Globe net income drops 76% in first quarter

Globe Telecom Inc. on Tuesday reported that its net income in the first quarter fell by 76 percent to P656 million, despite a 6-percent increase in service revenue to P21.4 billion.

In a stock exchange filing, the country’s second biggest telecommunications cited intense competition with dominant Philippine Long Distance Telephone Co. as a major reason behind the steep decline.

Also, the company Tuesday said that its board had approved a plan to issue P7 billion in retail bonds this year to partly finance its capital expenditure requirements and prepay debts.

“The debt securities will be sold to both retail and institutional investors,” Globe said.

In its regulatory filing, Globe said the decline in income was due to reinvestments to lock in subscribers, protect market share and deal with reduced margins. It also cited the impact of accelerated depreciation charges related to its $790-million modernization program.

Nonetheless, Globe said that core net income increased by 13 percent to P2.7 billion.

Globe said that its mobile business continued to drive growth in the first quarter due to the rise in Internet services. Revenues from the broadband and fixed line data segments likewise provided “solid” contributions.

“The strong revenue performance was supported by an overall expansion in customer base,” Globe said in its report.

On its mobile business, the company said that it registered record acquisitions to bring its subscriber base to 35.1 million. Broadband subscribers likewise grew, fueled by the increase in so-called nomadic and DSL services to bring total subscriber base to over 1.7 million at the close of the first quarter.

But Globe noted a slight decline in service revenue compared to that of the last quarter of 2012. But the decline was tempered by the rise of its mobile data earnings.

“We are encouraged by the results we delivered in the first quarter of 2013 despite the continued challenges raised by competition and in the midst of this most critical period as we complete our network and IT modernization programs,” Globe president and CEO Ernest Cu said in the statement. “Our mobile business remains fundamentally strong and continues to be in an uptrend given the success of the programs that we have implemented in the past.”

Market participants expect earnings to improve once the company completes its modernization program this year.