Globe Telecom: Quality over quantity

By Karen Flores,

Posted at Aug 06 2009 10:17 PM | Updated as of Aug 07 2009 07:18 PM

MANILA - For Ayala-led Globe Telecom Inc., it's no longer about attracting more subscribers. It's all about getting their existing ones to spend more.

At the end of the day, Globe's goal is "to generate revenues for a continuously growing company," according to company president and chief executive officer Ernest Cu. Since more users do not necessarily translate to higher profits, he said Globe would rather focus on encouraging current subscribers to make more voice calls and send text messages.

"We're not here to say that we have (for instance) 1 billion subscribers, yet we have no profits. We can do that, yes, but we'll sacrifice our margins," Cu told reporters in a briefing on Thursday.

This new strategy, however, may prove to be challenging as Filipinos continue to hold back on mobile phone use due to the uncertainties brought about by the economic downturn.

Since the start of the year, Globe has reported continuous growth rates in the number of users signing up for their mobile services. There is, however, a steep decline in the company's average revenue per subscriber (ARPU), a prime indicator of profit potential. It is also a key indicator of consumer behavior. 

For instance, Globe's postpaid, prepaid, and mass-market brands had more subscribers during the second quarter of the year, posting respective growth rates of 16%, 5%, and 17%. 

The gross ARPUs of these brands, however, have dropped by 10%, 12%, and 19%, respectively, compared to the same period in 2008. The same trend has also been seen in Globe during the previous quarter, together with rival Philippine Long Distance Telephone Co. (PLDT).

The economic slowdown has caused subscribers to shop for the lowest call and text offerings by changing SIM on the same phone unit or by keeping separate phones for each SIM. This is especially true for users from lower-income segments, who tend to have lower reload activity and shorter tenures.

Given these, Cu stressed the need for "quality, usage, and retaining subscribers" over "simply going after the bulk of subscribers."

To achieve this goal, he said the company continues to improve service quality and strengthen brand loyalty.

"We want them to use Globe for either mobile or fixed space. We don't want to confuse clients with multiple brands or multiple services," Cu said. Just recently, Globe has integrated its sales group handling consumer wireless and broadband so users will have a unified look and feel of their products.

Globe reported a 17% growth in net income at P7.241 billion as of end-June. But this was driven mainly by one-off charges as the company had P398 million in non-operating charges arising from an equipment exchange transaction with an equipment supplier.

It's core income actually increased by only 3%.

Like PLDT, Globe sees a slower third quarter, but is expecting profits to pick up by year-end due to election-related spending and increased consumption during the Christmas season.