earnings reports

Globe cuts capex by 20% due to rollout delays

Aika Rey
Globe Telecom's core net income declines by 8% to P11.1 billion in the 1st half of 2020, even as demand surges for mobile data and broadband services

Globe Telecom slashed its capital expenditure (capex) for 2020 by 20% – from P63 billion to P50.3 billion – citing rollout delays due to the coronavirus lockdown.

The telco giant made the announcement as it released on Tuesday, August 4, its financial statement for the 1st half of the year.

Nearly half or P20.9 billion of its capex was invested during the 1st semester, said Globe president and chief executive officer Ernest Cu.

“Globe’s network has withstood and continues to prove its resilience during this COVID-19 pandemic. Our priority to keep our network up to speed has allowed us to continuously serve our customers and ensure that communities stay connected during these tough times,” said Cu in a statement.

For the January-June period, Globe said its consolidated net income declined by 5% to P11.5 billion from last year’s P12 billion, citing its continued push for network investments.

Its core net income, meanwhile, dropped by 8% to P11.1 billion, from P12 billion a year ago.

“While we expect revenues for full-year 2020 to decline by low single digit against last year, given the impact of community quarantine restrictions, we do see growth opportunities on the home broadband front and ICT space,” Cu said.

“Higher demand for internet connectivity and cloud solutions are expected as companies have been forced to embrace remote working for employees and to fast-track their digitalization efforts,” he added.

Globe’s service revenues remained flat at P72.4 billion, from P72.9 billion last year. Data services was the top revenue contributor at 75%, as the country shifted to digital due to the pandemic.

Home broadband services grew by 19% to P12.5 billion in revenues from P10.6 billion year-on-year. Mobile business, however, fell by 5% to P51.8 billion, due to lower prepaid top-ups and postpaid enrollment.

The Ayala-backed telco also saw a decline in voice call and SMS revenues to P10.2 billion and P5.8 billion, respectively, as customers shifted to mobile data services which generated P35.8 billion in the 1st half of 2020 compared to P34 billion in the same period last year. Mobile data traffic saw 45% growth year-on-year.

Total operating expenses for the 1st half amounted to P34 billion, 1% lower year-on-year, due to “cost saving provisions.” While Globe’s debt increased to P151.7 billion against last year’s P136.3 billion, the telco said its balance sheet “remained strong with ample liquidity and gearing comfortably within bank covenants.”

At the 5th State of the Nation Address last July, President Rodrigo Duterte threatened to shut down Globe and Smart Communications, unless their services improve by December.

Cu previously said infrastructure developments were slowed down by the “long-drawn permitting process.” On Sunday, August 2, Globe again appealed to the government to ease fees and expedite the processing of permits. – Rappler.com

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Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.