilities as a director.The board members have enough expertise, professional experiences and background that enable thorough examination anddeliberation of the issues and matters affecting the Company. Moreover, for the members to fully execute their responsibilities,trainings on corporate governance are given to them prior to assuming office.The Nomination Committee presided by an independent director reviews the qualifications of all board members. The profilesof the directors are found in the “Board of Directors” section of this Annual Report.52 53


Globe 2012 annual reportcorporate governanceErnest L. CuFernando Zobel de Ayala Jaime Augusto Zobel de Ayala Hui Weng Cheong Gerardo C. Ablaza, Jr.Gerardo C. Ablaza, Jr.Mr. Ablaza, 59, Filipino, has served as Director since June1997. He is a Senior Managing Director of Ayala Corporationand a member of the Ayala Group Management Committee,a post he has held since 1998. He also serves as director forAzalea International Ventures Partners, AsiaCom Philippines,Inc., LiveIt Investment Ltd. and AC Energy Holdings, Inc.Mr. Ablaza is currently the President and CEO of ManilaWater Company where he is responsible for overseeingthe financial and operational growth within Manila Water’sservice areas in the Metro Manila east zone and in itsexpansion areas. He was also the former President andCEO of Globe Telecom, Inc. from 1998 to April 2009 duringwhich he was recognized by CNBC as the Asia BusinessLeader of the Year, making him the first Filipino CEO towin the award. In the same year, he was also awarded byTelecom Asia as the Best Asian Telecom CEO. Prior tojoining the Ayala Group, he was Vice-President and CountryBusiness Manager for the Philippines and Guam of Citibank,N.A. for its Global Consumer Banking Business after headingthe Credit Payments Products Division of Citibank, N.A.Singapore. Mr. Ablaza graduated summa cum laude fromDe La Salle University in 1974 with a degree in Liberal Arts,Major in Mathematics (Honors Program).Ernest L. Cu.Mr. Cu, 52, Filipino, is currently the President and ChiefExecutive Officer of Globe Telecom, Inc. Mr. Cu has servedas Director since April 2009. He joined the Companyon 1 October 2008 as Deputy CEO. He brings with himover two decades of general management and businessdevelopment experience spanning multi-country operations.In 2010, he was adjudged Best CEO by Finance Asia andwas moreover conferred the International Association ofBusiness Communicators (IABC) CEO EXCEL award forcommunication excellence in telecom and IT. In 2012, Mr. Cuearned international accolade as CEO of the Year by Frost& Sullivan Asia Pacific. Prior to joining Globe, he was thePresident and Chief Executive Officer of SPI Technologies,Inc., where he received the Ernst & Young ICT Entrepreneurof the Year award in 2003. Mr. Cu earned his Bachelor ofScience in Industrial Management Engineering from DeLa Salle University in Manila, and his Master of BusinessAdministration from the J.L. Kellogg Graduate School ofManagement, Northwestern University.Jaime Augusto Zobel de Ayala.Mr. Zobel, 53, Filipino, has served as Chairman of theBoard since December 1996 and a Director since March1989. He is the Chairman and CEO of Ayala Corporation.He also holds the following positions: Chairman of GlobeTelecom, Inc., Bank of the Philippine Islands, and IntegratedMicro-Electronics, Inc.; Co-Chairman of Ayala Foundation,Inc.; Vice Chairman of Ayala Land, Inc. and Manila WaterCompany, Inc.; Co-Vice Chairman of Mermac, Inc.; Directorof Alabang Commercial Corporation, Ayala International PteLtd. and AC Energy Holdings, Inc.; Chairman of HarvardBusiness School Asia-Pacific Advisory Board, Children’sHour Philippines, Inc.; Vice Chairman of the Asia BusinessCouncil, Makati Business Club, and Asia Society PhilippineFoundation, Inc.; Member of The Asia Society, EisenhowerFellowships, Harvard University Asia Advisory Committee,Harvard Business School Social Enterprises InitiativeAdvisory Board, Harvard Global Advisory Council, HarvardGlobal Advisory Council, Mitsubishi Corporation InternationalAdvisory Committee, JP Morgan International Council,International Business Council of the World EconomicForum, Asia Pacific Basin Economic Council, PhilippineEconomic Society, World Wildlife Fund Philippine AdvisoryCouncil, Pacific Basin Economic Council and ToshibaInternational Advisory Group; and Philippine Representativefor APEC Business Advisory Council.Hui Weng Cheong.Mr Hui, 58, Singaporean, has served as Director sinceOctober 2010. Mr. Hui is currently the Chief OperatingOfficer with the SingTel Group’s Thai associate, AdvancedInfo Service (AIS), and is responsible for sales andmarketing, network operations, IT solutions, and customerand services management. He has held this positionprior to his return to SingTel in 2010 as CEO International,responsible for growing the Group's overseas investmentand strengthening its relationships with overseas partners.Mr. Hui started his SingTel career as an engineer and workedin various management roles within the Group. In 1995,he was posted to Thailand as the Managing Director ofShinawatra Paging, before returning to Singapore in 1999to take on the role of Vice President (Consumer Products)to manage the product development of all new mobile,paging, internet, broadband and telephone business. Mr. Huigraduated with First Class Honors in Electrical Engineeringfrom the National University of Singapore in 1980, andobtained his Master in Business Administration from theInternational Business Education and Research Program atthe University of Southern California, USA in 1992.Fernando Zobel de Ayala.Mr. Zobel, 52, Filipino, has served as Director since October1995. He is the President and Chief Operating Officer ofAyala Corporation. He is also: Chairman of Ayala Land,Inc., Manila Water Company, Inc., AC International FinanceLtd., Ayala International Pte Ltd., Ayala DBS Holdings, Inc.,Alabang Commercial Corporation, AC Energy Holdings,Inc., and Hero Foundation, Inc.; Co-Chairman of AyalaFoundation, Inc.; Co-Vice Chairman of Mermac, Inc.;Director of Bank of The Philippine Islands, Globe Telecom,Inc., Integrated Micro-Electronics, Inc., LiveIt Investments,Ltd., Asiacom Philippines, Inc., AG Holdings Limited, AyalaInternational Holdings Limited, AI North America, Inc., VestaProperty Holdings Inc., Honda Cars Philippines, Inc., IsuzuPhilippines Corporation and Manila Peninsula; Memberof The Asia Society, World Economic Forum, INSEADEast Asia Council, and World Presidents’ Organization;Chairman of Habitat for Humanity’s Asia-Pacific CapitalCampaign Steering Committee; Vice Chairman of Habitatfor Humanity International; and Member of the Board ofTrustees of Caritas Manila, Pilipinas Shell Foundation,Kapit Bisig para sa Ilog Pasig Advisory Board and NationalMuseum.54 55


Globe 2012 annual reportcorporate governanceRomeo L. Bernardo.Mr. Bernardo, 58, Filipino, has served as Director sinceSeptember 2001. He is Managing Director of LazaroBernardo Tiu and Associates (LBT), a financial advisory firmbased in Manila. He is also a GlobalSource economist inthe Philippines. He is Chairman of ALFM Family of Fundsand Philippine Stock Index Fund. He is likewise a directorof several companies and organizations including AboitizPower, BPI, RFM Corporation, Philippine InvestmentManagement, Inc. (PHINMA), Philippine Institute forDevelopment Studies (PIDS), BPI-Philam Life AssuranceCorporation, National Reinsurance Corporation of thePhilippines and Institute for Development and EconometricAnalysis. He previously served as Undersecretary ofFinance and as Alternate Executive Director of the AsianDevelopment Bank. He was an Advisor of the World Bankand the IMF (Washington D.C.). Mr. Bernardo holds adegree in Bachelor of Science in Business Economicsfrom the University of the Philippines (magna cum laude)and a Masters Degree in Development Economics atWilliams College from Williams College in Williamstown,Massachusetts.Guillermo D. Luchangco.Mr. Luchangco, 73, Filipino, has served as IndependentDirector since September 2001. He is also Chairman andChief Executive Officer of various companies of the ICCPGroup, including Investment & Capital Corporation of thePhilippines, Science Park of the Philippines, Inc., CebuLight Industrial Park, Inc., Pueblo de Oro DevelopmentCorp., Regatta Properties, Inc, and RFM-Science Parkof the Philippines, Inc.; ICCP Venture Partners, Inc. andManila Exposition Complex, Inc.; Chairman and Presidentof Beacon Property Ventures, Inc.; Independent Director ofPhinma Corporation, Phinma Property Holdings Corp. andRoxas & Co., Inc.; and a regular Director of Ionics, Inc. andIonics EMS, Inc.Xavier P. Loinaz Manuel A. Pacis Romeo L. Bernardo Tay Soo Meng Delfin L. Lazaro Guillermo D. LuchangcoDelfin L. Lazaro.Tay Soo Meng.Xavier P. Loinaz.Manuel A. Pacis.Mr. Lazaro, 66, Filipino, has served as Director since January Mr. Tay, 63, Singaporean, was elected as Director on 8Mr. Loinaz, 69, Filipino, has served as Independent Director Mr. Pacis, 68, Filipino, has served as Independent Director1997. He is a member of the Management Committee of February 2011. Mr. Tay was appointed Group Chief Technologysince April 2009. He was formerly the President of the since April 2011. He was formerly a Vice PresidentAyala Corporation. His other significant positions include: Officer of Singapore Telecommunications Limited (SingTel)Bank of the Philippine Islands (BPI). He currently holds for Finance of the Procter & Gamble Company (P&G)Chairman of Philwater Holdings Company, Inc., Atlasin September 2012, and was responsible for the Networksthe following positions: Independent Director of BPI, BPI in Cincinnati, Ohio. He held positions of increasingFertilizer & Chemicals Inc., Chairman and President ofStrategy, planning operations and architecture across theCapital Corporation, BPI Direct Savings Bank, Inc., BPI/ responsibility in the Philippines, the US, Mexico, China,Michigan Power, Inc., and A.C.S.T. Business Holdings, Inc.; Group. Prior to this, he was Managing Director, Networks,MS Insurance Corporation, BPI Family Savings Bank, Inc. and Japan including Chief Financial Officer of P&G Asia,Chairman of Azalea Intl. Venture Partners, Ltd.; Director of Consumer Singapore for two years heading the Networksand Ayala Corporation; Member of the Board of Trustees and a Global Business Unit (GBU). He also served as ViceAyala Land, Inc., Integrated Micro-Electronics, Inc., Manila Group in Singapore. Mr. Tay was also with Optus Networksof BPI Foundation, Inc. and E. Zobel Foundation; andPresident for Internal Controls Worldwide and FinancialWater Co., Inc., Ayala DBS Holdings, Inc., AYC Holdings, as Managing Director from July 2008 to July 2010, andChairman of the Board of Directors of Alay Kapwa Kilusan Systems Worldwide at P&G. His wide-ranging experiencesLtd., Ayala International Holdings, Ltd., Bestfull Holdings was responsible for driving the technology, engineering andPangkalusugan.throughout his business career have included leadershipLimited, AG Holdings, AI North America, Inc., Probeoperation of Optus’ fixed, satellite, IP and mobile networks toroles in corporate governance, strategic planning, internalProductions, Inc. and Empire Insurance Company; andmeet strategic and operational needs. Mr. Tay was also theaudit, management systems / IT, M&A, joint ventures, andTrustee of Insular Life Assurance Co., Ltd. He was named Vice President of Network Operations for SingTel, overseeingfinance & accounting.Management Man of the Year 1999 by the Management SingTel’s Network Operation for two years – including Local,Association of the Philippines for his contribution to theInternational and Mobile Switch Management Operations,conceptualization and implementation of the PhilippineSatellite Operations, Submarine Cables Management andEnergy Development Plan and to the passage of the law Restoration, Field Operations, Outside Plant Operations,creating the Department of Energy. He was also citedSingTel Group Operations, Business Operations and Networkfor stabilizing the power situation that helped the country Operation centre. Before this assignment, Mr. Tay was Viceachieve successive high growth levels up to the Asian crisis President of Mobile Networks for SingTel. Mr. Tay has overin 1997.45 years of global telecommunication experience, and wasresponsible for setting up paging and cellular networks forSingTel’s overseas joint ventures in countries like Indonesia,Mauritius, Norway, Sri Lanka, Thailand, Philippines, andVietnam. He was the GSM Association’s Asia Pacific Chairmanin 1997, and was responsible for looking after the interests ofGSM operators in the Asia Pacific region. Mr. Tay holds an MBAdegree from the University of Leicester (England).56 57


Globe 2012 annual reportcorporate governanceKey Officers and ConsultantsBoard PerformanceAlberto M. de LarrazabalCarmina J. HerbosaChief Financial Officer and TreasurerHead, Internal AuditThe ASM is held annually wherein shareholders have the opportunity to raise questions and clarify issues relevant to theCompany. The Board members, President and CEO together with the external auditors are in attendance. Queries raised duringthe meeting are addressed and swiftly handled.In 2012, a total of 7 meetings were held including the ASM. The attendance of each board member is enumerated below:Chee Loo FunGil B. GenioHenry Rhoel R. AgudaMarisalve Ciocson-CoSenior Adviser for Consumer MarketingHead, Business & International Markets and Corporate Strategy andBusiness DevelopmentPresident, Innove Communications, Inc.Head, Information Systems GroupChief Information OfficerCompliance Officer and Assistant Corporate SecretaryBoard MemberJaime Augusto Zobel de AyalaGerardo C. Ablaza Jr.Hui Weng CheongMeetingsAttended6682011 2012Meetingsheld888PercentPresent75%75%100%MeetingsAttended677Meetingsheld777PercentPresent86%100%100%Peter BithosBernard P. LlamzonAdvisor for the Consumer Customer Facing UnitHead, Consumer SalesDelfin L. LazaroTay Soo MengErnest L. Cu78788888%100%88%767777100%86%100%Rebecca V. EclipseRenato M. JiaoHead, Office of Strategy ManagementHead, Human ResourcesFernando Zobel de AyalaRomeo L. BernardoRoberto F. de Ocampo 178388388%100%100%57-77-71%100%-Robert TanRodolfo A. SalalimaChief Technical AdviserChief Legal Counsel and Senior AdvisorManuel A. Pacis 2Xavier P. LoinazGuillermo D. Luchangco688688100%100%100%776777100%100%86%Solomon M. HermosuraVicente Froilan M. CasteloBoard RemunerationCorporate SecretaryHead, Corporate and Legal Services Group1Mr. de Ocampo served as Director until April 12, 20112Mr. Pacis was elected as an Independent Director on April 12, 2011.The Board is provided board documents prior to meetings. These contain the reports on the Company’s strategic, operationaland financial performance and other regulatory matters. The Corporate Secretary serves as adviser to the directors on theirresponsibilities and obligations and functions to oversee the flow of information prior to meetings as well. The Board may alsoclarify with the management the matters concerning items submitted during the meeting for their consideration.An annual self-assessment is conducted to be able to ensure the effectiveness of processes and identify areas forimprovement. Every last meeting of the year, an executive session takes place to evaluate and discuss various mattersconcerning the Board. This includes evaluating Company performance and its management team.The Board member’s remuneration is set at an optimum level to attract and retain high caliber directors to continue deliveringtheir services effectively. In accordance with the Company’s By-Laws, the Board members shall receive, pursuant to a resolutionof the stockholders, fees and other compensation for their services as directors and members of committees of the Board ofDirectors. As approved by the shareholders during the ASM held on April 1, 2003, the Board members shall receive a per diemof ₱100,000 per board or committee meeting. The remuneration is a form of recognition for the responsibilities of the Board fordelivering high standard services for continuous growth of the Company.58 59


Globe 2012 annual reportcorporate governanceManagement CommitmentsGlobe Telecom management continually commits to high standards of disclosure, transparency and accountability. Themanagement established the sustainability policy and reviews its adequacy at the highest level periodically and allocatedresources to ensure effective implementation. The practice of sustainability reporting was implemented as a means to providefair, accurate and meaningful assessment of its overall performance on triple bottom line (viz. Economic, Environment andSocial) responsibility to its stakeholders including investors.As for the investor community, the Company practices regular disclosure of financial results. Quarterly financial results areimmediately disclosed after the approval by the Board to Philippines Stock Exchange (PSE) and Securities and ExchangeCommission (SEC). Quarterly and yearend financial statements and detailed management’s discussion and analysis arefiled within forty five (45) and one hundred and five (105) calendar days respectively from the end of financial period. TheCompany’s financial reporting disclosures are in compliance with the PSE and SEC requisites. These reports are madeavailable to the analysts after disclosure and posting on the Company’s website.Any market sensitive information such as dividend declaration is also disclosed to the SEC and PSE and then releasedthrough various modes of communication.To ensure compliance with regulatory requirements andassess the appropriateness of the existing Charter forenabling good corporate governance, the Committeealso reviews and assesses the adequacy of its Charterannually, seeking Board approval for any amendments. Themost recent Charter review was done in July 2012, withamendments on Audit Committee’s Performance Evaluationin compliance with SEC Memo Circular No. 4 (Series of2012), approved by the Board in August 2012.The Committee conducts an annual assessment of itsperformance to benchmark its practices against theexpectations set out in the approved Charter, and to ensurethat it continues to fulfill its responsibilities in accordancewith global best practices and in compliance with the Manualof Corporate Governance and other relevant regulatoryrequirements. The results of the self-assessment and anyensuing action plans formulated to improve the Committee’sperformance are reported to the Board.Internal AuditThe Committee meets with the internal auditors, anddiscusses the results of their audits, ensuring thatmanagement is taking appropriate corrective actions ina timely manner, including addressing internal controls,regulatory and compliance issues. The Committee alsoreceives periodic reports on the status of internal auditactivities, key performance indicators’ accomplishments, andquality assurance and improvement programs.Globe IA governs its internal audit activities in conformancewith the Institute of Internal Auditor’s Code of Ethics, and theCompany’s Code of Conduct. In 2007, the group subjectedits activities to an external Quality Assurance Review (QAR)which resulted in a “Generally Conforms” rating, the highestrating that can be achieved in the QAR process, confirmingthat internal audit activities are conducted in conformancewith the International Standards for the ProfessionalPractice of Internal Auditing (the “Standards”). In December2012, Globe IA started its preparation for another round ofQAR in 2013 to ensure continuous conformance with the“Standards”.FUNCTIONS OF AUDITAudit CommitteeThe Audit Committee’s roles and responsibilities are definedclearly in the Audit Committee Charter approved by theBoard. The Committee supports the corporate governanceof the Company by fulfilling its oversight responsibilityrelating to: a) the integrity of the financial statements andthe financial reporting process and principles; b) internalcontrols; c) the qualifications, independence, remunerationand performance of the independent auditors; d) staffing,focus, scope, performance, and effectiveness of the internalaudit function; e) risk management; and f) compliance withlegal, regulatory, and corporate governance requirements.Management however has primary responsibility for financialstatements and reporting process, internal controls, legal andregulatory compliance, and risk management.The Committee is composed of three members, one ofwhom is an independent director. The independent directorchairs the Audit Committee. All members of the AuditCommittee are appointed by the Board.The Committee ensures tenders for independent auditservices are conducted, reviews audit fees, and recommendsthe appointment and fees of the independent auditors tothe Board. The Board, in turn, submits the appointmentof the independent auditors and their fees for approval ofthe shareholders at the ASM. The amount of audit fees isdisclosed in this Annual Report.The Audit Committee also approves the work plan of theGlobe Internal Audit Division, as well as the overall scopeand work plan of the independent auditors. The AuditCommittee meets at least once every quarter and invitesnon-members, including the President and CEO, ChiefFinancial Officer, independent and internal auditors, andother key persons involved in Company governance, toattend meetings where necessary. During these meetings:• The Committee reviews the financial statements andall related disclosures and reports certified by the ChiefFinancial Officer, and released to the public and/orsubmitted to the SEC for compliance with both the internalfinancial management handbook and pertinent accountingstandards, including regulatory requirements. TheCommittee, after its review of the quarterly unaudited andannual audited consolidated financial statements of GlobeTelecom, Inc. and Subsidiaries, endorses these to theBoard for approval.• The Committee meets with the internal and independentauditors, and discusses the results of their audits, ensuringthat management is taking appropriate corrective actions ina timely manner, including addressing internal controls andcompliance issues.• The Committee reviews the performance and recommendsthe appointment, retention or discharge of the independentauditors, including the fixing of their remuneration, to the fullBoard. On an annual basis, the Committee also assessesthe independent auditor’s qualifications, skills, resources,effectiveness and independence. The Committee alsoreviews and approves the proportion of audit and non-auditwork both in relation to their significance to the auditorand in relation to the Company’s total expenditure onconsultancy, to ensure that non-audit work will not be inconflict with the audit functions of the independent auditor.• The Committee reviews the plans, activities, staffing, andorganizational structure and assesses the effectiveness ofthe internal audit function.• The Committee provides oversight of financial reportingand operational risks, specifically on financial statements,internal controls, legal or regulatory compliance, corporategovernance, risk management and fraud risks. TheCommittee also reviews the results of management’sannual risk assessment exercise.The Audit Committee reports after each meeting andprovides a copy of the minutes of its meetings to the Board.(Also see Annual Report of the Audit Committee to the Boardof Directors on page 132 of this Annual Report).It is the policy of Globe Telecom to establish and supportan Internal Audit function as a fundamental part of itscorporate governance practices. Internal Audit is a service,providing an independent, objective assurance andconsulting function within Globe Telecom, and sharing theorganization’s common goal of creating and enhancingvalue for its stakeholders, through a systematic approachin evaluating the effectiveness of the Company’s riskmanagement, internal control and governance processes.In addition, Globe Internal Audit (IA) assists and supportsManagement in developing, instilling, and nurturing a Riskand Control Self-Assessment (RCSA) environment at GlobeTelecom. The Audit Committee regards its relationshipwith Internal Audit as having a vital role in supporting theCommittee in the effective discharge of its oversight role andresponsibilities.Globe IA performs its auditing functions faithfully bymaintaining independence from management and controllingshareholders as it reports functionally to the Board, throughthe Audit Committee, and administratively, to the Presidentand CEO.Internal Audit maintains, reviews, and assesses theadequacy of its Charter annually to ensure compliance withregulatory requirements and appropriateness for enablinggood corporate governance. Any amendments to the Charterare submitted to the Audit Committee and the Board forapproval.Globe IA adopts a risk-based audit approach in developingits annual work plan, re-assessed quarterly to consideremerging risks and the changing dynamics of thetelecommunications industry. The Audit Committee reviewsand approves the annual work plan and all deviations, andensures that internal audit examinations cover at leastthe evaluation of adequacy and effectiveness of controlsencompassing the Company’s governance, operations,information systems, reliability and integrity of financialand operational information, effectiveness and efficiency ofoperations, safeguarding of assets, and compliance withlaws, rules, and regulations. The Audit Committee alsoensures that audit resources are adequately allocated to andfocused on the areas of highest risk.Geared towards excellence, Globe Internal Audit providesfor continuing professional and personal development for allauditors through its Learning Ladder Framework to equipthem in the conduct of reviews, with focus on acquiringexpertise on Globe Telecom’s business processes, networkand IT systems, internal controls, new accounting andauditing standards, and regulatory updates.External AuditThe Company engages the services of independent auditorsto conduct an audit and obtain reasonable assurance onwhether the financial statements and relevant disclosures arefree from material misstatements. The independent auditorsare directly responsible to the Audit Committee in helpingensure the integrity of the Company’s financial statementsand reporting process.It is the practice of the Company every three (3) years totender bid for the external audit services of independentauditors. The most recent tender bid process was conductedin Q4/2012. Also, the Company conducts on an annual basisan independent auditor’s performance appraisal. From theresults, the Audit Committee evaluates and proposes to theBoard for endorsement and approval of the shareholder, theappointment of the independent auditors. The endorsementis submitted to the shareholders for approval at the ASM.The representatives of the independent auditors areexpected to be present at the ASM and have the opportunityto make a statement on the Company’s financial statementsand results of operations if they desire to do so. The auditorsare also expected to be available to respond to appropriatequestions during the meeting.SyCip, Gorres, Velayo & Company (SGV & Co.), a memberfirm of Ernst and Young (EY), is the appointed independentauditors for Globe Telecom, Inc., and its subsidiaries. Inaccordance with regulations issued by the SEC, the auditpartner principally handling the Company’s account is rotatedevery five (5) years or sooner. The most recent rotationoccurred in 2011.62 63


Globe 2012 annual reportcorporate governanceEnterprise Risk ManagementGlobe Telecom Inc. is committed in shaping an organizationthat ensures risk management is an integral part of allbusiness units and activities and a core capability. Effectiveenterprise risk management practices are a key enabler tothe continuing growth and success of the Company.Globe Telecom's objectives in managing risk include:• Aligning and embedding risk management intothe culture and strategic decision making of theorganization;• Anticipating and responding to changing social,environmental and regulatory conditions andemerging changes in technology;• Managing risk in accordance with best practices anddemonstrating due diligence in decision making;• Promoting sound management practices, enhancingthe quality of decision making, and protectinggovernance and accountability principles, and• Balancing the cost of managing risk with theanticipated benefitsRisk Management ApproachAs part of its annual planning cycles, senior managementand key leaders perform an enterprise wide assessment ofrisks focused on identifying the key risks that could threatenthe achievement of the Company's business objectives,both at the corporate and business unit level, as well asspecific plans to mitigate or manage such risks.Risks are prioritized, depending on their impact to theoverall business and the effectiveness by which theseare managed. Risk mitigation strategies are developed,updated and continuously reviewed for effectiveness, andare also monitored through various control mechanisms.Globe Telecom employs a two-dimensional view of riskmonitoring. Business unit or functional group level leadersregularly monitor the status of operational, legal, financial,project risks that may threaten the achievement of definedbusiness outcomes and are accountable for the completionof the approved mitigation plans meant to address therisks to the business. Senior management's oversightof enterprise level risks includes strategic risks, majorprogramme risks, regulatory risks.Since the Philippines is one of the most disaster-pronecountries, there are risks due to climate change that candirectly impact Globe Telecom’s delivery of services. Theinterruption of services during the natural calamity affectsthe revenue of the company. To avoid such interruptionsand in totally future-proofing of the network, Globe isimplementing measures to ensure its full capacity todeliver on-time and excellent services regardless of anycatastrophes. The network transformation plan is one ofthe initiatives wherein advanced equipment are beingcontinuously deployed on several sites which in the longrun will contribute to a faster and greener network andat the same time, act to withstand natural disasters. Anamplified Business Continuity Management (BCM) plan isalso prepared in which better maintenance and operationsare implemented for the continuity of services andoperations in case of any natural threats and crises.Roles and ResponsibilitiesThe Board of Directors, supported by the ExecutiveCommittee (ExCom) and Audit Committee, has an oversightrole over the Company's risk management activities andapproves Globe Telecom's risk management policies andframework.The ExCom covers specific non-financial (e.g., strategic,operational, human capital, regulatory) risks, while the AuditCommittee provides oversight of financial reporting risks.The Chief Financial Officer and concurrent Chief RiskOfficer (CRO) supports the President, as the overall riskexecutive, in overseeing the risk management activities ofthe Company, ensuring that the process is embedded inthe normal business cycles and operational decisions, theresponsibilities for managing specific risks are clear, thelevel of risk accepted by the Company is appropriate, andthat an effective control environment and risk disciplineexists for the Company as a whole.The CRO reports annually to the Board and /or the AuditCommittee Globe Telecom's risk profile and the mitigationstrategies.Risk owners at the senior executive level have beenidentified and made accountable for managing specificrisks, supported by business process owners who havebeen designated and made responsible for the particularprocess or activity from which the risk arises. This isconsistent with management's belief that risks are bestunderstood and managed by the employees who areclosest to the process.Business Continuity ManagementGlobe Telecom maintains an enterprise-wide BusinessContinuity Management (BCM) program that is internationallycertified to BS (British Standards) 25999. BCM is an integralcomponent of Globe Telecom's ERM program and is ahigh priority aligned to our commitment to customers tocontinuously improve capabilities that will help reduce theprobability, shorten the period and limit the impact of anydisruption. It is a program that has top management supportand oversight, and an organizational structure, frameworkand funding to maintain and implement it. The Company’sBCM Policy prioritizes the safety of people and the continuityof operations of critical resources that support the deliveryof key products and services, while abiding to legal andregulatory requirements.While no certification and recovery plans can provideabsolute assurance that a severely disruptive event will nolonger occur, Globe is strongly committed to maintainingits BCM program to provide reasonable assurance to itsstakeholders that it is ready to respond to and recoverfrom any incident, including those not anticipated. Suchcommitment is demonstrated by appointing competentpeople and functional experts who are responsible formaintaining the program, creating, and implementing riskreduction measures as well as incident management andrecovery plans, and for managing and monitoring GlobeTelecom's disaster-preparedness.The company has implemented suitable risk reductionand response measures against the common and highimpacting threats notwithstanding the nature of the threatwhether it be natural or man-made like typhoons, flooding,fire, earthquake, pandemic flu, acts of terrorism, crashing ofhardware and software systems, among others. Operatingin a country that is prone to natural calamities, Globeestablished an Incident Management Plan (IMP) for suchthreats and created Emergency Response Team (ERT) in allcritical sites. ERT members are fully trained with skills andcapabilities to respond to emergencies with the goal to savelives and prevent any further damage to assets. The IMP isregularly monitored, tested, and improved to keep it relevantand easy to implement. Globe Telecom recognizes that aproperly maintained and implemented IMP may help preventthe escalation of an incident into a crisis that may necessitatethe activation of recovery plans. The existing network and ITrecovery plans aim for quick recovery of its mission-criticalservices and operations within management approvedrecovery time objectives.Globe keeps its BCM program relevant and updated byconducting regular tests and reviews Annual internal andsurveillance audits are conducted to ensure relevance ofthe programs and compliance of the team to the BCM setpolicies and standards. Numerous exercises and drills,including site emergency and response drills as well as drillsfor community-wide disasters like typhoons and floods, areregularly conducted to test the effectiveness of the plans.The best proof of effectiveness comes in the form of GlobeTelecom’s response to last year’s Habagat flooding. Allaspects of Globe Telecom’s calamity incident managementworked during this incident such as employee safety,network and IT service continuity, internal and externalcommunications, CSR relief operations, internal situationassessment and timely reporting.The Enterprise Risk Management Services Division(ERMSD) supports the CRO in developing, establishing,maintaining and continually improving the ERM processes.It assists all levels of the organization in achieving its keyobjectives by bringing a systematic approach to evaluatingand improving the effectiveness of risk management.66 67


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Globe 2012 annual reportour people, Our globeOur People, Our GlobeEMPLOYMENT DIVERSITYGlobe Telecom believes in the potential of the Filipino workforce. That is why the company welcomes every employeeregardless of gender, age, religion or ethnicity. Any form of discrimination is never acceptable and embracing every uniqueworker is part of the company’s philosophy. Currently, Globe employs close to 6,000 male and female workers from staff tosenior management levels. The table below shows the summary of the company’s total workforce by employment type, contractand region.Note - (All the figures are as of 31 Decmber 2012.)Employee RemunerationThe lowest actual salary of Globe Telecom employeescovered by the Collective Bargaining Agreement (CBA) is15% above the minimum wage mandated by the Departmentof Labor and Employment (DOLE).As per ratio of basic salary, male employees have a slightlyhigher rate compared to female employees due to the variedresponsibilities undertaken by male employees comparedto female employees. However there is no discriminationfor a given job profile based on the gender. The variancein comparative salary is due to the varying job profileundertaken by male and female employees.In total, Globe also maintains fourteen (14) different divisionsthat work together to meet the goals and objectives of thecompany. The table below shows total employed workforceby group in the year 2012.TOTAL WORKFORCE BY GROUP TotalBusiness CFU794Office of the BCFU and IB Head1Consumer Business2,628Corporate and Legal Services Group64Finance and Administration536Human Resources50Information Systems192International Business60Network Technical Group1,322New Business3Office of the President80Corporate Communications18Corporate Strategy & Business Development 11Enterprise Architecture2Internal Controls28Office of Strategy Management17Office of the Head4Pipeline Management Group8Product and Service Delivery63Transformation Management Office71Total5,872%13.52%0.02%44.75%1.09%9.13%0.85%3.27%1.02%22.51%0.05%1.36%0.31%0.19%0.03%0.48%0.29%0.07%0.14%1.07%1.21%100.00%72 73


Globe 2012 annual reportour people, Our globeTotal number and rate of employee turnover by age group, gender and region:74 75


Globe 2012 annual reportour people, Our globeOur Happy EmployeesGlobe does its best to provide the most satisfying total work experience for its employees. Continuous benefit enhancement isan important element aimed at making its employees happier and more productive at work.are institutionalized across the entire organization withcustomized implementation at a group level followingcommon criteria and guidelines anchored on the Globe Way.There was also the Globe Longevity Awards Programlaunched by the Human Resources group in 2012. It gaverecognition and publicly thanked employees who haveserved an appreciated period of time in the company.Certificates, monetary awards and simple tokens were givento each employee who have stayed and worked hard for atleast 5 years or more.Improvement on service unit issuance was also doneby allowing brand new unit replacement as opposed toproviding only a refurbished unit in 2011. After three years ofunit use, automatic employee ownership was also allowedby the company at no cost unlike in previous years where acertain percentage of the unit’s acquisition cost must be paidby the employee depending on years of usage.Proactive partnerships with different merchants wereestablished as well which enable selling of Globemerchandise with discounts for Globe employees.Furthermore, the online store Zalora offers online privilegesfor an easier shopping experience.Fun Life at GlobeFun at Globe is essential in an employee’s total workexperience. Every Ka-Globe has the same freedom tochoose how they become one with the company’s cultureand colleagues. Fun activities and gatherings are staged bythe company through the Globe Employee Programs. Theseprograms are a series of events guided by “work-life balanceand fun environment” aimed at improving the personalgrowth and well-being of all Globe employees including theretirees and extending up to family members. In the end, theobjective is to build a culture of happiness at work.Initially, the easiest and self-satisfying activities for theemployees were provided through the health and wellnessprograms. These include the fitness activities offered bythe company when a gym-like space was provided in 2012at Globe Telecom’s current headquarters in Mandaluyong,TRX Training, Street Dancing, Zumba, Yoga, Belly andPole dancing. The employees were also able to participatein various sports tournaments through the different sportsprograms.Life at Globe also becomes more exceptional as it extendsfun at work through the Thank Globe It’s Friday (TGIF) treatwhich gives employees some time to relax after a week’shard work. Eventually, more opportunity to unwind will bepossible once the green headquarters is completed where itwill have an Employee Center for dining and relaxing.Other occasions are being celebrated through the annualHalloween and Christmas Parties. Family celebrationsand bonds are honored as well through the Valentine andMother’s day events. In addition, the spiritual well-being ofthe employees is enriched through First Friday masses,annual Lenten Recollections and other spiritual activities.Experiencing the fun life at Globe does not only stop atthe employees but by also extending help to those inneed. Through the i-Give program, Globe employees areencouraged to be active citizens through volunteerism. Thesaid program provides numerous opportunities to every Ka-Globe to participate in BridgeCom activities, the corporatesocial responsibility (CSR) efforts of the company. In the end,our employees will practice “volunteerism as a way of life” asthey get more opportunities to help others and at the sametime, gain self-empowerment and fulfillment.The Globe culture is not simply making things possible forcustomers but also for the employees. Benefits and otherperks are continuously reviewed and improved alignedwith company goals. In 2012, the company's in-patient/hospitalization benefit plan as well as life insuranceentitlement were enhanced.Globe pushes its employees towards common goals butstill does not forget to recognize the hard work, loyalty andexemplary performance of every employee.Performance-related rewards and recognition is based onemployees’ annual evaluation and performance assessmentbased on delivered Key Performance Indicators (KPI)and behaviors aligned with Globe Telecom’s 7 LeadershipCompetencies.Part of giving back to the Globe employees is thecompany’s programs to reward them with appreciationsand great treats. The Globe Excellence Awards and SpotRecognition Program are initiatives to give honor to themost prized assets of the company – the employees. TheGlobe Excellence Award recognizes the Globe Way Valuesexemplars in the categories of leadership, customer andoutstanding achievement while Spot Recognition ProgramsGlobe enhances the Globe Longevity Awards Program in January2012. Under the improved program, a longevity token and acertificate are given to the awardee on top of the monetary award.In line with Human Resources' pursuit of bringing "Fun at Work", Globe brings "Thank Globe it's Friday!" to all ka-Globe. This event givesemployees a chance to unwind with free beers, hangout with Globe ambassadors, and dance to the tunes of popular local bands.76 77


Globe 2012 annual reportour people, Our globeEmployee Health and SafetyAffirming its commitment to quality health and safetypractices in the workplace, Globe obtained an OccupationalHealth and Safety Management System (OHSAS) 18001certification for the Valero Telepark. Steps are beingundertaken for other Globe Telecom locations which aim toachieve the OHSAS certification.To strengthen ensure employee health and safety, thecompany employs a dedicated health and safety committee.10.06% of the Globe workforce provides hands-oncommitment on health and safety practices covering allareas – nationwide in areas where Globe Telecom operates.Total No. of Health and Safety CommitteeMembersTotal No. EmployeePercentageFor the year 2012, 5.04% employee accident rate wasrecorded, mostly due to vehicle driving-related incidents.However, no fatalities causing death or permanent disabilitywere recorded.Year20112012Total No. ofEmployees5,7575,872In order to minimize these incidents, the company conductsseveral trainings and awareness programs for the relevantemployees, on safe driving and fuel economy.1. Defensive Driving Course2. Construction Safety3. Confined Space Entry4. Electrical SafetyTotalIncidents152296TotalAccidents5. Industrial First Aid and Basic Life Support6. Industrial Climbing, Hauling & Rope AccessGuaranteeing employee safety and security, qualifiedlicensed security guards are hired by Globe to provideprotection in case of uncontrolled events. Globe ensures allsecurity staff undergoes trainings every three years. Thisincludes a two-day course on RA 5487 – Private SecurityAgency Law which discusses professional conduct andethics that must be performed by the security. Laws onarrests, searches, seizures, strike and lock-outs are alsotackled. Furthermore, a one-day course on RA 9372 –Human Security Act of 2007 is also undertaken, as well as ahalf-day course on Gender Sensitivity Awareness.555915,87210.06%Rate ofAccident /Employee0.08%0.08%Employee RelationsTo date, no incidents of discrimination have occurred withinthe company facility and during official work hours. This isdue to the company’s compliance with RA 7160 – SpecialProtection of Children Against Child Abuse, Exploitation andDiscrimination Act, and adherence to the principles of HumanRights Act and Child Labor Law. To guarantee observanceof such laws, a strict preliminary screening of applicants iscarried out. The company does not condone the violationof the rights of indigenous people, nor does the companypromote any operational activities that would pose hazardousrisks or damages to children or young employees.Globe ensures conformation to government-mandatedregulations, such as guidelines issued by the Department ofLabor and Employment (DOLE), to protect its employeesand to ensure that they are fairly treated.Through the Globe Telecom Employees Union-Federationof Free Workers (GTEU-FFW), the company recognizesthe right of employees to form a collective bargaining unit.The GTEU-FFW is the sole bargaining representative of allcovered rank-and-file employees. All the employees of GlobeTelecom have the right to participate in Collective BargainingAgreement as the company does not restrict any employeeto be a part of the agreement. Complete informationregarding the CBA is provided to the employees at the timeof their orientation trainings. A Labor-Management Councilhas been in existence for enhancement of cooperation,productivity, customer service and other policies andprocedural issues directly affecting the welfare of concernedemployees.As part of the CBA is to address the health needs of everyemployee, medical, dental and optical care services providedby the company at a certain expense with correspondingsalary deduction depending on the total cost. Emergencyloans for health services can also be availed by employeeswith immediate dependents.PERCENTAGE OF EMPLOYEES COVERED BYCOLLECTIVE BARGAINING AGREEMENT92% or 5,407 of 5,872 are Non-Collective Bargaining Unit Employees(NCBU) and thus covered by regularperformance planning and appraisal,and career development reviews8% or 465 of 5,872 are members ofthe Collective Bargaining Unit andare exempted from performance andcareer development reviewsAnother component of CBA is the Family PlanningProgram and Services. Recreational activities encouragingemployees to further encourage camaraderie and friendshipis the key focus.The company also ensures to address issues that violatethe Company’s Code of Conduct (COC). Offensive actionsinvolving corporate values such as honesty and integrity,particularly corruption, extortion, bribery among others aresanctioned accordingly. As part of the COC, each staff isobliged to declare or divulge in writing, any involvement thatwould potentially raise conflict with the company. Failure toexpress such, whether personal, professional or financialdisagreements shall subject the employee to urgentdismissal.Employee EmpowermentCulture BuildingIn 2012, the company carried out programs to enableemployees and leaders to help propel the Globe Way Culturewe all aspire for. The programs in place targeted specificdemographics like our new hires (cutting across all functionsand levels) and people leaders. The core anchors used todefine our culture are the company's Vision, Mission andValues, where every culture-building initiative is to be hinged.Happiest Customers and Happiest Employees – this is theessence of The Globe Way culture we are building.The Globe Way SeriesThe Globe Way Series is an engaging on-boarding programthat allows new hires to probe deeper into Globe Telecom’sculture, values and ideals through a combination of live casestudies, experiential learning activities and fun exercises.Interspersed with blended learning (e-learning, short talks) toacquire information and knowledge on the Company history,background, business and industry, and various employeeprocesses, TGWS, the program’s acronym, is really abouthaving a personal stake on how to live and breathe theGlobe Values. The workshop allows participants theopportunity to explore them through real stories of Ka-Globein action and Real Ka-Globe heroes in action.Since its launch, The Globe Way Series has beencontributing to the increase of employee satisfaction whichconsequently redounds to happy customers and goodbusiness growth. At Globe, “people make the difference”,therefore they are engaged from Day 1 to live the values.Culture Change Workshop for LeadersIn the midst of all the business and technical transformationhappening in Globe, it can only prove to be successful if itruns parallel with another one - PEOPLE transformation.And this is what is in the heart of the Culture ChangeWorkshop for Leaders, a program that enables GlobeLeaders to play a significant role in building the future ofGlobe by driving The Globe Way culture.Intended for all people managers and leaders, the programelicits from the participants the emotional connectionand commitment pivotal for effective culture changeand transformation. Utilizing varied methodologies, thesession’s activities and exercises will enable participantsto deeply understand the organization’s value system andits manifestations, including the process of discerning“On-Globe” versus “Off-Globe” behaviors and norms. Asa natural progression, participants will then strategize howthey can best propagate the Globe culture within their workteams, in the context of the transformation going on, thusbuilding corporate culture from the ground up.Globe provides numerous opportunities for employees to develop theirskills and competencies through formal and on-the-job learning activities.78 79


Globe 2012 annual reportour people, Our globeEmployee SatisfactionSince 2009, Globe has been conducting an annualEmployee Satisfaction Survey (ESAT) to measure how theCompany is faring in driving engagement in Globe. The 2012survey was conducted with an increase in response rate of97.10% compared with 95% in November 2011. The 2012survey response rate was an all-time high since it was firstadministered in 2009.In the future, Globe Telecom aims to pull off 100% employeesatisfaction and engagement, Our Globe Way becomingsecond nature to all and most importantly, the companybeing the home of quality products and services with a poolof quality talent and processes.Grow at GlobeGlobe continues to invest in its people through variousprofessional training and development activities. Globe followsa 70/20/10 Development Plan – 70 % of the learning occurson-the-job, 20% from others and 10% from formal training.The 70% on-the-job experience includes the regularemployee tasks based on their office function. Others aretheir committee participation, customer immersion and jobrotation. Meanwhile for the 20% learning from others, thedevelopment comes through the coaching or mentoringof the immediate superiors and other colleagues. Jobshadowing and observation also help as well as knowledgetransfer from other professionals and consultants. Last butnot least, the 10% formal training and learning is expandedthrough the offered training programs and courses offered byGlobe.Integrated Leadership Development ProgramsiLeadGlobeiLeadGlobe aims to develop key talents into future leaderswho role-model the Globe Way and practice the 7 GlobeLeadership Competencies, namely, customer orientation,people orientation, personal values, entrepreneurial mindset,execution excellence, innovation and strategic thinking.The programs are all highly selective with eligibility criteriarelevant to the participants that are handpicked by theSenior Leadership Team through a stringent talent reviewand nomination process. The series of trainings include theExecutive Development Program (for the next generation ofsenior leaders), Fast Tracker Program (for the mid-careertalents) and Young Leaders Program (for emerging talents).University PartnershipsGlobe Telecom partnered with the Asian Institute ofManagement (AIM) and the Ateneo de Manila – Centerfor Continuing Education and opened programs for theemployees who are interested to develop their leadershipand management skills the Globe way. The series oftrainings include the Globe-AIM Management DevelopmentProgram (for managers who aspire to hone and applymanagement skills), Globe-Ateneo Empowering Leaderprogram (for mid-career to seasoned career employee whohas the potential of a Globe Leader) and the Globe-AteneoEmerging Leader Program (for junior leaders with thepotential of evolving as a Globe Leader).To date, more training are being developed by Globe toensure coverage and eligibility of all employees and grantthem more learning and knowledge to future-proof theircareers. Course descriptions for Sales and MarketingAcademies are presently under development at the time ofproduction of this report.Junior Mobile WizardThe Junior Mobile Wizard Program is a one-month summerprogram offered to Globe employees’ high school children,providing them the opportunity to better understand thePhilippine telecommunications industry. Pioneered in 2012,18 high school students joined the program to assist inselected Globe concept stores in Metro Manila. They weretasked to demo the latest gadgets and mobile data services,as well as sell other Globe offers and services.Graduate 2 GlobeGraduate 2 Globe (G2G) Program is a development programfor high potential, future talents of Globe in partnership withtop colleges and universities. Activities include the Get-toknow-Globe(Company Orientation), Singtel UndergraduateScholarship, Globe Summer Internship and Post GraduateInternship Program, Cadetship and ManagementDevelopment Program.Customer First Circle (CFC) ProgramCustomer First Circle is a continuous improvement programthat ultimately aims to foster and create a customer-centricculture within Globe. In order to achieve this, CFC usesthe Lean Six Sigma Methodology as a vehicle to drivedown cost, improve customer experience and increaserevenue. To date there has been over a thousand employeesparticipating actively with over a hundred projects and billionsof financial benefit.Meanwhile, the Employee Satisfaction Index (ESI) in 2012also increased at 75.28 compared to previous years’ index at72.80.Across all employee engagement drivers measured in 2012,highest satisfaction ratings of significant improvements werein Work Relationships (86.57), Vision, Clarity, Alignment(85.06), and Job Enrichment (83.31). Also included aresatisfaction ratings on Senior Leadership (+4.91%) andBenefits (+4.87%).The Employee Satisfaction scores in 2012 also improvedwhen compared with the previous results. The survey wasadministered twice in 2011 with the first survey conducted inMarch 2011, with a response rate of 86% and an ESI resultof 70.14. The second survey was conducted in November2011 a response rate of 95% and an ESI of 72.80.At present, the company hopes to obtain more and newaccomplishments and positive employee feedback.80 81


Globe 2012 annual reportgreening the globeGreening the GlobeGlobe Telecom Environmental StrategyGlobe Telecom continues to aspire growth in all facets of the business but at the same time in fully taking care of the planet. Theefforts to minimize impacts persist through the Environmental Management System being implemented in the workplace. Thesystem already began in 2011 for the Valero Telepark office as certified by the ISO 14001 (Environmental Management System)while certification of GT-IT Plaza in Cebu started in 2012 with completion in 2014. Such initiatives and environmental system inplace contribute to a greener and more sustainable Globe Telecom.Environmental Sustainability PolicyWe are committed to promote environmental sustainability by reducing the impact of our business operations to environmentand we shall achieve this together with the help of our employees, business partners and clients. We have robust systems inplace to manage our environment impact and integrate them into our corporate social responsibility management.We commit to:• Consciously move towards the continuous reduction of our ecological footprints from our operations. Where possible, wewill move beyond regularly compliance and apply best practices and global voluntary standards on environmental and socialresponsibility.• Manage emissions from our energy use, particularly to our networks and ensure that we carry out regular assessments onhow energy is consumed within our network to monitor our climate impact and identify opportunities to reduce it.• Comply with all environmental laws and other laws relevant to our business.• Encourage and train our employees and business partners to help us reduce our environment impact by communicating ourpolicies and programs.• Partner with organizations which share the same environmental values and find ways of cooperation to protect theenvironment.• Conduct a review of our environmental management system to ensure that the commitment of this policy are delivered andthat we strive for continuous improvement.• Report our environmental performance to our stakeholders.86 87


Globe 2012 annual reportgreening the globeKey Achievements for 201290 91


Globe 2012 annual reportgreening the globeEnergy ManagementGlobe Telecom has implemented various energy management systems for its corporate offices as well as satellite offices of thecompany. These initiatives include managing air conditioning control and retrofit, lighting efficiency and energy management.Corporate Office Operation1. Switching off lights in office areas from 12:00 noon – 1:00pm and 6:30pm onwards (isolated lighting for areas with overtime).2. Turning off /dimming lightings in unmanned Mobile Switch Centers (MSC), Data Center, Network Operation Centers (NOC),IN, Switch Room areas based in corporate buildings.3. Switching off air conditioning units in offices 15 minutes earlier than office closing time.4. Initiative to replace all desktops workstations with laptops which consume less power and do not require UPS system.5. Adopt the LED lighting technology for office lighting as this uses less power and has a longer usage file.6. Release of new energy conservation (enercon) guidelines for employees such as switching off of unnecessary lights,unplugging of office equipment, recycling, etc.Results of Energy Management in Corporate OfficesCell site Operation1. Network equipment refreshed with upscale battery autonomy and delaying genset mode feature, as well as operating onnatural cooling methods, resulting in more efficient use of commercial power and at least 30% worth of fuel savings.2. Adopted solar power/wind power for most of the 99 prime-powered sites.Fleet Operation1. Included training on the Efficient Driving Practices with the Safe Defensive Driving for employees.2. Considered the adoption of cleaner fuel alternatives such as E10 and LPG.3. Reviewed and rationalized vehicle distribution based on territorial usage e.g. 4x4 assigned in Metro Manila could be redeployedin the provinces.Business Travel1. Recommended the use of teleconference to lower frequency of business air tavels.Note: Calculation Tool was derived from GHG Emission from Fuel Used. Version 3.0. December 2007. Developed by WorldResources Institute (WRI) and copyrighted. Available at www.ghgprotocol.org.94 95


Globe 2012 annual reportgreening the globeHazardous and Solid Waste ManagementGlobe Telecom maintains its participation in proper waste management efforts through recycling of its hazardous used leadacid batteries, used oil and busted fluorescent lamps generated by it various operations. Furthermore, its daily generatedwastes are being collected and put into good use through recycling instead of directly disposing to landfills.Note: Calculation Tool was derived from GHG Emission from Fuel Used. Version 3.0. December 2007. Developed by WorldResources Institute (WRI) and copyrighted. Available at www.ghgprotocol.org.Water ConsumptionGlobe Telecom regularly records water-related data to help the company perform measures on proper water use and asmuch as possible, carry out minimal water consumption. Currently, the company has not performed any water recyclinginitiatives but will eventually be observed once the transfer to the green headquarters takes place. All the waste watercollected is being transferred to the local sewage system by the service provider and is being treated as per the local normsby the supplier.*Globe Telecom Plaza 1&2, The Professional Tower (TPT) Building, Valero Telepark, Globe Telecom-IT Plaza, Innove Plazaand Cagayan de Oro (CDO) Corp. Office.96 97


Globe 2012 annual reportgreening the globeNote: Conversion factors derived from Philippine Recyclers, Inc.: 0.7 kg of Lead recovered per kg of battery; 0.05 kg of plastic recoveredper kg of battery; 0.2 liters of sulfuric acid neutralized per kg of battery; 0.025 cm3 of landfill space saved per kg of batteryNote: 15 – 40 mg of liquid mercury is properly disposed per piece, Conversion factor derived from Dolomatrix Philippines, Inc., a DENRaccreditedHazardous Waste Treater.Note: Used oil is 60% recyclable: Conversion factor derived from Genetron International Marketing, a DENR-Accredited Used OilRecycler and TreaterNote: Recovered Data are from actual report of TES-AMM Philippines98 99


Globe 2012 annual reportgreening the globeProtecting DiversityGlobe Telecom values protection of biodiversity and rich resources. Globe ensures that the natural environment in areas whereit operates remains unharmed.Community volunteers prepare the seedlings for the first Roots and Shoots Nursery of the Cordillera Conservation Trust being supported byGlobe Telecom.100 101


Globe 2012 annual reportgreening the globeCLEAN FLEET PROGRAMThe Clean Fleet Program continues to contribute tocleaner air through elimination of present air pollutants.In cooperation with the United Nations EnvironmentProgramme, Globe utilizes clean fleet tools to examineits impacts in terms of its emissions of Particulate Matter(PM), Sulfur Dioxide (SO2), Nitrogen Dioxide (NO2), VolatileOrganic Compounds (VOCs), Carbon Monoxide (CO) andLead (Pb). Usage of such tools also helps in suggestingmeasures to minimize air pollution caused by the company.EXPENDITURES ON ENVIRONMENTAL PROGRAM FOR 2012By end of year 2012, a total cost of ₱6,490,236.54 were used to facilitate all the green programs of Globe Telecom.STRATEGIC PARTNERSHIPS AND MEMBERSHIPSStrategic partnerships were once again carried out with different agencies and groups to be able to execute the differentgreening programs of the company.List of Stakeholder Groups for Globe Environment ProgramsForest Building Program:1. San Roque Coastal Environment Program Association, Inc.2. La Paz Fisherfolks Aquatic Resources and Mangrove Management Association, Inc.3. Guibuangan United Coatal Environmental Saver's Association4. Local Environment Awareness and Protection Philippines, Inc.5. Barangay Council of Bool, Tagbilaran City6. Parel Organization for Water Environmental and Resources, Inc.7. Save Davao Gulf Foundation, Inc.8. Benejiwan Integrated Social Forestry Farmers Association9. National Union to Restore the Environment, Inc.10. Cordillera Conservation Trust11. Brgy Council of Tala, Candaba, Pampanga12. DENR Region 4ABiodiversity Program13. Philippine Eagle Foundation14. Pusod, Inc.15. Sangkalikasan Producer CooperativeBalik-Baterya Program16. ABS-CBN Foundation, Inc.Balik-Langis Program17. ABS-CBN Foundation, Inc.Cell Phone Take Back Program18. Philippine Tarsiers Foundation, Inc.19. Ayala Foundation, Inc.Other Industry Associations20. Philippine Business for the EnvironmentStrategic memberships with different organizations maintained in 2012:1. Philippine Business for the Environment2. Pollution Control Association of the Philippines, Inc.3. Green Philippine Island of Sustainability4. Business Continuity Managers Association of the Philippines5. Corporate Network for Disaster ResponseReferences:• CO 2Emissions Calculation Tool s. Version 3.0. December 2007. Developed by World Resources Institute (WRI) and copyrighted.Available at www.ghgprotocol.org.• http://conservatree.org/learn/EnviroIssues/TreeStats.shtm• http://bgm.stanford.edu/pssi_faq_benefits• http://www.epa.gov/osw/conserve/materials/paper/basics/• http://stats.paperrecycles.org/• http://www.epa.gov/osw/conserve/materials/paper/basics/• Philippine Recyclers Institute (Inc)• Envirocycle, an HMRGroup Affiliate• Dolomatrix Philippines, Inc.• Genetron International Marketing104 105


Globe 2012 annual reportbridging communitiesBridging CommunitiesGlobe BridgeCom ProjectsGlobe Bridging Communities (BridgeCom) is the corporate social responsibility (CSR) arm of Globe Telecom. Institutionalizedin 2004, Globe BridgeCom has evolved from practicing strategic philanthropy into a program which champions five pillarsrepresenting major economic, social, and environmental advocacies: good governance (i-Lead), social entrepreneurship(i-Prosper), environment conservation and protection (i-Conserve), access to education and social services delivery (i-Access),and active citizenship through volunteerism (i-Give).Globe BridgeCom works in strategic geographical focus areas—Batangas, Benguet, Bicol, Bohol, and Lanao—which werechosen based on ranking of poverty incidence, high vulnerability to climate change, presence of local BridgeCom partnershipsand potential growth area for the business’ sales and marketing efforts. Globe BridgeCom has taken the Communities ofPractice (CoP) approach in all of the focus areas where all of the company’s advocacies are practiced and synergized.By utilizing technology-based solutions, Globe BridgeCom aims to transform the lives of people, businesses, and communitiesall over the Philippines. It continues to strengthen its partnership portfolio guided by principles of creating shared value, activecitizenship and environmental conservation, and use of ICT-based innovations.i-LeadSagot Ka ni Kap!The “Sagot Ka ni Kap!” program hinges on the core business and competencies of GlobeTelecom---mobile communication and broadband services. More than just equippingthe community watch volunteers with mobile phones and hand-held radios, Globe alsoprovides capacity-building workshops designed to inspire and enable them to be moreproactive in community development. The workshop includes modules on communityleadership, conflict resolution, and crisis management. The beneficiaries also receive aone-year comprehensive personal accident insurance package.The “Sagot Ka ni Kap!” program also strengthens the local security infrastructure andinspires the essential set of capabilities needed for effective leadership and at the sametime, develop their capacities as future community leaders.Globe BridgeCom Pillarsi-LeadThe i-Lead pillar is dedicated to the establishment ofpeaceful, orderly and progressive communities through theadvancement of good governance and excellence in publicservice. It aims to promote accountability, transparencyand increase one's participation in governance throughinfrastructure support capacity development. Moreimportantly, the program intends to empower barangayofficials and the youth to become transformational leadersand active citizens.i-ProsperThe i-Prosper program works with social enterprisesand micro-entrepreneurs to establish sustainable formsof livelihood for bottom of the pyramid (BOP) sectorsnationwide. Applying the same philosophy of GlobeTelecom's triple bottom-line approach of doing business,the program aims to introduce socially responsible incomegeneratingopportunities for the entrepreneurial poorthrough capacity development, provision of capital andmarket access.i-Conservei-Conserve is the environmental protection andsustainability pillar of the Globe Bridging Communities, astrategic venture to characterize the commitment of Globeto business and environmental sustainability through theuse of its ICT competencies.i-AccessThe i-Access pillar supports a portfolio of programsharnessing mobile and broadband technologies to improveaccess to and delivery of social services to help nationalgovernment agencies, local government units and otherdevelopment players achieve equitable and responsivedelivery of mandates to citizens and disadvantagedcommunities through sustainable and relevant ICT-enabledcontent and technology solutions.i-GiveThe program aims to mobilize Globe employees tobe active citizens through volunteerism, whereby itsemployees are encouraged and supported to volunteerduring relief operations, fundraising for Globe BridgingCommunities projects, and mentoring the youth, teachers,micro-entrepreneurs, barangay leaders and other nongovernmentorganizations.The “Sagot Ka ni Kap!” program of Globe Bridging Communities aims to arm local leaders with mobile communication tools to prevent crime inrural communities.110 111


Globe 2012 annual reportbridging communitiesi-ProsperMy Fair Share ProgramIn 2012, Globe Bridging Communities inked partnerships with social enterprisesGifts & Graces Inc. to produce eco-bags for the Globe My Fair Share program.The bags are made by the Bulacan-based Kaibhan Women’s Association,Caritas Manila, and Pamana ng Pag-asa and are sold for ₱99 each. The programtransforms the way Globe gives back—not only by aiding partners and beneficiarycommunities with capital, funds for capacity and skills development and ICTtools—but also by empowering them with livelihood opportunities and by bringingthem into the Globe value chain.i-ConserveGlobe Cordillera Challenge 3Bigger in scale than the previous Globe Cordillera biking events held in 2010 and 2011,the Globe Cordillera Challenge 3 targeted not only Globe employees, members of themedia, and stakeholders, but also a broader audience of recreational bikers and triathletesnationwide to bike a total of 27 kilometer-trail along the Cordillera mountain range fromBaguio City to Mount Cabuyao and Mount Sto. Tomas in Benguet.Together with Cordillera Conservation Trust (CCT), Globe Bridging Communities changedthe game by creating three different bike trails following the theme, “Choose your trail, Bikeyour way, Save the Cordilleras”. Bikers were given the freedom to decide which route totake based on their skill level, bike discipline and bike set-up. Total registered bikers forthe Globe Cordillera Challenge 3 reached 319, while 222 bikers were in attendance on theevent day, May 5. The event raised a total of ₱800,000 from online registration, corporatesponsorship, and from the pooled donations of Globe Telecom employees’ own fundraisingactivities.One’s fair share, one prayer answeredChanging people’s lives and taking care of the environment,one eco bag at a time – that is the story behind theMy Fair Share bags of Globe Bridging Communities. Apartnership between social enterprise Gifts & Graces andGlobe Telecom, the bags are sewn by Kaibhan Women’sAssociation, an NGO based in Bulacan. The group helpsimprove maternal mortality statistics, provide Internet accessfor the youth, and livelihood opportunities for women sewersand embroiderers in the community.The Globe Cordillera Challenge 3 also raised the bar in employee volunteerism: GlobeTelecom bikers from Manila, Negros, and La Union joined the event in Baguio. Since May2012, the Roots and Shoots nursery program of CCT has established seedling nurseries intwenty-one (21) public elementary schools in the Cordillera area.The partnership integrates Kaibhan into the Globe Telecomvalue chain by providing market access for their products.“Through the My Fair Share program, we are able to helpKaibhan achieve its mission and reach out to more womensewers in the area. Benefiting around fifty women sewersin Bulacan, they were amazed at the timing when Globecontracted them for the program.“We had been worrying about not having money due to atemporary stop in our usual sewing jobs. The sewing projectfor the My Fair Share bags was sort of God’s answer,”shared Marge Galit, a member of the Kaibhan Women’sAssociation.The My Fair Share eco bags are high-quality productscreated under fair trade principles and are environmentfriendly.All the proceeds from the sales of the bags supportthe Kaibhan Women’s Association.Globe joins in the fight against climate change through Globe Goes Green, a sustainability campaign to help integrate key environmentalinitiatives to the company’s business strategy. Since 2012, Globe together with the Cordillera Conservation Trust has been staging the CordilleraChallenge, a fund-raising biking activity designed to fast track reforestation efforts in the Cordillera mountain range.112 113


Globe 2012 annual reportbridging communitiesi-AccessGlobal Filipino Teacher (GFT) ProgramThrough the Global Filipino Teacher program (GFT), educators are trained tointegrate ICT in teaching basic subjects like English, Science, Math, and HeKaSi.GFT is done in partnership with the Department of Education (DepEd) and theCoalition for Better Education, a Cebu-based non-profit organization composedof various education stakeholders from the academe, students, parents, nongovernmentand business organizations.The GFT training program equips teachers with knowledge using the projectbasedlearning approach and will train 100 new teachers and existing GFTteachers to become peer coaches to their co-teachers on the use of project-basedlearning (PBL), creating a community-based ripple effect of 21st century learning.i-GiveVolunteamingVolunteaming encourages employees to customize their volunteering projects andpromote camaraderie in their communities of choice. As part of i-Give's commitment tosupport corporate citizenship, Globe Bridging Communities matches the project withminimal funding. This project is open to all Globe employees nationwide who can form agroup of five and is willing to commit eight (8) volunteer hours each.Volunteaming allows employees to be vigilant with the social issues of the communitiesnearest to them. They are able to customize the assistance needed according to theneeds of their communities or charity of choice. Through volunteaming, Globe employeesare given access to Corporate Social Responsibility projects regardless of their worklocation and expertise by simply volunteering their time and talents.Globe Telecom joins TINGOG 2015, apioneering SMS-based citizen feedbackinitiative aimed to promote the effectivedelivery of basic services for therealization of the country’s MillenniumDevelopment Goals (MDGs) by 2015.Becky Malay, Program Director ofthe Philippine Rural ReconstructionMovement (PRRM), implementingagency of TINGOG 2015, affixes hersignature to the mock cell phone thatshows government and private sectorsupport for the SMS-based citizenfeedback initiative. Together with herare (from L-R): Department of Interiorand Local Government SupervisingUndersecretary Rafael Santos ,Globe Head for Corporate SocialResponsibility Rob I. Nazal, and TabacoCity Mayor Cielo Krisel Lagman-Luistro.Globe congratulates the 69 public school teachers from Luzon as the newest GFT graduates.114 115


Globe 2012 annual reportbridging communitiesMETHODOLOGY FOR ENGAGING IN CSR INITIATIVESCreating Shared Value through the My Fair Share ProgramBy following the “trade versus aid” framework, the program encourages both subscribers and employees to do their share tosupport fair trade practices and generate livelihood for marginalized communities.Implemented with partner Gifts & Graces Inc., the program tapped communities of women sewers such as Caritas Manila,Pamana Pag-asa Boni Producers Cooperative in Mandaluyong, and Kaibhan Women’s Association in Bulacan to produce theMy Fair Share eco-bags sold at all Globe business centers. The eco-bags were also sold online (www.shop.globe.com.ph) andwere used by various business groups for their merchandising and gift requirements. As of December 2012, Globe sold 16,000eco-bags generating a revenue of ₱1.4 million for the women sewers.Signing the partnership agreement on the GNG Partner Communities Program are Globe Head for Corporate Social Responsibility Rob I. Nazal(2nd from right) and Gifts and Graces Executive Director Greg Perez (middle). Witnesses are Globe President and CEO Ernest L. Cu (right),Gifts and Graces President Sandy Prieto-Romualdez (left) and Gifts and Graces Board Member Marivic Puyat-Limcaoco (2nd from left).Members of the PinagdanlayanFarmers Association Inc. (PFAI)in Dolores, Quezon roast andsell their own coffee beans intheir “Kapehan sa Bayan.” PFAIis one of the twenty-one partnerbeneficiaries who received whoreceived desktop computers,subsidized internet fees, GlobeBridging Communities SIM cards,and subsidized BPI Globe BanKOATM fee through the Kape’t BuhayProgram.116 117


Globe 2012 annual reportbridging communitiesGlobe also launched the Kape’t Buhay Program inpartnership with Bote Central, Inc. in 2012 which providesfarmers with a community roasting business unit (CRBU)allowing them to roast their own beans. With the improvedcapacity combined with seminars on business skillsdevelopment, planning and bookkeeping, the farmers nowhave the opportunity to increase their earning potential.Globe supported twenty-one coffee roasting communitiesin 2012, encouraging them to capitalize on other earningopportunities all throughout the chain of coffee production.The same coffee beans from the Kape’t Buhay program arealso used in the various coffee vendo machines located inGlobe Telecom offices in Metro Manila. The coffee vendomachines allow Globe employees to enjoy freshly-brewedcoffee produced under fair trade principles and at the sametime empower employees to do their own share for localcoffee farmers and small communities.Globe also tapped Salay Handmade Paper Industries, Inc.and Custom Made Crafts Center, Inc. (CMCC) to producethe 2013 My Fair Share Planner, made from handmadepaper and bound by a special weave by the Higaonon tribein Bukidnon.The My Fair Share program has helped raise a total of₱4,110,249.60 in revenue for Globe BridgeCom’s partnercommunities. It has also helped foster responsibleconsumerism among Globe employees, brand segments,media partners, and subscribers which in turn helps achievethe company’s sustainability objectives.Coffee-Roasting Communities Supported by GlobeBridgeCom:1. Social Action & Development Center in Lagawe, Ifugao2. Samahan ng nagkakaisang Brgy. ng Guinayangan inQuezon Province3. Episcopal Diocese North Cordillera in Bontoc, MountainProvince4. Pinagdanlayan Farmers Association in Dolores, Quezon5. Tricom in Sultan Kudarat6. Samahan ng mga Alangan Na Mangyan in Calapan,Oriental Mindoro7. KPFMI in Guingoog, Misamis Oriental8. CRS in Maramag, Bukidnon9. Happy Earth in Lipa, Batangas10. Bote Central in Las Pinas11. Meralco Foundation in Tanjay City, Negros Oriental12. Sulu Coffee Task Force in Jolo, Sulu13. Banas Café in Sagada, Mt. Province14. LYASD-Liguasan Youth in Sultan Kudarat15. Nisard Foundation in Bacolod City16. Kape Pinoy in San Fernando, Pampanga17. Bote Central in Alabang18. Batangas Coffee in Batangas City19. 18 Days Cash & Carry in Makati City20. Baguio Coffee in Teacher’s Camp, Baguio21. Matutum Coffee Farmers-Green Tropics in GeneralSantos CityFinancial Inclusion for the Bottom of the Pillar (BoP) through the Promotion ofMobile SavingsThe partnership with BPI Globe BanKO, the country’s first mobile-based savings bank, has enabled Globe to providelower-income segments access to a variety of financial services. By providing Globe Bridging Communities SIM cards tobeneficiary communities— which include fisherfolk, coffee farmers, and marginalized communities—Globe BridgeComempowered marginalized communities with their own bank accounts accessible through mobile phones.Thus far, Globe BridgeCom has significantly promoted the culture of savings among the lower-income segments: 4,161mobile savings accounts have been opened by the beneficiary communities since January 2012 with a total of ₱404,899.00in savings mobilized.Shared Value CreationBOP Sector Financially Included/Accounts OpenedAmount of Savings MobilizedAmount4,161₱404,899.00Liberating the UnbankedRag weaver Victoria Taborda spends her days weavingdoormats and rags to help her husband make ends meet andfeed their brood of four children. Opening a bank accountdoes not rank high on her list of daily priorities. According toTaborda, her income from weaving sometimes reaches upto ₱1,000 in a week. She shares,“Yung mga rag at doormat,₱75 per piece namin binebenta.” She never tried opening abank account because of the strict guidelines set by financialinstitutions and the family always needed the extra cashrequired for the maintaining balance.Taborda is now one of the Cash Conditional Transferbeneficiaries in Baguio City empowered with her first savingsaccount through a partnership by the Department of SocialWelfare and Development (DSWD) with Globe BridgingCommunities. Globe partnered with DSWD to aid CCTbeneficiaries with sustainability skills and empower themwith their own bank accounts using the Globe BridgingCommunities (GBC) SIM. T his gives them access to avariety of financial services through BPI Globe BanKO, thecountry’s first mobile-based savings bank.Says Taborda on her first bank account, “Buti nalang atnakapagbukas na kami ng sariling naming bank account.Kahit konti, makakatulong sa maliit na kita namin.” Tabordaalso received free life insurance which comes with thesavings account. The Baguio weaver shared that the familywill save some of the funds they received from the DSWDCCT program and work towards saving. “Gusto ko rinmagkaroon ng sariling business para di na ako mamasukansa iba, ako na ang maghahabi at magbebenta ng mga rag atdoormat.”118 119


Globe 2012 annual reportbridging communitiesPromoting Active Citizenship for DisasterRisk Reduction (DRR) and EnvironmentalConservation“Doing a Globe of good” characterized the i-Give programin 2012. Active citizenship through volunteerism wasimbedded in every Globe BridgeCom program by providingopportunities for both employees and stakeholders tobecome volunteers.The i-Give program, which champions volunteerism as a wayof life within Globe Telecom, was launched in 2012 and hasslowly changed the face of volunteerism within the company.By providing numerous opportunities where employees cantake part in Globe BridgeCom programs, employees wereencouraged to do their part and give their time, talent ortreasure.Globe Telecom’s disaster relief response also elicited supportfrom Globe employees. Aside from Libreng Tawag stationsin 11 evacuation sites, volunteers assisted the Departmentof Social Welfare and Development (DSWD) during theirrepacking efforts for Habagat victims. President BenignoAquino III also lauded Globe volunteers for their vigorousparticipation in the repacking and distribution of goods inflood-stricken areas of Metro Manila and Luzon wherein 200Globe employees participated in the said activity.Globe BridgeCom also conducted distribution of food, water,and clothes to about 5,300 families in Fairview, Payatas andprovided hot meals to feed 500 individuals in Marikina as wellas setting up of a soup kitchen at the Malolos Central School,and mobilized donations in cash, in-kind, or via GCASH.Skill-based volunteering was also introduced: employeeslent their skills as their form of volunteering. Throughvolunteaming, employees may craft their own CSR programto support their own advocacies and in turn get a chance toreceive financial support from Globe BridgeCom. In 2012,1,715 Globe employees reached out to communities andwent beyond their comfort zones, logging in a total of 7,943volunteer hours. Globe employees also raised a total of₱778,410 for various partner NGOs, beneficiary communitiesand advocacies.i-Volunteer, an online volunteer-matching facility, was alsolaunched in December 2012 to pave the way for building aculture of engaged and active volunteerism. The websitehighlights opportunities for employees seeking volunteeractivities outside of Globe-initiated programs.Globe also nurtures passionate eco-warriors and weregiven opportunities to help. Both the Globe CordilleraChallenge and the Globe Arakan XC allowed employees andstakeholders to bike for nature, in support of the reforestationefforts in the Cordillera region and the forest corridoringprogram of the Philippine Eagle Foundation respectively.Globe is also blazing trails in environment conservation byutilizing ICT tools in implementing an E-governance planthat hopes to keep Taal Lake and its peripheries garbageand waste-free and help support the livelihood of fisher folkcommunities.Aside from relief operations, Globe also utilized ICT tools to help both public andprivate organizations conduct emergency response activities especially in difficult-toreachareas. Similar disaster relief operations were also conducted in Mindanao duringTyphoon Pablo in December 2012.120 121


Globe 2012 annual reportbridging communitiesTechnology-based Innovations for Transparency, Governance Accountability, Citizen Participation and Capacity-building ofDuty BearersGlobe BridgeCom’s CSR programs hinge and capitalize on the core business and competencies of the company—mobilecommunication and broadband services. One of the innovations shared with beneficiary communities and partners is theGlobe Bridging Communities (GBC) SIM card. This enables access to discounted rates on calls and SMS.In 2012, 20,000 Globe Bridging Communities SIM cards were deployed to Globe BridgeCom partners and beneficiaries aspart of the partnership and generated ₱2,986,380 in top-up revenues for the company.Globe BridgeCom also utilized ICT solutions in strengtheninggood governance and accountability through the followingpartnerships and programs:Sagot Ka ni Kap is an ongoing program which enablescommunity members to contribute in keeping the peaceand order in the community. More than just equipping thecommunity watch volunteers with mobile phones and handheldradios, Globe also provided capacity-building workshopsdesigned to inspire and enable them to be more proactive incommunity development. The beneficiaries also received aone-year personal accident insurance package.A survey tool, Delphio, was also introduced to theDepartment of Interior and Local Government (DILG)partnership for citizens to monitor the Anti-Red Tape Act(ARTA) and ensure that their local government units arekeeping to their commitment of service. A similar programdubbed Tingog 2015 was rolled out in Tabaco, Albay inpartnership with the United Nations Development Program(UNDP) which aimed at providing a venue for people’svoices to be heard on issues such as maternal, neonatal,child health and nutrition.The partnership with UNICEF also harnessed the power ofSMS and ICT for the real-time Community Health InformationTracking System (rCHITS). The rCHITS is the country’s firstelectronic medical record system for government healthfacilities which allowed nurses and midwives nationwideto help generate health data and timely reports for theDepartment of Health’s (DOH) health programs by sendingreports through their mobile phones. The program waspiloted in three disadvantaged areas identified by UNICEFin 2012—G’lan in Sarangani, Sto. Domingo in Albay, andGamay, Northern Samar—and aimed at providing localstakeholders information on maternal and child health inrural areas to help them make informed decisions on socialservices delivery.Globe also empowered the Manila Observatory (MO), theMetro Manila Development Authority (MMDA), Chevron, andthe Ateneo de Manila University with ICT tools for the MetroWeather project, a network of automated weather stations(AWS) in Metro Manila that will provide free and real-timeweather data that can be used to prepare for severe weatherconditions such as typhoons and heavy flooding.By providing survey tools and ICT support to the DILG, MMDA,UNICEF and the United Nations, and UNICEF, Globe is able tohelp ordinary citizens have their voices heard and be part of theimproved implementation of transparency and accountabilitytowards good governance.Technology is also used in increasing citizen participation:Globe supported TaoPo.org, an online portal which empowersFilipinos to become “changeneers” and utilize interactivetools and social media to promote accountability and activecitizenry by allowing readers to articulate their experiences andpost solutions to governance-related issues; and through theNatasha Goulbourn Foundation (NGF) Hopeline, which servesas a counseling hotline for people suffering from depressionand for those who are concerned with individuals with theseconditions, to be connected to trained responders and giverelevant information on mental well-being.Globe also recognizes the power in strengthening thecapabilities of the youth by providing support for AyalaFoundation’s Leadership Communities (LeadComm) andPhilippine Center for Civic Education and Democracy’s(PCCED) Project Citizen, which empowers high schoolstudents with leadership skills and training in seeking publicpolicy interventions to solve community problems.Duty-bearers are also empowered with capacity-building skills:the Global Filipino Teacher (GFT) program, first launched in2009, continues to equip public school teachers nationwidewith necessary skills to efficiently integrate information andcommunications technology (ICT) in their teaching strategies.In 2012, a peer coaching session, participated by 30 GlobalFilipino Teachers, was done to empower educators with skills totrain their colleagues in ICT integration.The Global Filipino School (GFS)—an ICT model schoolequipped with wired and wireless Internet connection, multimediaperipherals, and is housed in an energy-efficientand environment-friendly building—was turned over to theBilar National High School, Bohol in December 2012. Thecompetency-building initiative seeks to transform public highschools into ICT centers of excellence and hopes to drivethe delivery of and access to quality education to produceteachers and students who can contribute to the growth andcompetitiveness of their respective localities.122 123


Globe 2012 annual reportbridging communitiesBarangay Rule of Law seminars (BRLS) were also introduced to barangay tanods under the Sagot ka ni Kap program whichincludes modules on community leadership, conflict resolution, and crisis management. A total of 460 barangay officials from 63barangays were included in the BRLS seminars.Total population of three (3) pilot sites of rCHITS: 152,509 individuals• Sto. Domingo, Albay: 34,488• G'lan, Sarangani: 93,801• Gamay, North Samar: 24,220Our External Partners for Community Development are:1. Department of Interior and Local Government (DILG)2. Philippine Center for Civic Education (PCCED)3. Ayala Foundation, Inc.4. Changeneers Digital Corporation (Tao Po)5. Department of Social Welfare and Development (DSWD)6. Gifts & Graces, Inc.7. Bote Central8. Microventures Foundation, Inc.9. Rurungan sa Tubod Foundation10. Custom Made Crafts Center (CMCC)11. Seed Core Enterprises12. Gawad Kalinga Community Development Foundation, Inc.13. BPI Globe BanKO14. Department of Education (DepEd)15. Disaster Risk Resilience Management Office (DRRMO-DepEd)16. United Nations Children’s Fund (UNICEF)17. International Rice Research Institute (IRRI)18. Natasha Goulbourn Foundation (NGF)19. Philippine HIV AIDS NGO Support (PHANSuP)20. The Asia Foundation (TAF)21. Department of Science-PAGASA22. PUSOD, Inc.23. Cordillera Conservation Trust (CCT)24. Philippine Eagle Conservation Foundation, Inc. (PEF)25. Bagong Lumad Foundation, Inc. (BLAFI)26. Foundation for Philippine Environment (FPE)27. Department of Environment and Natural Resources (DENR)28. Manila Observatory (MO)29. Chevron30. Metropolitan Manila Development Authority (MMDA)31. Batas Kalikasan32. Philippine Tarsiers Foundation, Inc.33. UN Volunteers Program34. Coalition for Better Education (CBE)35. Simbahang Lingkod ng Bayan (SLB)36. Voluntary Service Overseas37. Children International38. Children’s Hour39. Hero Foundation40. Kythe Foundation41. Haribon Foundation42. Corporate Network for Disaster Response (CNDR)43. Mindanao Emergency Response Network (MERN)44. Childfund International, Philippines45. World Wide Fund (WWF)46. Nokia PhilippinesMembership of Globe Telecom with External Agencies1. Corporate Network for Disaster Response (CNDR)2. League of Corporate Foundations3. Text2Teach4. Teacher’s Month Campaign Consortium124 125


Globe 2012 annual reportmanagement discussion and analysisManagement Discussion & AnalysisOperational PerformanceNote: 2011 service revenues have been restated to reflect the change in the presentation of outbound revenues to be at gross ofinterconnect expenses (from net previously).1 Includes mobile voice and data revenues.2 Includes revenues from wired, fixed wireless, and fully mobile broadband services.3 Includes international and domestic data services, corporate internet access, and data center solutions.4 Includes revenues from landline and DUO services.Mobile BusinessGlobe provides digital mobile communication servicesnationwide using a fully digital network based on the GlobalSystem for Mobile Communication (GSM) technology. Itprovides voice, data and value-added services to its mobilesubscribers through three major brands: Globe Postpaid, GlobePrepaid and TM.Globe Postpaid includes all postpaid plans such as regularG-Plans, consumable G-Flex Plans, Load Allowance Plans,Load Tipid, Apple TM iPhone 3G plans and high-end PlatinumPlans. In 2010, the Company expanded its postpaid offeringsto include MY SUPERPLAN and MY FULLY LOADED PLANwhich allow subscribers to personalize their plans, choose andcombine various unlimited call, text and web browsing serviceoptions. In addition to these personalized plans, Globe hasmade available various add-on roaming and mobile browsingplans to cater to the needs of its subscribers.Globe earlier consolidated its personalized and customizableplan service with the launch of the All New My Super Planwhere subscribers are given the flexibility to create their ownplans by either subscribing to an All-Unlimited Plan or an All-Consumable Plan. Subscribers also get the chance to designtheir plans based on their usage by selecting the freebies andadd-on services that would come with their subscriptions. Tofurther enhance their experience, subscribers are allowed tochange the freebies and add-on services monthly. Driven bythe popularity of social networking sites as well as increasedsmartphone penetration, Globe introduced a fully-customizableunlimited data plan to its subscribers in mid-2011. The UnliSurf Combo Plan provides uninterrupted mobile surfing foron-the-go subscribers without the need for a WiFi connection.Data plan subscriptions also come with consumable amountswhich subscribers may use to make local and internationalcalls and text messages. On top of this, subscribers alsoget bonus calls and SMS which they can change monthlydepending on their needs.Globe Prepaid and TM are the prepaid brands of Globe.Globe Prepaid is targeted towards the mainstream market.TM, on the other hand, caters to the value-conscioussegment of the market, offering various affordable voice anddata services to its subscribers.The Company had earlier launched its Today I Will campaignfor Globe Prepaid. The campaign aims to support theaspirations of the Filipino youth aided by the brand’s suite ofproducts and services. Its unique brand proposition revolvesaround its innovative product and service offerings, superiorcustomer service, and Globe Telecom’s “worldwidest”services and global network reach. In 2012, the Companyrevolutionized the mobile business anew by introducing aself-service menu that provides subscribers an easy wayto access and avail of the latest promos and services fromGlobe. Subscribers simply have to dial *143# to get a list ofGlobe Telecom's latest offerings and choose which servicesthey wish to avail.In addition to digital wireless communications, Globe alsooffers mobile payments and remittance services under theGCASH brand. GCASH is an internationally acclaimedmicro payment service that transforms a mobile phone intoa virtual wallet, enabling secure, fast, and convenient moneytransfers at the speed and cost of a text message. Sincethe launch of GCASH, wholly-owned subsidiary GXI hasestablished a wide network of local and international partnersthat includes government agencies, utility companies,cooperatives, insurance companies, remittance companies,universities, and commercial establishments which all acceptGCASH as a means of payment for products and services.The mobile business closed 2012 with record revenuesof ₱67.2 billion, 6% above previous year’s ₱63.5 billion,to counter market challenges underpinned by peakingpenetration rates driven partly by the prevalence of multi-SIMusage, eroding prices and margins as a result of subscribers’continued preference for unlimited and bucket services,and the increasingly competitive environment. The strongperformance in 2012 was a reflection of the Company’scontinued success in its pioneering customizable andinnovative service offers for both domestic and internationalmarkets, value-for-money promotions, as well as handsetand gadget launches. The year-on-year growth wasbroad based and was supported by an overall increase insubscribers as well as improvements across key productsegments. Subscriber acquisitions remained robust ledby the prepaid brands and the ample contribution from thepostpaid segment which benefited from the highly successfullaunch of the Apple iPhone 5 in the last quarter of the year.Both mobile voice and data segments delivered 6% yearon-yearrevenue expansion led by the increase in unlimitedvoice subscriptions and mobile browsing services whichcontributed ₱3.1 billion to total mobile top line compared toonly ₱2.0 billion in 2011.Globe ended the year with cumulative mobile subscriberbase of 33.1 million, up 10% from 30.0 million in 2011. Grossadditions increased by 6% year-on-year from 23.2 million in2011 to 24.6 million. Although churn rates were maintainedwithin manageable levels, net incremental subscribers weredown by 14% from 3.6 million in the previous period to about3.1 million in 2012.Globe Postpaid, accounts for 5% of the total mobilesubscriber base and remains the stronghold of theCompany. In 2012, Globe Postpaid continued to post robustacquisitions led by strong sales of the latest devices fromApple, Samsung, and BlackBerry®. Globe capped off theyear with the launch of Apple iPhone 5 which also helpedto fuel acquisitions in the segment to bring full year 2012gross additions to a record 589,642 subscribers, slightly upby 1% from 585,724 in 2011. With slightly elevated churn,full year net incremental postpaid subscribers of 279,762were below the 2011 level of 388,569. Full year 2012net acquisitions reflected as well the improving quality ofacquired subscribers with about 42% of regular postpaid netadditions signing up for plans with monthly service fees of₱999 and above, compared to just 19% in 2011. Cumulativepostpaid subscribers stood at 1,734,468 at yearend, 19%over previous year’s level of 1,454,706. Globe PostpaidARPU of ₱1,191 was 3% below last year’s ₱1,223 as aresult of a higher mix of lower-MSF plans and the increasein subscriptions to the Company’s value service offerings.Meanwhile, subscriber acquisition costs (SAC) increasedsubstantially in 2012 mainly on higher handset subsidies forsubscriber availments of devices from Apple, Samsungand BlackBerry®. Costs, however, remain recoverable wellwithin the 24-month contract period for postpaid subscribers.Globe Prepaid accounts for 50% of cumulative mobilesubscriber base in 2012. Globe Prepaid continued tooffer the best value-for-money services to its subscribers.Boosted by services that included the all-unlimited serviceGoUnli as well as All Unli Trio, All Net Combo, ImmortalOffers and Unli Tingi, and further reinforced by competitivelypricedinternational services such as GoTipIDD, full yeargross acquisitions improved by 3% from about 11.4 millionin 2011 to nearly 11.8 million in 2012. While churn rateswere maintained at manageable levels, the third quarter’sunderperformance weighed down full year 2012 netincremental subscribers to 977,710, 40% below the 2011level of 1,627,716 net incremental subscribers. Despite thisslowdown in net additions, total Globe Prepaid subscriberswere still up by 6% year-on-year from about 15.5 million to16.4 million. Globe Prepaid ARPU meanwhile declined by12% year-on-year resulting from the revenue dilution fromunlimited and bucket service offerings. Globe Prepaid SAC,on the other hand, was below its 2011 levels due mainly tolower ads and promo spending, and remained recoverablewithin a month’s ARPU.TM accounts for the remaining 45% of the total mobilesubscriber base in 2012. TM generated the highest grossacquisitions in the last quarter of the year to bring full yeartotal gross additions to about 12.3 million, up 9% from 11.2million in 2011. TM benefited from the various productlaunches throughout the year that included value serviceofferings such as TM Combo and the enhanced mobilebrowsing offers for TM which now include SuperSurf,Social20, Mail20, and Fun20. With churn rates maintainedwithin manageable levels, full year net incrementalsubscribers increased by 17% from about 1.6 million in2011 to 1.8 million. As a result, cumulative TM subscribersincreased by 14% from 13.1 million in 2011 to 14.9 million in2012. TM ARPU meanwhile was down by 9% year-on-yearwith the continued shift from regular pay-as-you-use serviceto unlimited and value offers. TM SAC, on the other hand,was below its 2011 levels due mainly to lower ads and promospending, and remained recoverable within a month’s ARPU.126 127


Globe 2012 annual reportmanagement discussion and analysisGlobe offers a full range of fixed line communicationsservices, wired and wireless broadband access, and endto-endconnectivity solutions customized for consumers,SMEs (Small & Medium Enterprises), large corporations andbusinesses.Globe Telecom’s fixed line voice services include local,national and international long distance calling services inpostpaid and prepaid packages through its Globelines brand.Subscribers get to enjoy toll-free rates for national longdistance calls with other Globelines subscribers nationwide.Additionally, postpaid fixed line voice consumers enjoy freeunlimited dial-up internet from their Globelines subscriptions.Low-MSF (monthly service fee) fixed line voice servicesbundled with internet plans are available nationwide and canbe customized with value-added services including multicalling,call waiting and forwarding, special numbers andvoice mail. For corporate and enterprise customers, Globeoffers voice solutions that include regular and premiumconferencing, enhanced voice mail, IP-PBX solutions anddomestic or international toll free services.The Company’s fixed line data services include end-toenddata solutions customized according to the needs ofbusinesses. Globe Telecom's product offerings includeinternational and domestic leased line services, wholesaleand corporate internet access, data center services andother connectivity solutions tailored to the needs of specificindustries.Globe offers wired, fixed wireless, and fully mobileinternet-on-the-go services across various technologiesand connectivity speeds for its residential and businesscustomers. Tattoo@Home consists of wired or DSLbroadband packages bundled with voice, or broadbanddata-only services which are available at download speedsranging from 1 mbps up to 15 mbps. In selected areaswhere 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-Goallows subscribers to access the internet using LTE, HSPA+,3G with HSDPA, EDGE, GPRS or Wi-Fi at various hotspotsnationwide using a plug-and-play USB modem. This serviceis available in both postpaid and prepaid packages. Inaddition, consumers in selected urban areas who requirefaster connections have the option to subscribe to TattooTorque broadband plans using leading edge GPON (GigabitPassive Optical Network) technology with speeds of up to100 mbps.In 2012, the Company officially launched its Long-TermEvolution (LTE) broadband service with the Tattoo BlackPostpaid Plans. The nomadic broadband plans are equippedwith an LTE dongle and LTE superstick that deliver browsingspeeds of up to 42 Mbps and come with personalizedcustomer handling services such as a dedicated hotline, arelationship manager, and many other perks.The fixed line and broadband business registered significantgains in 2012, with revenues rising by 9% from ₱14.2 billionin 2011 to about ₱15.6 billion on account of increasingdemand for data and internet connectivity.Full year broadband revenues were up 16% to ₱8.7 billionas the year marked another milestone for the businesswith the commercial launch of its broadband LTE servicethat provided subscribers with alternative tools to improvetheir overall internet experience. The broadband businesslikewise continued to ride on the popularity of socialnetworking sites and benefited from declining prices ofaccess devices such as PCs, tablets, and laptops. Full year2012 cumulative broadband subscribers stood at about 1.7million, up by 18% from 1.4 million in 2011.The fixed line data also contributed to the Company’soverall top line growth with revenues of almost ₱4.2 billion,10% higher than the ₱3.8 billion booked in 2011. Thiswas accomplished by the Company’s innovative businesssolutions and products that capitalized on demand for highspeeddata nodes, transmission links, bandwidth capacityand reliable service. Globe Business’ products include M2M(machine-to-machine) solutions, cloud computing services,domestic and international data services, leased lines andmanaged services among other solutions for improving abusiness’ productivity and IT security.On the other hand, subscription to traditional landline servicewas slightly revived through low call rate offers and togetherwith DUO & SUPERDUO’s continued popularity liftedcumulative voice subscriber base 6% to 711,429 customers.However, revenues still fell 9% to ₱2.7 million as the strategylowered MSF and consequently ARPU.Financial PerformanceFull year 2012 consolidated service revenues soared to ahistoric-high of ₱82.7 billion, up 6% from 2011 results of₱77.8 billion. The mobile business sustained its stronggrowth momentum by delivering a 6% year-on-year increasein revenues on account of the record gross acquisitions inthe postpaid segment, expansion in mobile browsing usageas well as unlimited and bulk voice services. Incrementalrevenues compensated for the decline in IDD revenueswhich were partly weighed down by an appreciating Peso,and also helped to counter market challenges underscoredby peaking penetration levels resulting from increasingincidence of multi-SIM, declining yields from unlimited andvalue promotions, and intensifying competition. Fixed lineand broadband revenues likewise contributed additionalrevenues and registered 9% year-on-year growth withsustained expansion in total broadband subscriber base andsteady demand for data services from the corporate sector.Operating expenses and subsidy increased by 12% yearon-yearfrom ₱42.7 billion to ₱47.7 billion as 2012 was aperiod of investment in terms of acquiring and retainingsubscribers as well as beefing up capacity with the networkmodernization and IT transformation programs. Marketingand subsidy costs increased substantially following theaggressive acquisition of new postpaid subscribers whoopted to get the higher-end gadgets such as the AppleiPhone. Marketing costs also increased to support thevarious brand-building initiatives such as product and servicelaunches for the mobile and broadband business. As aresult, marketing and subsidy as a percentage of servicerevenues rose to 13% in 2012 from 9% in 2011. Networkrelatedcosts, which included lease, utilities, and repairsand maintenance, were also higher in 2012 as a result ofthe continued expansion of the 2G, 3G, and broadbandnetworks. Operating expenses in 2012 likewise includedcharges for various outsourced and contracted services, aswell as professional fees resulting from the various projectsbeing undertaken by the Company, including our networkand IT modernization initiatives. Interconnect costs, on theother hand, were down year-on-year driven by the NTCmandatedreduction in access charges implemented in late2011.Consolidated EBITDA of ₱35.0 billion was lower by about₱93 million from previous year’s total of ₱35.1 billion asthe overall growth in expenses outpaced the increase inrevenues. As a result, EBITDA margin declined from 45% in2011 to 42% in 2012.Meanwhile, total depreciation expense grew 25% year-onyearfrom ₱18.9 billion to ₱23.6 billion with the increaseattributed mainly to charges related to the networkmodernization and IT transformation programs. As theCompany had disclosed in the past, the carrying value ofthe old, non-useable assets will impact Globe Telecom’sprofitability through an acceleration of depreciation overits remaining useful life and until such time when the new,replacement assets are ready for service. Accelerateddepreciation charges increased further towards the lastquarter of the year to bring full year total to ₱5.1 billion.Excluding this item, total depreciation expense would havedeclined by 2% against previous year to about ₱18.5 billion.Globe closed the year with core net income of about ₱10.3billion, up 2% from ₱10.0 billion in 2011. Core net incomeexcludes foreign exchange and mark-to-market gainsand losses as well as non-recurring items such as theaccelerated depreciation charges related to transformationinitiatives. Reported net income after tax, on the other hand,was down 30% year-on-year from ₱9.8 billion to ₱6.9 billionas revenue gains were offset by the impact of accelerateddepreciation charges as well as sustained investments insubscriber postpaid acquisitions.128 129


Globe 2012 annual reportmanagement discussion and analysisService Revenue ProfileMeanwhile, net cash used in investing activities amountingto ₱24,633 million was up 35% driven largely by investmentsin property and equipment resulting from the networkmodernization projects and ongoing efforts to expand thecoverage and capacities of the Company’s broadbandnetwork and improve the quality of its mobile service.Consolidated capital expenditures in 2012 amounted to₱26,810 million, up 54% from the 2011 level of ₱17,417million.Consolidated net cash from financing activities generatedan inflow of ₱2,198 million in 2012 compared to the net cashoutflow of ₱12,521 million in 2011. This was driven largelyby the bond issuance and borrowings from banks to fundthe Company’s network modernization and IT transformationprogram as well as finance business-as-usual capitalexpenditure requirements. The 2012 inflow was partiallyoffset by payments of cash dividends as well as shorttermand long-term loan repayments. Consolidated debtincreased by 27% from ₱48,679 million in 2011 to ₱61,779million in 2012.The Company’s gearing levels have been increasinglyoptimized over the past few years with the raised dividendpayouts and higher proportion of debt to total capitalization.Globe ended the year with gross debt to equity ratio of 1.32:1on a consolidated basis which is well within the 2:1 debt toequity limit dictated by its debt covenants. Meanwhile, netdebt to equity ratio was at 1.18:1 compared to 0.90:1 in 2011.With 2012 reported net income weighed down byinvestments in subscriber acquisitions and accelerateddepreciation charges arising from network modernization,consolidated basic earnings per common share decreasedto ₱51.54 from previous year’s ₱74.02, while consolidateddiluted earnings per common share declined to ₱51.47 from₱73.77 in 2011. Consolidated return on average equity,meanwhile, registered 14% in 2012 compared to 21% in2011 using reported net income and based on averageequity balances for the year ended. Using core net incometo strip out the effects of accelerated depreciation onreported net income, return on average equity in 2012 wasup to 22% compared to 21% in 2011.Globe Group’s consolidated assets in 2012 amounted to₱148,433 million compared to ₱130,839 million in 2011.Consolidated cash, cash equivalents and short terminvestments (including investments in assets available forsale and held to maturity investments) was at ₱6,760 millionin 2012 compared to ₱5,159 million in 2011.Consolidated net cash flows provided by operating activitiesin 2012 stood at ₱24,237 million, down 19% year-onyeardriven by the increase in advances to suppliers andcontractors related to the various projects being undertaken.Globe Telecom’s balance sheet and cash flows remainstrong with ample liquidity and gearing comfortably withinbank covenants albeit higher year-on-year with additionaldebt raised as a result of Globe Telecom’s transformationinitiatives.130 131


Globe 2012 annual reportfinancial reportReport of the Audit Committee of the Board of DirectorsFor the Year Ended 31 December 2012Pursuant to the Audit Committee Charter, the Committee supports corporate governance of the Company byfulfilling its oversight responsibility relating to: a) the integrity of the financial statements and the financial reportingprocess and principles; b) internal controls; c) the qualifications, independence, remuneration and performance ofthe independent auditors; d) staffing, focus, scope, performance, and effectiveness of the internal audit function;e) risk management; and (f) compliance with legal, regulatory, and corporate governance requirements.Management however has primary responsibility for financial statements and reporting process, internal controls,legal and regulatory compliance, and risk management.The Audit Committee hereby reports as follows: An independent director chairs the Audit Committee. The Audit Committee has an established Charter outlining the practices it follows. We reviewed and made necessary,minor revisions to the Charter pursuant to Securities and Exchange Commission(SEC) Memorandum Circular No. 4Series of 2012, “Guidelines for the Assessment of the Performance of Audit Committees of Companies Listed on theExchange” effective 30 July 2012. We had four (4) meetings during the year. The Company’s President & CEO, the Chief Financial Officer, and othermembers of management were requested to attend the Committee meetings. External subject matter experts, such asthe appointed Independent Auditors and other consultants, were also invited to the meetings. The Committee met with the Head of Internal Audit and the Head of Human Resources in separate executive sessionsduring the year, in addition to the Committee Chairman’s separate briefing sessions with members of management, Headof Internal Audit and Independent Auditors. We reviewed and discussed the quarterly unaudited financial statements and the audited annual financial statements ofGlobe Telecom, Inc. and Subsidiaries (Globe Group), including Management’s Discussion and Analysis of FinancialCondition and Results of Operations with SGV & Co., Internal Auditors, and Management. We reviewed and discussed the adequacy of the Globe Group’s Enterprise Risk Management framework, includingmanagement’s report on Ernst & Young’s assessment of Globe’s revenue assurance model, and risk managementprocesses specific to financial statements and reporting, business continuity, fraud, revenue assurance, regulatory, andTransformation Program related risks. We noted that the Company has policies in place and ongoing initiatives toaddress these risks. We discussed with the Company’s Internal Auditors and Independent Auditors the overall scope of, and plans for, theirrespective 2012 audits, approved the same and reviewed their performance relative to the audit plans. We discussed the reports of SGV & Co., mainly on financial statements and compliance to financial reporting standardsand their observations on internal controls. We discussed the results and reports of Internal Audit, their participation in the Company’s Transformation Program, andfollow-up on implementation of audit recommendations. We understand that Management are responding positively, andhave taken and are taking appropriate actions in a timely manner. We reviewed the effectiveness of the internal audit function and Internal Audit’s annual and quarterly reports to the AuditCommittee ensuring compliance with the International Standards for the Professional Practice of Internal Auditing(ISSPIA) and providing value to the Company. We also reviewed and concluded that Internal Audit resources areallocated to support the Company’s Transformation Program and the areas of highest risk. We assessed and discussed the Audit Committee’s performance for 2012 to confirm that the Committee continues tomeet Board, Management and shareholder expectations. We reviewed and recommended for Board approval the audit services of SGV & Co. and approved audit-related andpermitted non-audit services provided by SGV & Co. to the Globe Group and the related fees for such services andconcluded that non-audit fees are not significant to impair their independence.Based on the reviews and discussions referred to above, the Audit Committee recommends that the auditedfinancial statements be included in the Annual Report for the year ended 31 December 2012 for filing with theSecurities and Exchange Commission.We also recommend the re-appointment of SGV & Co. as the Globe Group’s Independent Auditors for 2013based on a fair and transparent tender process and considering their performance and qualifications.4 February 2013132 133


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Globe 2012 annual reportfinancial reportIndependent Auditor's ReportGLOBE TELECOM, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITIONINDEPENDENT AUDITORS’ REPORTASSETSDecember 31Notes 2012 2011 2010(In Thousand Pesos)The Stockholders and the Board of DirectorsGlobe Telecom, Inc.We have audited the accompanying consolidated financial statements of Globe Telecom, Inc. and Subsidiaries,which comprise the consolidated statement of financial position as at December 31, 2012, 2011 and 2010, and theconsolidated statements of comprehensive income, consolidated statements of changes in equity and consolidatedstatements of cash flows for the years then ended, and a summary of significant accounting policies and otherexplanatory information.Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with Philippine Financial Reporting Standards, and for such internal control as management determinesis necessary to enable the preparation and fair presentation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audits. Weconducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in theconsolidated financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud orerror. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparationand fair presentation of the consolidated financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position ofGlobe Telecom, Inc. and Subsidiaries as at December 31, 2012, 2011 and 2010, and its financial performance andits cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.SYCIP GORRES VELAYO & CO.Gemilo J. San PedroPartnerCPA Certificate No. 32614SEC Accreditation No. 0094-AR-3 (Group A),February 4, 2013, valid until February 3, 2016Tax Identification No. 102-096-610BIR Accreditation No. 08-001998-34-2012,April 11, 2012, valid until April 10, 2015PTR No. 3670020, January 2, 2013, Makati CityCurrent AssetsCash and cash equivalents 28, 30 P=6,759,755 P=5,159,046 P=5,868,986Receivables - net 4, 28 12,105,437 10,119,505 8,374,123Inventories and supplies 5 2,076,176 1,911,190 1,839,333Derivative assets 28 421 9,766 19,888Prepayments and other current assets - net 6, 28 12,308,248 5,586,419 4,704,19833,250,037 22,785,926 20,806,528Assets classified as held for sale 25.4 778,321 778,321 778,32134,028,358 23,564,247 21,584,849Noncurrent AssetsProperty and equipment - net 7, 8 101,422,364 99,267,780 101,837,254Investment property - net 8 – 191,645 214,192Intangible assets and goodwill - net 7, 9 3,793,958 3,591,514 3,248,376Investments in joint ventures 10 183,193 249,000 197,016Deferred income tax - net 24 765,585 765,670 670,594Other noncurrent assets - net 11, 18 8,239,618 3,209,477 2,875,686114,404,718 107,275,086 109,043,118Total Assets P=148,433,076 P=130,839,333 P=130,627,967LIABILITIES AND EQUITYCurrent LiabilitiesAccounts payable and accrued expenses 12, 18, 28 P=29,735,614 P=23,042,514 P=22,115,203Notes payable 14, 28 2,053,900 1,756,760 –Current portion of long-term debt 14, 28 9,294,888 9,597,367 8,677,209Unearned revenues 4 2,502,903 2,474,142 2,402,749Derivative liabilities 28 235,633 208,247 93,336Income tax payable 24 1,341,583 1,157,927 1,098,492Provisions 13 203,191 166,773 224,38845,367,712 38,403,730 34,611,377Liabilities directly associated with the assetsclassified as held for sale 25.4 459,760 583,365 697,72945,827,472 38,987,095 35,309,106Noncurrent LiabilitiesDeferred income tax - net 24 2,473,115 3,929,414 4,620,490Long-term debt - net of current portion 14, 28 50,430,632 37,324,579 41,694,261Derivative liabilities 28 5,021 58,370 152,529Other long-term liabilities - net of current portion 15, 28 2,942,152 2,111,719 1,982,45355,850,920 43,424,082 48,449,733Total Liabilities 101,678,392 82,411,177 83,758,839EquityPaid-up capital 17 34,095,976 33,967,476 33,946,004Cost of share-based payments 16, 18 472,911 573,436 544,794Other reserves 17, 28 (44,588) (124,902) (88,310)Retained earnings 17 12,230,385 14,012,146 12,466,640Total Equity 46,754,684 48,428,156 46,869,128Total Liabilities and Equity P=148,433,076 P=130,839,333 P=130,627,967See accompanying Notes to Consolidated Financial Statements.February 5, 2013138 139


Globe 2012 annual reportfinancial reportGLOBE TELECOM, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEGLOBE TELECOM, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYYears Ended December 31Notes 20122011(As restatedsee Note 2.4)2010(As restatedsee Note 2.4)(In Thousand Pesos, Except Per Share Figures)REVENUESService revenues 2, 16, 29 P=82,742,565 P=77,764,964 P=72,742,090Nonservice revenues 3,703,584 3,753,283 2,993,30186,446,149 81,518,247 75,735,391INCOMEInterest income 19, 25.5, 29 579,851 297,388 218,532Gain on disposal of property and equipment - net 7 42,447 319,250 32,535Other income - net 20, 25.1, 29 716,371 574,768 856,9411,338,669 1,191,406 1,108,008COSTS AND EXPENSESGeneral, selling and administrative 21 33,604,328 29,304,463 26,692,104Depreciation and amortization: 7, 8, 9, 29Incremental effect of network modernization 5,080,471 – –Others 18,502,946 18,941,227 18,085,839Interconnect costs 2 8,859,309 9,953,663 10,187,401Cost of sales 5 7,678,359 5,887,589 4,238,960Financing costs 14, 22, 29 2,343,895 2,579,714 2,068,401Impairment losses and others 23 1,863,584 1,918,583 1,529,534Equity in net losses of joint ventures 10, 29 83,582 27,345 2,96878,016,474 68,612,584 62,805,207INCOME BEFORE INCOME TAX 9,768,344 14,097,069 14,038,192PROVISION FOR (BENEFIT FROM) INCOME TAX 24Current 4,355,699 5,049,479 4,187,625Deferred (1,444,367) (784,215) 105,9332,911,332 4,265,264 4,293,558NET INCOME 6,857,012 9,831,805 9,744,634OTHER COMPREHENSIVE INCOME (LOSS) 17Transactions on cash flow hedges - net 45,529 (53,194) (133,257)Changes in fair value of available-for-sale investment inequity securities 43,974 1,269 20,150Exchange differences arising from translations offoreign investments 4,470 (625) (33,698)Tax effect relating to components of othercomprehensive income (13,659) 15,958 39,97780,314 (36,592) (106,828)TOTAL COMPREHENSIVE INCOME P=6,937,326 P=9,795,213 P=9,637,806NotesCapitalStock(Note 17)AdditionalPaid-inCapitalFor the Year Ended December 31, 2012Cost ofShare-Based OtherPayments Reserves(Note 16.5) (Note 17)(In Thousand Pesos)RetainedEarningsAs of January 1, 2012 P=7,410,226 P=26,557,250 P=573,436 (P=124,902) P=14,012,146 P=48,428,156Total comprehensive income for the year – – – 80,314 6,857,012 6,937,326Dividends on: 17.3Common stock – – – – (8,605,628) (8,605,628)Preferred stock – – – – (33,145) (33,145)Cost of share-based payments 18.1 – – 11,502 – – 11,502Collection of subscription receivables – – – – – –Exercise of stock options 17.2 2,640 125,860 (112,027) – – 16,473As of December 31, 2012 P=7,412,866 P=26,683,110 P=472,911 (P=44,588) P=12,230,385 P=46,754,684NotesCapitalStock(Note 17)For the Year Ended December 31, 2011Cost ofAdditional Share-Based OtherPaid-in Payments (Note ReservesCapital16.5) (Note 17)(In Thousand Pesos)RetainedEarningsAs of January 1, 2011 P=7,409,223 P=26,536,781 P=544,794 (P=88,310) P=12,466,640 P=46,869,128Total comprehensive income (loss)for the year – – – (36,592) 9,831,805 9,795,213Dividends on: 17.3Common stock – – – – (8,205,605) (8,205,605)Preferred stock – – – – (80,694) (80,694)Cost of share-based payments 18.1 – – 49,338 – 49,338Collection of subscription receivables 776 – – – – 776Exercise of stock options 17.2 227 20,469 (20,696) – – –As of December 31, 2011 P=7,410,226 P=26,557,250 P=573,436 (P=124,902) P=14,012,146 P=48,428,156NotesCapitalStock(Note 17)For the Year Ended December 31, 2010Cost ofAdditional Share-Based OtherPaid-in Payments (Note ReservesCapital16.5) (Note 17)(In Thousand Pesos)RetainedEarningsAs of January 1, 2010 P=7,409,079 P=26,503,079 P=468,367 P=18,518 P=13,309,871 P=47,708,914Total comprehensive income (loss)for the year – – – (106,828) 9,744,634 9,637,806Dividends on common stock 17.3 – – – – (10,587,865) (10,587,865)Cost of share-based payments 18.1 – – 104,788 – – 104,788Exercise of stock options 17.2 144 33,702 (28,361) – – 5,485As of December 31, 2010 P=7,409,223 P=26,536,781 P=544,794 (P=88,310) P=12,466,640 P=46,869,128See accompanying Notes to Consolidated Financial Statements.TotalTotalTotalEarnings Per Share 27Basic P=51.54 P=74.02 P=73.29Diluted P=51.47 P=73.77 P=73.12Cash dividends declared per common share 17 P=65.00 P=62.00 P=80.00See accompanying Notes to Consolidated Financial Statements.140 141


Globe 2012 annual reportfinancial reportGLOBE TELECOM, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSGLOBE TELECOM, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31Notes 2012 2011 2010(In Thousand Pesos)CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=9,768,344 P=14,097,069 P=14,038,192Adjustments for:Depreciation and amortization 7, 8, 9 23,583,417 18,941,227 18,085,839Interest expense 22 2,086,078 2,059,660 1,981,785Foreign exchange losses (gains) - net 20, 22 (318,334) 308,650 (465,373)Impairment losses on property and equipment andintangible assets 23 259,262 128,614 63,126Cost of share-based payments 16, 18 11,502 49,338 104,788Equity in net losses of a joint venture 10 83,582 27,345 2,968Provisions for (reversals of) claims and assessments 23 56,327 (47,916) 138,760Loss (gain) on derivative instruments 20, 22 9,593 (25,495) 28,295Gain on disposal of property and equipment 7 (42,447) (319,250) (32,535)Interest income 19 (579,851) (297,388) (218,532)Dividend income – (503) (2,366)Operating income before working capital changes 34,917,473 34,921,351 33,724,947Changes in operating assets and liabilities:Increase in:Receivables (2,235,848) (1,678,456) (1,932,420)Inventories and supplies (164,986) (67,358) (185,583)Prepayments and other current assets (6,996,121) (774,230) (438,809)Increase (decrease) in:Accounts payable and accrued expenses 2,597,424 2,142,313 980,104Unearned revenues 28,761 71,393 (579,131)Other long-term liabilities (106,783) (180,080) (314,998)Cash generated from operations 28,039,920 34,434,933 31,254,110Income tax paid (3,802,665) (4,508,758) (4,105,733)Net cash flows provided by operating activities 24,237,255 29,926,175 27,148,377CASH FLOWS FROM INVESTING ACTIVITIESAdditions to:Property and equipment 7, 30 (20,124,476) (18,007,055) (17,552,246)Intangible assets 9 (152,056) (145,208) (169,329)Investment in joint ventures 10 (20,990) (79,010) –Proceeds from sale of property and equipment 70,070 180,939 113,258Decrease (increase) in:Short-term investments – – 2,784Other noncurrent assets (4,871,386) (399,878) 482,918Dividend received – 503 2,366Interest received 465,711 259,992 191,436Net cash flows used in investing activities (24,633,127) (18,189,717) (16,928,813)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings: 14Long-term 25,847,770 8,000,000 14,181,967Short-term 5,052,430 1,738,600 1,000,000Repayments of borrowings: 14Long-term (12,810,082) (11,552,501) (8,986,275)Short-term (4,694,020) – (3,000,829)Payments of dividends to stockholders: 17Common (8,605,628) (8,205,605) (10,587,865)Preferred (35,295) (45,399) (50,492)Collection of subscriptions receivable and exerciseof stock options 16,473 776 5,485Interest paid (2,573,745) (2,456,763) (2,734,000)Net cash flows provided (used) in financing activities 2,197,903 (12,520,892) (10,172,009)NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS 1,802,031 (784,434) 47,555NET FOREIGN EXCHANGE DIFFERENCE ON CASH ANDCASH EQUIVALENTS (201,322) 74,494 (118,496)CASH AND CASH EQUIVALENTS AT BEGINNING OFTHE YEAR 5,159,046 5,868,986 5,939,927CASH AND CASH EQUIVALENTS AT END OF YEAR 28, 30 P=6,759,755 P=5,159,046 P=5,868,986See accompanying Notes to Consolidated Financial Statements.1. Corporate InformationGlobe Telecom, Inc. (hereafter referred to as “Globe Telecom”) is a stock corporation organized under the lawsof the Philippines, and enfranchised under Republic Act (RA) No. 7229 and its related laws to render any and alltypes of domestic and international telecommunications services. Globe Telecom is one of the leadingproviders of digital wireless communications services in the Philippines under the Globe Handyphone (GHP),Touch Mobile (TM) and Tattoo brands using a fully digital network. It also offers domestic and international longdistance communication services or carrier services. Globe Telecom’s principal executive office is located at5th Floor, Globe Telecom Plaza, Pioneer Highlands, Pioneer corner Madison Streets, Mandaluyong City,Metropolitan Manila, Philippines. Globe Telecom is listed in the Philippine Stock Exchange (PSE) and has beenincluded in the PSE composite index since September 17, 2001. Major stockholders of Globe Telecom includeAyala Corporation (AC), Singapore Telecom International Pte Ltd. (STI) and Asiacom Philippines, Inc. None ofthese companies exercise control over Globe Telecom.Globe Telecom owns 100% of Innove Communications, Inc. (Innove). Innove is a stock corporation organizedunder the laws of the Philippines and enfranchised under RA No. 7372 and its related laws to render any and alltypes of domestic and international telecommunications services. Innove holds a license to provide digitalwireless communication services in the Philippines. Innove also offers a broad range of broadband internet andwireline voice and data communication services, as well as domestic and international long distancecommunication services or carrier services. Innove also has a license to establish, install, operate and maintaina nationwide local exchange carrier (LEC) service, particularly integrated local telephone service with publicpayphone facilities and public calling stations, and to render and provide international and domestic carrier andleased line services.Globe Telecom owns 100% of G-Xchange, Inc. (GXI). GXI is a stock corporation organized under the laws ofthe Philippines and formed for the purpose of developing, designing, administering, managing and operatingsoftware applications and systems, including systems designed for the operations of bill payment and moneyremittance, payment and delivery facilities through various telecommunications systems operated bytelecommunications carriers in the Philippines and throughout the world and to supply software and hardwarefacilities for such purposes. GXI is registered with the Bangko Sentral ng Pilipinas (BSP) as a remittance agentand electronic money issuer. GXI handles the mobile payment and remittance service using Globe Telecom’snetwork as transport channel under the GCash brand. The service, which is integrated into the cellular servicesof Globe Telecom and Innove, enables easy and convenient person-to-person fund transfers via shortmessaging services (SMS) and allows Globe Telecom and Innove subscribers to easily and conveniently putcash into and get cash out of the GCash system.Globe Telecom acquired 100% of Entertainment Gateway Group Corporation (EGGC) and EGGstreme (HongKong) Limited (EHL) (collectively referred here as “EGG Group”) on June 26, 2008. EGG Group is engaged inthe development and creation of wireless products and services accessible through telephones or other forms ofcommunication devices. It also provides internet and mobile value added services, information technology andtechnical services including software development and related services. EGGC is registered with theDepartment of Transportation and Communication (DOTC) as a content provider. EHL was liquidated onFebruary 1, 2013 (see Note 31).Globe Telecom owns 100% of GTI Business Holdings, Inc. (GTI). The primary purpose of this company is toinvest, purchase, subscribe for or otherwise acquire and own, hold, sell or otherwise dispose of real andpersonal property of every kind and description, provided that GTI shall not engage in the business of an openendedinvestment company as defined in the Investment Company Act (Republic Act 2629). GTI wasincorporated on November 25, 2008. In July 2009, GTI incorporated its wholly owned subsidiary, GTICorporation (GTIC), a company organized under the General Corporation Law of the State of Delaware for thepurpose of engaging in any lawful act or activity for which corporations may be organized under the DelawareGeneral Corporation Law. GTIC has started commercial operations on April 1, 2011. In December 2011, GTIincorporated another wholly owned subsidiary, Globe Telecom HK Limited (GTIC HK), a limited companyorganized under the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). GTIC HK has startedcommercial operations on August 1, 2012.On March 28, 2012, Globe Telecom incorporated Kickstart Ventures, Inc. (Kickstart), a stock corporationorganized under the laws of the Philippines and formed for the purpose of investing in individual, corporate, orstart-up businesses, and to do research, technology development and commercializing of new businessventures. Kickstart has started commercial operations on March 29, 2012.142 143


Globe 2012 annual reportfinancial report2. Summary of Significant Accounting and Financial Reporting Policies2.1 Basis of Financial Statement PreparationThe accompanying consolidated financial statements of Globe Telecom, Inc. and Subsidiaries, collectivelyreferred to as the “Globe Group”, have been prepared under the historical cost convention method, except forderivative financial instruments and available-for-sale (AFS) investments that are measured at fair value.The consolidated financial statements of the Globe Group are presented in Philippine Peso (P=), GlobeTelecom’s functional currency, and rounded to the nearest thousands, except when otherwise indicated.On February 5, 2013, the Board of Directors (BOD) approved and authorized the release of the consolidatedfinancial statements of Globe Telecom, Inc. and Subsidiaries as of and for the years ended December 31, 2012,2011 and 2010.2.2 Statement of ComplianceThe consolidated financial statements of the Globe Group have been prepared in compliance with PhilippineFinancial Reporting Standards (PFRS).2.3 Basis of ConsolidationThe accompanying consolidated financial statements include the accounts of Globe Telecom and itssubsidiaries as of and for the years ended December 31, 2012, 2011 and 2010. The subsidiaries are as follows:Name of Subsidiary Place of Incorporation Principal ActivityPercentage ofOwnershipInnove Philippines Wireless and wireline voice and datacommunication services 100%GXI Philippines Software development for telecommunicationsapplications and money remittance services 100%EGG GroupEGGC Philippines Mobile content and application developmentservices 100%EHL Hong Kong Mobile content and application developmentservices 100%GTI Philippines Investment and holding company 100%GTIC United States Wireless and data communication services 100%GTIC HK Hong Kong Exclusive distributorship of Globe Telecomproducts in the international market (exceptthe United States) 100%Kickstart Philippines Investment, research, technology developmentand commercializing for business ventures 100%Subsidiaries are consolidated from the date on which control is transferred to the Globe Group and cease to beconsolidated from the date on which control is transferred out of the Globe Group. The financial statements ofthe subsidiaries are prepared for the same reporting year as Globe Telecom using uniform accounting policiesfor like transactions and other events in similar circumstances. All significant intercompany balances andtransactions, including intercompany profits and losses, were eliminated during consolidation in accordance withthe accounting policy on consolidation.2.4 Change in the Presentation of Outbound RevenuesBeginning January 1, 2012, the Globe Group voluntarily changed the presentation of its outbound revenues togross amounts before interconnect costs billed to the Globe Group in order to align its presentation with thepredominant global practice in the telecommunications industry. With this presentation, interconnect costs arepresented in a separate line item in the statement of comprehensive income. In prior years, outbound revenueswere presented net of the share of other carriers.The change was accounted for retrospectively, and accordingly, the Globe Group restated its comparativestatements of comprehensive income. The change has no impact on consolidated net income, earnings pershare, cash flows and statements of financial position. The table below shows the affected line items in ourfinancial information for the year ended December 31, 2011 and 2010:As restatedDecember 31, 2011 December 31, 2010As previouslypresented Change As restated(In Thousand Pesos)As previouslypresentedChangeRevenues P=77,764,964 P=67,811,301 P=9,953,663 P=72,742,090 P=62,554,689 P=10,187,401Expenses 68,612,584 58,658,921 9,953,663 62,805,207 52,617,806 10,187,4012.5 Changes in Accounting PoliciesThe accounting policies adopted are consistent with those of the previous financial year, except for the followingnew and amended Philippine Accounting Standards (PAS) and PFRS effective as of January 1, 2012. Exceptas otherwise indicated, the adoption of the new and amended Standards and Interpretations, did not have asignificant impact on the consolidated financial statements.PAS 12, Income Taxes, Deferred Tax: Recovery of Underlying AssetsThis Amendment to PAS 12 is effective for annual periods beginning on or after January 1, 2012. TheAmendment clarifies the determination of deferred tax on investment property measured at fair value. Theamendment introduces a rebuttable presumption that deferred tax on investment property measured usingthe fair value model in PAS 40, Investment Property, should be determined on the basis that its carryingamount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on nondepreciableassets that are measured using the revaluation model in PAS 16, Property, Plant andEquipment, always be measured on a sale basis of the asset. The Globe Group accounts for its propertyand equipment and investment properties at cost, thus, the Amendment does not have an effect to theGlobe Group.PFRS 7, Financial Instruments: Disclosures – Enhanced Derecognition Disclosure RequirementsThe Amendments to PFRS 7 are effective for annual periods beginning on or after July 1, 2011. Theamendments require additional disclosure about financial assets that have been transferred but notderecognized to enable the user of the entity’s financial statements to understand the relationship withthose assets that have not been derecognized and their associated liabilities. In addition, the amendmentsrequire disclosures about continuing involvement in derecognized assets to enable the user to evaluate thenature of, and risks associated with, the entity’s continuing involvement in those derecognized assets.2.6 Future Changes in Accounting PoliciesThe Globe Group will adopt the following new and amended standards enumerated below when these becomeeffective. Except as otherwise indicated, the Globe Group does not expect the adoption of these new andamended PAS and PFRS to have significant impact on the consolidated financial statements.Effective January 1, 2013Amendments to PAS 1, Financial Statement Presentation, Presentation of Items of Other ComprehensiveIncomeThe Amendment changed the grouping of items presented in other comprehensive income. Items thatcould be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, uponderecognition or settlement) would be presented separately from items that will never be reclassified.PFRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial LiabilitiesThe Amendments to PFRS 7 are to be retrospectively applied for annual periods beginning on or afterJanuary 1, 2013. These Amendments require an entity to disclose information about rights of set-off andrelated arrangements (such as collateral agreements). The new disclosures are required for all recognizedfinancial instruments that are set off in accordance with PAS 32, Financial Instruments: Presentation.These disclosures also apply to recognized financial instruments that are subject to an enforceable masternetting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance withPAS 32. The amendments require entities to disclose, in a tabular format unless another format is moreappropriate, certain minimum quantitative information.PFRS 10, Consolidated Financial StatementsPFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that addressesthe accounting for consolidated financial statements. It also includes the issues raised in SIC 12,Consolidation - Special Purpose Entities.144 145


Globe 2012 annual reportfinancial report2.7 Significant Accounting Policies2.7.1 Revenue RecognitionThe Globe Group provides mobile and wireline voice, data communication and broadband internet serviceswhich are both provided under postpaid and prepaid arrangements.The Globe Group assesses its revenue arrangements against specific criteria in order to determine if it isacting as principal or agent (see Note 3.1.5).Revenue is recognized when the delivery of the products or services has occurred and collectability isreasonably assured.Revenue is stated at amounts invoiced and accrued to customers, taking into consideration the bill cyclecut-off (for postpaid subscribers), the amount charged against preloaded airtime value (for prepaidsubscribers), switch-monitored traffic (for carriers and content providers) and excludes value-added tax(VAT) and overseas communication tax. Inbound traffic charges, net of discounts and outbound trafficcharges, are accrued based on actual volume of traffic monitored by Globe Group’s network and in thetraffic settlement system.2.7.1.1 Service Revenues2.7.1.1.1 SubscribersRevenues from subscribers principally consist of: (1) fixed monthly service fees for postpaidwireless, wireline voice, broadband internet, data subscribers and wireless prepaid subscriptionfees for promotional offers; (2) usage of airtime and toll fees for local, domestic and internationallong distance calls in excess of consumable fixed monthly service fees, less (a) bonus airtime andshort messaging services (SMS) on free Subscribers’ Identification Module (SIM), and (b) prepaidreload discounts, (3) revenues from value-added services (VAS) such as SMS in excess ofconsumable fixed monthly service fees (for postpaid) and free SMS allocations (for prepaid),multimedia messaging services (MMS), content and infotext services, net of payout to contentproviders; (4) mobile data services, (5) inbound revenues from other carriers which terminate theircalls to the Globe Group’s network less discounts; (6) revenues from international roamingservices; (7) usage of broadband and internet services in excess of fixed monthly service fees;and (8) one-time service connection fees (for wireline voice and data subscribers).Postpaid service arrangements include fixed monthly service fees, which are recognized over thesubscription period on a pro-rata basis. Monthly service fees billed in advance are initiallydeferred and recognized as revenues during the period when earned. Telecommunicationsservices provided to postpaid subscribers are billed throughout the month according to the billcycles of subscribers. As a result of bill cycle cut-off, monthly service revenues earned but not yetbilled at the end of the month are estimated and accrued. These estimates are based on actualusage less estimated consumable usage using historical ratio of consumable usage over billableusage.Proceeds from over-the-air reloading channels and the sale of prepaid cards are deferred andshown as “Unearned revenues” in the consolidated statements of financial position. Revenue isrecognized upon actual usage of airtime value net of discounts on promotional calls and net of freeairtime value or SMS and bonus reloads. Unused load value is recognized as revenue uponexpiration.The Globe Group offers loyalty programs which allow its subscribers to accumulate points whenthey purchase services from the Globe Group. The points can then be redeemed for free services,discounts and raffle coupons, subject to a minimum number of points being obtained. Theconsideration received or receivable is allocated between the sale of services and award credits.The portion of the consideration allocated to the award credits is accounted for as unearnedrevenues. This will be recognized as revenue upon the award redemption.2.7.1.1.2 TrafficInbound revenues refer to traffic originating from other telecommunications providers terminatingto the Globe Group’s network, while outbound charges represent traffic sent out or mobile contentdelivered using agreed termination rates and/or revenue sharing with other foreign and localcarriers and content providers. Adjustments are made to the accrued amount for discrepanciesbetween the traffic volume per Globe Group’s records and per records of the other carriers asthese are determined and/or mutually agreed upon by the parties. Outstanding inbound revenuesare shown as traffic settlements receivable under the “Receivables” account, while unpaidoutbound charges are shown as traffic settlements payable under the “Accounts payable andaccrued expenses” account in the consolidated statements of financial position unless a legal rightof offset exists in which case the net amount is shown either under “Receivables” or “Accountspayable and accrued expenses” account.2.7.1.1.3 GCashService revenues of GXI consist of SMS revenue arising from GCash transactions passing throughthe telecom networks of Globe Telecom. Service revenue also includes transaction fees anddiscounts earned from arrangements with partners and from remittances made through GCashpartners using the Globe Group’s facilities. The Globe Group earns service revenue from one-timeconnection fee received from new partners. Depending on the arrangement with partners andwhen the fee is nonconsumable, outright service revenue is recognized upon cash receipt.2.7.1.2 Nonservice RevenuesProceeds from sale of handsets, devices and accessories, tattoo prepaid kits, SIM packs, modems andaccessories, spare parts and supplies, callcards and others are recognized as revenue upon deliveryof the items and the related cost or net realizable value are presented as “Cost of sales” in theconsolidated statements of comprehensive income.2.7.1.3 OthersInterest income is recognized as it accrues using the effective interest rate method.Lease income from operating lease is recognized on a straight-line basis over the lease term.Dividend income is recognized when the Globe Group’s right to receive payment is established.2.7.2 Subscriber Acquisition and Retention CostsThe related costs incurred in connection with the acquisition of wireless and wireline voice subscribers arecharged against current operations, while the related acquisition costs of data communication andbroadband internet subscribers are capitalized. Subscriber acquisition costs primarily include commissions,handset, phonekit, modems, mobile internet kit subsidies, device subsidies and selling expenses.Subsidies represent the difference between the cost of handsets, devices and accessories, tattoo prepaidkits, SIM packs, modems and accessories, spare parts and supplies, callcards and others (included in the“Cost of sales” and “Impairment losses and others” account), and the price offered to the subscribers(included in the “Nonservice revenues” account). The data communication and broadband internet costsrepresent the acquisition cost of modems (included in the “Property and Equipment” account) which aredepreciated over a period of two years (included in the “depreciation and amortization” account). Retentioncosts for existing postpaid subscribers are in the form of free handsets, devices and bill credits. Retentioncosts are charged against current operations and included under the “General, selling and administrativeexpenses” account in the consolidated statements of comprehensive income upon delivery or when there isa contractual obligation to deliver. Bill credits are deducted from service revenues upon application againstqualifying subscriber bills.2.7.3 Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments thatare readily convertible to known amounts of cash with original maturities of three months or less from dateof placement and that are subject to an insignificant risk of change in value.2.7.4 Financial Instruments2.7.4.1 General2.7.4.1.1 Initial recognition and fair value measurementFinancial instruments are recognized in the Globe Group’s consolidated statements of financialposition when the Globe Group becomes a party to the contractual provisions of the instrument.Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized (regular way trades) onthe trade date, i.e., the date that the Globe Group commits to purchase or sell the asset.Financial instruments are recognized initially at fair value. Except for financial instruments at fairvalue through profit or loss (FVPL), the initial measurement of financial assets includes directlyattributable transaction costs.148 149


Globe 2012 annual reportfinancial reportThe Globe Group classifies its financial assets into the following categories: financial assets atFVPL, held-to-maturity (HTM) investments, AFS investments, and loans and receivables. TheGlobe Group classifies its financial liabilities into financial liabilities at FVPL and other financialliabilities. The classification depends on the purpose for which the investments were acquired andwhether they are quoted in an active market. Management determines the classification of itsinvestments at initial recognition and, where allowed and appropriate, re-evaluates suchdesignation every reporting date.The fair value for financial instruments traded in active markets at the end of reporting date isbased on their quoted market price or dealer price quotations (bid price for long positions and askprice for short positions), without any deduction for transaction costs. When current bid and askprices are not available, the price of the most recent transaction provides evidence of the currentfair value as long as there has not been a significant change in economic circumstances since thetime of the transaction.For all other financial instruments not listed in an active market, the fair value is determined byusing appropriate valuation techniques. Valuation techniques include net present valuetechniques, comparison to similar instruments for which market observable prices exist, optionpricing models, and other relevant valuation models. Any difference noted between the fair valueand the transaction price is treated as expense or income, unless it qualifies for recognition assome type of asset or liability.Where the transaction price in a non-active market is different from the fair value of otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Globe Group recognizes thedifference between the transaction price and fair value (a “Day 1” profit or loss) in profit or loss. Incases where no observable data is used, the difference between the transaction price and modelvalue is only recognized in profit or loss when the inputs become observable or when theinstrument is derecognized. For each transaction, the Globe Group determines the appropriatemethod of recognizing the “Day 1” profit or loss amount.2.7.4.1.2 Financial assets or financial liabilities at FVPLThis category consists of financial assets or financial liabilities that are held for trading ordesignated by management as FVPL on initial recognition. Financial assets or financial liabilitiesare classified as held for sale if they are acquired for the purpose of selling or repurchasing in thenear term. Derivatives, including separated embedded derivatives, are also classified as held fortrading, unless they are designated as effective hedging instruments as defined by PAS 39.Financial assets or financial liabilities at FVPL are recorded in the consolidated statements offinancial position at fair value, with changes in fair value being recorded in profit or loss. Interestearned or incurred is recorded as “Interest income or expense”, respectively, while dividendincome is recorded when the right to receive payment has been established. Both are recorded inprofit or loss.Financial assets or financial liabilities are classified in this category as designated by managementon initial recognition when any of the following criteria are met:the designation eliminates or significantly reduces the inconsistent treatment that wouldotherwise arise from measuring the assets or liabilities or recognizing gains or losses on adifferent basis; orthe assets and liabilities are part of a group of financial assets, financial liabilities or bothwhich are managed and their performance are evaluated on a fair value basis in accordancewith a documented risk management or investment strategy; orthe financial instrument contains an embedded derivative, unless the embedded derivativedoes not significantly modify the cash flows or it is clear, with little or no analysis, that it wouldnot be separately recorded.The Globe Group evaluates its financial assets held for trading, other than derivatives, todetermine whether the intention to sell them in the near term is still appropriate. When in rarecircumstances the Globe Group is unable to trade these financial assets due to inactive marketsand management’s intention to sell them in the foreseeable future significantly changes, the GlobeGroup may elect to reclassify these financial assets. The reclassification to loans and receivables,AFS or HTM depends on the nature of the asset. This evaluation does not affect any financialassets designated at FVPL using the fair value option at designation because these instrumentscannot be reclassified after initial recognition.Derivatives embedded in host contracts are accounted for as separate derivatives and recorded atfair value if their economic characteristics and risks are not closely related to those of the hostcontracts and the host contracts are not held for trading or designated at fair value though profit orloss. These embedded derivatives are measured at fair value with changes in fair valuerecognised in profit or loss. Reassessment only occurs if there is a change in the terms of thecontract that significantly modifies the cash flows that would otherwise be required.2.7.4.1.3 HTM investmentsHTM investments are quoted non-derivative financial assets with fixed or determinable paymentsand fixed maturities for which the Globe Group’s management has the positive intention and abilityto hold to maturity. Where the Globe Group sells other than an insignificant amount of HTMinvestments, the entire category would be tainted and reclassified as AFS investments. After initialmeasurement, HTM investments are subsequently measured at amortized cost using the effectiveinterest rate method, less any impairment losses. Amortized cost is calculated by taking intoaccount any discount or premium on acquisition and fees that are an integral part of the effectiveinterest rate. Gains and losses are recognized in profit or loss when the HTM investments arederecognized or impaired, as well as through the amortization process. The amortization isincluded in “Interest income” in the consolidated statements of comprehensive income. Theeffects of restatement of foreign currency-denominated HTM investments are recognized in profitor loss.There are no outstanding HTM investments as of December 31, 2012, 2011 and 2010.2.7.4.1.4 Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. They are not entered into with the intention of immediate orshort-term resale and are not classified as financial assets held for trading, designated as AFSinvestments or designated at FVPL.This accounting policy relates to the consolidated statements of financial position caption“Receivables”, which arise primarily from subscriber and traffic revenues and other types ofreceivables, “Short-term investments”, which arise primarily from unquoted debt securities, andother nontrade receivables included under “Prepayments and other current assets” and loansreceivables included under “Other noncurrent assets”.Receivables are recognized initially at fair value. After initial measurement, receivables aresubsequently measured at amortized cost using the effective interest rate method, less anyallowance for impairment losses. Amortized cost is calculated by taking into account any discountor premium on the issue and fees that are an integral part of the effective interest rate.Penalties, termination fees and surcharges on past due accounts of postpaid subscribers arerecognized as revenues upon collection. The losses arising from impairment of receivables arerecognized in the “Impairment losses and others” account in the consolidated statements ofcomprehensive income. The level of allowance for impairment losses is evaluated bymanagement on the basis of factors that affect the collectability of accounts (see accounting policyon 2.7.4.2 Impairment of Financial Assets).Short-term investments, other nontrade receivables and loans receivable are recognized initially atfair value, which normally pertains to the consideration paid. Similar to receivables, subsequent toinitial recognition, short-term investments, other nontrade receivables and loans receivables aremeasured at amortized cost using the effective interest rate method, less any allowance forimpairment losses.2.7.4.1.5 AFS investmentsAFS investments are those investments which are designated as such or do not qualify to beclassified or designated as at FVPL, HTM investments or loans and receivables. They arepurchased and held indefinitely, and may be sold in response to liquidity requirements or changesin market conditions. They include equity investments.After initial measurement, AFS investments are subsequently measured at fair value. Interestearned on holding AFS investments are reported as interest income using the effective interestrate. The unrealized gains and losses arising from the fair value changes of AFS investments are150 151


Globe 2012 annual reportfinancial reportincluded in other comprehensive income and are reported as “Other reserves” (net of tax whereapplicable) in the equity section of the consolidated statements of financial position. When theinvestment is disposed of, the cumulative gains or losses previously recognized in equity isrecognized in profit or loss.When the fair value of AFS investments cannot be measured reliably because of lack of reliableestimates of future cash flows and discount rates necessary to calculate the fair value of unquotedequity instruments, these investments are carried at cost, less any allowance for impairmentlosses. Dividends earned on holding AFS investments are recognized in profit or loss when theright to receive payment has been established.The losses arising from impairment of such investments are recognized as “Impairment lossesand others” in the consolidated statements of comprehensive income.2.7.4.1.6 Other financial liabilitiesIssued financial instruments or their components, which are not designated at FVPL are classifiedas other financial liabilities where the substance of the contractual arrangement results in theGlobe Group having an obligation either to deliver cash or another financial asset to the holder, orto satisfy the obligation other than by the exchange of a fixed amount of cash or another financialasset for a fixed number of own equity shares. The components of issued financial instrumentsthat contain both liability and equity elements are accounted for separately, with the equitycomponent being assigned the residual amount after deducting from the instrument as a whole theamount separately determined as the fair value of the liability component on the date of issue.After initial measurement, other financial liabilities are subsequently measured at amortized costusing the effective interest rate method. Amortized cost is calculated by taking into account anydiscount or premium on the issue and fees that are an integral part of the effective interest rate.Any effects of restatement of foreign currency-denominated liabilities are recognized in profit orloss.This accounting policy applies primarily to the Globe Group’s debt, accounts payable and otherobligations that meet the above definition (other than liabilities covered by other accountingstandards, such as income tax payable).2.7.4.1.7 Derivative Instruments2.7.4.1.7.1 GeneralThe Globe Group enters into short-term deliverable and nondeliverable currency forwardcontracts to manage its currency exchange exposure related to short-term foreign currencydenominatedmonetary assets and liabilities and foreign currency linked revenues.The Globe Group also enters into long-term currency and interest rate swap contracts tomanage its foreign currency and interest rate exposures arising from its long-term loan. Suchswap contracts are sometimes entered into in combination with options.2.7.4.1.7.2 Recognition and measurementDerivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value. Derivativesare carried as financial assets when the fair value is positive and as financial liabilities whenthe fair value is negative. The method of recognizing the resulting gain or loss depends onwhether the derivative is designated as a hedge of an identified risk and qualifies for hedgeaccounting treatment. The objective of hedge accounting is to match the impact of thehedged item and the hedging instrument in profit or loss. To qualify for hedge accounting, thehedging relationship must comply with strict requirements such as the designation of thederivative as a hedge of an identified risk exposure, hedge documentation, probability ofoccurrence of the forecasted transaction in a cash flow hedge, assessment (both prospectiveand retrospective bases) and measurement of hedge effectiveness, and reliability of themeasurement bases of the derivative instruments.Upon inception of the hedge, the Globe Group documents the relationship between thehedging instrument and the hedged item, its risk management objective and strategy forundertaking various hedge transactions, and the details of the hedging instrument and thehedged item. The Globe Group also documents its hedge effectiveness assessmentmethodology, both at the hedge inception and on an ongoing basis, as to whether thederivatives that are used in hedging transactions are highly effective in offsetting changes infair values or cash flows of hedged items.Hedge effectiveness is likewise measured, with any ineffectiveness being reportedimmediately in profit or loss.2.7.4.1.7.3 Types of HedgesThe Globe Group designates derivatives which qualify as accounting hedges as either: (a) ahedge of the fair value of a recognized fixed rate asset, liability or unrecognized firmcommitment (fair value hedge); or (b) a hedge of the cash flow variability of recognizedfloating rate asset and liability or forecasted sales transaction (cash flow hedge).Fair Value HedgesFair value hedges are hedges of the exposure to variability in the fair value of recognizedassets, liabilities or unrecognized firm commitments. The gain or loss on a derivativeinstrument designated and qualifying as a fair value hedge, as well as the offsetting loss orgain on the hedged item attributable to the hedged risk, are recognized in profit or loss in thesame accounting period. Hedge effectiveness is determined based on the hedge ratio of thefair value changes of the hedging instrument and the underlying hedged item. When thehedge ceases to be highly effective, hedge accounting is discontinued.As of December 31, 2012, 2011 and 2010, there were no derivatives designated andaccounted for as fair value hedges.Cash Flow HedgesThe Globe Group designates as cash flow hedges the following derivatives: (a) interest rateswaps as cash flow hedge of the interest rate risk of a floating rate obligation, and (b) certainforeign exchange forward contracts as cash flow hedge of expected United States Dollar(USD) revenues.A cash flow hedge is a hedge of the exposure to variability in future cash flows related to arecognized asset, liability or a forecasted sales transaction. Changes in the fair value of ahedging instrument that qualifies as a highly effective cash flow hedge are recognized in“Other reserves,” which is a component of equity. Any hedge ineffectiveness is immediatelyrecognized in profit or loss.If the hedged cash flow results in the recognition of a nonfinancial asset or liability, gains andlosses previously recognized directly in equity are transferred from equity and included in theinitial measurement of the cost or carrying value of the asset or liability. Otherwise, for allother cash flow hedges, gains and losses initially recognized in equity are transferred fromequity to profit or loss in the same period or periods during which the hedged forecastedtransaction or recognized asset or liability affect earnings.Hedge accounting is discontinued prospectively when the hedge ceases to be highly effective.When hedge accounting is discontinued, the cumulative gains or losses on the hedginginstrument that has been recognized in OCI is retained in “Other reserves” until the hedgedtransaction impacts profit or loss. When the forecasted transaction is no longer expected tooccur, any net cumulative gains or losses previously recognized in “Other reserves” isimmediately recycled in profit or loss.For cash flow hedges of USD revenues, the effective portion of the hedge transaction comingfrom the fair value changes of the currency forwards are subsequently recycled from equity toprofit or loss and is presented as part of the US dollar-based revenues upon consummation ofthe transaction or when the hedge become ineffective.2.7.4.1.7.4 Other Derivative Instruments Not Accounted for as Accounting HedgesCertain freestanding derivative instruments that provide economic hedges under the GlobeGroup’s policies either do not qualify for hedge accounting or are not designated asaccounting hedges. Changes in the fair values of derivative instruments not designated ashedges are recognized immediately in profit or loss. For bifurcated embedded derivatives infinancial and nonfinancial contracts that are not designated or do not qualify as hedges,changes in the fair values of such transactions are recognized in profit or loss.2.7.4.1.8 OffsettingFinancial assets and financial liabilities are offset and the net amount is reported in theconsolidated statements of financial position if, and only if, there is a currently enforceable legalright to offset the recognized amounts and there is an intention to settle on a net basis, or torealize the asset and settle the liability simultaneously. This is not generally the case with master152 153


Globe 2012 annual reportfinancial reportnetting agreements; thus, the related assets and liabilities are presented gross in the consolidatedstatements of financial position.2.7.4.2 Impairment of Financial AssetsThe Globe Group assesses at end of the reporting date whether a financial asset or group of financialassets is impaired.2.7.4.2.1 Assets carried at amortized costIf there is objective evidence that an impairment loss on financial assets carried at amortized cost(e.g., receivables) has been incurred, the amount of the loss is measured as the differencebetween the asset’s carrying amount and the present value of estimated future cash flowsdiscounted at the asset’s original effective interest rate. Time value is generally not consideredwhen the effect of discounting is not material. The carrying amount of the asset is reducedthrough the use of an allowance account. The amount of the loss is to be recognized in profit orloss.The Globe Group first assesses whether objective evidence of impairment exists individually forfinancial assets that are individually significant, and individually or collectively for financial assetsthat are not individually significant. If it is determined that no objective evidence of impairmentexists for an individually assessed financial asset, whether significant or not, the asset is includedin a group of financial assets with similar credit risk characteristics and that group of financialassets is collectively assessed for impairment.Assets that are individually assessed for impairment and for which an impairment loss is orcontinues to be recognized are not included in a collective assessment of impairment.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reversed. Any subsequent reversal of an impairment loss isrecognized in profit or loss to the extent that the carrying value of the asset does not exceed whatshould have been its amortized cost at the reversal date.With respect to receivables, the Globe Group performs a regular review of the risk profile ofaccounts, designed to identify accounts with objective evidence of impairment and provide theappropriate allowance for impairment losses. The review is accomplished using a combination ofspecific and collective assessment approaches, with the impairment losses being determined foreach risk grouping identified by the Globe Group.2.7.4.2.1.1 SubscribersManagement regularly reviews its portfolio and assesses if there are accounts requiringspecific provisioning based on objective evidence of high default probability. Observable dataindicating high impairment probability could be deterioration in payment status, declaration ofbankruptcy or national/local economic indicators that might affect payment capacity ofaccounts.Full allowance for impairment losses, net of average recoveries, is provided for receivablesfrom permanently disconnected wireless, wireline and broadband subscribers. Permanentdisconnections are made after a series of collection steps following nonpayment by postpaidsubscribers. Such permanent disconnections generally occur within a predetermined periodfrom due date.Impairment losses are applied to active wireless, wireline and broadband accounts specificallyidentified to be doubtful of collection where there is information on financial incapacity afterconsidering the other contractual obligations between Globe Group and the subscriber.Allowance is applied regardless of age bucket of identified accounts.Application of impairment losses to receivables, net of receivables with applied specific loss,is also determined based on the results of net flow to permanent disconnection methodology.For wireless, net flow tables are derived from account-level monitoring of subscriber accountsbetween different age brackets depending on the defined permanent disconnection timeline,from current to 150 days past due and up. The net flow to permanent disconnectionmethodology relies on the historical data of net flow tables to establish a percentage (“netflow rate”) of subscriber receivables that are current or in any state of delinquency as ofreporting date that will eventually result to permanent disconnection. The allowance forimpairment losses is then computed based on the outstanding balances of the receivables atthe end of reporting date and the net flow rates determined for the current and eachdelinquency bucket. Full allowance is provided for receivables of active consumer accounts inthe 150 days past due and up bucket.For active wireline voice and broadband subscribers, the allowance for impairment loss is alsodetermined based on the results of net flow rate to permanent disconnection computed fromaccount-level monitoring of accounts from current to 90 days past due and up age bucketexcept for consumer where impairment rate applied at 90 days past due and up bucket is fullallowance net of average recoveries prior to permanent disconnection.2.7.4.2.1.2 TrafficAs per PAS 39, impairment provision is recognized in the light of actual losses incurred by theGlobe Group as a result of one or more events that occurred after the initial recognition of theasset (a “loss event”) and that loss event (or events) has an impact on the estimated futurecash flows of the financial asset or group of assets that can be reliably estimated.For traffic receivables, impairment losses are made for accounts specifically identified to bedoubtful of collection regardless of the age of the account. For accounts that have noestablished recovery rate yet, full provision for ten months and above traffic receivable isbeing applied. For receivable balances that appear doubtful of collection, allowance isprovided after review of the status of settlement with each carrier and roaming partner, takinginto consideration normal payment cycles, recovery experience and credit history of thecounterparties.2.7.4.2.1.3 Other receivablesOther receivables from dealers, credit card companies and other parties are provided withallowance for impairment losses if specifically identified to be doubtful of collection regardlessof the age of the account.2.7.4.2.2 AFS investments carried at costIf there is objective evidence that an impairment loss has been incurred on an unquoted equityinstrument that is not carried at fair value because its fair value cannot be reliably measured, or ona derivative asset that is linked to and must be settled by delivery of such unquoted equityinstrument, the amount of the loss is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows discounted at the current market rateof return for a similar financial asset. The carrying amount of the asset is reduced through the useof an allowance account.2.7.4.2.3 AFS investments carried at fair valueIf an AFS investment carried at fair value is impaired, an amount comprising the differencebetween its cost (net of any principal repayment and amortization) and its current fair value, lessany impairment loss previously recognized in profit or loss, is transferred from equity to profit orloss. Reversals of impairment losses in respect of equity instruments classified as AFS are notrecognized in profit or loss. Reversals of impairment losses on debt instruments are made throughprofit or loss if the increase in fair value of the instrument can be objectively related to an eventoccurring after the impairment loss was recognized in profit or loss.2.7.4.3 Derecognition of Financial Instruments2.7.4.3.1 Financial AssetA financial asset (or, where applicable a part of a financial asset or part of a group of financialassets) is derecognized where:the rights to receive cash flows from the asset have expired;the Globe Group retains the right to receive cash flows from the asset, but has assumed anobligation to pay them in full without material delay to a third party under a “pass-through”arrangement; orthe Globe Group has transferred its rights to receive cash flows from the asset and either (a)has transferred substantially all the risks and rewards of ownership or (b) has neithertransferred nor retained the risk and rewards of the asset but has transferred the control of theasset.Where the Globe Group has transferred its rights to receive cash flows from an asset and hasneither transferred nor retained substantially all the risks and rewards of the asset nor transferred154 155


Globe 2012 annual reportfinancial reportcontrol of the asset, the asset is recognized to the extent of the Globe Group’s continuinginvolvement that takes the form of a guarantee over the transferred asset, which is measured atthe lower of the original carrying amount of the asset and the maximum amount of considerationthat the Globe Group could be required to pay.2.7.4.3.2 Financial LiabilityA financial liability is derecognized when the obligation under the liability is discharged orcancelled or has expired. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liability andthe recognition of a new liability, and the difference in the respective carrying amounts isrecognized in profit or loss.2.7.5 Inventories and SuppliesInventories and supplies are stated at the lower of cost or net realizable value (NRV). NRV for handsets,modems, devices and accessories is the selling price in the ordinary course of business less direct costs tosell; while NRV for SIM packs, call cards, spare parts and supplies consists of the related replacementcosts. In determining the NRV, the Globe Group considers any adjustment necessary for obsolescence,which is generally provided 80% for non-moving items after a certain period. Cost is determined using themoving average method.2.7.6 Non-current Assets Held for SaleNon-current assets classified as held for sale are measured at the lower of carrying amount and fair valueless cost to sell. Non-current assets (and the related liabilities) are classified as held for sale if theircarrying amounts will be recovered through a sale transaction rather than through continuing use. Thiscondition is regarded as met only when the sale is highly probable and the asset is available for immediatesale in its present condition.Events or circumstances may extend the period to complete the sale beyond one year. An extension of theperiod required to complete a sale does not preclude an asset from being classified as held for sale if thedelay is caused by events or circumstances beyond the entity's control and there is sufficient evidence thatthe entity remains committed to its plan to sell the asset.Items of property and equipment and intangible assets once classified as held for sale are notdepreciated/amortized.2.7.7 Property and EquipmentProperty and equipment, except land, are carried at cost less accumulated depreciation, amortization andimpairment losses. Land is stated at cost less any impairment losses.The initial cost of an item of property and equipment includes its purchase price and any cost attributable inbringing the property and equipment to its intended location and working condition. Cost also includes: (a)interest and other financing charges on borrowed funds specifically used to finance the acquisition ofproperty and equipment to the extent incurred during the period of installation and construction; and (b)asset retirement obligations (ARO) specifically on property and equipment installed/constructed on leasedproperties.Expenditures incurred after the property and equipment have been put into operation, such as repairs andmaintenance, are normally charged to income in the period when the costs are incurred. In situationswhere it can be clearly demonstrated that the expenditures have resulted in an increase in the futureeconomic benefits expected to be obtained from the use of an item of property and equipment beyond itsoriginally assessed standard of performance, the expenditures are capitalized as additional costs ofproperty and equipment.Subsequent costs are capitalized as part of property and equipment only when it is probable that futureeconomic benefits associated with the item will flow to the Globe Group and the cost of the item can bemeasured reliably. All other repairs and maintenance are charged against current operations as incurred.Assets under construction (AUC) are carried at cost and transferred to the related property and equipmentaccount when the construction or installation, and the related activities necessary to prepare the propertyand equipment for their intended use are complete, and the property and equipment are ready for service.Depreciation and amortization of property and equipment commences once the property and equipment areavailable for use and computed using the straight-line method over the estimated useful lives (EUL) of theproperty and equipment.Leasehold improvements are amortized over the shorter of their EUL or the corresponding lease terms.The EUL of property and equipment are reviewed annually based on expected asset utilization as anchoredon business plans and strategies that also consider expected future technological developments andmarket behavior to ensure that the period of depreciation and amortization is consistent with the expectedpattern of economic benefits from items of property and equipment.When property and equipment is retired or otherwise disposed of, the cost and the related accumulateddepreciation, amortization and impairment losses are removed from the accounts. Any resulting gain orloss is credited to or charged against current operations.2.7.8 AROThe Globe Group is legally required under various contracts to restore leased property to its originalcondition and to bear the cost of dismantling and deinstallation at the end of the contract period. The GlobeGroup recognizes the present value of these obligations and capitalizes these costs as part of the carryingvalue of the related property and equipment accounts, and are depreciated on a straight-line basis over theuseful life of the related property and equipment or the contract period, whichever is shorter.The amount of ARO is recognized at present value and the related accretion is recognized as interestexpense.2.7.9 Investment PropertyInvestment property is initially measured at cost, including transaction costs. Subsequent to initialrecognition, investment property is carried at cost less accumulated depreciation and any impairmentlosses.Expenditures incurred after the investment property has been put in operation, such as repairs andmaintenance costs, are normally charged to profit or loss in the period in which the costs are incurred.Depreciation of investment property is computed using the straight-line method over its useful life. The EULand the depreciation method are reviewed periodically to ensure that the period and method of depreciationare consistent with the expected pattern of economic benefits from items of investment properties.Transfers are made to investment property, when, and only when, there is a change in use, evidenced bythe end of the owner occupation, commencement of an operating lease to another party or completion ofconstruction or development. Transfers are made from investment property when, and only when, there isa change in use, evidenced by the commencement of owner occupation or commencement of developmentwith the intention to sell.Investment property is derecognized when it has either been disposed of or permanently withdrawn fromuse and no future benefit is expected from its disposal.Any gain or loss on derecognition of an investment property is recognized in profit or loss in the period ofderecognition.2.7.10 Intangible AssetsIntangible assets consist of: 1) costs incurred to acquire application software (not an integral part of itsrelated hardware or equipment) and telecommunications equipment software licenses; and 2) intangibleassets identified to exist during the acquisition of EGG Group for its existing customer contracts. Costsdirectly associated with the development of identifiable software that generate expected future benefits tothe Globe Group are recognized as intangible assets. All other costs of developing and maintainingsoftware programs are recognized as expense when incurred.Subsequent to initial recognition, intangible assets are measured at cost less accumulated amortization andany impairment losses. The EUL of intangible assets with finite lives are assessed at the individual assetlevel. Intangible assets with finite lives are amortized on a straight-line basis over their useful lives. Theperiods and method of amortization for intangible assets with finite useful lives are reviewed annually ormore frequently when an indicator of impairment exists.A gain or loss arising from derecognition of an intangible asset is measured as the difference between thenet disposal proceeds and the carrying amount of the asset and is recognized in the consolidatedstatements of comprehensive income when the asset is derecognized.2.7.11 Business Combinations and GoodwillBusiness combinations are accounted for using the purchase method. The cost of an acquisition is156 157


Globe 2012 annual reportfinancial reportmeasured as the aggregate of the consideration transferred, measured at acquisition date fair value and theamount of any non-controlling interest in the acquiree. For each business combination, the Globe Groupelects whether it measures the non-controlling interest in the acquiree either at fair value or at theproportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed andincluded in administrative expenses.When the Globe Group acquires a business, it assesses the financial assets and financial liabilitiesassumed for appropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree.If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previouslyheld equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.Any contingent consideration to be transferred by the acquirer will be recognized at fair value at theacquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to bean asset or liability will be recognized in accordance with PAS 39 either in profit or loss or as a change toOCI. If the contingent consideration is classified as equity, it will not be remeasured. Subsequentsettlement is accounted for within equity. In instances where the contingent consideration does not fallwithin the scope of PAS 39, it is measured in accordance with the appropriate PFRS.Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferredand the amount recognized for non-controlling interest over the net identifiable assets acquired andliabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiaryacquired, the difference is recognized in profit or loss.After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For thepurpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,allocated to each of the Globe Group’s cash-generating units (CGUs) that are expected to benefit from thecombination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwillassociated with the operation disposed of is included in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance ismeasured based on the relative values of the operation disposed of and the portion of the CGU retained.2.7.12 Investments in Joint VenturesInvestments in joint ventures (JV) classified as jointly controlled entities, are accounted for under the equitymethod, less any impairment losses. A JV is an entity, not being a subsidiary nor an associate, in which theGlobe Group exercises joint control together with one or more venturers.Under the equity method, the investments in JV are carried in the consolidated statements of financialposition at cost plus post-acquisition changes in the Globe Group’s share in net assets of the JV, less anyallowance for impairment losses. The profit or loss includes Globe Group’s share in the results ofoperations of its JV. Where there has been a change recognized directly in the JV’s equity, the GlobeGroup recognizes its share of any changes and discloses this, when applicable, in other OCI.2.7.13 Impairment of Nonfinancial AssetsFor nonfinancial assets, excluding goodwill, an assessment is made at the end of the reporting date todetermine whether there is any indication that an asset may be impaired, or whether there is any indicationthat an impairment loss previously recognized for an asset in prior periods may no longer exist or may havedecreased. If any such indication exists and when the carrying value of an asset exceeds its estimatedrecoverable amount, the asset or CGU to which the asset belongs is written down to its recoverableamount. The recoverable amount of an asset is the greater of its net selling price and value in use.Recoverable amounts are estimated for individual assets or investments or, if it is not possible, for the CGUto which the asset belongs. For impairment loss on specific assets or investments, the recoverable amountrepresents the net selling price.In assessing value in use, the estimated future cash flows are discounted to their present value using a pretaxdiscount rate that reflects current market assessments of the time value of money and the risks specificto the asset.An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount.An impairment loss is charged against operations in the year in which it arises. A previously recognizedimpairment loss is reversed only if there has been a change in estimate used to determine the recoverableamount of an asset, however, not to an amount higher than the carrying amount that would have beendetermined (net of any accumulated depreciation and amortization for property and equipment, investmentproperty and intangible assets) had no impairment loss been recognized for the asset in prior years. Areversal of an impairment loss is credited to current operations.For assessing impairment of goodwill, a test for impairment is performed annually and when circumstancesindicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing therecoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverableamount of the CGU is less than their carrying amount, an impairment loss is recognized. Impairment lossesrelating to goodwill cannot be reversed in future periods.2.7.14 Income Tax2.7.14.1 Current TaxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expectedto be recovered from or paid to the tax authority. The tax rates and tax laws used to compute theamount are those that are enacted or substantively enacted as at the end of the reporting date.2.7.14.2 Deferred Income TaxDeferred income tax is provided using the balance sheet liability method on all temporary differences,with certain exceptions, at the end of the reporting date between the tax bases of assets and liabilitiesand their carrying amounts for financial reporting purposes.Deferred income tax liabilities are recognized for all taxable temporary differences, with certainexceptions. Deferred income tax assets are recognized for all deductible temporary differences, withcertain exceptions, and carryforward benefits of unused tax credits from excess minimum corporateincome tax (MCIT) over regular corporate income tax (RCIT) and net operating loss carryover(NOLCO) to the extent that it is probable that taxable income will be available against which thedeductible temporary differences and the carryforward benefits of unused MCIT and NOLCO can beused.Deferred income tax is not recognized when it arises from the initial recognition of an asset or liability ina transaction that is not a business combination and, at the time of transaction, affects neither theaccounting income nor taxable income or loss. Deferred income tax liabilities are not provided onnontaxable temporary differences associated with investments in JV.Deferred income tax relating to items recognized directly in equity or OCI is included in the relatedequity or OCI account and not in profit or loss.The carrying amounts of deferred income tax assets are reviewed every end of reporting date andreduced to the extent that it is no longer probable that sufficient taxable income will be available toallow all or part of the deferred income tax assets to be utilized.Deferred income tax assets and liabilities are offset, if a legally enforceable right exists to set offcurrent income tax assets against current income tax liabilities and the deferred income taxes relate tothe same taxable entity and the same taxation authority.Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply inthe year when the assets are realized or the liabilities are settled based on tax rates (and tax laws) thathave been enacted or substantively enacted as at the end of the reporting date.Movements in the deferred income tax assets and liabilities arising from changes in tax rates arecharged or credited to income for the period.2.7.15 ProvisionsProvisions are recognized when: (a) the Globe Group has a present obligation (legal or constructive) as aresult of a past event; (b) it is probable (i.e., more likely than not) that an outflow of resources embodyingeconomic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of theamount of the obligation. Provisions are reviewed every end of the reporting period and adjusted to reflectthe current best estimate. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessment of thetime value of money and, where appropriate, the risks specific to the liability. Where discounting is used,the increase in the provision due to the passage of time is recognized as interest expense under “Financingcosts” in consolidated statements of comprehensive income.158 159


Globe 2012 annual reportfinancial report2.7.16 Share-based Payment TransactionsCertain employees (including directors) of the Globe Group receive remuneration in the form of sharebasedpayment transactions, whereby employees render services in exchange for shares or rights overshares (“equity-settled transactions”) (see Note 18).The cost of equity-settled transactions with employees is measured by reference to the fair value at thedate at which they are granted. In valuing equity-settled transactions, vesting conditions, includingperformance conditions, other than market conditions (conditions linked to share prices), shall not be takeninto account when estimating the fair value of the shares or share options at the measurement date.Instead, vesting conditions are taken into account in estimating the number of equity instruments that willvest.The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increasein equity, over the period in which the service conditions are fulfilled, ending on the date on which therelevant employees become fully entitled to the award (‘vesting date’). The cumulative expenserecognized for equity-settled transactions at each reporting date until the vesting date reflects the extent towhich the vesting period has expired and the number of awards that, in the opinion of the management ofthe Globe Group at that date, based on the best available estimate of the number of equity instruments, willultimately vest.No expense is recognized for awards that do not ultimately vest, except for awards where vesting isconditional upon a market condition, which are treated as vesting irrespective of whether or not the marketcondition is satisfied, provided that all other performance conditions are satisfied.Where the terms of an equity-settled award are modified, as a minimum, an expense is recognized as if theterms had not been modified. In addition, an expense is recognized for any increase in the value of thetransaction as a result of the modification, measured at the date of modification.Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, andany expense not yet recognized for the award is recognized immediately. However, if a new award issubstituted for the cancelled award, and designated as a replacement award on the date that it is granted,the cancelled and new awards are treated as if they were a modification of the original award, as describedin the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilutionin the computation of earnings per share (EPS) (see Note 27).2.7.17 Capital StockCapital stock is recognized as issued when the stock is paid for or subscribed under a binding subscriptionagreement and is measured at par value. The transaction costs incurred as a necessary part of completingan equity transaction are accounted for as part of that transaction and are deducted from equity.2.7.18 Additional Paid-in CapitalAdditional paid-in capital includes any premium received in excess of par value on the issuance of capitalstock.2.7.19 Treasury StockTreasury stock is recorded at cost and is presented as a deduction from equity. When the shares areretired, the capital stock account is reduced by its par value and the excess of cost over par value uponretirement is debited to additional paid-in capital to the extent of the specific or average additional paid-incapital when the shares were issued and to retained earnings for the remaining balance.2.7.20 Other Comprehensive IncomeOCI are items of income and expense that are not recognized in the profit or loss for the year in accordancewith PFRS.2.7.21 Pension CostPension cost is actuarially determined using the projected unit credit method. This method reflects servicesrendered by employees up to the date of valuation and incorporates assumptions concerning employees’projected salaries. Actuarial valuations are conducted with sufficient regularity, with option to acceleratewhen significant changes to underlying assumptions occur. Pension cost includes current service cost,interest cost, expected return on any plan assets, actuarial gains and losses and the effect of anycurtailment or settlement.The net pension asset recognized by the Globe Group in respect of the defined benefit pension plan is thelower of: (a) the fair value of the plan assets less the present value of the defined benefit obligation at theend of the reporting period, together with adjustments for unrecognized actuarial gains or losses that shallbe recognized in later periods; or (b) the total of any cumulative unrecognized net actuarial losses and pastservice cost and the present value of any economic benefits available in the form of refunds from the planor reductions in future contributions to the plan. The defined benefit obligation is calculated annually by anindependent actuary using the projected unit credit method. The present value of the defined benefitobligation is determined by applying a single weighted average discount rate that reflects the estimatedtiming and amount of benefit payments.A portion of actuarial gains and losses is recognized as income or expense if the cumulative unrecognizedactuarial gains and losses at the end of the previous reporting period exceeded the greater of 10% of thepresent value of defined benefit obligation or 10% of the fair value of plan assets. These gains and lossesare recognized over the expected average remaining working lives of the employees participating in theplan.2.7.22 Borrowing CostsBorrowing costs are capitalized if these are directly attributable to the acquisition, construction or productionof a qualifying asset. Capitalization of borrowing costs commences when the activities for the asset’sintended use are in progress and expenditures and borrowing costs are being incurred. Borrowing costsare capitalized until the assets are ready for their intended use. These costs are amortized using thestraight-line method over the EUL of the related property and equipment. If the resulting carrying amount ofthe asset exceeds its recoverable amount, an impairment loss is recognized. Borrowing costs includeinterest charges and other related financing charges incurred in connection with the borrowing of funds, aswell as exchange differences arising from foreign currency borrowings used to finance these projects to theextent that they are regarded as an adjustment to interest costs. Premiums on long-term debt are includedunder the “Long-term debt” account in the consolidated statements of financial position and are amortizedusing the effective interest rate method.Other borrowing costs are recognized as expense in the period in which these are incurred.2.7.23 LeasesThe determination of whether an arrangement is, or contains a lease, is based on the substance of thearrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on theuse of a specific asset or assets and the arrangement conveys a right to use the asset. A reassessment ismade after inception of the lease only if one of the following applies:there is a change in contractual terms, other than a renewal or extension of the arrangement;a renewal option is exercised or an extension granted, unless that term of the renewal or extensionwas initially included in the lease term;there is a change in the determination of whether fulfillment is dependent on a specified asset; orthere is a substantial change to the asset.Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for any of the scenarios above, and at the date ofrenewal or extension period for the second scenario.2.7.23.1 Group as LesseeFinance leases, which transfer to the Globe Group substantially all the risks and benefits incidental toownership of the leased item, are capitalized at the inception of the lease at the fair value of the leasedproperty or, if lower, at the present value of the minimum lease payments and included in the “Propertyand equipment” account with the corresponding liability to the lessor included in the “Other long-termliabilities” account in the consolidated statements of financial position. Lease payments areapportioned between the finance charges and reduction of the lease liability so as to achieve aconstant rate of interest on the remaining balance of the liability. Finance charges are charged directlyas “Interest expense” in the consolidated statements of comprehensive income.Capitalized leased assets are depreciated over the shorter of the EUL of the assets and the respectivelease terms.Leases where the lessor retains substantially all the risks and benefits of ownership of the asset areclassified as operating leases. Operating lease payments are recognized as an expense in profit orloss on a straight-line basis over the lease term.2.7.23.2 Group as LessorFinance leases, where the Globe Group transfers substantially all the risk and benefits incidental toownership of the leased item to the lessee, are included in the consolidated statements of financialposition under “Prepayments and other current assets” account. A lease receivable is recognized160 161


Globe 2012 annual reportfinancial reportequivalent to the net investment (asset cost) in the lease. All income resulting from the receivable isincluded in the “Interest income” account in the consolidated statements of comprehensive income.Leases where the Globe Group does not transfer substantially all the risk and benefits of ownership ofthe assets are classified as operating leases. Initial direct costs incurred in negotiating operatingleases are added to the carrying amount of the leased asset and recognized over the lease term on thesame basis as the rental income. Contingent rents are recognized as revenue in the period in whichthey are earned.2.7.24 General, Selling and Administrative ExpensesGeneral, selling and administrative expenses, except for rent, are charged against current operations asincurred (see Note 2.7.23.1).2.7.25 Foreign Currency TransactionsThe functional and presentation currency of the Globe Group is the Philippine Peso, except for EHL andGTIC HK whose functional currency is the Hong Kong Dollar (HKD) and GTIC US whose functionalcurrency is the USD. Transactions in foreign currencies are initially recorded at the functional currency rateprevailing at the date of the transaction. Outstanding monetary assets and liabilities denominated in foreigncurrencies are retranslated at the functional currency rate of exchange ruling at the end of reporting period.Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated usingthe exchange rate as at the date of the initial transaction and are not subsequently restated. Nonmonetaryitems measured at fair value in a foreign currency are translated using the exchange rate at the date whenthe fair value was determined. All foreign exchange differences are taken to profit or loss, except where itrelates to equity securities where gains or losses are recognized directly in other OCI.As at the reporting date, the assets and liabilities of EHL, GTIC US and HK are translated into thepresentation currency of the Globe Group at the rate of exchange prevailing at the end of reporting periodand its profit or loss is translated at the monthly weighted average exchange rates during the year. Theexchange differences arising on the translation are taken directly to a separate component of equity under“Other reserves” account. Upon disposal of EHL, GTIC US and HK, the cumulative translation adjustmentsshall be recognized in profit or loss.2.7.26 EPSBasic EPS is computed by dividing net income attributable to common stock by the weighted averagenumber of common shares outstanding, after giving retroactive effect for any stock dividends, stock splits orreverse stock splits during the period.Diluted EPS is computed by dividing net income by the weighted average number of common sharesoutstanding during the period, after giving retroactive effect for any stock dividends, stock splits or reversestock splits during the period, and adjusted for the effect of dilutive options and dilutive convertible preferredshares. Outstanding stock options will have a dilutive effect under the treasury stock method only when theaverage market price of the underlying common share during the period exceeds the exercise price of theoption. If the required dividends to be declared on convertible preferred shares divided by the number ofequivalent common shares, assuming such shares are converted, would decrease the basic EPS, thensuch convertible preferred shares would be deemed dilutive. Where the effect of the assumed conversionof the preferred shares and the exercise of all outstanding options have anti-dilutive effect, basic and dilutedEPS are stated at the same amount.2.7.27 Operating SegmentThe Globe Group’s major operating business units are the basis upon which the Globe Group reports itsprimary segment information. The Globe Group’s business segments consist of: (1) mobile communicationservices; (2) wireline communication services; and (3) others. The Globe Group generally accounts forintersegment revenues and expenses at agreed transfer prices.2.7.28 ContingenciesContingent liabilities are not recognized in the consolidated financial statements. These are disclosedunless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assetsare not recognized in the consolidated financial statements but are disclosed when an inflow of economicbenefits is probable.2.7.29 Events after the Reporting PeriodAny post period-end event up to the date of approval of the BOD of the consolidated financial statementsthat provides additional information about the Globe Group’s position at the end of reporting period(adjusting event) is reflected in the consolidated financial statements. Any post period-end event that is notan adjusting event is disclosed in the consolidated financial statements when material.3. Management’s Significant Accounting Judgments and Use of EstimatesThe preparation of the accompanying consolidated financial statements in conformity with PFRS requiresmanagement to make estimates and assumptions that affect the amounts reported in the consolidated financialstatements and accompanying notes. The estimates and assumptions used in the accompanying consolidatedfinancial statements are based upon management’s evaluation of relevant facts and circumstances as of thedate of the consolidated financial statements. Actual results could differ from such estimates.Judgments and estimates are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances.3.1 Judgments3.1.1 Leases3.1.1.1 Operating lease commitments as lessorThe Group has entered into a lease agreements as a lessor. Critical judgment was exercised bymanagement to distinguish the lease agreement as either an operating or finance lease by looking atthe transfer or retention of significant risk and rewards of ownership of the properties covered by theagreements. The Group has determined that it retains all the significant risks and rewards ofownership of the properties and so accounts for the agreement as an operating lease(see Note 25.1.1).3.1.1.2 Operating lease commitments as lesseeThe Group has entered into various lease agreements as a lessee where it has determined that thelessors retain all the significant risks and rewards of ownership of the properties and, as such,accounts for the agreements as operating lease (see Note 25.1.1).3.1.1.3 Finance leaseThe Globe Group has entered into a finance lease agreement related to hardware infrastructure andinformation equipment. They have determined, based on the evaluation of the terms and conditions ofthe arrangement, that they bear substantially all the risks and rewards incidental to ownership of thesaid machineries and equipment and so account for the contracts as finance leases (see note 25.1.2).3.1.2 Fair value of financial instrumentsWhen the fair value of financial assets and financial liabilities recorded in the consolidated statement offinancial position cannot be derived from active markets, their fair value is determined using valuationtechniques including the discounted cash flow model. The inputs to these models are taken fromobservable markets where possible, but where this is not feasible, a degree of judgment is required inestablishing fair values. The judgments include considerations of inputs such as liquidity risk, credit riskand volatility. Changes in assumptions about these factors could affect the reported fair value of financialinstruments.3.1.3 Financial assets not quoted in an active marketThe Globe Group classifies financial assets by evaluating, among others, whether the asset is quoted or notin an active market. Included in the evaluation on whether a financial asset is quoted in an active market isthe determination on whether quoted prices are readily and regularly available, and whether those pricesrepresent actual and regularly occurring market transactions on an arm’s-length basis.3.1.4 Allocation of goodwill to cash-generating unitsThe Globe Group allocated the carrying amount of goodwill to the mobile content and applicationdevelopment services business CGU, for the Group believes that this CGU represents the lowest levelwithin the Globe Group at which the goodwill is monitored for internal management reporting purposes; andnot larger than an operating segment determined in accordance with PFRS 8.3.1.5 Determination of whether the Globe Group is acting as a principal or an agentThe Globe Group assesses its revenue arrangements against the following criteria to determine whether itis acting as a principal or an agent:whether the Globe Group has primary responsibility for providing the goods and services;162 163


Globe 2012 annual reportfinancial reportwhether the Globe Group has inventory risk;whether the Globe Group has discretion in establishing prices; and,whether the Globe Group bears the credit risk.If the Globe Group has determined it is acting as a principal, the Group recognizes revenue on a grossbasis, with the amount remitted to the other party being accounted for as part of costs and expenses.If the Globe Group has determined it is acting as an agent, only the net amount retained is recognized asrevenue.The Globe Group assessed its revenue arrangements and concluded that it is acting as a principal in somearrangements and as an agent in other arrangements.3.1.6 Provisions and ContingenciesGlobe Group is currently involved in various legal proceedings. The estimate of the probable costs for theresolution of these claims has been developed in consultation with internal and external counsel handlingGlobe Group’s defense in these matters and is based upon an analysis of potential results. Globe Groupcurrently does not believe that these proceedings will have a material adverse effect on the consolidatedstatements of financial position and results of operations. It is possible, however, that future results ofoperations could be materially affected by changes in the estimates or in the effectiveness of the strategiesrelating to these proceedings (see Note 26).3.1.7 Classification of Non-current Assets Held for SaleThe Globe Group classified certain non-current assets as held-for-sale in 2010. PFRS 5, NoncurrentAssets Held for Sale and Discontinued Operations, requires that the sale should be expected to qualify forrecognition as a completed sale within one year from the date of classification, with certain exceptions.Globe Group has determined that circumstances have occurred which will qualify as exception to the timingof the recognition of the sale.As of December 31, 2012, the Globe Group retained the classification of its non-current assets as held forsale, including the related liabilities. Globe Group expects no changes in the terms of agreement and onthe valuation as the considerations have already been fixed, and remains to be committed to its plan to sellthe assets. Globe Group expects that the sale will be fully executed within 2013 (see Note 25.4).3.2 Estimates3.2.1 Revenue recognitionThe Globe Group’s revenue recognition policies require management to make use of estimates andassumptions that may affect the reported amounts of revenues and receivables.The Group estimates the fair value of points awarded under its Loyalty programmes, which are within thescope of Philippine Interpretation IFRIC 13, Customer Loyalty Programmes, by applying estimationprocedures using historical data and trends. The points expected to be redeemed is estimated based onthe remaining points, the run-rate redemption by the subscribers and the points to peso conversion. As ofDecember 31, 2012, 2011 and 2010, the estimated liability for unredeemed points included in “Unearnedrevenues” amounted to P=244.25 million, P=21.71 million, and P=121.81 million, respectively.As a result of continuous improvements in the Globe Group’s estimation process, the Group recognized aone-time upward adjustment (included in the “Service revenues” account of the statements ofcomprehensive income) amounting to P=526.00 million in the fourth quarter of 2010, representing prepaidload credits that have either expired or have already been used up.3.2.2 Allowance for impairment losses on receivablesThe Globe Group maintains an allowance for impairment losses at a level considered adequate to providefor potential uncollectible receivables. The Globe Group performs a regular review of the age and status ofthese accounts, designed to identify accounts with objective evidence of impairment and provide theappropriate allowance for impairment losses. The review is accomplished using a combination of specificand collective assessment approaches, with the impairment losses being determined for each risk groupingidentified by the Globe Group. The amount and timing of recorded expenses for any period would differ ifthe Globe Group made different judgments or utilized different methodologies. An increase in allowance forimpairment losses would increase the recorded operating expenses and decrease current assets.Impairment losses on receivables for the years ended December 31, 2012, 2011 and 2010 amounted toP=1,377.32 million, P=1,599.97 million, and P=1,285.53 million, respectively (see Note 23). Receivables, net ofallowance for impairment losses, amounted to P=12,105.44 million, P=10,119.51 million, andP=8,374.12 million as of December 31, 2012, 2011 and 2010, respectively (see Note 4).3.2.3 Obsolescence and market declineThe Globe Group, in determining the NRV, considers any adjustment necessary for obsolescence which isgenerally provided 100% for nonmoving items after a certain period. The Globe Group adjusts the cost ofinventory to the recoverable value at a level considered adequate to reflect market decline in the value ofthe recorded inventories. The Globe Group reviews the classification of the inventories and generallyprovides adjustments for recoverable values of new, actively sold and slow-moving inventories by referenceto prevailing values of the same inventories in the market.The amount and timing of recorded expenses for any period would differ if different judgments were madeor different estimates were utilized. An increase in allowance for obsolescence and market decline wouldincrease recorded operating expenses and decrease current assets.Inventory obsolescence and market decline for the years ended December 31, 2012, 2011 and 2010amounted to P=170.68 million, P=237.92 million, and P=42.12 million, respectively (see Note 23).Inventories and supplies, net of allowances, amounted to P=2,076.18 million, P=1,911.19 million, andP=1,839.33 million as of December 31, 2012, 2011 and 2010, respectively (see Note 5).3.2.4 AROThe Globe Group is legally required under various contracts to restore leased property to its originalcondition and to bear the costs of dismantling and deinstallation at the end of the contract period. Thesecosts are accrued based on an in-house estimate, which incorporates estimates of asset retirement costsand interest rates. The Globe Group recognizes the present value of these obligations and capitalizes thepresent value of these costs as part of the balance of the related property and equipment accounts, whichare being depreciated and amortized on a straight-line basis over the EUL of the related asset or the leaseterm, whichever is shorter.The present value of dismantling costs is computed based on an average credit-adjusted risk-free rate of6.85%, 6.98%, and 9.27% in 2012, 2011 and 2010, respectively. Assumptions used to compute ARO arereviewed and updated annually.The amount and timing of recorded expenses for any period would differ if different judgments were madeor different estimates were utilized. An increase in ARO would increase recorded operating expenses andincrease noncurrent liabilities.The Globe Group updated its assumptions on timing of settlement and estimated cash outflows arising fromARO on its leased premises. As a result of the changes in estimates, the Globe group adjusted downwardits ARO liability (included under “Other long-term liabilities” account) by P=25.53 million, P=1.64 million, andP=64.45 million in 2012, 2011 and 2010 against the book value of the assets on leased premises(see Note 15).As of December 31, 2012, 2011 and 2010, ARO amounted to P=1,594.63 million, P=1,476.60 million, andP=1,341.53 million, respectively (see Note 15).3.2.5 EUL of property and equipment, investment property and intangible assetsGlobe Group reviews annually the EUL of these assets based on expected asset utilization as anchored onbusiness plans and strategies that also consider expected future technological developments and marketbehavior. It is possible that future results of operations could be materially affected by changes in theseestimates brought about by changes in the factors mentioned.A reduction in the EUL of property and equipment, investment property and intangible assets wouldincrease the recorded depreciation and amortization expense and decrease noncurrent assets.The EUL of property and equipment of the Globe Group are as follows:YearsTelecommunications equipment:Tower 20Switch 7 and 10Outside plant, cellsite structures and improvements 10-20Distribution dropwires and other wireline assets 2-10164 165


Globe 2012 annual reportfinancial reportCellular equipment and others 3-10Buildings 20Leasehold improvements5 years or lease term,whichever is shorterInvestments in cable systems 15Office equipment 3-5Transportation equipment 3-5The EUL of investment property is twenty (20) years.Intangible assets comprising of licenses and application software are amortized over the EUL of the relatedhardware or equipment ranging from three (3) to ten (10) years or life of the telecommunications equipmentwhere it is assigned. Customer contracts acquired during business combination are amortized over five (5)years.In 2012, 2011 and 2010, the Globe Group changed the EUL of certain wireless and wirelinetelecommunications equipment and licenses resulting from new information affecting the expectedutilization of these assets. The net effect of the change in EUL resulted in higher depreciation ofP=4,245.30 million, P=243.04 million, and P=119.03 million in 2012, 2011 and 2010, respectively.As of December 31, 2012, 2011 and 2010, the aggregate carrying value of property and equipment,investment property and intangible assets amounted to P=104,889.20 million, P=102,723.81 million, andP=104,972.70 million, respectively (see Notes 7, 8 and 9).3.2.6 Asset impairment3.2.6.1 Impairment of nonfinancial assets other than goodwillThe Globe Group assesses impairment of assets (property and equipment, investment property,intangible assets and investments in joint ventures) whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. The factors that the GlobeGroup considers important which could trigger an impairment review include the following:significant underperformance relative to expected historical or projected future operating results;significant changes in the manner of use of the acquired assets or the strategy for the overallbusiness; and,significant negative industry or economic trends.An impairment loss is recognized whenever the carrying amount of an asset or investment exceeds itsrecoverable amount. The recoverable amount is the higher of an asset’s net selling price and value inuse. The net selling price is the amount obtainable from the sale of an asset in an arm’s lengthtransaction, while value in use is the present value of estimated future cash flows expected to arisefrom the continuing use of an asset and from its disposal at the end of its useful life. Recoverableamounts are estimated for individual assets or investments or, if it is not possible, for the CGU to whichthe asset belongs.For impairment loss on specific assets or investments, the recoverable amount represents the netselling price.For the Globe Group, the CGU is the combined mobile and wireline asset groups of Globe Telecomand Innove. This asset grouping is predicated upon the requirement contained in Executive Order(EO) No.109 and Republic Act (RA) No.7925 requiring licensees of Cellular Mobile Telephone System(CMTS) and International Digital Gateway Facility (IGF) services to provide 400,000 and 300,000 LEClines, respectively, as a condition for the grant of such licenses.In determining the present value of estimated future cash flows expected to be generated from thecontinued use of the assets or holding of an investment, the Globe Group is required to makeestimates and assumptions that can materially affect the consolidated financial statements.The aggregate carrying value of property and equipment, investment property, intangible assets,and investments in joint ventures amounted to P=105,072.39 million, P=102,972.81 million, andP=105,169.71 million as of December 31, 2012, 2011 and 2010, respectively (see Notes 7, 8, 9 and 10).3.2.6.2 Impairment of goodwillThe Globe Group’s impairment test for goodwill is based on value in use calculations that use adiscounted cash flow model. The cash flows are derived from the budget for the next five years and donot include restructuring activities that the Group is not yet committed to or significant futureinvestments that will enhance the asset base of the CGU being tested. The recoverable amount ismost sensitive to the discount rate used for the discounted cash flow model as well, as the expectedfuture cash inflows and the growth rate used for extrapolation purposes. As of December 31, 2012,2011 and 2010, the carrying value of goodwill amounted to P=327.13 million (see Note 9).Goodwill acquired through business combination with EGG Group was allocated to the mobile contentand applications development services business CGU, which is part of the “Others” reporting segment(see Note 29).The recoverable amount of the CGU, which exceeds the carrying amount of the related goodwill byP=962.34 million, P=461.88 million, and P=165.30 million as of December 31, 2012, 2011 and 2010,respectively, has been determined based on value in use calculations using cash flow projections fromfinancial budgets covering a five-year period. The pretax discount rate applied to cash flow projectionswas 11% in 2012 and 2011 and 12% in 2010, and cash flows beyond the five-year period areextrapolated using a 3% long-term growth rate in 2012, 2011 and 2010.3.2.7 Deferred income tax assetsThe carrying amounts of deferred income tax assets are reviewed at each reporting date and reduced tothe extent that it is no longer probable that sufficient taxable income will be available to allow all or part ofthe deferred income tax assets to be utilized (see Note 24).As of December 31, 2012 and 2011, Innove, GXI and EGG Group has net deferred income tax assetsamounting to P=765.59 million and P=765.67 million, respectively, while as of December 31, 2010, Innove andEGG Group has net deferred income tax assets amounting to P=670.59 million.As of December 31, 2012, 2011 and 2010, Globe Telecom has net deferred income tax liabilities amountingto P=2,473.12 million, P=3,929.41 million, and P=4,620.49 million, respectively (see Note 24). Globe Telecomand Innove have no unrecognized deferred income tax assets as of December 31, 2012, 2011 and 2010.As of December 31, 2012 and 2011, GXI recognized deferred income tax assets from NOLCO amountingto P=15.01 million and P=1.01 million, respectively (see Note 24).As of December 31, 2010, Innove and EGG Group’s recognized deferred income tax assets from NOLCOamounted to P=13.50 million and MCIT amounted to P=0.95 million (see Note 24).3.2.8 Financial assets and financial liabilitiesGlobe Group carries certain financial assets and liabilities at fair value, which requires extensive use ofaccounting estimates and judgment. While significant components of fair value measurement weredetermined using verifiable objective evidence (i.e., foreign exchange rates, interest rates), the amount ofchanges in fair value would differ if the Globe Group utilized different valuation methodologies. Anychanges in fair value of these financial assets and financial liabilities would affect the consolidatedstatements of comprehensive income and consolidated statements of changes in equity.Financial assets comprising AFS investments and derivative assets carried at fair values as ofDecember 31, 2012, 2011 and 2010, amounted to P=141.87 million, P=109.09 million, and P=121.77 million,respectively, and financial liabilities comprising of derivative liabilities carried at fair values as ofDecember 31, 2012, 2011 and 2010, amounted to P=240.65 million, P=266.62 million, and P=245.87 million,respectively (see Note 28.11).3.2.9 Pension and other employee benefitsThe determination of the obligation and cost of pension is dependent on the selection of certainassumptions used in calculating such amounts. Those assumptions include, among others, discount rates,expected returns on plan assets and salary rates increase (see Note 18). In accordance with PAS 19,actual results that differ from the Globe Group’s assumptions, subject to the 10% corridor test, areaccumulated and amortized over future periods and therefore, generally affect the recognized expense andrecorded obligation in such future periods.As of December 31, 2012, 2011 and 2010, Globe Group has unrecognized net actuarial losses ofP=1,512.30 million, P=1,215.69 million, and P=781.01 million, respectively (see Note 18.2). As of the samedates, net pension asset amounted to P=671.08 million, P=872.10 million and P=950.52 million, respectively.166 167


Globe 2012 annual reportfinancial reportThe Globe Group also determines the cost of equity-settled transactions using assumptions on theappropriate pricing model. Significant assumptions for the cost of share-based payments include, amongothers, share price, exercise price, option life, expected dividend and expected volatility rate.Cost of share-based payments in 2012, 2011 and 2010 amounted to P=11.50 million, P=49.34 million andP=104.79 million, respectively (see Notes 16.5 and 18.1).The Globe Group also estimates other employee benefit obligations and expenses, including cost of paidleaves based on historical leave availments of employees, subject to the Globe Group’s policy. Theseestimates may vary depending on the future changes in salaries and actual experiences during the year.The accrued balance of other employee benefits (included in the “Accounts payable and accruedexpenses” account and in the “Other long-term liabilities” account in the consolidated statements offinancial position) as of December 31, 2012, 2011 and 2010 amounted to P=484.60 million, P=434.04 millionand P=406.14 million, respectively (see Notes 12 and 15).While the Globe Group believes that the assumptions are reasonable and appropriate, significantdifferences between actual experiences and assumptions may materially affect the cost of employeebenefits and related obligations.4. ReceivablesThis account consists of receivables from:Notes 2012 2011 2010(In Thousand Pesos)Subscribers 16, 28.2.2 P=11,508,305 P=10,245,268 P=8,038,451Traffic settlements - net 12, 16, 28.2.2 2,611,358 2,291,862 2,130,238Dealers 28.2.2 844,838 677,270 455,238Others 28.2.2 679,008 285,735 203,64015,643,509 13,500,135 10,827,567Less allowance for impairment losses:Subscribers 28.2.2 3,317,014 3,131,289 2,173,912Traffic settlements and others 28.2.2 221,058 249,341 279,5323,538,072 3,380,630 2,453,444P=12,105,437 P=10,119,505 P=8,374,123Subscriber receivables arise from wireless and wireline voice, data communications and broadband internetservices provided under postpaid arrangements.Amounts collected from wireless subscribers under prepaid arrangements are reported under “Unearnedrevenues” in the consolidated statements of financial position and recognized as revenues upon actual usage ofairtime value or upon expiration of the prepaid credit. The unearned revenues from these subscribers amountedto P=2,502.90 million, P=2,474.14 million and P=2,402.75 million as of December 31, 2012, 2011 and 2010,respectively.Traffic settlements receivable are presented net of traffic settlements payable from the same carrier amountingto P=3,503.52 million, P=3,838.82 million and P=4,099.08 million as of December 31, 2012, 2011 and 2010,respectively.Receivables are noninterest-bearing and are generally collectible in the short-term.5. Inventories and SuppliesThis account consists of:2012 2011 2010(In Thousand Pesos)At cost:Spare parts and supplies P=6,142 P=3,068 P=1,454SIM cards and SIM packs 29 20 –Handsets, devices and accessories – 1,931 98Modems and accessories – – 592,709Call cards and others 508 2,905 22,2446,679 7,924 616,505At NRV:Handsets, devices and accessories 1,139,463 1,016,844 518,145Modems and accessories 375,037 451,727 240,578Spare parts and supplies 246,103 273,911 298,331Tattoo 62,639 31,140 27,738SIM cards and SIM packs 36,160 55,930 42,928Call cards and others 210,095 73,714 95,1082,069,497 1,903,266 1,222,828P=2,076,176 P=1,911,190 P=1,839,333Inventories recognized as expense during the year amounting to P=7,849.04 million, P=6,142.34 million andP=4,281.08 million in 2012, 2011 and 2010, respectively, are included as part of “Cost of sales” and “Impairmentlosses and others” accounts (see Note 23) in the consolidated statements of comprehensive income. Aninsignificant amount is included under “General, selling and administrative expenses” as part of “Utilities,supplies and other administrative expenses” account (see Note 21).Cost of sales incurred consists of:2012 2011 2010(In Thousand Pesos)Handsets, devices and accessories P=6,565,510 P=4,928,921 P=3,185,163Tattoo 561,310 545,354 597,430SIM cards and SIM packs 245,462 245,418 274,882Modems and accessories 73,407 89,423 141,272Spare parts and supplies 4,472 1,440 13,164Call cards and others 228,198 77,033 27,049P=7,678,359 P=5,887,589 P=4,238,960There are no unusual purchase commitments and accrued net losses as of December 31, 2012.6. Prepayments and Other Current AssetsThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Advance payments to suppliers andcontractors 25.3 P=8,815,534 P=1,674,923 P=764,699Prepayments 25.1 1,050,731 1,288,290 983,545Deferred input VAT 11 527,276 730,387 951,449Input VAT - net 638,626 844,089 954,636Miscellaneous receivables - net 16, 28.11 425,426 662,203 455,005Current portion of loan receivable from BayanTelecommunications, Inc. (BTI) 11 347,910 – –Creditable withholding tax 300,680 295,102 494,942Other current assets 28.11 202,065 91,425 99,922P=12,308,248 P=5,586,419 P=4,704,198The “Prepayments” account includes prepaid insurance, rent, maintenance, and NTC spectrum users’ feeamong others.Deferred input VAT pertains to various purchases of goods and services which cannot be claimed yet as creditsagainst output VAT liabilities, pursuant to the existing VAT rules and regulations. However, these can beapplied on future output VAT liabilities.168 169


Globe 2012 annual reportfinancial reportAs of December 31, 2012, Innove, GXI, GTI and KVI reported net input VAT amounting to P=638.63 million, netof output VAT of P=110.94 million. As of December 31, 2011, Innove and GXI reported net input VAT amountingto P=844.09 million, net of output VAT of P=94.36 million. As of December 31, 2010, Innove, GXI and EGGreported net input VAT amounting to P=954.64 million, net of output VAT of P=102.45 million.7. Property and EquipmentThe rollforward analysis of this account follows:TelecommunicationsEquipmentBuildings andLeaseholdImprovementsInvestments inCable Systems2012Office TransportationEquipment Equipment(In Thousand Pesos)LandAssets UnderConstructionCostAt January 1 P=187,924,112 P=27,374,020 P=13,129,153 P=7,333,754 P=2,206,974 P=1,527,375 P=11,955,324 P=251,450,712Additions 5,026,981 58,025 351,345 212,107 257,696 – 20,751,350 26,657,504Retirements/disposals (1,030,704) (1,960) – (139,907) (154,746) – (5,600) (1,332,917)Reclassifications/adjustments 10,281,243 1,422,676 663,946 545,614 1,916 46,619 (15,104,603) (2,142,589)At December 31 202,201,632 28,852,761 14,144,444 7,951,568 2,311,840 1,573,994 17,596,471 274,632,710AccumulatedDepreciationand AmortizationAt January 1 125,417,729 13,087,427 5,569,643 6,152,934 1,582,493 – – 151,810,226Depreciation andamortizationIncremental effect ofnetworkmodernization 4,202,766 8 5,043 37,488 – – – 4,245,305Others 14,185,102 1,264,176 858,464 815,831 241,031 – – 17,364,604Retirements/disposals (999,456) (1,797) – (139,841) (142,533) – – (1,283,627)Reclassifications/adjustments 241,728 202,159 51,893 (32,180) – – – 463,600At December 31 143,047,869 14,551,973 6,485,043 6,834,232 1,680,991 – – 172,600,108Impairment LossesAt January 1 159,837 – – 3,182 – – 209,687 372,706Additions – – – – – – 259,262 259,262Write-off/adjustments (21,768) – – – – – 38 (21,730)At December 31 138,069 – – 3,182 – – 468,987 610,238Net Book Value atDecember 31 P=59,015,694 P=14,300,788 P=7,659,401 P=1,114,154 P=630,849 P=1,573,994 P=17,127,484 P=101,422,364TelecommunicationsEquipmentBuildings andLeaseholdImprovementsInvestments inCable SystemsOfficeEquipment2011TransportationEquipment(In Thousand Pesos)LandAssets UnderConstructionCostAt January 1 P=174,342,419 P=25,605,238 P=13,028,303 P=6,395,943 P=2,153,222 P=1,514,332 P=16,441,841 P=239,481,298Additions 1,837,618 67,717 87,900 163,909 260,991 13,043 14,840,996 17,272,174Retirements/disposals (2,969,817) (2,894) – (137,669) (208,432) – (99,698) (3,418,510)Reclassifications/adjustments 14,713,892 1,703,959 12,950 911,571 1,193 – (19,227,815) (1,884,250)At December 31 187,924,112 27,374,020 13,129,153 7,333,754 2,206,974 1,527,375 11,955,324 251,450,712AccumulatedDepreciationand AmortizationAt January 1 113,486,718 11,955,511 4,736,035 5,642,866 1,497,090 – – 137,318,220Depreciation andamortization 14,802,833 1,134,039 833,833 646,073 263,634 – – 17,680,412Retirements/disposals (2,811,884) (2,782) – (136,195) (178,231) – – (3,129,092)Reclassifications/adjustments (59,938) 659 (225) 190 – – – (59,314)At December 31 125,417,729 13,087,427 5,569,643 6,152,934 1,582,493 – – 151,810,226Impairment LossesAt January 1 151,751 – – 3,182 – – 170,891 325,824Additions 11,200 – – – – – 117,414 128,614Write-off/adjustments (3,114) – – – – – (78,618) (81,732)At December 31 159,837 – – 3,182 – – 209,687 372,706Net Book Value atDecember 31 P=62,346,546 P=14,286,593 P=7,559,510 P=1,177,638 P=624,481 P=1,527,375 P=11,745,637 P=99,267,780TotalTotalRetirements/disposals (408,040) (29,092) – (87,113) (237,996) (14,025) (4,162) (780,428)Reclassifications/adjustments 12,064,233 1,299,402 (1,415,706) 201,797 11,883 (23,705) (15,100,321) (2,962,417)At December 31 174,342,419 25,605,238 13,028,303 6,395,943 2,153,222 1,514,332 16,441,841 239,481,298AccumulatedDepreciation andAmortizationAt January 1 99,668,498 11,009,763 4,758,210 5,065,820 1,431,233 – – 121,933,524Depreciation andamortization 14,403,724 1,054,839 899,440 693,641 265,153 – – 17,316,797Retirements/disposals (354,424) (25,502) – (81,707) (207,716) – – (669,349)Reclassifications/adjustments (231,080) (83,589) (921,615) (34,888) 8,420 – – (1,262,752)At December 31 113,486,718 11,955,511 4,736,035 5,642,866 1,497,090 – – 137,318,220Impairment LossesAt January 1 185,138 – – 3,182 – – 110,887 299,207Additions – – – – – – 57,805 57,805Write-off/adjustments (33,387) – – – – – 2,199 (31,188)At December 31 151,751 – – 3,182 – – 170,891 325,824Net Book Value atDecember 31 P=60,703,950 P=13,649,727 P=8,292,268 P=749,895 P=656,132 P=1,514,332 P=16,270,950 P=101,837,254In the last quarter of 2011, Globe Group has announced to undertake a network and IT transformation programfor an estimated investment of USD790.00 million over the next two to three years. External partners wereengaged in 2011 to help manage the modernization effort. In the first quarter of 2012, the EUL of certainwireless and wireline telecommunications equipment were changed as a result of continuing upgrade andmigration to a modernized network. The net effect of the change in EUL resulted in higher depreciation expenseof P=4,245.30 million for the year ended December 31, 2012.Assets under construction include intangible components of a network system which are reclassified todepreciable intangible assets only when assets become available for use (see Note 9).Investments in cable systems include the cost of the Globe Group’s ownership share in the capacity of certaincable systems under a joint venture or a consortium or private cable set-up and indefeasible rights of use (IRUs)of circuits in various cable systems. It also includes the cost of cable landing station and transmission facilitieswhere the Globe Group is the landing party.The costs of fully depreciated property and equipment that are still being used in the network amounted toP=87,165.41 million, P=70,229.60 million and P=52,467.14 million as of December 31, 2012, 2011 and 2010,respectively.The Globe Group uses its borrowed funds to finance the acquisition of property and equipment and bring it to itsintended location and working condition. Borrowing costs incurred relating to these acquisitions were includedin the cost of property and equipment using 3.01%, 3.19% and 5.61% capitalization rates in 2012, 2011 and2010, respectively. The Globe Group’s total capitalized borrowing costs amounted to P=808.25 million,P=591.66 million and P=1,091.21 million for the years ended December 31, 2012, 2011 and 2010, respectively(see Note 22).In 2011, the Globe Group entered into a sale-buy back transaction with an equipment supplier whereby GlobeGroup conveyed and transferred ownership of certain hardware equipment and licenses nearing end ofeconomic life and then later purchased upgraded equipment from the same equipment supplier. Thistransaction resulted in a gain amounting to P=244.37 million (included under “Gain on disposal of property andequipment - net” in the consolidated statements of comprehensive income), equivalent to the differencebetween the fair value of the new equipment and the carrying amount of the old platforms and equipment at thetime the transaction was consummated.The carrying value of the hardware infrastructure and information equipment held under finance lease (includedunder “Telecommunications equipment”) at December 31, 2012 amounted to P=738.09 million (see Note 25.1.2).TelecommunicationsEquipmentBuildings andLeaseholdImprovementsInvestments inCable SystemsOfficeEquipment2010TransportationEquipment(In Thousand Pesos)LandAssets UnderConstructionCostAt January 1 P=161,614,664 P=24,149,664 P=14,444,009 P=6,052,613 P=2,074,149 P=1,551,558 P=14,039,942 P=223,926,599Additions 1,071,562 185,264 – 228,646 305,186 504 17,506,382 19,297,544Total170 171


Globe 2012 annual reportfinancial report8. Investment PropertyThe rollforward analysis of this account follows:2012 2011 2010(In Thousand Pesos)CostAt January 1 and December 31 P=390,641 P=390,641 P=390,641Reclassification (Note 7) (390,641) – –At December 31 – 390,641 390,641Accumulated DepreciationAt January 1 198,996 176,449 153,902Depreciation 6,457 22,547 22,547Reclassification (Note 7) (205,453) – –At December 31 – 198,996 176,449Net Book Value at December 31 P=– P=191,645 P=214,192Investment property represents the portion of a building that was held for lease to third parties in 2009 (see Note25.1b). In 2012, the Globe Group transferred the remaining book value of the Investment property to Propertyand equipment (see Note 7).The expenses related to the investment property amounted to P=16.06 million and P=23.45 million in 2011 and2010, respectively. These are included under “General, selling and administrative expenses” in the consolidatedstatements of comprehensive income.9. Intangible Assets and GoodwillThe rollforward analysis of this account follows:Licenses andApplicationSoftware2012TotalCustomer IntangibleContracts Assets(In Thousand Pesos)GoodwillTotalIntangibleAssets andGoodwillCostAt January 1 P=9,063,214 P=28,381 P=9,091,595 P=327,125 P=9,418,720Additions 152,056 – 152,056 – 152,056Retirements/disposals (119) – (119) – (119)Reclassifications/adjustments (Note 7) 2,045,529 – 2,045,529 – 2,045,529At December 31 11,260,680 28,381 11,289,061 327,125 11,616,186Accumulated Depreciation andAmortizationAt January 1 5,807,340 19,866 5,827,206 – 5,827,206Amortization:Incremental effect of networkmodernization 835,166 – 835,166 – 835,166Others 1,126,209 5,676 1,131,885 – 1,131,885Retirements/disposals (58) – (58) – (58)Reclassifications/adjustments (Note 7) 28,029 – 28,029 – 28,029At December 31 7,796,686 25,542 7,822,228 – 7,822,228Net Book Value at December 31 P=3,463,994 P=2,839 P=3,466,833 P=327,125 P=3,793,958No impairment loss on intangible assets was recognized in 2012.Licenses andApplicationSoftware2011TotalCustomer IntangibleContracts Assets(In Thousand Pesos)GoodwillTotalIntangibleAssets andGoodwillCostAt January 1 P=8,362,110 P=28,381 P=8,390,491 P=327,125 P=8,717,616Additions 145,208 – 145,208 – 145,208Retirements/disposals (862,847) – (862,847) – (862,847)Reclassifications/adjustments (Note 7) 1,418,743 – 1,418,743 – 1,418,743At December 31 9,063,214 28,381 9,091,595 327,125 9,418,720Accumulated Depreciation andAmortizationAt January 1 P=5,449,729 P=14,190 P=5,463,919 P=– P=5,463,919Amortization 1,232,592 5,676 1,238,268 – 1,238,268Retirements/disposals (848,131) – (848,131) – (848,131)Reclassifications/adjustments (Note 7) (26,850) – (26,850) – (26,850)At December 31 5,807,340 19,866 5,827,206 – 5,827,206Impairment LossesAt January 1 5,321 – 5,321 – 5,321Write-off/adjustments (5,321) – (5,321) – (5,321)At December 31 – – – – –Net Book Value at December 31 P=3,255,874 P=8,515 P=3,264,389 P=327,125 P=3,591,514Licenses andApplicationSoftware2010TotalCustomer IntangibleContracts Assets(In Thousand Pesos)GoodwillTotalIntangibleAssets andGoodwillCostAt January 1 P=7,431,159 P=28,381 P=7,459,540 P=327,125 P=7,786,665Additions 169,329 – 169,329 – 169,329Retirements/disposals (128,606) – (128,606) – (128,606)Reclassifications/adjustments (Note 7) 890,228 – 890,228 – 890,228At December 31 8,362,110 28,381 8,390,491 327,125 8,717,616Accumulated Depreciation andAmortizationAt January 1 4,795,295 8,514 4,803,809 – 4,803,809Amortization 740,819 5,676 746,495 – 746,495Retirements/disposals (120,561) – (120,561) – (120,561)Reclassifications/adjustments (Note 7) 34,176 – 34,176 – 34,176At December 31 5,449,729 14,190 5,463,919 – 5,463,919Impairment LossesAt January 1 – – – – –Additions 5,321 – 5,321 – 5,321At December 31 5,321 – 5,321 – 5,321Net Book Value at December 31 P=2,907,060 P=14,191 P=2,921,251 P=327,125 P=3,248,376In the first quarter of 2012, the EUL of certain wireless and wireline licenses were changed as a result ofcontinuing upgrade and migration to a modernized network. The net effect of the change in EUL resulted tohigher amortization expense of P=835.17 million for the year ended December 31, 2012.172 173


Globe 2012 annual reportfinancial report10. Investments in Joint VenturesThis account consists of:2012 2011 2010(In Thousand Pesos)Acquisition CostAt January 1 P=331,620 P=252,610 P=252,610Acquisition during the year 20,990 79,010 –At December 31 352,610 331,620 252,610Accumulated Equity in Net Losses:At January 1 (75,073) (47,728) (44,760)Equity in net losses (83,582) (27,345) (2,968)(158,655) (75,073) (47,728)Net foreign exchange difference (10,762) (7,547) (7,866)At December 31 (169,417) (82,620) (55,594)Carrying Value at December 31 P=183,193 P=249,000 P=197,01610.1 Investment in BPI Globe BanKO Inc., A Savings Bank (BPI Globe BanKO)On July 17, 2009, Globe acquired a 40% stake in BPI Globe BanKO (formerly Pilipinas Savings Bank, Inc. or PSBank) for P=141.33 million, pursuant to a Shareholder Agreement with Bank of the Philippine Islands (BPI), ACand PS Bank, and a Deed of Absolute Sale with BPI. BPI Globe BanKO will have the capability to provideservices to micro-finance institutions and retail clients through mobile and related technology.On May 10, 2011, the BOD of Globe Telecom approved the additional investment of P=100.00 million as sharefor BPI Globe BanKO’s increase in capitalization to cover its expansion plan for the next three years. GlobeTelecom made the initial capital infusion of P=79.01 million on May 10, 2011, and P=20.99 million last March28, 2012. As of December 31, 2012, the investment of Globe Telecom in BPI Globe BanKO amounted toP=114.42 million, representing 40% interest.The Globe Group’s interest in BPI Globe BanKO is as follows:2012 2011 2010(In Thousand Pesos)Assets:Current P=1,454,187 P=530,179 P=283,305Noncurrent 27,463 16,208 4,386Liabilities:Current (1,279,796) (339,212) (151,150)Income 82,792 50,379 16,409Expenses (170,230) (78,040) (24,839)The Globe Group has no share of any contingent liabilities as of December 31, 2012, 2011 and 2010.10.2 Investment in Bridge Mobile Pte. Ltd. (BMPL)Globe Telecom and other leading Asia Pacific mobile operators (JV partners) signed an Agreement in 2004 (JVAgreement) to form a regional mobile alliance, which will operate through a Singapore-incorporated company,BMPL. The JV company is a commercial vehicle for the JV partners to build and establish a regional mobileinfrastructure and common service platform and deliver different regional mobile services to their subscribers.Globe Group has a ten percent (10%) stake in BMPL. The other joint venture partners each with equal stake inthe alliance include SK Telecom, Co. Ltd., Advanced Info Service Public Company Limited, Bharti Airtel Limited,Maxis Communications Berhad, Optus Mobile Pty. Limited, Singapore Telecom Mobile Pte, Ltd., Taiwan MobileCo. Ltd., PT Telekomunikasi Selular and CSL Ltd. Under the JV Agreement, each partner shall contributeUSD4.00 million based on an agreed schedule of contribution. Globe Telecom may be called upon to contributeon dates to be determined by the JV. As of December 31, 2012, Globe Telecom has invested a total ofUSD2.20 million (P=111.28 million) in the joint venture.The Globe Group’s interest in BMPL is accounted for as follows:2012 2011 2010(In Thousand Pesos)Assets:CurrentNoncurrentP=68,9361,844P=75,0111,750P=67,7222,744Liabilities:Current (5,859) (7,591) (7,023)Income 24,960 24,337 19,693Expenses (21,104) (24,021) (14,231)The Globe Group has no share of any contingent liabilities as of December 31, 2012, 2011 and 2010.11. Other Noncurrent AssetsThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Loan receivable from BTI - net of currentportion 6 P=4,548,782 P=– P=–Loan receivable from Globe Groupretirement plan (GGRP) 16.3, 18.2 968,000 968,000 968,000Deferred input VAT 6 927,096 372,771 43,320Pension asset 18.2 681,001 876,970 951,083Miscellaneous deposits 25.1 609,060 534,088 473,862Loan receivable from Bethlehem Holdings,Inc. (BHI) 16.3, 25.5 295,000 295,000 295,000AFS investment in equity securities 28.10, 28.11 141,446 99,319 101,877Others - net 69,233 63,329 42,544P=8,239,618 P=3,209,477 P=2,875,686Loan Receivable from BTIOn November 5, 2012, Globe Telecom obtained internal approvals to commence offers to purchase up to100% of the financial obligations of BTI and Radio Communications of the Philippines, Inc. (RCPI), a subsidiaryof BTI, collectively referred to as “BTI loans”, to their respective financial creditors.On December 21, 2012, Globe Telecom settled its tender offers for:i. 93.66% of the aggregate remaining principal amount of the USD-denominated notes originally due in 2006;ii. 98.26% of the aggregate remaining principal amount of peso and USD-denominated BTI loans; andiii. 100% of the aggregate remaining principal amount of peso and USD-denominated RCPI loans.The total consideration for the tender offers is USD/P=310.00 per USD/P=1,000.00 face amount, for a totalpayment of P=5,354.76 million, composed of US Dollar and Philippine peso-denominated loans amounting toUSD110.55 million and P=818.74 million, respectively.The acquired loans were part of the original debt subjected to rehabilitation plan approved on June 28, 2004.The plan was reviewed and evaluated by a court appointed receiver who was tasked to monitor and overseethe implementation of the Plan. The implementing term sheet submitted by the receiver was approved onMarch 15, 2005.The restructured loan is divided into sustainable (Tranche A) and unsustainable debt (Tranche B) and isdenominated in existing currencies with an option for any of the creditors in Tranche B to convert their USDdenominatedrestructured debt into PHP at an agreed exchange rate on the date of implementation.174 175


Globe 2012 annual reportfinancial reportTranche A is repayable semi-annually on a pari passu basis up to December 31, 2023 based on a table of debtreduction computed at certain percentages of the principal. Tranche B is a non-interest bearing convertibledebt and to be repaid only if there are sufficient future cash flows and upon full repayment of Tranche A. At theconclusion of the rehabilitation period, other than as the result of an event of default, Tranche B to the extentnot previously converted is to be converted into new BTI shares. The conversion rights in relation to Tranche Bare up to a maximum of 40% of the authorized share capital as at the effective date. The loans were initiallyaccounted for at fair value, and the entire acquisition price was allocated to Tranche A.As of December 31, 2012, loans receivable from BTI amounted to P=4.90 billion comprising of principal andinterest due until 2023, with quarterly interest payments and semi-annual principal payments.As of February 5, 2013, Globe Telecom did not exercise any of the conversion rights attached to Tranche B.12. Accounts Payable and Accrued ExpensesThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Accrued project costs 25.3 P=11,400,188 P=6,906,943 P=8,638,119Accounts payable 16 8,837,714 7,314,069 5,617,380Accrued expenses 16, 18.2 7,020,572 5,995,940 5,587,799Traffic settlements - net 4 2,374,154 2,722,809 2,172,426Output VAT 69,841 67,458 99,479Dividends payable 17.3 33,145 35,295 –P=29,735,614 P=23,042,514 P=22,115,203The “Accrued expenses” account includes accruals for services, advertising, manpower and various general,selling and administrative expenses.Traffic settlements payable are presented net of traffic settlements receivable from the same carrier amountingto P=3,318.91 million, P=2,372.03 million and P=2,335.95 million as of December 31, 2012, 2011 and 2010,respectively.As of December 31, 2012, Globe and EGG reported net output VAT amounting to P=69.84 million, net of inputVAT of P=558.95 million. As of December 31, 2011, Globe and EGG reported net output VAT amounting toP=67.46 million, net of input VAT of P=458.67 million. As of December 31, 2010, Globe Telecom reported netoutput VAT amounting to P=99.48 million, net of input VAT of P=359.93 million.13. ProvisionsThe rollforward analysis of this account follows:Note 2012 2011 2010(In Thousand Pesos)At beginning of year P=166,773 P=224,388 P=89,404Provisions for (reversals of) claims andassessments 23 56,327 (47,916) 138,760Payments (19,909) (9,699) (3,776)At end of year P=203,191 P=166,773 P=224,388Provisions relate to various pending unresolved claims and assessments over the Globe Group’s mobile andwireline businesses. The information usually required by PAS 37, Provisions, Contingent Liabilities andContingent Assets, is not disclosed as it may prejudice the outcome of these on-going claims and assessments.As of February 5, 2013, the remaining pending claims and assessments are still being resolved.14. Notes Payable and Long-term DebtNotes payable consist of short-term, unsecured US dollar and peso-denominated promissory notes from localbanks for working capital requirements amounting to P=2,053.90 million, which bears interest ranging from 1.12%to 1.65% and P=1,756.76 million, which bears interest ranging from 1.57% to 1.91% as of December 31, 2012and 2011, respectively. There is no outstanding notes payable as of December 31, 2010.Long-term debt consists of:2012 2011 2010(In Thousand Pesos)Banks:Local P=38,164,986 P=27,555,234 P=20,352,194Foreign 5,829,588 3,541,621 7,317,483Corporate notes 5,819,400 10,839,226 17,729,939Retail bonds 9,911,546 4,985,865 4,971,85459,725,520 46,921,946 50,371,470Less current portion 9,294,888 9,597,367 8,677,209P=50,430,632 P=37,324,579 P=41,694,261The maturities of long-term debt at nominal values, excluding unamortized debt issuance costs, as ofDecember 31, 2012 follow (amounts in thousands):Due in:2013 P=9,731,0792014 6,737,6342015 8,497,9452016 2,669,8502017 and thereafter 32,403,080P=60,039,588Unamortized debt issuance costs included in the above long-term debt as of December 31, 2012, 2011 and2010 amounted to P=314.07 million, P=212.03 million and P=279.24 million, respectively (see Note 28.2.3).Total interest expense recognized, excluding the capitalized interest, amounted to P=2,086.08 million,P=2,059.66 million and P=1,981.79 million in 2012, 2011 and 2010, respectively (see Notes 7 and 22).The interest rates and maturities of the above debt are as follows:MaturitiesInterest RatesBanks:Local 2013–2022 1.19% to 7.03% in 20121.42% to 7.03% in 20115.26% to 7.03% in 2010Foreign 2013–2022 1.83% to 4.19% in 20120.68% to 3.86% in 20110.74% to 4.13% in 2010Corporate notes 2013–2016 1.83% to 8.43% in 20122.78% to 8.43% in 20115.52% to 8.38% in 2010Retail bonds 2017–2019 5.75% to 6.00% in 20127.50% to 8.00% in 20117.50% to 8.00% in 2010176 177


Globe 2012 annual reportfinancial report14.1 Bank Loans and Corporate NotesGlobe Telecom’s unsecured bank loans and corporate notes, which consist of fixed and floating rate notes anddollar and peso-denominated bank loans, bear interest at stipulated and prevailing market rates.The loan agreements with banks and other financial institutions provide for certain restrictions and requirementswith respect to, among others, maintenance of financial ratios and percentage of ownership of specificshareholders, incurrence of additional long-term indebtedness or guarantees and creation of propertyencumbrances.As of February 5, 2013, the Globe Group is not in breach of any loan covenants.14.2 Retail BondsOn February 25, 2009, Globe Group issued P=5,000.00 million fixed rate bonds. This amount comprisesP=1,974.00 million and P=3,026.00 million fixed rate bonds due in 2012 and 2014, respectively, with interest of7.50% and 8.00%, respectively. The proceeds of the retail bonds were used to fund Globe Group’s variouscapital expenditures.The five-year retail bonds may be redeemed in whole, but not in part, on the twelfth (12th) interest payment dateat a price equal to 102.00% of the principal amount of the bonds and all accrued interest to the date ofredemption. Globe Group may not redeem the retail bonds unless allowed under conditions specified in theagreements with respect to redemption for tax reasons, purchase and cancellation and change in law orcircumstance.On January 17, 2012, Globe Group exercised its option to redeem the P=3,026.00 million fixed rate bonds thru anirrevocable notice issued to its trustee bank. The full settlement happened on February 27, 2012, withredemption cost of P=60.51 million.On February 10, 2012, the BOD approved and authorized a corporate bond program to fund the Globe Group’scapital expenditures with a principal amount of up to P=15,000.00 million for issuance in one or more tranches.The Globe Group management has been authorized to determine the final features and other terms andconditions of the offer and issuance of the corporate bonds, including all agreements related to such offer andissuance.On June 1, 2012, Globe Group issued P=10,000.00 million fixed rate bonds. The amount comprisesP=4,500.00 million and P=5,500.00 million fixed rate bonds due in 2017 and 2019, with interest rate of 5.75% and6.00%, respectively. The net proceeds of the issue shall be used to partially finance Globe Group’s capitalexpenditure requirements in 2012.The five-year and seven-year retail bonds may be redeemed in whole, but not in part, starting two years beforematurity date and on the anniversary thereafter at a price equal to 101.00% and 100.50% of the principalamount of the bonds and all accrued interest to the date of the redemption.The Globe Group has to meet certain bond covenants including a maximum debt-to-equity ratio of 2 to 1. As ofFebruary 5, 2013, the Globe Group is not in breach of any bond covenants.15. Other Long-term LiabilitiesThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)ARO 3.2.4, 7 P=1,594,633 P=1,476,597 P=1,341,526Accrued lease obligations and others 25.1 1,347,519 635,122 640,927P=2,942,152 P=2,111,719 P=1,982,453The rollforward analysis of the Globe Group’s ARO follows:Notes 2012 2011 2010(In Thousand Pesos)At beginning of year P=1,476,597 P=1,341,526 P=1,269,291Capitalized to property and equipmentduring the year - net of reversal 30 25,022 27,403 41,473Accretion expense during the year 22 119,814 109,309 95,207Adjustments due to changes in estimates 3.2.4 (26,800) (1,641) (64,445)At end of year P=1,594,633 P=1,476,597 P=1,341,52616. Related Party TransactionsParties are considered to be related to Globe Group if it has the ability, directly or indirectly, to control the Groupor exercise significant influence over the Group in making financial and operating decisions, or vice versa, orwhere the Group and the party are subject to common control or common significant influence. Related partiesmaybe individuals (being members of key management personnel, significant shareholders and/or their closefamily members) or entities and include entities which are under the significant influence of related parties of theGroup where those parties are individuals, and post-employment benefit plan which are for the benefit ofemployees of the Group or of any entity that is a related party of the Group.The Globe Group, in their regular conduct of business, enter into transactions with their major stockholders, ACand STI, venturers and certain related parties. These transactions, which are accounted for at market pricesnormally charged to unaffiliated customers for similar goods and services, include the following:16.1 Entities with joint control over Globe Group - AC and STIGlobe Telecom has interconnection agreements with STI. The related net traffic settlements receivable(included in “Receivables” account in the consolidated statements of financial position) and theinterconnection revenues earned (included in “Service revenues” account in the consolidated statements ofcomprehensive income) are as follows:2012 2011 2010(In Thousand Pesos)Traffic settlements receivable - net P=126,277 P=36,994 P=124,319Interconnection revenues - net 966,037 1,136,294 1,857,336Globe Telecom and STI have a technical assistance agreement whereby STI will provide consultancy andadvisory services, including those with respect to the construction and operation of Globe Telecom’snetworks and communication services (see Note 25.6), equipment procurement and personnel services. Inaddition, Globe Telecom has software development, supply, license and support arrangements, lease ofcable facilities, maintenance and restoration costs and other transactions with STI.The details of fees (included in repairs and maintenance under the “General, selling and administrativeexpenses” account in the consolidated statements of comprehensive income) incurred under theseagreements are as follows:2012 2011 2010(In Thousand Pesos)Technical assistance fee P=140,083 P=179,014 P=149,662Maintenance and restoration costs and othertransactions 64,835 53,996 86,901Software development, supply, license and support 12,590 25,999 26,904178 179


Globe 2012 annual reportfinancial reportThe outstanding balances due to STI (included in the “Accounts payable and accrued expenses” accountin the consolidated statements of financial position) arising from these transactions are as follows:2012 2011 2010(In Thousand Pesos)Technical assistance fee P=45,326 P=54,873 P=48,870Software development, supply, license and support 35,268 80,377 26,640Maintenance and restoration costs and othertransactions 32,372 23,103 28,818Globe Telecom earns subscriber revenues from AC. The outstanding subscribers receivable from AC(included in “Receivables” account in the consolidated statements of financial position) and the amountearned as service revenue (included in the “Service revenues” account in the consolidated statements ofcomprehensive income) are as follows:2012 2011 2010(In Thousand Pesos)Subscriber receivables P=2,143 P=1,718 P=3,152Service revenues 14,720 12,640 13,214Globe Telecom reimburses AC for certain operating expenses. The net outstanding liabilities to (included in“Accounts payable and accrued expenses” account in the consolidated statement of financial position) andthe amount of expenses incurred (included in the “General, selling and administrative expenses” account inthe consolidated statements of comprehensive income) are as follows:2012 2011 2010(In Thousand Pesos)General, selling and administrative expenses P=9,145 P=7,878 P=26,847Accounts payable and accrued expenses – 234 –16.2 Joint Ventures in which the Globe Group is a venturer (see Note 10)Globe Telecom has preferred roaming service contract with BMPL. Under this contract, Globe Telecom willpay BMPL for services rendered by the latter which include, among others, coordination and facilitation ofpreferred roaming arrangement among JV partners, and procurement and maintenance oftelecommunications equipment necessary for delivery of seamless roaming experience to customers.Globe Telecom also earns or incurs commission from BMPL for regional top-up service provided by the JVpartners. The net outstanding liabilities to BMPL related to these transactions amounted to P=2.21 million,P=1.00 million and P=2.89 million as of December 31, 2012, 2011 and 2010, respectively. Balances related tothese transactions (included in “General, selling and administrative expenses” account in the consolidatedstatements of comprehensive income) amounted to P=15.49 million, P=12.24 million and P=12.07 million, as ofDecember 31, 2012, 2011 and 2010, respectively.In October 2009, the Globe Group entered into an agreement with BPI Globe BanKO for the pursuit ofservices that will expand the usage of GCash technology. As a result, the Globe Group recognizedrevenue amounting to P=1.58 million and P=2.86 million in 2012 and 2011, respectively. The revenue earnedin 2010 is immaterial. The related receivables amounted to P=3.79 million, P=2.01 million and P=9.19 million in2012, 2011 and 2010, respectively.16.3 Transactions with the Globe Group Retirement Plan (GGRP) (see Note 11)In 2008, Globe Telecom, Innove and GXI pooled its plan assets for single administration by the GGRP,which was created for the management of the retirement fund. The decisions of the GGRP are madethrough collective decision of the Board of Trustees.The plan is funded by contributions as recommended by the independent actuary on the basis ofreasonable actuarial assumptions. These assumptions and the funded status of the pension plan aredisclosed in Note 18.2.The funded status for the pension plan of Globe Group as of December 31, 2012, 2011 and 2010 amountedto P=671.08 million, P=872.10 million, and P=950.52 million, respectively (see Note 18.2).The fair value of plan assets by each class held by the retirement fund, on a pooled basis, as ofDecember 31, 2012 follows (in thousands):Cash and cash equivalentsP=28,333Investment in fixed income securities 1,032,279Investment in equity securities 1,515,993Loans and receivables 1,010,980Liabilities (995,067)Balance at end of yearP=2,592,518All equity and debt instruments held, except for investment in preferred shares of HALO Group, debtsecurities issued by private corporations and long-term negotiable certificates of deposit, have quotedprices in active market. The remaining plan assets do not have quoted market prices in active market.Loans and receivables consist of interest and dividend receivables, receivable on securities sold to brokersand loan granted by the plan to BHI (see Note 25.5).Liabilities pertain to interest and trust fee payables, accrued professional fees and loan granted to the planby Globe Telecom.The plan assets have diverse investments and do not have any concentration risk.As of December 31, 2012, the pension plan assets of the retirement plan include shares of stock of GlobeTelecom with total fair value of P=13.02 million, and shares of stock of other related parties with total fairvalue of P=71.96 million. Gains/losses arising from these investments amounted to P=10.97 million in 2012.In 2008, the Globe Group granted a short-term loan to the GGRP amounting to P=800.00 million with interestat 6.20%. Upon maturity in 2009, the loan was rolled over until September 2014 with interest at 7.75%.Further, in 2009, the Globe Group granted an additional loan to the retirement fund amounting toP=168.00 million which bears interest at 7.75% and is due also in September 2014.The retirement plan utilized the loan to fund its investments in BHI, a domestic corporation organized toinvest in media ventures. BHI has controlling interest in Altimax Broadcasting Co., Inc. (Altimax) andBroadcast Enterprises and Affiliated Media Inc. (BEAM), respectively.On August 13 and December 21, 2009, the Globe Group granted five-year loans amounting toP=250.00 million and P=45.00 million, respectively, to BHI at 8.275% interest. The P=250.00 million loan iscovered by a pledge agreement whereby in the event of default, the Globe Group shall be entitled to offsetwhatever amount is due to BHI from any unpaid fees to BEAM from the Globe Group. The P=45.00 millionloan is fully secured by a chattel mortgage agreement dated December 21, 2009 between Globe Group andBEAM (see Note 25.5).On February 1, 2009, the Globe Group entered into a memorandum of agreement (MOA) with BEAM forthe latter to render mobile television broadcast service to Globe subscribers using the mobile TV service.As a result, the Globe Group recognized an expense (included in “Professional and other contractedservices”) amounting to P=194.00 million in 2012 and P=250.00 million in 2011 and 2010.On October 1, 2009, the Globe Group entered into a MOA with Altimax for the Globe Group’s co-use ofspecific frequencies of Altimax’s for the rollout of broadband wireless access to the Globe Group’ssubscribers. As a result, the Globe Group recognized an expense (included in “General, selling andadministrative expenses” account in the consolidated statements of comprehensive income) amounting toP=90.00 million in 2012, 2011 and 2010.16.4 Transactions with other related partiesGlobe Telecom has money market placements and bank balances, and subscriber receivables (included in“Cash and cash equivalents” and “Receivables” accounts in the consolidated statements of financial position,respectively) and earns service revenues (included in the “Service revenues” account in the consolidatedstatements of comprehensive income) from its other related parties namely, Ayala Land Inc., Ayala PropertyManagement Corporation, Bank of the Philippine Islands, Manila Water Company, Inc., IntegratedMicroelectronics, Inc., Stream Global Services, Inc., HR Mall Inc., Honda Cars, Inc., Isuzu AutomotiveDealership, Inc., Accendo Commercial Corp., Affinity Express Philippines, Inc., Alveo Land Corp., Asian I-OfficeProperties,Inc., Avida Land Corp., Avida Sales Corporation, Ayala Hotels, Inc., Ayala Plans, Inc., AyalaSystems Technology, Inc., Cebu Holdings, Inc., Makati Development Corp., myAyala.com, Inc., North TriangleDepot Commercial Corp., PSI Technologies, Inc., Roxas Land Corp, Serendra, Inc., Station Square East180 181


Globe 2012 annual reportfinancial reportCommercial Corp., Ten Knots Development, KHI ALI Manila, Inc., Lagoon Development Corp., Subic Bay TownCenter, Inc., Ayala Aviation Corporation, Laguna AAA Water Corp., Liveit Solution, Inc., Liveit Investments,Ltd., Integreon, Inc., Arvo Commercial Corp., Amaia Land Corp., Michigan Power, Philippine Intergrated EnergySolutions, Inc., Southcrest Hotel Ventures, Inc., Bonifacio Hotels and Crestview E-Office.The balances with other related parties are recorded under the following accounts:Notes 2012 2011 2010(In Thousand Pesos)Cash and cash equivalents 30 P=199,392 P=1,098,168 P=694,277Service revenues 344,206 306,846 243,346General, selling and administrative expenses 21 345,004 288,351 270,819Property and equipment 7 71,272 137,209 78,321Subscriber receivables (included in “Receivables”account) 4 102,454 65,694 150,403Accounts payable and accrued expenses 12 50,008 32,750 21,496The balances under “General, selling and administrative expenses” and “Property and equipment” accountsconsist of expenses incurred on rent, utilities, customer contract services, other miscellaneous services andpurchase of vehicles, respectively.These related parties are either controlled or significantly influenced by AC.16.5 Transactions with key management personnel of the Globe GroupThe Globe Group’s compensation of key management personnel by benefit type are as follows:Notes 2012 2011 2010(In Thousand Pesos)Short-term employee benefits 21 P=123,700 P=75,343 P=92,631Share-based payments 18.1 11,502 49,338 104,788Post-employment benefits 18.2 12,822 1,736 6,035P=148,024 P=126,417 P=203,454There are no agreements between the Globe Group and any of its directors and key officers providing forbenefits upon termination of employment, except for such benefits to which they may be entitled under theGlobe Group’s retirement plans.The Globe Group granted short-term loans to its key management personnel amounting to P=0.05 million,P=0.32 million and P=0.27 million in 2012, 2011 and 2010, respectively, included in the “Prepayments and othercurrent assets” in the consolidated statements of financial position.The summary of balances arising from related party transactions for the relevant financial year (in thousands) follows:2012Amount/Volume Outstanding BalanceAmountsOwed toRelatedParties Terms ConditionsOtherCurrentAssetsAmountsOwed byRelatedPartiesCash(Note 30)PropertyandEquipment(Note 7)Cost andExpensesRevenuesEntities with joint controlover Globe GroupAC P=14,720 P=9,145 P=– P=– P=2,143 P=– P=– Interest-free, settlement in cash Unsecured, no impairmentSTI 966,037 217,508 – – 126,277 – 112,966 Interest-free, settlement in cash Unsecured, no impairmentJointly controlled entities –BMPL – 15,491 – – – – 2,208 Interest-free, settlement in cash Unsecured, no impairmentBPI Globe BanKO 1,584 – – – 3,792 – – Interest-free, settlement in cash Unsecured, no impairmentOther related partiesGGRP – – – – 968,000 – – 5 years, 7.75% Unsecured, no impairmentBHI – – – – 295,000 – – 5 years, 8.275% The P=250.00 million is covered bya pledge agreement while theP=45.00 million is fully securedby chattel mortgage agreement.BEAM – 194,000 – – – – – – –Altimax – 90,000 – – – – – – –Key management personnel – – – – 53 – – Interest-free, settlement in cash Unsecured, no impairmentOthers 344,206 345,004 71,272 199,392 102,454 6,281 50,008 Interest-free, settlement in cash Unsecured, no impairmentTotal P=1,326,547 P=871,148 P=71,272 P=199,392 P=1,497,719 P=6,281 P=165,182182 183


Globe 2012 annual reportfinancial report2011RevenuesAmount/Volume Outstanding BalanceCost andExpensesProperty andEquipment(Note 7)Cash(Note 30)AmountsOwed byRelatedPartiesOtherCurrentAssetsAmountsOwed toRelatedParties Terms ConditionsEntities with joint controlover Globe GroupAC P=12,640 P=7,878 P=– P=– P=1,718 P=– P=234 Interest-free, settlement in cash Unsecured, no impairmentSTI 1,136,294 259,009 – – 36,994 – 158,353 Interest-free, settlement in cash Unsecured, no impairmentJointly controlled entities –BMPL – 12,237 – – – – 966 Interest-free, settlement in cash Unsecured, no impairmentBPI Globe BanKO 2,860 – – – 2,007 – – Interest-free, settlement in cash Unsecured, no impairmentOther related partiesGGRP – – – – 968,000 – – 5 years, 7.75% Unsecured, no impairmentBHI – – – – 295,000 – – 5 years, 8.275% The P=250.00 million is covered bya pledge agreement while theP=45.00 million is fully securedby chattel mortgage agreement.BEAM – 250,000 – – – – – – –Altimax – 90,000 – – – – – – –Key management personnel – – – – 318 – – Interest-free, settlement in cash Unsecured, no impairmentOthers 306,846 288,351 137,209 1,098,168 65,694 3,312 32,750 Interest-free, settlement in cash Unsecured, no impairmentTotal P=1,458,640 P=907,475 P=137,209 P=1,098,168 P=1,369,731 P=3,312 P=192,3032010RevenuesAmount/Volume Outstanding BalanceCost andExpensesProperty andEquipment(Note 7)Cash(Note 30)AmountsOwed byRelatedPartiesOtherCurrentAssetsAmountsOwed toRelatedParties Terms ConditionsEntities with joint controlover Globe GroupAC P=13,214 P=26,847 P=– P=– P=3,152 P=– P=– Interest-free, settlement in cash Unsecured, no impairmentSTI 1,857,336 263,467 – – 124,319 – 104,328 Interest-free, settlement in cash Unsecured, no impairmentJointly controlled entities –BMPL – 12,070 – – – – 2,895 Interest-free, settlement in cash Unsecured, no impairmentBPI Globe BanKO – – – – 9,187 – – Interest-free, settlement in cash Unsecured, no impairmentOther related partiesGGRP – – – – 968,000 – – 5 years, 7.75% Unsecured, no impairmentBHI – – – – 295,000 – – 5 years, 8.275% The P=250.00 million is covered bya pledge agreement while theP=45.00 million is fully securedby chattel mortgageagreement.BEAM – 250,000 – – – – – – –Altimax – 90,000 – – – – – – –Key management personnel – – – – 271 – – Interest-free, settlement in cash Unsecured, no impairmentOthers 243,346 270,819 78,321 694,277 150,403 5,461 21,496 Interest-free, settlement in cash Unsecured, no impairmentTotal P=2,113,896 P=913,203 P=78,321 P=694,277 P=1,550,332 P=5,461 P=128,719184 185


Globe 2012 annual reportfinancial report17. Equity and Other Comprehensive IncomeGlobe Telecom’s authorized capital stock consists of:2012 2011 2010Shares Amount Shares Amount Shares Amount(In Thousand Pesos and Number of Shares)Preferred stock - P=5 per share 250,000 P=1,250,000 250,000 P=1,250,000 250,000 P=1,250,000Common stock - P=50 per share 179,934 8,996,719 179,934 8,996,719 179,934 8,996,719Globe Telecom’s issued and subscribed capital stock consists of:2012 2011 2010Shares Amount Shares Amount Shares Amount(In Thousand Pesos and Number of Shares)Preferred stock 158,515 P=792,575 158,515 P=792,575 158,515 P=792,575Common stock 132,406 6,620,291 132,353 6,617,651 132,348 6,617,424Total shares issued andsubscribed 7,412,866 7,410,226 7,409,999Less subscriptions receivable – – (776)Total capital stock P=7,412,866 P=7,410,226 P=7,409,22317.1 Preferred StockPreferred stock has the following features:(a) Issued at P=5 par;(b) Dividend rate to be determined by the BOD at the time of issue;(c) One preferred share is convertible to one common share starting at the end of the 10 th year of the issuedate at a price to be determined by the Globe Telecom’s BOD at the time of issue which shall not be lessthan the market price of the common share less the par value of the preferred share;(d) Call option - Exercisable any time by Globe Telecom starting at the end of the 5 th year from issue date at aprice to be determined by the BOD at the time of issue;(e) Eligibility of Investors - Only Filipino citizens or corporations or partnerships wherein 60% of the voting stockor voting power is owned by Filipino;(f) With voting rights;(g) Cumulative and non-participating;(h) Preference as to dividends and in the event of liquidation; and(i) No preemptive right to any share issue of Globe Telecom, and subject to yield protection in case of changein tax laws.The dividends for preferred shares are declared upon the sole discretion of the Globe Telecom’s BOD.17.2 Common StockThe rollforward of outstanding common shares are as follows:2012 2011 2010Shares Amount Shares Amount Shares Amount(In Thousand Pesos and Number of Shares)At beginning of year 132,353 P=6,617,651 132,348 P=6,617,424 132,346 P=6,617,280Exercise of stock options 53 2,640 5 227 2 144At end of year 132,406 P=6,620,291 132,353 P=6,617,651 132,348 P=6,617,42417.3 Cash DividendsInformation on Globe Telecom’s declaration of cash dividends follows:DatePer Share Amount Record Payable(In Thousand Pesos, Except Per Share Figures)Preferred stock dividends declared on:February 8, 2011 P=0.29 P=45,399 February 22, 2011 March 18, 2011December 15, 2011 0.22 35,295 December 29, 2011 March 18, 2012December 11, 2012 0.21 33,145 December 27, 2012 January 24, 2013DatePer Share Amount Record Payable(In Thousand Pesos, Except Per Share Figures)Common stock dividends declared on:February 4, 2010 P=40.00 P=5,293,926 February 19, 2010 March 15, 2010August 3, 2010 40.00 5,293,939 August 17, 2010 September 13, 2010February 8, 2011 31.00 4,102,803 February 22, 2011 March 18, 2011August 8, 2011 31.00 4,102,802 August 22, 2011 September 19, 2011February 10, 2012 32.50 4,302,737 February 24, 2012 March 16, 2012August 6, 2012 32.50 4,302,891 August 28, 2012 September 18, 2012The dividend policy of Globe Telecom as approved by the BOD is to declare cash dividends to its commonstockholders on a regular basis as may be determined by the BOD. The dividend payout rate starting 2006 isapproximately 75% of prior year’s net income payable semi-annually in March and September of each year.This is reviewed annually, taking into account Globe Telecom’s operating results, cash flows, debt covenants,capital expenditure levels and liquidity.On November 8, 2011, the BOD approved the change in dividend policy from 75% - 90% of net income to 75% -90% of core net income.17.4 Retained Earnings Available for Dividend DeclarationThe total unrestricted retained earnings available for dividend declaration amounted toP=9,937.99 million as of December 31, 2012. This amount excludes the undistributed net earnings ofconsolidated subsidiaries, accumulated equity in net earnings of joint ventures accounted for under the equitymethod, and unrealized gains recognized on asset and liability currency translations and unrealized gains on fairvalue adjustments. The Globe Group is also subject to loan covenants that restrict its ability to pay dividends(see Note 14).17.5 Other Comprehensive IncomeOther ReservesFor the Year Ended December 31, 2012Exchangedifferencesarising fromtranslationsCash flowhedgesAFS financialassetsof foreigninvestmentsTotal(In Thousand Pesos)As of January 1, 2012 (P=153,070) P=36,301 (P=8,133) (P=124,902)Fair value changes 32,760 43,974 – 76,734Transferred to profit or loss 12,769 – – 12,769Tax effect of items taken directly to ortransferred from equity (13,659) – – (13,659)Exchange differences – – 4,470 4,470As of December 31, 2012 (P=121,200) P=80,275 (P=3,663) (P=44,588)For the Year Ended December 31, 2011Exchangedifferencesarising fromtranslationsCash flowhedgesAFS financialassetsof foreigninvestmentsTotal(In Thousand Pesos)As of January 1, 2011 (P=115,834) P=35,032 (P=7,508) (P=88,310)Fair value changes (239,094) 1,269 – (237,825)Transferred to profit or loss 185,900 – – 185,900Tax effect of items taken directly to ortransferred from equity 15,958 – – 15,958Exchange differences – – (625) (625)As of December 31, 2011 (P=153,070) P=36,301 (P=8,133) (P=124,902)186 187


Globe 2012 annual reportfinancial reportFor the Year Ended December 31, 2010Exchangedifferencesarising fromtranslationsCash flow AFS financial of foreignhedgesassets investments(In Thousand Pesos)As of January 1, 2010 (P=22,554) P=14,882 P=26,190 P=18,518Fair value changes (116,679) 20,150 – (96,529)Transferred to profit or loss (16,578) – – (16,578)Tax effect of items taken directly to ortransferred from equity 39,977 – – 39,977Exchange differences – – (33,698) (33,698)As of December 31, 2010 (P=115,834) P=35,032 (P=7,508) (P=88,310)18. Employee Benefits18.1 Stock Option PlansThe Globe Group has a share-based compensation plan called the Executive Stock Option Plan (ESOP). Thenumber of shares allocated under the ESOP shall not exceed the aggregate equivalent of 6% of the authorizedcapital stock.On October 1, 2009, the Globe Group granted additional stock options to key executives and seniormanagement personnel under the ESOP. The grant requires the grantees to pay a nonrefundable optionpurchase price of P=1,000.00 until October 30, 2009, which is the closing date for the acceptance of the offer. Inorder to avail of the privilege, the grantees must remain with Globe Telecom or its affiliates from grant date up tothe beginning of the exercise period of the corresponding shares.The following are the stock option grants to key executives and senior management personnel of the GlobeGroup under the ESOP from 2003 to 2009:Date of GrantNumber ofOptionsGranted Exercise Price Exercise DatesApril 4, 2003 680,200 P=547.00 per share 50% of options exercisable from April 4,2005 to April 14, 2013; the remaining50% exercisable from April 4, 2006 toApril 14, 2013July 1, 2004 803,800 P=840.75 per share 50% of options exercisable from July 1,2006 to June 30, 2014; the remaining50% from July 1, 2007 to June 30,2014Fair Valueof eachOptionP=283.11P=357.94TotalFair ValueMeasurementBlack-Scholes optionpricing modelBlack-Scholes optionpricing modelA summary of the Globe Group’s ESOP activity and related information follows:2012 2011 2010Numberof SharesWeightedAverageExercisePriceNumberof SharesWeightedAverageExercisePriceNumberof Shares(In Thousands and Per Share Figures)WeightedAverageExercisePriceOutstanding, at beginning of year 1,740,326 P=1,055.03 1,848,081 P=1,047.80 2,038,106 P=1,041.62Exercised (358,736) 952.28 (50,705) 856.65 (34,900) 817.79Expired/forfeited (14,900) 1,145.88 (57,050) 997.06 (155,125) 1,018.39Outstanding, at end of year 1,366,690 P=1,081.01 1,740,326 P=1,055.03 1,848,081 P=1,047.80Exercisable, at end of year 1,366,690 P=1,081.01 1,661,401 P=1,057.94 1,267,506 P=1,055.41The average share prices at dates of exercise of stock options as in 2012, 2011 and 2010 amounted toP=1,213.00, P=1,005.55 and P=948.65, respectively.As of December 31, 2012, 2011 and 2010, the weighted average remaining contractual life of optionsoutstanding is 4.68 years, 5.70 years and 6.65 years, respectively.The following assumptions were used to determine the fair value of the stock options at effective grant dates:October 1,2009August 1,2008May 17,2007March 24,2006July 1,2004April 4,2003Share price P=995.00 P=1,130.00 P=1,340.00 P=930.00 P=835.00 P=580.00Exercise price P=993.75 P=1,064.00 P=1,270.50 P=854.75 P=840.75 P=547.00Expected volatility 48.49% 31.73% 38.14% 29.51% 39.50% 34.64%Option life 10 years 10 years 10 years 10 years 10 years 10 yearsExpected dividends 6.43% 6.64% 4.93% 5.38% 4.31% 2.70%Risk-free interest rate 8.08% 9.62% 7.04% 10.30% 12.91% 11.46%The expected volatility measured at the standard deviation of expected share price returns was based onanalysis of share prices for the past 365 days. Cost of share-based payments for the years endedDecember 31, 2012, 2011 and 2010 amounted to P=11.50 million, P=49.34 million and P=104.79 million,respectively (see Note 16.5).18.2 Pension PlanThe Globe Group has a funded, noncontributory, defined benefit pension plan covering substantially all of itsregular employees. The benefits are based on years of service and compensation on the last year ofemployment.The components of pension expense (included in staff costs under “General, selling and administrativeexpenses”) in the consolidated statements of comprehensive income are as follows:March 24, 2006 749,500 P=854.75 per share 50% of the options become exercisablefrom March 24, 2008 to March 23,2016; the remaining 50% becomeexercisable from March 24, 2009 toMarch 23, 2016May 17, 2007 604,000 P=1,270.50 per share 50% of the options become exercisablefrom May 17, 2009 to May 16, 2017,the remaining 50% becomeexercisable from May 17, 2010 toMay 16, 2017P=292.12P=375.89Trinomial optionpricing modelTrinomial optionpricing model2012 2011 2010(In Thousand Pesos)Current service cost P=282,062 P=199,555 P=245,766Interest cost on benefit obligation 165,541 150,463 181,638Expected return on plan assets (235,140) (259,605) (232,747)Net actuarial losses (gains) 72,574 (26) 47,110Total pension expense P=285,037 P=90,387 P=241,767August 1, 2008 635,750 P=1,064.00 per share 50% of the options become exercisablefrom August 1, 2010 to July 31, 2018,the remaining 50% becomeexercisable from August 1, 2011 toJuly 31, 2018P=305.03Trinomial optionpricing modelActual return on plan assets P=197,785 P=140,792 P=234,071October 1, 2009 298,950 P=993.75 per share 50% of the options become exercisablefrom October 1, 2011 to September30, 2019, the remaining 50% becomeexercisable from October 1, 2012 toSeptember 30, 2019P=346.79Trinomial optionpricing modelThe exercise price is based on the average quoted market price for the last 20 trading days preceding theapproval date of the stock option grant.188 189


Globe 2012 annual reportfinancial reportThe funded status for the pension plan of Globe Group is as follows:2012 2011 2010(In Thousand Pesos)Present value of benefit obligation P=3,434,339 P=2,720,266 P=2,186,228Fair value of plan assets (2,593,117) (2,376,680) (2,355,730)841,222 343,586 (169,502)Unrecognized net actuarial losses (1,512,304) (1,215,686) (781,014)Asset recognized in the consolidated statementsof financial position* (P=671,082) (P=872,100) (P=950,516)* This amount consists of P=672.57 million, P=873.26 million and P=951.08 million included in “Other noncurrent assets”account and P=1.49 million, P=1.16 million and P=0.57 million included in “Accrued expenses” under “Accounts payable andaccrued expenses” account as of December 31, 2012, 2011 and 2010, respectively (see Note 12).The following tables present the changes in the present value of defined benefit obligation and fair value of planassets:Present value of defined benefit obligation2012 2011 2010(In Thousand Pesos)Balance at beginning of year P=2,720,266 P=2,186,228 P=2,079,316Current service cost 282,062 199,555 245,766Interest cost 165,541 150,463 181,638Benefits paid (116,063) (90,945) (167,620)Transfers out (20,217) (9,334) –Actuarial losses (gains) 402,750 284,299 (152,872)Balance at end of year P=3,434,339 P=2,720,266 P=2,186,228Fair value of plan assets2012 2011 2010(In Thousand Pesos)Balance at beginning of year P=2,376,680 P=2,355,730 P=2,334,772Expected return 235,140 259,605 232,747Contributions 92,441 16,151 137,287Benefits paid (116,063) (90,945) (167,620)Asset transfer (20,217) (9,334) –Actuarial gain (losses) 25,136 (154,527) (181,456)Balance at end of year P=2,593,117 P=2,376,680 P=2,355,730The recommended contribution for the Globe Group retirement fund for the year 2013 amounted toP=118.93 million. This amount is based on the Globe Group’s actuarial valuation report as ofDecember 31, 2012.As of December 31, 2012, 2011 and 2010, the allocation of the fair value of the plan assets of the Globe Groupfollows:2012 2011 2010Investments in fixed income securities:Corporate 15.06% 14.16% 12.66%Government 24.75% 28.85% 20.96%Investments in equity securities 58.48% 54.48% 63.89%Others 1.71% 2.51% 2.49%The assumptions used to determine pension benefits of Globe Group are as follows:2012 2011 2010Discount rate 6.25% 6.25% 8.50%Expected rate of return on plan assets 10.00% 10.00% 10.00%Salary rate increase 4.50% 4.50% 6.00%In 2012, 2011 and 2010, the Globe Group applied a single weighted average discount rate that reflects theestimated timing and amount of benefit payments.The overall expected rate of return on plan assets is determined based on the market prices prevailing on thatdate, applicable to the period over which the obligation is to be settled.Amounts for the current and previous four years are as follows:2012 2011 2010 2009 2008(In Thousand Pesos)Present value of defined benefitobligation P=3,434,339 P=2,720,266 P=2,186,228 P=2,079,316 P=1,319,742Fair value of plan assets 2,593,117 2,376,680 2,355,730 2,334,772 2,344,764Deficit (surplus) 841,222 343,586 (169,502) (255,456) (1,025,022)Experience adjustments:Gain (loss) on plan liabilities (P=89,538) P=343,102 (P=23,901) P=18,390 (P=51,340)Gain (loss) on plan assets 25,136 (154,527) (181,456) (114,327) (272,539)19. Interest IncomeInterest income is earned from the following sources:Notes 2012 2011 2010(In Thousand Pesos)Short-term placements 30 P=316,894 P=188,557 P=90,889Cash in banks 30 17,097 8,025 23,121Loans receivable 11, 16.3BTI 138,385 – –GGRP 76,273 76,056 78,766BHI 24,818 24,750 25,756Others 6,384 – –P=579,851 P=297,388 P=218,53220. Other IncomeThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Foreign exchange gain - net 22, 28.2.1.2 P=318,334 P=– P=465,373Lease income 25.4, 25.1.b 172,499 172,499 P=173,261Gain on derivative instruments 28 – 25,495 –Others 225,538 376,774 218,307P=716,371 P=574,768 P=856,941The peso to US dollar exchange rates amounted to P=41.078, P=43.919 and P=43.811 as of December 31, 2012,2011 and 2010, respectively.In 2011, net foreign exchange loss amounting to P=308.65 million was presented as part of “Financing costs”account in the consolidated statements of comprehensive income (see Note 22).The Globe Group’s net foreign currency-denominated liabilities amounted to USD161.22 million,USD188.97 million and USD267.77 million as of December 31, 2012, 2011 and 2010, respectively(see Note 28.2.1.2).190 191


Globe 2012 annual reportfinancial reportThese combinations of net liability movements and peso rate depreciation/appreciation resulted in foreignexchange loss in 2011 and foreign exchange gains in 2010, respectively (see Note 22).The “Others” account includes insurance claims and other items that are individually immaterial.21. General, Selling and Administrative ExpensesThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Selling, advertising and promotions P=6,440,554 P=4,756,425 P=4,268,843Staff costs 16.5, 18 6,428,508 5,809,831 5,088,990Professional and other contracted services 16 5,193,217 4,214,284 3,587,635Utilities, supplies and other administrativeexpenses 5 4,260,773 3,804,762 3,338,608Repairs and maintenance 16 3,672,038 3,522,778 3,272,514Rent 16, 25 3,153,505 2,830,382 2,808,906Taxes and licenses 1,595,842 1,380,270 1,175,417Insurance and security services 1,330,648 1,381,633 1,701,258Courier, delivery and miscellaneous expenses 1,055,375 1,116,181 984,274Others 473,868 487,917 465,659P=33,604,328 P=29,304,463 P=26,692,104The “Others” account includes various other items that are individually immaterial.22. Financing CostsThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Interest expense - net* 7, 14 P=2,086,078 P=2,059,660 P=1,981,785Swap and other financing costs - net 183,007 211,404 58,321Loss on derivative instruments 28 74,810 – 28,295Foreign exchange loss - net 20, 28.2.1.2 – 308,650 –P=2,343,895 P=2,579,714 P=2,068,401*This account is net of the amount capitalized borrowing costs (see Note 7).In 2012 and 2010, net foreign exchange gain amounting to P=318.33 million and P=465.37 million, respectivelywere presented as part of “Other income - net” account in the consolidated statements of comprehensiveincome (see Note 20).In 2011, gain on derivative instruments amounting to P=25.50 million was presented as part of “Other income -net” account in the consolidated statements of comprehensive income (see Note 20).Interest expense - net is incurred on the following:Notes 2012 2011 2010(In Thousand Pesos)Long-term debt 14 P=1,657,862 P=1,762,501 P=1,658,291Accretion expense 15, 25.4 168,707 167,445 162,002Amortization of debt issuance cost 14 103,497 116,618 110,570Short term notes payable 14 82,047 3,823 39,237Others 73,965 9,273 11,685P=2,086,078 P=2,059,660 P=1,981,78523. Impairment Losses and OthersThis account consists of:Notes 2012 2011 2010(In Thousand Pesos)Impairment loss on:Receivables 4, 6, 28.2.2 P=1,377,317 P=1,599,967 P=1,285,533Property and equipment and intangibleassets 259,262 128,614 63,126Provisions for (reversal of):Inventory obsolescence and marketdecline 5 170,678 237,918 42,115Other claims and assessments 13 56,327 (47,916) 138,760P=1,863,584 P=1,918,583 P=1,529,53424. Income TaxThe significant components of the deferred income tax assets and liabilities of the Globe Group represent thedeferred income tax effects of the following:2012 2011 2010(In Thousand Pesos)Deferred income tax assets on:Allowance for impairment losses on receivables P=1,081,543 P=1,033,282 P=737,311Unearned revenues already subjected to income tax 730,079 760,762 744,504ARO 440,857 406,953 374,106Accumulated impairment losses on propertyand equipment 183,072 126,247 98,389Accrued rent expense under PAS 17 109,237 112,842 120,753Inventory obsolescence and market decline 103,196 98,752 43,265Accrued vacation leave 103,110 90,788 84,168Unrealized loss on derivative transactions 72,070 77,056 67,793Provisions for claims and assessments 68,496 56,632 73,592Cost of share-based payments 44,236 13,208 5,819NOLCO (see Note 3.2.7) 15,005 1,012 13,499Allowance for doubtful accounts for long-outstandingnet advances 12,654 8,980 –MCIT (see Note 3.2.7) 2,176 – 954Unrealized foreign exchange losses 1,108 125 125Others 25,672 – –2,992,511 2,786,639 2,364,278Deferred income tax liabilities on:Excess of accumulated depreciation andamortization of Globe Telecom equipment fortax reporting (a) over financial reporting (b) 2,946,566 4,382,211 4,799,099Undepreciated capitalized borrowing costs alreadyclaimed as deduction for tax reporting 1,553,478 1,324,137 1,166,689Unrealized foreign exchange gain 144,476 167,834 279,037Prepaid pension 24,981 33,658 23,059Unamortized discount on noninterest bearing liability 7,910 22,277 39,718Interest accretion 6,382 – –Customer contracts of acquired company 858 4,870 6,572Others 15,390 15,396 –4,700,041 5,950,383 6,314,174Net deferred income tax liabilities P=1,707,530 P=3,163,744 P=3,949,896(a) Sum-of-the-years digit method(b) Straight-line methodNet deferred tax assets and liabilities presented in the consolidated statements of financial position on a netbasis by entity are as follows:192 193


Globe 2012 annual reportfinancial report2012 2011 2010(In Thousand Pesos)Net deferred tax assets* P=765,585 P=765,670 P=670,594Net deferred tax liabilities (Globe Telecom) 2,473,115 3,929,414 4,620,490*2012 and 2011 consist of Innove, GXI and EGG Group; 2010 consists of Innove and EGG Group.The details of NOLCO and MCIT of Innove, GXI, and EGG and the related tax effects are as follows(in thousand pesos):Tax Effect ofInception Year MCIT NOLCO NOLCO Expiry Year2011 P=92,676 P=1,236 P=371 20142010 16,101 53,391 16,144 2013P=108,777 P=54,627 P=16,515GXI’s NOLCO amounting to P=34.87 million expired in 2011. GTI’s NOLCO amounting toP=0.05 million expired in 2012.The reconciliation of the provision for income tax at statutory tax rate and the actual current and deferredprovision for income tax follows:2012 2011 2010(In Thousand Pesos)Provision at statutory income tax rate P=2,930,503 P=4,229,121 P=4,211,458Add (deduct) tax effects of:Equity in net losses of joint ventures 25,075 8,203 890Deferred tax on unexercised stock options and basisdifferences on deductible and reported stockcompensation expense (54,524) 5,324 47,806Income subjected to lower tax rates (823,505) (517,986) (51,205)Others 833,783 540,602 84,609Actual provision for income tax P=2,911,332 P=4,265,264 P=4,293,558The current provision for income tax includes the following:2012 2011 2010(In Thousand Pesos)RCIT or MCIT whichever is higher P=4,291,409 P=5,011,849 P=4,166,153Final tax 64,290 37,630 21,472P=4,355,699 P=5,049,479 P=4,187,625The corporate tax rate is 30% in 2012, 2011 and 2010.Globe Telecom and Innove are entitled to certain tax and nontax incentives and have availed of incentives fortax and duty-free importation of capital equipment for their services under their respective franchises.25. Agreements and Commitments25.1 Lease Commitments25.1.1 Operating lease commitments(a) Globe Group as lesseeGlobe Group leases certain premises for some of its telecommunications facilities and equipment andfor most of its business centers and network sites. The operating lease agreements are for periodsranging from one to 10 years from the date of the contracts and are renewable under certain terms andconditions. The agreements generally require certain amounts of deposit and advance rentals, whichare shown as part of the “Prepayment and other current assets” and “Other noncurrent assets”accounts in the consolidated statements of financial position (see Notes 6 and 11). The Globe Groupalso has short term renewable leases on transmission cables and equipment. The Globe Group’srentals incurred on these various leases (included in “General, selling and administrative expenses”account in the consolidated statements of comprehensive income) amounted to P=3,153.51 million,P=2,830.38 million and P=2,808.91 million for the years ended December 31, 2012, 2011 and 2010,respectively (see Note 21).As of December 31, 2012, the future minimum lease payments under these operating leases are asfollows (in thousand pesos):Not later than one yearP=786,356After one year but not more than five years 4,799,558After five years 3,337,817P=8,923,731(b) Globe Group as lessorGlobe Telecom and Innove have certain lease agreements on equipment and office spaces. Theoperating lease agreements are for periods ranging from one (1) to fourteen (14) years from the date ofcontracts. These include Globe Telecom’s lease agreement with C2C Pte. Ltd. (C2C) (see Note 25.4).Total lease income amounted to P=172.50 million for the years ended December 31, 2012, 2011 and2010, respectively (included in “Other income” account in the consolidated statements ofcomprehensive income).The future minimum lease receivables under these operating leases are as follows (in thousandpesos):Within one yearP=146,615After one year but not more than five years 329,884P=476,49925.1.2 Finance lease commitmentsGlobe Group as lesseeThe Globe Group engaged the services of various suppliers for the upgrade of its wireless, data andtelephony network. In partnership with equipment and service providers and the appointment of a projectand program manager, Globe Group will undertake a transformation upgrade and overhaul of its businesssupport systems within the USD790.00 million modernization project.Part of the managed service engagement with the service provider is a lease for hardware infrastructureand information equipment valued over the seven-year term of the lease at P=785.00 million. Total leasepayments as of December 31, 2012, which is equivalent to one year advance lease, amounted toP=112.00 million. The managed service engagement has terms of renewal and purchase options, amongothers.Future minimum lease payments under finance leases with the present value of the net minimum leasepayments as of December 31, 2012 are as follows (in thousand pesos):MinimumpaymentsPresent value ofpaymentsWithin one year P=112,171 P=99,941After one year but not more than five years 448,684 417,878More than five years 224,342 220,267Total minimum lease payments 785,197 738,086Less amounts representing finance charges (47,111) –Present value of minimum lease payments P=738,086 P=738,086In addition, total payments to service providers based on the seven-year agreement for the maintenance ofservers, which includes application development and maintenance, service design, managed networkservices, office automation or end-user computing, service desk services and business supports systemsamounted to P=49.00 million as of December 31, 2012.194 195


Globe 2012 annual reportfinancial report25.2 Agreements and Commitments with Other CarriersGlobe Telecom and Innove have existing international telecommunications service agreements with variousforeign administrations and interconnection agreements with local telecommunications companies for theirvarious services. Globe also has international roaming agreements with other foreign operators, which allow itssubscribers access to foreign networks. The agreements provide for sharing of toll revenues derived from themutual use of telecommunication networks.25.3 Arrangements and Commitments with SuppliersGlobe Telecom and Innove have entered into agreements with various suppliers for the development orconstruction, delivery and installation of property and equipment. Under the terms of these agreements,advance payments are made to suppliers and delivery, installation, development or construction commencesonly when purchase orders are served. While the development or construction is in progress, project costs areaccrued based on the billings received. Billings are based on the progress of the development or constructionand advance payments are being applied proportionately to the milestone billings. When development orconstruction and installation are completed and the property and equipment is ready for service, the balance ofthe value of the related purchase orders is accrued.The consolidated accrued project costs as of December 31, 2012, 2011 and 2010 included in the “Accountspayable and accrued expenses” account in the consolidated statements of financial position amounted toP=11,400.19 million, P=6,906.94 million and P=8,638.12 million, respectively (see Note 12). As ofDecember 31, 2012, the consolidated expected future billings on the unaccrued portion of purchase ordersissued amounted to P=35,279.00 million. The settlement of these liabilities is dependent on the payment termsand project milestones agreed with the suppliers and contractors. As of December 31, 2012, the unappliedadvances made to suppliers and contractors relating to purchase orders issued amounted to P=8,815.53 million(see Note 6).25.4 Agreements with C2C/PacnetIn 2001, Globe Telecom signed a cable equipment supply agreement with C2C as the supplier. In March 2002,Globe Telecom as lessor entered into an equipment lease agreement for the said equipment with GB21 HongKong Limited (GB21).Subsequently, GB21, in consideration of C2C’s agreement to assume all payment obligations pursuant to thelease agreement, assigned all its rights, obligations and interest in the equipment lease agreement to C2C. Asa result of the said assignment of payables by GB21 to C2C, Globe Telecom’s liability arising from the cableequipment supply agreement with C2C was effectively converted into a noninterest- bearing long-term obligationaccounted for at net present value under PAS 39 starting 2005.In January 2003, Globe Telecom received advance lease payments from C2C for its use of a portion of GlobeTelecom’s cable landing station facilities. Based on the amortization schedule, Globe Telecom recognizedlease income amounting to P=12.26 million for the years ended December 31, 2012, 2011 and 2010.On November 17, 2009, Globe Telecom and Pacnet Cable Ltd. (Pacnet), formerly C2C, signed a memorandumof agreement (MOA) to terminate and unwind their Landing Party Agreement dated August 15, 2000 (LPA). TheMOA further requires Globe Telecom, being duly licensed and authorized by the NTC to land the C2C CableNetwork in the Philippines and operate the C2C Cable Landing Station (CLS) in Nasugbu, Batangas,Philippines, to transfer to Pacnet’s designated qualified partner, the license of the C2C CLS, the CLS, a portionof the property on which the CLS is situated, certain equipment and associated facilities thereof.In return, Pacnet will compensate Globe Telecom in cash and by way of C2C cable capacities deliverable uponcompletion of certain closing conditions. The MOA also provided for novation of abovementioned equipmentsupply and lease agreements and reciprocal options for Globe Telecom to purchase future capacities fromPacnet and Pacnet to purchase backhaul and ducts from Globe Telecom at agreed prices.In the second quarter of 2010, the specific equipment, portion of the property and facilities, and the liabilitiesassociated with the transfer were identified, classified and shown separately in the consolidated statement offinancial position as “Assets classified as held for sale” and “Liabilities directly associated with the assetsclassified as held for sale”.As of December 31, 2012, the Globe Group retains the classification of its non-current assets as held for sale.Globe Group expects no changes in the terms of agreement and on the valuation as the considerations havealready been fixed, and remains to be committed to its plan to sell the assets. The closing documents arecurrently being finalized and expected to be fully executed within 2013.As of December 31, 2012, 2011 and 2010, assets classified as held for sale amounted to P=778.32 million. As ofDecember 31, 2012, 2011 and 2010, liabilities directly associated with assets classified as held for saleamounted to P=459.76 million, P=583.37 million and P=697.73 million, respectively.25.5 Agreement with BHIOn August 11, 2009, Globe Telecom signed a credit facility agreement with BHI amounting to P=750.00 million.As of December 31, 2012 and 2011, the total drawdown of BHI amounted to P=295.00 million (see Note 11). Theloan is payable in one full payment, five years from the date of initial drawdown, with a prepayment option inwhole or in part on an interest payment date. Interest is at the rate of 8.275%, payable semi-annually in arrearsand the loan is secured by a pledge and chattel mortgage agreement. As of December 31, 2012, 2011 and2010, the undrawn balance of the credit facility is P=455.00 million. Interest income amounted to P=24.82 million,P=24.75 million and P=25.76 million in 2012, 2011 and 2010, respectively (see Note 19).25.6 Agreement with STIIn 2009, STI agreed to sell to Globe Telecom its own capacity in a certain cable system. In 2009 also, GlobeTelecom agreed to sell to STI capacities that it owns in a certain cable system (see Note 16.1). In March 2011,the final agreements were executed between Globe Telecom and STI whereby Globe Telecom conveyed andtransferred ownership of certain IRU of certain international cables systems in exchange for IRUs of certaincables systems of STI. The assets received were booked at its fair value amounting to P=120.19 million.25.7 Construction Maintenance Agreement for South-East Asia Japan Cable System (SJC)In April 2011, the global consortium of telecommunication companies formed to build and operate the South-East Asia Japan Cable (SJC) system officially started the construction of the project that will link Brunei, ChinaMainland, Hong Kong, Philippines, Japan, and Singapore with options to extend to Thailand. The SJCconsortium is composed of Globe Telecom and nine other international carriers. Globe Telecom’s estimatedinvestment for this project amounts to USD63.60 million and total expenditures incurred was at 74% and 20% asof December 31, 2012 and 2011, respectively (see Note 7).25.8 Agreement with BTIOn July 26, 2012, Globe Telecom and BTI executed an agreement to jointly use BTI frequencies for theirrespective telecommunications services. Globe Telecom agreed to pay BTI a capacity provision fee per annumand grant access to each other’s network, resources and facilities to enable joint and efficient use of thefrequency.On October 1, 2012, the National Telecommunications Commission provisionally approved the joint use byGlobe Telecom and BTI the frequencies assigned to BTI. The joint use agreement will allow Globe Telecom toaddress the increasing demand for voice, SMS and mobile data services; and for BTI to be able to offer mobiletelecommunications services nationwide. The Commission imposed conditions to both parties, which includesthe continuous payment of annual spectrum usage fee (SUF) imposed by the Commission to both parties, andwhere Globe Telecom shall improve and maintain the required quality service in order to continue the joint useof the assigned frequencies.26. ContingenciesOn July 23, 2009, the NTC issued NTC Memorandum Circular (MC) No. 05-07-2009 (Guidelines on Unit ofBilling of Mobile Voice Service). The MC provides that the maximum unit of billing for the cellular mobiletelephone service (CMTS) whether postpaid or prepaid shall be six (6) seconds per pulse. The rate for the firsttwo (2) pulses, or equivalent if lower period per pulse is used, may be higher than the succeeding pulses torecover the cost of the call set-up. Subscribers may still opt to be billed on a one (1) minute per pulse basis orto subscribe to unlimited service offerings or any service offerings if they actively and knowingly enroll in thescheme.On December 28, 2010, the CA rendered its decision declaring null and void and reversing the decisions of theNTC in the rates applications cases for having been issued in violation of Globe and the other carrier’sconstitutional and statutory right to due process. However, while the decision is in Globe’s favor, there is aprovision in the decision that NTC did not violate the right of petitioners to due process when it declared viacircular that the per pulse billing scheme shall be the default.Last January 21, 2011, Globe and two other telecom carriers, filed their respective Motions for PartialReconsideration (MR) on the pronouncement that “the Per Pulse Billing Scheme shall be the default”. The MRis pending resolution as of February 5, 2013.196 197


Globe 2012 annual reportfinancial reportThe Globe Group is contingently liable for various claims arising in the ordinary conduct of business and certaintax assessments which are either pending decision by the courts or are being contested, the outcome of whichare not presently determinable. In the opinion of management and legal counsel, the possibility of outflow ofeconomic resources to settle the contingent liability is remote.27. Earnings Per ShareThe Globe Group’s earnings per share amounts were computed as follows:2012 2011 2010(In Thousand Pesos and Number of Shares,Except Per Share Figures)Net income attributable to common shareholders forbasic earnings per share P=6,823,867 P=9,796,510 P=9,699,235Add dividends on preferred shares 33,145 35,295 45,399Net income attributable to shareholders for dilutedearnings per share 6,857,012 9,831,805 9,744,634Weighted average number of shares for basic earningsper share 132,394 132,349 132,343Dilutive shares arising from:Stock options 136 40 42Convertible preferred shares 699 882 890Adjusted weighted average number of common stock fordiluted earnings per share 133,229 133,271 133,275Basic earnings per share P=51.54 P=74.02 P=73.29Diluted earnings per share P=51.47 P=73.77 P=73.1228. Capital and Risk Management and Financial Instruments28.1 GeneralThe Globe Group adopts an expanded corporate governance approach in managing its business risks. AnEnterprise Risk Management Policy was developed to systematically view the risks and to provide a betterunderstanding of the different risks that could threaten the achievement of the Globe Group’s mission, vision,strategies, and goals, and to provide emphasis on how management and employees play a vital role inachieving the Globe Group’s mission of transforming and enriching lives through communications.The policies are not intended to eliminate risk but to manage it in such a way that opportunities to create valuefor the stakeholders are achieved. Globe Group risk management takes place in the context of the normalbusiness processes such as strategic planning, business planning, operational and support processes.The application of these policies is the responsibility of the BOD through the Chief Executive Officer. The ChiefFinancial Officer and concurrent Chief Risk Officer champions and oversees the entire risk managementfunction. Risk owners have been identified for each risk and they are responsible for coordinating andcontinuously improving risk strategies, processes and measures on an enterprise-wide basis in accordance withestablished business objectives.The risks are managed through the delegation of management and financial authority and individualaccountability as documented in employment contracts, consultancy contracts, letters of authority, letters ofappointment, performance planning and evaluation forms, key result areas, terms of reference and otherpolicies that provide guidelines for managing specific risks arising from the Globe Group’s business operationsand environment.The Globe Group continues to monitor and manage its financial risk exposures according to its BOD approvedpolicies.The succeeding discussion focuses on Globe Group’s capital and financial risk management.28.2 Capital and Financial Risk Management Objectives and PoliciesCapital includes convertible preference shares and equity attributable to equity holders of the parent.The primary objective of the Globe Group’s capital management is to ensure that it maintains a strong creditrating and healthy capital ratios in order to support its business and maximize shareholder value.The Globe Group monitors its use of capital using leverage ratios, such as debt to total capitalization and makesadjustments to it in light of changes in economic conditions and its financial position.The Globe Group is not subject to externally imposed capital requirements. The ratio of debt to totalcapitalization for the years ended December 31, 2012, 2011 and 2010 was at 57%, 50% and 52%, respectively.The main purpose of the Globe Group’s financial risk management is to fund its operations and capitalexpenditures. The main risks arising from the use of financial instruments are market risk, credit risk andliquidity risk. The Globe Group also enters into derivative transactions, the purpose of which is to manage thecurrency and interest rate risk arising from its financial instruments.Globe Telecom’s BOD reviews and approves the policies for managing each of these risks. The Globe Groupmonitors market price risk arising from all financial instruments and regularly reports financial managementactivities and the results of these activities to the BOD.The Globe Group’s risk management policies are summarized below:28.2.1 Market RiskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate becauseof changes in market prices. Globe Group is mainly exposed to two types of market risk: interest rate riskand currency risk.Financial instruments affected by market risk include loans and borrowings, AFS investments, andderivative financial instruments.The sensitivity analyses in the following sections relate to the position as at December 31, 2012, 2011 and2010. The analyses exclude the impact of movements in market variables on the carrying value of pension,provisions and on the non-financial assets and liabilities of foreign operations.The following assumptions have been made in calculating the sensitivity analyses:The statement of financial position sensitivity relates to derivatives.The sensitivity of the relevant income statement item is the effect of the assumed changes inrespective market risks. This is based on the financial assets and financial liabilities held as atDecember 31, 2012, 2011 and 2010 including the effect of hedge accounting.The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges forthe effects of the assumed changes in the underlying.28.2.1.1 Interest Rate RiskThe Globe Group’s exposure to market risk from changes in interest rates relates primarily to theGlobe Group’s long-term debt obligations. Please refer to table presented under 28.2.3 Liquidity Risk.Globe Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt, targetinga ratio of between 31-62% fixed rate USD debt to total USD debt, and between 44-88% fixed rate PHPdebt to total PHP debt. To manage this mix in a cost-efficient manner, Globe Group enters into interestrate swaps, in which Globe Group agrees to exchange, at specified intervals, the difference betweenfixed and variable interest amounts calculated by reference to an agreed-upon notional principalamount.After taking into account the effect of currency and interest rate swaps, 31% and 59%, 39% and 58%,and 32% and 65% of the Globe Group’s USD and PHP borrowings as of December 31, 2012, 2011and 2010, respectively, are at a fixed rate of interest.198 199


Globe 2012 annual reportfinancial reportThe following tables demonstrate the sensitivity of income before tax to a reasonably possible changein interest rates after the impact of hedge accounting, with all other variables held constant.Increase/decreasein basis points2012Effect on incomebefore income taxEffect on equityIncrease (decrease) Increase (decrease)(In Thousand Pesos)USD +35bps (P=4,462) P=4,624-35bps 4,457 (3,198)PHP +100bps (71,844) 8,244-100bps 66,850 (7,761)Increase/decreasein basis points2011Effect on incomebefore income taxEffect on equityIncrease (decrease) Increase (decrease)(In Thousand Pesos)USD +35bps (P=2,599) P=193-35bps 2,570 (193)PHP +100bps (151,509) 145,932-100bps 151,504 (150,577)Increase/decreasein basis points2010Effect on incomebefore income taxEffect on equityIncrease (decrease) Increase (decrease)(In Thousand Pesos)USD +35bps (P=14,607) P=7,086-35bps 14,622 (7,009)PHP +100bps (134,008) 153,121-100bps 133,980 (160,664)28.2.1.2 Foreign Exchange RiskThe Globe Group’s foreign exchange risk results primarily from movements of the PHP against theUSD with respect to USD-denominated financial assets, USD-denominated financial liabilities andcertain USD-denominated revenues. Majority of revenues are generated in PHP, while substantially allof capital expenditures are in USD. In addition, 13%, 11% and 15% of debt as of December 31, 2012,2011 and 2010, respectively, are denominated in USD before taking into account any swap andhedges.Information on the Globe Group’s foreign currency-denominated monetary assets and liabilities andtheir PHP equivalents are as follows:USDollar2012 2011 2010PesoUS PesoUS PesoEquivalent Dollar Equivalent Dollar Equivalent(In Thousands)AssetsCash and cash equivalents $41,508 P=1,705,082 $57,337 P=2,517,883 $41,573 P=1,821,337Receivables 73,127 3,003,898 65,555 2,879,122 58,257 2,552,308Long-term notes receivable 100,302 4,120,226 1,590 69,831 – –214,937 8,829,206 124,482 5,466,836 99,830 4,373,645LiabilitiesAccounts payable and accruedexpenses 182,505 7,496,940 191,159 8,395,498 197,586 8,656,460Short-term notes payable 50,000 2,053,900 40,000 1,756,760 – –Long-term debt 143,648 5,900,752 82,290 3,614,095 170,011 7,448,357376,153 15,451,592 313,449 13,766,353 367,597 16,104,817Net foreign currencydenominatedliabilities $161,216 P=6,622,386 $188,967 P=8,299,517 $267,767 P=11,731,172*This table excludes derivative transactions disclosed in Note 28.3The following tables demonstrate the sensitivity to a reasonably possible change in the PHP to USDexchange rate, with all other variables held constant, of the Globe Group’s income before tax (due tochanges in the fair value of financial assets and liabilities).Increase/decreasein Peso toUS Dollar exchange rate2012Effect on income before income Effect on equitytax Increase (decrease)Increase (decrease)(In Thousand Pesos)+.40 (P=64,493) P=5-.40 64,493 (5)Increase/decreasein Peso toUS Dollar exchange rate2011Effect on income before income Effect on equitytax Increase (decrease)Increase (decrease)(In Thousand Pesos)+.40 (P=74,558) (P=12)-.40 74,558 12Increase/decreasein Peso toUS Dollar exchange rate2010Effect on income before income Effect on equitytax Increase (decrease)Increase (decrease)(In Thousand Pesos)+.40 (P=106,051) (P=14,181)-.40 106,051 14,181The movement on the effect on income before income tax is a result of a change in the fair value ofderivative financial instruments not designated in a hedging relationship and monetary assets andliabilities denominated in US dollars, where the functional currency of the Group is Philippine Peso.Although the derivatives have not been designated in a hedge relationship, they act as a commercialhedge and will offset the underlying transactions when they occur.The movement in equity arises from changes in the fair values of derivative financial instrumentsdesignated as cash flow hedges.In addition, the consolidated expected future payments on foreign currency-denominatedpurchase orders related to capital projects amounted to USD537.49 million, USD203.47 millionand USD274.51 million as of December 31, 2012, 2011 and 2010, respectively (see Note 25.3).The settlement of these liabilities is dependent on the achievement of project milestones andpayment terms agreed with the suppliers and contractors. Foreign exchange exposure assuminga +/-40 centavos in 2012, 2011 and 2010 movement in PHP to USD rate on commitments amounted toP=215.00 million, P=81.39 million and P=109.80 million gain or loss, respectively.The Globe Group’s foreign exchange risk management policy is to maintain a hedged financialposition, after taking into account expected USD flows from operations and financing transactions.Globe Telecom enters into short-term foreign currency forwards and long-term foreign currency swapcontracts in order to achieve this target.28.2.2 Credit RiskApplications for postpaid service are subjected to standard credit evaluation and verification procedures.The Credit and Billing Management of the Globe Group continuously reviews credit policies and processesand implements various credit actions, depending on assessed risks, to minimize credit exposure.Receivable balances of postpaid subscribers are being monitored on a regular basis and appropriate credittreatments are applied at various stages of delinquency. Likewise, net receivable balances from carriers oftraffic are also being monitored and subjected to appropriate actions to manage credit risk. The maximumcredit exposure relates to receivables net of any allowances provided.With respect to credit risk arising from other financial assets of the Globe Group, which comprise cash andcash equivalents, short-term investments, AFS financial investments and certain derivative instruments, theGlobe Group’s exposure to credit risk arises from the default of the counterparty, with a maximum exposureequal to the carrying amount of these instruments. The Globe Group’s investments comprise short-termbank deposits and government securities. Credit risk from these investments is managed on a Globe200 201


Globe 2012 annual reportfinancial reportGroup basis. For its investments with banks, the Globe Group has a counterparty risk management policywhich allocates investment limits based on counterparty credit rating and credit risk profile.The Globe Group makes a quarterly assessment of the credit standing of its investment counterparties, andallocates investment limits based on size, liquidity, profitability, and asset quality. For investments ingovernment securities, these are denominated in local currency and are considered to be relatively riskfree.The usage of limits is regularly monitored. For its derivative counterparties, the Globe Group dealsonly with counterparty banks with investment grade ratings and large local banks. Credit ratings ofderivative counterparties are reviewed quarterly.Following are the Globe Group exposures with its investment counterparties for cash and cash equivalentsas of December 31:2012 2011 2010Local bank deposits 36% 53% 52%Onshore foreign bank 36% 40% 16%Special deposit account 20% 7% 29%Offshore bank deposit 8% – 3%The Globe Group has not executed any credit guarantees in favor of other parties. There is also minimalconcentration of credit risk within the Globe Group. Credit exposures from subscribers and carrier partnerscontinue to be managed closely for possible deterioration. When necessary, credit management measuresare proactively implemented and identified collection risks are being provided for accordingly. Outstandingcredit exposures from financial instruments are monitored daily and allowable exposures are reviewedquarterly.The tables below show the aging analysis of the Globe Group’s receivables as of December 31.2012Neither Past Past Due But Not Impaired ImpairedDue Nor Less than 31 to 60 61 to 90 More than FinancialImpaired 30 days days Days 90 days Assets Total(In Thousand Pesos)Wireless receivables:Consumer P=1,074,174 P=1,036,145 P=485,308 P=277,761 P=646,642 P=1,102,113 P=4,622,143Key corporate accounts 1,278 215,499 216,293 185,195 407,679 138,754 1,164,698Other corporations andSmall and MediumEnterprises (SME) 189,558 202,800 107,798 59,396 377,067 311,587 1,248,2061,265,010 1,454,444 809,399 522,352 1,431,388 1,552,454 7,035,047Wireline receivables:Consumer 248,568 244,694 134,382 66,115 71,340 1,492,204 2,257,303Key corporate accounts 82,666 179,561 321,359 227,458 797,021 265,827 1,873,892Other corporations andSME 56,449 42,032 31,786 16,209 16,190 151,087 313,753387,683 466,287 487,527 309,782 884,551 1,909,118 4,444,948Other trade receivables – 28,310 – – – – 28,310Traffic receivables:Foreign 2,107,169 – – – – 164,302 2,271,471Local 296,453 – – – – 43,434 339,8872,403,622 – – – – 207,736 2,611,358Other receivables 1,511,217 – – – – 12,629 1,523,846Total P=5,567,532 P=1,949,041 P=1,296,926 P=832,134 P=2,315,939 P=3,681,937 P=15,643,5092011Neither Past Past Due But Not Impaired ImpairedDue Nor Less than 31 to 60 61 to 90 More than FinancialImpaired 30 days days Days 90 days Assets Total(In Thousand Pesos)Wireless receivables:Consumer P=668,475 P=651,816 P=381,531 P=227,761 P=538,984 P=713,729 P=3,182,296Key corporate accounts 51,246 169,990 201,517 132,861 326,724 81,418 963,756Other corporations andSME 288,812 254,929 250,509 137,686 436,163 161,668 1,529,7671,008,533 1,076,735 833,557 498,308 1,301,871 956,815 5,675,819Wireline receivables:Consumer 241,871 240,349 117,342 57,601 50,462 1,782,483 2,490,108Key corporate accounts 54,660 160,792 310,180 205,290 676,864 214,751 1,622,537Other corporations andSME 62,354 82,425 31,998 24,815 41,776 192,679 436,047358,885 483,566 459,520 287,706 769,102 2,189,913 4,548,692Other trade receivables – 3,986 1,940 5,553 9,278 – 20,757Traffic receivables:Foreign 1,890,996 – – – – 165,261 2,056,257Local 163,068 – – – – 72,537 235,6052,054,064 – – – – 237,798 2,291,862Other receivables 951,302 – – – – 11,703 963,005Total P=4,372,784 P=1,564,287 P=1,295,017 P=791,567 P=2,080,251 P=3,396,229 P=13,500,1352010Neither Past Past Due But Not Impaired ImpairedDue Nor Less than 31 to 60 61 to 90 More than FinancialImpaired 30 days days Days 90 days Assets Total(In Thousand Pesos)Wireless receivables:Consumer P=521,771 P=739,554 P=311,860 P=139,330 P=744,827 P=346,499 P=2,803,841Key corporate accounts 19,975 103,032 150,689 127,929 201,733 74,131 677,489Other corporations andSME 129,570 152,544 76,092 18,802 175,710 83,920 636,638671,316 995,130 538,641 286,061 1,122,270 504,550 4,117,968Wireline receivables:Consumer 235,480 215,510 111,297 66,806 76,989 1,252,527 1,958,609Key corporate accounts 11,998 166,530 154,248 207,756 813,507 179,015 1,533,054Other corporations andSME 77,937 66,958 41,847 24,945 58,744 140,542 410,973325,415 448,998 307,392 299,507 949,240 1,572,084 3,902,636Other trade receivables – – 8,447 5,186 4,214 17,847Traffic receivables:Foreign 1,731,708 – – – – 175,241 1,906,949Local 133,474 – – – – 89,815 223,2891,865,182 – – – – 265,056 2,130,238Other receivables 647,464 – – – – 11,414 658,878Total P=3,509,377 P=1,444,128 P=854,480 P=590,754 P=2,075,724 P=2,353,104 P=10,827,567Total allowance for impairment losses amounted to P=3,538.07 million, P=3,380.63 million and P=2,453.44million includes allowance for impairment losses arising from specific and collective assessment amountedto P=341.73 million, P=337.65 million and P=328.72 million as of December 31, 2012, 2011 and 2010,respectively (see Note 4).202 203


Globe 2012 annual reportfinancial reportThe following tables show comparative information about the Globe Group’s financial instruments as of December 31 that are exposed to liquidity risk and interest rate risk andpresented by maturity profile including forecasted interest payments for the next five years from December 31 figures (in thousands) (see Note 14):Long-term Liabilities20122013 2014 2015 20162017 andthereafterTotal(in USD)Total(in PHP)DebtIssuanceCostsCarrying Value(in PHP)LiabilitiesLong-term debtFixed ratePhilippine peso P=3,397,450 P=1,406,300 P=1,991,100 P=2,117,800 P=16,850,000 $– P=25,762,650 P=124,414 P=25,638,236 P=28,327,286Interest rate 5.97%, 7.03%,7.40%7.03%, 7.40%,5.89%, 8.36%7.03%, 8.36%,5.89%8.36%, 5.89% 5.89%, 5.75%,6.00%Floating rateUSD notes 14,273 17,710 11,730 11,735 88,200 143,648 – 71,164 5,829,588 5,876,330Interest rate Libor 6-mo. plus3.40% margin;Libor 6-mo. plus2.65% marginLibor 6-mo. plus3.40% margin;Libor 6-mo. plus2.65% marginLibor 6-mo. plus3.40% margin;Libor 3-mo. plus1.50% marginLibor 6-mo. plus3.40% margin;Libor 3mo +1.50% marginLibor 3mo +1.50% marginFair Value(in PHP)Philippine peso 5,747,343 4,603,843 6,025,000 70,000 11,930,000 – 28,376,186 118,490 28,257,696 28,266,107Interest rate PDSTF 3mo +0.75% margin;PDSTF 3mo +1.25% margin;PDSTF 3mo +1.00% margin;PDSTF 6mo +1.25% margin;PDSTF 3mo +1.50% marginPDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF3mo + 1%margin;PDSTF6mo +1.25% marginPDSTF 3mo +0.75% margin;PDSTF3mo +0.65% marginPDSTF 3mo +0.60% marginPDSTF 3mo +0.50% margin;PDSTF 3mo +0.60% margin$143,648 P=54,138,836 P=314,068 P=59,725,520 P=62,469,723Interest payable*PHP debt P=2,092,544 P=1,754,816 P=1,578,270 P=1,355,781 P=2,933,782 $– P=9,715,194 P=– P=– P=–USD debt $3,661 $3,022 $2,392 $1,951 $8,646 $– $19,672 $– $– $–*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.*Using P=41.078 - USD exchange rate as of December 31, 2012.20112012 2013 2014 20152016 andthereafterTotal(in USD)Total(in PHP)DebtIssuanceCostsCarrying Value(in PHP)LiabilitiesLong-term debtFixed ratePhilippine peso P=7,033,150 P=3,397,450 P=4,381,850 P=1,941,100 P=2,067,800 $– P=18,821,350 P=38,718 P=18,782,632 P=20,270,049Interest rate 5.97%, 7.03%,7.4%, 7.5%5.97%, 7.03%,7.4%7.03%, 7.4%,8%, 8.36%7.03%, 8.36% 8.36%Floating rateUSD notes $28,643 $14,273 $17,710 $10,830 $10,834 82,290 – 72,474 3,541,621 3,618,373Interest rate Libor 6-mo. plus3.4% margin;Libor 6-mo. plus2.65% margin;3mo or 6moLIBOR + .43%margin (roundedto 1/16%); 6moLIBOR + 3%marginLibor 6-mo. plus3.4% margin;Libor 6-mo. plus2.65% marginLibor 6-mo. plus3.4% margin;Libor 6-mo. plus2.65% marginLibor 6-mo.plus3.4% marginLibor 6-mo.plus3.4% marginPhilippine peso P=1,322,343 P=5,747,343 P=4,603,843 P=6,025,000 P=7,000,000 – 24,698,529 100,836 24,597,693 24,608,340Interest rate PDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF6mo +1.25% margin;PDSTF 3mo + 1%marginPDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF6mo +1.25% margin;PDSTF 3mo + 1%marginPDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF6mo +1.25% margin;PDSTF 3mo + 1%marginPDSTF 3mo +0.75% margin;PDSTF-3 month +0.65% marginPDSTF 3mo +0.75% margin;PDSTF 3mo +.35% marginFair Value(in PHP)$82,290 P=43,519,879 P=212,028 P=46,921,946 P=48,496,762Interest payable*PHP debt P=1,711,349 P=1,376,164 P=813,874 P=525,410 P=423,967 $– P=4,850,764 P=– P=– P=–USD debt $2,718 $2,104 $1,483 $810 $348 $– $7,463 $– $– $–*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.*Using P=43.92 - USD exchange rate as of December 31, 2011.206 207


Globe 2012 annual reportfinancial report20102011 2012 2013 20142015 andthereafterTotal(in USD)Total(in PHP)DebtIssuance CostsCarrying Value(in PHP)LiabilitiesLong-term debtFixed ratePhilippine peso P=4,138,700 P=7,033,150 P=3,397,450 P=4,381,850 P=4,008,900 $– P=22,960,050 P= 71,638 P=22,888,412 P=24,816,963Interest rate 5.97%, 6.68%,7.03%, 7.4%5.97%, 6.68%,7.03%, 7.4%,7.5%5.97%, 6.68%,7.03%, 7.4%7.03%, 7.4%, 8%,8.36%7.03%, 8.36%Floating rateUSD notes $87,721 $28,642 $14,273 $17,710 $21,665 170,011 – 130,874 7,317,483 7,410,651Interest rate 6-mo. LIBOR+3.4% margin;6-mo.LIBOR+2.65%margin; 3mo or6mo LIBOR+.43% margin(rounded to1/16%); 6moLIBOR +3%margin; 1mo or3mo or 6moLIBOR+2%margin; 6moLIBOR+ .85%6-mo.LIBOR+3.4%margin; 6-mo.LIBOR+ 2.65%margin; 3mo or6mo LIBOR+.43% margin(rounded to1/16%); 6moLIBOR +3%margin6-mo.LIBOR+3.4%margin; 6-mo.LIBOR+2.65%margin6-mo.LIBOR+3.4%margin; 6-mo.LIBOR+2.65%margin6-mo. LIBOR+3.4% marginPhilippine peso P=743,771 P=4,122,343 P=5,747,343 P=4,603,843 P=5,025,000 – 20,242,300 76,725 20,165,575 20,136,024Interest rate PDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF3mo + 1%margin;PDSTF6mo +1.25% marginPDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF3mo + 1%margin;PDSTF6mo +1.25% margin;PDSTF 3 mo +1.50% marginPDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF3mo + 1%margin;PDSTF6mo +1.25% marginPDSTF 3mo +0.75% margin;PDSTF3mo +1.25% margin;PDSTF3mo + 1margin %;PDSTF6mo +1.25% marginPDSTF 3mo +0.75% margin;PDSTF 3mo +0.65% marginFair Value(in PHP)$170,011 P=43,202,350 P=279,237 P=50,371,470 P=52,363,638Interest payable*PHP debt P=2,023,562 P=1,494,852 P=1,152,815 P=606,723 P=416,655 P=– P=5,694,607 P=– P=– P=–USD debt $4,578 $2,605 $1,918 $1,355 $1,061 $11,517 $– $– $– $–*Used month-end USD LIBOR and PDEX rates.*Using P=43.81 - USD exchange rate as of December 31, 2010.The following tables present the maturity profile of the Globe Group’s other liabilities and derivative instruments (undiscounted cash flows including swap costspayments/receipts except for other long-term liabilities) as of December 31 (in thousands) (see Note 14):2012Other Financial LiabilitiesOn demandLess than1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years TotalAccounts payable and accrued expenses* P=1,834,283 P=25,862,630 P=– P=– P=– P=– P=– P=27,696,913Notes payable – 2,053,900 – – – – – 2,053,900Liabilities directly associated with the assets classified as held for sale – 457,185 – – – – – 457,185Other long-term liabilities – – – – – – 1,347,519 1,347,519P=1,834,283 P=28,373,715 P=– P=– P=– P=– P=1,347,519 P=31,555,517*Excludes taxes payable which is not a financial instrument.Derivative Instruments2013 2014 2015 2016 2017 and beyondReceive Pay Receive Pay Receive Pay Receive Pay Receive PayProjected Swap Coupons*:Principal Only Swaps P=– P=– P=– P=– P=– P=– P=– P=– P=– P=–Interest Rate Swaps – 203,073 182 11,639 3,847 – – – – –*Projected USD swap coupons were converted to PHP at the balance sheet date.208 209


Globe 2012 annual reportfinancial report2011Other Financial LiabilitiesOn demandLess than1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years TotalAccounts payable and accrued expenses* P=684,963 P=20,431,535 P=– P=– P=– P=– P=– P=21,116,498Notes payable – 1,756,760 – – – – – 1,756,760Liabilities directly associated with the assets classified as held for sale – 540,206 – – – – – 540,206Other long-term liabilities – – – – – – 635,122 635,122P=684,963 P=22,728,501 P=– P=– P=– P=– P=635,122 P=24,048,586*Excludes taxes payable which is not a financial instrument.Derivative Instruments2012 2013 2014 2015 2016 and beyondReceive Pay Receive Pay Receive Pay Receive Pay Receive PayProjected Swap Coupons*:Principal Only Swaps P=– P=1,508 P=– P=– P=– P=– P=– P=– P=– P=–Interest Rate Swaps 1,953 167,387 1,485 90,036 – P2,218 P33,517 – – –*Projected USD swap coupons were converted to PHP at the balance sheet date.2012 2013 2014 2015 2016 and beyondReceive Pay Receive Pay Receive Pay Receive Pay Receive PayProjected Principal Exchanges*:Principal Only Swaps $2,500 P=140,825 $– P=– $– P=– $– P=– $– P=–*Projected principal exchanges for Principal only swaps represent commitment to purchase USD for payment of USD debt payments with the same maturities.2010Other Financial LiabilitiesOn demandLess than1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years TotalAccounts payable and accrued expenses* P=426,696 P=19,906,644 P=– P=– P=– P=– P=– P=20,333,340Liabilities directly associated with the assets classified as held for sale – 642,313 – – – – – 642,313Other long-term liabilities – – – – – – 640,927 640,927P=426,696 P=20,548,957 P=– P=– P=– P=– P=640,927 P=21,616,580*Excludes taxes payable which is not a financial instrument.Derivative Instruments2011 2012 2013 2014 2015 and beyondReceive Pay Receive Pay Receive Pay Receive Pay Receive PayProjected Swap Coupons*:Principal Only Swaps P=– P=4,048 P=– P=2,572 P=– P=– P=– P=– P=– P=–Interest Rate Swaps – 146,821 4,065 51,911 16,745 – 19,889 – 11,388 –*Projected USD swap coupons were converted to PHP at the balance sheet rate. Further, it was assumed that 3m Libor, 3m PDSTF, and 6m PDSTF would stay at December 31, 2010 levels.2011 2012 2013 2014 2015 and beyondReceive Pay Receive Pay Receive Pay Receive Pay Receive PayProjected Principal Exchanges*:Principal Only Swaps** $– P=– $2,500 P=140,825 $– P=– $– P=– $– P=–Forward Sale of USD** P=1,539,082 $35,000 – – – – – – – –**Projected principal exchanges represent commitments to purchase USD for payment of USD debts with the same maturities.**Nondeliverable210 211


Globe 2012 annual reportfinancial report28.2.4 Hedging Objectives and PoliciesThe Globe Group uses a combination of natural hedges and derivative hedging to manage its foreignexchange exposure. It uses interest rate derivatives to reduce earnings volatility related to interest ratemovements.It is the Globe Group’s policy to ensure that capabilities exist for active but conservative management of itsforeign exchange and interest rate risks. The Globe Group does not engage in any speculative derivativetransactions. Authorized derivative instruments include currency forward contracts (freestanding andembedded), currency swap contracts, interest rate swap contracts and currency option contracts(freestanding and embedded). Certain swaps are entered with option combination or structured provisions.28.3 Derivative Financial InstrumentsThe Globe Group’s freestanding and embedded derivative financial instruments are accounted for as hedges ortransactions not designated as hedges. The table below sets out information about the Globe Group’sderivative financial instruments and the related fair values as of December 31 (in thousands):2012NotionalAmountNotionalAmountDerivativeAssetDerivativeLiabilityDerivative instruments designated as hedgesCash flow hedgesInterest rate swaps $26,000 P=1,437,500 P=– P=31,810Derivative instruments not designated as hedgesFreestandingInterest rate swaps 19,168 4,750,000 – 183,432EmbeddedCurrency forwards* 12,557 – 421 25,412Net P=421 P=240,654*The embedded currency forwards are at a net sell position.2011NotionalAmountNotionalAmountDerivativeAssetDerivativeLiabilityDerivative instruments designated as hedgesCash flow hedgesInterest rate swaps $15,000 P=6,637,500 P=– P=224,893Derivative instruments not designated as hedgesFreestandingInterest rate swaps 27,083 – 4,692 –Principal only currency swaps 2,500 – – 31,610EmbeddedCurrency forwards* 10,579 – 5,074 10,114Net P=9,766 P=266,617*The embedded currency forwards are at a net sell position.2010NotionalAmountNotionalAmountDerivativeAssetDerivativeLiabilityDerivative instruments designated as hedgesCash flow hedgesInterest rate swaps $57,000 P=5,000,000 P=– P=163,448Nondeliverable forwards* 35,000 – 6,255 8,285Derivative instruments not designated as hedges:FreestandingInterest rate swaps 6,667 – 11,743 210Principal only currency swaps 2,500 – – 35,519EmbeddedCurrency forwards** 14,651 – 1,890 38,403Net P=19,888 P=245,865**All in sell position.**The embedded currency forwards are at a net sell position.The table below also sets out information about the maturities of Globe Group’s derivative instruments as ofDecember 31 that were entered into to manage interest and foreign exchange risks related to the long-term debtand US dollar-based revenues (in thousands).20121-2-3-4-


Globe 2012 annual reportfinancial report28.4 Derivative Instruments Accounted for as HedgesThe following sections discuss in detail the derivative instruments accounted for as cash flow hedges.Interest Rate SwapsAs of December 31, 2012, 2011 and 2010, the Globe Group has USD26.00 million, USD15.00 million, andUSD57.00 million, respectively, in notional amount of USD interest rate swap that have been designated ascash flow hedge of interest rate risk from USD loans. The interest rate swap effectively fixed thebenchmark rate of the hedged USD loan at 0.67% over the duration of the agreement, which involvesquarterly payment intervals up to April 2014.The Globe Group also has PHP interest rate swap contracts with a total notional amount ofP=1,437.50 million, P=6,637.50 million, and P=5,000.00 million as of December 31, 2012, 2011 and 2010,respectively, which have been designated as cash flow hedges of interest rate risk from PHP loans. Theseinterest rate swaps effectively fixed the benchmark rate of the hedged PHP loans at 3.90% to 3.93% overthe duration of the swaps, with quarterly payment intervals up to July 2014.As of December 31, 2012, 2011 and 2010, the fair value of the outstanding swap amounted toP=31.81 million, P=224.89 million, and P=163.45 million losses, respectively, of which P=121.20 million,P=153.07 million, and P=114.41 million (net of tax), respectively, is reported as “Other reserves” in the equitysection of the consolidated statements of financial position (see Note 17.5).Accumulated swap cost for the years ended December 31, 2012, 2011 and 2010 amounted toP=35.46 million, P=213.66 million, and P=58.98 million, respectively.Nondeliverable ForwardsThe Globe Group entered into short-term nondeliverable currency forward contracts hedge the changes inthe cash flows of USD revenues related to changes in foreign currency exchange rates. These currencyforward contracts have a notional amount of USD35.00 million as of December 31, 2010. There were nooutstanding non-deliverable forward as of December 31, 2012 and 2011.The fair value of the outstanding short-term nondeliverable currency forwards as of December 31, 2010amounted to a loss of P=2.03 million of which P=1.42 million (net of tax) is reported in the equity section of theconsolidated statements of financial position.Hedging gains on derivatives intended to manage foreign currency fluctuations on dollar based revenuesfor the years ended December 31, 2012, 2011 and 2010 amounted to P=21.29 million, P=28.27 million, andP=75.56 million, respectively. These hedging gains are reflected under “Service revenues” in theconsolidated statements of comprehensive income.28.5 Other Derivative Instruments not Designated as HedgesThe Globe Group enters into certain derivatives as economic hedges of certain underlying exposures. Suchderivatives, which include embedded and freestanding currency forwards, embedded call options, and certaincurrency and interest rate swaps with option combination or structured provisions, are not designated asaccounting hedges. The gains or losses on these instruments are accounted for directly in profit or loss in theconsolidated statements of comprehensive income. This section consists of freestanding derivatives andembedded derivatives found in both financial and nonfinancial contracts.28.6 Freestanding DerivativesFreestanding derivatives that are not designated as hedges consist of currency forwards and interest rate swapsentered into by the Globe Group. Fair value changes on these instruments are accounted for directly in profit orloss in the consolidated statements of comprehensive income.Nondeliverable ForwardsAs of December 31, 2012 and 2011, the Globe Group has no outstanding nondeliverable currency forwardcontracts not designated as hedges.Interest Rate SwapsThe Globe Group has outstanding interest rate swap contracts, which swap certain floating USDdenominatedloans into fixed rate with semi-annual payment interval up to July 2013. The swaps haveoutstanding notional amount of USD19.17 million, USD27.08 million, and USD6.67 million as ofDecember 31, 2012, 2011 and 2010, respectivelyThe Globe Group also has an outstanding PHP interest rate swap contract which swaps a floating PHPloan into fixed rate of 4.92% and involves quarterly payment intervals up to September 2015. Outstandingnotional as of December 31, 2012 amounts to P=4,750.00 million. There were no outstanding PHP interestrate swap not designated as hedge as of December 31, 2011 and 2010.The fair values on the interest rate swaps as of December 31, 2012, 2011 and 2010 amounted to P=183.43million net loss, P=4.69 million net gain, and P=11.53 million net gain, respectively.Principal Only Currency SwapsAs of December 31, 2012, the Globe Group has no outstanding foreign principal only swap contract. Thenotional amount of the swap amounted to USD2.50 million as of December 31, 2011 and 2010. The fairvalue losses of the principal only currency swap as of December 31, 2011 and 2010 amounted to P=31.61million and P=35.52 million, respectively.28.7 Embedded DerivativesThe Globe Group has instituted a process to identify any derivatives embedded in its financial or nonfinancialcontracts. Based on PAS 39, the Globe Group assesses whether these derivatives are required to be bifurcatedor are exempted based on the qualifications provided by the said standard. The Globe Group’s embeddedderivatives include embedded currency derivatives noted in non-financial contracts.Embedded Currency ForwardsAs of December 31, 2012, 2011 and 2010, the total outstanding notional amount of currency forwardsembedded in nonfinancial contracts amounted to USD12.29 million, USD10.58 million and USD14.65million, respectively. The nonfinancial contracts consist mainly of foreign currency-denominated purchaseorders with various expected delivery dates and unbilled leaselines receivables and payables denominatedin foreign currency with domestic counterparties. The net fair value losses of the embedded currencyforwards as of December 31, 2012, 2011 and 2010 amounted to P=24.99 million, P=5.04 million, andP=36.51 million, respectively.Embedded Currency OptionsAs of December 31, 2012, the Globe Group does not have an outstanding currency option embedded innon-financial contracts.28.8 Fair Value Changes on DerivativesThe net movements in fair value changes of all derivative instruments are as follows:December 312012 2011 2010(In Thousand Pesos)At beginning of year (P=256,851) (P=225,977) (P=56,151)Net changes in fair value of derivatives:Designated as cash flow hedges (555) (239,094) (116,679)Not designated as cash flow hedges (190,444) 28,261 (27,631)(447,850) (436,810) (200,461)Less fair value of settled instruments (207,617) (179,959) 25,516At end of year (P=240,233) (P=256,851) (P=225,977)28.9 Hedge Effectiveness ResultsAs of December 31, 2012, 2011 and 2010, the effective fair value changes on the Globe Group’s cash flowhedges that were deferred in equity amounted to P=121.20 million, P=153.07 million, and P=115.83 million losses,net of tax, respectively. Total ineffectiveness for the years ended December 31, 2012, 2011 and 2010 isimmaterial.The distinction of the results of hedge accounting into “Effective” or “Ineffective” represent designations basedon PAS 39 and are not necessarily reflective of the economic effectiveness of the instruments.214 215


Globe 2012 annual reportfinancial report28.10 Categories of Financial Assets and Financial LiabilitiesThe table below presents the carrying value of Globe Group’s financial instruments by category as ofDecember 31:2012 2011 2010(In Thousand Pesos)Financial AssetsFinancial assets at FVPL:Derivative assets designated as cash flow hedges P=– P=– P=6,255Derivative assets not designated as hedges 421 9,766 13,633AFS investment in equity securities (Note 11) 141,446 99,319 101,877Loans and receivables - net* 34,750,907 19,574,110 18,987,991Financial LiabilitiesFinancial liabilities at FVPL:Derivative liabilities designated as cash flow hedges 31,810 224,893 171,733Derivative liabilities not designated as hedges 208,844 41,724 74,132Financial liabilities at amortized cost** 91,281,037 70,970,531 71,988,050** This consists of cash and cash equivalents, short-term investments and long-term investments, receivables, other nontrade receivables andloans receivables.** This consists of accounts payable, accrued expenses, accrued project cost, traffic settlement-net, dividends payable, notes payable, longtermdebt (including current portion) and other long-term liabilities (including current portion).As of December 31, 2012, 2011 and 2010, the Globe Group has no investments in foreign securities.28.11 Fair Values of Financial Assets and Financial LiabilitiesThe table below presents a comparison of the carrying amounts and estimated fair values of all the GlobeGroup’s financial instruments as of:December 312012 2011 2010CarryingCarryingCarrying Value Fair Value Value Fair Value Value(In Thousand Pesos)Fair ValueFinancial AssetsCash and cash equivalents P=6,759,755 P=6,759,755 P=5,159,046 P=5,159,046 P=5,868,986 P=5,868,986Receivables - net 12,105,437 12,105,437 10,119,505 10,119,505 8,374,123 8,374,123Derivative assets 421 421 9,766 9,766 19,888 19,888Other nontrade receivables* 15,885,715 15,885,715 4,295,559 4,295,559 4,744,882 4,744,882AFS investment in equity securities (Note 11) 141,446 141,446 99,319 99,319 101,877 101,877Financial LiabilitiesAccounts payable and accrued expenses** 27,696,913 27,696,913 21,116,498 21,116,498 20,333,340 20,333,340Derivative liabilities (including current portion) 240,654 240,654 266,617 266,617 245,865 245,865Liabilities directly associated with the assetsclassified as held for sale 457,185 457,185 540,206 540,206 642,313 642,313Notes payable 2,053,900 2,053,900 1,756,760 1,756,760 – –Long-term debt (including current portion) 59,725,520 62,469,723 46,921,946 48,496,762 50,371,470 52,363,670Other long-term liabilities (including currentportion) 1,347,519 1,347,519 635,122 635,122 640,927 640,927** This consists of loan, accrued interest, employee receivable and miscellaneous receivables included under “Prepayments and other currentassets” and “Other noncurrent assets” (see Notes 6 and 11).** This consists of accounts payable, accrued expenses, accrued project cost, traffic settlement-net and dividends payable.The following discussions are methods and assumptions used to estimate the fair value of each class offinancial instrument for which it is practicable to estimate such value.28.11.1 Non-derivative Financial InstrumentsThe fair values of cash and cash equivalents, short-term investments, AFS investments, subscriberreceivables, traffic settlements receivable, loan receivable, miscellaneous receivables, accrued interestreceivables, accounts payable, accrued expenses and notes payable are approximately equal to theircarrying amounts considering the short-term maturities of these financial instruments.The fair value of AFS investments are based on quoted prices. Unquoted AFS equity securities are carriedat cost, subject to impairment.For variable rate financial instruments that reprice every three months, the carrying value approximates thefair value because of recent and regular repricing based on current market rates. For variable rate financialinstruments that reprice every six months, the fair value is determined by discounting the principal amountplus the next interest payment using the prevailing market rate for the period up to the next repricing date.The discount rates used range from 0.07% to 0.83% (for USD floating loans) and from 0.70% to 2.96% (forPHP floating loans). For noninterest bearing obligations, the fair value is estimated as the present value ofall future cash flows discounted using the prevailing market rate of interest for a similar instrument.28.11.2. Derivative InstrumentsThe fair value of freestanding and embedded forward exchange contracts is calculated by using the interestrate parity concept.The fair values of interest rate swaps and cross currency swap transactions are determined using valuationtechniques with inputs and assumptions that are based on market observable data and conditions andreflect appropriate risk adjustments that market participants would make for credit and liquidity risks existingat the end each of reporting period. The fair value of interest rate swap transactions is the net presentvalue of the estimated future cash flows. The fair values of currency and cross currency swap transactionsare determined based on changes in the term structure of interest rates of each currency and the spot rate.Embedded currency options are valued using the simple option pricing model of third party provider.28.11.3 Fair Value HierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of financial instrumentsby valuation technique:Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilitiesLevel 2: other techniques for which all inputs which have a significant effect on the recorded fair value areobservable, either directly or indirectlyLevel 3: techniques which use inputs which have a significant effect on the recorded fair value that are notbased on observable market data.December 312012 2011 2010(In Thousand Pesos)Level 1AFS investment in equity securities - net P=141,446 P=99,319 P=101,877Level 2Derivative assets 421 9,766 19,888Derivative liabilities (including noncurrent portion) 240,654 266,617 245,865There were no transfers from Level 1 and Level 2 fair value measurements for the years endedDecember 31, 2012, 2011 and 2010. The Globe Group has no financial instruments classified underLevel 3.29. Operating Segment InformationThe Globe Group’s reportable segments consist of: (1) mobile communications services; (2) wirelinecommunication services; and (3) others, which the Globe Group operates and manages as strategic businessunits and organize by products and services. The Globe Group presents its various operating segments basedon segment net income.Intersegment transfers or transactions are entered into under the normal commercial terms and conditions thatwould also be available to unrelated third parties. Segment revenue, segment expense and segment resultinclude transfers between business segments. Those transfers are eliminated in consolidation.Most of revenues are derived from operations within the Philippines, hence, the Globe Group does not presentgeographical information required by PFRS 8. The Globe Group does not have a single customer that will meetthe 10% or more reporting criteria.216 217


Globe 2012 annual reportfinancial reportThe Globe Group also presents the different product types that are included in the report that is regularlyreviewed by the chief operating decision maker in assessing the operating segments performance.Segment assets and liabilities are not measures used by the chief operating decision maker since the assetsand liabilities are managed on a group basis.The Globe Group’s segment information is as follows (in thousand pesos):2012Mobile WirelineCommunications CommunicationsServices Services Others ConsolidatedRevenuesService revenues:External customers:Voice P=34,343,471 P=2,665,559 P=– P=37,009,030Data 32,743,644 4,166,919 102,041 37,012,604Broadband – 8,720,931 – 8,720,931Nonservice revenues:External customers 2,791,596 929,592 (17,604) 3,703,584Segment revenues 69,878,711 16,483,001 84,437 86,446,149EBITDA 32,445,341 2,737,792 (172,323) 35,010,810Depreciation and amortization (13,220,052) (10,350,911) (12,454) (23,583,417)EBIT 19,225,289 (7,613,119) (184,777) 11,427,393Net Income (Loss) Before Income Tax 2 17,687,147 (7,732,316) (186,487) 9,768,344Benefit from (provision for) income tax 2 (3,554,197) 693,237 (50,372) (2,911,332)Net Income (Loss) P=14,132,950 (P=7,039,079) (P=236,859) P=6,857,012Other Segment InformationIntersegment revenues (P=77,679) (P=206,911) (P=207,454) (P=492,044)Subsidy 1 (4,033,824) 62,117 (3,068) (3,974,775)Interest income 2 448,300 67,081 181 515,562Interest expense (2,002,475) (83,447) (156) (2,086,078)Equity in net losses of joint ventures (83,582) – – (83,582)Impairment losses and others (1,186,031) (677,553) – (1,863,584)Capital expenditure (23,165,833) (3,615,609) (28,118) (26,809,560)Cash FlowsNet cash provided by (used in):Operating activities P=17,901,778 P=6,259,215 P=76,262 P=24,237,255Investing activities (24,243,478) (344,365) (45,284) (24,633,127)Financing activities 2,197,903 – – 2,197,9031Computed as non-service revenues less cost of sales2 Net of final taxes2011Mobile WirelineCommunications CommunicationsServices Services Others ConsolidatedRevenuesService revenues:External customers:Voice P=35,290,101 P=2,938,717 P=– P=38,228,818Data 28,139,234 3,791,928 108,481 32,039,643Broadband – 7,496,503 – 7,496,503Nonservice revenues:External customers 3,028,245 725,038 – 3,753,283Segment revenues 66,457,580 14,952,186 108,481 81,518,247EBITDA 32,145,366 3,056,714 (87,007) 35,115,073Depreciation and amortization (11,402,577) (7,527,599) (11,051) (18,941,227)EBIT 20,742,789 (4,470,885) (98,058) 16,173,846Net Income (Loss) Before Income Tax 2 18,634,742 (4,478,893) (96,410) 14,059,439Benefit from (provision for) income tax 2 (4,190,298) (34,101) (3,235) (4,227,634)Net Income (Loss) P=14,444,444 (P=4,512,994) (P=99,645) P=9,831,8052011Mobile WirelineCommunications CommunicationsServices Services Others ConsolidatedOther Segment InformationIntersegment revenues P=34,747 (P=264,929) (P=246,673) (P=476,855)Subsidy 1 (2,091,403) (42,060) (843) (2,134,306)Interest income 2 172,156 87,532 70 259,758Interest expense (1,994,371) (65,289) (2,059,660)Equity in net losses of joint ventures (27,345) – – (27,345)Impairment losses and others (1,068,597) (849,986) – (1,918,583)Capital expenditure (13,530,030) (3,777,427) (109,925) (17,417,382)Cash FlowsNet cash provided by (used in):Operating activities 23,605,233 6,114,936 206,006 29,926,175Investing activities (13,734,642) (4,345,211) (109,864) (18,189,717)Financing activities (12,520,892) – – (12,520,892)1Computed as non-service revenues less cost of sales2 Net of final taxes2010MobileCommunicationsServicesWirelineCommunicationsServices Others ConsolidatedRevenuesService revenues:External customers:Voice P=36,028,624 P=3,174,947 P=– P=39,203,571Data 24,221,919 3,487,999 80,335 27,790,253Broadband – 5,748,266 – 5,748,266Nonservice revenues:External customers 2,374,542 618,759 – 2,993,301Segment revenues 62,625,085 13,029,971 80,335 75,735,391EBITDA 31,924,609 1,719,351 (84,928) 33,559,032Depreciation and amortization (11,734,900) (6,346,429) (4,510) (18,085,839)EBIT 20,189,709 (4,627,078) (89,438) 15,473,193Net Income (Loss) Before Income Tax 2 18,768,054 (4,661,415) (89,919) 14,016,720Benefit from (provision for) income tax 2 (4,518,236) 246,150 – (4,272,086)Net Income (Loss) P=14,249,818 (P=4,415,265) (P=89,919) P=9,744,634Other Segment InformationIntersegment revenues P=35,545 (P=191,933) (P=107,080) (P=263,468)Subsidy 1 (900,760) (344,899) – (1,245,659)Interest income 2 168,300 28,666 94 197,060Interest expense (1,975,932) (5,823) (30) (1,981,785)Equity in net losses of joint ventures (2,968) – – (2,968)Impairment losses and others (820,978) (708,556) – (1,529,534)Capital expenditure (13,982,817) (5,478,589) (5,467) (19,466,873)Cash FlowsNet cash provided by (used in):Operating activities 21,802,415 5,338,255 7,707 27,148,377Investing activities (12,194,022) (4,729,510) (5,281) (16,928,813)Financing activities (10,171,150) – (859) (10,172,009)1Computed as non-service revenues less cost of sales2 Net of final taxes218 219


Globe 2012 annual reportfinancial reportA breakdown of gross revenues to net revenues and a reconciliation of segment revenues to the total revenuespresented in the consolidated statements of comprehensive income are shown below:2012 2011 2010(In Thousand Pesos)Gross service revenues P=82,742,565 P=77,764,964 P=72,742,090Interconnection charges (8,859,309) (9,953,663) (10,187,401)Net service revenues 73,883,256 67,811,301 62,554,689Nonservice revenues 3,703,584 3,753,283 2,993,301Segment revenues 77,586,840 71,564,584 65,547,990Interest income 579,851 297,388 218,532Other income - net 716,371 574,768 856,941Total revenues P=78,883,062 P=72,436,740 P=66,623,463The reconciliation of the EBITDA to income before income tax presented in the consolidated statements ofcomprehensive income is shown below:2012 2011 2010(In Thousand Pesos)EBITDA P=35,010,810 P=35,115,073 P=33,559,032Gain on disposal of property and equipment -net 42,447 319,250 32,535Interest income 579,851 297,388 218,532Equity in net losses of joint ventures (83,582) (27,345) (2,968)Financing costs (2,343,895) (2,579,714) (2,068,401)Depreciation and amortization (23,583,417) (18,941,227) (18,085,839)Other items 146,130 (86,356) 385,301Income before income tax P=9,768,344 P=14,097,069 P=14,038,19229.1 Mobile Communications ServicesThis reporting segment is made up of digital cellular telecommunications services that allow subscribers to makeand receive local, domestic long distance and international long distance calls, international roaming calls,mobile data or internet services and other value added services in any place within the coverage areas.29.1.1 Mobile communication voice net service revenues include the following:a) Monthly service fees on postpaid plans;b) Charges for intra-network and outbound calls in excess of the consumable minutes for various GlobePostpaid plans, including currency exchange rate adjustments (CERA) net of loyalty discounts creditedto subscriber billings;c) Airtime fees for intra network and outbound calls recognized upon the earlier of actual usage of theairtime value or expiration of the unused value of the prepaid reload denomination (for Globe Prepaidand TM) which occurs between 1 and 60 days after activation depending on the prepaid value reloadedby the subscriber net of (i) bonus credits and (ii) prepaid reload discounts; andd) Revenues generated from inbound international and national long distance calls and internationalroaming calls.Revenues from (a) to (d) are net of any settlement payouts to international and local carriers.29.1.2 Mobile communication data net service revenues consist of revenues from value-added servicessuch as inbound and outbound SMS and MMS, content downloading, mobile data or internet services andinfotext, subscription fees on unlimited and bucket prepaid SMS services net of any settlement payouts tointernational and local carriers and content providers.29.1.3 Globe Telecom offers its wireless communications services to consumers, corporate and SMEclients through the following two (2) brands: Globe Handyphone Postpaid and Prepaid and Touch MobilePrepaid brands.The Globe Group also provides its subscribers with mobile payment and remittance services under theGCash brand.29.2 Wireline Communications ServicesThis reporting segment is made up of fixed line telecommunications services which offer subscribers local,domestic long distance and international long distance voice services in addition to broadband and fixed mobileinternet services and a number of VAS in various areas covered by the Certificate of Public Convenience andNecessity (CPCN) granted by the NTC.29.2.1 Wireline voice net service revenues consist of the following:a) Monthly service fees including CERA of voice-only subscriptions;b) Revenues from local, international and national long distance calls made by postpaid, prepaid wirelinesubscribers and payphone customers, as well as broadband customers who have subscribed to datapackages bundled with a voice service. Revenues are net of prepaid and payphone call carddiscounts;c) Revenues from inbound local, international and national long distance calls from other carriersterminating on our network;d) Revenues from additional landline features such as caller ID, call waiting, call forwarding, multi-calling,voice mail, duplex and hotline numbers and other value-added features; ande) Installation charges and other one-time fees associated with the establishment of the service.Revenues from (a) to (c) are net of any settlement payments to domestic and international carriers.29.2.2 Wireline data net service revenues consist of the following:a) Monthly service fees from international and domestic leased lines. This is net of any settlementpayments to other carriers;b) Other wholesale transport services;c) Revenues from value-added services; andd) One-time connection charges associated with the establishment of service.29.2.3 Broadband service revenues consist of the following:a) Monthly service fees on mobile and fixed wireless and wired broadband plans and charges for usage inexcess of plan minutes; andb) Prepaid usage charges consumed by mobile broadband subscribers.29.2.4 The Globe Group provides wireline voice communications (local, national and international longdistance), data and broadband and data services to consumers, corporate and SME clients in thePhilippines.a) Consumers - the Globe Group’s postpaid voice service provides basic landline services including tollfreeNDD calls to other Globe landline subscribers for a fixed monthly fee. For wired broadband,consumers can choose between broadband services bundled with a voice line, or a broadband dataonlyservice. For fixed wireless broadband connection using its WiMax network and 3G with High-Speed Downlink Packet Access (HSDPA) network, the Globe Group offers broadband packagesbundled with voice, or broadband data-only service.For subscribers who require full mobility, Globe Broadband Tattoo service come in postpaid andprepaid packages and allow them to access the internet via 3G with HSDPA, Enhanced Datarate forGSM Evolution (EDGE), General Packet Radio Service (GPRS) or WiFi at hotspots located nationwide.b) Corporate/SME clients - for corporate and SME enterprise clients wireline voice communication needs,the Globe Group offers postpaid service bundles which come with a business landline and unlimiteddial-up internet access. The Globe Group also provides a full suite of telephony services from basicdirect lines to Integrated Services Digital Network (ISDN) services, 1-800 numbers, International DirectDialing (IDD) and National Direct Dialing (NDD) access as well as managed voice solutions such asVoice Over Internet Protocol (VOIP) and managed Internet Protocol (IP) communications. Valuepriced,high speed data services, wholesale and corporate internet access, data center services andsegment-specific solutions customized to the needs of vertical industries.29.3 OthersThis reporting segment represents mobile value added data content and application development services.Revenues principally consist of revenue share with various carriers on content downloaded by their subscribersand contracted fees for other application development services provided to various partners.220 221


Globe 2012 annual reportGRI INDEX SHEET30. Notes to Consolidated Statements of Cash FlowsThe principal noncash transactions are as follows:Note 2012 2011 2010(In Thousand Pesos)Increase (decrease) in liabilities related tothe acquisition of property and equipment P=5,699,760 (P=1,353,939) P=612,613Capitalized ARO 15 25,022 27,403 41,473Dividends on preferred shares 33,145 35,295 –The cash and cash equivalents account consists of:2012 2011 2010(In Thousand Pesos)Cash on hand and in banks P=2,632,954 P=1,182,895 P=944,866Short-term placements 4,126,801 3,976,151 4,924,120P=6,759,755 P=5,159,046 P=5,868,986Cash in banks earn interest at the respective bank deposit rates. Short-term placements represent short-termmoney market placements.The ranges of interest rates of the above placements are as follows:Strategy &AnalysisGRI Index SheetProfile Disclosure Section Page No.1.1 Statement from the senior most decision maker of theorganizationMessage from the CEO& Chairman1.2 Description of key impacts, risks and opportunities Enterprise RiskManagement2.1 Name of organization Our Business 202.2 Primary brands, products and / or services Empowering You, YourWay2.3 Operational structure of the organization Our Business 212.4 Location of organization’s headquarter Contact Details 236466302012 2011 2010Placements:PHP 1.35% to 4.69% 1.50% to 4.88% 2.00% to 4.25%USD 0.06% to 1.85% 0.05% to 1.75% 0.09% to 1.55%OrganizationalProfile2.5 Number of countries of operation Our Business 202.6 Nature of ownership and legal form Corporate Governance 6531. Events after the Reporting PeriodOn February 1, 2013, EHL has been deregistered pursuant to Section 291AA (9) of the Companies Ordinance.Accordingly, EHL was dissolved.On February 5, 2013, the BOD approved the declaration of the first semi-annual cash dividend of P=33.50 percommon share, payable to common stockholders of record as of February 19, 2013. Total dividends amountingto P=4,435.65 million will be payable on March 12, 2013.2.7 Markets served Stores Directory 2342.8 Scale of reporting organization Our People, Our Globe 702.9 Significant changes during reporting period About the Report 22.10 Awards received during reporting period 2012 Key Highlights 223.1 Reporting period (fiscal / calendar year) of the report About the Report 23.2 Date of most recent previous report About the Report 23.3 Reporting cycle (annual, biennial, etc) About the Report 2ReportParameters3.4 Contact point for questions regarding report & itscontentAbout the Report 2363.5 Process for defining report content Materiality Analysis 173.6 Boundary of report About the Report 23.7 Specific limitations on scope of boundary of report About the Report 2222223


Globe 2012 annual reportGRI INDEX SHEET3.8 Basis for reporting on joint ventures, subsidiaries etc. Our Business 214.14 List of stakeholder groups engaged by organization Stakeholder Engagement 143.9 Data measurement techniques and bases ofcalculationsMateriality Analysis 173.10 Explanation of effect of any re-statements ofNot applicable -information provided in earlier reports and reason forre-statements3.11 GRI content Index GRI Content Index 223Governance,Commitments &Engagements4.15 Basis of identification & selection of stakeholders withwhom to engage4.16 Approaches to stakeholder engagement, includingfrequency of engagement by type & stakeholder group4.17 Key topics & concern that have been raised throughstakeholder engagementStakeholder Engagement 16Stakeholder Engagement 16Stakeholder Engagement 163.12 External assurance certificate External AssuranceCertificate232EC1Direct economic values generated & distributed,including revenues and other costsManagement’sDiscussion & Analysis1264.1 Governance structure of the organization Corporate Governance 53EC2Financial implications and other risks due to climatechangeEnterprise RiskManagement664.2 Indicate whether chair of highest governance body isalso an executive officerCorporate Governance 53EC3 Coverage of organization’s defined benefit plan Our People, Our Globe 764.3 Structure of members of the board of highestgoverning bodyCorporate Governance 534.4 Mechanism for shareholders & employees Corporate Governance 65EC4Significant financial assistance received fromgovernmentNILDoes not receiveany financialassistance from thegovernmentGovernance,Commitments &Engagements4.5 Linkage between compensation for members ofhighest governance body, managers & executives4.6 Process to ensure conflicts of interest are avoidedamong the highest governance body4.7 Process to determine qualifications & expertise ofmembers of highest governance body4.8 Internally developed statements of mission or values,code of conduct and principles relevant to EESperformanceCorporate Governance 58Corporate Governance 52Corporate Governance 53Our Business 20EconomicEC5EC6Range of ratio of standard entry level wage comparedto minimum wage of operation at significant locationsof operationPolicy, practices & proportion of spending on locallybased supplier at significant locations of operationsOur People, Our Globe 73Empowering You, YourWayEC7 Procedures for local hiring & proportion of senior- -management hired from local community at significantlocation of operationEC8 Impact of infrastructure investments & services - -EC9 Indirect economic impacts Bridging Communities 122494.9 Procedures for overseeing EES associated risk andopportunitiesEnterprise RiskManagement664.10 Process for evaluating highest governance body’sperformanceCorporate Governance 594.11 Explanation on how precautionary approach orprinciple is addressed by organizationEnterprise RiskManagement664.12 Externally developed EES charters or initiativesorganization endorsesNot Applicable -4.13 Membership with associations at organizational level Not Applicable -224 225


Globe 2012 annual reportGRI INDEX SHEETEN1 Material used by weight or volume - -EN16 Total direct or indirect GHG by weight Greening the Globe 103EN2Percentage of materials used that are recycled inputmaterial- -EN17 Other relevant Indirect GHG by weight Greening the Globe 103EN3 Direct energy consumption by primary energy source Greening the Globe 95EN18Initiatives to reduce GHG emissions & reductionsachievedGreening the Globe 103EN4 Indirect energy consumption by primary energy source Greening the Globe 96EN19 Emissions of ozone depleting substance by weight - -EN5Energy saved due to conservation & efficiencyimprovementsGreening the Globe 94EN20NO, SO and other significant air emissions by type &weight- -EN6Initiatives to provide energy efficient or renewableenergy based products & servicesGreening the Globe 94EN 21 Total waste discharge by quality & destination Greening the Globe 97EN7 Initiatives to reduce Indirect energy consumption Greening the Globe 94EN 22 Total weight of waste by type and disposal method Greening the Globe 97EnvironmentEN8 Total water withdrawal by source Greening the Globe 96EnvironmentEN 23 Total number and volume of significant spills Greening the Globe There were nosignificant spillsEN9Significant affect on water sources caused due towithdrawalGreening the Globe 96EN 24 Percentage of waste imported of exported Greening the Globe 97EN10Percentage of total volume of water recycled andreusedGreening the Globe 96EN 25 Identify status & value of protected water bodies Not Applicable 88EN11Location & size of land owned, leased adjacent toprotected areas and areas of high biodiversity- -EN26Initiatives to mitigate environmental impacts ofproducts / servicesGreening the Globe 88EN12Description of significant impacts of activities,products, and services on biodiversity- -EN27Percentage of products sold and their packagingmaterialNot Applicable -EN13 Habitats protected or restored Bridging Communities /Greening the GlobeEN14EN15Strategies, current actions and future plans formanaging impacts on biodiversityNumber of IUCN red list species and nationalconservation list species with habitats in areas affectedby operation102- -- -EN28EN29EN30Monetary value of significance fines due to noncompliancewith environmental laws and regulationsSignificant environmental impacts of transportingproducts and other goods and material used fororganizations operationTotal environmental protection expenditures andinvestment by type.Not ApplicableThere were nosignificant fines fornon-compliance- -Greening the Globe 104HR1Percentage of total number of significant investmentagreements which includes human rights clauses- -Human RightsHR2Percentage of significant suppliers & contractorsundergone human rights screening- -226 227


Globe 2012 annual reportGRI INDEX SHEETHR3HR4Total hours of training on policies & proceduresconcerning human rights aspects relevant tooperationsTotal number of incidents of discrimination and actionstakenOur People, Our Globe 78Our People, Our Globe 78LA6LA7Percentage of total workforce represented in healthand safety committeeRates of injury, occupational diseases, fatalities byregionOur People, Our Globe 78Our People, Our Globe 78Human RightsHR5HR6HR7Operations Identified in which right to exercisefreedom of association and collective bargaining maybe at significant risk and actions taken to supportthese rightsSignificant initiatives & risk taken for eliminatingincidents of child laborSignificant initiatives & risk taken for eliminatingincidents of forced laborOur People, Our Globe 79Our People, Our Globe 78There were no cases ofchild labor78Labor Practices &Decent WorkLA 8LA9LA10Education, training, counseling programs in place toassist workforceHealth & safety topics covered in formal agreementwith trade unionsAverage hours of training per year per employee byemployee categoryOur People, Our Globe 80- -Our People, Our Globe 80LA11 Programs for skill management and lifelong learning Our People, Our Globe 80HR8HR9Percentage of security personal trained in theorganization’s policies or procedures concerningaspects of human rights that are relevant to operationsTotal number of incidents of violations involving rightsof indigenous people and actions takenOur People, Our Globe 78Bridging Communities 110HR10 Percentage & total number of operations that have Our People, Our Globe 78been subject to human rights reviews and/or impactassessmentsHR11 Number of grievances related to human rights filed,addressed and resolved through formal grievancemechanismOur People, Our Globe 78LA1 Total workforce by employment type, contract & region Our People, Our Globe 72LA2Total number & rate of employee turnover by agegroup, gender & religionOur People, Our Globe 72LA12LA13LA14SO1SO9Percentage of employees receiving regularperformance and career development reviewsComposition of governance bodies and employeesaccording to gender, age group, minority group andother diversity indicatorsRatio of basic salary of men to women by employeecategoryNature, scope & effectiveness of any programs &practices that assess & manage impacts of operationson communitiesPotential or actual negative impacts of operations oncommunityOur People, Our Globe 80Our People, Our Globe 72Our People, Our Globe 73Bridging Communities 109Bridging Communities 110SO10 Measure to prevent or mitigate these negative impacts Bridging Communities 110Labor Practices &Decent WorkLA3LA 15LA4Benefits provided to full time employees that are notprovided to temporary or part time employeesReturn to work and retention rates after parental leaveby genderPercentage of employees covered by collectivebargaining agreementsOur People, Our Globe 76Our People, Our Globe 76Our People, Our Globe 79LA5 Minimum notice periods for operational changes Our People, Our Globe 78SocietySO2SO3Percentage & total number of business units analyzedfor risk related to corruptionPercentage of employees trained in organization’s anticorruption policies & proceduresAll business units are66analyzed and auditedregularly.Our People, Our Globe 78SO4 Actions taken in response to incidents of corruption Our People, Our Globe Dismissal ofemployees in suchcases, as statedin the employeeshandbookSO5Public policy positions & participation in public policydevelopment- -SO6Total value of financial & in-kind contributions topolitical parties, politicians & related institutions bycountry- -228 229


Globe 2012 annual reporttable of abbreviationSocietySO7SO8Total number of legal actions for anti- competitivebehavior, anti-trust and monopoly practices & theiroutcomesMonetary value of significant fines for non-compliancewith laws & regulationsNot Applicable -NIL -Table of AbbreviationASMAnnual Stockholder's MeetingPR1Stages for improvement for health & safety impacts ofproducts & services for customersNot Applicable -BCMBPIBusiness Continuity ManagementBank of the Philippine IslandsPR2Incidents concerning with non-compliance with health& safety by productsEmpowering You, YourWayPR3 Product & service information Empowering You, YourWayPR4Non-compliance with voluntary codes governingproduct / service informationEmpowering You, YourWay493249CBUCCTCSMEDSWDDOLECentral Business UnitConditional Cash TransferCorporate & Small Medium EnterprisesDepartment of Social Welfare & DevelopmentDepartment of Labor & EmploymentProductResponsibilityPR5 Measures & practices for customer satisfaction Empowering You, YourWayPR6Programs adherence to laws, voluntary codes relatedto marketing communicationsEmpowering You, YourWay4349EBITDAERMSGHGGILASEarnings Before Interest, Taxes, Depreciation & AmortizationEnterprise Risk Management Service DivisionGreen House GasGearing Up Internet Literacy and Access for StudentsPR7 Incidents of non-compliances to these laws & codes NIL -GMAGreater Manila AreaGRIGlobal Reporting InitiativePR8Total number of sustained complaints regardingbreaches of customer privacy and losses of customerdataNIL -GTIGXIGlobe Telecom IncorporationGlobe Exchange IncorporationPR9Significant fines for non-compliance with laws ®ulations concerning the use of products & servicesNIL -HSPAICDHigh Speed Packet AccessInternal Control DivisionICTInformation & Communication TechnologyIDDInternational Direct DialingKwhKilo Watt HourLEDLight Emitting DiodeLTELong Term EvolutionMTMetric TonneNDDNational Direct DialingPLDTPhilippine Long Distance TelephonePSEPhilippine Stock ExchangePSTDPhilippine Society of Training & DevelopmentSECSecurities Exchange CommissionSingTelSingapore TelecomTBLTriple Bottom LineWFPWorld Food ProgramWRIWorld Resource Institute230231


Globe 2012 annual reportassurance statement232 233


Globe 2012 annual reportlist of storesSTORESADDRESSGMA REGIONNorth GMAREGULAR STORESM VALENZUELAUnit 338-339, 3/F SM Valenzuela Super Center, McArthur Highway, Valenzuela CityUP TECHNO STOREUP Ayalaland Technohub, Diliman, Commonwealth, Quezon CityNEW CONCEPT STORE/FLAGSHIPSM NORTH EDSA4/F Cyberzone Bldg, New SM Annex, SM City North Edsa , Quezon CityTRINOMAM1 Unit 1034 Trinoma Mall, EDSA, Quezon CityNEW CONCEPT STORE/REGIONALGATEWAYSM NOVALICHESSM MARIKINASM FAIRVIEWSM TAYTAYSM MASINAGEASTWOOD MALLALI MALL CUBAOQUEZON AVE.3/F Gateway Mall, Araneta Center, Cubao, Quezon CityUnit 216-217, 2/F SM City Novaliches, Quirino Highway, San Bartolome 2, Novaliches, Quezon CityUnit 148-149, G/F Cyberzone SM City Marikina, Marcos Highway, Calumpang, Marikina CityUnit 318-A, 3/F Cyberzone SM City Fairview, Quirino Highway cor. Regalado Ave., Brgy. Greater Lagro, Novaliches, Quezon City2/F Bldg. B SM City Taytay, Manila East Road, Taytay, RizalUnit 205, 2/F Cyberzone, Marcos Highway, Antipolo2/F Eastwood Mall, Eastwood City, Cyberpark E. Rodriguez Ave., Bagumbayan, Quezon CitySpace 35, Upper G/F Ali Mall II, Araneta Cubao, Quezon CityUnit 103-A, G/F National Bookstore Inc., Quezon Ave., Quezon CityCentral GMAREGULAR STOREGLORIETTAG/F Glorietta 3, Ayala Center, Makati CityGT PLAZAUpper G/F Globe Telecom Plaza Tower 1, Pioneer cor. Madison Sts., Mandaluyong CityPODIUM5/F The Podium Bldg, ADB Ave., Ortigas Center, Madaluyong CitySM MAKATI4/F Concourse Area, SM Makati Dept. Store, Ayala Center, Makati CityTOWER ONEUnit C, G/F Tower One and Exchange Plaza Ayala Ave. , Makati CityNEW CONCEPT STORE/FLAGSHIPGREENBELT 42/F Greenbelt 4, Ayala Center, Makati CityGREENHILLSUNIT V-10883, G/F V MALL, Greenhills Shopping Center, San Juan CitySM MEGAMALL4/F Cyberzone Area, SM Megamall Bldg. B, Ortigas Center, Pasig CityMARKET MARKETUnit 444-445, 4/F Market Market, Lot C, Bonifacio Globel City, TaguigNEW CONCEPT STORE/REGIONALSHANGRI-LAROBINSONS GALLERIAROCKWELLKIOSKALPHA LANDUnit GK, G/F Alphaland Mall, 2258 Chino Roces cor. EDSA, Makati CitySouth GMAREGULAR STORESM BICUTANUnit 212, 2/F SM Bicutan Bldg BSM CENTERPOINTUnit 310, 3/F Magsaysay Blvd. cor Araneta ave., Sta Mesa, ManilaSM MUNTINLUPAUnit 240, 2/F SM Supercenter Muntinlupa, National Road., Tunasan, Muntinlupa CitySM SAN LAZARO3/F SM San Lazaro, Feliz Huertas St. cor. Lacson st., Sta. Cruz, ManilaNEW CONCEPT STORE/FLAGSHIPALABANG TOWN CENTER 2/F Alabang Town Center, Madrigal cor. Commerce Ave, Alabang MuntinlupaSM MALL OF ASIAUnit 202, 2/F North Parking Bldg., SM Mall of Asia, Pasay CityNEW CONCEPT STORE/REGIONALSM MANILASM SOUTHMALLSM SUCATROBINSONS PLACE MANILAFESTIVAL SUPERMALLBINONDOLower G/F Cyberzone SM City Manila, Arroceros St. cor. Marcelino Sts., ManilaUnit 1412, 3/F Cyberzone SM Southmall, Alabang-Zapote Road, Las Pinas3/F SM SuperSucat center, Sucat Road, Paranaque CitySpace 04107, 4/F Pedro Gil Wing, Robinsons Place, Manila08 & XS-09, 3/F Filinvest Festival Supermall, Filinvest Corporate City, Alabang, Muntinlupa3/F Lucky Chinatown Mall, Reina Regente Street, Binondo, ManilaLUZON REGIONSouth Luzon Area 1REGULAR STORESM ROSARIOUnit 250, 2/F SM City Rosario, Gen. Trias Drive, Rosario, Cavite.NEW CONCEPT STORE/REGIONALSM SAN PABLO2/F SM San Pablo, Maharlika Highway, San Pablo CitySM CALAMBA2/F Cyberzone SM City Calamba, National Highway, Brgy. Real, Calamba CitySM BACOORUnit 324-325, 3/F Cyberzone Area SM City Bacoor Tirona Highway cor. Aguinaldo Highway, Bacoor, CaviteSM MOLINOUnit 213, 2/F SM Supercenter Molino, Molino IV, Bacoor, CaviteNEW CONCEPT STORE/FLAGSHIPSM DASMARINASUnit E204, 2/F SM Dasmariñas, Governor Drive 1, Brgy. Sampaloc, Dasmariñas, CaviteSM STA. ROSAUnit 281, 2/F SM City Sta. Rosa, Brgy. Tagapo, Sta. Rosa City, LagunaSouth Luzon Area 2REGULAR STORECALAPANG/F Homemark Bldg, JP Rizal St. Camilmil, Calapan City, Oriental MindoroLEMERYCJ Bldg., Independencia St., Lemery, BatangasNEW CONCEPT STORE/REGIONALSM NAGAUnit 212, 2/F SM City Naga Central Business II, Brgy. Triangulo, Naga CitySM LUCENAUnit CZ 014, 3/F Cyberzone SM Lucena, Dalahican cor. Pagbilao Roads, Lucena CityLEGASPI2/F, Pacific Mall, Landco Business Park, Bitano, Legaspi CityPUERTO PRINCESAUnit 1, G/F GETAN Square, 273 Rizal Ave. Puerto Princesa, PalawanNEW CONCEPT STORE/FLAGSHIPSM BATANGASSM LIPAList of StoresG/F Shangri-la Plaza, EDSA cor. Shaw Blvd., Mandaluyong CityUnit 440-441, G/F East Wing, Robinson's Galleria Mall, Ortigas St., Quezon CityLevel R2 Power Plant Mall, Rockwell, Makati CityUnits 229& 230, 2/F SM City Batangas, Pastor Village, Pallocan West, Batangas City2/F SM City Lipa, Ayala Highway, Brgy. Marawoy, Lipa City, BatangasREGULAR STORECANDONSM ROSALESVIGANNEW CONCEPT STORE/REGIONALSM BAGUIOTUGUEGARAOSAN NICOLAS, ILOCOS NORTESAN FERNANDO, LA UNIONDAGUPANNorth LuzonREGULAR STORESM BALIWAGUnit 141, G/F SM City Baliwag, Doña Remedios Trinidad Highway, Brgy. Pagala, Baliuag, BulacanNEW CONCEPT STORE/REGIONALSM TARLACUnit 345, 3/F Cyberzone, SM City, McArthur Highway, Tarlac City,SM MARILAOUnit 219, 2/F SM City Marilao, Km. 21 Brgy. Ibayo, McArthur Highway, BulacanSM CLARKUnit 203-204, 2/F SM City Clark, Clarkfield, PampangaSM OLONGAPOUnit 311, 3/F SM City Olongapo, Brgy. Pagasa, Magsaysay Drive, Olongapo CityCABANATUANGL-4B, G/F NE Pacific Mall, Km. 111, Maharlika Highway, Cabanatuan City, Nueva EcijaSM SAN FERNANDOUnit 314, 3/F SM City San Fernando, V. Tiomico St., Brgy. Poblacion, City of San Fernando, PampangaNEW CONCEPT STORE/FLAGSHIPSM PAMPANGAUnit 129, Cyberzone SM City, City of San Fernando, PampangaVISMIN REGIONEastern & Central VisayasREGULAR STOREBOGOG/F Sim Bldg, P. Rodriguez St, Bogo City, CebuGAISANO TABUNOKUnit 2FF-17, 2/F Gaisano Grand Fiesta Mall, Highway Tabunok, Talisay City, CebuMANDAUE2/F Fortune Square Bldg., MC Briones Highway cor. AS Fortune St., Mandaue CityTOLEDOUnit 14, G/F Toledo Commercial Village, Reclamation Area, Poblacion, Toledo CityBORONGAN2/F Wilsam Uptown Mall, Borongan, SamarCALBAYOGUnit 2, Crown Bldg., Magsaysay Blvd., Calbayog City, Western SamarISLAND CITY MALLU/G Island City Mall, Dao District, Tagbilaran CityMAASINMaasin Port Terminal Commercial Complex, Demetrio St., Agbao, Maasin CityORMOCMFT Bldg., Real St., Ormoc CityTAGBILARANDoor 5, EB Gallares Bldg., Carlos P. Garcia Ave., Tagbilaran CityUBAYN. Reyes St., Poblacion, Ubay, BoholCATBALOGANUnit 2, Samar College Bldg., Mabini Ave., Catbalogan, SamarNEW CONCEPT STORE/FLAGSHIPAYALA CEBUActive Zone, Ayala Center Cebu, Cebu Business Park, Cebu CitySM CEBU2/F Cyberzone SM City Cebu Northwing, North Reclamation Area, Cebu CityNEW CONCEPT STORE/REGIONALGAISANO MACTANG/F Gaisano Grand Mall of Mactan, Agus Road cor. Basak, Lapu-lapu City, Cebu"ELIZABETH MALL, CEBU Unit T-020 3/F, Elizabeth Mall, N Bacalso cor. Keon Kilat Sts., Cebu City(Wireless & Wireline Center-Enabled)""TACLOBANG/F Annex Bldg. Robinson's Place Tacloban, National Highway, Tabuan, Marasbaras, Tacloban City, Leyte(Wireless & Wireline Center-Enabled)"Western VisayasREGULAR STOREBACOLOD27th cor. Lacson Sts. , Mandalangan, Bacolod CityGAISANO ILOILO2/F Gaisano City, La Paz, Iloilo CityGAISANO ROXASArea #9, Gaisano Arcade, Arnaldo Blvd., Roxas CityNEW CONCEPT STORE/FLAGSHIPSM ILOILO2/F SM City Iloilo, B. Aquino Ave. Mandurriao, Iloilo CityNEW CONCEPT STORE/REGIONALSM BACOLODSM DELGADOROBINSONS BACOLODDUMAGUETEREGULAR STORESM CAGAYAN DE ORONEW CONCEPT STORE/REGIONALCDO LIMKETKAIBUTUANILIGANVALENCIAOZAMIZKanPing Commercial Bldg. Maharlika Highway, Brgy.. San Antonio Candon City, Ilocos SurUnit 1102, G/F SM City Rosales MacArthur Highway Brgy., Carmen East , Rosales PangasinanCollegio Business Center, Mart 1 Nueva Segovia St., Vigan CityUnit 349 & 350, 3/F SM City Baguio, Luneta Hill, Upper Session Road, Baguio CityUnit 79, Chowking Bldg. Balzain Road. Tuguegarao City, Cagayan ValleyUnit LG-9, 365 Plaza, National Highway, Brgy. 1, San Francisco, San Nicolas, Ilocos NorteG/F La Union Provincial Administrative Commercial Bldg., Quezon Ave., 2500 San Fernando, La UnionG/F, 127 Nepo Mall, Dagupan Arellano St. , Dagupan, PangasinanCentral Luzon StoresUnit 115, Southwing SM City, Poblacion reclamation Area, Bacolod CityG/F SM Delgado, Valeria cor. Delgado Sts. Iloilo City3/F, Robinsons Place, Mandalagan, Bacolod CitySpace 276-279, 2/F Robinsons Dumaguete, Calingdanga, Dumaguete City, Negros OrientalMINDANAO REGIONNorth MindanaoUnit 313, 3/F SM City-CDO, Gran Via St. cor. Mastersons Ave. Cagayan De Oro CityNew Concourse, Limketkai Mall, Lapasan, Cagayan de Oro City3/F Gaisano Mall, J.C. Aquino Ave., Butuan City3/F Gaisano Mall, Roxas Ave., Villa VeRoade, Iligan CityG/F, NVM Building, Sayre Highway, Valencia City, BukidnonUnit B-5, G/F Gaisano Ozamis City Mall, Rizal Ave. cor. Zamora Extension, Ozamiz City, Misamis OccidentalSouth MindanaoREGULAR STORECOTABATO CITYBPI Bldg. Makakua St., Cotabato CityGENERAL SANTOSUnit 201, 2/F KCC Mall, Gensan J. Catololico Ave., General Santos CityNEW CONCEPT STORE/REGIONALTAGUMUnit 4-5, UG/F Gaisano Grand Mall Tagum, Apokon Road Visayan Village, Tagum CitySM LANANGGt- Unit C3-150, 3F Cyberzone, SM Lanang Premier, JP Laurel Ave. Bajada, Davao CitySM DAVAO3/F SM City Davao, Ecoland Subd., Quimpo Blvd., Davao CityZAMBOANGADoor 2-3, ARV Bldg., San Jose Road, Zamboanga CityNEW CONCEPT STORE/FLAGSHIPDAVAO ABREEZA3/F Abreeza Mall, JP Laurel Ave., Davao City234 235


AcknowledgementsProject Lead:Ma. Yolanda C. Crisanto, APRProject Manager:Cris Cariaga-LacunaProject Assistant:Kristel N. OrConsultant:ECCI International (www.eccigroup.com)Jose Mari S. FajardoArtist:Kelvin TeePhotography:Stephen MilitanteErik LiongorenHair and make-up:Arlene AdtoCorporate Information:Head Office:Globe Telecom, Inc.Globe Telecom PlazaPioneer cor. Madison Streets,1552 Mandaluyong CityTrunkline: (02) 730-2000Website: www.globe.com.phInvestor Relations:5th Floor, Globe Telecom Plaza 1Pioneer cor. Madison Streets,1552 Mandaluyong CityTel. (02) 730-2820Fax. (02) 739-0072Email: ir@globetel.com.phCorporate Communications:5th Floor, Globe Telecom Plaza 1Pioneer cor. Madison Streets,1552 Mandaluyong CityTel. (02) 730-2627Fax. (02) 739-3075Email: globe.corpcomm@gmail.comStock Trading Information:Globe Telecom, Inc. is listed on the Philippine StockExchangeTicker symbol: GLOCustomer Services:For inquiries about our product and services, please contact:Hotline: (02) 730-1000Mobile: 211 (toll free access)Self-Service: www.globe.com.ph/helpTwitter: @Talk2GLOBEFacebook: www.facebook.com/GlobePHChat: www.globe.com.ph/talk2GlobeText: HELP to 1234Subsidiaries:Innove Communications, Inc.18th Floor, Innove IT PlazaSamar Loop corner Panay RoadCebu Business Park6000 Cebu CityTrunkline: (032) 415-8822 / (032) 730-2000G-Xchange, Inc.UG Floor, Globe Telecom Plaza 1Pioneer corner Madison Streets1552 Mandaluyong CityTrunkline: (02) 730-4617Entertainment Gateway Group3rd Floor, Bloomingdale BuildingSalcedo Street, Legaspi Village1229 Makati CityTrunkline: (02) 892-8101 / (02) 840-1576 / (02)892-8103Email: info@egg.phKickstart Ventures, Inc.55 Paseo de Roxas AvenueMakati CityEmail: info@kickstart.phShareholder Services:For inquiries regarding dividend payments,change of address, account status, and lost/damaged stock certificates, please contact ourstock transfer agent:Bank of the Philippine IslandsStock Transfer Office16th Floor, BPI BuildingAyala Avenue corner Paseo de RoxasMakati CityTel. (02) 816-9067 / (02) 816-9321Fax. (02) 845-5515For further information regarding the annualreport, please contact:Ma. Yolanda C. CrisantoHead, Corporate CommunicationsEmail: globe.corpcomm@gmail.comThe Globe Telecom 2012 Annual and SustainabilityReport cover is printed on FSC®-certified MohawkOptions, made with 100% post-consumer waste.Meanwhile, the main section of this report is printedin 9Lives Offset, a premium grade recycled paperthat is carbon-neutral, FSC®-certified and made of100% post-consumer waste.The Financial Statement is printed in Econobond,which is 100% recycled uncoated paper made frompost-consumer collected waste.236


Globe Telecom, Inc.Globe Telecom PlazaPioneer cor. Madison Streets,1552 Mandaluyong City, Philippineswww.globe.com.ph

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