Globe Telecom 1H revenues soar to fresh record high, up 5% year on year

Globe Telecom soared to new all-time high levels, with consolidated service revenues reaching P62.9 billion as of the first half of 2017, or 5% higher than the P59.9 billion reported in the same period of 2016.
Revenues posted record highs for two consecutive quarters this year with the second

quarter ending at P31.8 billion, outpacing the prior quarter’s record-level revenues and the same quarter last year by 2% and 6%, respectively. The robust performance remained broad-based with both the mobile data and home broadband segments posting outstanding results, spurred by the continuous expansion of the broadband customer base, and the excellent market execution of the company’s game-changing initiatives. This result was likewise boosted by Globe Telecom’s reliable network that supports the enhanced digital lifestyle of its customers.

Mobile revenues stood at P48.3 billion as of end-June 2017, up 5% year-on-year, led by the sustained solid growth in mobile data. Both Globe Prepaid and TM, the company’s mass-market brand, registered 8% revenue growth from same period last year, while Globe Postpaid posted a 1% increase year-on-year. Globe Telecom’s mobile subscriber base reached 59.7 million for the first semester of the year, down 3% from the 61.3 million subscribers reported in the same period of 2016. The decline in the cumulative mobile subscriber base was due to the change in reporting of the company’s prepaid subscribers. Beginning the first quarter of 2017, the company excluded in their reporting the prepaid subscribers who do not reload within 90 days of the second expiry period, versus the previous cut-off of 120 days.

On a product perspective, mobile data contributed about 42% of total mobile revenues for first half of 2017, versus 39% a year ago. Mobile data service revenues reached P20.3 billion as of end-June 2017, or 13% higher than the P18.0 billion reported in the same period last year. This was due to the steady rise in smartphone penetration, which increased to 67% for the period, and the growth in data usage. Mobile data traffic for the period grew 85% from 151 petabytes (PB) in 2016 to 280 PB this year.

Despite the double-digit growth, the company believes the reported increase in mobile data revenues is not representative of the true growth of the business, due to the application of certain accounting standards on bundled promotions. In particular, the Free Facebook offer, which we began to bundle in our lower denominated prepaid promos in 2015 and subsequently ended in June 2016 for TM and May 2017 for Globe Prepaid, mutes the performance of the mobile data business due to the change in the assignment of revenues in the different periods.

The Free Facebook offer was an initiative that allowed Globe to transform its customers’ behavior and successfully allowed the company to increase its mobile data traffic and improve its yields, leading to the revenue levels we see today. It is for this reason that the company believes it is appropriate to provide a normalized view to show the true impact of the initiative and provide a more accurate picture of the momentum of the mobile data business. On a normalized basis, adjusting for the impact of the Free Facebook promotion, mobile data revenues would have increased by 24% against the same period last year.

Meanwhile, Globe home broadband business continued its solid growth year-on-year, delivering a total of P7.7 billion revenues as of end-June this year, up a strong 8% from the same period last year. This was mainly driven by the continued customer base expansion, which now reached a total of 1.2 million as of the first half of 2017, with fixed wireless growing by 22% year-on-year. With the company’s aim to give its customers a better connected experience, Globe At Home recently launched its new and improved Go BIG plans, which provide bigger data allocations at affordable rates alongside fast and reliable speeds. This only proves how Globe leads in broadband adoption through the continuous deployment of its leading edge network technology – targeting two million homes with reliable internet access by 2020.

Complementing the growth in mobile and home broadband, Globe Telecom’s corporate data business registered a 3% increase year-on-year to P5.0 billion as of the first half of 2017, from the P4.9 billion posted in the same period of 2016. The increasing demand for data connectivity, managed service solutions, and cloud-based services were the main drivers behind this revenue performance. This resulted to growth in terms of customer base and circuit count, as well as increased usage year-on-year.

Traditional fixed line voice revenues however, posted a decline of 5% from a year ago.

Globe Telecom’s new record-level consolidated EBITDA stood at P27.3 billion, up 6% from same period of 2016. Total operating expenses and subsidy grew by 4% year-on-year to reach P35.6 billion from P34.3 billion last year, largely coming from higher network related costs, and subscriber-driven expenses. EBITDA margin held steady year-on-year at 43% while quarterly EBITDA margin showed significant improvement (44% 2Q17 vs. 42% 2Q16).

Notwithstanding the sustained record highs in terms of revenues and EBITDA as of end-June this year, Globe Telecom’s net income was weighed down by the impact of increased interest expenses, depreciation charges and Globe Telecom’s share in equity losses and spectrum amortization related to the SMC telco asset acquisition. Net income as of the first half of 2017 dropped 10% to only P8.1 billion from the P9.0 billion posted in the first half of 2016, as the charges related to the SMC transaction were only reflected in Globe Telecom’s financials starting the third quarter of 2016. Excluding the impact of the SMC transaction, net income would have just declined by 4% at P8.7 billion versus the first half of 2016. Globe Telecom’s core net income, which excludes the impact of non-recurring charges, and foreign exchange and mark-to-market charges, likewise declined by 10% from P8.8 billion a year ago.

“We are happy with our achievements in the first half of the year, with record-breaking gross service revenues and EBITDA,” Globe President and CEO Ernest L. Cu, said. “This affirms our confidence in delivering consistent business growth that is sustainable moving forward, leveraging on our continued aggressive network upgrades, customer-focused products and service offerings, as well as our continued attention to cost management.” Mr. Cu added.

Globe spent around P27.5 billion in capital expenditures as of end-June of 2017 to support the growing subscriber base and its demand for data. Of the total capital expenditures spent this year, about 87% was for the data service needs of its customers.