Globe profits drop 10% in first half

ABS-CBN News

Posted at Aug 07 2012 12:24 PM | Updated as of Aug 08 2012 12:32 AM

MANILA, Philippines - (CORRECTED) Globe Telecom, the country's second largest telecommunications company, reported a 10% drop in net income to P4.96 billion in the first half of the year from P5.49 billion a year ago, due to higher expenses from its investments in its network infrastructure and IT transformation program.

Core net income was up 2% year-on-year from P5.6 billion in the first 6 months of the year

The company, owned by Ayala Corp. and Singapore Telecommunications Ltd., posted a 6% jump in consolidated service revenues to P40.8 billion in the January to June period, from last year's P38.4 billion, on the back of strong growth in its mobile and broadband businesses.

Mobile business revenues grew 6% to P33.3 billion, despite increased competition from Smart and Sun, multi-SIM usage and subscribers' preference for services that offer best value for money. Cumulative mobile subscribers stood at 31.7 million as of end June, 12% higher than the same period last year.

On the other hand, broadband revenues rose 13% to P4.1 billion, due to rising internet usage among Filipinos. The popularity of Tatoo-On-The-Go products helped Globe's broadband subscriber base increase 22% to 1.6 million as of end of June.

In the second quarter alone, Globe said its service revenues reached an all-time high of P20.5 billion, on record performance of its mobile business and growth from its fixed line and broadband businesses.

Globe's operating expenses and subsidies in the first half increased by 13% to P23.08 billion, from P20.34 billion a year ago. This was attributed to increased spending in marketing and higher subsidies in order to attract new subscribers and maintain existing subscribers.

In the first half of the year, Globe's total capital expenditures reached P11.7 billion, 35% higher than last year's level of P8.6 billion. This included investments in network modernization and IT transformation, as well as spending to expand coverage and capacity of its broadband and mobile networks.

"We are very satisfied with our performance this period, allowing us to further extend our growth momentum for another quarter. This was achieved despite the challenges posed by competition that is beginning to leverage its scale advantages of having a bigger combined subscriber base and network. Also, the market’s preference for value offers continues to increase, putting more pressure on yields in our mobile business. Plus our existing network has to contend with emerging capacity constraints caused by the increased volume of voice and data traffic. Nevertheless, we remain focused on our strategy blueprint and were able to extend our gains in key business segments,” Ernest Cu, president and CEO of Globe, said.

Cu expressed hope Globe will build on the growth momentum going into the second half of 2012.

"While we expect competitive and market pressures to persist and even intensify, we believe that as we exert greater efforts to accelerate the completion of our network change-out and IT transformation initiatives, we will be in a better position to sustain these gains and adapt to this fast-evolving market," he said.