Globe Telecom posts P3-B consolidated profit in Q1

Ayala-owned Globe Telecom posted a consolidated net income of P3 billion in the first quarter of 2005, the same level posted in the comparable period last year.

Officials said the January-March 2005 net income actually increased slightly, if compared with the restated first quarter 2004 income of P2.99 billion.

"The first quarter of the year was a mixture of challenges and good results," Globe president and CEO Gerardo Ablaza Jr. said.

Globe grew its total wireless subscriber base to 12.9 million as of end-March 2005, a 42-percent increase from a year ago. However, service revenues grew by a slower five percent to P13.5 billion compared to the same period in 2004 as average revenue per user (ARPU) declined from wider penetration of the provincial markets.

Operating costs and expenses, on the other hand, increased at a higher rate of 24 percent to P6.6 billion as the company intensified its marketing initiatives as well as shouldered the costs related to the expansion of its network.

At the end of the first quarter, Globe had a total of 4,106 cellsites in service, putting the company in a much better position to serve the broader mass markets, officials said.

Globe’s total asset base was at P125.1 billion, with total debt dropping further by four percent from the previous year to P53.2 billion as of March 31, 2005. Capital expenditures amounted to P5.1 billion. Free cash flow was strong at P4.7 billion, 35 percent higher than the P3.5 billion recorded in the first quarter

Ablaza added that the Touch Mobile (TM) relaunch has led to improved subscriptions and revenues for their second brand. "However, although Globe Prepaid Plus’ gross take-up remained robust, net additions were softened by rotational churn from SIM-swap dynamics," he added.

The revitalized TM brand gained momentum during the first three months of its relaunch, resulting to breaking the two million subscriber mark for the first time. In addition, Globe continued to introduce new products and innovations during the quarter which included G2P, a new postpaid service providing the subscriber with a prepaid line using one mobile number and one SIM.

The company also gained further ground in expanding the pervasiveness of its award-winning G-Cash service. As of March 31, 2005, registered users reached close to 800,000 from only 200,000 at the beginning of the year. The business partners of G-Cash have also expanded significantly to over 100 retail establishments, domestic and international remittance firms, banks, government agencies, and charitable institutions.

Globe expects revenue growth beginning this year to be driven by increased usage by existing subscribers rather than from market expansion, as growth is likely to flatten soon given that cellular penetration rate has already reached the 40-percent mark.

Ablaza noted that other challenges face the company this year, including further escalation of competition, continued high level of innovation in the areas of product and pricing, dampening of consumer demand due to increased taxation, and the arrival of new technologies such as 3G, Wi-Max, and VoIP that may start a new round of capex commitments.

Inspite of these challenges, Ablaza expects business revenues will continue to grow healthily this year. "We expect a healthy profitability this year. Competition will be intense but it has been intense for the last two to three years," he pointed out.

Globe’s chief executive likewise anticipates that churn rates will continue to be challenge during the first half of 2005. "Goss take-up during the first half will be healthy inspite of the challenge on churn. In the second half, it will be a significantly moderated issue," he said.

The company earlier announced that it will continue on its aggressive expansion program through 2005, with P17-billion capital expenditure budget that will spent mostly for wireless network expansion. This will include more cellsites and investments in Innove’s broadband programs.

Globe in 2004 posted a yearend net income of P11.3 billion, nine percent higher than the P10.3 billion in the previous year. Its subscriber base expanded to 12.5 million, a 41-percent increase from a year ago while service revenues grew by 11 percent to P52.7 billion due to strong subscriber take-up.