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High cost of modernization takes toll on Globe income

Net profit down 30% despite 6% rise in revenues

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One step back, two steps forward. This was how Globe Telecom Inc. characterized its latest financial performance after it reported a 30-percent decline in its net earnings last year—despite having booked higher sales—as it accelerated spending for its ongoing network modernization program.

In a press briefing, officials of the Ayala-controlled telecommunications firm said that its net income for 2012 declined to P6.85 billion from the previous year’s P9.83 billion. The drop came despite a 6-percent increase in Globe’s revenues to P82.7 billion at the end of 2012 from P77.7 billion in the previous year.

Amid complaints being received by the firm from subscribers as it upgrades its long-neglected network, Globe president and CEO Ernest Cu said the company was “encouraged by the continued growth and resilience” of its mobile and broadband businesses “that allowed us to reach record peaks in revenues quarter after quarter despite intense competition” and the ongoing network and IT modernization.

“As we anticipate a more challenging year ahead, given the increasingly competitive environment, we are hopeful that the gains we have made in terms of brand building and differentiation through customer experience will tide us through this most critical period as we complete our network and IT modernization program and undertake the related transition efforts,” he said.

The impact of the modernization-related spending was felt most acutely in the final quarter of the year when its quarterly net income dropped to only P49 million from P1.84 billion in the same quarter of 2011.

The sharp decline was due to the accelerated depreciation costs associated with retiring old network equipment as well as to higher subsidies the company had to pay for the large demand for new iPhone 5 units acquired by subscribers.

On Wednesday, Globe officials also said that the company would soon begin talks with stakeholders of Lopez-owned Bayan Telecommunications Inc. to discuss the firm’s eventual exit from its ongoing rehabilitation program.

Globe recently acquired close to 100 percent of the liabilities of the debt-saddled company in a deal that also allowed the Ayala-led firm to make use of Bayan’s valuable 3G frequency.

Cu said that a future merger with Bayan was possible if such a plan would be accepted by all stakeholders involved. He stressed, however, that any prospective union between Globe and Bayan would not face the same regulatory roadblock experienced by rival PLDT and Digital Telecommunications Inc. two years ago since a merged Globe-Bayan entity would be far from the size that a PLDT-Digitel union would have created in terms of cellular frequencies controlled by a single entity.

During Wednesday’s briefing, Globe officials noted that the company’s broadband and fixed line data segments also posted significant gains on account of the rising demand for data and Internet connectivity.

“Full year broadband revenues were up 16 percent to P8.7 billion as the year marked another milestone for the business with the commercial launch of its broadband LTE service that provided subscribers with alternative tools to improve their overall Internet experience,” Globe said.

Cumulative mobile subscribers by end of the year stood at 33.1 million, up 10 percent from previous year.


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Tags: Business , Earnings , Globe telecom , modernization , Philippines , telco , Telecommunications

  • http://twitter.com/alfs_alfs Pons Corpuz

    This is a stupid press release of Globe. If you just read Globe’s report, one of the main cause of the decline in their income is the increase in marketing expenses. Just sad to say that their marketing is not coupled by better service.

    • Aligato_hai

       Globe is only good in window dressed press release. Blame it to the modernization contractor Huawei and the top management who oversees the modernization. Reckoning from the time they release the news, Globe infrastructure project implementation is already delayed by one a half year or more. Ayala and the other stakeholders should come in why the marketing pace is so quick in advertising new products that does not exist.

      • http://twitter.com/Melbea1 Mel Bea

        .

    • http://twitter.com/Melbea1 Mel Bea

      The increase in revs and subs says it all.  Consumers are generally satisfied.  I assure you that as Ayala company, this company is doing its very best to deliver and get to the point to that our Globe customers would undoubtedly be consistently satisfied with the service and network quality.

      • http://twitter.com/alfs_alfs Pons Corpuz

        I beg to disagree that consumers are generally satisfied and I am one of NOT satisfied. Globe increased its subs because of good marketing and thus, it has increased its revs. But that does not necessarily mean that consumers are satisfied. The increase in revs and subs BUT decrease in income and poor quality of service says that Globe is only good in marketing. You should read Globe’s Annual Report.

      • http://twitter.com/hp2184 RJ Legaspi

        Marketing (and advertising ) is always part of any organization’s expenses. In fact, most companies invest on significantly in marketing together with research and development. It is one of the key drivers that drives revenue for every company but of course it is the quality of the service or product that matters most. In fairness to Globe, I’ve never had problems with them when I was using it in the Philippines, but that was few years ago. 

  • RiverHorse

    High cost of modernization takes toll on Globe income <<< yeah, that and those idiot who man their customer service lines. then again, almost all customer service lines of all public utility companies are manned by idiots – Sun, Smart and PLDT (foremost).
     

  • http://profile.yahoo.com/MJFXCRSCXRWPLL42QQKSINC3AQ Mamerto

    Why do we have ONE of the HIGHEST TELE-COMMUNICATION Rates in the World..?

    • tanga_hanga_ni_abnoy

      kuryente pa

      • http://twitter.com/hp2184 RJ Legaspi

        I couldn’t agree more!

    • http://twitter.com/alfs_alfs Pons Corpuz

      Can you give some proof? Because as far as I know (comparing  places that I`ve been in the world), Philippines has one of the cheapest rate that is why we have crappy service.  

      • http://twitter.com/hp2184 RJ Legaspi

        Here in Thailand voice call is only 1 Baht per minute… or 1.35 pesos. 

      • http://twitter.com/alfs_alfs Pons Corpuz

        Yeah, Thailand, maybe. But is it the only country in the world? The man/woman on the top comment was saying “one of the highest in the world”.

      • http://twitter.com/hp2184 RJ Legaspi

        When I was in Shanghai, I think I was charged for about 2 pesos per minute of voice call. In Vietnam, I think i paid 100 pesos for one week internet access via 3G from my phone.

        Perhaps we have a really high voice call rate but we have the cheapest SMS rate. 

      • themask celestial

        No Sir, its both SMS and Voice Call rates mahal sa pinas. TRy mo tumwag sa skype terminating to Phils (.20 Euro) sa ibang lugar poorer that Phils mas cheaper pa ang tawag. Sa mga developed country, halos 1 euro for an hour na, Napansin ko na ang skype rate is directly proportional sa rate ng mobile at sms ng isang bansa. Dahil  skype call rate ay split between skype and the terminating telecom company, mahal sa atin kasi ang telecom company sa pinas is charging more. I am working in an IT company, and I travel overseas most of the time. Kung nasaang bansa ako, bumibili ako ng local sim card and I can compare. India is the cheapest telco rates everywhere in the world . In Singapore you have an option to use VOIP using your sim card ie starhub,M1 etc. Pag tumatawag ako ng pinas halos same rate lang ang overseas call to Pinas and local-to local call sa pinas.

        Yung unang equipment na ginamit nila is Nokia, na malayong-malayo ang price sa ginamit nila for upgrade na Huawei. Pero yung pricing since nag start ang gsm, halos di gaanong bumaba. From Nokia to Huawei baka ilang fold ang diff ng price. And just watch out, they use Huawei equipment na mostly unreliable and unstable ang service. lalo ka ng mag-iisip na gumamit ng globe service

      • http://twitter.com/hp2184 RJ Legaspi

        I still think we have one of the cheapest SMS rates. In Thailand, it would cost you 2.5 baht (3.25 pesos) to send an SMS locally. In the US it would cost 20 US cents (8 pesos) for AT&T. We still have better rates at 1 peso per SMS. 

        But we still have ridiculously high voice call rate!!! 

    • Pyrite C

      To add, the Philippines only charge out-going SMS and at 1 peso at that.  In the US it costs more to send SMS (if converted to peso).  You also get charged in the US if you RECEIVE sms.

      Nasanay lang talaga ang mga Pinoy ng “libre”.

  • Lloyd Ryan David

    I will never recommend Globe and will never use any of their services again. Better use Bayantel for cable internet services or Smart for mobile services. I’m completely dissatisfied with their service.

    • http://mikkieugenio.tumblr.com/ Paul Eugenio

      Paano iyan, Globe’s set to takeover Bayantel. Next stop: Sky Cable…and maybe ABS-CBN!

  • http://profile.yahoo.com/6LJQGKALKYF3QXFZ3G5J4V36HY Yolly

    with its poor service  good for you

  • Nic Legaspi

    Modernization? I’d rather call it keeping up with the times.

  • Weder-Weder Lang

    Modernization takes a toll on Globe income?

    So all this time, they were selling their broadband services and yet they have not modernized their network infrastructure. Kaya naman pala saksakan ng bagal ang broadband. Kaya pala drop ng drop ang mga calls. All due to network congestion. This is what happens when a telco takes in more than it can chew. Due to corporate greed, Globe went ahead and acquired subscribers knowing fully well that their network capacity is already overloaded as it is. They used income derived from unwitting and unprotected consumers to buy cheaper network components from China’s Huawei and ZTE. In short, “modernization” is a euphemism for catching up and upgrading a severely understated network undercapacity. Not a bad business model. Kung sa Singapore nila ginawa yan, baka nakwestyon na sila ng Info-Communications Development Authority of Singapore from day 1.

    Meanwhile, the mother company Ayala is busy expanding into infrastructure and utilities despite deluge of complaints against Globe’s bad network connection and frequent dropped calls.

    Panalo si Globe. Talo ang Filipino consumers. Why not open up our telco sector to foreign competition with no restriction on company ownership? 100 million Filipino consumers is an attractive market.



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