Globe home broadband delivers growth, but mobile slows

Industry giant Globe Telecom recorded stronger earnings in the first quarter of the year despite the slowdown in its flagship mobile business.

Bolstered by demand for internet during the COVID-19 pandemic, Globe saw profit jump 11 percent to P7.3 billion from January to March compared to the same period in 2020. Service revenues gained 3 percent to P37.8 billion.

Warning signals also flashed as a key profit indicator declined and the company spent more on marketing and subsidies while allotting bigger provisions for customers unable to pay their bills due to the pandemic.

“It will be a very challenging year to the extent that lockdowns have really done damage. I think it’s a full year effect,” Globe CEO Ernest Cu said during a media briefing on Friday.

Still, he said the telco industry was weathering the crisis “quite well.”

Revenue gains for the quarter were driven by Globe’s home internet business, which was undergoing aggressive expansion to meet demand triggered by the work-from-home phenomenon.

Defensive positionDuring the first quarter of 2021, Globe’s fixed-line and home broadband revenues jumped 15 percent to P11.3 billion after subscribers surged 81-percent higher to over four million.

Its mobile segment, however, was forced into a rare defensive position as subscribers fell 11 percent to 78.9 million.

Globe’s mobile revenues for the period dropped 2 percent to P26.3 billion. It remained the revenue leader in wireless, but main rival PLDT narrowed the gap with P22.1 billion.

Globe responded by ramping up spending for marketing and subsidies by 53 percent to P2.3 billion while provisions were up 52 percent to P1.6 billion.

Higher expenses were a drag on profitability. Globe’s earnings before interest, taxes, depreciation and amortization (Ebitda) fell 11 percent to P18.3 billion. Ebitda margin was likewise down to 48 percent from 56 percent a year ago.

April Lee-Tan, research head at COL Financial Group Inc., said a shrinking Ebitda was a concern. “We are more concerned about lower Ebitda margins,” Tan told the Inquirer on Friday.

She said there would be less need for provisions once the economy recovers.

“Improving economic conditions would help and if their marketing campaigns would encourage more use of data,” Tan said.

‘Wait and see’

While competition with PLDT was intensifying, Cu said he would “wait and see” how new telco player Dito Telecommunity rolls out its business.

“We haven’t seen them in the market,” he said. “When you’re competing against a large one I think you’re well placed to compete against an upstart like them.”

For the remainder of 2021, Globe chief financial officer Rosemarie Maniego-Eala said revenue would grow by “mid-single digits” while Ebitda margin would rise to about 50 percent. The company deployed P19.1 in capital spending for the first quarter, mainly for data and network upgrades. It will maintain its full year budget of P70 billion.