Globe to cut spending by P2 billion as Q1 2020 earnings fall 3%

Ralf Rivas
Globe to cut spending by P2 billion as Q1 2020 earnings fall 3%
Globe joins other Ayala companies in cutting capex for the year, as the conglomerate carefully analyzes the impact of the coronavirus crisis on the business environment

MANILA, Philippines – Globe Telecom will be trimming its capital expenditures (capex) by at least P2 billion for the 2nd quarter of 2020, as the company braces for the full impact of the coronavirus crisis.

The telecommunications giant said on Tuesday, May 5, that it faced delays with its network rollout due to the enhanced community quarantine (ECQ) implemented in Metro Manila and several areas nationwide.

“Although plans to ramp up spending once operations normalize are in place, the full impact on the planned 2020 capex will be reevaluated once ECQ is lifted on [May 15],” Globe said.

The Ayala-led firm said it was able to invest P10.7 billion in the 1st quarter of 2020, 22% higher than the same period last year and representing 29% of gross service revenues. Bulk of the capex went to data-related requirements, which in turn ensured stable data connections during the lockdown.

Globe joins other Ayala units like Bank of the Philippine Islands and Ayala Land in rethinking spending plans, as the conglomerate carefully treads the new normal in the business environment.

Earnings

Globe’s earnings fell to P6.6 billion in the 1st quarter, 3% lower than the P6.7 billion recorded in the same period in 2019.

Consolidated service revenues increased by 2% to P36.9 billion from the P36 billion a year ago, given the limited impact of COVID-19 on operations during the covered period.

Total data revenues, which account for 75% of total service revenues, remained the key driver for growth, given the higher demand for video streaming services and internet connectivity.

Mobile revenues stood flat at P26.8 billion, due to lower prepaid top-up and postpaid acquisitions, while mobile data revenues increased by 12% to P18.5 billion.

Mobile data traffic jumped from 370 petabytes to 522 petabytes, 41% higher year-on-year.

“While we are grateful for our recent achievement, we understand that this is not reflective of our performance moving forward,” said Globe president and chief executive officer Ernest Cu.

“In light of this extraordinary environment, we expect revenues in the next quarter to decline by low double digits from the 1st quarter levels, as the ECQ limits people’s movement and affects their disposable income.”

Globe has provided additional data allocation for its customers amid the lockdown. The company also provided discounts for installations.

Despite the difficulties in the 1st quarter, Cu said they see growth in home broadband services and cybersecurity solutions, as more companies embrace work-from-home arrangements.

Globe’s home broadband revenues grew to P5.8 billion from P5.2 billion last year. The number of total home subscribers was up by 32% to 2.2 million. – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.