Globe may borrow $300M for 2013 capex

By Lenie Lectura, BusinessMirror

Posted at Aug 27 2012 09:38 AM | Updated as of Aug 27 2012 05:38 PM

MANILA, Philippines - Globe Telecom, Inc. may tap the debt market for a $200-300 million funding requirement for next year.

“We are basically done for the year. Toward end-November, we will have a view on the requirements for next year. The initial estimate is [between] $200 million [and] $300 million,” said Albert de Larrazabal, chief financial officer, in an interview last week.

He cited ways to raise the amount needed for Globe’s capital expenditure (capex) which he pegged at around $400 million for 2013.  Options being considered include bilateral agreements with banks, syndicated loans or commercial paper issuance.

“We will take a pause and see what offers will come in. The market is so liquid, placing us in a very nice position to choose which instrument is the most competitive. We will most likely do it in pesos,” added the Globe executive.

Most likely, he said the cellular firm will partly finance the initial funding requirement for 2013 through a peso bond issuance. Globe still has a remaining P5 billion from the P15-billion fixed-rate bonds offering approved last year.

The cellular firm was allowed to issue up to P15 billion in fixed-rate bonds, of which P5 billion has yet to be tapped. De Larrazabal said Globe will raise the remaining P5 billion later this year. “The paper license we got was P15 billion. We have raised P10 billion so there’s P5 billion left to tap,” he said.

Globe’s capex in the first half of the year reached P11.7 billion or about $273 million as its network modernization and IT transformation programs went into full swing. It expects the second-half spend to bring full-year capex to around $750 million to $800 million.  Of this amount, $530 million was earmarked for network and IT modernization while about $220 million to $270 million was set aside for various business-as-usual activities such as investments in submarine cable and fixed-line data and broadband capacity upgrades.

“Our network modernization program remains on-track and is currently being rolled out throughout the country.  In the last six months, we have progressively transformed almost 50 percent of our network, with improvements in service quality already being felt by customers in Davao, Cebu, South Luzon and some parts of Metro Manila,” said Globe president Ernest L. Cu.

The massive network modernization program entails a cost of $700 million while the IT transformation program is placed at $90 million.

For the funding of this year’s capex, Globe obtained loans from China Bank, Banco de Oro and Rizal Commercial Banking Corp. and also undertook a P10-billion bond offer.

Globe’s new network will have an all-Internet protocol architecture as well as a significantly increased use of fiber optic cables to handle voice and data traffic and will give Globe the capability to upgrade to more advanced technologies in the future and even to personalize its services.

The program is also designed to reduce the cost of operating, maintaining and upgrading the network as the company shifts towards more power-efficient equipment and adopts more green solutions that will further reduce its carbon footprint and energy consumption.

Globe reported that second-quarter income dropped from P2.51 billion from P2.26 billion. This resulted in a 10-percent decline in its first half net income to P4.965 billion from P5.499 billion in the same period last year.

Globe’s mobile subscribers stood at 31.7 million at end-June while its broadband subscribers grew to 1.6 million.