MANILA, PHILIPPINES – Globe‘s digital transformation over the last five years paved the way for the Company’s resilience during the COVID-19 pandemic. Despite the limitations brought about by the enhanced community quarantine (ECQ) in Luzon, Globe was able to continue its operations even on a Work from Home (WFH) with Critical Skeletal Force operations scheme. This was accomplished with the support of the government by allowing access to its network facilities particulary during the ECQ.
As the ECQ was only effected in the last 2 weeks of the quarter, Globe was still able to continue to invest on its network, spending P10.7 billion, 22% higher than last year and representing 29% of gross service revenues. Bulk of the capex spending went to data-related requirements, comprising 68%, as the Company continued to invest in wonderful experiences for Filipino families and businesses. This investment allowed Globe to ensure stable data connections and provide enhanced internet services to its customers most importantly during this time of crisis.
However, given the full impact of the ECQ and the delays the Company is experiencing with its network rollout, capex guidance for the second quarter will likely be lower by at least P2.0 billion from the first quarter capex spend. Although plans to ramp up spending once operations normalize are in place, the full impact on the planned 2020 capex will be re-evaluated once ECQ is lifted on 15 May 2020.
Globe’s consolidated service revenues for the first three months of 2020 totaled P36.9 billion, a healthy 2% increase from P36.0 billion a year ago given the limited impact of COViD-19 to operations during the period covered. Total data revenues, which now account for 75% of total service revenues (versus 69% last year), remained the key driver for this growth, given the greater customer demand for online video entertainment and internet connectivity. Consolidated EBITDA stood at P20.5 billion with EBITDA margin reaching 56% (from 55% in 2019). The sustained network investments resulted in depreciation and non-operating charges likewise increasing, leading consolidated net income to decline by 2% to P6.6 billion this period from P6.7 billion a year earlier. Similarly, core net income posted a year-on-year decline of 3% from P6.7 billion in 2019.
Ernest L. Cu, President and CEO of Globe Telecom Inc., commented:
“I am pleased to report that Globe remained resilient and posted healthy results in the first quarter, despite going into enhanced community quarantine (ECQ) in the last two weeks of March. While we are grateful for our recent achievement, we understand that this is not reflective of our performance moving forward. In light of this extraordinary environment, we expect revenues in the next quarter to decline by low double- digits from the first quarter levels, as the ECQ limits people’s movement and affects their disposable income. However, as we prepare for the new reality, we do see an acceleration in home broadband services, and cloud-based and cybersecurity solutions given the move of most companies to work remotely. Consequently, we expect to maintain EBITDA margin at low 50s, as the reduced operations allow us to control some expenses.
“Furthermore, Globe is very well positioned to pull through this unprecedented time, with a strong balance sheet and an effective and efficient Business Continuity Plan in place. Outlook for the balance of the year will be assessed further as the impact is highly dependent on the duration of the community quarantine.
“Our top priorities at this time are the safety of our employees, and supporting the nation’s needs through the mitigation of network disruptions and ensuring that our network keeps up with the increased spike in data traffic. Rest assured that our unwavering commitment to better serve and help our customers surpass these challenging times and emerge stronger, compel us to keep on creating new programs and solutions to alleviate the challenges that lie ahead of us.”
For the Mobile business, revenues posted P26.8 billion as of end-March 2020, relatively flat year-on-year given lower Prepaid top up and Postpaid acquisitions. Total mobile revenues comprised 73% of the total service revenues, with total mobile subscriber base now reaching 89.3 million, up 7% compared to the same period of 2019.
From a product standpoint, mobile data revenues generated P18.5 billion in the first quarter of 2020 versus P16.5 billion of last year, as customers spend more time online. Mobile data now accounts for 69% of mobile revenues from 61% a year ago. Mobile data traffic jumped from 370 petabytes in the first three months of 2019 to 522 petabytes this period, or a 41% growth year-on-year. Meanwhile, mobile voice and mobile SMS revenues for the period ended at P5.3 billion and P3.0 billion, lower year-on-year by 15% and 28%, respectively, as more customers shift to data-based services versus the traditional voice calls and text.
For the Home Broadband business, revenues grew to P5.8 billion this period from P5.2 billion reported in the same period a year earlier. Total home broadband subscriber base now stands at over 2.2 million, up32% from the first three months of 2019, driven mainly by the rising level of fixed wireless broadband users. This was also supported by the strong take up of Home Prepaid Wi-Fi (HPW) and @Home broadband plans bundled with the best local and international content.
Corporate Data revenues improved by 4% year-on-year with total revenues reaching P3.2 billion as of end- March 2020, largely coming from the rise in information and communication technology (ICT) revenues and 3% expanded circuit base.
Globe’s total operating expenses including subsidy posted P16.4 billion for the period, a 2% increase from a year ago, leading to consolidated EBITDA to end the first three months of 2020 at P20.5 billion, up 3% from same period last year. However, with the sustained increase in depreciation charges and higher share in affiliates’ losses, net income declined by 2% from the P6.7 billion reported last year. Accordingly, core net income, which excludes the impact of non-recurring charges, and foreign exchange and mark-to-market charges, stood at P6.6 billion, 3% lower year-on-year.
Globe’s balance sheet is at its healthiest in the last five years, with debt levels at a manageable level and well within covenant ratios. Cash balance as of March 31, 2020 is at P14.5 billion, a sharp increase against end-2019 of P8.3 billion, as liquidity is prioritized in the near term considering the risks brought by the ECQ. Likewise, gross debt also rose, now at P145 billion versus P136 billion in 2019. Notwithstanding the higher debt, Globe is still at a comfortable level with its debt ratios; Gross debt to equity is at 1.71x while gross debt to EBITDA is at 1.97x; Net debt to equity ratio is at 1.54x while net debt to EBITDA is 1.77x; and Debt service coverage ratio is at 4.56.
As Luzon went into ECQ, Globe’s swift response to the nation’s call for bayanihan spirit was to offer assistance to all its customers; all postpaid customers, including enterprise customers nationwide were given 60 days credit payment extension. Globe and TM users who subscribed to KonsultaMD can get in touch with doctors via its telehealth hotline without any mobile call charges, and Mobile Prepaid customers who subscribed to GoSurf50 were given an increased data allocation from 1 GB to 2 GB (applicable to all websites), valid for three days starting March 25 to April 25, 2020. Discounts were likewise given with free installation to all new Globe At home postpaid customers during the Luzon-wide lockdown. An additional 8 GB were also provided to prepaid customers who subscribed to HomeSurf199, bringing up data allocation from 22 GB to 30 GB (23 GB open access data + 1 GB of Youtube daily) valid for seven days (with promo period until April 21, 2020). Globe also supported its enterprise clients by ensuring ample supply chain capacity to serve all the orders especially since there was increased demand for HPW from enterprise clients ordering for their WFH employees. All these were were done as the Company continuously provides enterprise clients with the right technology, infrastructure, and know-how to create a positive impact and help them move forward with their business continuity initiatives.
Risks and Impact of COVID-19 on Globe’s Business Operations and Commitment to Service
On March 16, 2020 the Philippine government declared an enhanced community quarantine covering the whole of Luzon, including the National Capital Region (NCR), in view of COVID-19, earlier declared a pandemic by the World Health Organization on March 11, 2020. As outlined in its Business Continuity Plan, Globe recognizes the critical risks that a disruption from an Emerging Infectious Disease (EID) can bring to its operations. Workforce health and safety, supply chain disruption and the need to provide seamless connectivity are some of the critical aspects that the Company immediately addressed.
The magnitude of the pandemic’s impact to the company’s overall business operations and the whole economy will have to be assessed further.
Beyond its business operations, Globe likewise ensured that it is doing its part and supporting the nation in this time of uncertainty. The Company is providing free access to reliable and verified news and information sources, offering free and unlimited GoWiFi service in a growing list of hospitals, airports, and supermarkets. Globe also led fundraising and donations efforts in the fight against CoVID-19, raising close to P84 million, including P36 million in cash donations raised by loyal Globe customers through their Globe Rewards Points for partner medical institutions to provide PPEs for health workers and frontliners; over P27.5 million raised by employees from a fundraising initiative primarily aimed at providing much-need PPEs, face shields, and face masks to healthcare workers in 50 hospitals across the country; and donations in kind for hospitals and frontliners, ranging from medical supplies to 1,500 mobile phones preloaded with 45 days unlimited call and text. The #OneGlobeVsCOVID project of the company’s over 8,000 workforce realized total employee donations of P13.79 million which was 100% matched by Singtel and Globe. Lastly, Globe earmarked P270 million in financial support for vendor partners and retail stores support staff salaries as part of the Ayala Group’s P2.4 billion emergency aid package.
