Globe ends 2014 with record-high results, core net profit up 25%
Globe Telecom ended 2014 with impressive financial performance, posting a core net profit growth of 25% to a record level of P14.5 billion, driven by solid performance of its mobile, broadband, and fixed line data businesses. Consolidated service revenues reached a new high of P99.0 billion, besting the previous high of P90.5 billion in 2013.
The solid full-year results were buoyed by a strong second half performance, with fourth quarter revenues at an all-time quarterly high, peaking at P26.3 billion, 5% higher than the previous best of P25.0 billion in the preceding quarter and a 13% improvement from the P23.2 billion from the same period last year. This was driven by the sustained demand for data connectivity across the mobile, broadband and fixed line data businesses, which improved by 7%, 22% and 17%, respectively, given the increasing affordability of the service and compelling gadget bundle offers backed by Globe’s improved network with 100% 3G and 4G coverage completed during the year.
“2014 is another banner year for Globe Telecom, reaching the best-ever consolidated service revenues, EBITDA, net income and core net income, despite intensifying competition Our full year results are testaments of our continued commitment in creating a complete digital experience, delivering best-in-class products and services and a whole new level of customer service experience for our customers,” Globe President & CEO Ernest Cu said.
“Reaping the benefits of our modernized network, with 100% 3G and 4G coverage, we have seen a steady and healthy growth in both our mobile and broadband businesses, surpassing all of our expectations, and we are confident in sustaining this momentum moving forward. Even as we face new challenges in the coming year, we are optimistic that the new innovations and product offerings we have lined-up will continue to be relevant to our customers, provide growth across all our businesses and create value for our shareholders,” Cu added.
Mobile telephony revenues, which contributed 79% of consolidated revenues, grew 7% year-on-year from the prior year’s P72.8 billion to P78.1 billion in 2014, propelled by growth in the Globe Postpaid and mass-market TM brands. Driven by the rapid expansion of the postpaid base, which stood at 2.3 million at the end of the year, Globe Postpaid revenues improved 11% to P29.9 billion from P27.1 billion last year.
For the prepaid segment, TM had another banner year with a 14% growth in revenues and a 21% increase in customer base compared to last year. TM now accounts for 51% of the total mobile subscriber base. Despite the continued pressures on yields with the increasing multi-SIM incidence in the market, as well as the popularity of value-based bucket and unlimited offers for voice and SMS services, total prepaid revenues improved by 5% to P48.2 billion from P45.7 billion a year ago, signaling its return on a growth track. Total mobile subscriber base stood at 44.0 million as of end-December 2014, up by a solid 14% from the 38.5 million a year ago.
The rapid growth momentum for Globe’s broadband businesses continued in 2014, registering steady double digit growths of 22% for revenues and 37% growth customer base year-on-year. Globe ended the year with nearly 2.8 million broadband subscribers, with the strong growths registering across fixed broadband, wireless broadband and long-term evolution (LTE) solutions of 16%, 42% and 377%, respectively. The introduction of more affordable products & competitive tablet bundles throughout the year and the expanded pervasiveness of the fixed and wireless broadband network stimulated the robust performance in the year just ended.
The company’s fixed line data segment likewise posted 17% growth in revenues of P5.5 billion, or P790 million higher compared to the P4.7 billion revenues posted in 2013, as the corporate demand for various communications and connectivity solutions continue to grow. Also, the fixed line voice segment improved by 7% to P2.8 billion from P2.6 billion the previous year, given the continued popularity of bundled internet and landline plans at competitive price points.
Total consolidated EBITDA reached a record P39.3 billion in 2014, up by P2.8 billion or 8% against the P36.5 billion registered in 2013, as the revenue gains fully offset the increase in operating expenses. Operating expenses, which include subsidy and other operating expenses, grew by 11% from P54.0 billion in 2013 to P59.8 billion in 2014. Higher spending across all accounts, except for interconnect and re-contracting costs, was largely to support management strategies, business, subscriber and data-network expansion, and post-Yolanda restoration activities.
In addition, the increase in subsidy and marketing spending resulted from the successful launch of the latest smartphones from Apple and Samsung (iPhone 6/6 Plus; Samsung Note 4) during the last quarter of the year. However, the increase in expenses was partly cushioned by lower interconnect costs year-on-year. The continued surge in Globe’s mobile subscriber base has led to the decreasing inter-network traffic largely coming from domestic core services given various intra-network offers.
Consolidated EBITDA margin for 2014 remained steady at 40% year-on-year, in line with management’s earlier guidance. Driven by the growth in EBITDA coupled with lower depreciation expenses, largely on accelerated depreciation (from P9.1 billion in 2013 to only P1.6 billion in 2014), and a decrease in non-operating charges, Globe Telecom’s all-time high net income surged to P13.4 billion in 2014, 170% higher against the P5.0 billion net income reported in 2013. Core net income, which excludes the impact of accelerated depreciation and other non-recurring charges, likewise grew 25% year-on-year to an all-time high of P14.5 billion from P11.6 billion in 2013.
For 2015, the company expects the market to remain challenging and competitive, particularly given the shifting focus of the customer’s lifestyles and usage into the digital world. Against this environment, the company believes that the current revenue momentum built, coupled with the adaptive platform of digital lifestyle offers to cater to the subscribers’ changing lifestyle, could further push revenues to increase by high single-digit from 2014 level. EBITDA margin is expected to remain around 40%, as margins would be continuously impacted by the growth of our postpaid business and the increasing contribution of lower-margin data-related products.
The company’s new capital expenditures for 2015 are programmed to be approximately $650 million, which remains consistent with the original CAPEX program earlier guided. With the growing demand for data and internet connectivity, the company anticipates that approximately 75% of said CAPEX would be related to data, including spend for deployments of LTE mobile and LTE @Home, capacity and coverage augmentation of the 3G, HSPA+ and DSL network, as well as requirements for domestic transmission and international cable capacities. The balance of the CAPEX is seen to be spent for business support systems in line with product innovations, and other corporate CAPEX. With the $200 million CAPEX, which was initially estimated in 2014, expected to slide into the early parts of 2015, total cash CAPEX for 2015 would be approximately $850 million.