Globe taps P5B loan to fund expansion

Ayala-led Globe Telecom Inc. has secured a P5-billion loan from a local bank to help fund the company’s aggressive expansion in the next five years.

In a statement at the weekend, Globe said it had secured a seven-year fixed term loan from Rizal Commercial Banking Corp. (RCBC), marking the second time the company has tapped bank financing this year.

The company said it opted to tap bank finance, instead of raising fresh capital from equity or through a commercial bond offer, due to the low interest rate on loans.

“We want to take advantage of the low interest rate environment and replace some loans with cheaper debt,” Globe said. In February, Globe closed a seven-year, P7-billion loan with another local bank to pre-pay debts and fund a portion of capital expenditures for 2011.

Globe recently announced it would invest $790 million to undertake a massive network modernization and IT transformation program over the next five years. This aims to boost the company’s network capacity and the quality of services.

This is also being done in anticipation of the exponential rise in demand for bandwidth-heavy services such as broadband Internet and mobile data. Of the amount, $640 million will be spent in 2012 and 2013.

Aside from bank loans, Globe said it might tap funds from foreign Export-Import credit agencies. As of end-September 2011, Globe had a debt-to-equity ratio of 1.04.

Globe president Ernest Cu earlier said the modernization program would have an impact on Globe’s finances, with an estimated $388 million worth of equipment to be decommissioned in five years on top of the $790 million to be spent.