Globe Telecom sees P1-B net income for Q3

Ayala-owned Globe Telecom expects to post a P1-billion net income during the third quarter of this year, despite an asset write-off of around P2.2 billion resulting from the shutting down of part of its subsidiary Isla Communications‚ network.

Company officials yesterday announced that the wireless networks of Globe Telecom and Islacom have been operationally integrated, a move that is projected to save the former around P1.5 billion in capital expenditures and P600 million every year in cash operating expenses.

They said the operational integration is part of the company’s bid to strengthen overall efficiency moving forward.

A key element involves the migration of existing wireless subscribers of Islacom to the improved Touch Mobile service, allowing them to immediately enjoy superior coverage and service offerings available through the Globe-Islacom integrated network, the officials explained.

The operational integration enables the joint use of Islacom’s 10 Mhz frequency resources by Globe and the use of elements of the existing Islacom network in the Globe network, resulting in billions of savings for the company.

Certain elements of the Islacom network will be shut down to avoid unnecessary duplication. This will result in a provision for asset write-off of P2.2 billion to be booked this quarter.

Improved operating results and the reversal of certain accounting provisions will allow Globe to partly offset the effect of the write-off, so that the net impact of all these non-recurring adjustments on third quarter net income will only be about P200 million.

Globe expects to report a net income in the area of P1 billion for the third quarter despite this one-time write-off. Among the adjustments are reversals of provisions made last quarter for possible collection risks of certain receivables to the extent that these have been paid to the company and expense accruals that are no longer needed.

Officials emphasized that Globe will remain well within comfortable levels in all its debt covenants.

They also noted that the operational integration furthers the company’s strategic goal of enhancing shareholder value, improving corporate agility and retaining its leading position as the wireless service provider of choice.

"We are proud of the company’s achievements and strong performance but management will always look for ways to further improve overall profitability," Globe president and chief executive officer Gerardo C. Ablaza, Jr. said.

He added that the operational integration of the wireless networks will increase their focus, streamline operations and result in a more efficient utilization of the network to the benefit their shareholders.

Significant operational synergies have been created since the Islacom acquisition last year. Globe had earlier estimated operating cost savings of approximately $31 million per year and reduction in its capital expenditure program of $125 million. These savings have been realized, officials said.

Moreover, Islacom launched its new wireless brand, Touch Mobile, in September 2001. The new service has since gained momentum with a total subscriber base of over 430,000 in June 2002. Globe and Isla reported a consolidated subscriber base for its two brands of over 5.4 million at the end of June, equivalent to approximately 44 percent market share of the Philippine wireless industry.