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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