Network spending takes toll on Globe profits

Globe Telecom, the Philippines’ second-biggest telecoms operator, has reported a massive fall in net income due to investments it has been forced to make in improving its network.

The operator saw net income for the first half of 2013 drop by 73%, to PHP1.4 billion ($32.1 million), despite growing revenues by 9%, to PHP44.5 billion, over the same period.

Globe Telecom, the Philippines’ second-biggest telecoms operator, has reported a massive fall in net income due to investments it has been forced to make in improving its network.

The operator saw net income for the first half of 2013 drop by 73%, to PHP1.4 billion ($32.1 million), despite growing revenues by 9%, to PHP44.5 billion, over the same period.

Globe (Manila, Philippines) has been replacing legacy access radios with state-of-the-art software defined radios, allowing it to make upgrades more easily in future, and saw a huge increase in depreciation charges as a result of the program.

The operator has also been extending HSPA+ services across its footprint and says that 73% of its network is now equipped to provide the high-speed technology.

In May, it also completed the installation of new submarine fiber links, and on the IT side has been migrating its postpaid customers on to a new business support system.

Globe said that capital expenditure over the first half of the year was 66% higher than in the first six months of 2012, at PHP19.4 billion.

“We are pleased with our first half performance despite the ongoing network and IT modernization initiatives we are undertaking to serve our customers better,” said Ernest Cu, Globe’s chief executive. “We anticipate competition to escalate in the second semester given the gains we’ve realized in the past, and anticipated launches of in-demand mobile devices from Apple [Cupertino, CA, USA] and Samsung [Seoul, South Korea] in the second half of the year.”

“We’ve built up great momentum during the first semester, and we need to strive harder to sustain it in this very competitive and fast-paced environment,” he added.

Despite the bottom-line pressure, the operator reported solid growth across all of its business activities apart from fixed-line voice.

Mobile revenues grew by 8%, broadband by 25% and fixed-line data by 12%, with the fixed-line voice business registering a 6% decline in sales.

The operator now claims to serve nearly 36.1 million customers, up from about 35.2 million in June 2012, although just 1.9 million of those customers are on higher-value postpaid deals.

Average revenue per user was up 15% for postpaid customers, to PHP1,274 a month, while that for Globe Prepaid remained flat at PHP141 a month.