Globe to cut network spending next year after record investments in 2022

Globe Telecom is cutting network spending next year after raising capital expenditure estimates to a record $1.9 billion (P105 billion) in 2022 as the home broadband business slows in the postpandemic era.

The Ayala Group’s telecommunications arm said on Friday its board had approved a “significantly” lower budget of $1.3 billion in 2023, or a reduction of 30 percent from the 2022 level.

“After investing heavily in our builds and rollouts, we now have a significant backbone for our network, which allows us to shift our focus toward capital efficiency and optimization, beginning with 2023’s $1.3 billion guidance, with the target of eventually bringing this down to $1 billion by 2024,” said Globe president and CEO Ernest Cu.

The spending in 2022 would eclipse the company’s previous record budget in 2021 of about $1.7 billion, based on the prevailing exchange rate.

“With these investments, the company was able to strengthen its network and keep up with the burgeoning data needs of Filipinos, especially during the past two years,” Globe said.

The telco giant ramped up network investments during the health crisis to capture surging demand for home internet amid stringent lockdown rules and the aggressive expansion of competitors such as PLDT Inc. and fiber internet provider Converge ICT Solutions Inc.

Spending supported the company’s growth, with revenues in the first nine months of 2022 rising 3 percent to P118 billion, mainly from its flagship mobile and corporate segments.

Home broadband revenues, however, fell 8.5 percent to P20.5 billion during the period as lockdown rules were further relaxed in early 2022. Globe said total home broadband subscribers also fell 27 percent during the period.

In a report last Nov. 15, the Fitch Group’s research unit CreditSights said the decline in home internet sales was partly due to increased competition from rivals and the “normalization of particularly robust pandemic-driven broadband demand.”

“That said, we note that home broadband revenues are still stronger than pre-pandemic years as home broadband demand remains solid amid the new work-from-home setting,” CreditSights said in the report.

Globe’s profit from January to September jumped 48 percent to P26.5 billion, mainly due to one-time gains from the partial sale of its data centre business and the sale and leasback of thousands of cell towers to third-party operators.

In its filing on Friday, the telco giant also lauded efforts by the government to streamline the permitting process.

As of September this year, Globe had deployed about 1.4 million home fiber lines, built 1,064 new cell sites, upgraded 10,600 4G sites and installed nearly 1,900 5G sites across the country.

“Through the support of the government to simplify the industry’s permitting process, the company was able to fast track its network expansion, consistent with the Company’s bid to make fast and reliable connectivity pervasive and accessible to more households and businesses,” Globe said.