Globe Telecom secures $51.1M loan on the back of 'healthy balance sheet'

Globe Telecom has secured a 3 billion Philippine peso (US$51.1 million) loan from the Bank of the Philippine Islands to fund its capital expenditures, debt refinancing and general corporate expenses, according to a stock exchange filing last week.

The Philippine mobile operator has invested PHP41 billion ($698.5 million) in capital expenditures in the first nine months of 2024. The bulk of this expenditure – approximately 91% – was used to strengthen Globe Telecom's network infrastructure to ensure that subscribers have improved access to its digital solutions and connectivity services.

By the end of September, the mobile operator had built 684 new cell sites and upgraded 2,723 existing cell sites to LTE technology. It also deployed 55,076 fiber-to-the-home (FTTH) lines to strengthen its fiber infrastructure.

"These initiatives underscore Globe's strategic focus on enhancing capacity utilization and maximizing network efficiency through prudent spending," the company said in the stock filing.

It noted that these initiatives support Globe Telecom's goal of achieving a positive free cash flow position.

"They also reinforce the company's mission to ensure equitable connectivity and empower communities across the Philippines to thrive in the digital economy," the company said.

Related:Philippines' Globe Telecom establishes AI business unit

Reduce capex below $1 billion by 2025

In its third-quarter 2024 earnings results, Globe Telecom said it is on track to maintain its capex spending at PHP55 billion ($1 billion) by the end of this year. The company noted that the PHP41 billion spent on capex in the first nine months of 2024 is 24% lower compared to the same period in 2023.

"From 2023 onwards, Globe has strategically shifted its focus from opportunistic capacity expansion to optimizing existing network investments. This prudent approach has enabled the company to restore sustainable capital expenditure (capex) levels while maintaining network quality and capacity," the company said in the Q3 2024 results released in November.

The company has focused on being fiscally responsible over the past two years to achieve positive free cash flow by 2025. Already, its capex-to-revenue ratio has declined from 45% in 2023 to 33% in the first nine months of 2024.

Globe Telecom has been funding its capex mainly from revenues and proceeds from its tower sales, which amounted to more than PHP96 billion ($1.6 billion). The company has officially handed over 6,653 of the 7,506 towers in its sale-and-leaseback portfolio, generating about PHP85.5 billion ($1.5 billion) in proceeds as of end October. It expects the bulk of the remaining PHP11 billion ($187.4 million) in proceeds to be received within the year.

Citing the telco's chief financial officer Juan Carlo Puno, the Philippine Star reported last month – at the time of the company's third-quarter results – that Globe Telecom is preparing to reduce its capital expenditures to below $1 billion in 2025, in line with its strategy to improve its financial position and maximize existing assets.

"We have gone to the markets in the past few quarters with a signal of dropping cash capex to at least below $1 billion for 2025. That is still the commitment on Globe's side," Puno said.

"In terms of how we would fund it, preferably, we will generate a lot more working cash flow in 2025. The way we look at things is, it is always a mix of whatever is the most appropriate way of funding it. Be it debt, (be it equity), we will follow through," he added.

Full-year targets remain on track

Meanwhile, Globe Telecom said it is on track to achieve low- to mid-single-digit year-end revenue growth in line with previous guidance.

"Globe's balance sheet remains healthy, despite the challenging macro environment," the company told financial analysts during its third-quarter earnings call last month, adding that it has "improved gearing ratios, comfortably satisfying bank covenants".

The company also said that EBITDA margin is tracking above guidance on the back of effective cost management, as well as lower opex complementing a robust topline performance.

Based on its latest financial results, the company's gross revenues for the first nine months of 2024 increased 2% year-on-year to PHP124 billion ($2.1 billion), while net income for the same period was recorded at PHP20.6 billion ($351 million), up 6% from PHP19.4 billion ($330.5 million) in the same period last year.

Across its core businesses, Globe's mobile and enterprise revenues grew 5% and 14% respectively. Globe said its subscriber base grew to 60.2 million as its mobile products remain competitive for consumers.

However, as customers dropped their fixed wireless subscriptions in favor of fiber connections, Globe Telecom experienced a 6% decline in broadband revenues and a 10% reduction in fixed voice revenues.

One bright spot on the horizon is Globe's fintech arm Mynt, which more than doubled its equity profit to about PHP3.5 billion ($59.6 million) in the first nine months of 2024. Mynt, which operates the country's largest e-wallet platform, GCash, now accounts for 14% of the telco's pretax profit in the third quarter of 2024, up from 6% in the same period last year.