Philippines operator Globe Telecom has reported a sharp fall in profits as it continues to invest in the modernization of its network amid tough competition.
Net income after tax fell by 10% for the first half of the year, to 5 billion pesos ($120 million), compared with the same period last year, despite a 6% increase in revenues to 40.8 billion pesos.
Globe spent 11.7 billion pesos in capital expenditure over the first half of the year, a 35% increase on the figure for the first half of 2011. The operator has been modernizing its network and overhauling its IT systems, as well as expanding the coverage and capacity of its broadband and mobile networks, which include 2G, 3G, 4G and WiMax services.
Globe also witnessed a 13% increase in operating expenses and subsidies, to 23.1 billion pesos. A rise in marketing expenses at its mobile business was largely to blame—with the company under pressure from rivals like PLDT, under the Smart brand—but Globe also incurred higher network-related costs due to the expansion of its 2G, 3G and broadband networks.
Nevertheless, the operator reported top-line successes at its mobile, broadband and fixed-line operations.
Mobile service revenues were up by 6%, to 33.3 billion pesos, even though competition is getting tougher in the Philippines’ saturated mobile market. Globe says that growth in unlimited text messaging, mobile browsing and other value-added services helped to offset a decline in regulator, pay-per-use text messaging. Similarly, a rise in unlimited voice subscriptions and internet-telephony take-up helped compensate for a decline in outbound voice and international services.
On the broadband side, Globe’s subscriber base rose by 6% to give the operator a total of 1,583,996 customers by the end of the second quarter, with revenues growing by 13% to 4.1 billion pesos.
Globe claims its fixed-line data business is benefitting from demand for transmission links and bandwidth capacity from business and enterprise clients. It has also been offering clients new cloud computing and M2M services to make up for a fall in demand for international services.
Unsurprisingly, revenues from fixed-line voice services fell by 135 million pesos, to nearly 1.4 billion pesos, between the first half of 2011 and the first half of 2012, due to weak demand for voice-only fixed-line products and the ongoing shift in traffic from fixed-line voice to mobile services.