Rise in expenses drags down Globe’s 2011 profit growth

The profit of Globe Telecom Inc. stayed flat in 2011 as increases in expenses, amid aggressive subscriber acquisition and network expansion efforts, offset higher service revenues.

A strong peso also affected the company’s dollar-denominated revenue, dragging down profitability.

The company, however, stayed optimistic as revenue reached an all-time high, partly due to a significant expansion in its broadband subscriber base.

“We are pleased with the overall gains we achieved in 2011, and the momentum that it provides us going into 2012,” Globe Telecom president Ernest Cu said in a statement.

Globe’s full-year income posted a modest 1 percent gain from year-ago level to P9.832 billion. This, however, included the one-time adjustment of P526 million, arising from prepaid load credits that were not used by subscribers.

Excluding “transformation-related professional fees,” linked to the company’s on-going network modernization program, Globe said its profit would have risen by 15 percent.

The company’s core profit, which excluded accounting adjustments for the movement of foreign exchange and other financial instruments, rose 11 percent to P10.03 billion.

Globe said consolidated service revenue reached a record P67.8 billion, up 9 percent year on year. Mobile service revenue, the biggest contributor to the network’s earnings, rose 8 percent, beating market expectations.

“This was despite peaking penetration rates, persistent price pressures, and declining yields resulting from subscribers’ continued preference for unlimited and bucket offers, as well as the negative impact of the strong peso on dollar-linked revenues,” the company said.

The company said it was able to buck an industry-wide decline in earnings due largely to the expansion of its broadband business. Paolo G. Montecillo