Globe compartment
Even for a conglomerate as big as the Ayala group, the premier real estate firm in the country and owner of BPI, $790 million is a lot of money.
It is the amount that Globe Telecom, a publicly listed venture between the Ayala group and Singapore Telecoms, is reportedly pouring into an ambitious three-year “modernization” project.
That, at current exchange rates, is all of P34 billion.
The project has been talked about in business circles even before the Ayala group announced it late last year. It is fair to say that the project never really escaped the radar of Globe’s main competitors – i.e. the double-teaming Smart Communications and Sun Cellular.
It is now clear that Smart’s acquisition of Sun last year, something that merited a congressional inquiry, was a move directed at the P34-billlion Globe modernization. A preemptive strike!
It is now obvious that, given its three-year ambitious investment plan, Globe would have killed for the Sun franchise, including its frequency licenses. And Globe did want to acquire Sun.
It is just that, Smart did everything to beat Globe to the acquisition of the also—run Sun. What we would do for a glimpse of the Smart-Sun “deal”—the inside story!
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Anyway, the question is, particularly among those following the stocks of Globe on the PSE ticker tape, can the company recoup such a huge P34-billion investment?
Even in the telecom business, they are saying that the industry has almost reached its limit on new subscribers in the text-and-call service. It is said that there is hardly any room for expansion.
Surprise—last year, Globe posted its best ever annual revenue of P68 billion. The bulk was in the traditional text-and-call services. Only P7.5 billion was in the form of “broadband” revenue, and this is the line of business that Globe is spending a lot of money for, apparently as a way to escape the trap from the Smart-Sun double team.
Like or not, broadband is the future of the telecom industry. As Globe tries to get itself a good slice of the business, its executives are using words, like “milestone,” to describe the project.
Its president and CEO, Ernest Cu, in launching the project in Malacañang, said: “This is a milestone not only for Globe but for the rest of our growing subscriber base.”
Bear in mind that Globe, in the early 1990s, started the mobile phone “text” craze in this country. “Texting” became almost an exclusive Globe compartment. It must be pining for its old forgotten role as the pacesetter.
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Press statements from Globe said that it considered the P34-billion project the biggest and most significant investment that it has undertaken in the past two decades.
Here is the more important part of it: At least $570 million of the total amount, or more than P24 billion, would be spent this year.
It seems that the technology for its project is readily available abroad. Globe last year announced that it had contracted China’s Huawei. This is the gigantic conglomerate that boasts of at least 17 research-and-development centers worldwide.
From what I heard, Huawei is opening up its archives to Globe, which should give the local company a view to similar projects that Huawei has undertaken in other countries.
Reportedly, the Globe modernization project would be geared toward 4G technologies – i.e. the newest version of broadband. In fact, its statements used nosebleed terms such as “HSPA+” [or high speed packet access] and “LTE” [long term evolution]. Let us say that both systems, although they employ different methods, are the answers to the modern world’s ever-increasing need for Internet speed.
Because they are fast, those two systems are designed for such products as “real-time” video calls or even video sharing. You know—for downloading video! Today such activities take a lot of time because of the limited speed in our current mobile systems.
In other words, Globe is targeting the very products that our children are going crazy about nowadays.
Reports overseas indicate that some 157 countries are now using HSPA in hundreds of products. It is also said that, only a couple of years from now, subscribers of telecom companies in HSPA would reach over 3.5 billion, or more than half of the world’s population.
There is another aspect in the Globe project—another nosebleed term “IPv6”—which Globe said it would be readying for its business customers.
The term “IP” means—in a language that my mother-in-law can understand—something like “phone numbers” for the Internet. They identify the gadgets and computers, the mobile phones, so that the devices can talk to each other.
I gathered that the present system called “IPv4” could provide around 4 billion of those ID numbers, technically known as IP addresses.
In the new system called “IPv6,” for which Globe would spend a fortune, those ID numbers would be in effect unlimited.
It simply means that, with the Globe system in the near future, the company can connect an unlimited number of gadgets or devices to the Internet—globally.
Today, Globe claims to have at least 30 million subscribers, who surely complain about dropped calls, or late delivery of text messages, or impossible connections during peak hours.
This I know for a fact: that the P34-billion Globe modernization project will solve all those problems. This, I thought, is a bonus for its present subscribers.
