Philippines' Globe Telecom profit soars


Globe's earnings pushed the Philippine main stock index higher to break a three-day losing streak

MANILA, Philippines -- The phenomenal popularity of mobile phones in the Philippines has pushed its second largest mobile operator, Globe Telecom, to incur a record net income of 4.3 billion pesos ($84.31 million) in 2001.

Thanks to soaring mobile phone sales growth, Globe's 2001 net profit nearly tripled compared to the 1.5 billion pesos it earned in 2001.

The firm is jointly owned by conglomerate Ayala Corp, Deutsche Telekom AG, and Singapore Telecom.

Globe's consolidated revenues rose 76 percent to 35.4 billion pesos from 20 billion from a year earlier, boosted by a remarkable 72 percent surge in mobile phone subscribers to 4.6 million customers.

Globe said Touch Mobile, a new cellular phone service it launched in September, contributed largely to subscriber growth.

"Globe anticipates further growth in its newest revenue generating initiative as an alternative wireless product catering to an untapped segment of the prepaid market," the company said.

Earnings before interest, taxes, depreciation, and amortization for 2001 grew to 15.8 billion pesos from 8.0 billion a year ago. The firm generated an estimated 10.8 billion pesos in net cash from operating activities.

Globe spent 29.8 billion pesos in 2001 for its expansion program. Of the expansion budget, 78 percent went to the cellular phone business.

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Globe's claim to fame was the introduction of the short message service, or SMS. The service proved to be popular among Filipinos giving Globe a head start in the industry.

The cheap service also transformed the mobile phone from a symbol of privilege and power, to an essential communications tool among Filipinos regardless of social status.

The Philippines is considered the text messaging capital of the world. Its 9-10 million mobile subscribers send about 75 million text messages per day on average.

Analysts expect further growth for the country's mobile phone companies, as there has been a continuous demand for its services despite the weak economic outlook.

They also expect subscriber take-up to surge further this year due to an expected economic rebound in the second half.

Dark clouds


SMS was instrumental in the ouster of disgraced Philippine leader Jospeh Estrada

But analysts are concerned that the impact of a reduction in free text messaging could dampen Globe's meteoric rise.

Free text message allocations were trimmed by around 33 percent last October, with a similar-sized cut introduced in January this year, raising concerns users might sharply cut back on SMS.

They also noted a recent court ruling compelling mobile firms to charge on a six second pulse billing formula rather than the previous one-minute minimum charging.

SMS comprises 21 percent of Globe's wireless revenues in the first nine months, and any cutback in this service could affect popularity and profits.

Should this happen, analysts expect Globe to hurt be hurt more than its main rival Philippine Long Distance Telephone, because PLDT's revenue is more wireless-driven.

PLDT has two mobile phones units, Smart Inc and Filipino Telephone Corp. But its fixed line operations remain a major part of its business.

Globe's earnings result sent its share prices soaring 3.7 percent or 25 pesos to close at 700 pesos on Wednesday.

The main stock index ended up 2.72 points or 0.21 percent at 1,308.11 points, breaking a three-day losing streak.