Globe to spin off cellular tower assets

Ayala-led Globe Telecom plans to spin off its cellular tower assets to an independent tower company, aiming to speed up the deployment of cellular towers and address poor mobile connectivity in the Philippines.

This came on the heels of a new common tower policy announced by the Duterte administration, under which the government plans to tap a third party group to finance and build independent cell towers, which will then be leased to telecom operators such as PLDT, Globe and new entrants.

In a disclosure to the Philippine Stock Exchange on Thursday, Globe said it’s looking at divesting all or part of its tower assets to an independent tower company as part of its network expansion and optimization plan. To date, Globe has over 8,000 cell towers nationwide.

For its part, Globe has initiated discussions with third party players for this project, which seeks to address lack of towers in the country, in turn identified as a major constraint to mobile internet connectivity.

“We have been allocating over 30 percent of our total revenues to capital expenditure for the past five years and this level will be sustained over a period of time. An independent tower company will be a win-win solution. lt will monetize assets for capex (capital expenditure) use and help maintain our consistent dividend policy. ln addition, this greatly helps President Duterte’s initiative to open the telco industry to new players,” Globe president and CEO Ernest Cu said.

“The plan is for these towers to be open for lease to new and existing players. This effectively lessens the barriers that a new entrant has to endure because they will not have to spend the capex to build towers and instead focus on rolling out the necessary network equipment. This significantly reduces the time needed for a new player to rollout given the 25 permits and up to eight months required to build one cell tower. Our move is also consistent with our position of being open to more competition in the telecom mu nications industry,” he said.

To date, the Philippines has one of the lowest tower densities in the world, with less than 20,000 towers serving a population of 100 million people. ln contrast, Vietnam, with a population of 90 million, has 70,000 towers for its telecommunications needs. Bangladesh and Pakistan have
more towers than the Philippines with over 30,000 each.

About 50,000 more towers are seen needed to be built in the future to optimize network deployment in the country.

But tower companies generally want multlple operators as locators, effectively reducing the cost for all locators and increasing the return for the tower company. Globe plans to work with these tower companies in determining the appropriate locations for all prospective towers.

Globe nonetheless sees rough times ahead to improve services and keep up with the rapid data consumption growth of its customers.

“We hope to continue working with the government to reduce the red tape that is currently being encountered in the permitting and right of way process. The only reason we are able to keep up with the demand for wireless data is because of the ultra-high capacity nature of our sites,” said Cu.

Globe has ramped up its annual capital outlays from P25.8 billion in 2012 to P36.7 billion in 2016 and P42.5 billion in 2017. This year, it expects to spend P43.5 billion. As a ratio to total revenues, its capital spending has averaged at around 31 percent.

“We are one with our customers who want to see further development of the telco industrv in the country. We have been helping the nation in providing opportunities for more Filipinos by providing them with connectivity and access to the internet, enabling industries like BPO (business process outsourcing) to flourish, creating connected cities in the rural areas, initiating financial inclusion with e-payments and e-commerce, and enhancing the digital lifestyles of our customers through world class content and product offers. The sustained high capital spending year on year creates a ripple effect on the whole ecosystem through more jobs and better opportunities down to the sari-sari store level,” said Cu.